-----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, QRjqpMr7YQSqg4kBqRTBr6ldSUS+QPYa6kVF17cPsLYU538jFtGA7E0VCudWHx4M 51Ld7ZznOwrvJQ01/WoJzw== 0000950123-04-000226.txt : 20040109 0000950123-04-000226.hdr.sgml : 20040109 20040109152809 ACCESSION NUMBER: 0000950123-04-000226 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 17 FILED AS OF DATE: 20040109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERRY PLASTICS CORP CENTRAL INDEX KEY: 0000919463 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 351813706 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-111809 FILM NUMBER: 04517842 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 S-4 1 y92946sv4.txt ORIGNAL FILING: BERRY PLASTICS CORPORATION AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 9, 2004 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- BERRY PLASTICS CORPORATION GUARANTORS LISTED ON SCHEDULE A HERETO (Exact name of Registrants as Specified in their Charters) DELAWARE 3089 35-1813706 (State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Incorporation or Organization) Classification Code Number) Identification No.)
101 OAKLEY STREET EVANSVILLE, INDIANA 47710 (812) 424-2904 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) --------------------- JAMES M. KRATOCHVIL EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER, TREASURER AND SECRETARY BERRY PLASTICS CORPORATION 101 OAKLEY STREET EVANSVILLE, INDIANA 47710 (812) 424-2904 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service) --------------------- COPY TO: STUART H. GELFOND, ESQ. FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LLP ONE NEW YORK PLAZA NEW YORK, NEW YORK 10004 (212) 859-8000 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED EXCHANGE OFFER: As soon as practicable after the effective date of this Registration Statement. If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED PER NOTE(1) OFFERING PRICE REGISTRATION FEE - --------------------------------------------------------------------------------------------------------------------------------- 10 3/4% Senior Subordinated Notes due 2012.................................... $85,000,000 100% $85,000,000 $6,877 - --------------------------------------------------------------------------------------------------------------------------------- Guarantees of 10 3/4% Senior Subordinated Notes due 2012.......................... $85,000,000 (2) (2) (2) - --------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(f) under the Securities Act. (2) No separate filing fee is required pursuant to Rule 457(n) under the Securities Act. --------------------- THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SHALL SPECIFICALLY STATE THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SCHEDULE A GUARANTORS BPC HOLDING CORPORATION BERRY IOWA CORPORATION PACKERWARE CORPORATION KNIGHT PLASTICS, INC. BERRY STERLING CORPORATION BERRY PLASTICS DESIGN CORPORATION POLY-SEAL CORPORATION VENTURE PACKAGING, INC. VENTURE PACKAGING MIDWEST, INC. BERRY PLASTICS TECHNICAL SERVICES, INC. CPI HOLDING CORPORATION CARDINAL PACKAGING, INC. AEROCON, INC. BERRY TRI-PLAS CORPORATION BERRY PLASTICS ACQUISITION CORPORATION III PESCOR, INC. BERRY PLASTICS ACQUISITION CORPORATION V BERRY PLASTICS ACQUISITION CORPORATION VI BERRY PLASTICS ACQUISITION CORPORATION VII BERRY PLASTICS ACQUISITION CORPORATION VIII BERRY PLASTICS ACQUISITION CORPORATION IX BERRY PLASTICS ACQUISITION CORPORATION X BERRY PLASTICS ACQUISITION CORPORATION XI BERRY PLASTICS ACQUISITION CORPORATION XII BERRY PLASTICS ACQUISITION CORPORATION XIII BERRY PLASTICS ACQUISITION CORPORATION XIV, LLC BERRY PLASTICS ACQUISITION CORPORATION XV, LLC LANDIS PLASTICS, INC. EXPLANATORY NOTE This registration statement covers the registration of an aggregate principal amount of $85,000,000 of our 10 3/4% senior subordinated notes dues 2012, which we hereinafter refer to as the exchange notes, that may be exchanged for an equal principal amount of our outstanding 10 3/4% senior subordinated notes due 2012. This registration statement also covers the registration of exchange notes for resale by Goldman, Sachs & Co. and J.P Morgan Securities Inc. in market-making transactions. The complete prospectus relating to the exchange offer follows immediately after this explanatory note. Following the exchange offer prospectus are selected pages of the prospectus relating solely to these market-making transactions, including an alternate front cover page, and alternate sections entitled "Use of proceeds" and "Plan of distribution". In addition, the market-making prospectus will not include the following captions, or the information set forth under these captions, included in the exchange offer prospectus: "Prospectus summary--The exchange offer," "Risk factors--Risks related to the notes--You may have difficulty selling the notes which you do not exchange," "The exchange offer," and "Certain material U.S. federal tax considerations--U.S. federal income tax consequences of the exchange offer." The table of contents of the market-making prospectus will reflect these changes accordingly. All other sections of the exchange offer prospectus will be included in the market-making prospectus. PROSPECTUS [BERRY LOGO] BERRY PLASTICS CORPORATION EXCHANGE OFFER FOR $85,000,000 10 3/4% SENIOR SUBORDINATED NOTES DUE 2012 We are offering to exchange 10 3/4% senior subordinated notes due 2012 for our currently outstanding 10 3/4% senior subordinated notes due 2012. The exchange notes are the same as the outstanding notes, except that the exchange notes will have been registered under the federal securities laws and will not bear any legend restricting their transfer. The exchange notes will represent the same debt as the outstanding notes, and we will issue the exchange notes under the same indenture. The outstanding notes were issued in connection with our acquisition of Landis Plastics, Inc., which is referred to in this prospectus as the "Landis Acquisition". The exchange notes will be guaranteed by BPC Holding Corporation, and all of our existing and future domestic subsidiaries, except as provided herein. The notes will not be guaranteed by our foreign subsidiaries: Berry Plastics Acquisition Corporation II, NIM Holdings Limited, Berry Plastics U.K. Limited, Norwich Acquisition Limited, Capsol Berry Plastics S.p.a. or Ociesse S.r.l. The notes will not be guaranteed by any foreign subsidiaries in the future unless any such foreign subsidiary guarantees any senior indebtedness of ours or any of our subsidiaries (other than that of another foreign subsidiary). The notes will be subordinated in right of payment to all obligations of our non-guarantor subsidiaries. The notes will also be subordinated in right of payment to all existing and future senior indebtedness, will rank equally in right of payment with any existing and future senior subordinated indebtedness and will be senior in right of payment to all future subordinated obligations. The notes will also be effectively subordinated to all of our and our subsidiaries' secured indebtedness to the extent of the value of the assets securing such indebtedness. The principal features of the exchange offer are as follows: - Expires 5:00 p.m., New York City time, on , 2004, unless extended. - We will exchange all outstanding notes that are validly tendered and not validly withdrawn prior to the expiration date of the exchange offer. - You may withdraw tendered outstanding notes at any time prior to the expiration of the exchange offer. - The exchange of outstanding notes for exchange notes pursuant to the exchange offer will be a tax free event for United States federal tax purposes. - We will not receive any proceeds from the exchange offer. - We do not intend to apply for listing of the exchange notes on any securities exchange or automated quotation system. Broker-dealers receiving exchange notes in exchange for outstanding notes acquired for their own account through market-making or other trading activities must deliver a prospectus in any resale of the exchange notes. INVESTING IN THE EXCHANGE NOTES INVOLVES RISKS THAT ARE DESCRIBED IN THE "RISK FACTORS" SECTION BEGINNING ON PAGE 8 OF THIS PROSPECTUS. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is , 2004 IN MAKING YOUR INVESTMENT DECISION, YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH ANY OTHER INFORMATION. IF YOU RECEIVE ANY OTHER INFORMATION, YOU SHOULD NOT RELY ON IT. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT COVER OF THIS PROSPECTUS. TABLE OF CONTENTS
PAGE Prospectus summary.................... 1 Risk factors.......................... 8 Use of proceeds....................... 20 Capitalization........................ 21 Unaudited pro forma financial information......................... 22 Selected consolidated financial data................................ 30 Management's discussions and analysis of financial condition and results of operations....................... 33 Business.............................. 48 Management............................ 61 Principal stockholders................ 69
PAGE Related party transactions............ 71 Description of other indebtedness..... 75 The exchange offer.................... 79 Description of exchange notes......... 89 Certain material U.S. federal tax considerations...................... 142 ERISA considerations.................. 150 Plan of distribution.................. 152 Legal matters......................... 153 Independent auditors.................. 153 Where you can find more information... 153 Index to financial statements......... F-1
--------------------- Berry Plastics Corporation is a Delaware corporation. Our principal executive offices are located at 101 Oakley Street, Evansville, Indiana 47710, and our telephone number at that address is 812-424-2904. In this prospectus, unless the context otherwise requires, "BPC Holding" or "Holding" refers to BPC Holding Corporation, "we," "our" or "us" refers to BPC Holding Corporation together with its consolidated subsidiaries (not including Landis, unless the context otherwise requires), "Berry Plastics" or "the Company" refers to Berry Plastics Corporation, a wholly owned subsidiary of BPC Holding and the issuer of the notes, and "Landis" refers to Landis Plastics, Inc. Unless otherwise indicated, all references in this prospectus to our fiscal years are to the 52/53 week period ending on the Saturday closest to December 31. Unless the context requires otherwise, all references in this prospectus to "2002," "2001," "2000," "1999," and "1998," or to such periods as our fiscal years, relate to our fiscal years ended December 28, 2002, December 29, 2001, December 30, 2000, January 1, 2000 and January 2, 1999, respectively. For 2002, the results under Holding's prior ownership have been combined with results subsequent to the merger of GS Berry Acquisition Corp. with and into BPC Holding on July 22, 2002, which is referred to in this prospectus as "the Buyout." --------------------- "Outstanding notes" refers to all the 10 3/4% Senior Subordinated Notes due 2012 that were issued in a private placement transaction on November 20, 2003 and "exchange notes" refers to the 10 3/4% Senior Subordinated Notes due 2012 offered pursuant to this prospectus. i "Existing notes" refers to the $250,000,000 aggregate principal amount of 10 3/4% Senior Subordinated Notes due 2012 that were issued on September 18, 2002. We sometimes refer to the outstanding notes, the exchange notes and the existing notes collectively as the "notes". In addition, we may issue additional notes, under the Indenture subject to the terms of the Indenture, and these additional notes would also be included in the term "notes". --------------------- This prospectus includes trademarks owned by third parties, such as COOL WHIP(R), LIFE SAVERS(R), COLOMBO(R), PHILADELPHIA(R) Cream Cheese, CRYSTAL LIGHT(R), DANNON(R) and YOPLAIT(R). --------------------- NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH AN OFFER TO SELL OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS. ii CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This prospectus includes "forward-looking statements," within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with respect to our financial condition, results of operations and business and our expectations or beliefs concerning future events. Such statements include, in particular, statements about the benefits of the Landis Acquisition, and our plans, strategies and prospects under the headings "Summary," "Management's discussion and analysis of financial condition and results of operations" and "Business." You can identify certain forward-looking statements by our use of forward-looking terminology such as, but not limited to, "believes," "expects," "anticipates," "estimates," "intends," "plans," "targets," "likely," "will," "would," "could" and similar expressions identify forward-looking statements. All forward-looking statements involve risks and uncertainties. Many risks and uncertainties are inherent in our industry and markets. Others are more specific to our operations. The occurrence of the events described and the achievement of the expected results depend on many events, some or all of which are not predictable or within our control. Actual results may differ materially from the forward-looking statements contained in this prospectus. Factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include: - risks associated with our substantial indebtedness and debt service; - performance of our business and future operating results; - risks of competition in our existing and future markets; - changes in prices and availability of resin and other raw materials and our ability to pass on changes in raw material prices on a timely basis; - catastrophic loss of our key manufacturing facility; - risks related to the Landis Acquisition, including the integration of Landis into our business; - risks related to our acquisition strategy in general and integration of acquired businesses; - general business and economic conditions, particularly an economic downturn; - increases in the cost of compliance with laws and regulations, including environmental laws and regulations; and - the other risks described under the heading "Risk factors" beginning on page 8. All future written and verbal forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in or referred to in this section. We undertake no obligation, and specifically decline any obligation, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this prospectus might not occur. iii MARKET DATA The data included in this prospectus regarding markets, product categories and ranking, including, but not limited to, the size of certain markets and product categories and our position and the positions of our competitors within these markets and product categories, are based on our and Landis' estimates and definitions, which have been derived from management's knowledge and experience in the areas in which the relevant businesses operate, and information obtained from customers, distributors, suppliers, trade and business organizations and other contacts in the areas in which the relevant businesses operate. We have also cited information compiled by Plastics News, an industry publication. Unless otherwise specified, market share and product category data relate to the injection-molding segment of the plastics packaging industry. Although we believe that these sources are generally reliable, we have not independently verified data from these sources or obtained third party verification of this data. In addition, data within our industry are intended to provide general guidance but is inherently imprecise. References herein to our or Landis' being a leader in a product segment or product category refer to our or Landis, as the case may be, having a leading position based on sales in 2002 of injected-molded plastic products in such segment or product category, unless the context otherwise requires. The plastics packaging industry consists of rigid and non-rigid plastic products. There are three primary manufacturing processes used in the rigid plastics packaging segment of the plastics packaging industry: injection-molding and thermoforming, which both we and Landis use, and blow molding, which neither we nor Landis currently use. Each of these processes may be interchangeable depending on the product and the cost. Blow molding is used to produce most plastic drinking bottles, which constitutes approximately three-fourths of the United States plastic container demand by weight. iv PROSPECTUS SUMMARY This summary highlights material information contained elsewhere in this prospectus. This summary of material information contained elsewhere in this prospectus is not complete and does not contain all of the information that may be important to you. We urge you to read this entire prospectus carefully, including the "Risk factors" section and our and Landis' consolidated financial statements and related notes included elsewhere in this prospectus. BERRY PLASTICS CORPORATION We are one of the world's leading manufacturers and suppliers of a diverse mix of injection-molded plastic packaging products focusing on the open-top container, closure, aerosol overcap, drink cup and housewares markets. We sell a broad product line to over 12,000 customers. We concentrate on manufacturing higher quality, value-added products sold to image-conscious marketers of institutional and consumer products. We believe that our large operating scale, low-cost manufacturing capabilities, purchasing leverage, proprietary thermoforming technology and extensive collection of over 1,000 active proprietary molds provide us with a competitive advantage in the marketplace. We have been able to leverage our broad product offering, value-added manufacturing capabilities and long-standing customer relationships into leading positions across a number of products. The average length of our relationship with our top 10 customers in fiscal 2002 was over 16 years, and these customers represented approximately 19% of our fiscal 2002 net sales with no customer accounting for more than 4% of our fiscal 2002 net sales. We believe that over 58% of our 2002 revenues were generated from the sale of products that held a number one position relative to competing injection-molded products. Our products are primarily sold to customers in industries that exhibit relatively stable demand characteristics and are considered less sensitive to overall economic conditions, such as pharmaceuticals, food, dairy and health and beauty. Additionally, we operate 12 high-volume manufacturing facilities and have extensive distribution capabilities. We organize our product categories into three business divisions: containers, closures, and consumer products. The following table displays our net sales by division for each of the past five fiscal years.
- ------------------------------------------------------------------------------------------- (DOLLARS IN MILLIONS) 1998 1999 2000 2001 2002 - ------------------------------------------------------------------------------------------- Containers..................................... $154.0 $188.7 $231.2 $234.5 $250.4 Closures....................................... 56.4 81.0 112.2 132.4 133.9 Consumer products.............................. 61.4 59.1 64.7 94.8 110.0 ------------------------------------------ Total net sales........................... $271.8 $328.8 $408.1 $461.7 $494.3 - -------------------------------------------------------------------------------------------
THE LANDIS ACQUISITION On November 20, 2003, we acquired Landis Plastics, Inc., pursuant to which our wholly-owned subsidiary, Berry Plastics Acquisition Corporation IV, merged with and into Landis, and Landis became our wholly-owned subsidiary. The Landis Acquisition was funded through (1) the issuance of $85 million aggregate principal amount of the notes, which resulted in gross proceeds of $95.2 million, (2) $25 million of cash on hand, (3) aggregate net borrowings of $57.0 million under our amended and restated senior secured credit facility, consisting of $3.7 million of borrowings under our revolving credit facility and $53.3 million of additional 1 net borrowings under our new term loans, after giving effect to the refinancing of our prior term loan and (4) an aggregate common equity contribution of $62 million, consisting of contributions of $35.4 million by GS Capital Partners 2000, L.P. and its affiliates, $16.1 million by J.P. Morgan Partners Global Investors, L.P. and its affiliates, and an aggregate of $10.5 million from existing Landis shareholders. We also agreed to acquire, for $32 million, four facilities that Landis leased from certain of its affiliates. Prior to the closing of the Landis Acquisition, we assigned our rights and obligations to purchase the four facilities owned by affiliates of Landis to an affiliate of W.P. Carey & Co., L.L.C. and then leased those four facilities from them. The Landis Acquisition, the recent amendment and restatement of our senior secured credit facility, the borrowings under our revolving credit facility and our new term loans and the common equity contributions described above are collectively referred to in this prospectus as the Transactions. LANDIS PLASTICS, INC. Landis is a leading United States manufacturer of thinwall injection-molded and thermoformed plastic packaging. Landis manufactures rigid plastic packaging for yogurt and cultured dairy products and plastic packaging for margarine products. Landis also manufactures dessert, institutional and industrial plastic containers. While a substantial majority of Landis' sales are to the food industry, it also produces industrial packaging products used to store and transport products such as adhesives and wall and tile grout. Landis has focused its business on customers that are high-volume purchasers to take advantage of manufacturing efficiencies, and has strategically located its facilities to accommodate specific customer needs. Among its numerous products, Landis produces several highly recognized containers for large, well-known food processors, including General Foods (Kraft) Cool Whip, Philadelphia Cream Cheese and Crystal Light, General Mills Yoplait yogurt and Dannon yogurt. Landis organizes its products into five categories (by end-market): yogurt, dairy, margarine, dessert and industrial. These five categories accounted for approximately 37%, 28%, 18%, 9% and 8% of its 2002 net sales, respectively. Most of Landis' products are produced from either high density polyethylene or polypropylene and feature high resolution graphics through its eight color printing capability. BUSINESS STRATEGY Our goal is to leverage our core strengths to increase profitability. Our strategy to achieve this goal includes the following elements: - Increase sales to existing customers. - Aggressively pursue new customers. - Continue to effectively manage costs. - Selectively pursue strategic acquisitions in our core businesses. 2 THE EXCHANGE OFFER On November 20, 2003, we completed the offering of $85 million aggregate principal amount of 10 3/4% senior subordinated notes due 2012 in a transaction exempt from registration under the U.S. Securities Act of 1933, as amended (the "Securities Act"). The net proceeds of this offering were used to fund a portion of the Landis Acquisition. In connection with this offering, we entered into a registration rights agreement with the initial purchasers of the outstanding notes, in which we agreed to commence this exchange offer. Accordingly, you may exchange your outstanding notes for exchange notes which have substantially the same terms. You should read the discussion under the headings "The exchange offer" and "Description of exchange notes" for further information regarding the exchange notes to be issued in the exchange offer. SECURITIES OFFERED......Up to $85,000,000 aggregate principal amount of 10 3/4% senior subordinated notes due 2012, registered under the Securities Act. The terms of the exchange notes offered in the exchange offer are substantially identical to those of the outstanding notes, except that the transfer restrictions, registration rights and penalty interest provisions relating to the outstanding notes do not apply to the exchange notes. THE EXCHANGE OFFER......We are offering exchange notes in exchange for a like principal amount of our outstanding notes. We are offering these exchange notes to satisfy our obligations under a registration rights agreement which we entered into with the initial purchasers of the outstanding notes. You may tender your outstanding notes for exchange by following the procedures described under the heading "The exchange offer". TENDERS; EXPIRATION DATE; WITHDRAWAL........The exchange offer will expire at 5:00 p.m., New York City time, on , 2004, unless we extend it. If you decide to exchange your outstanding notes for exchange notes, you must acknowledge that you are not engaged in, and do not intend to engage in, a distribution of the exchange notes. You may withdraw any outstanding notes that you tender for exchange at any time prior to the expiration date of this exchange offer. See "The exchange offer--Terms of the exchange offer" for a more complete description of the tender and withdrawal period. CERTAIN MATERIAL U.S. FEDERAL TAX CONSIDERATIONS..........Your exchange of outstanding notes for exchange notes to be issued in the exchange offer will not result in any gain or loss to you for United States federal income tax purposes. See "Certain material U.S. federal tax considerations" for a summary of material United States federal income tax consequences associated with the exchange of outstanding notes for the exchange notes and the ownership and disposition of those exchange notes. USE OF PROCEEDS.........We will not receive any cash proceeds from the exchange offer. 3 EXCHANGE AGENT..........U.S. Bank Trust National Association SHELF REGISTRATION......If applicable interpretations of the staff of the SEC do not permit us to effect the exchange offer, we will be required to use our reasonable best efforts to file, and cause to become effective, a shelf registration statement under the Securities Act, which would cover resales of outstanding. See "Description of exchange notes--Registration rights; additional interest." CONSEQUENCES OF EXCHANGING YOUR OUTSTANDING NOTES.......Based on interpretations of the staff of the SEC, we believe that you may offer for resale, resell or otherwise transfer the exchange notes that we issue in the exchange offer without complying with the registration and prospectus delivery requirements of the Securities Act if: - you acquire the exchange notes issued in the exchange offer in the ordinary course of your business; - you are not participating, do not intend to participate, and have no arrangement or undertaking with anyone to participate, in the distribution of the exchange notes issued to you in the exchange offer; and - you are not an "affiliate" of us, as described in Rule 405 of the Securities Act. If any of these conditions are not satisfied and you transfer any exchange notes issued to you in the exchange offer without delivering a proper prospectus or without qualifying for a registration exemption, you may incur liability under the Securities Act. We will not be responsible for, or indemnify you against, any liability you incur. Any broker-dealer that acquires exchange notes in the exchange offer for its own account in exchange for outstanding notes which it acquired through market-making or other trading activities must acknowledge that it will deliver a prospectus when it resells or transfers any exchange notes issued in the exchange offer. See "Plan of distribution" for a description of the prospectus delivery obligations of broker-dealers in the exchange offer. THE EXCHANGE NOTES The following is a brief summary of the terms of the exchange notes. For a more complete description of the terms of the notes, see "Description of exchange notes" in this prospectus. ISSUER..................Berry Plastics Corporation, a Delaware corporation. SECURITIES OFFERED......$85,000,000 in aggregate principal amount of 10 3/4% senior subordinated notes due 2012. The exchange notes are being offered as additional debt securities under an indenture pursuant to which we 4 issued $250,000,000 of 10 3/4% senior subordinated notes due 2012, which we refer to as the existing notes. The exchange notes, the outstanding notes and the existing notes will be treated as a single class. MATURITY DATE...........July 15, 2012. INTEREST PAYMENT DATES...................January 15 and July 15. GUARANTORS..............The notes will be fully and unconditionally guaranteed by BPC Holding Corporation, our parent company, and each of our current and future domestic subsidiaries. These guarantees can be released upon the circumstances described under "Description of exchange notes--Certain covenants--Future note guarantors and release of note guarantees." If we cannot make payments on the notes when they are due, the note guarantors are obligated to make them instead. RANKING.................The notes will be unsecured and: - will be subordinated in right of payment to all existing and future senior debt; - will rank equally in right of payment with any existing and future senior subordinated debt; - will rank senior in right of payment to all future subordinated debt; - will be effectively subordinated to our secured debt to the extent of the value of the assets securing such debt; - will be effectively subordinated to all liabilities and preferred stock of our subsidiaries that do not guarantee the notes; and - any debt that could be incurred under the indenture may be deemed senior debt. Similarly, the guarantees of the notes by BPC Holding and our guarantor subsidiaries are unsecured and: - will be subordinated in right of payment to all of the applicable note guarantor's existing and future senior debt; - will rank equally in right of payment with any of the applicable note guarantors' existing and future senior subordinated debt; - will rank senior in right of payment to all of the applicable note guarantors' future subordinated debt; - will be effectively subordinated to all secured debt of such note guarantor to the extent of the value of the assets securing such debt; and - will be effectively subordinated to the obligations of any subsidiary of a note guarantor if that subsidiary is not a note guarantor. 5 On a pro forma basis after giving effect to the Transactions, as of September 27, 2003: - we would have had approximately $412.2 million of senior debt to which the notes and the note guarantees would be subordinated (which amount excludes $5.7 million of letters of credit and the remaining availability of $89.8 million under our revolving credit facility); however the covenants under our amended and restated senior secured credit facility may limit our ability to make such borrowings; - we would not have had any senior subordinated debt (other than the notes and the existing notes); - we would not have had any subordinated debt; and - our subsidiaries that are not guarantors of the notes would have had $12.2 million of liabilities including trade payables, but excluding liabilities owed to us. As of January 7, 2004, we could incur approximately $89.8 million in additional senior debt under our amended and restated senior secured credit facility, subject to conditions to borrowing; however, the covenants under our amended and restated senior secured credit facility may limit our ability to make such borrowings. OPTIONAL REDEMPTION.....We may redeem the notes, in whole or in part, at any time beginning on July 15, 2007 at the redemption prices listed under "Description of exchange notes--Optional redemption." In addition, before July 15, 2005, we may redeem up to 35% of the notes with the net cash proceeds from certain equity offerings at the price listed under "Description of exchange notes--Optional redemption." CHANGE OF CONTROL.......Upon the occurrence of a change of control, unless we have exercised our right to redeem all of the notes as described above, you will have the right to require us to purchase all or a portion of your notes at a purchase price in cash equal to 101% of the principal amount plus accrued and unpaid interest to the date of purchase. The occurrence of a change of control will also result in an event of default under our amended and restated senior secured credit facility, which would allow the lenders under that facility to accelerate their debt. Such acceleration will be considered an event of default under the notes. See "Description of exchange notes--Change of control." BASIC COVENANTS.........The indenture governing the notes contains covenants that impose significant restrictions on our business. The restrictions these covenants place on us and our restricted subsidiaries include limitations on our ability and the ability of our restricted subsidiaries to: - incur indebtedness; 6 - pay dividends or make distributions in respect of our capital stock or to make certain other restricted payments or investments; - sell assets, including capital stock of restricted subsidiaries; - agree to payment restrictions affecting our restricted subsidiaries; - consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; - enter into transactions with our affiliates; and - designate our subsidiaries as unrestricted subsidiaries. These covenants are subject to important exceptions and qualifications, which are described under "Description of exchange notes--Certain covenants." REGISTRATION RIGHTS; ADDITIONAL INTEREST.....In connection with the offering of the outstanding notes, we and our guarantors entered into a registration rights agreement pursuant to which we are obligated to file with the SEC this registration statement with respect to an offer to exchange the notes for substantially similar notes that are registered under the Securities Act. Alternatively, if the exchange offer is not available or cannot be completed or some holders are not able to participate in the exchange offer, we are required to file a shelf registration statement to cover resales of the notes under the Securities Act. If we do not comply with these obligations, we will be required to pay additional interest on the notes under specified circumstances. See "Description of exchange notes--Registration rights." RISK FACTORS You should carefully consider all the information in this prospectus prior to participating in the exchange offer. Our business is subject to significant risks. We may not be able to arrange for sources of resin in the event of an industry-wide general shortage of resins used by us, or a shortage or discontinuation of certain types of resins. Any such shortage may negatively impact our competitive position versus other companies that are able to better or more cheaply source resin. Additionally, increases in the cost of resin may significantly impact our financial condition to the extent we are not able to pass through any such cost increase. Our Evansville, Indiana facility produces approximately one-third of our products. A catastrophic loss of all or a part of the facility could have a material adverse effect on us. Also, we may not be able to successfully integrate Landis. In addition, we face intense competition in the sale of our products. Competition could result in our products losing market share or our having to reduce our prices, either of which would have a material adverse effect on our business and results of operations and financial condition. We have substantial debt, and we may incur substantial additional debt in the future under the terms of our indebtedness. On a pro forma basis after giving effect to the Transactions, as of September 27, 2003, we would have had total indebtedness of approximately $757.4 million, excluding $5.7 million in letters of credit under our revolving credit facility and, subject to certain conditions to borrowing, $89.8 million available for future borrowings under our revolving credit facility. In particular, we urge you to consider carefully the factors set forth under "Risk factors" beginning on page 8 of this prospectus. 7 RISK FACTORS You should read and consider carefully each of the following factors, as well as the other information contained in this prospectus before participating in the exchange offer or deciding whether to invest in the notes. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business. For purposes of this "Risk Factors" section, the terms "we", "our" or "us" refer to BPC Holding Corporation together with its consolidated subsidiaries (including Landis, unless the context signifies otherwise). RISKS RELATED TO THE NOTES WE HAVE SUBSTANTIAL DEBT AND WE MAY INCUR SUBSTANTIALLY MORE DEBT, WHICH COULD AFFECT OUR ABILITY TO MEET OUR OBLIGATIONS UNDER THE NOTES AND MAY OTHERWISE RESTRICT OUR ACTIVITIES. We have substantial debt and we may incur substantial additional debt in the future. On a pro forma basis after giving effect to the Transactions, as of September 27, 2003, we would have had total indebtedness of approximately $757.4 million, excluding $5.7 million in letters of credit under our revolving credit facility and, subject to certain conditions to borrowing, $89.8 million available for future borrowings under our revolving credit facility. As of January 7, 2004, we could incur approximately $89.8 million in additional senior debt under our amended and restated senior secured credit facility, subject to conditions to borrowing; however, the covenants under our amended and restated senior secured credit facility may limit our ability to make such borrowings. We are also permitted by the terms of the notes and our other debt instruments to incur substantial additional indebtedness, subject to the restrictions therein. See "Description of exchange notes--Certain covenants" and "Description of other indebtedness--The amended and restated senior secured credit facility." Any debt that could be incurred under the indenture may be deemed senior debt. Our substantial debt could have important consequences to you. For example, it could: - make it more difficult for us to satisfy our obligations under the notes; - require us to dedicate a substantial portion of our cash flow to payments on our indebtedness, which would reduce the amount of cash flow available to fund working capital, capital expenditures, product development and other corporate requirements; - increase our vulnerability to general adverse economic and industry conditions, including changes in raw material costs; - limit our ability to respond to business opportunities; - limit our ability to borrow additional funds, which may be necessary; and - subject us to financial and other restrictive covenants, which, if we fail to comply with these covenants and our failure is not waived or cured, could result in an event of default under our debt. TO SERVICE OUR DEBT, WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH. OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL. Our ability to make payments on our debt, including the notes, and to fund planned capital expenditures and research and development efforts will depend on our ability to generate cash in the future. This, to an extent, is subject to general economic, financial, competitive, 8 legislative, regulatory and other factors, including those described in this "Risk factors" section, that are beyond our control. On a pro forma basis after giving effect to the Transactions, our interest costs would have been approximately $40.7 million for the thirty-nine weeks ended September 27, 2003. If the interest rate on our variable rate debt increases by 1.00%, we estimate an annual increase in our pro forma interest expense of approximately $3.8 million. On a pro forma basis after giving effect to the Transactions, our principal payments due in the next twelve months are approximately $9.5 million. For future periods, see "Management's discussion and analysis of financial condition and results of operations--Liquidity and capital resources." Our business may not generate sufficient cash flow from operations and future borrowings may not be available to us under our amended and restated senior secured credit facility in an amount sufficient to enable us to pay our debt, including the notes, or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness, including the notes, at or before maturity. We may not be able to refinance any of our debt, including our amended and restated senior secured credit facility and the notes, on commercially reasonable terms or at all. THE AGREEMENTS GOVERNING THE NOTES AND OUR OTHER DEBT IMPOSE RESTRICTIONS ON OUR BUSINESS. The indenture governing the notes and the agreements that govern our amended and restated senior secured credit facility contain a number of covenants imposing significant restrictions on our business. These restrictions may affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise. The restrictions these covenants place on us and our restricted subsidiaries include limitations on our ability and the ability of our restricted subsidiaries to: - incur indebtedness or issue preferred shares; - pay dividends or make distributions in respect of our capital stock or to make certain other restricted payments; - create liens; - agree to payment restrictions affecting our restricted subsidiaries; - make acquisitions; - consolidate, merge, sell or lease all or substantially all of our assets; - enter into transactions with our affiliates; and - designate our subsidiaries as unrestricted subsidiaries. Our amended and restated senior secured credit facility also requires us to meet a number of financial ratios. For a discussion of these financial ratios, see "Description of other indebtedness--The amended and restated senior secured credit facility". The breach of any of these covenants or restrictions could result in a default under the indenture governing the notes or under our amended and restated senior secured credit facility. An event of default under our debt agreements would permit some of our lenders to declare all amounts borrowed from them to be immediately due and payable. If we were unable to repay debt to our lenders, these lenders could proceed against the collateral securing that debt. In addition, acceleration of our other indebtedness may cause us to be unable to make interest payments on the notes and repay the principal amount of the notes. 9 YOUR RIGHT TO RECEIVE PAYMENTS ON THE NOTES IS JUNIOR TO OUR EXISTING AND FUTURE SENIOR INDEBTEDNESS. FURTHER, THE GUARANTEES OF THE NOTES ARE JUNIOR TO ALL OF OUR GUARANTORS' EXISTING AND FUTURE SENIOR INDEBTEDNESS. The notes and the guarantees rank behind all of our and our guarantors' existing and future senior indebtedness. All of our and their future indebtedness will be deemed senior indebtedness, unless it expressly provides that it ranks equal with, or is subordinated in right of payment to, the notes and the guarantees. The notes offered by this prospectus rank equal to the existing notes. As of September 27, 2003, on a pro forma basis after giving effect to the Transactions, the amount of debt issued by us that is senior, or effectively senior, to the notes and the note guarantees would have been $412.2 million (which amount excludes $5.7 million of letters of credit and the remaining availability of $89.8 million under our revolving credit facility). As a result, upon any distribution to our creditors or the creditors of the guarantors in a bankruptcy, liquidation or reorganization or similar proceeding relating to us or the guarantors or our or their property, the holders of our senior debt and senior debt of the guarantors will be entitled to be paid in full before any payment may be made with respect to the notes or the guarantees. In addition, all payments on the notes and the guarantees will be blocked in the event of a payment default on senior debt and may be blocked for up to 179 of 360 consecutive days in the event of specified non-payment defaults on senior debt. In the event of a bankruptcy, liquidation or reorganization or similar proceeding relating to us or the guarantors, holders of the notes will participate with trade creditors and all other holders of our and the guarantors' senior subordinated indebtedness in the assets remaining after we and the guarantors have paid all of our and their senior debt. The indenture governing the notes requires that amounts otherwise payable to holders of the notes in a bankruptcy or similar proceeding be paid first to holders of any remaining senior indebtedness. In any of these cases, if our assets are insufficient to pay all of our creditors, the holders of the notes will receive a proportional payment only if the holders of our senior indebtedness are paid in full. In any of these cases, we and the guarantors may not have sufficient funds to pay all of our creditors and holders of notes may receive less, ratably, than the holders of our senior debt. See "Description of exchange notes--Ranking." THE NOTES ARE NOT SECURED BY ANY OF OUR ASSETS. HOWEVER, OUR AMENDED AND RESTATED SENIOR SECURED CREDIT FACILITY IS SECURED AND, THEREFORE, OUR BANK LENDERS HAVE A PRIOR CLAIM ON SUBSTANTIALLY ALL OF OUR ASSETS. The notes are not secured by any of our assets. However, our amended and restated senior secured credit facility is secured by (1) a pledge of 100% of the stock of our existing and future domestic subsidiaries and 65% of the stock of our existing and future first-tier foreign subsidiaries, and (2) substantially all of our assets. If we become insolvent or are liquidated, or if payment under any of the instruments governing our secured debt is accelerated, the lenders under these instruments will be entitled to exercise the remedies available to a secured lender under applicable law and pursuant to instruments governing such debt. Accordingly, the lenders under our amended and restated senior secured credit facility have a prior claim on our and our guarantor subsidiaries' assets. In that event, because the notes are not secured by any of our assets, it is possible that our remaining assets might be insufficient to satisfy your claims in full. At September 27, 2003, assuming the incurrence of additional borrowings under our amended and restated senior secured credit facility of $57.8 million, the outstanding balance 10 would have been $384.5 million, and we would have had remaining availability of $89.8 million under that facility. YOUR RIGHT TO RECEIVE PAYMENTS ON THE NOTES COULD BE ADVERSELY AFFECTED IF ANY OF OUR NON-GUARANTOR SUBSIDIARIES DECLARE BANKRUPTCY, LIQUIDATE, OR REORGANIZE; THE NOTES WILL BE STRUCTURALLY SUBORDINATED TO THE OBLIGATIONS OF OUR NON-GUARANTOR SUBSIDIARIES. Some but not all of our subsidiaries guarantee the notes. Our foreign subsidiaries are not guarantors on the notes, and will become so in the future only if they guarantee other debt of Berry Plastics or Berry Plastics' non-foreign subsidiaries. Furthermore, the guarantee of the notes may be released under the circumstances described under "Description of exchange notes--Certain covenants--Future note guarantors and release of note guarantees." Our obligations under the notes are structurally subordinated to the obligations of our non-guarantor subsidiaries. In the event of a bankruptcy, liquidation or reorganization of any of our non-guarantor subsidiaries, holders of their indebtedness and their trade creditors will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to us. As of September 27, 2003, on a pro forma basis after giving effect to the Transactions, our non-guarantor subsidiaries held 4% of our consolidated assets. These non-guarantor subsidiaries accounted for 3% of our pro forma net sales for fiscal year 2002. FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID GUARANTEES AND REQUIRE NOTE HOLDERS TO RETURN PAYMENTS RECEIVED FROM GUARANTORS. Under the federal bankruptcy law and comparable provisions of state fraudulent transfer laws, a guarantee could be voided, or claims in respect of a guarantee could be subordinated to all other debts of that guarantor under specific circumstances, including circumstances where the guarantor, at the time it incurred the indebtedness evidenced by its guarantee: - received less than reasonably equivalent value or fair consideration for the incurrence of such guarantee and was insolvent or rendered insolvent by reason of such incurrence; - was engaged in a business or transaction for which the guarantor's remaining assets constituted unreasonably small capital; or - intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature. In addition, any payment by that guarantor pursuant to its guarantee could be voided and required to be returned to the guarantor, or to a fund for the benefit of the creditors of the guarantor. 11 The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a guarantor would be considered insolvent if: - the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all of its assets; - the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or - it could not pay its debts as they become due. On the basis of historical financial information, recent operating history and other factors, we believe that each guarantor of the notes offered hereby, after giving effect to its guarantee of the notes offered hereby, will not be insolvent, will not have unreasonably small capital for the business in which it is engaged and will not have incurred debts beyond its ability to pay such debts as they mature. However, a court may apply a different standard in making these determinations or may not agree with our conclusions in this regard. WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE INDENTURE. Upon the occurrence of specific kinds of change of control events, we will be required to offer to repurchase all then-outstanding notes at 101% of the principal amount thereof plus accrued and unpaid interest and additional interest, if any, to the date of repurchase. However, it is possible that we will not have sufficient funds at the time of the change of control to make the required repurchase of notes or that restrictions in our amended and restated senior secured credit facility will not allow such repurchases. In addition, various important corporate events, such as leveraged recapitalizations that would increase the level of our indebtedness, would not constitute a "Change of Control" under the indenture. The occurrence of a change of control will also result in an event of default under our amended and restated senior secured credit facility, which would allow the lenders under that facility to accelerate their debt. Such acceleration will be considered an event of default under the notes. See "Description of exchange notes--Change of control." WE HAVE EXPERIENCED CONSOLIDATED NET LOSSES. Our net losses were $7.6 million for fiscal 1998, $9.1 million for fiscal 1999, $23.1 million for fiscal 2000, $2.1 million for fiscal 2001, and $32.6 million for fiscal 2002. Consolidated earnings have been insufficient to cover fixed charges by $7.0 million for fiscal 1998, by $7.1 million for fiscal 1999, by $20.5 million for fiscal 2000, by $0.8 million for fiscal 2001, and by $3.1 million for fiscal 2002. See "Management's discussion and analysis of financial condition and results of operations." THE OUTSTANDING NOTES HAVE NO PRIOR PUBLIC MARKET, AND A PUBLIC MARKET FOR THE NOTES OFFERED HEREBY MAY NOT DEVELOP OR BE SUSTAINED. The outstanding notes were issued to, and we believe these securities are currently owned by, a relatively small number of beneficial owners. The outstanding notes have not been registered under the Securities Act and will remain subject to restrictions on transferability if they are not exchanged for the exchange notes. Although the exchange notes may be resold or otherwise 12 transferred by the holders (who are not our affiliates) without compliance with the registration requirements under the Securities Act, and they will constitute the same issue of securities as the existing notes, a public market for the notes may not develop or be sustained. In addition, the exchange notes will not be listed on any national securities exchange. The exchange notes may trade at a discount from the initial offering price of the outstanding notes, depending upon many factors, including among other things, prevailing interest rates, the market for similar securities and other factors, including general economic conditions, our financial condition, performance and prospects and prospects for companies in our industry generally. In addition, the liquidity of the trading market in the notes and the market prices quoted for the notes may be adversely affected by changes in the overall market for high-yield securities. Although they are not obligated to do so, Goldman, Sachs & Co. and J.P. Morgan Securities Inc. have advised us that they presently intend to make a market in the notes as permitted by applicable law. Goldman, Sachs & Co. and J.P. Morgan Securities Inc. are not obligated, however, to make a market in the notes and any such market-making may be discontinued at any time at the sole discretion of Goldman, Sachs & Co. and J.P. Morgan Securities Inc. In addition, such market-making activity may be limited during the exchange offer and the pendency of a shelf registration. No assurance can be given as to the liquidity of any trading market for the notes, or the ability of the holders of the notes to sell their notes or the price at which such holders may be able to sell their notes. An active market for the notes may not develop or be sustained. If an active public market does not develop or continue, the market price and liquidity of the notes may be adversely affected. Historically, the market for non-investment grade debt has been volatile in terms of price. It is possible that the market for the notes will be volatile. This volatility in price may affect your ability to resell your notes or the timing of their sale. Notwithstanding the registration of the notes, holders who are "affiliates" (as defined under Rule 405 of the Securities Act) of us may publicly offer for sale or resale the notes only in compliance with the provisions of Rule 144 under the Securities Act. Each broker-dealer that receives exchange notes for its own account in exchange for outstanding notes, where such outstanding notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. See "Plan of distribution." Because we are an affiliate of Goldman, Sachs & Co. and J.P. Morgan Securities Inc., Goldman, Sachs & Co. and J.P. Morgan Securities Inc. are required to deliver a current "market-maker" prospectus and otherwise comply with the registration requirements of the Securities Act in connection with any secondary market sale of the notes, which may affect their ability to continue market-making activities. Following completion of the exchange offer, we have agreed to make a "market-maker" prospectus generally available to Goldman, Sachs & Co. and J.P. Morgan Securities Inc. to permit them to engage in market-making transactions. However, the registration rights agreement also provides that we may, for valid business reasons, allow the market-maker prospectus to cease to be effective and usable for a period of time set forth in the registration rights agreement or as otherwise acceptable to the market-maker. Valid business reasons include, without limitation, a potential acquisition, divestiture of assets or other material corporate transaction. As a result, the liquidity of the secondary market for the notes may be materially adversely affected by the unavailability of a current "market-maker" prospectus following the exchange offer. 13 YOU MAY HAVE DIFFICULTY SELLING THE NOTES WHICH YOU DO NOT EXCHANGE. If you do not exchange your outstanding notes for the exchange notes offered in this exchange offer, you will continue to be subject to the restrictions on the transfer of your outstanding notes. Those transfer restrictions are described in the indenture and in the legend contained on the outstanding notes, and arose because we originally issued the outstanding notes under exemptions from, and in transactions not subject to, the registration requirements of the Securities Act. In general, you may offer or sell your outstanding notes only if they are registered under the Securities Act and applicable state securities laws, or if they are offered and sold under an exemption from those requirements. We do not intend to register the outstanding notes under the Securities Act. If a large number of outstanding notes are exchanged for notes issued in the exchange offer, it may be more difficult for you to sell your unexchanged notes. In addition, if you do not exchange your outstanding notes in the exchange offer, you will no longer be entitled to have those notes registered under the Securities Act. See "The exchange offer--Consequences of failure to exchange your outstanding notes" for a discussion of the possible consequences of failing to exchange your outstanding notes. RISKS RELATED TO OUR BUSINESS WE DO NOT HAVE GUARANTEED SUPPLY OR FIXED-PRICE CONTRACTS WITH PLASTIC RESIN SUPPLIERS. We source plastic resin primarily from major industry suppliers such as Dow Chemical, Chevron, Nova, ExxonMobil, Atofina, Basell and Equistar. We have long-standing relationships with some of these suppliers but we have no guaranteed supply or fixed-price contracts with any of our resin vendors. We may not be able to arrange for other sources of resin in the event of an industry-wide general shortage of resins used by us, or a shortage or discontinuation of certain types of grades of resin purchased from one or more of our suppliers. Any such shortage may negatively impact our competitive position versus companies that are able to better or more cheaply source resin. Additionally, we may be subject to significant increases in prices that may materially impact our financial condition. Over the past several years we have at times experienced rapidly increasing resin prices primarily due to the increased cost of oil and natural gas. Due to the uncertain extent and rapid nature of cost increases, we cannot reasonably estimate our ability to successfully recover any cost increases in the short-term. If rapidly increasing resin prices occur, our revenue and/or profitability may be materially and adversely affected, both in the short-term as we attempt to pass through changes in the cost of resin to customers under current agreements and in the longer term as we negotiate new agreements. IF MARKET CONDITIONS DO NOT PERMIT US TO PASS ON THE COST OF PLASTIC RESINS TO OUR CUSTOMERS ON A TIMELY BASIS, OR AT ALL, OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS COULD SUFFER MATERIALLY. To produce our products we use large quantities of plastic resins, which in fiscal 2002 cost us approximately $113.0 million, or 30% of our total cost of goods sold and cost Landis approximately $58.9 million, or 36% of its total cost of goods sold. Plastic resins are subject to cyclical price fluctuations, including those arising from supply shortages and changes in the prices of natural gas, crude oil and other petrochemical intermediates from which resins are produced. The instability in the world markets for petroleum and natural gas could materially 14 adversely affect the prices and general availability of raw materials quickly. Based on information from Plastics News, an industry publication, average spot prices of HDPE and PP on October 27, 2003 were $0.515 per pound and $0.47 per pound, respectively, reflecting increases of $0.12 per pound, or 30%, and $0.08 per pound, or 21%, over the respective average spot prices from December 28, 2002. Historically, we and Landis have generally been able to pass on a significant portion of the increases in resin prices to our customers over a period of time, but even in such cases there have been significant negative short-term impacts to our and Landis' respective financial performances. Some of our customers (currently accounting for fewer than 10% of our net sales) purchase our products pursuant to fixed-price arrangements in respect of which we have at times and may continue to enter into hedging or similar arrangements. In the future, we may not be able to pass on substantially all of the increases in resin prices to our customers on a timely basis, if at all, which would have a material adverse effect on our competitive position and financial performance. WE FACE INTENSE COMPETITION AND MAY NOT BE ABLE TO COMPETE SUCCESSFULLY; OUR CUSTOMERS MAY NOT CONTINUE TO PURCHASE OUR PRODUCTS. We face intense competition in the sale of our products. We compete with multiple companies in each of our product lines, including divisions or subsidiaries of larger companies. We compete on the bases of a number of considerations, including price, service, quality, product characteristics and the ability to supply products to customers in a timely manner. Our products also compete with metal and glass, paper and other packaging materials as well as plastic packaging materials made through different manufacturing processes. Many of our product lines also compete with plastic products in other lines and segments. Many of our competitors have financial and other resources that are substantially greater than ours and may be better able than us to withstand price competition. In addition, some of our customers do and could in the future choose to manufacture the products they require for themselves. Furthermore, there are relatively low barriers to entry into our business and for each of our product lines. Each of our product lines faces a different competitive landscape. We may not be able to compete successfully with respect to any of the foregoing factors. Competition could result in our products losing market share or our having to reduce our prices, either of which would have a material adverse effect on our business and results of operations and financial condition. In addition, since we don't have long-term arrangements with many of our customers, these competitive factors could cause our customers to shift suppliers and/or packaging material quickly. IN THE EVENT OF A CATASTROPHIC LOSS OF OUR KEY MANUFACTURING FACILITY, OUR BUSINESS WOULD BE ADVERSELY AFFECTED. Our primary manufacturing facility is in Evansville, Indiana, where we produce approximately 30% of our products. While we maintain insurance covering the facility, including business interruption insurance, a catastrophic loss of the use of all or a portion of the facility due to accident, labor issues, weather conditions, other natural disaster or otherwise, whether short or long-term, could have a material adverse effect on us. After the Landis Acquisition, approximately 20% of our products are produced at this facility. OUR ACQUISITION STRATEGY MAY BE UNSUCCESSFUL. As part of our growth strategy, we plan to pursue the acquisition of other companies, assets and product lines that either complement or expand our existing business. We may not be able 15 to consummate any such transaction, at all or assure that any future acquisitions will be able to be consummated at acceptable prices and terms. We expect to continue to evaluate potential acquisition opportunities in the ordinary course of business, including those that could be material in size and scope. Acquisitions involve a number of special risks and factors, including: - the focus of management's attention to the assimilation of the acquired companies and their employees and on the management of expanding operations; - the incorporation of acquired products into our product line; - the increasing demands on our operational systems; - adverse effects on our reported operating results; and - the loss of key employees and the difficulty of presenting a unified corporate image. We may be unable to make appropriate acquisitions because of competition for the specific acquisition. In pursuing acquisitions, we compete against other plastic product manufacturers, some of which are larger than we are and have greater financial and other resources than we have. We compete for potential acquisitions based on a number of factors, including price, terms and conditions, size and ability to offer cash, stock or other forms of consideration. Increased competition for acquisition candidates could result in fewer acquisition opportunities for us and higher acquisition prices. As a company without public equity, we may not be able to offer attractive equity to potential sellers. Additionally, our acquisition strategy may result in significant increases in our outstanding indebtedness and debt service requirements. In addition, the negotiation of potential acquisitions may require members of management to divert their time and resources away from our operations. We may become responsible for unexpected liabilities that we failed or were unable to discover in the course of performing due diligence in connection with the Landis Acquisition and any future acquisitions. We have required the selling stockholders of Landis to indemnify us against certain undisclosed liabilities. However, the indemnification, even if obtained, may not be enforceable, collectible or sufficient in amount, scope or duration to fully offset the possible liabilities associated with the business or property acquired. Any of these liabilities, individually or in the aggregate, could have a material adverse effect on our business, financial condition and results of operations. THE INTEGRATION OF ACQUIRED BUSINESSES, INCLUDING LANDIS, MAY RESULT IN SUBSTANTIAL COSTS, DELAYS OR OTHER PROBLEMS. We may not be able to successfully integrate Landis or any future acquisitions without substantial costs, delays or other problems. We will have to continue to expend substantial managerial, operating, financial and other resources to integrate our businesses. The costs of such integration could have a material adverse effect on our operating results and financial condition. Such costs include non-recurring acquisition costs including accounting and legal fees, investment banking fees, recognition of transaction-related obligations, plant closing and similar costs and various other acquisition-related costs. In addition, although we conduct what we believe to be a prudent level of investigation regarding the businesses we purchase, in light of the circumstances of each transaction, an unavoidable level of risk remains regarding the actual condition of these businesses. Until we actually assume operating control of such business assets and their operations, we may not be able to ascertain the actual value or 16 understand the potential liabilities of the acquired entities and their operations. Once we acquire a business, we are faced with risks, including: - the possibility that it will be difficult to integrate the operations into our other operations; - the possibility that we have acquired substantial undisclosed liabilities; - the risks of entering markets or offering services for which we have no prior experience; - the potential loss of customers as a result of changes in management; and - the possibility we may be unable to recruit additional managers with the necessary skills to supplement the incumbent management of the acquired business. We may not be successful in overcoming these risks. The acquisition of Landis is significantly larger than any of our previous acquisitions. The significant expansion of our business and operations resulting from the acquisition of Landis may strain our administrative, operational and financial resources. The integration of Landis into our company will require substantial time, effort, attention, and dedication of management resources and may distract our management in unpredictable ways from our existing business. The integration process could create a number of adverse consequences for us, including the possible unexpected loss of key employees, customers or suppliers, a possible loss of sales or an increase in operating or other costs. The foregoing could have a material adverse effect on our business, financial condition and results of operations. We may not be able to manage the combined operations and assets effectively or realize all or any of the anticipated benefits of the Landis Acquisition. WE RELY ON UNPATENTED PROPRIETARY KNOW-HOW AND TRADE SECRETS. In addition to relying on patent and trademark rights, we rely on unpatented proprietary know-how and trade secrets, and employ various methods, including confidentiality agreements with employees and consultants, to protect our know-how and trade secrets. However, these methods and our patents and trademarks may not afford complete protection and there can be no assurance that others will not independently develop the know-how and trade secrets or develop better production methods than us. Further, we may not be able to deter current and former employees, contractors and other parties from breaching confidentiality agreements and misappropriating proprietary information and it is possible that third parties may copy or otherwise obtain and use our information and proprietary technology without authorization or otherwise infringe on our intellectual property rights. Additionally, we have licensed, and may license in the future, patents, trademarks, trade secrets, and similar proprietary rights to and from third parties. While we attempt to ensure that our intellectual property and similar proprietary rights are protected and that the third party rights we need are licensed to us when entering into business relationships, third parties may take actions that could materially and adversely affect our rights or the value of our intellectual property, similar proprietary rights or reputation. Furthermore, we can give you no assurance that claims or litigation asserting infringement of intellectual property rights will not be initiated by third parties seeking damages, the payment of royalties or licensing fees and/or an injunction against the sale of our products or that we would prevail in any litigation or be successful in preventing such judgment. See "Business--Berry Plastics--Legal proceedings." in the future, we may also rely on litigation to enforce our intellectual property rights and contractual rights, 17 and, if not successful, we may not be able to protect the value of our intellectual property. Any litigation could be protracted and costly and could have a material adverse effect on our business and results of operations regardless of its outcome. Although we believe that our intellectual property rights are sufficient to allow us to conduct our business without incurring liability to third parties, our products may infringe on the intellectual property rights of third parties and our intellectual property rights may not have the value we believe them to have. A SIGNIFICANT AMOUNT OF OUR NET WORTH REPRESENTS GOODWILL AND OTHER INTANGIBLES, AND A WRITE-OFF COULD RESULT IN LOWER REPORTED NET INCOME AND A REDUCTION OF OUR NET WORTH. On a pro forma basis after giving effect to the Transactions, as of September 27, 2003, the net value of our goodwill and other intangibles was approximately $547.2 million. In July 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets." Under the new standard, we are no longer required or permitted to amortize goodwill reflected on our balance sheet. We are, however, required to evaluate goodwill reflected on our balance sheet when circumstances indicate a potential impairment, or at least annually, under the new impairment testing guidelines outlined in the standard. Future changes in the cost of capital, expected cash flows, or other factors may cause our goodwill to be impaired, resulting in a noncash charge against results of operations to write-off goodwill for the amount of impairment. If a significant write-off is required, the charge would have a material adverse effect on our reported results of operations and net worth in the period of any such write-off. CURRENT AND FUTURE ENVIRONMENTAL AND OTHER GOVERNMENTAL REQUIREMENTS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND OUR ABILITY TO CONDUCT OUR BUSINESS. Our operations are subject to federal, state, local and foreign environmental laws and regulations that impose limitations on the discharge of pollutants into the air and water and establish standards for the use of hazardous materials and the treatment, storage and disposal of solid and hazardous wastes. While we have never been required historically to make significant capital expenditures in order to comply with applicable environmental laws and regulations, we cannot predict with any certainty our future capital expenditure requirements because of continually changing compliance standards and environmental technology. Furthermore, violations or contaminated sites that we do not know about (including contamination caused by prior owners and operators of such sites) could result in additional compliance or remediation costs or other liabilities. We have limited insurance coverage for environmental liabilities and we do not anticipate increasing such coverage in the future. We may also assume significant environmental liabilities in acquisitions. In addition, federal, state and local governments could enact laws or regulations concerning environmental matters that increase the cost of producing, or otherwise adversely affect the demand for, plastic products. Legislation that would prohibit, tax or restrict the sale or use of certain types of plastic and other containers, and would require diversion of solid wastes such as packaging materials from disposal in landfills, has been or may be introduced in the United States Congress, in state legislatures and other legislative bodies. While container legislation has been adopted in a few jurisdictions, similar legislation has been defeated in public referenda in several states, local elections and many state and local legislative sessions. Although we believe that the laws promulgated to date have not had a material adverse effect on us, we can give you no assurance that future legislation or regulation would not have a material adverse effect on us. Furthermore, a decline in consumer preference for plastic products due to environmental considerations could have a negative effect on our business. 18 The Food and Drug Administration, or FDA, regulates the material content of direct-contact food containers and packages we manufacture pursuant to the Federal Food, Drug and Cosmetic Act. Furthermore, some of our products are regulated by the Consumer Product Safety Commission, or CPSC, pursuant to various federal laws, including the Consumer Product Safety Act. Both the FDA and the CPSC can require the manufacturer of defective products to repurchase or recall these products and may also impose fines or penalties on the manufacturer. Similar laws exist in some states, cities and other countries in which we sell products. In addition, laws exist in certain states restricting the sale of packaging with certain levels of heavy metals and imposing fines and penalties for noncompliance. Although we use FDA-approved resins and pigments in containers that directly contact food products and we believe our products are in material compliance with all applicable requirements, we remain subject to the risk that our products could be found to be not in compliance with these and other requirements. A recall of any of our products or any fines and penalties imposed in connection with non-compliance could have a materially adverse effect on us. See "Business--Berry Plastics--Environmental matters and government regulation" and "Business--Landis--Environmental matters and government regulation". OUR OPERATIONS OUTSIDE OF THE UNITED STATES ARE SUBJECT TO ADDITIONAL CURRENCY EXCHANGE, POLITICAL, INVESTMENT AND OTHER RISKS. We currently operate two facilities outside the United States which combined accounted for approximately 3% of our pro forma 2002 net sales. This amount may change in the future as we are subject to the risks associated with selling and operating in foreign countries, including devaluations and fluctuations in foreign currencies, unstable political conditions, imposition of limitations on conversion of foreign currencies into United States dollars and remittance of dividends and payments by foreign subsidiaries. The imposition of taxes and imposition or increase of investment and other restrictions, tariffs or quotas may also have a negative effect on our business and profitability. WE ARE CONTROLLED BY AFFILIATES OF GOLDMAN, SACHS & CO. AND J.P. MORGAN SECURITIES INC., AND THEIR INTERESTS AS EQUITY HOLDERS MAY CONFLICT WITH YOUR INTERESTS AS A CREDITOR. As a result of the Buyout, certain private equity funds affiliated with Goldman, Sachs & Co. and J.P. Morgan Securities Inc. own a substantial majority of our common stock. The interests of Goldman, Sachs & Co. and J.P. Morgan Securities Inc. and their respective affiliates may not in all cases be aligned with your interests as a holder of the notes. Goldman, Sachs & Co. and J.P. Morgan Securities Inc. and their respective affiliates, control the power to elect our directors, to appoint members of management and to approve all actions requiring the approval of the holders of our common stock, including adopting amendments to our certificate of incorporation and approving mergers, certain acquisitions or sales of all or substantially all of our assets. For example, Goldman, Sachs & Co. and J.P. Morgan Securities Inc. and their respective affiliates could pursue acquisitions, divestitures or other transactions that, in their judgment, could enhance their equity investment, even though such transactions might involve significant risks to the holders of the notes. 19 USE OF PROCEEDS We will not receive any proceeds in connection with the exchange offer. In consideration for issuing the exchange notes in exchange for the outstanding notes as described in this prospectus, we will receive, retire and cancel the outstanding notes tendered in the exchange offer. The net proceeds from the sale of the outstanding notes, after deducting fees and expenses, was approximately $92.2 million. We used all of the net proceeds to fund a portion of the consideration for, and fees and expenses relating to, the Landis Acquisition. 20 CAPITALIZATION The following table sets forth our (i) capitalization as of September 27, 2003 and (ii) capitalization as of such date as adjusted to give effect to the Transactions. This table should be read in conjunction with "Use of proceeds" and our combined financial statements and related notes and the unaudited pro forma financial statements included elsewhere in this prospectus.
- -------------------------------------------------------------------------------------- AS OF SEPTEMBER 27, 2003 (UNAUDITED) ------------------------ (DOLLARS IN THOUSANDS) ACTUAL PRO FORMA - -------------------------------------------------------------------------------------- Long-term debt (including current portion thereof): Amended and restated senior secured credit facilities Revolving credit facility(1)............................. $ - $ 4,500 Term loans(2)............................................ 326,700 380,000 Existing notes.............................................. 250,000 250,000 Notes offered hereby, including premium..................... - 95,200 Capital leases.............................................. 25,306 25,306 Nevada industrial revenue bonds and other................... 2,429 2,429 ------------------------ Total debt............................................ 604,435 757,435 Stockholders' equity: Preferred stock.......................................... - - Common stock............................................. 28 34 Additional paid-in capital............................... 282,370 344,364 Adjustment of the carryover basis of continuing stockholders........................................... (196,603) (196,603) Notes receivable--common stock........................... (13,966) (13,966) Treasury stock........................................... (1,972) (1,972) Retained earnings........................................ 15,018 15,018 Accumulated other comprehensive income................... 2,227 2,227 ------------------------ Total stockholders' equity............................ 87,102 149,102 ------------------------ Total capitalization........................................ $ 691,537 $ 906,537 - --------------------------------------------------------------------------------------
(1) As of September 27, 2003, on a pro forma basis after giving effect to the Transactions, we would have had unused borrowing capacity under the revolving credit facility of $89.8 million, with $5.7 million in letters of credit outstanding thereunder. As of the date of this prospectus, we had no borrowings outstanding under our revolving credit facility. (2) Between September 27, 2003 and the date of this prospectus, we made a principal payment of $1.6 million on our term loans and scheduled payments on capital leases. 21 UNAUDITED PRO FORMA FINANCIAL INFORMATION Set forth below are the unaudited pro forma combined balance sheet of BPC Holding as of September 27, 2003 and Landis as of September 28, 2003, assuming the Transactions occurred on September 27, 2003 (with respect to BPC Holding) and September 28, 2003 (with respect to Landis), and the unaudited pro forma combined statements of operations of BPC Holding for the year ended December 28, 2002 and the thirty-nine weeks ended September 27, 2003 and of Landis for the year ended December 31, 2002 and the thirty-nine weeks ended September 28, 2003 assuming the Transactions occurred at the beginning of the respective period. The unaudited pro forma combined statement of operations for the year ended December 28, 2002 has been prepared assuming the Buyout occurred at the beginning of the period. The pro forma statements of operations do not reflect transaction costs that will be expensed in connection with the Transactions. We do not believe that any write-offs will be material to the Company. For presentation purposes, the results under Holding's prior ownership ("Predecessor") for periods prior to the Buyout have been combined with results of the Company subsequent to the Buyout. The unaudited pro forma combined financial information is presented for informational purposes only and does not purport to represent the financial condition of BPC Holding had the Transactions occurred on September 27, 2003 or the results of operations of us for the year ended December 28, 2002 or the thirty-nine weeks ended September 27, 2003 had the Transactions occurred at the beginning of such period, or to project the results for any future date or period. The unaudited pro forma combined financial information should be read in conjunction with the financial statements and related notes thereto included elsewhere in this prospectus and the information set forth in "Management's discussion and analysis of financial condition and results of operations." 22 PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 27, 2003
- ------------------------------------------------------------------------------------------------------ BPC HOLDING LANDIS AS OF AS OF ADJUSTMENTS PRO FORMA SEPTEMBER 27, SEPTEMBER 28, FOR THE FOR THE (DOLLARS IN THOUSANDS) 2003 2003 TRANSACTIONS TRANSACTIONS - ------------------------------------------------------------------------------------------------------ ASSETS Current assets: Cash and cash equivalents...... $ 26,452 $ 6,903 $(28,730)(1) $ 4,625 Accounts receivable............ 67,854 24,868 (261)(2) 92,461 Inventories.................... 57,819 22,299 3,259(3) 83,377 Other current assets........... 8,502 2,106 - 10,608 ------------------------------------------------------------------ Total current assets........ 160,627 56,176 (25,732) 191,071 Property and equipment, net....... 190,835 64,681 10,846(2)(5) 266,362 Intangible assets................. 413,041 - 134,129(4) 547,170 Other assets...................... 102 10,369 (9,986)(2)(5) 485 ------------------------------------------------------------------ Total assets................ $ 764,605 $131,226 $109,257 $1,005,088 ------------------------------------------------------------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable............... $ 33,266 $ 10,113 $ - $ 43,379 Accrued interest............... 6,623 105 3,068(6) 9,796 Other current liabilities...... 28,483 12,505 (391)(2) 40,597 Current portion of long-term debt........................ 9,000 5,786 (5,286)(7) 9,500 ------------------------------------------------------------------ Total current liabilities... 77,372 28,509 (2,609) 103,272 Long-term debt (less current portion)....................... 595,435 26,801 125,699(7) 747,935 Other liabilities................. 4,696 83 - 4,779 ------------------------------------------------------------------ Total liabilities........... 677,503 55,393 123,090 855,986 ------------------------------------------------------------------ Stockholders' equity: Preferred stock................ - - - - Common stock................... 28 54 (48)(8) 34 Additional paid-in capital..... 282,370 1,258 60,736(8) 344,364 Adjustment of the carryover basis of continuing stockholders................ (196,603) - - (196,603) Notes receivable-common stock.. (13,966) - - (13,966) Treasury stock................. (1,972) - - (1,972) Retained earnings.............. 15,018 74,521 (74,521)(2)(8) 15,018 Accumulated other comprehensive income...................... 2,227 - - 2,227 ------------------------------------------------------------------ Total stockholders' equity................... 87,102 75,833 (13,833) 149,102 ------------------------------------------------------------------ Total liabilities and stockholders' equity..... $ 764,605 $131,226 $109,257 $1,005,088 - ------------------------------------------------------------------------------------------------------
23 NOTES TO PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 27, 2003 (DOLLARS IN THOUSANDS) (1) This adjustment reflects the elimination of Landis cash of ($6,903) not being acquired in the Landis Acquisition, the Company's estimated use of cash of ($25,000) in connection with the purchase price, and assumed accrued interest received of $3,173 on the outstanding notes. (2) This adjustment reflects the elimination of transactions with related parties on Landis' balance sheet that were terminated prior to the Landis Acquisition. See notes 2, 3, 4 and 5 of Landis' audited financial statements for the years ended December 31, 2002 and 2001, included elsewhere in this prospectus. The detail by account is as follows:
- --------------------------------------------------------------------- Accounts receivable......................................... $ (261) Property and equipment, net................................. (43) Other assets................................................ (4,766) ------- $(5,070) ------- Other current liabilities................................... (391) Retained earnings........................................... (4,679) ------- $(5,070) - ---------------------------------------------------------------------
(3) This adjustment reflects Landis changing its accounting policy for its inventory from a LIFO basis to a FIFO basis, consistent with the Company's accounting policy. (4) The Landis Acquisition will be accounted for as a purchase. Preliminarily, we have allocated the excess of the purchase price over the net assets acquired to goodwill (included in intangible assets). Under generally accepted accounting principles, goodwill is not amortized but is reviewed for impairment annually. We have not completed the process of reviewing our assets to determine the amount of any write-up or write-down to fair value of our net assets in connection with the Landis Acquisition. Accordingly, the allocation described below is subject to change when we determine the purchase price allocation. If our non-goodwill assets are written up to fair value in connection with the Landis Acquisition, our expenses in the future will be higher as a result of increased depreciation and amortization of our assets. Similarly, if our non-goodwill assets are written down to fair value, our depreciation and amortization will decrease in the future.
- ----------------------------------------------------------------------- Purchase price.............................................. $228,000 Estimated transaction costs................................. 12,000 -------- Total consideration......................................... 240,000 Less: Net assets acquired................................... 105,871 -------- Net adjustment.............................................. $134,129 - -----------------------------------------------------------------------
(5) This adjustment reclassifies Landis' assets in progress of $5,220 from other assets to property and equipment, net and capitalization of Landis tooling costs of $5,669 in each case to be consistent with the Company's presentation. 24 (6) This adjustment reflects the elimination of Landis accrued interest of ($105) and the assumed accrued interest received from investors upon the issuance of the outstanding notes of $3,173. (7) This adjustment reflects the retirement of Landis debt and the financings in connection with the Transactions.
- ---------------------------------------------------------------------------------------------- CURRENT LONG-TERM PORTION DEBT - ---------------------------------------------------------------------------------------------- Retirement of Landis debt................................... $ (5,786) $ (26,801) Outstanding notes........................................... - 95,200(a) Revolving line of credit.................................... - 4,500 Existing term loan.......................................... (3,300) (323,400) New term loan............................................... 3,800 376,200 -------------------------------- Net adjustments............................................. $ (5,286) $ 125,699 - ----------------------------------------------------------------------------------------------
(a) Includes unamortized bond premium. (8) This adjustment reflects the elimination of Landis stockholders' equity and the issuance of common stock in connection with the Landis Acquisition, including the after-tax reinvestment of approximately $10.5 million by Landis management.
- ------------------------------------------------------------------------------------------------- ADDITIONAL COMMON PAID-IN RETAINED STOCK CAPITAL EARNINGS - ------------------------------------------------------------------------------------------------- Landis equity............................. $ (54) $ (1,258) $ (69,842) New equity................................ 6 61,994 - ----------------------------------------------------- Net adjustments........................... $ (48) $ 60,736 $ (69,842) - -------------------------------------------------------------------------------------------------
25 PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE FISCAL YEAR ENDED DECEMBER 28, 2002
- ---------------------------------------------------------------------------------------------------------------------- ADJUSTMENTS PRO FORMA PREDECESSOR COMPANY LANDIS YEAR FOR THE FOR THE PERIOD FROM PERIOD FROM COMBINED ENDED BUYOUT BUYOUT 12/30/01- 7/22/02- COMPANY & DECEMBER 31, AND THE AND THE (DOLLARS IN THOUSANDS) 7/21/02 12/28/02 PREDECESSOR 2002 TRANSACTIONS TRANSACTIONS - ---------------------------------------------------------------------------------------------------------------------- Net sales.................. $ 280,677 $ 213,626 $ 494,303 $ 211,613 $ - $ 705,916 Cost of goods sold......... 207,458 163,815 371,273 166,977 (2,572)(1) 535,678 ----------------------------------------------------------------------------------------- Gross profit............... 73,219 49,811 123,030 44,636 2,572 170,238 Operating expenses......... 33,321 23,159 56,480 31,048 (235)(3) 87,293 Merger expenses............ 20,987 - 20,987 - (20,987)(2) - ----------------------------------------------------------------------------------------- Operating income........... 18,911 26,652 45,563 13,588 23,794 82,945 Other expenses............. 291 8 299 81 - 380 Loss on extinguished debt.. 25,328 - 25,328 - (25,328)(6) - Interest expense, net...... 28,742 20,512 49,254 2,694 4,680(4) 56,628 ----------------------------------------------------------------------------------------- Income (loss) before income taxes................... (35,450) 6,132 (29,318) 10,813 44,442 25,937 Income taxes............... 345 2,953 3,298 23 7,718(5) 11,039 ----------------------------------------------------------------------------------------- Net income (loss).......... (35,795) 3,179 (32,616) 10,790 36,724 14,898 Preferred stock dividends............... 6,468 - 6,468 - (6,468)(7) - Amortization of preferred stock dividends......... 574 - 574 - (574)(8) - ----------------------------------------------------------------------------------------- Net income (loss) attributable to common stockholders............ $ (42,837) $ 3,179 $ (39,658) $ 10,790 $ 43,766 $ 14,898 ----------------------------------------------------------------------------------------- OTHER DATA: Depreciation and amortization............ $ 24,775 $ 17,190 $ 41,965 $ 12,561 $ 2,085(1) $ 56,611 - ----------------------------------------------------------------------------------------------------------------------
26 PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THIRTY-NINE WEEKS ENDED SEPTEMBER 27, 2003
- ------------------------------------------------------------------------------------------------------------ BPC HOLDING LANDIS THIRTY-NINE THIRTY-NINE WEEKS ENDED WEEKS ENDED ADJUSTMENTS PRO FORMA SEPTEMBER 27, SEPTEMBER 28, FOR THE FOR THE (DOLLARS IN THOUSANDS) 2003 2003 TRANSACTIONS TRANSACTIONS - ------------------------------------------------------------------------------------------------------------ Net sales................................. $ 411,555 $ 164,525 $ - $ 576,080 Cost of goods sold........................ 313,221 134,371 (2,735)(1) 444,857 ---------------------------------------------------------------- Gross profit.............................. 98,334 30,154 2,735 131,223 Operating expenses........................ 43,176 25,648 (176)(3) 68,648 ---------------------------------------------------------------- Operating income.......................... 55,158 4,506 2,911 62,575 Interest expense, net..................... 33,794 1,886 4,994(4) 40,674 ---------------------------------------------------------------- Income (loss) before income taxes......... 21,364 2,620 (2,083) 21,902 Income taxes.............................. 9,525 77 127(5) 9,729 ---------------------------------------------------------------- Net income (loss)......................... $ 11,839 $ 2,543 $ (2,210) 12,172 ---------------------------------------------------------------- OTHER DATA: Depreciation and amortization............. $ 31,054 $ 9,586 $ 1,519(1) $ 42,159 - ------------------------------------------------------------------------------------------------------------
27 NOTES TO PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS) (1) This adjustment reflects Landis changing its accounting policy for its inventory from a LIFO basis to a FIFO basis and capitalization and related depreciation of tooling costs in order to be consistent with the Company's accounting policies, the elimination of operating leases that are not being assumed in the Landis Acquisition, and new operating leases consummated.
- ------------------------------------------------------------------------------------------- THIRTY-NINE WEEKS ENDED 2002 SEPTEMBER 27, 2003 - ------------------------------------------------------------------------------------------- LIFO adjustment to FIFO..................................... $(1,615) $ (1,499) Tooling costs to be capitalized............................. (1,392) (1,525) Depreciation on capitalized tooling......................... 2,085 1,519 Operating leases not part of purchase....................... (4,610) (3,450) New operating leases........................................ 2,960 2,220 ---------------------------- Net adjustments............................................. $(2,572) $ (2,735) - -------------------------------------------------------------------------------------------
(2) This adjustment reflects the elimination of Buyout expenses of ($20,987) in the period from December 30, 2001 to July 21, 2002. (3) This adjustment reflects the elimination of an operating lease of ($235) in the year ended December 31, 2002 and ($176) in the thirty-nine weeks ended September 27, 2003 that was not assumed in the Landis Acquisition. (4) This adjustment reflects the elimination of Landis interest expense, changes in interest expense resulting from the financing of the Landis Acquisition and an adjustment to interest expense resulting from the financing of the Buyout as if it was in place at the beginning of 2002.
- ------------------------------------------------------------------------------------------- THIRTY-NINE WEEKS ENDED 2002 SEPTEMBER 27, 2003 - ------------------------------------------------------------------------------------------- Landis existing interest.................................... $(2,694) $ (1,886) Outstanding Notes: Interest.................................................. 9,138 6,853 Amortization of bond premium.............................. (1,166) (874) Amortization of deferred financing costs.................. 343 257 Amendment of credit agreement: Interest.................................................. 563 422 Amortization of deferred financing........................ 295 222 Adjustment for Buyout financing............................. (1,799) - ---------------------------- Net adjustments............................................. $ 4,680 $ 4,994 - -------------------------------------------------------------------------------------------
(5) This adjustment represents the income tax change as a result of the other items reflected in these notes to pro forma combined condensed consolidated statement of operations and the conversion of Landis from an S corporation to a C corporation. 28 (6) This adjustment eliminates the expense incurred with the extinguishment of debt in connection with the Buyout. (7) This adjustment reflects the elimination of preferred stock dividends on the preferred stock of the Company redeemed in connection with the Buyout. (8) This adjustment reflects the elimination of the amortization of preferred stock discount on the preferred stock of the Company redeemed in connection with the Buyout. 29 SELECTED CONSOLIDATED FINANCIAL DATA BPC HOLDING The following table sets forth Holding's selected consolidated historical financial data for each of the fiscal years 1998, 1999, 2000, 2001 and 2002, which have been derived from the consolidated financial statements of Holding which have been audited by Ernst & Young LLP, independent auditors, and for the thirty-nine weeks ended September 27, 2003 and September 28, 2002, which is derived from our unaudited consolidated financial statements included elsewhere in this prospectus. In the opinion of management, the unaudited interim financial data includes all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation of this information. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the entire year. Holding's fiscal year is a 52/53 week period ending on the Saturday closest to December 31. All references herein to fiscal "2002," "2001," "2000," "1999," and "1998" relate to the fiscal years ended December 28, 2002, December 29, 2001, December 30, 2000, January 1, 2000, and January 2, 1999, respectively. The following data should be read in conjunction with our consolidated financial statements and related notes, "Management's discussion and analysis of financial condition and results of operations," "Unaudited pro forma combined financial information" and other financial information included elsewhere in this prospectus.
- -------------------------------------------------------------------------------------------------------------------------- THIRTY-NINE WEEKS ENDED FISCAL ----------------------------- ------------------------------------------------------- COMBINED COMBINED COMPANY & COMPANY & PREDECESSOR COMPANY PREDECESSOR PREDECESSOR ------------- ------------- ----------------------------------------- ----------- SEPTEMBER 28, SEPTEMBER 27, (DOLLARS IN THOUSANDS) 1998 1999 2000 2001 2002 2002 2003 - -------------------------------------------------------------------------------------------------------------------------- (UNAUDITED) (UNAUDITED) Statement of operations data: Net sales...................... $271,830 $328,834 $408,088 $461,659 $494,303 $378,499 $411,555 Cost of goods sold............. 199,227 241,067 312,119 338,000 371,273 282,767 313,221 --------------------------------------------------------------------------------------- Gross profit................... 72,603 87,767 95,969 123,659 123,030 95,732 98,334 Operating expenses Selling...................... 14,780 17,383 21,630 21,996 22,209 16,692 17,714 General and administrative... 19,308 22,034 24,408 28,535 23,414 19,800 18,142 Research and Development..... 1,690 2,338 2,606 1,948 2,888 1,991 2,459 Amortization of intangibles................ 4,139 7,215 10,579 12,802 2,408 1,351 2,188 Other expenses............... 4,084 5,148 6,639 4,911 5,561 3,400 2,673 Merger expenses.............. - - - - 20,987 20,987 - --------------------------------------------------------------------------------------- Total operating expenses..... 44,001 54,118 65,862 70,192 77,467 64,221 43,176 --------------------------------------------------------------------------------------- Operating income............... 28,602 33,649 30,107 53,467 45,563 31,511 55,158 Other expense (income)(1)...... 1,865 1,416 877 473 299 347 - Loss on extinguished debt...... - - 1,022 - 25,328 25,328 - Interest expense, net(2)....... 34,556 40,817 51,457 54,355 49,254 37,495 33,794 --------------------------------------------------------------------------------------- Income (loss) before income taxes........................ (7,819) (8,584) (23,249) (1,361) (29,318) (31,659) 21,364 Income taxes (benefit)......... (249) 554 (142) 734 3,298 432 9,525 --------------------------------------------------------------------------------------- Net income (loss).............. (7,570) (9,138) (23,107) (2,095) (32,616) (32,091) 11,839 Preferred stock dividends...... 3,551 3,776 6,665 9,790 6,468 6,468 - Amortization of preferred stock discount..................... 292 292 768 1,024 574 574 - --------------------------------------------------------------------------------------- Net income (loss) attributable to common stockholders....... $(11,413) $(13,206) $(30,530) $(12,909) $(39,658) $(39,133) $ 11,839 ---------------------------------------------------------------------------------------
30
- -------------------------------------------------------------------------------------------------------------------------- THIRTY-NINE WEEKS ENDED FISCAL ----------------------------- ------------------------------------------------------- COMBINED COMBINED COMPANY & COMPANY & PREDECESSOR COMPANY PREDECESSOR PREDECESSOR ------------- ------------- ----------------------------------------- ----------- SEPTEMBER 28, SEPTEMBER 27, (DOLLARS IN THOUSANDS) 1998 1999 2000 2001 2002 2002 2003 - -------------------------------------------------------------------------------------------------------------------------- (UNAUDITED) (UNAUDITED) Other financial data: Depreciation and amortization(3)............ $ 24,829 $ 31,795 $ 42,148 $ 50,907 $ 41,965 $ 33,053 $ 31,054 Capital expenditures......... 22,595 30,738 31,530 32,834 28,683 22,767 21,110 Ratio of earnings to fixed charges(4)................. - - - - - - 1.6x Balance sheet data (at end of period): Working capital.............. $ 4,762 $ 10,527 $ 20,470 $ 19,327 $ 64,201 $ 61,833 $ 83,255 Property and equipment, net.. 120,005 146,792 179,804 203,217 193,132 213,699 190,835 Total assets................. 255,317 340,807 413,122 446,876 760,576 802,730 764,605 Total debt................... $323,298 $403,989 $468,806 $485,881 $609,943 $608,764 $604,435 - --------------------------------------------------------------------------------------------------------------------------
(1) Other expenses consist of net losses (gains) on disposal of property and equipment for the respective years. (2) Includes non-cash interest expense of $14,824, $15,567, $18,047, $11,268 and $2,476, in fiscal 1998, 1999, 2000, 2001 and 2002, respectively, and $1,845 and $1,800 for the thirty-nine weeks ended September 28, 2002 and September 27, 2003, respectively. (3) Depreciation and amortization excludes non-cash amortization of deferred financing fees and debt premium/discount amortization, which are included in interest expense. (4) For purposes of calculating the ratio of earnings to fixed charges, "earnings" represent net income (loss) before extraordinary items. "Fixed charges" consist of interest expenses, including amortization of debt issuance costs and that portion of rental expenses which we consider to be a reasonable approximation of the interest factor of operating lease payments. For fiscal 1998, 1999, 2000, 2001 and 2002, our fixed charges exceeded our earnings by $7,042, $7,137, $20,520, $772 and $3,146, respectively, and $30,927 for the thirty-nine weeks ended September 28, 2002. 31 LANDIS The following table sets forth Landis' selected historical financial data for each of the fiscal years ended December 31, 2000, 2001 and 2002, which have been derived from the financial statements of Landis which have been audited by Roche, Scholz, Roche & Walsh, Ltd., independent auditors, and for the thirty-nine weeks ended September 28, 2003 and September 29, 2002, which is derived from Landis' unaudited financial statements included elsewhere in this prospectus. Landis has informed us that the unaudited interim financial data includes all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation of this information. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the entire year. The following data should be read in conjunction with Landis' financial statements and related notes, "Management's discussion and analysis of financial condition and results of operations," "Unaudited pro forma combined financial information" and other financial information included elsewhere in this prospectus.
- -------------------------------------------------------------------------------------------------------------------- THIRTY-NINE WEEKS ENDED FISCAL ----------------------------- ------------------------------ SEPTEMBER 29, SEPTEMBER 28, (DOLLARS IN THOUSANDS) 2000 2001 2002 2002 2003 - -------------------------------------------------------------------------------------------------------------------- (UNAUDITED) (UNAUDITED) Statement of operations data: Net sales........................................ $194,308 $201,179 $211,613 $155,622 $164,525 Cost of goods sold............................... 155,084 157,590 166,977 123,229 134,371 -------------------------------------------------------------- Gross profit..................................... 39,224 43,589 44,636 32,393 30,154 Operating expenses: Selling and marketing......................... 4,107 4,630 5,016 3,524 4,451 Administrative................................ 11,361 12,712 12,554 8,825 10,155 Transportation................................ 2,324 3,149 3,095 2,290 2,618 Warehousing................................... 8,286 10,486 10,383 7,682 8,424 Asset impairment loss(1)...................... 426 532 - - - -------------------------------------------------------------- Total operating expenses...................... 26,505 31,509 31,048 22,321 25,648 -------------------------------------------------------------- Operating income................................. 12,719 12,080 13,588 10,072 4,506 Other expense (income)(2)........................ (942) 65 81 - - Interest expense, net............................ 3,127 3,089 2,694 1,886 1,886 -------------------------------------------------------------- Income before income taxes....................... 10,534 8,925 10,813 8,186 2,620 Income taxes(3).................................. 12 7 23 82 77 -------------------------------------------------------------- Net income....................................... $ 10,522 $ 8,918 $ 10,790 $ 8,104 $ 2,543 -------------------------------------------------------------- Other financial data: Depreciation and amortization.................... $ 11,772 $ 12,447 $ 12,561 $ 9,224 $ 9,586 Capital expenditures............................. 16,663 9,806 6,579 4,199 7,718 Balance sheet data (at end of period): Working capital.................................. $ 19,386 $ 22,482 $ 32,225 $ 28,534 $ 27,667 Property and equipment, net...................... 78,179 77,583 71,526 69,655 64,681 Total assets..................................... 129,821 126,014 127,311 129,969 131,226 Total debt....................................... $ 45,808 $ 37,837 $ 34,237 $ 34,787 $ 32,587 - --------------------------------------------------------------------------------------------------------------------
(1) Represents the impairment of assets under Statement of Financial Accounting Standards (FAS) No. 121, "Accounting for the impairment of long-lived assets and for long-lived assets to be disposed of." The 2000 and 2001 losses related to production equipment that did not meet performance criteria. (2) Majority of other income ($937) in fiscal 2000 represents a gain on the sale of aircraft equipment. (3) Landis Plastics, Inc. has elected by unanimous consent of its stockholders to be taxed as an "S" corporation under Section 1362 of the Internal Revenue Code for years beginning after December 31, 1986. Accordingly, no provision or liability for federal income taxes is reflected in the accompanying statements. Instead, the stockholders are liable for individual federal income taxes on their respective share of Landis' taxable income. However, Landis is liable for certain state income taxes. 32 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our and Landis' financial condition and results of operations in conjunction with the consolidated financial statements and related notes of Berry Plastics and Landis included elsewhere in this prospectus. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the "Risk factors" section of this prospectus. Our actual results may differ materially from those contained in any forward-looking statements. For presentation purposes, the results of Predecessor have been combined with results subsequent to the Buyout. BERRY PLASTICS CRITICAL ACCOUNTING POLICIES We disclose those accounting policies that we consider to be significant in determining the amounts to be utilized for communicating our consolidated financial position, results of operations and cash flows in the second note to our consolidated financial statements included elsewhere herein. Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with these principles requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results are likely to differ from these estimates, but management does not believe such differences will materially affect our financial position or results of operations. We believe that the following accounting policies are the most critical because they have the greatest impact on the presentation of our financial condition and results of operations. Accounts receivable. We evaluate our allowance for doubtful accounts on a quarterly basis and review any significant customers with delinquent balances to determine future collectibility. We base our determinations on legal issues (such as bankruptcy status), past history, current financial and credit agency reports, and the experience of our credit representatives. We reserve accounts that we deem to be uncollectible in the quarter in which we make the determination. We maintain additional reserves based on our historical bad debt experience. We believe that, based on past history and our credit policies, the net accounts receivable are of good quality. Medical insurance. We offer our employees medical insurance that is primarily self-insured by us. As a result, we accrue a liability for known claims as well as the estimated amount of expected claims incurred but not reported. We evaluate our medical claims liability on a quarterly basis and obtain an independent actuarial analysis on an annual basis. We accrue as a liability expected claims incurred but not reported and any known claims. Based on our analysis, we believe that our recorded medical claims liability is sufficient. Our accrued liability for medical claims was $1.6 million, including reserves for expected medical claims incurred but not reported, as of September 27, 2003. 33 Workers' compensation insurance. Starting in fiscal 2000, we converted the majority of our facilities to a large deductible program for workers' compensation insurance. On a quarterly basis, we evaluate our liability based on third-party adjusters' independent analyses by claim. Based on our analysis, we believe that our recorded workers' compensation liability is sufficient. Our accrued liability for workers' compensation claims was $1.5 million as of September 27, 2003. Revenue recognition. Revenue from sales of products is recognized at the time product is shipped to the customer at which time title and risk of ownership transfer to the purchaser. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, we believe that our consolidated financial statements provide a meaningful and fair perspective of BPC Holding and its consolidated subsidiaries. This is not to suggest that other risk factors such as changes in economic conditions, changes in material costs and others could not adversely impact our consolidated financial position, results of operations and cash flows in future periods. ACQUISITIONS We maintain a selective and disciplined acquisition strategy, which is focused on improving our financial performance in the long-term, enhancing our market positions and expanding our product lines or, in some cases, providing us with a new or complementary product line. We have historically acquired businesses with profit margins that are lower than that of our existing business, which results in a temporary decrease in our margins. We have historically achieved significant reductions in manufacturing and overhead costs of acquired companies by introducing advanced manufacturing processes, exiting low-margin businesses or product lines, reducing headcount, rationalizing facilities and machinery, applying best practices and capitalizing on economies of scale. In connection with our acquisitions, we have in the past and may in the future incur charges related to these reductions and rationalizations. For purposes of this prospectus, "APM" refers to the acquisition of the injection molded overcap lid assets of APM Inc. in 2003; "CCL" refers to the acquisition of the threaded injection molded closure assets from CCL Plastics Packaging in 2003; "Mount Vernon" refers to the acquisition of the injection molding assets from Mount Vernon Plastics Corporation in 2002; "Pescor" refers to the acquisition of Pescor Plastics, Inc. in 2001; "Poly-Seal" refers to the acquisition of Poly-Seal Corporation in 2000; "Capsol" refers to the acquisition of Capsol S.p.a. in 2000; and "Cardinal" refers to the acquisition of CPI Holding Corporation, the parent company of Cardinal Packaging, Inc. in 1999. RESULTS OF OPERATIONS COMPARISON OF THE 39 WEEKS ENDED SEPTEMBER 27, 2003 TO THE 39 WEEKS ENDED SEPTEMBER 28, 2002 Net Sales. Net sales increased $33.1 million, or 9%, to $411.6 million for the thirty-nine weeks ended September 27, 2003 from $378.5 million for the thirty-nine weeks ended September 28, 2002, with an approximate 5% increase in net selling price due to higher resin costs. Container net sales increased $16.8 million from the thirty-nine weeks ended September 28, 2002, including approximately $0.5 million of net sales from the APM acquisition, due primarily to higher selling prices and increases in base business. Closure net sales increased $10.5 million from the thirty-nine weeks ended September 28, 2002, primarily due to $4.3 million of net sales from the CCL acquisition, higher selling prices, and new business in the United States 34 closure product line. Consumer product sales for the thirty-nine weeks ended September 27, 2003 increased $5.8 million from the thirty-nine weeks ended September 28, 2002, primarily due to increased sales from the thermoformed drink cup line partially offset by a reduction in sales of a specialty drink cup line. Gross Profit. Gross profit increased by $2.6 million to $98.3 million (24% of net sales) for the thirty-nine weeks ended September 27, 2003 from $95.7 million (25% of net sales) for the thirty-nine weeks ended September 28, 2002. This increase is primarily attributable to the combined impact of additional sales volume, productivity improvement initiatives, and lower depreciation partially offset by the timing effect of increased raw material costs in excess of selling price increases. We have continued to consolidate products and business of recent acquisitions to the most efficient tooling, providing customers with improved products and customer service. As part of the integration, we removed molding operations from our Fort Worth, Texas facility, which was acquired in the Pescor acquisition. Subsequently, in the fourth quarter of 2002, the Fort Worth facility was closed in our continued effort to reduce costs and provide improved customer service. The business from this location was distributed throughout our facilities. Also, significant productivity improvements were made since the thirty-nine weeks ended September 28, 2002, including the addition of state-of-the-art injection molding equipment, molds and printing equipment at several of our facilities. Operating Expenses. Selling expenses increased by $1.0 million to $17.7 million for the thirty-nine weeks ended September 27, 2003 from $16.7 million for the thirty-nine weeks ended September 28, 2002, principally as a result of increased selling expenses resulting from higher revenue. General and administrative expenses decreased from $19.8 million for the thirty-nine weeks ended September 28, 2002 to $18.1 million for the thirty-nine weeks ended September 27, 2003. This decrease of $1.7 million is primarily attributable to decreased accrued bonus expenses and cost reduction efforts. During the thirty-nine weeks ended September 27, 2003, transition expenses were $1.0 million related to uncompleted acquisitions, $0.9 million related to acquisitions, and $0.8 million related to the shutdown and reorganization of facilities. In the thirty-nine weeks ended September 28, 2002, transition expenses were $0.3 million related to uncompleted acquisitions, $0.9 million related to acquisitions, $2.2 million related to the shutdown and reorganization of facilities, and $21.0 million related to the Buyout. Interest Expense, Net. Net interest expense decreased $29.0 million to $33.8 million for the thirty-nine weeks ended September 27, 2003 compared to $62.8 million for the thirty-nine weeks ended September 28, 2002, primarily due to $18.7 million of prepayment fees and related charges and $6.6 million of deferred financing fees written off in the thirty-nine weeks ended September 28, 2002 due to the extinguishment of debt in connection with the Buyout. The prepayment fees and related charges and deferred financing fees written off in the thirty-nine weeks ended September 28, 2002 were previously classified as extraordinary. Pursuant to SFAS 145, any gain or loss on extinguishment of debt that was classified as an extraordinary item in prior periods presented that does not meet the criteria in Opinion 30 for classification as an extraordinary item must be reclassified. As a result, we have reclassified the extraordinary item in the Statements of Operations to continuing operations in these quarterly financial statements. Income Tax. For the thirty-nine weeks ended September 27, 2003, we recorded income tax expense of $9.5 million, or an effective tax rate of 45%. The effective tax rate is greater than the statutory rate due to the impact of state taxes and foreign location losses for which no 35 benefit was currently provided. The increase of $9.1 million over the thirty-nine weeks ended September 28, 2002 can be attributed to the Buyout as the use of net operating loss carryforwards is recorded as a reduction to goodwill as compared to a credit to income tax expense in the thirty-nine weeks ended September 28, 2002. As a result of the Buyout, the amount of the predecessor's net operating loss carryforward which can be used in any given year will be limited to approximately $12.9 million. Net Income. Net income is $11.8 million for the thirty-nine weeks ended September 27, 2003, compared to a net loss of $32.1 million for the thirty-nine weeks ended September 28, 2002, for the reasons discussed above. COMPARISON OF THE YEAR ENDED DECEMBER 28, 2002 TO THE YEAR ENDED DECEMBER 29, 2001 Net Sales. Net sales increased 7% to $494.3 million in 2002, up $32.6 million from $461.7 million in 2001, despite an approximate 2% decrease in net selling price due to cyclical impact of lower resin costs. Container net sales increased $16.0 million to $250.4 million, of which approximately $11.5 million was attributable to the Mount Vernon acquisition. The remaining increase of $4.5 million is primarily attributed to new retail dairy and polypropylene business. Closure net sales increased $1.5 million to $133.9 million primarily due to new business partially offset by the shedding of low margin business in our Norwich, England facility. Consumer products net sales increased $15.1 million to $110.0 million in 2002 primarily as a result of the Pescor acquisition and increased sales from the thermoformed drink cup line. Gross Profit. Gross profit decreased $0.7 million from $123.7 million, or 27% of net sales, in 2001 to $123.0 million, or 25% of net sales, in 2002. This decrease of 2% includes the timing effect of increased raw material costs in excess of selling price increases partially offset by the combined impact of the added Pescor and Mount Vernon sales volume, acquisition integration and productivity improvement initiatives. The margin percentage of the acquired division of Mount Vernon was, for 2002 and historically, significantly less than our overall gross margin thereby reducing the consolidated margin, however, we expect the margin percentage of this acquired business to increase as it becomes more fully integrated. We have continued to consolidate products and business of recent acquisitions to the most efficient tooling, providing customers with improved products and customer service. As part of the integration, we removed molding operations from our Fort Worth, Texas facility, which was acquired in the Pescor acquisition. Subsequently, in the fourth quarter of 2002, the Fort Worth facility was closed in our continued effort to reduce costs and provide improved customer service. The business from this location was distributed throughout our facilities. Also, significant productivity improvements were made during the year, including the addition of state-of-the-art injection molding equipment, molds and printing equipment at several of our facilities. Operating Expenses. Selling expenses increased $0.2 million to $22.2 million in 2002 as a result of increased sales partially offset by continued cost reduction efforts. General and administrative expenses decreased $5.1 million to $23.4 million in 2002 primarily as a result of decreased accrued bonus expenses and cost reduction efforts. Research and development costs increased $1.0 million to $2.9 million in 2002 primarily as a result of an increase in projects under development and legal costs associated with patents and licenses. Intangible asset amortization decreased to $2.4 million in 2002 from $12.8 million for 2001, primarily as a result of the implementation in 2002 of SFAS No. 142, which eliminates the amortization of goodwill. In connection with the Buyout, the Predecessor incurred Buyout related expenses of approximately $21.0 million, consisting primarily of investment banking fees, bonuses to management, non-cash modification of stock option awards, legal costs and financial and management 36 consulting fees paid to an affiliate of the largest voting stockholder of the Predecessor. Other expenses were $5.6 million for 2002 compared to $4.9 million for 2001. Other expenses in 2002 include transition expenses of $1.3 million related to recently acquired businesses, $4.1 million related to the shutdown and reorganization of facilities, and $0.2 million related to an acquisition that was not completed. Other expenses in 2001 include transition expenses of $2.7 million related to recently acquired businesses and $2.2 million related to the shutdown and reorganization of facilities. Interest Expense, Net. Net interest expense, including amortization of deferred financing costs, for 2002 was $49.3 million, or 10% of net sales, compared to $54.4 million, or 12% of net sales, in 2001, a decrease of $5.1 million. This decrease is primarily attributed to decreased rates of interest on borrowings. Cash interest paid in 2002 was $40.8 million as compared to $44.2 million for 2001. Income Taxes. During 2002, we recorded an expense of $3.3 million for income taxes compared to $0.7 million for 2001. We continue to operate in a net operating loss carryforward position for federal income tax purposes. Extraordinary Item. As a result of extinguishing our debt in connection with the Buyout, $6.6 million of existing deferred financing fees and $18.7 million of prepayment fees and related charges were charged to expense in 2002 as an extraordinary item. Net Loss. We recorded a net loss of $32.6 million in 2002 compared to a $2.1 million net loss in 2001 for the reasons discussed above. COMPARISON OF THE YEAR ENDED DECEMBER 29, 2001 TO THE YEAR ENDED DECEMBER 30, 2000 Net Sales. Net sales increased 13% to $461.7 million in 2001, up $53.6 million from $408.1 million in 2000, including an approximate 1% increase in net selling price. Container net sales increased $3.2 million, primarily due to a large promotion in 2001. Closure net sales increased $20.2 million with the Poly-Seal acquisition and Capsol acquisition representing $25.4 million of the increase, partially offset by a general slowdown in the market. Consumer products net sales increased $30.2 million in 2001 primarily as a result of the Pescor acquisition which contributed 2001 net sales of approximately $19.9 million, continued strong demand in the retail housewares market, and the introduction of a thermoformed drink cup line. Gross Profit. Gross profit increased $27.7 million from $96.0 million, or 24% of net sales, in 2000 to $123.7 million, 27% of net sales, in 2001. This increase of 29% includes the combined impact of the added Poly-Seal, Capsol, and Pescor sales volume, the timing effect of increases in selling prices and decreases in raw material costs, acquisition integration, and productivity improvement initiatives. The 1% increase in net selling price was primarily the result of partially recovering raw material costs increases incurred in 2000. In addition, we continued to consolidate the products and businesses of recent acquisitions to the most efficient tooling, providing customers with improved products and customer service. As part of the integration, we closed our York, Pennsylvania facility and removed remaining production from our Minneapolis, Minnesota facility (acquired in the Cardinal acquisition) in the fourth quarter of 2000. Also, in the fourth quarter of 2001, we removed molding operations from our Fort Worth, Texas facility (acquired in the Pescor acquisition). The business from these locations was distributed throughout our facilities. Also, significant productivity improvements were made during the year, including the addition of state-of-the-art injection-molding equipment, molds and decorating equipment at several of our facilities. We achieved additional cost reductions through our realignment in the third quarter of 2000 from a functional based 37 organization to a divisional structure. This realignment has enabled us to reduce personnel costs and improve employee productivity. Operating Expenses. Selling expenses increased $0.4 million as a result of acquired businesses partially offset by savings from the organizational realignment in the third quarter of 2000. General and administrative expenses increased $4.1 million in 2001 primarily as a result of acquired businesses and increased accrued bonus expenses partially offset by savings from the organizational realignment in the third quarter of 2000. Research and development costs decreased $0.7 million to $1.9 million in 2001 primarily as a result of savings from the organizational realignment in the third quarter of 2000. Intangible asset amortization increased from $10.6 million in 2000 to $12.8 million for 2001, primarily as a result of the amortization of goodwill ascribed to acquired companies in 2000 and 2001. Other expenses were $4.9 million for 2001 compared to $6.6 million for 2000. Other expenses in 2001 include transition expenses of $2.7 million related to recently acquired businesses and $2.2 million related to the shutdown and reorganization of facilities. Other expenses in 2000 include transition expenses of $2.2 million related to recent acquisitions, $3.7 million related to the shutdown and reorganization of facilities and $0.7 million of litigation expenses related to a drink cup patent. Interest Expense, Net. Net interest expense, including amortization of deferred financing costs for 2001, was $54.4 million, or 12% of net sales, compared to $51.5 million, or 13% of net sales, in 2000, an increase of $2.9 million. This increase was attributed to interest on borrowings related to the acquired businesses in 2000 and 2001 but was offset partially by principal reductions. Cash interest paid in 2001 was $44.2 million as compared to $32.8 million for 2000. Income Taxes. During fiscal 2001, we recorded an expense of $0.7 million for income taxes compared to a benefit of $0.1 million for fiscal 2000. We continue to operate in a net operating loss carryforward position for federal income tax purposes. Extraordinary Item. As a result of amending our senior credit facility, $1.0 million of deferred financing fees related to the facility was charged to expense in 2000 as an extraordinary item. Net Loss. We recorded a net loss of $2.1 million in 2001 compared to a $23.1 million net loss in 2000 for the reasons stated above. LIQUIDITY AND CAPITAL RESOURCES On July 22, 2002, we entered into a credit and guaranty agreement and a related pledge security agreement with a syndicate of lenders led by Goldman Sachs Credit Partners L.P., as administrative agent. In connection with the Landis Acquisition, we recently amended and restated the senior secured credit facility. The amended and restated senior secured credit facility consists of our previous $100 million revolving credit facility, a new $330 million term loan and a new $50 million term loan. On November 10, 2003, we used $325.9 million of the new $330 million term loan to refinance in full the balance outstanding under our prior term loan. The remaining $4.1 million was used to fund a portion of the purchase price for the Landis Acquisition. The new $50 million term loan was also used to pay a portion of the purchase price for the Landis Acquisition. The maturity date of the term loans is July 22, 2010 and the maturity date of the revolving credit facility is July 22, 2008. Our prior term loan was initially funded on the closing date of the Buyout and the proceeds were used in connection with the Buyout to pay the cash consideration payable to stockholders, the costs of prepaying our indebtedness and the transaction costs incurred in connection therewith. The indebtedness 38 under our amended and restated senior secured credit facility is guaranteed by BPC Holding and all of its domestic subsidiaries. The obligations of Berry Plastics under the amended and restated senior secured credit facility and the guarantees thereof are secured by substantially all of the assets of such entities. On a pro forma basis after giving effect to the Transactions, as of September 27, 2003, there was $4.5 million of outstanding borrowings under the revolving credit facility and $380 million of outstanding borrowings under the term loans. Borrowings under our amended and restated senior secured credit facility bear interest, at our option, at either (1) the base rate, which is a rate per annum equal to the greater of the prime rate and the federal funds effective rate in effect on the date of determination plus 0.50% plus the applicable margin, the Base Rate Loans, or (2) an adjusted Eurodollar Rate which is equal to the rate for Eurodollar deposits plus the applicable margin, the Eurodollar Rate Loans. For the term loans, the applicable margin is (1) with respect to Base Rate Loans, 1.50% per annum and (2) with respect to Eurodollar Rate Loans, 2.50% per annum. For Eurodollar Rate Loans under the revolving credit facility, the applicable margin ranges from 2.75% per annum to 2.00% per annum, depending on our leverage ratio (2.75% based on results through September 27, 2003). The applicable margin with respect to Base Rate Loans will always be 1.00% per annum less than the applicable margin for Eurodollar Rate Loans. Interest is payable quarterly for Base Rate Loans and at the end of the applicable interest period for all Eurodollar Rate Loans. The interest rate applicable to overdue payments and to outstanding amounts following an event of default under our amended and restated senior secured credit facility will be equal to the interest rate at the time of an event of default plus 2.00%. The amended and restated senior secured credit facility also requires us to pay commitment fees equal to 0.50% per annum on the average daily unused portion of the revolving credit facility, which fee is subject to a pricing grid ranging from 0.50% per annum to 0.375% per annum. In October 2002, pursuant to a requirement in the senior secured credit facility and as a result of the current economic slowdown and corresponding interest rate reductions, we entered into an interest rate collar agreement with Goldman Sachs Capital Markets, L.P., which applies to $50.0 million of the term loans and protects both parties against fluctuations in interest rates. Under the interest rate collar agreement, the Eurodollar rate with respect to $50.0 million of the outstanding principal amount of the term loan will not exceed 6.75% or drop below 1.97%. Our amended and restated senior secured credit facility contains significant financial and operating covenants, including prohibitions on our ability to incur certain additional indebtedness or to pay dividends, and restrictions on our ability to make capital expenditures and investments and dispose of assets or consummate acquisitions. The amended and restated senior secured credit facility contains (i) a minimum interest coverage ratio as of the last day of any quarter of 2.00:1.00 per quarter for the quarters ending December 2003 and March 2004, 2.10:1.00 per quarter for the quarters ending June 2004 and September 2004, 2.15:1.00 per quarter for the quarters ending December 2004 and March 2005, 2.25:1.00 per quarter for the quarters ending June 2005 through the quarter ending March 2006, 2.35:1.00 per quarter for the quarters ending June 2006 through the quarter ending December 2006 and 2.50:1.00 per quarter thereafter, (ii) a maximum amount of capital expenditures (subject to the rollover of certain unexpended amounts from the prior year) of $50 million for the years ending 2003 and 2004, $60 million for the years ending 2005, 2006 and 2007, and $65 million for each year thereafter, and (iii) a maximum total leverage ratio as of the last day of any quarter of 5.90:1.00 per quarter for the quarters ending December 2003 and March 2004, 5.75:1.00 per quarter for the quarters ending June 2004 and September 2004, 5.50:1.00 per quarter for the 39 quarters ending December 2004 and through the quarter ending June 2005, 5.25:1.00 per quarter for the quarters ending September 2005 and December 2005, 5.00:1.00 per quarter for the quarters ending March 2006 and June 2006, 4.75:1.00 per quarter for the quarters ending September 2006 through the quarter ending March 2007, 4.50:1.00 per quarter for the quarters ending June 2007 through the quarter ending December 2007, 4.25:1.00 per quarter for the quarters ending March 2008 through the quarter ending December 2008, and 4.00:1.00 per quarter thereafter. The breach of any of these covenants or restrictions could result in a default under the indenture governing the notes or under our amended and restated senior secured credit facility. The occurrence of a default, an event of default or a material adverse effect on Berry Plastics would result in our inability to obtain further borrowings under our revolving credit facility and could also result in the acceleration of our obligations under any or all of our debt agreements, each of which could materially and adversely affect our business. If we were unable to repay debt to our lenders, these lenders could proceed against the collateral securing that debt. In addition, acceleration of our other indebtedness may cause us to be unable to make interest payments on the notes and repay the principal amount of the notes. On a pro forma basis after giving effect to the Transactions, as of September 27, 2003, we were in compliance with all of the financial and operating covenants under our amended and restated senior secured credit facility. The term loans amortize quarterly in the aggregate as follows: $950,000 each quarter through June 30, 2009 and $89,631,250 each quarter beginning September 30, 2009 and ending June 30, 2010. Borrowings under our amended and restated senior secured credit facility are subject to mandatory prepayment under specified circumstances, including if we meet certain cash flow thresholds, collect insurance proceeds in excess of certain thresholds, issue equity securities or debt or sell assets not in the ordinary course of business, or upon a sale or change of control of the Company. There is no required amortization of the revolving credit facility. Outstanding borrowings under the revolving credit facility may be repaid at any time, and may be reborrowed at any time prior to the maturity date which is on July 22, 2008. The revolving credit facility allows up to $25 million of letters of credit to be issued instead of borrowings under the revolving credit facility and up to $10 million of swingline loans. On July 22, 2002, we completed an offering of $250.0 million aggregate principal amount of the notes. The net proceeds to us from the sale of the notes, after expenses, were $239.4 million. The proceeds from the notes were used in the financing of the Buyout. The notes mature on July 15, 2012, and interest is payable semi-annually on January 15 and July 15 of each year beginning January 15, 2003. BPC Holding and all of our domestic subsidiaries fully, jointly, severally, and unconditionally guarantee the notes. The exchange notes will be the same series as the existing notes. We are not required to make mandatory redemption or sinking fund payments with respect to the notes. On or subsequent to July 15, 2007, the notes may be redeemed at our option, in whole or in part, at redemption prices ranging from 105.375% in 2007 to 100% in 2010 and thereafter. Prior to July 15, 2005, up to 35% of the notes may be redeemed at 110.75% of the principal amount at our option in connection with an equity offering. Upon a change of control, as defined in the indenture entered into in connection with the notes, each holder of notes will have the right to require us 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 40 interest. The indenture restricts our ability to incur additional debt and contains other provisions which could limit our liquidity. Our contractual cash obligations as of December 28, 2002 are summarized in the following table.
- ---------------------------------------------------------------------------------------------- PAYMENTS DUE BY PERIOD AT DECEMBER 28, 2002 ----------------------------------------------------- <1 1-3 4-5 >5 (DOLLARS IN THOUSANDS) TOTAL YEAR YEARS YEARS YEARS - ---------------------------------------------------------------------------------------------- Long-term debt, excluding capital leases.............................. $582,367 $ 3,800 $ 7,600 $ 7,600 $563,367 Capital leases......................... 33,101 6,416 12,437 5,559 8,689 Operating leases....................... 19,221 6,925 9,186 3,110 - Other long-term obligations............ 1,285 1,281 4 - - ----------------------------------------------------- Total contractual cash obligations..... $635,974 $18,422 $29,227 $16,269 $572,056 - ----------------------------------------------------------------------------------------------
On a pro forma basis after giving effect to the Transactions, our expected contractual cash obligations as of December 28, 2002 are summarized in the following table.
- --------------------------------------------------------------------------------------------------- PAYMENTS DUE BY PERIOD AT DECEMBER 28, 2002 ---------------------------------------------------------- <1 1-3 4-5 >5 (DOLLARS IN THOUSANDS) TOTAL YEAR YEARS YEARS YEARS - --------------------------------------------------------------------------------------------------- Long-term debt, excluding capital leases.............................. $735,367 $ 4,300 $ 8,600 $ 8,600 $713,867 Capital leases......................... 33,101 6,416 12,437 5,559 8,689 Operating leases....................... 79,321 10,485 15,406 9,030 44,400 Other long-term obligations............ 1,285 1,281 4 - - ---------------------------------------------------------- Total contractual cash obligations..... $849,074 $22,482 $36,447 $23,189 $766,956 - ---------------------------------------------------------------------------------------------------
Net cash provided by operating activities was $45.9 million for the thirty-nine weeks ended September 27, 2003, compared to $15.1 million for the thirty-nine weeks ended September 28, 2002. The increase of $30.8 million is primarily the result of $21.0 million of Buyout expenses in the thirty-nine weeks ended September 28, 2002, improved inventory management, and reduced rates of interest on borrowings in the thirty-nine weeks ended September 27, 2003. Net cash used for investing activities decreased from $39.3 million for the thirty-nine weeks ended September 28, 2002 to $26.9 million for the thirty-nine weeks ended September 27, 2003 primarily as a result of $12.7 million of Buyout transaction costs in the thirty-nine weeks ended September 28, 2002. Capital spending of $21.1 million in the thirty-nine weeks ended September 27, 2003 included $2.0 million for buildings and systems, $12.5 million for molds, $2.3 million for molding and printing machines, and $4.3 million for accessory equipment and systems. Net cash used for financing activities was $7.8 million for the thirty-nine weeks ended September 27, 2003, compared to $36.7 million provided by financing activities for the thirty-nine weeks ended September 28, 2002. The decrease of $44.5 million can be attributed to Buyout financing in the thirty-nine weeks ended September 28, 2002 and reduced borrowings due to increased cash provided by operations in the thirty-nine weeks ended September 27, 2003. Increased working capital needs occur whenever we experience strong incremental demand or a significant rise in the cost of raw material, particularly plastic resin. However, we anticipate 41 that our cash interest, working capital and capital expenditure requirements through 2004 will be satisfied through a combination of funds generated from operating activities and cash on hand, together with funds available under our amended and restated senior secured credit facility. We base such belief on historical experience and the substantial funds available under our amended and restated senior secured credit facility. However, we cannot predict our future results of operations and we will need to remain in compliance with the covenants described above to be able to borrow under the amended and restated senior secured credit facility. On a pro forma basis after giving effect to the Transactions, as of September 27, 2003, our cash balance would have been $4.6 million, and we would have had unused borrowing capacity under the amended and restated senior secured credit facility's revolving line of credit of $89.8 million. Our ability to make payments on and to refinance our indebtedness, including the notes, and to fund planned capital expenditures and research and development efforts will depend on our ability to generate cash in the future. This is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control as well as factors described under "Risk factors." We may need to refinance all or a portion of our indebtedness, including the notes, on or before maturity. We may not be able to refinance any of our indebtedness, including our amended and restated senior secured credit facility and the notes, on commercially reasonable terms or at all. RECENT ACCOUNTING PRONOUNCEMENTS In April 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections ("SFAS No. 145"). Upon the adoption of SFAS No. 145, all gains and losses on the extinguishment of debt for periods presented in the financial statements will be classified as extraordinary items only if they meet the criteria in APB Opinion No. 30, Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions ("APB No. 30"). The provisions of SFAS No. 145 related to the rescission of FASB Statement No. 4 and FASB Statement No. 64 shall be applied for fiscal years beginning after May 15, 2002. Any gain or loss on extinguishment of debt that was classified as an extraordinary item in prior periods presented that does not meet the criteria in Opinion 30 for classification as an extraordinary item must be reclassified. As a result, we and Landis will reclassify the extraordinary item in the Statements of Operations to continuing operations in our 2003 third quarter financial statements. The provisions of SFAS No. 145 related to the rescission of FASB Statement No. 44, the amendment of FASB Statement No. 13 and Technical Corrections became effective as of May 15, 2002 and did not have a material impact on either us or Landis. In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities ("SFAS No. 146"). SFAS No. 146 nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS No. 146 generally requires companies to recognize costs associated with exit activities when they are incurred rather than at the date of a commitment to an exit or disposal plan and is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The initial adoption of this statement did not have a material impact on either us or Landis. 42 In November 2002, the FASB issued FASB Interpretation (FIN) 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." Interpretation No. 45 requires certain guarantees to be recorded at fair value and requires a guarantor to make significant new disclosures, even when the likelihood of making any payments under the guarantee is remote. Interpretation No. 45's initial recognition and initial measurement provisions are applicable on a prospective basis to guarantees issued or modified after December 31, 2002; however, its disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. The interpretation had no effect on the company's results of operations or financial position for the current year. The company will continue to evaluate what effect, if any, the recognition and measurement provisions will have on its financial statements and related disclosures in future periods. In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities ("FIN No. 46"). FIN No. 46 clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, in determining whether a reporting entity should consolidate certain legal entities, including partnerships, limited liability companies, or trusts, among others, collectively defined as variable interest entities ("VIEs"). This interpretation applies to VIEs created or obtained after January 31, 2003, and as of July 1, 2003, to VIEs in which an enterprise holds a variable interest that it acquired before February 1, 2003. The initial adoption of this statement did not have a material impact on either us or Landis. In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities ("SFAS No. 149"). SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under Statement 133 and is to be applied prospectively to contracts entered into or modified after June 30, 2003. We are currently evaluating the effects, if any, that this standard will have on our results of operations and financial position. In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity ("SFAS No. 150"). This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003. The adoption of this statement does not result in any material change to the existing reporting for either us or Landis. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTEREST RATE RISK We are exposed to market risk from changes in interest rates primarily through our amended and restated senior secured credit facility. The amended and restated senior secured credit facility consists of our previous $100 million revolving credit facility, a new $330 million term loan and a new $50 million term loan. On November 10, 2003, we used $325.9 million of the new $330 million term loan to refinance in full the balance outstanding under our prior term loan. The remaining $4.1 million was used to fund a portion of the purchase price for the Landis Acquisition. The new $50 million term loan was also used to pay a portion of the purchase price for the Landis Acquisition. At September 27, 2003, there were no borrowings outstanding on the revolving credit facility. Future borrowings under the credit facility bear 43 interest, at our option, at either (1) the base rate, which is a rate per annum equal to the greater of the prime rate and the federal funds effective rate in effect on the date of determination plus 0.5% plus the applicable margin or (2) an adjusted Eurodollar Rate which is equal to the rate for Eurodollar deposits plus the applicable margin. We utilize interest rate instruments to reduce the impact of either increases or decreases in interest rates on our floating rate debt. Pursuant to a requirement in the senior secured credit facility before it was amended and restated, and as a result of an economic slowdown and corresponding interest rate reductions, we entered into an interest rate collar arrangement in October 2002 to protect $50.0 million of the outstanding variable rate term loan debt from future interest rate volatility. Under the interest rate collar agreement, the Eurodollar rate with respect to the $50.0 million of outstanding variable rate term loan debt will not exceed 6.75% or drop below 1.97%. At September 27, 2003, the Eurodollar rate applicable to the prior term loan was 1.35%. If the Eurodollar rate increases 0.25% and 0.5%, we estimate an annual increase in our pro forma interest expense of approximately $0.8 million and $1.7 million, respectively. LANDIS CRITICAL ACCOUNTING POLICIES Landis discloses those accounting policies that it considers to be significant in determining the amounts to be utilized for communicating its financial position, results of operations and cash flows in the second note to its financial statements included elsewhere herein. This discussion and analysis of Landis' financial condition and results of operations is based on its financial statements, included elsewhere in this prospectus, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with these principles required Landis' management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results are likely to differ from these estimates, but we do not believe such differences will materially affect Landis' financial position or results of operations. Prior to the Landis Acquisition, Landis informed us that it believes the following accounting policies are the most critical because they have the greatest impact on the presentation of Landis' financial condition and results of operations. Cash and Cash Equivalents. For financial statement presentation purposes, Landis considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The carrying value of cash equivalents approximates fair value due to the short term, highly liquid nature of cash equivalents. Accounts receivable. Accounts receivable are stated at the amount management expects to collect from outstanding balances. Landis management provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation allowance based on its assessments of the current status of individual accounts. Balances that are still outstanding after Landis management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to trade accounts receivable. Landis believes that, based on past history and Landis' credit policies, the net accounts receivable are of good quality. Inventories. Landis values substantially all of its inventories at cost determined on a last-in, first-out (LIFO) basis. 44 Revenue recognition. Revenue from sales of products is recognized at the time product is shipped to the customer at which time title and risk of ownership transfer to the purchaser. Income Taxes. Landis has elected by unanimous consent of its stockholders to be taxed as an "S" corporation under Section 1362 of the Internal Revenue Code. Accordingly, no provision or liability for federal income taxes is reflected in the accompanying statements. Instead, the stockholders are liable for individual federal income taxes on their respective share of Landis' taxable income. However, Landis is liable for certain state income taxes. General investment and employment tax credit carryforwards are available in various states of approximately $900,000. These credits expire between 2004 and 2017. RESULTS OF OPERATIONS COMPARISON OF THE 39 WEEKS ENDED SEPTEMBER 28, 2003 TO THE 39 WEEKS ENDED SEPTEMBER 29, 2002 Net Sales. Net sales increased 5.7% or $8.9 million to $164.5 million for the thirty-nine weeks ended September 28, 2003 from $155.6 million for the thirty-nine weeks ended September 29, 2002. This increase was primarily attributable to higher selling prices resulting from increased resin costs, offset by reduced sales to a single customer. Gross Profit. Gross profit decreased by $2.3 million to $30.1 million, or 18.3% of net sales, for the thirty-nine weeks ended September 28, 2003 from $32.4 million, or 20.8% of net sales, for the thirty-nine weeks ended September 29, 2002. This decrease of 7.1% was primarily attributable to the timing effect of increased raw material costs in excess of selling price increases. Operating Expenses. Selling expenses increased by $1.0 million to $4.5 million for the thirty-nine weeks ended September 28, 2003 from $3.5 million for the thirty-nine weeks ended September 29, 2002, primarily as a result of additional artwork related to additional volume with Dean Foods, higher wage rates, and positions added to support new business. General and administrative expenses increased from $8.8 million for the thirty-nine weeks ended September 29, 2002 to $10.2 million for the thirty-nine weeks ended September 28, 2003. This increase of $1.4 million was primarily attributable to compensation recognition (non-cash) for stock vesting. Interest Expense, Net. Net interest expense was $1.9 million for the thirty-nine weeks ended September 28, 2003, identical to the $1.9 million for the thirty-nine weeks ended September 29, 2002. Income Taxes. Landis Plastics, Inc. has elected by unanimous consent of its stockholders to be taxed as an "S" corporation under Section 1362 of the Internal Revenue Code for years beginning after December 31, 1986. Accordingly, no provision or liability for federal income taxes is reflected in the accompanying statements. Items reported under Income Taxes are liabilities related to state taxes where S filings are not appropriate. Net Income. Net income was $2.5 million for the thirty-nine weeks ended September 28, 2003 compared to $8.1 million for the thirty-nine weeks ended September 29, 2002 for the reasons discussed above. 45 COMPARISON OF THE YEAR ENDED DECEMBER 31, 2002 TO THE YEAR ENDED DECEMBER 31, 2001 Net Sales. Net sales increased 5.2% to $211.6 million in 2002, up $10.4 million from $201.2 million in 2001. This increase was primarily due to stronger sales volume in the yogurt and dairy lines. Gross Profit. Gross profit increased $1.0 million from $43.6 million, or 21.7% of net sales, in 2001 to $44.6 million, or 21.1% of net sales, in 2002. This increase was primarily attributable to the margin gain from higher sales volumes partially offset by increased raw material costs. Operating Expenses. Selling expenses increased $0.4 million primarily as a result of higher artwork costs related to additional business gained when Dean Foods merged with Suiza Foods, and shifted the business to Landis. General and administrative expenses fell $0.2 million as a result of lower human resource expenditures spent on recruiting fees. Interest Expense, Net. Net interest expense, including amortization of deferred financing costs for 2002, was $2.7 million, or 1.3% of net sales, compared to $3.1 million or 1.5% of net sales in 2001, a decrease of $0.4 million. This decrease was attributed to lower borrowing costs and lower debt levels. Income Taxes. Landis Plastics, Inc. has elected by unanimous consent of its stockholders to be taxed as an "S" corporation under Section 1362 of the Internal Revenue Code for years beginning after December 31, 1986. Accordingly, no provision or liability for federal income taxes is reflected in the accompanying statements. Items reported under Income Taxes are liabilities related to state taxes where S filings are not appropriate. Asset Impairment. As required by Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the impairment of long-lived assets and for long-lived assets to be disposed of," Landis recorded losses on long-lived assets of $0.5 million in 2001. This related to robotic parts handling equipment that did not meet performance criteria. There were no asset impairments recognized in 2002. Net Income. Landis recorded net income of $10.8 million in 2002 as compared to $8.9 million in 2001 for the reasons discussed above. COMPARISON OF THE YEAR ENDED DECEMBER 31, 2001 TO THE YEAR ENDED DECEMBER 31, 2000 Net Sales. Net sales increased 3.6% to $201.2 million in 2001, up $6.9 million from $194.3 million in 2000. This increase was primarily due to stronger sales volume in the yogurt and dairy lines. Gross Profit. Gross profit increased $4.4 million from $39.2 million, or 20.2% of net sales, in 2000 to $43.6 million, or 21.7% of net sales, in 2001. This increase is primarily attributable to the margin gain from higher sales volumes. Operating Expenses. Selling expenses increased $0.5 million largely as a result of higher insurance costs. General and administrative expenses increased $1.3 million as a result of rent expenses and other costs associated with the start of the Phoenix facility. The income of 2000 was largely related to a gain on sale of a corporate aircraft. Interest Expense, Net. Net interest expense, including amortization of deferred financing costs for 2001, was $3.1 million, or 1.5% of net sales, compared to $3.1 million, or 1.6% of net sales, in 2000. 46 Income Taxes. Landis Plastics, Inc. has elected by unanimous consent of its stockholders to be taxed as an "S" corporation under Section 1362 of the Internal Revenue Code for years beginning after December 31, 1986. Accordingly, no provision or liability for federal income taxes is reflected in the accompanying statements. Items reported under Income Taxes are liabilities related to state taxes where S filings are not appropriate. Asset Impairment. As required by Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the impairment of long-lived assets and for long-lived assets to be disposed of," Landis recorded losses on long-lived assets of $0.4 million in 2000. This related to stacking and handling equipment that did not meet performance criteria. An asset impairment of $0.5 million was recognized in 2001 for robotics equipment. Net Income. Landis recorded net income of $8.9 million in 2001 as compared to $10.5 million in 2000 for the reasons discussed above. 47 BUSINESS BERRY PLASTICS GENERAL We are one of the world's leading manufacturers and suppliers of a diverse mix of injection-molded plastics packaging products focusing on the open-top container, closure, aerosol overcap, drink cup and housewares markets. We sell a broad product line to over 12,000 customers. We concentrate on manufacturing higher quality, value-added products sold to image-conscious marketers of institutional and consumer products. We believe that our large operating scale, low-cost manufacturing capabilities, purchasing leverage, proprietary thermoforming technology and extensive collection of over 1,000 active proprietary molds provide us with a competitive advantage in the marketplace. We have been able to leverage our broad product offering, value-added manufacturing capabilities and long-standing customer relationships into leading positions across a number of products. The average length of our relationship with our top 10 customers in fiscal 2002 was over 16 years, and these customers represented approximately 19% of our fiscal 2002 net sales with no customer accounting for more than 4% of our fiscal 2002 net sales. We believe that over 58% of our 2002 revenues were generated from the sale of products that held a number one position relative to competing injection-molded products. Our products are primarily sold to customers in industries that exhibit relatively stable demand characteristics and are considered less sensitive to overall economic conditions, such as pharmaceuticals, food, dairy and health and beauty. Additionally, we operate 12 high-volume manufacturing facilities and have extensive distribution capabilities. COMPETITIVE STRENGTHS We believe that our consistent financial performance is the direct result of the following competitive strengths, which we believe will be enhanced by the Landis Acquisition: - Leading positions across a broad product offering. - Significant scale resulting in low-cost position and strong cash flow. - Ability to pass through changes in the cost of resin. - Large, diverse and stable customer base. - Proven ability to integrate strategic acquisitions. - Unique, proprietary thermoforming drink cup manufacturing process. - Proven and motivated management team. BUSINESS STRATEGY Our goal is to leverage our core strengths to increase profitability. Our strategy to achieve this goal includes the following elements: - Increase sales to existing customers. - Aggressively pursue new customers. 48 - Continue to effectively manage costs. - Selectively pursue strategic acquisitions in our core businesses. PRODUCT OVERVIEW We organize our product categories into three business divisions: containers, closures, and consumer products. The following table displays our net sales by division for each of the past five fiscal years.
- ------------------------------------------------------------------------------------------- (DOLLARS IN MILLIONS) 1998 1999 2000 2001 2002 - ------------------------------------------------------------------------------------------- Containers..................................... $154.0 $188.7 $231.2 $234.5 $250.4 Closures....................................... 56.4 81.0 112.2 132.4 133.9 Consumer products.............................. 61.4 59.1 64.7 94.8 110.0 ------------------------------------------ Total net sales............................. $271.8 $328.8 $408.1 $461.7 $494.3 - -------------------------------------------------------------------------------------------
CONTAINERS We classify our containers into six product lines: thinwall, pry-off, dairy, industrial, polypropylene and specialty. We believe that we have leading positions in key injection-molded plastic container segments including thinwall (household products and food) and pry-off (building materials), as well as strong positions in frozen dessert (ice cream and yogurt) and clear polypropylene (high value food and consumer applications). The following table describes our container product lines.
- ---------------------------------------------------------------------------------------------- PRODUCT LINE DESCRIPTION SIZES MAJOR END-USES - ---------------------------------------------------------------------------------------------- Thinwall Thinwalled, multi-purpose 8 oz. to 2 gallons Food, promotional products, containers with or without toys and a wide variety of handles and lids other uses Pry-off Containers having a tight 4 oz. to 2 gallons Building products, lid-fit and requiring an adhesives, chemicals and opening device other industrial uses Dairy Thinwall containers in 4 oz. to 5 lbs., Cultured dairy products, traditional dairy market Multi-pack including yogurt, cottage sizes and styles cheese, sour cream and dips and frozen desserts Polypropylene Usually clear containers in 6 oz. to 5 lbs. Food, deli, sauces and round, oblong or salads rectangular shapes Industrial Thick-walled, larger pails 2.5 to 5 gallons Building products, designed to accommodate chemicals, paints and other heavy loads industrial uses Specialty Customer specific Various Premium consumer items, such as tobacco and drink mixes - ----------------------------------------------------------------------------------------------
The largest end-uses for our containers are food products, building products, chemicals and dairy products. We have a diverse customer base for our container lines, and no single container customer exceeded 3% of our total net sales in fiscal 2002. 49 We believe that we offer the broadest product line among United States-based injection-molded plastic container manufacturers. Our container capacities range from 4 ounces to 5 gallons and are offered in various styles with accompanying lids, bails and handles, some of which we produce, as well as a wide array of decorating options. In addition to a complete product line, we have sophisticated printing capabilities, an in-house graphic arts department, low-cost manufacturing capability with 10 plants strategically located throughout the United States and a dedication to high-quality products and customer service. Our product engineers work with customers to design and commercialize new containers. In addition, as part of our dedication to customer service, on occasion, we provide filling machine equipment to some of our customers, primarily in the dairy market, and we also provide the services necessary to operate such equipment. We believe that providing such equipment and services increases customer retention by increasing the customer's production efficiency. The cost of, and revenue from, such equipment is not material. We seek to develop niche container products and new applications by taking advantage of our state-of-the-art decorating and graphic arts capabilities and dedication to service and quality. We believe that these capabilities have given us a significant competitive advantage in certain high-margin niche container 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, we rely extensively on our national sales force. Once these opportunities are identified, our sales force coordinates with our product design engineers to satisfy customers' needs. In non-industrial containers, our strongest competitors include Airlite, Sweetheart and Polytainers. We also produce commodity industrial pails for a market that is dominated by large volume competitors such as Letica, Plastican, NAMPAC and Ropak. We do not participate heavily in this large market. CLOSURES Our closures division focuses on aerosol overcaps and closures. AEROSOL OVERCAPS We believe that we are the worldwide leading producer of injection-molded aerosol overcaps. Our aerosol overcaps are used in a wide variety of consumer goods including spray paints, household and personal care products, insecticides and numerous other commercial and consumer products. Most United States manufacturers of aerosol products, and companies that fill aerosol products on a contractual basis, are our customers for some portion of their needs. Approximately 19% of the United States injection-molded market consists of manufacturers who produce overcaps in-house for their own needs. We believe that a portion of these in-house producers will increase the outsourcing of their production to high-technology, low-cost manufacturers, such as us, as a means of reducing manufacturing assets and focusing on their core marketing objectives. We believe that, over the years, we have developed several significant competitive advantages, including (1) a reputation for outstanding quality, (2) short lead-time requirements to fill customer orders, (3) long-standing relationships with major customers, (4) the ability to accurately reproduce over 3,500 colors, (5) proprietary packing technology that minimizes freight cost and warehouse space, (6) high-speed, low-cost molding and decorating capability 50 and (7) a broad product line of proprietary molds. We continue to develop new products in the overcap market, including a "spray-thru" line of aerosol overcaps that has a built-in release button. In fiscal 2002, no single aerosol overcap customer accounted for over 2% of our total net sales. Competitors include Dubuque Plastics, Cobra and Plasticum. In addition, a number of companies, including several of our customers, currently produce aerosol overcaps for their own use. CLOSURES We believe that our combined product line offerings to the closures market establish us as a leading provider of closures. Our product line offerings include continuous thread, dispensing, tamper evident, and child resistant closures. In addition, we are a leading provider of (1) fitments and plugs for medical applications, (2) cups and spouts for liquid laundry detergent, (3) dropper bulb assemblies for medical and personal care applications and (4) jiggers for mouthwash products. Our closures are used in a wide variety of consumer goods markets, including health and beauty aids, pharmaceutical, household chemicals, commercial chemicals, and food and dairy. We are a major provider of closures to many of the leading companies in these markets. We believe the capabilities and expertise we have established as a closure provider create significant competitive advantages, including the latest in single and bi-injection technology, molding of thermoplastic and thermoset resins, compression molding of thermoplastic resins, and lining and assembly applications applying the latest in computerized vision inspection technology. In addition, we have an in-house package development and design group focused on developing new closures to meet customers' proprietary needs. We have a strong reputation for quality and have received numerous "Supplier Quality Achievement Awards" from customers in different markets. In fiscal 2002, no single closure customer accounted for over 2% of our total net sales. Competitors include Owens-Illinois, Kerr/Suncoast, Phoenix Closures, Portola, Rexam Closures and Seaquist Closures. CONSUMER PRODUCTS Our consumer product division focuses on drink cups and housewares. DRINK CUPS We believe that we are the largest provider of injection-molded plastic drink cups in the United States. As beverage producers, convenience stores and fast food restaurants increase their marketing efforts for larger sized drinks, we believe that the plastic drink cup market will expand because of plastic's desirability over paper for larger drink cups. We produce injection-molded plastic cups that range in size from 12 to 64 ounces. Primary markets are fast food and family dining restaurants, convenience stores, stadiums, and retail stores. Virtually all cups are decorated, often as promotional items, and we are known in the industry for our innovative, state-of-the-art graphics capability. We launched our thermoformed drink cup line in fiscal 2001. Our thermoformed product line offers sizes ranging from 22 to 44 ounces. Our thermoform process is unique in the industry in that it uses polypropylene instead of more expensive polystyrene in producing deep draw drink 51 cups. This offers a material competitive advantage versus competitive thermoformed drink cups. In fiscal 2002, no single drink cup customer accounted for more than 3% of our total net sales. Drink cup competitors include Huhtamaki (formerly Packaging Resources Incorporated), Sweetheart, Letica, and WNA (formerly Cups Illustrated). HOUSEWARES Our participation in the housewares market is focused on producing seasonal (spring and summer) semi-disposable plastic housewares and plastic garden products. Examples of our products include plates, bowls, pitchers, tumblers and outdoor flowerpots. We sell virtually all of our products in this market through major national retail marketers and national chain stores, such as Wal-Mart. PackerWare is our recognized brand name in these markets and PackerWare branded products are often co-branded by our customers. Our position in this market has been to provide high value to consumers at a relatively modest price, consistent with the key price points of the retail marketers. We believe outstanding service and ability to deliver products with timely combination of color and design further enhance our position in this market. This focus allowed PackerWare to be named Wal-Mart's category manager for its seasonal housewares department. In fiscal 2002, no single housewares customer accounted for more than 4% of our total net sales. Housewares competitors include imported products from China, Arrow Plastics and United Plastics. MARKETING AND SALES We reach our large and diversified base of over 12,000 customers primarily through our direct field sales force of over 50 dedicated professionals. Our field sales, production and support staff meet with customers to understand their needs and improve our product offerings and services. While these field sales representatives are focused on individual product lines, they are also encouraged to sell all our products to serve the needs of our customers. We believe that a direct field sales force is able to better focus on target markets and customers, with the added benefit of permitting us to control pricing decisions centrally. We also utilize the services of manufacturing representatives to assist our direct sales force. We believe that we produce a high level of customer satisfaction. Highly skilled customer service representatives are located in each of our facilities to support the national field sales force. In addition, telemarketing representatives, marketing managers and sales/marketing executives oversee 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. Our sales force is supported by technical specialists and our in-house graphics and design personnel. Our Graphic Arts department includes computer-assisted graphic design capabilities and in-house production of photopolymer printing plates. We also have a centralized Color Matching and Materials Blending department that utilizes a computerized spectrophotometer to insure that colors match those requested by customers. MANUFACTURING We primarily manufacture our 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. 52 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 5 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, silkscreening, labeling) or assembled (e.g., bail handles fitted to containers). We believe that our molding and post-molding capabilities are among the best in the industry. In 2001, after several years of development, we introduced our proprietary thermoforming molding process that enables us to mass-produce large drink cups (22-ounce to 44-ounce) less expensively than our competitors. The thermoforming machine used in our process was built by a third-party manufacturer to standard specifications. We modified the machine on-site in order to produce high-cavitation, deep draw cups using our process. These modifications were made without the help of outside consultants. Our overall manufacturing philosophy is to be a low-cost producer by using (1) high-speed molding machines, (2) modern multi-cavity hot runner, cold runner and insulated runner molds, (3) extensive material handling automation and (4) sophisticated printing technology. We utilize state-of-the-art robotic packaging processes for large volume products, which enables us to reduce breakage while lowering warehousing and shipping costs. Each plant has complete tooling maintenance capability to support molding and decorating operations. We have historically made, and intend to continue to make, significant capital investments in plant and equipment because of our objectives to improve productivity, maintain competitive advantages and foster continued growth. Over the past five fiscal years our capital expenditures in plant and equipment, exclusive of acquisitions, were $146.4 million. RESEARCH AND PRODUCT DEVELOPMENT AND DESIGN We believe that our technology base and research and development support are among the best in the rigid plastics packaging industry. Our full-time product engineers use three-dimensional computer-aided-design (CAD) technology to design and modify new products and prepare mold drawings. We can simulate the molding environment by running unit-cavity prototype molds in small injection-molding machines for research and development of new products. Production molds are then designed and outsourced for production by various companies with which we have extensive experience and established relationships. Our engineers oversee the mold-building process from start to finish. Many of our customers work in partnership with our technical representatives to develop new, more competitive products. We have enhanced our relationships with these customers by providing the technical service needed to develop products combined with our internal graphic arts support. We spent $2.9 million, $1.9 million and $2.6 million on research and development in 2002, 2001, and 2000, respectively, and $2.5 million in the thirty-nine weeks ended September 27, 2003. We also utilize our in-house graphic design department to develop color and styles for new products. Our design professionals work directly with our customers to develop new styles and use computer-generated graphics to enable our customers to visualize the finished product. 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 53 teamwork approach to problem-solving increases employee participation and provides necessary training at all levels. All of our facilities have been ISO certified, which demonstrates compliance by a company with a set of shipping, trading and technology standards promulgated by the International Standardization Organization ("ISO"). 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 our quality assurance activities. SYSTEMS We utilize a fully integrated computer software system at each of our plants that produces complete financial and operational reports. This accounting and control system is easily expandable to add new features and/or locations as we grow. In addition, we have in place a sophisticated quality assurance system, 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 us is plastic resin. We purchased approximately $113.0 million of resin in fiscal 2002. Approximately 50% of the resin pounds purchased were HDPE, 13% linear low density polyethylene and 37% PP. We have contractual price escalators and de-escalators tied to the price of resin representing approximately 40% of net sales that result in price increases/decreases to many of our customers in a relatively short period of time, typically quarterly. In addition, we have historically had success in passing through price increases and decreases in the price of resin to customers without indexed price agreements. For example, in the fifty-two weeks ended September 27, 2003, our net sales increased by $50.1 million over the prior fifty-two week period, of which approximately $20.6 million was attributable to increased selling prices. This occurred in an environment of rapidly escalating resin prices during which our cost of goods sold increased by approximately $45.3 million, of which approximately $25.9 million was attributable to increased raw material prices. Fewer than 10% of our net sales are generated from fixed-price arrangements, and we have at times and may continue to enter into negotiated purchase agreements with resin suppliers related to these fixed price arrangements. We can further mitigate the effect of resin price movements through our ability to accommodate raw material switching for certain products between HDPE and PP as prices fluctuate. Based on information from Plastics News, an industry publication, average spot prices of HDPE and PP on September 27, 2003 were $0.465 per pound and $0.450 per pound, respectively, reflecting increases of $0.07 per pound, or 17.7%, and $0.06 per pound, or 15.4%, over the respective average spot prices from December 28, 2002. Our purchasing strategy is to deal with only high-quality, dependable suppliers, such as Dow, Chevron, Nova, Equistar, Atofina, Basell, and ExxonMobil. Although we do not have any supply requirements contracts with our key suppliers, we believe that we have maintained strong relationships with these key suppliers and expect that such relationships will continue into the foreseeable future. Based on our experience, we believe that adequate quantities of plastic resins will be available at market prices, but we can give you no assurance as to such availability or the prices thereof. 54 EMPLOYEES As of September 27, 2003, we had approximately 3,250 employees. Poly-Seal Corporation, a wholly owned subsidiary, and the United Steelworkers of America are parties to a collective bargaining agreement which expires on April 24, 2005. As of September 27, 2003, approximately 332 employees of Poly-Seal Corporation, all of whom are located in our Baltimore, Maryland facility, were covered by this agreement. None of our other employees are covered by collective bargaining agreements. We believe our relations with our employees are good. PATENTS AND TRADEMARKS We rely on a combination of patents, trade secrets, unpatented know-how, trademarks, copyrights and other intellectual property rights, nondisclosure agreements and other protective measures to protect our proprietary rights. We do not believe that any individual item of our intellectual property portfolio is material to our current business. We employ various methods, including confidentiality and non-disclosure agreements with third parties, employees and consultants, to protect our trade secrets and know-how. We have licensed, and may license in the future, patents, trademarks, trade secrets, and similar proprietary rights to and from third parties. See "Risk factors--Risks related to our business--We and Landis rely on unpatented proprietary know-how and trade secrets". PROPERTIES We believe that our property and equipment are well maintained, in good operating condition and adequate for our present needs. The following table sets forth our principal manufacturing facilities:
- ------------------------------------------------------------------ APPROXIMATE SQUARE OWNED/ LOCATION ACRES FOOTAGE USE LEASED - ------------------------------------------------------------------ Evansville, IN 15.8 580,000 Headquarters and Owned Manufacturing Henderson, NV 12.3 175,000 Manufacturing Owned Iowa Falls, IA 14.1 100,000 Manufacturing Owned Charlotte, NC 37.3 150,000 Manufacturing Owned Lawrence, KS 19.3 424,000 Manufacturing Owned Suffolk, VA 14.0 110,000 Manufacturing Owned Monroeville, OH 34.7 152,000 Manufacturing Owned Norwich, England 5.0 88,000 Manufacturing Owned Woodstock, IL 13.7 170,000 Manufacturing Owned Streetsboro, OH 11.9 140,000 Manufacturing Owned Baltimore, MD 9.9 244,000 Manufacturing Owned Milan, Italy 11.6 125,000 Manufacturing Leased - ------------------------------------------------------------------
ENVIRONMENTAL MATTERS AND GOVERNMENT REGULATION Our past and present operations and our past and present ownership and operations of real property are subject to extensive and changing federal, state, local and foreign environmental laws and regulations pertaining to the discharge of materials into the environment, the use and management of hazardous materials, the handling and disposition of wastes or otherwise 55 relating to the protection of the environment. We believe that we are in substantial compliance with applicable environmental laws and regulations. However, we cannot assure you with any certainty that we will not in the future incur liability under environmental statutes and regulations with respect to non-compliance with environmental laws, contamination of sites formerly or currently owned or operated by us (including contamination caused by prior owners and operators of such sites) or the off-site disposal of hazardous materials. Like any manufacturer, we are subject to the possibility that we may receive notices of potential liability in connection with materials that were sent to third-party recycling, treatment, and/or disposal facilities under the Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA, and comparable state statutes, which impose liability for investigation and remediation of contamination without regard to fault or the legality of the conduct that contributed to the contamination. Liability under CERCLA is retroactive, and liability for the entire cost of a cleanup can be imposed on any responsible party. No such notices are currently pending. The FDA regulates the material content of direct-contact food containers and packages, including certain thinwall containers we manufacture pursuant to the Federal Food, Drug and Cosmetics Act. Certain of our products are also regulated by the CPSC pursuant to various federal laws, including the Consumer Product Safety Act. Both the FDA and the CPSC can require the manufacturer of defective products to repurchase or recall such products and may also impose fines or penalties on the manufacturer. Similar law exists in some states, cities and other countries in which we sell our products. In addition, laws exist in certain states restricting the sale of packaging with certain levels of heavy metals, imposing fines and penalties for non-compliance. Although we use FDA approved resins and pigments in containers that directly contact food products and believe they are in material compliance with all such applicable FDA regulations, and we believe our products are in material compliance with all applicable requirements, we remain subject to the risk that our products could be found not to be in compliance with such requirements. The plastics industry, including us, is subject to existing and potential federal, state, local and foreign legislation designed to reduce solid wastes by requiring, among other things, plastics to be degradable in landfills, minimum levels of recycled content, various recycling requirements, disposal fees and limits on the use of plastic products. In addition, various consumer and special interest groups have lobbied from time to time for the implementation of these and other similar measures. The principal resins used in our products, HDPE and PP, are recyclable, and, accordingly, we believe that the legislation promulgated to date and such initiatives to date have not had a material adverse effect on us. We cannot assure you that any such future legislative or regulatory efforts or future initiatives would not have a material adverse effect on us. 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, they principally require the use of post consumer regrind, or PCR, as an ingredient in containers or the reduction of their weight. These regulations do not apply to food, cosmetic or drug containers. Oregon and California provide for an exemption from these regulations if statewide recycling rates for rigid plastic containers reach or exceeds 25%. We assist our customers in complying with these regulations. Oregon's aggregate recycling rate for rigid plastic containers has exceeded the 25% goal since the effective date of the law through 2001, the most recent compliance period examined. 56 Therefore, rigid plastic containers are exempt from the requirements of the Oregon statute. In addition, California's recycling rate for rigid plastic containers exceeded 25% in 2001 and 2002. Therefore, rigid plastic containers were exempt from the requirements of the California statute in 2001 and 2002. In order to facilitate continued individual customer compliance with these regulations, we are providing customers the option of purchasing containers with limited amounts of PCR or reduced weight. LEGAL PROCEEDINGS We are party to various legal proceedings involving routine claims which are incidental to our business. Although our legal and financial liability with respect to such proceedings cannot be estimated with certainty, we believe that any ultimate liability would not be material to our financial condition. LANDIS GENERAL Landis is a leading United States manufacturer of thinwall injection molded and thermoformed plastic packaging. Landis manufactures rigid plastic packaging for yogurt and cultured dairy products and plastic packaging for margarine products. Landis also manufactures dessert and industrial plastic containers. While a substantial majority of Landis' sales are to the food industry, it also produces industrial packaging products used to store and transport such products as adhesives and wall and tile grout. Landis has focused its business on larger customers that are high-volume purchasers to take advantage of manufacturing efficiencies, and has strategically located its facilities to accommodate specific customer needs. PRODUCT OVERVIEW Landis organizes its products into five categories (by end-market): yogurt, dairy, margarine, dessert and industrial. These five categories accounted for approximately 37%, 28%, 18%, 9% and 8% of its 2002 net sales, respectively. Most of Landis' products are produced from either high density polyethylene or polypropylene and feature high resolution graphics through its eight color printing capability. In addition to the well known food lines contained in the yogurt, dairy, margarine and dessert categories, Landis is also a supplier of institutional and industrial containers and lids ranging in size from 1/2 pint to 6 gallons. End users of these products consist of both institutional food customers and building and home improvement customers. CUSTOMERS Landis sells its products to an established base of approximately 150 customers. Kraft has been a Landis customer since 1978 and purchased over $54 million of Landis products during 2002. General Mills and Dean Foods have been customers for 10 and 12 years, respectively, and purchased approximately $48 million and $19 million, respectively, from Landis in 2002. Landis believes it is the sole supplier of plastic containers for such leading product brands as Cool Whip, Philadelphia Cream Cheese, Yoplait and Crystal Light drink mixes. 57 MARKETING AND SALES We believe Landis' customer base and strong position result from its commitment to quality and customer service. Landis' overall sales strategy has been to expand its customer base by pursuing underserved market opportunities while capturing additional sales from its existing customer base. Historically, Landis has been successful in acquiring new customers by offering competitive pricing, which has been made possible through continuous process improvements. Landis' sales representatives work closely with Landis' design engineers and the customer to deliver innovative packaging products. This allows Landis to improve its reputation in the industry and capture additional business by capitalizing on existing customers' expanding packaging needs. More than half of Landis' 2002 sales were for packaging products for which Landis is the sole supplier to that customer. MANUFACTURING We believe Landis has an established reputation for producing high-quality products. This reputation is largely due to its control over the manufacturing process. Landis designs, builds and maintains its own molds, which increases performance through increased unit per minute cycle times, reduced cavity-off and down times and tighter product tolerances. By controlling the manufacturing process, Landis has better control over its cost structure and can ensure higher productivity and product quality. Landis has significant capability in both thin-wall injection molding and thermoforming, each of which offers certain performance advantages. RESEARCH AND PRODUCT DEVELOPMENT AND DESIGN Landis has invested in developing innovative products and processes to gain customer accounts and recognize cost savings. Landis has a long history of innovation in the plastic packaging industry. In 1975, Landis was one of the first manufacturers to injection mold polyethylene. In 1978, Landis expanded the injection molding process to straight wall containers used in the first plastic frosting cans. In 1988, Landis developed the "tear strip" lid concept. The result was a patented "easy open" lid for industrial containers. In 1995, Landis was one of the pioneers of the "4 level" container mold expanding the production output necessary to serve the pudding cup market. We believe Landis was the first United States manufacturer to utilize 8-color lid printing. This enabled General Foods (Kraft) Cool Whip to replace a difficult to handle paper insert with an all plastic decorated lid. In the same year, Landis developed a "sonic welding" process, allowing General Mills Yoplait the opportunity to move away from more expensive thermoformed styrene container. In 1999, Landis introduced an injection molded non-round container for the Take Control product. Also in the same year Landis introduced the highly recognized "Spoon-in-the-Lid" product for Colombo Yogurt, acknowledged in 1999 by Business Week magazine as one of its "packaging products" of the year. QUALITY ASSURANCE Landis' philosophy of Total Quality Management has helped establish it as a leading supplier of high quality packaging. Landis has technologically advanced quality control equipment that verifies and documents product quality. Landis has also implemented a firm-wide quality policy by training manufacturing personnel on a set of policies, procedures, and work instructions that comply with ISO standards and other regulatory requirements. Landis is also training its production teams to conduct in-line testing, which helps enable the individual manufacturing cells to be responsible for both production and quality. 58 SYSTEMS Landis' technologically advanced machinery generates quality products and enables it to accommodate increased levels of production with relatively limited incremental operating expense. To complement its automated manufacturing capabilities, Landis utilizes customized, industry-specific software to plan and monitor the business on a real-time basis. Landis has also invested in a fully integrated warehouse management. SOURCES AND AVAILABILITY OF RAW MATERIALS Landis purchases resin under multi-year contracts with highly dependable, cost competitive vendors such as Basell USA, Dow, Equistar and Sunoco. These contracts generally include volume rebates but do not provide for guaranteed supplies or fixed-prices for resin. Historically, Landis has purchased significant portions of its resin from a single supplier. Landis does not engage in any hedging transactions with respect to commodity suppliers. EMPLOYEES As of September 28, 2003, Landis employed 1,535 non-union employees. We do not believe Landis is faced with any significant labor issues and considers its working conditions to be excellent. PATENTS AND TRADEMARKS Landis strives to maintain a competitive advantage through continuing investment in new product development and advanced engineering. As a result, Landis has developed and registered patented technologies in the United States and Canada, relating to both proprietary products and innovative process technologies and has also developed unpatented know-how, trade secrets and other intellectual property rights. Landis employs various methods, including confidentiality and non-disclosure agreements with third parties, employees and consultants to protect its trade secrets and know-how. Landis has licensed, and may license in the future, patents and other intellectual property rights from third parties and may license in the future intellectual property to third parties. See "Risk Factors--Risks related to our business--We and Landis rely on unpatented proprietary know-how and trade secrets". PROPERTIES Landis has five primary manufacturing facilities, which are strategically located close to major processed food industry participants. All manufacturing facilities are also used as distribution hubs. The following table sets forth Landis' manufacturing facilities statistics:
- ------------------------------------------------------------------------------------------- FACILITY LOCATION SQUARE FOOTAGE OWNED/LEASED - ------------------------------------------------------------------------------------------- Alsip, Il (South) 388,000 Owned(1) Alsip, Il (North) 84,000 Owned(1) Monticello, IN 184,000 Owned Phoenix, AZ 140,000 Owned(1) Richmond, IN 160,000 Owned Syracuse, NY 135,000 Owned(1) - -------------------------------------------------------------------------------------------
(1) Were owned by affiliates of Landis. Under the agreement and plan of merger, we agreed to acquire these four facilities for $32 million. Prior to the closing of the Landis Acquisition, we assigned our rights and obligations to purchase these facilities to an affiliate of W.P. Carey & Co., and then leased these facilities from them. 59 ENVIRONMENTAL MATTERS AND GOVERNMENT REGULATION The past and present operations of Landis and the past and present ownership and operations of real property by Landis are subject to extensive and changing federal, state and local environmental laws and regulations pertaining to the discharge of materials into the environment, the use and management of hazardous materials, the handling and disposition of wastes or otherwise relating to the protection of the environment. The plastics industry, including Landis, is also subject to existing and potential federal, state, local and foreign legislation designed to reduce solid wastes. In addition, the FDA regulates the material content of direct-contact food containers and packages, including certain containers manufactured by Landis. Based on information provided to us by Landis, we believe that Landis is in material compliance with regard to all laws and regulations applicable to its business and that it only uses approved resins and pigments in its direct-contact food packaging products. Pursuant to the agreement and plan of merger in the Landis Acquisition, the Landis stockholders have furnished certain representations and warranties, and agreed to certain indemnities, with respect to environmental matters. Such indemnities are, in some cases, supported by escrowed funds, and are subject to survival and dollar limitations and other conditions. Since Landis' operations are similar to Berry Plastics' operations, Landis is subject to the same types of laws and regulations as Berry Plastics. For further detail regarding such laws and regulations, see "Business--Berry Plastics--Environmental matters and government regulation." LEGAL PROCEEDINGS Landis is involved in litigation from time to time in the ordinary course of business, but we believe that such matters will not have a material effect on our financial position or results of operations. 60 MANAGEMENT Our directors and executive officers and their ages as of the date of this prospectus are as follows:
- ---------------------------------------------------------------------------------------------------- NAME AGE TITLE - ---------------------------------------------------------------------------------------------------- Joseph H. Gleberman(1)(2)(3) 45 Chairman and Director Ira G. Boots(1)(3) 49 President, Chief Executive Officer and Director James M. Kratochvil 47 Executive Vice President, Chief Financial Officer, Treasurer and Secretary R. Brent Beeler 50 President, Container, Consumer Product and Drink Cup Division Gregory J. Landis 53 Director and President, Container Branded Products Division William J. Herdrich 53 Executive Vice President and General Manager, Closures Division Antonio Gabriele 46 Vice President, International Business Development Division Christopher C. Behrens(1)(2) 42 Director Patrick J. Dalton(2)(4) 35 Director Douglas F. Londal(1)(3)(4) 38 Director Mathew J. Lori(3)(4) 39 Director - ----------------------------------------------------------------------------------------------------
(1) Member of the Compensation Committee. (2) Member of the Finance Committee. (3) Member of the Corporate Development Committee. (4) Member of the Audit Committee. Joseph H. Gleberman has been our chairman of the board of directors since the closing of the Buyout and has been a Managing Director at Goldman, Sachs & Co. since 1996. He serves on the Board of Directors of aaiPharma, IPC Acquisition Corp., and MCG Capital Corporation, as well as a number of private companies. Mr. Gleberman received his M.B.A. in 1982 from Stanford University Graduate School of Business and a M.A./B.A. from Yale University in 1980. Ira G. Boots has been our President and Chief Executive Officer since June 2001, and a director since April 1992. Prior to that, Mr. Boots served as our Chief Operating Officer since August 2000 and Vice President of Operations, Engineering and Product Development of the Company since April 1992. Mr. Boots was employed by us from 1984 to December 1990 as Vice President, Operations. James M. Kratochvil has been our Executive Vice President, Chief Financial Officer, Secretary and Treasurer since December 1997. He formerly served as Vice President, Chief Financial Officer and Secretary of the Company since 1991, and as Treasurer of the Company since May 1996. Mr. Kratochvil was employed by us from 1985 to 1991 as Controller. R. Brent Beeler was named our President, Container, Consumer Product and Drink Cup Division in October 2003. He had been our Executive Vice President and General Manager-Containers and Consumer Products since October 2002 and was our Executive Vice President and General Manager-Containers since August 2000. Prior to that, Mr. Beeler was Executive Vice President, Sales and Marketing of the Company since February 1996 and Vice President, Sales and Marketing of the Company since December 1990. Mr. Beeler was employed by us from October 1988 to December 1990 as Vice President, Sales and Marketing. 61 Gregory J. Landis became a director upon the closing of the Landis Acquisition. He is also our President, Container Branded Products Division. Prior to the closing of the Landis Acquisition, he had been President of Landis since 1991. William J. Herdrich has been our Executive Vice President and General Manager, Closures Division since August 2000. From May 2000 to August 2000, Mr. Herdrich was a consultant to the Company. During the period from April 1994 to May 2000, Mr. Herdrich was President, Executive Vice President and General Manager of Poly-Seal Corporation, which we acquired in 2000. Mr. Herdrich was employed by Seaquist Closures from 1990 to April 1994 as Executive Vice President. Antonio Gabriele became our Vice President, International Business Development Division in September, 2003. He was previously employed by Solo Cup Company as International Sales Manager and National Sales Manager since 1995. Christopher C. Behrens has been a director since the closing of the Buyout and has been a partner of J.P. Morgan Partners, LLC and its predecessor, Chase Capital Partners, since 1999. Prior to joining Chase Capital Partners, Mr. Behrens served as Vice President in Chase's Merchant Banking Group. Mr. Behrens serves on the Board of Directors of Carrizo Oil & Gas, Brand Services Inc. and Interline Holdings, as well as a number of private companies. Mr. Behrens received a B.A. from the University of California at Berkeley and an M.A. from Columbia University. Patrick J. Dalton has been a director since the closing of the Buyout and has been a Vice President at Goldman, Sachs & Co. since 2001. Prior to joining the Principal Investment Area of Goldman, Sachs & Co. in 2000, Mr. Dalton was at Chase Securities from 1997 to 2000. He serves on the Board of Directors of First Asset Management Inc. and Waddington North America, Inc. as well as a number of private companies. Mr. Dalton received his M.B.A. in 1997 from Columbia University Graduate School of Business and a B.S. from Boston College in 1990. Douglas F. Londal has been a director since the closing of the Buyout and has been a Managing Director at Goldman, Sachs & Co. since 1999. Prior to joining the Principal Investment Area of Goldman, Sachs & Co. in 1995, he worked in the Mergers & Acquisitions Department of Goldman, Sachs & Co. from 1991 to 1995. He serves on the Board of Directors of 21st Century Newspapers, NextMedia Investors LLC and Village Voice Media, LLC, as well as a number of private companies. Mr. Londal received his M.B.A. in 1991 from the University of Chicago and a B.A. from the University of Michigan in 1987. Mathew J. Lori has been a director since the closing of the Buyout. Mr. Lori has been a principal with J.P. Morgan Partners, LLC and its predecessor, Chase Capital Partners, since 1998, and prior to that, he had been an associate. Mr. Lori has been on the board of Berry Plastics since 1996, and is also a director of Doane Pet Care Company, as well as a number of private companies. Mr. Lori received an M.B.A. from Kellogg Graduate School of Management at Northwestern University in 1993. BOARD OF DIRECTORS Our board of directors currently consists of seven directors, including Gregory J. Landis, who became a director of our company upon the closing of the Landis Acquisition. Pursuant to the stockholders' agreement entered into in connection with the Landis Acquisition with affiliates of Goldman, Sachs & Co. and affiliates of J.P. Morgan Securities Inc., described below, affiliates 62 of Goldman, Sachs & Co. has the right to designate two additional members of our board of directors. COMMITTEES OF THE BOARD OF DIRECTORS Our board of directors has a Compensation Committee, an Audit Committee, a Finance Committee and a Corporate Development Committee. The Compensation Committee, consisting of Messrs. Gleberman, Boots, Behrens and Londal, makes recommendations concerning salaries and incentive compensation for our employees and consultants. The Audit Committee, consisting of Messrs. Dalton, Londal and Lori, recommends the annual appointment of auditors with whom the audit committee reviews the scope of audit and non-audit assignments and related fees, accounting principles we use in financial reporting, internal auditing procedures and the adequacy of our internal control procedures. The Finance Committee, consisting of Messrs. Gleberman, Behrens and Dalton, oversees our capital structure and reviews and approves significant financing decisions. The Corporate Development Committee, consisting of Messrs. Gleberman, Boots, Londal and Lori, oversees our business strategy and, in particular, reviews and recommends potential acquisition candidates. COMPENSATION OF DIRECTORS Directors receive no cash consideration for serving on our board of directors, but directors are reimbursed for out-of-pocket expenses incurred in connection with their duties as directors. STOCKHOLDERS' AGREEMENT In connection with the Buyout, BPC Holding entered into a stockholders' agreement with GSCP 2000 and other private equity funds affiliated with Goldman, Sachs & Co. that, in the aggregate, own a majority of our common stock and J.P. Morgan Partners Global Investors, L.P. and other private equity funds affiliated with J.P. Morgan Securities Inc. that, in the aggregate, own approximately 29% of our common stock. Under the terms of this agreement, which was amended upon the closing of the Landis Acquisition, among other things: (1) GSCP 2000 and other private equity funds affiliated with Goldman, Sachs & Co., have the right to designate seven members of our board of directors, one of which shall be a member of our management, and J.P. Morgan Partners Global Investors, L.P. and other private equity funds affiliated with J.P. Morgan Securities Inc. have the right to designate two members of our board of directors, one of which will be designated by J.P. Morgan Partners Global Investors, L.P.; (2) the Goldman Sachs and J.P. Morgan funds have the right to subscribe for a proportional share of future equity issuances by BPC Holding; (3) after July 29, 2009, the J.P. Morgan funds have the right to demand that BPC Holding cause the initial public offering of its common stock, if such an offering or other sale of BPC Holding has not occurred by such time; and (4) BPC Holding has agreed not to take specified actions, including, making certain amendments to either the certificate of incorporation or the by-laws of BPC Holding, changing independent accountants, or entering into certain affiliate transactions, without the approval of a majority of its board of directors, including at least one director designated by the J.P. Morgan funds. The stockholders agreement also contains provisions regarding transfer restrictions, rights of first offer, tag-along rights and drag-along rights related to the shares of BPC Holding common stock owned by the Goldman Sachs and J.P. Morgan funds. 63 MANAGEMENT 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") during the 2002 fiscal year for services rendered in all capacities to the Company during fiscal 2002, 2001 and 2000. SUMMARY COMPENSATION TABLE
- -------------------------------------------------------------------------------------------------- LONG TERM COMPENSATION ------------ ANNUAL SECURITIES COMPENSATION UNDERLYING FISCAL --------------------- OPTIONS OTHER NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) (#) COMPENSATION(2) - -------------------------------------------------------------------------------------------------- Ira G. Boots..................... 2002 $424,536 $1,452,018 61,814 $ 12,505 President and Chief Executive 2001 316,461 87,500 - 12,428 Officer 2000 289,328 150,000 - 11,779 James M. Kratochvil.............. 2002 $273,400 $ 945,026 35,040 $ 9,889 Executive Vice President, 2001 231,919 64,166 - 9,198 Chief Financial Officer, Treasurer 2000 212,049 120,000 - 8,800 and Secretary R. Brent Beeler(3)............... 2002 $298,172 $1,080,496 35,229 $ 2,590 President, Container, Consumer 2001 284,251 78,750 - 3,196 Product and Drink Cup Division 2000 257,236 135,000 - 2,879 William J. Herdrich.............. 2002 $269,222 $ 983,506 25,581 $ 4,899 Executive Vice President and 2001 258,690 62,800 2,000 3,834 General Manager--Closures 2000 99,003 18,986 - 4,691 Bruce J. Sims(4)................. 2002 $263,533 $ 908,435 26,412 $ 4,024 Executive Vice President of 2001 211,851 55,693 - 3,912 Sales--Drink Cups 2000 193,055 114,000 - 3,879 - --------------------------------------------------------------------------------------------------
(1) Amounts shown include transaction bonuses of $1,238,298, $788,298, $871,298, $803,831 and $766,298 paid to Messrs. Boots, Kratochvil, Beeler, Herdrich and Sims, respectively, in connection with the Buyout. (2) Amounts shown reflect contributions by the Company under the Company's 401(k) plan and the personal use of a Company vehicle. (3) Mr. Beeler served as our Executive Vice President and General Manager--Containers and Consumer Products since October 2002 and was our Executive Vice President and General Manager--Containers since 2000. (4) Mr. Sims served as our Executive Vice President of Sales--Drink Cups from October 2002 until May 16, 2003 and our Executive Vice President and General Manager--Consumer Products from August 2000 to October 2002. Prior to that, he served as our Executive Vice President, Sales and Marketing, Housewares from January 1997 to August 2000. 64 The following table sets forth a summary of the options granted by the Company to the Named Executive Officers during the 2002 fiscal year. OPTION GRANTS IN LAST FISCAL YEAR
- ---------------------------------------------------------------------------------------------------- INDIVIDUAL GRANTS ------------------------- POTENTIAL REALIZABLE NUMBER OF VALUE AT ASSUMED SECURITIES % OF TOTAL RATES OF STOCK PRICE UNDERLYING OPTIONS APPRECIATION FOR OPTIONS GRANTED TO OPTION TERM GRANTED EMPLOYEES IN EXERCISE EXPIRATION --------------------- NAME (#) FISCAL YEAR PRICE($) DATE 5%($) 10%($) - ---------------------------------------------------------------------------------------------------- Ira Boots.............. 15,886(1) 4.0 100 9/19/12 999,071 2,531,752 Ira Boots.............. 7,943(2) 2.0 100 9/19/12 499,535 1,265,876 Ira Boots.............. 37,985(3) 9.6 100 9/19/12 0 0 James M. Kratochvil.... 9,035(1) 2.2 100 9/19/12 568,211 1,439,908 James M. Kratochvil.... 4,518(2) 1.1 100 9/19/12 284,137 720,034 James M. Kratochvil.... 21,487(3) 5.4 100 9/19/12 0 0 R. Brent Beeler........ 9,035(1) 2.3 100 9/19/12 568,211 1,439,908 R. Brent Beeler........ 4,518(2) 1.1 100 9/19/12 284,137 720,034 R. Brent Beeler........ 21,676(3) 5.5 100 9/19/12 0 0 William J. Herdrich.... 9,035(1) 2.3 100 9/19/12 568,211 1,439,908 William J. Herdrich.... 4,518(2) 1.1 100 9/19/12 284,137 720,034 William J. Herdrich.... 12,028(3) 3.0 100 9/19/12 0 0 Bruce J. Sims(4)....... 9,035(1) 2.3 100 9/19/12 568,211 1,439,908 Bruce J. Sims(4)....... 4,518(2) 1.1 100 9/19/12 284,137 720,034 Bruce J. Sims(4)....... 12,859(3) 3.3 100 9/19/12 0 0 - ----------------------------------------------------------------------------------------------------
(1) Represents options granted on September 19, 2002, which (i) have an exercise price fixed at $100 per share, which was the fair market value of a share of Holding Common Stock on the date of grant, and (ii) vest and become exercisable over a five year period, beginning the last day of 2002 based on continued service with the Company. (2) Represents options granted on September 19, 2002, which (i) have an exercise price fixed at $100 per share, which was the fair market value of a share of Holding Common Stock on the date of grant, and (ii) vest and become exercisable based on the achievement by BPC Holding of certain financial targets, or if such targets are not achieved, based on continued service with the Company. (3) Represents options granted on September 19, 2002, which (i) have an exercise price which commenced at $100 per share, which was the fair market value of a share of Holding Common Stock on the date of grant and will increase at the rate of 15% per year during the term of the option, and (ii) vest and become exercisable over a five year period, beginning the last day of 2002 based on continued service with the Company. (4) Mr. Sims served as our Executive Vice President of Sales--Drink Cups from October 2002 until May 16, 2003 and our Executive Vice President and General Manager--Consumer Products from August 2000 to October 2002. Prior to that, he served as our Executive Vice President, Sales and Marketing, Housewares from January 1997 to August 2000. 65 FISCAL YEAR-END OPTION HOLDINGS The following table provides information on the number of exercisable and unexercisable management stock options held by the Named Executive Officers at December 28, 2002. FISCAL YEAR-END OPTION VALUES(1)
- ---------------------------------------------------------------------------------------------------- NUMBER OF UNEXERCISED VALUE OF UNEXERCISED SHARES OPTIONS AT FISCAL IN-THE-MONEY OPTIONS ACQUIRED ON VALUE YEAR-END EXERCISABLE/ AT FISCAL YEAR-END NAME EXERCISE REALIZED UNEXERCISABLE(#)(2) EXERCISABLE/UNEXERCISABLE(2) - ---------------------------------------------------------------------------------------------------- Ira G. Boots......... - - 16,278/61,814 $1,106,416/$0 James M. Kratochvil.. - - 10,174/35,040 691,527/0 R. Brent Beeler...... - - 10,174/35,229 691,527/0 William J. Herdrich.......... - - 6,244/25,581 172,397/0 Bruce J. Sims........ - - 4,058/26,412 265,434/0 - ----------------------------------------------------------------------------------------------------
(1) None of Holding's capital stock is currently publicly traded. The values reflect management's estimate of the fair market value of the Common Stock at December 28, 2002. (2) All options granted to management of the Company are exercisable for shares of Common Stock, par value $.01 per share, of Holding. The following is a summary of BPC Holding's employee equity plans and certain employment agreements Berry Plastics has entered into with Berry Plastics' Chief Executive Officer and each of its other four most highly compensated executive officers, based on compensation paid for services rendered during the 2002 fiscal year. 1996 STOCK OPTION PLAN BPC Holding currently maintains the Amended and Restated BPC Holding Corporation 1996 Stock Option Plan ("1996 Option Plan") pursuant to which nonqualified options to purchase 137,980 shares are outstanding. All outstanding options under the 1996 Option Plan are scheduled to expire on or before July 22, 2012 and no additional options will be granted under it. Option agreements issued pursuant to the 1996 Option Plan generally provide that options become vested and exercisable at a rate of 10% per year based on continued service. Additional options also vest in years during which certain financial targets are attained. Notwithstanding the vesting provisions in the option agreements, all options that were scheduled to vest prior to December 31, 2002 accelerated and became vested immediately before the Buyout. 2002 STOCK OPTION PLAN BPC Holding has adopted a new employee stock option plan ("2002 Stock Option Plan") pursuant to which options to acquire up to 437,566 shares of BPC Holding's common stock may be granted to its employees, directors and consultants. Options granted under the 2002 Stock Option Plan will have an exercise price per share that either (1) is fixed at the fair market value of a share of common stock on the date of grant or (2) commences at the fair market value of a share of common stock on the date of grant and increases at the rate of 15% per year during the term. Generally, options will have a ten-year term, subject to earlier expiration upon the termination of the optionholder's employment and other events. Some options granted under the plan will become vested and exercisable over a five-year period based on continued service with BPC Holding. Other options will become vested and exercisable based on the achievement by BPC Holding of certain financial targets, or if such targets are not 66 achieved, based on continued service with BPC Holding. Upon a change of control of BPC Holding, the vesting schedule with respect to certain options may accelerate for a portion of the shares subject to such options. EMPLOYEE STOCK PURCHASE PLAN BPC Holding has adopted an employee stock purchase program pursuant to which a number of employees had the opportunity to invest in BPC Holding on a leveraged basis. Some senior employees also purchased shares of BPC Holding common stock in connection with the Buyout. See "Related party transactions--Loans to executive officers." Each eligible employee was permitted to purchase shares of BPC Holding common stock having an aggregate value of up to the greater of (1) 150% of the value attributable to shares of BPC Holding held by such employee immediately prior to the Buyout or (2) $60,000. Employees participating in this program were permitted to finance two-thirds of their purchases of shares of BPC Holding common stock under the program with a promissory note. In the event that an employee defaults on a promissory note used to purchase such shares, BPC Holding's only recourse is to the shares of BPC Holding securing the note. In this manner, the remaining management acquired 41,628 shares in the aggregate. EMPLOYMENT AGREEMENTS The Company has employment agreements with each of Messrs. Boots, Kratochvil, Beeler and Herdrich. The agreements for Messrs. Boots, Kratochvil and Beeler expire on January 1, 2007 and Mr. Herdrich's agreement expires on December 31, 2003. The employment agreements provided for fiscal 2002 base compensation of $424,536, $273,400, $298,172 and $269,222, 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 those terms are defined in the employment agreements). Specifically, if any of Messrs. Boots, Kratochvil and Beeler is terminated by Berry Plastics without "cause" or resigns for "good reason" (as such terms are defined in the employment agreements), that individual is entitled to: (1) the greater of (a) base salary until the later of (i) July 22, 2004 or (ii) one year after termination or (b) 1/12 of one-year's base salary for each year of employment up to 30 years by Berry Plastics or a predecessor in interest and (2) the pro rata portion of his annual bonus. If Mr. Herdrich is terminated without "cause" or by Berry Plastics at the end of the employment term (which is December 31, 2003), he is entitled to: (1) one-year's base salary and (2) a pro rata portion of his annual bonus. Each employment agreement also includes customary noncompetition, nondisclosure and nonsolicitation provisions. The Company expects to enter into an employment agreement with Gregory J. Landis on terms consistent with the agreements described above. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Company established the Compensation Committee comprised of Messrs. Gleberman, Boots, Behrens, and Londal. The annual salary and bonus paid to Messrs. Boots, Kratochvil, Beeler, Herdrich and Sims for fiscal 2002 were determined by the Compensation Committee in accordance with their respective employment agreements. All other compensation decisions 67 with respect to officers of the Company are made by Mr. Boots pursuant to policies established in consultation with the Compensation Committee. Messrs. Gleberman and Londal are both Managing Directors of Goldman, Sachs & Co. Goldman, Sachs & Co. provided advisory and other services to us in connection with the Buyout and acted as an initial purchaser in the offering of the existing notes. Goldman, Sachs Credit Partners, L.P. participated in and acted as joint lead arranger, joint bookrunner and administrative agent for our amended and restated senior secured credit facility. Mr. Behrens is a partner of J.P. Morgan Partners, LLC, which is the private equity investment arm of J.P. Morgan Chase & Co. Various affiliates of J.P. Morgan provided advisory and other services to us in connection with the Buyout and acted as a dealer-manager in connection with the related debt tender offers, acted as an initial purchaser in the offering of the existing notes and participated in and acted as joint lead arranger, joint bookrunner and a syndication agent for our amended and restated senior secured credit facility. See "Related party transactions" for a description of these transactions between us and various affiliates of Goldman Sachs and J.P. Morgan. INDEMNIFICATION OF DIRECTORS AND OFFICERS We are incorporated under the laws of the State of Delaware. Section 145 of the Delaware General Corporation Law, or DGCL, provides that a Delaware corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with specified actions, suits and proceedings, whether civil, criminal, administrative or investigative (other than action by or in the right of the corporation--a "derivative action"), if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. A similar standard is applicable in the case of derivative actions, except that indemnification only extends to expenses (including attorneys' fees) incurred in connection with the defense or settlement of such action, and the statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation. The statute provides that it is not exclusive of other indemnification that may be granted by a corporation's certificate of incorporation, bylaws, disinterested director vote, stockholder vote, agreement, or otherwise. The DGCL further authorizes a Delaware corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise, against any liability asserted against him and incurred by him in any such capacity, arising out of his status as such, whether or not the corporation would otherwise have the power to indemnify him under Section 145. The Company's Certificate of Incorporation and Bylaws provide for the indemnification of the Company's directors to the fullest extent permitted under Delaware law. The Company's Certificate of Incorporation limits the personal liability of a director to the corporation or its stockholders to damages for breach of the director's fiduciary duty. The Company has purchased insurance on behalf of its directors and officers. 68 PRINCIPAL STOCKHOLDERS All of the outstanding capital stock of the Company is owned by Holding. The following table sets forth certain information regarding the beneficial ownership of the capital stock of Holding as of December 1, 2003 and pro forma giving effect to the expected financing of the Transactions 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 executive officers of Holding as a group. Except as otherwise indicated, each of the stockholders has sole voting and investment power with respect to the shares beneficially owned. Unless otherwise indicated, the address for each stockholder is c/o Berry Plastics Corporation, 101 Oakley Street, Evansville, Indiana 47710.
- -------------------------------------------------------------------------------------------- PERCENTAGE OF COMMON COMMON STOCK NAME AND ADDRESS OF BENEFICIAL OWNER STOCK OUTSTANDING* - -------------------------------------------------------------------------------------------- GS Capital Partners 2000, L.P.(2)........................... 1,155,042 33.4% GS Capital Partners 2000 Offshore, L.P.(2).................. 419,698 12.1 GS Capital Partners 2000 GmbH & Co. Beteiligungs KG(2)....................................... 48,278 1.4 GS Capital Partners 2000 Employee Fund, L.P.(2)............. 366,766 10.6 Stone Street 2000, L.P.(2).................................. 36,068 1.0 Bridge Street Special Opportunities Fund 2000, L.P.(2)...... 18,034 - Goldman Sachs Direct Investment Fund 2000, L.P.(2).......... 60,114 1.7 J.P. Morgan Partners Global Investors, L.P.(3).............. 120,821 3.5 J.P. Morgan Partners Global Investors (Cayman), L.P.(3)..... 61,203 1.8 J.P. Morgan Partners Global Investors (Cayman) II, L.P.(3).................................................. 6,825 - J.P. Morgan Partners Global Investors A, L.P.(3)............ 16,847 - J.P. Morgan Partners (BHCA), L.P.(3)........................ 748,856 21.6 Joseph H. Gleberman(4)...................................... 2,104,100 60.8 Christopher C. Behrens(5)................................... 954,552 27.6 Patrick J. Dalton(6)........................................ 2,104,100 60.8 Douglas F. Londal(7)........................................ 2,104,100 60.8 Mathew J. Lori(8)........................................... - - Ira G. Boots................................................ 70,224(9) 2.0 James M. Kratochvil......................................... 41,288(10) 1.2 R. Brent Beeler............................................. 41,595(11) 1.2 William J. Herdrich......................................... 27,967(12) - Gregory J. Landis........................................... 100,000 2.9 All executive officers and directors as a group (10 persons)................................................. 3,339,726(13) 96.5 - --------------------------------------------------------------------------------------------
* The number of shares outstanding used in calculating the percentage for each person, group or entity listed includes the number of shares underlying options held by such person or group that were exercisable or convertible within 60 days from the date of this prospectus, but excludes shares of stock underlying options held by any other person. - - Less than one percent. 69 (1) The authorized capital stock of Holding consists of 5,500,000 shares of capital stock, including 5,000,000 shares of Common Stock, $.01 par value (the "Holding Common Stock"), and 500,000 shares of Preferred Stock, $.01 par value (the "Preferred Stock"). (2) Address is c/o Goldman, Sachs & Co., 85 Broad Street, New York, New York, 10004. (3) Address is 1221 Avenue of the Americas, New York, New York 10020. (4) Address is c/o Goldman, Sachs & Co., 85 Broad Street, New York, New York, 10004. Represents shares owned by equity funds affiliated with Goldman, Sachs & Co. Mr. Gleberman is a Managing Director of Goldman, Sachs & Co. Mr. Gleberman disclaims any beneficial ownership of the shares of Holding Common Stock held by equity funds affiliated with Goldman, Sachs & Co. except to the extent of his pecuniary interest therein. (5) Address is c/o J.P. Morgan Partners, LLC, 1221 Avenue of the Americas, New York, New York 10020. Represents shares owned by equity funds affiliated with J.P. Morgan Chase & Co. Mr. Behrens is a partner of J.P. Morgan Partners, which is the private equity investment arm of J.P. Morgan Chase & Co. Mr. Behrens disclaims any beneficial ownership of the shares of Holding Common Stock held by equity funds affiliated with J.P. Morgan Chase & Co. except to the extent of his pecuniary interest therein. (6) Address is c/o Goldman, Sachs & Co., 85 Broad Street, New York, New York, 10004. Represents shares owned by equity funds affiliated with Goldman, Sachs & Co. Mr. Dalton is a Vice President of Goldman, Sachs & Co. Mr. Dalton disclaims any beneficial ownership of the shares of Holding Common Stock held by equity funds affiliated with Goldman, Sachs & Co. except to the extent of his pecuniary interest therein. (7) Address is c/o Goldman, Sachs & Co., 85 Broad Street, New York, New York, 10004. Represents shares owned by equity funds affiliated with Goldman, Sachs & Co. Mr. Londal is a Managing Director of Goldman, Sachs & Co. Mr. Londal disclaims any beneficial ownership of the shares of Holding Common Stock held by equity funds affiliated with Goldman, Sachs & Co. except to the extent of his pecuniary interest therein. (8) Address is c/o J.P. Morgan Partners, LLC, 1221 Avenue of the Americas, New York, New York 10020. (9) Includes options to purchase 32,439 shares of Holding Common Stock granted to Mr. Boots, exercisable within 60 days of the date of this prospectus. (10) Includes options to purchase 19,331 shares of Holding Common Stock granted to Mr. Kratochvil, exercisable within 60 days of the date of this prospectus. (11) Includes options to purchase 19,387 shares of Holding Common Stock granted to Mr. Beeler, exercisable within 60 days of the date of this prospectus. (12) Includes options to purchase 12,563 shares of Holding Common Stock granted to Mr. Herdrich, exercisable within 60 days of the date of this prospectus. (13) Includes options to purchase 83,720 shares of Holding Common Stock granted to executive officers, exercisable within 60 days of the date of this prospectus. 70 RELATED PARTY TRANSACTIONS MANAGEMENT AGREEMENT WITH FIRST ATLANTIC Prior to the Buyout, Atlantic Equity Partners International II, L.P. was our largest voting stockholder and we engaged First Atlantic Capital, Ltd. to provide certain financial and management consulting services to us. Under our management agreement with First Atlantic, First Atlantic provided us with financial advisory and management consulting services in exchange for an annual fee of $750,000 and reimbursement for out-of-pocket costs and expenses. In consideration of such services, we paid First Atlantic fees and expenses of approximately $385,000 for fiscal 2002. THE BUYOUT On July 22, 2002, GS Berry Acquisition Corp., a newly formed entity controlled by various private equity funds affiliated with Goldman, Sachs & Co., merged with and into BPC Holding, pursuant to an agreement and plan of merger, dated as of May 25, 2002. At the effective time of the Buyout, (1) each share of common stock of BPC Holding issued and outstanding immediately prior to the effective time of the Buyout was converted into the right to receive cash pursuant to the terms of the merger agreement, and (2) each share of common stock of GS Berry Acquisition Corp. issued and outstanding immediately prior to the effective time of the Buyout was converted into one share of common stock of BPC Holding. Additionally, in connection with the Buyout, we retired all of BPC Holding's senior secured notes and Berry Plastics' senior subordinated notes, repaid all amounts owed under our credit facilities, redeemed all of the outstanding preferred stock of BPC Holding, entered into a new credit facility and completed an offering of new senior subordinated notes of Berry Plastics. As a result of the Buyout, private equity funds affiliated with Goldman, Sachs & Co. own approximately 63% of the outstanding common stock of BPC Holding, private equity funds affiliated with J.P. Morgan Chase & Co. own approximately 29% and members of our management own the remaining 8%. ADVISORY FEES In connection with the Buyout, we paid Goldman, Sachs & Co. and its affiliates a total of $8.0 million for advisory and other services, J.P. Morgan Securities Inc., an affiliate of J.P. Morgan Chase & Co., a total of $5.2 million for advisory and other services and First Atlantic Capital, Ltd., a total of $1.8 million for advisory and other services. SENIOR SUBORDINATED DEBT PURCHASES In connection with the Buyout, Berry Plastics sold the existing notes to various private institutional buyers. Goldman, Sachs & Co. and J.P. Morgan acted as joint book-running managers in the transaction and received fees of approximately $4.4 million and $3.2 million, respectively, for services performed. In connection with the offering of the outstanding notes, Goldman, Sachs & Co. and J.P. Morgan acted as joint book-running managers and received fees of $1.0 million each, for services performed. TENDER OFFER FEES Prior to the Buyout, BPC Holding and Berry Plastics engaged in tender offer and consent solicitations to acquire their outstanding senior secured and senior subordinated notes, 71 respectively. J.P. Morgan Securities Inc. acted as a dealer-manager in connection with these tender offer and consent solicitations for consideration of $0.1 million. THE AMENDED AND RESTATED SENIOR SECURED CREDIT FACILITY In connection with the Buyout, we entered into a senior secured credit facility with a syndicate of lenders led by Goldman Sachs Credit Partners L.P., an affiliate of Goldman, Sachs & Co., as administrative agent, and JPMorgan Chase Bank, as syndication agent, which we recently amended and restated in connection with the Landis Acquisition. For a description of the senior secured credit facility, see "Description of other indebtedness--The amended and restated senior secured credit facility." STOCKHOLDERS AGREEMENT WITH MAJOR STOCKHOLDERS In connection with the Buyout, BPC Holding entered into a stockholders' agreement with GSCP 2000 and other private equity funds affiliated with Goldman, Sachs & Co. that, in the aggregate, own a majority of our common stock and J.P. Morgan Partners Global Investors, L.P. and other private equity funds affiliated with J.P. Morgan Securities Inc. that, in the aggregate, own approximately 29% of our common stock. Under the terms of this agreement, which was amended upon the closing of the Landis Acquisition, among other things: (1) GSCP 2000 and other private equity funds affiliated with Goldman, Sachs & Co., have the right to designate seven members of our board of directors, one of which shall be a member of our management, and J.P. Morgan Partners Global Investors, L.P. and other private equity funds affiliated with J.P. Morgan Securities Inc. have the right to designate two members of our board of directors, one of which will be designated by J.P. Morgan Partners Global Investors, L.P.; (2) the Goldman Sachs and J.P. Morgan funds have the right to subscribe for a proportional share of future equity issuances by BPC Holding; (3) after July 29, 2009, the J.P. Morgan funds have the right to demand that BPC Holding cause the initial public offering of its common stock, if such an offering or other sale of BPC Holding has not occurred by such time; and (4) BPC Holding has agreed not to take specified actions, including, making certain amendments to either the certificate of incorporation or the by-laws of BPC Holding, changing independent accountants, or entering into certain affiliate transactions, without the approval of a majority of its board of directors, including at least one director designated by the J.P. Morgan funds. The stockholders agreement also contains provisions regarding transfer restrictions, rights of first offer, tag-along rights and drag-along rights related to the shares of BPC Holding common stock owned by the Goldman Sachs and J.P. Morgan funds. STOCKHOLDERS AGREEMENT WITH MANAGEMENT In connection with the Buyout, BPC Holding also entered into a stockholders agreement with certain members of BPC Holding's management. The stockholders agreement grants certain rights to, and imposes certain obligations on, the management stockholders who are party to the agreement, including: (1) restrictions on transfer of BPC Holding's common stock; (2) obligations to consent to a merger or consolidation of BPC Holding or a sale of BPC Holding's assets or common stock; (3) obligations to sell their shares of BPC Holding common stock back to BPC Holding in specified circumstances in connection with the termination of their employment with BPC Holding; (4) rights of first offer, (5) tag-along rights, (6) drag-along rights, (7) preemptive rights and (8) registration rights. 72 LOANS TO EXECUTIVE OFFICERS In connection with the Buyout, Messrs. Boots, Kratochvil, Beeler, Herdrich and Sims together with certain other senior employees acquired shares of BPC Holding common stock pursuant to an employee stock purchase program. These employees paid for these shares with any combination of (1) shares of BPC Holding common stock that they held prior to the Buyout; (2) their cash transaction bonus, if any; and (3) a promissory note. In this manner, the senior employees acquired 182,699 shares in the aggregate. Messrs. Boots, Kratochvil, Beeler, Herdrich and Sims purchased 37,785, 21,957, 22,208, 15,404, and 14,016 shares of BPC Holding common stock, respectively pursuant to this program. In connection with these purchases, Messrs. Boots, Kratochvil, Beeler, Herdrich and Sims delivered ten-year promissory notes to BPC Holding in the principal amounts of $2,518,500, $1,302,900, $1,313,400, $1,027,000 and $915,900, respectively. The promissory notes are secured by the shares purchased and such notes accrue interest which compounds semi-annually at the rate of 5.50% per year, the applicable federal rate for the notes in effect on July 16, 2002. Principal and all accrued interest is due and payable on the earlier to occur of (i) the end of the ten-year term, (ii) the ninetieth day following such executive's termination of employment due to death, "disability", "redundancy" (as such terms are defined in the 2002 Stock Option Plan) or retirement, or (iii) the thirtieth day following such executive's termination of employment for any other reason. As of September 27, 2003, a total of $2,687,074, $1,390,109, $1,401,312 and $1,095,742, including principal and accrued interest, was outstanding under the promissory notes for each of Messrs. Boots, Kratochvil, Beeler and Herdrich respectively. THE LANDIS ACQUISITION We paid Goldman, Sachs & Co. and its affiliates a total of $1,720,000 and JPMorgan Partners, an affiliate of J.P. Morgan Chase & Co., a total of $780,000 for advisory and other services related to the Landis Acquisition. In addition, Goldman Sachs Credit Partners, L.P., and affiliates of Goldman, Sachs & Co., acted as the joint lead arranger, joint bookrunner and administrative agent under our senior secured credit facility and act in the same capacity under our amended and restated senior secured credit facility. J.P. Morgan Securities Inc., an affiliate of J.P. Morgan Chase & Co., acted as the joint lead arranger and joint bookrunner under our senior secured credit facility and JPMorgan Chase Bank acted as syndication agent under our senior secured credit facility and they act in the same capacities under our amended and restated senior secured credit facility. In connection with the Landis Acquisition, Goldman, Sachs & Co. and its affiliates made an equity contribution of $35.4 million and J.P. Morgan Chase & Co. and its affiliates made an equity contribution of $16.1 million to us. See also "The Landis Acquisition". FUTURE RELATIONSHIPS WITH GOLDMAN SACHS AND J.P. MORGAN In the future, we may engage in commercial banking, investment banking or other financial advisory transactions with Goldman Sachs and its affiliates or J.P. Morgan and its affiliates. In addition, Goldman Sachs and its affiliates or J.P. Morgan and its affiliates may purchase goods and services from us from time to time in the future. 73 TAX SHARING AGREEMENT For federal income tax purposes, Berry Plastics and its domestic subsidiaries are included in the affiliated group of which Holding is the common parent and as a result, the federal taxable income and loss of Berry Plastics and its subsidiaries is included in the group consolidated tax return filed by Holding. In April 1994, Holding, Berry Plastics and certain of its subsidiaries entered into a tax sharing agreement, which was amended and restated in March 2001 (the "Tax Sharing Agreement"). Under the Tax Sharing Agreement, for fiscal 1994 and all taxable years thereafter for which the Tax Sharing Agreement remains in effect, Berry Plastics and its subsidiaries as a consolidated group are required to pay at the request of Holding an amount equal to the taxes (plus any accrued interest) that they would otherwise have to pay if they were to file separate federal, state or local income tax returns (including any amounts determined to be due as a result of a redetermination arising from an audit or otherwise of a tax liability which is attributable to them). If Berry Plastics and its subsidiaries would have been entitled to a tax refund for taxes paid previously on the basis computed as if they were to file separate returns, then under the Tax Sharing Agreement, Holding is required to pay at the request of Berry Plastics and its subsidiaries an amount equal to such tax refund. If, however, Berry Plastics and its subsidiaries would have reported a tax loss if they were to file separate returns, then Holding intends, but is not obligated under the Tax Sharing Agreement, to pay to Berry Plastics and its subsidiaries an amount equal to the tax benefit that is realized by Holding as a result of such separate loss. Under the Tax Sharing Agreement any such payments to be made by Holding to Berry Plastics or any of its subsidiaries on account of a tax loss are within the sole discretion of Holding. Berry Plastics and its subsidiaries made payments of $8.5 million each to Holding in December 2001 and June 2002 under this tax sharing agreement. 74 DESCRIPTION OF OTHER INDEBTEDNESS THE AMENDED AND RESTATED SENIOR SECURED CREDIT FACILITY In connection with the Landis Acquisition, we recently amended and restated the senior secured credit facility that we, BPC Holding and our domestic subsidiaries are party to with the lenders from time to time party thereto, Goldman Sachs Credit Partners L.P., as administrative agent, JPMorgan Chase Bank, as syndication agent, Fleet National Bank, as collateral agent, issuing bank and swing line lender, and the Royal Bank of Scotland plc and General Electric Capital Corporation, as co-documentation agents. For purposes of this section, "we," "our" and "us" refer to Berry Plastics Corporation. Set forth below is a summary of the terms and conditions of the amended and restated senior secured credit facility. The amended and restated senior secured credit facility consists of our previous $100 million revolving credit facility, a new $330 million term loan and a new $50 million term loan. On November 10, 2003, we used $325.9 million of the new $330 million term loan to refinance in full the balance outstanding under our prior term loan. The remaining $4.1 million was used to fund a portion of the purchase price for the Landis Acquisition. The new $50 million term loan was also used to pay a portion of the purchase price for the Landis Acquisition and was funded concurrently with the closing of the Landis Acquisition. We are the borrower under the amended and restated senior secured credit facility. The maturity date of the term loans is July 22, 2010 and the maturity date of the revolving credit facility is July 22, 2008. At September 27, 2003, on a pro forma basis after giving effect to the Transactions, there would have been $4.5 million outstanding on the revolving line of credit and $380 million outstanding on the term loans. TERM LOANS PREPAYMENT The term loans amortize quarterly in the aggregate as follows: - $950,000 each quarter ending June 30, 2009; and - $89,631,250 each quarter beginning September 30, 2009 and ending June 30, 2010. The amended and restated senior secured credit facility may be prepaid at any time; provided, however, that voluntary prepayments will be applied first to repay swingline loans, and second, as between revolving loans on the one hand and the term loan on the other hand, as we direct. Borrowings and commitments under our credit facility will be subject to mandatory prepayment under specified circumstances, including some asset sales, receipt of proceeds of casualty insurance or condemnation, issuances of equity securities and from our excess cash flow (as defined in our amended and restated senior secured credit facility). REVOLVING LOANS There is no required amortization of the revolving credit facility. Outstanding borrowings under the revolving credit facility may be repaid at any time and may be reborrowed at any time prior to July 22, 2008. The revolving credit facility allows us to obtain up to $25 million of letters of credit instead of borrowing and up to $10 million of swingline loans. Revolving loans in connection with permitted acquisitions will only be made if a leverage ratio is met. 75 INTEREST RATE AND FEES Borrowings under the amended and restated senior secured credit facility bear interest, at our option, at either (i) a base rate (defined as a rate per annum equal to the greater of the prime rate and the federal funds effective rate in effect on the date of determination plus 1/2 of 1.00%) plus the applicable margin (as defined below) (the "Base Rate Loans") or (ii) an adjusted Eurodollar Rate (defined as the rate (as adjusted for statutory reserve requirements for eurocurrency liabilities) for Eurodollar deposits for a period of one, two, three or six months, as we select) (the "Eurodollar Rate Loans") plus the applicable margin. With respect to the term loan, the "applicable margin" is (i) with respect to Base Rate Loans, 1.50% per annum and (ii) with respect to Eurodollar Rate Loans, 2.50% per annum. With respect to the revolving credit facility, the "applicable margin" was, with respect to Eurodollar Rate Loans, initially 2.75% per annum. The "applicable margin" with respect to Eurodollar Rate Loans is subject to a pricing grid which ranges from 2.75% per annum to 2.00% per annum, depending on our leverage ratio. The "applicable margin" with respect to Base Rate Loans will always be 1.00% per annum less than the "applicable margin" for Eurodollar Rate Loans. Interest will be payable quarterly for Base Rate Loans and at the end of the relevant interest period of one, two, three, or six months (or quarterly in certain cases) for all Eurodollar Rate Loans. The interest rate applicable to overdue payments and to outstanding amounts following an event of default under the amended and restated senior secured credit facility is equal to the interest rate at the time of an event of default plus 2.00%. The amended and restated senior secured credit facility also requires us to pay commitment fees equal to 0.50% per annum on the average daily unused portion of the revolving credit facility, which fee is subject to a pricing grid ranging from 0.50% per annum to 0.375% per annum, letter of credit fees (equal to the "applicable margin" for revolving loans that are Eurodollar Rate Loans) and fronting fees (not to exceed 0.25%) on the average daily unused portion of the letters of credit, as well as annual agency fees. SECURITY Our obligations under the amended and restated senior secured credit facility are secured by a first priority security interest (with certain exceptions) in substantially all of our assets and the assets of the guarantors described below and, in addition, by a pledge of 100% of our shares and 100% of the shares of our domestic subsidiaries and up to 65% of the shares of our foreign subsidiaries and all intercompany debt with the exception of debt owed to our foreign subsidiaries. GUARANTORS BPC Holding and each of our domestic subsidiaries guarantee our obligations under the amended and restated senior secured credit facility. Upon the closing of the Landis Acquisition, Landis became our wholly-owned subsidiary and a guarantor of our obligations under the amended and restated senior secured credit facility. REPRESENTATIONS AND WARRANTIES The amended and restated senior secured credit facility contains representations and warranties customary for this type of financing. 76 COVENANTS AND CONDITIONS In addition to customary affirmative covenants, the amended and restated senior secured credit facility requires us to enter into interest rate hedging agreements to the extent necessary for at least 50% of the total indebtedness (not including indebtedness owed under the revolving credit facility) to be at a fixed rate and require us to provide funding protections customary for this type of financing, including breakage costs, gross-up for withholding, compensation for increased costs and compliance with capital adequacy and other regulatory restrictions. The amended and restated senior secured credit facility includes negative covenants that restrict our and the guarantors' ability to, among other things: - incur additional indebtedness; - incur liens; - enter into agreements with negative pledge clauses; - make investments; - guarantee obligations; - pay dividends or make redemptions or other payments in respect of capital stock; - make payments with respect to subordinated debt; - engage in mergers and make acquisitions; - sell assets; - make capital expenditures; - enter into leases; - engage in transactions with affiliates; and - make investments in foreign subsidiaries. The amended and restated senior secured credit facility contains (i) a minimum interest coverage ratio as of the last day of any quarter of 2.00:1.00 per quarter for the quarters ending December 2003 and March 2004, 2.10:1.00 per quarter for the quarters ending June 2004 and September 2004, 2.15:1.00 per quarter for the quarters ending December 2004 and March 2005, 2.25:1.00 per quarter for the quarters ending June 2005 through the quarter ending March 2006, 2.35:1.00 per quarter for the quarters ending June 2006 through the quarter ending December 2006 and 2.50:1.00 per quarter thereafter, (ii) a maximum amount of capital expenditures (subject to the rollover of certain unexpended amounts from the prior year) of $50 million for the years ending 2003 and 2004, $60 million for the years ending 2005, 2006 and 2007, and $65 million for each year thereafter, and (iii) a maximum total leverage ratio as of the last day of any quarter of 5.90:1.00 per quarter for the quarters ending December 2003 and March 2004, 5.75:1.00 per quarter for the quarters ending June 2004 and September 2004, 5.50:1.00 per quarter for the quarters ending December 2004 and through the quarter ending June 2005, 5.25:1.00 per quarter for the quarters ending September 2005 and December 2005, 5.00:1.00 per quarter for the quarters ending March 2006 and June 2006, 4.75:1.00 per quarter for the quarters ending September 2006 through the quarter ending March 2007, 4.50:1.00 per quarter for the quarters ending June 2007 through the quarter ending December 2007, 4.25:1.00 per quarter for the quarters ending March 2008 through the quarter ending December 2008, and 4.00:1.00 per quarter thereafter. 77 Certain conditions must be met for us to borrow under the revolving credit facility in the future, including that there has been no material adverse change to the business, operations, properties, assets, condition (financial or otherwise) or prospects of the Company and the guarantors, taken as a whole. EVENTS OF DEFAULT The amended and restated senior secured credit facility contains customary and appropriate events of default, which are subject to customary grace periods and materiality standards. The occurrence of a default, an event of default or a material adverse effect on Berry Plastics would result in our inability to obtain further borrowings under our revolving credit facility and could also result in the acceleration of our obligations under any or all of our debt agreements, each of which could materially and adversely affect our business. We were in compliance with all of the financial and operating covenants at September 27, 2003. CAPITAL LEASES We and our subsidiaries are also party to capital leases entered into in the ordinary course of business. As of September 27, 2003, we had $25.3 million of capital leases outstanding. NEVADA INDUSTRIAL REVENUE BONDS We are party to a Financing Agreement with the City of Henderson, Nevada Public Improvement Trust, pursuant to which we have agreed to pay amounts sufficient to pay principal, interest and any premium on an issue of Nevada Industrial Revenue Bonds. The Nevada Industrial Revenue Bonds had $2 million outstanding as of September 27, 2003, bear interest at a variable rate (1.2% at September 27, 2003), require annual principal payments of $0.5 million on each April 1 until maturity, are collateralized by an irrevocable letter of credit issued by JPMorgan Chase Bank under our revolving credit facility and mature in April 2007. 78 THE EXCHANGE OFFER PURPOSE OF THE EXCHANGE OFFER When we sold the outstanding notes on November 20, 2003, we entered into a registration rights agreement with the initial purchasers of the outstanding notes, which requires us to: - file with the SEC a registration statement related to the exchange notes; - use our reasonable best efforts to have the registration statement declared effective by the SEC under the Securities Act on or before June 17, 2004; - offer to the holders of the outstanding notes the opportunity to exchange their outstanding notes for a like principal amount of exchange notes upon the effectiveness of the registration statement; and - use our reasonable best efforts to issue on or prior to 60 business days, or longer, if required by the federal securities laws, after the date the registration statement is declared effective by the SEC, the exchange notes for all notes tendered in the exchange offer. If we fail to satisfy our registration and exchange obligations under the registration rights agreement, we will be required to pay additional interest to the holders of the notes. A copy of the registration rights agreement is filed as an exhibit to the registration statement of which this prospectus is a part. TERMS OF THE EXCHANGE OFFER This prospectus and the accompanying letter of transmittal together constitute the exchange offer. Upon the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal, we will accept for exchange outstanding notes which are properly tendered on or before the expiration date and are not withdrawn as permitted below. The expiration date for this exchange offer is 5:00 p.m., New York City time, on , 2004, or such later date and time to which we, in our sole discretion, extend the exchange offer. The form and terms of the exchange notes are the same as the form and terms of the outstanding notes, except that: - the exchange notes will have been registered under the Securities Act; - the exchange notes will not bear the restrictive legends restricting their transfer under the Securities Act; and - the exchange notes will not contain the registration rights additional interest provisions contained in the outstanding notes. Notes tendered in the exchange offer must be in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof. We expressly reserve the right, in our sole discretion: - to extend the expiration date; - to delay accepting any outstanding notes; 79 - if any of the conditions set forth below under "--Conditions to the exchange offer" have not been satisfied, to terminate the exchange offer and not accept any outstanding notes for exchange; or - to amend the exchange offer in any manner. We will give oral or written notice of any extension, delay, non-acceptance, termination or amendment as promptly as practicable by a public announcement, and in the case of an extension, no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. During an extension, all outstanding notes previously tendered will remain subject to the exchange offer and may be accepted for exchange by us. Any outstanding notes not accepted for exchange for any reason will be returned without cost to the holder that tendered them as promptly as practicable after the expiration or termination of the exchange offer. HOW TO TENDER NOTES FOR EXCHANGE When the holder of outstanding notes tenders, and we accept, such notes for exchange, a binding agreement between us and the tendering holder is created, subject to the terms and conditions set forth in this prospectus and the accompanying letter of transmittal. Except as set forth below, a holder of outstanding notes who wishes to tender such notes for exchange must, on or prior to the expiration date: - transmit a properly completed and duly executed letter of transmittal, including all other documents required by such letter of transmittal, to the U.S. Bank Trust National Association, which will act as the exchange agent, at the address set forth below under the heading "--The exchange agent"; or - if outstanding notes are tendered pursuant to the book-entry procedures set forth below, the tendering holder must transmit an agent's message to the exchange agent at the address set forth below under the heading "--The exchange agent." In addition, either: - the exchange agent must receive the certificates for the outstanding notes and the letter of transmittal; - the exchange agent must receive, prior to the expiration date, a timely confirmation of the book-entry transfer of the outstanding notes being tendered into the exchange agent's account at the Depository Trust Company, or DTC, along with the letter of transmittal or an agent's message; or - the holder must comply with the guaranteed delivery procedures described below. The term "agent's message" means a message, transmitted to DTC and received by the exchange agent and forming a part of a book-entry transfer, or "book-entry confirmation," which states that DTC has received an express acknowledgement that the tendering holder agrees to be bound by the letter of transmittal and that we may enforce the letter of transmittal against such holder. The method of delivery of the outstanding notes, the letters of transmittal and all other required documents is at the election and risk of the holders. If such delivery is by mail, we recommend registered mail, properly insured, with return receipt requested. In all cases, you 80 should allow sufficient time to assure timely delivery. No letters of transmittal or notes should be sent directly to us. Signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed unless the outstanding notes surrendered for exchange are tendered: - by a registered holder of the outstanding notes; or - for the account of an eligible institution. An "eligible institution" is a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States. If signatures on a letter of transmittal or notice of withdrawal are required to be guaranteed, the guarantor must be an eligible institution. If outstanding notes are registered in the name of a person other than the signer of the letter of transmittal, the outstanding notes surrendered for exchange must be endorsed by, or accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by us in our sole discretion, duly executed by the registered holder with the holder's signature guaranteed by an eligible institution. We will determine all questions as to the validity, form, eligibility (including time of receipt) and acceptance of outstanding notes tendered for exchange in our sole discretion. Our determination will be final and binding. We reserve the absolute right to: - reject any and all tenders of any outstanding note improperly tendered; - refuse to accept any outstanding note if, in our judgment or the judgment of our counsel, acceptance of the outstanding note may be deemed unlawful; and - waive any defects or irregularities or conditions of the exchange offer as to any particular outstanding note either before or after the expiration date, including the right to waive the ineligibility of any holder who seeks to tender outstanding notes in the exchange offer. Our interpretation of the terms and conditions of the exchange offer as to any particular outstanding notes either before or after the expiration date, including the letter of transmittal and the instructions to it, will be final and binding on all parties. Holders must cure any defects and irregularities in connection with tenders of notes for exchange within such reasonable period of time as we will determine, unless we waive such defects or irregularities. Neither we, the exchange agent nor any other person shall be under any duty to give notification of any defect or irregularity with respect to any tender of outstanding notes for exchange, nor shall any of us incur any liability for failure to give such notification. If a person or persons other than the registered holder or holders of the outstanding notes tendered for exchange signs the letter of transmittal, the tendered outstanding notes must be endorsed or accompanied by appropriate powers of attorney, in either case signed exactly as the name or names of the registered holder or holders that appear on the outstanding notes. If trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity sign the letter of transmittal or any outstanding notes or any power of attorney, such persons should so indicate when signing, and you must submit proper evidence satisfactory to us of such person's authority to so act unless we waive this requirement. 81 By tendering, each holder will represent to us that, among other things, the person acquiring exchange notes in the exchange offer is obtaining them in the ordinary course of its business, whether or not such person is the holder, and neither the holder nor such other person has any arrangement or understanding with any person to participate in the distribution of the exchange notes issued in the exchange offer. If any holder or any such other person is an "affiliate," as defined under Rule 405 of the Securities Act, of us, or is engaged in or intends to engage in or has an arrangement or understanding with any person to participate in a distribution of such notes to be acquired in the exchange offer, such holdee any such rather person: - may not rely on applicable interpretations of the staff of the SEC; and - must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Each broker-dealer who acquired its outstanding notes as a result of market-making activities or other trading activities, and thereafter receives exchange notes issued for its own account in the exchange offer, must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes issued in the exchange offer. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. See "Plan of distribution" for a discussion of the exchange and resale obligations of broker-dealers in connection with the exchange offer. ACCEPTANCE OF OUTSTANDING NOTES FOR EXCHANGE; DELIVERY OF NOTES ISSUED IN THE EXCHANGE OFFER Upon satisfaction or waiver of all the conditions to the exchange offer, we will accept, promptly after the expiration date, all outstanding notes properly tendered and will issue exchange notes registered under the Securities Act. For purposes of the exchange offer, we shall be deemed to have accepted properly tendered outstanding notes for exchange when, as and if we have given oral or written notice to the exchange agent, with written confirmation of any oral notice to be given promptly thereafter. See "--Conditions to the exchange offer" for a discussion of the conditions that must be satisfied before we accept any outstanding notes for exchange. For each outstanding note accepted for exchange, the holder will receive an exchange note registered under the Securities Act having a principal amount equal to that of the surrendered outstanding note. Accordingly, registered holders of exchange notes issued in the exchange offer on the relevant record date for the first interest payment date following the consummation of the exchange offer will receive interest accruing from the most recent date to which interest has been paid. Outstanding notes that we accept for exchange will cease to accrue interest from and after the date of consummation of the exchange offer. Under the registration rights agreement, we may be required to make additional payments in the form of penalty interest to the holders of the outstanding notes under circumstances relating to the timing of the exchange offer. In all cases, we will issue exchange notes for outstanding notes that are accepted for exchange only after the exchange agent timely receives: - certificates for such outstanding notes or a timely book-entry confirmation of such outstanding notes into the exchange agent's account at DTC; 82 - a properly completed and duly executed letter of transmittal or an agent's message; and - all other required documents. If for any reason set forth in the terms and conditions of the exchange offer we do not accept any tendered outstanding notes, or if a holder submits outstanding notes for a greater principal amount than the holder desires to exchange, we will return such unaccepted or nonexchanged notes without cost to the tendering holder. In the case of outstanding notes tendered by book-entry transfer into the exchange agent's account at DTC, such nonexchanged notes will be credited to an account maintained with DTC. We will return the outstanding notes or have them credited to DTC account as promptly as practicable after the expiration or termination of the exchange offer. BOOK-ENTRY TRANSFER The exchange agent will make a request to establish an account with respect to the outstanding notes at DTC for purposes of the exchange offer within two business days after the date of this prospectus. Any financial institution that is a participant in DTC's system must make book-entry delivery of outstanding notes by causing DTC to transfer such outstanding notes into the exchange agent's account at DTC in accordance with DTC's procedures for transfer. Such participant should transmit its acceptance to DTC on or prior to the expiration date or comply with the guaranteed delivery procedures described below. DTC will verify such acceptance, execute a book-entry transfer of the tendered outstanding notes into the exchange agent's account at DTC and then send to the exchange agent confirmation of such book-entry transfer. The confirmation of such book-entry transfer will include an agent's -message confirming that DTC has received an express acknowledgment from such participant that such participant has received and agrees to be bound by the letter of transmittal and that we may enforce the letter of transmittal against such participant. Delivery of exchange notes issued in the exchange offer may be effected through book-entry transfer at DTC. However, the letter of transmittal or facsimile thereof or an agent's message, with any required signature guarantees and any other required documents, must: - be transmitted to and received by the exchange agent at the address set forth below under "--The exchange agent" on or prior to the expiration date; or - comply with the guaranteed delivery procedures described below. GUARANTEED DELIVERY PROCEDURES If a holder of outstanding notes desires to tender such notes and the holder's outstanding notes are not immediately available, or time will not permit such holder's outstanding notes or other required documents to reach the exchange agent before the expiration date, or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected if: - the holder tenders the outstanding notes through an eligible institution; - prior to the expiration date, the exchange agent receives from such eligible institution a properly completed and duly executed notice of guaranteed delivery, acceptable to us, by telegram, telex, facsimile transmission, mail or hand delivery, setting forth the name and address of the holder of the outstanding notes tendered and the amount of the outstanding notes being tendered. The notice of guaranteed 83 delivery shall state that the tender is being made and guarantee that within three New York Stock Exchange trading days after the date of execution of the notice of guaranteed delivery, the certificates for all physically tendered outstanding notes, in proper form for transfer, or a book-entry confirmation, as the case may be, together with a properly completed and duly executed letter of transmittal or agent's message with any required signature guarantees and any other documents required by the letter of transmittal will be deposited by the eligible institution with the exchange agent; and - the exchange agent receives the certificates for all physically tendered outstanding notes, in proper form for transfer, or a book-entry confirmation, as the case may be, together with a properly completed and duly executed letter of transmittal or agent's message with any required signature guarantees and any other documents required by the letter of transmittal, within three New York Stock Exchange trading days after the date of execution of the notice of guaranteed delivery. WITHDRAWAL RIGHTS You may withdraw tenders of your outstanding notes at any time prior to 5:00 p.m., New York City time, on the expiration date. For a withdrawal to be effective, you must send a written notice of withdrawal to the exchange agent at one of the addresses set forth below under "The exchange agent." Any such notice of withdrawal must: - specify the name of the person that has tendered the outstanding notes to be withdrawn; - identify the outstanding notes to be withdrawn, including the principal amount of such outstanding notes; and - where certificates for outstanding notes are transmitted, specify the name in which outstanding notes are registered, if different from that of the withdrawing holder. If certificates for outstanding notes have been delivered or otherwise identified to the exchange agent, then, prior to the release of such certificates, the withdrawing holder must also submit the serial numbers of the particular certificates to be withdrawn and signed notice of withdrawal with signatures guaranteed by an eligible institution unless such holder is an eligible institution. If outstanding notes have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn notes and otherwise comply with the procedures of such facility. We will determine all questions as to the validity, form and eligibility (including time of receipt) of such notices and our determination will be final and binding on all parties. Any tendered notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the exchange offer. Any outstanding notes which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder. In the case of outstanding notes tendered by book-entry transfer into the exchange agent's account at DTC, the outstanding notes withdrawn will be credited to an account maintained with DTC for the outstanding notes. The outstanding notes will be returned or credited to DTC account as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn outstanding notes may be re-tendered by following one of the procedures described under 84 "--How to tender notes for exchange" above at any time on or prior to 5:00 p.m., New York City time, on the expiration date. CONDITIONS TO THE EXCHANGE OFFER We are not required to accept the outstanding notes in the exchange offer or to issue the exchange notes. We may terminate or amend the exchange offer if at any time before the acceptance of such outstanding notes for exchange: - any federal law, statute, rule or regulation shall have been adopted or enacted which, in our judgment, would reasonably be expected to impair our ability to proceed with the exchange offer; - any stop order shall be threatened or in effect with respect to the registration statement of which this prospectus constitutes a part or the qualification of the indenture under the Trust Indenture Act of 1939, as amended; or - there shall occur a change in the current interpretation by the staff of the SEC which permits the notes issued in the exchange offer in exchange for the outstanding notes to be offered for resale, resold and otherwise transferred by such holders, other than broker-dealers and any such holder which is an "affiliate" of us within the meaning of Rule 405 under the Securities Act, without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such notes acquired in the exchange offer are acquired in the ordinary course of such holder's business and such holder has no arrangement or understanding with any person to participate in the distribution of such notes issued in the exchange offer. The preceding conditions are for our sole benefit, and we may assert them regardless of the circumstances giving rise to any such condition. We may waive the preceding conditions in whole or in part at any time and from time to time in our sole discretion. Our failure at any time to exercise the foregoing rights shall not be deemed a waiver of any such right, and each such right shall be deemed an ongoing right which we may assert at any time and from time to time. THE EXCHANGE AGENT The U.S. Bank Trust National Association has been appointed as our exchange agent for the exchange offer. All executed letters of transmittal should be directed to our exchange agent at the address set forth below. Questions and requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal and requests for notices of guaranteed delivery should be directed to the exchange agent addressed as follows: By mail: U.S. Bank Trust National Association 60 Livingston Avenue 1st Floor Bond Drop Window St. Paul, MN 55107 Attention: Structured Finance Unit 85 By hand or overnight mail: U.S. Bank Trust National Association 60 Livingston Avenue 1st Floor Bond Drop Window St. Paul, MN 55107 Attention: Structured Finance Unit By telecopier: (651) 495-8158 Originals of all documents sent by facsimile should be promptly sent to the exchange agent by registered or certified mail, by hand, or by overnight delivery service. DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF SUCH LETTER OF TRANSMITTAL VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL. FEES AND EXPENSES We will not make any payment to brokers, dealers or others soliciting acceptance of the exchange offer except for reimbursement of mailing expenses. The cash expenses to be incurred in connection with the exchange offer will be paid by us and are estimated in the aggregate to be approximately $0.2 million. TRANSFER TAXES Holders who tender their outstanding notes for exchange notes will not be obligated to pay any transfer taxes in connection with the exchange. If, however, exchange notes issued in the exchange offer are to be delivered to, or are to be issued in the name of, any person other than the holder of the outstanding notes tendered, or if a transfer tax is imposed for any reason other than the exchange of outstanding notes in connection with the exchange offer, then the holder must pay any such transfer taxes, whether imposed on the registered holder or on any other person. If satisfactory evidence of payment of, or exemption from, such taxes is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed directly to the tendering holder. CONSEQUENCES OF FAILURE TO EXCHANGE OUTSTANDING NOTES Holders who desire to tender their outstanding notes in exchange for notes registered under the Securities Act should allow sufficient time to ensure timely delivery. Neither the exchange agent nor our company is under any duty to give notification of defects or irregularities with respect to the tenders of notes for exchange. Outstanding notes that are not tendered or are tendered but not accepted will, following the consummation of the exchange offer, continue to accrue interest and to be subject to the provisions in the indenture regarding the transfer and exchange of the outstanding notes and the existing restrictions on transfer set forth in the legend on the outstanding notes and in the offering memorandum dated November 10, 2003, relating to the outstanding notes. Except in limited circumstances with respect to specific types of holders of outstanding notes, we will have no further obligation to provide for the registration under the Securities Act of such outstanding notes. In general, outstanding notes, unless registered under the Securities Act, 86 may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. We do not currently anticipate that we will take any action to register the outstanding notes under the Securities Act or under any state securities laws. Upon completion of the exchange offer, holders of the outstanding notes will not be entitled to any further registration rights under the registration rights agreement, except under limited circumstances. CONSEQUENCES OF EXCHANGING OUTSTANDING NOTES Based on interpretations of the staff of the SEC, as set forth in no-action letters to third parties, we believe that the notes issued in the exchange offer may be offered for resale, resold or otherwise transferred by holders of such notes, other than by any holder which is an "affiliate" of us within the meaning of Rule 405 under the Securities Act. Such notes may be offered for resale, resold or otherwise transferred without compliance with the registration and prospectus delivery provisions of the Securities Act, if: - such holder is not a broker-dealer tendering notes acquired directly from us; - such notes issued in the exchange offer are acquired in the ordinary course of such holder's business; and - such holder, other than broker-dealers, has no arrangement or understanding with any person to participate in the distribution of such notes issued in the exchange offer. However, the SEC has not considered the exchange offer in the context of a no-action letter, and we cannot guarantee that the staff of the SEC would make a similar determination with respect to the exchange offer as in such other circumstances. Each holder, other than a broker-dealer, must furnish a written representation, at our request, that: - it is not an affiliate of us; - it is not a broker-dealer tendering notes acquired directly from us; - it is not engaged in, and does not intend to engage in, a distribution of the notes issued in the exchange offer and has no arrangement or understanding to participate in a distribution of notes issued in the exchange offer; and - it is acquiring the notes issued in the exchange offer in the ordinary course of its business. Each broker-dealer that receives notes issued in the exchange offer for its own account in exchange for outstanding notes must acknowledge that such outstanding notes were acquired by such broker-dealer as a result of market-making or other trading activities and that it will deliver a prospectus in connection with any resale of such notes issued in the exchange offer. See "Plan of distribution" for a discussion of the exchange and resale obligations of brokerdealers in connection with the exchange offer. 87 In addition, to comply with state securities laws of certain jurisdictions, the notes issued in the exchange offer may not be offered or sold in any state unless they have been registered or qualified for sale in such state or an exemption from registration or qualification is available and complied with by the holders selling the exchange notes. We have not agreed to register or qualify the exchange notes for offer or sale under state securities laws. 88 DESCRIPTION OF EXCHANGE NOTES Definitions of certain terms used in this "Description of exchange notes" may be found under the heading "Certain definitions." Defined terms used in this description but not defined below under the heading "Certain definitions" have the meanings assigned to them in the Indenture. For purposes of this section, (i) the term "Company" refers only to Berry Plastics Corporation and not to any of its subsidiaries, (ii) the term "Holding" refers to BPC Holding Corporation, the parent company of the Company, and not to any of its Subsidiaries and (iii) unless the context indicates otherwise, the term "Notes" refers to the notes offered by this prospectus and the $250 million aggregate principal amount of 10 3/4% Senior Subordinated Notes due 2012 that the Company issued under the Indenture on July 22, 2002 (the "Existing Notes"). Certain of the Company's Subsidiaries and Holding will guarantee the exchange notes and therefore will be subject to many of the provisions contained in this "Description of exchange notes". Each company which guarantees the Notes is referred to in this section as a "Note Guarantor." Each such guarantee is termed a "Note Guarantee." The Company will issue the exchange notes under the Indenture, dated as of July 22, 2002, as supplemented, (the "Indenture"), among the Company, the Note Guarantors and United States Bank Trust National Association, as trustee (the "Trustee"), incorporated by reference as an exhibit to the registration statement of which this prospectus is a part. A copy of the Indenture is available upon request to the Company. The Indenture contains provisions which define your rights under the Notes. In addition, the Indenture governs the obligations of the Company and of each Note Guarantor under the Notes. The terms of the exchange notes include those stated in the Indenture and, upon effectiveness of a registration statement with respect to the Notes offered hereby, those made part of the Indenture by reference to the TIA. Any outstanding notes that remain outstanding after completion of the exchange offer, together with the exchange notes issued in the exchange offer and the Existing Notes, will be treated as a single class of securities under the Indenture, including for the purpose of amending the Indenture. The following description is meant to be only a summary of certain provisions of the Indenture and the registration rights agreement. It does not restate the terms of the Indenture in their entirety. We urge that you carefully read the Indenture as it, and not this description, governs our obligations and your rights as Holders. OVERVIEW OF THE NOTES AND THE NOTE GUARANTEES THE NOTES These Notes: - are general unsecured obligations of the Company; - are equally in right of payment with any existing and future Senior Subordinated Indebtedness of the Company; - are subordinated in right of payment to all existing and future Senior Indebtedness of the Company; - are senior in right of payment to all future Subordinated Obligations of the Company; 89 - are effectively subordinated to all Secured Indebtedness of the Company and its Subsidiaries to the extent of the value of the assets securing such Indebtedness; and - are effectively subordinated to all liabilities (including Trade Payables) and Preferred Stock of each Subsidiary of the Company that is not a Note Guarantor. THE NOTE GUARANTEES These Notes are guaranteed by Holding, and all existing and future Domestic Subsidiaries of the Company, except as provided below. The Note Guarantee of each Note Guarantor: - is general unsecured obligations of such Note Guarantor; - ranks equally in right of payment with any existing and future Senior Subordinated Indebtedness of such Note Guarantor; - is subordinated in right of payment to all existing and future Senior Indebtedness of such Note Guarantor; - is senior in right of payment to all future Subordinated Obligations of such Note Guarantor; - is effectively subordinated to all Secured Indebtedness of such Note Guarantor and its Subsidiaries to the extent of the value of the assets securing such Indebtedness; and - is effectively subordinated to the obligations of any Subsidiary of a Note Guarantor if that Subsidiary is not a Note Guarantor. The Notes will not be guaranteed by Berry Plastics Acquisition Corporation II, NIM Holdings Limited, Berry Plastics U.K. Limited, Norwich Acquisition Limited, Capsol Berry Plastics S.p.a. or Ociesse S.r.l. The Notes will not be guaranteed by any Foreign Subsidiaries in the future unless any such Foreign Subsidiary Guarantees any Senior Indebtedness of the Company or any of the Company's Subsidiaries (other than that of another Foreign Subsidiary). The Note Guarantee of any Note Guarantor may be released in certain circumstances as described under "Certain covenants--Future note guarantors and release of note guarantees." Assuming the Company had completed the Transactions, as of September 27, 2003, these non-guarantor Subsidiaries would have (i) had approximately $12.2 million of total liabilities (including trade payables but excluding liabilities owed to us) and (ii) had approximately 4% of the Company's Consolidated assets. These non-guarantor subsidiaries accounted for 3% of our pro forma net sales for fiscal year 2002. PRINCIPAL, MATURITY AND INTEREST We initially issued the outstanding notes in an aggregate principal amount of $85,000,000. We had previously issued the Existing Notes in an aggregate principal amount of $250,000,000. The Notes will mature on July 15, 2012. We will issue the Notes in fully registered form, without coupons, and in denominations of $1,000 and any integral multiple of $1,000. Each Note will bear interest at the rate of 10 3/4% per annum beginning from the most recent interest payment date on which interest has been paid or provided for on the Existing Notes. We will pay interest semiannually to the Holders of record at the close of business on the January 1 or July 1 immediately preceding the relevant interest payment date on January 15 90 and July 15 of each year. Interest on the Notes will be computed on the basis of a 360-day year comprised of twelve 30-day months. We will also pay additional interest ("Additional Interest") to Holders of the outstanding notes if we fail to file a registration statement relating to the outstanding notes or if the registration statement is not declared effective on a timely basis or if certain other conditions are not satisfied. These Additional Interest provisions are more fully explained under the heading "--Registration rights". INDENTURE MAY BE USED FOR FUTURE ISSUANCES We may issue from time to time additional Notes having identical terms and conditions to the Notes (the "Additional Notes"). We will only be permitted to issue such Additional Notes if at the time of such issuance we are in compliance with the covenants contained in the Indenture, but the amount of such Additional Notes will not otherwise be restricted by the Indenture. Any Additional Notes will be part of the same issue as the Notes and will vote on all matters with such Notes. PAYING AGENT AND REGISTRAR We will pay the principal of, premium, if any, interest (including Additional Interest), if any, on the Notes at any office of ours or any agency designated by us which is located in the Borough of Manhattan, the City of New York. We have initially designated the corporate trust office of the Trustee to act as the agent of the Company in such matters. The location of the corporate trust office is 100 Wall Street, 16th Floor, New York, New York 10005. We, however, reserve the right to pay interest to Holders by check mailed directly to Holders at their registered addresses. Holders may exchange or transfer their Notes at the same location given in the preceding paragraph. No service charge will be made for any registration of transfer or exchange of Notes. We, however, may require Holders to pay any transfer tax or other similar governmental charge payable in connection with any such transfer or exchange. OPTIONAL REDEMPTION Except as set forth in the following paragraph, we may not redeem the Notes prior to July 15, 2007. After this date, we may redeem the Notes, in whole or in part, on one or more occasions, on not less than 30 nor more than 60 days' prior notice, at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest and Additional Interest thereon, if any, to, but not including, the redemption date (subject to the right of Holders of record on the relevant record date to receive interest, including Additional Interest, if any, due on the relevant interest payment date), if redeemed during the 12-month period commencing on July 15 of the years set forth below:
- ------------------------------------------------------------------------ REDEMPTION YEAR PRICE - ------------------------------------------------------------------------ 2007........................................................ 105.375% 2008........................................................ 103.583% 2009........................................................ 101.792% 2010 and thereafter......................................... 100.000% - ------------------------------------------------------------------------
91 Prior to July 15, 2005, we may, on one or more occasions, also redeem up to a maximum of 35% of the original aggregate principal amount of the Notes (calculated giving effect to any issuance of Additional Notes) with the Net Cash Proceeds of one or more Equity Offerings (1) by the Company or (2) by Holding to the extent the Net Cash Proceeds thereof are contributed to the Company or used to purchase Capital Stock (other than Disqualified Stock) of the Company from the Company, at a redemption price equal to 110.75% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest thereon, if any, to, but not including, the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided, however, that after giving effect to any such redemption: (1) at least 65% of the original aggregate principal amount of the Notes (calculated giving effect to any issuance of Additional Notes) remains outstanding; and (2) any such redemption by the Company must be made within 60 days of such Equity Offering and must be made in accordance with certain procedures set forth in the Indenture. In determining whether to redeem the Notes, we may consider, among other things, our cash flow, time remaining to maturity of the notes, our overall cost of capital, other financing alternatives, the state of the capital markets and our overall financial condition. SELECTION If we partially redeem Notes, the Trustee will select the Notes to be redeemed on a pro rata basis, by lot or by such other method as the Trustee in its sole discretion shall deem to be fair and reasonable, although no Note of $1,000 in original principal amount or less will be redeemed in part. If we redeem any Note in part only, the notice of redemption relating to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after the redemption date, interest will cease to accrue on Notes or portions thereof called for redemption so long as we have deposited with the Paying Agent funds sufficient to pay the principal of, plus accrued and unpaid interest and Additional Interest thereon, if any, the Notes to be redeemed. RANKING The Notes will be unsecured Senior Subordinated Indebtedness of the Company, will be subordinated in right of payment to all existing and future Senior Indebtedness of the Company, will rank equally in right of payment with any existing and future Senior Subordinated Indebtedness of the Company and will be senior in right of payment to all future Subordinated Obligations of the Company. The Notes also will be effectively subordinated to all Secured Indebtedness of the Company and its Subsidiaries to the extent of the value of the assets securing such Indebtedness. However, payment from the money or the proceeds of United States Government Obligations held in any defeasance trust described below under the caption "Defeasance" will not be subordinated to any Senior Indebtedness or subject to the restrictions described herein. The Note Guarantees will be unsecured Senior Subordinated Indebtedness of the applicable Note Guarantor, will be subordinated in right of payment to all existing and future Senior Indebtedness of such Note Guarantor, will rank equally in right of payment with any existing and future Senior Subordinated Indebtedness of such Note Guarantor and will be senior in 92 right of payment to all future Subordinated Obligations of such Note Guarantor. The Note Guarantees also will be effectively subordinated to all Secured Indebtedness of the applicable Note Guarantor and its Subsidiaries to the extent of the value of the assets securing such Secured Indebtedness and effectively subordinated to the obligations of any Subsidiary of a Note Guarantor if that Subsidiary is not a Note Guarantor. The Company currently conducts most of its operations through its Subsidiaries. To the extent such Subsidiaries are not Guarantors, creditors of such Subsidiaries, including trade creditors, and preferred stockholders, if any, of such Subsidiaries generally will have priority with respect to the assets and earnings of such Subsidiaries over the claims of creditors of the Company, including Holders. The Notes, therefore, will be effectively subordinated to the claims of creditors, including trade creditors, and preferred stockholders, if any, of Subsidiaries of the Company that are not Note Guarantors. For example, except under certain circumstances, the Company's Foreign Subsidiaries will not guarantee the Notes. Assuming that we had completed the Transactions as of September 27, 2003, on a pro forma basis: - we would have had approximately $412.2 million of Senior Indebtedness to which the Notes and the Note Guarantees would be subordinated (which amount excludes $5.7 million of letters of credit and the remaining availability of $89.8 million under our revolving credit facility; - we would not have had any Senior Subordinated Indebtedness (other than the Notes); - we would not have had any Subordinated Obligations; and - our Subsidiaries that are not Note Guarantors would have had $12.2 million of liabilities, excluding liabilities owed to us. As of January 7, 2004, we could incur approximately $89.8 million in additional senior debt under our amended and restated senior secured credit facility, subject to conditions to borrowing; however, the covenants under our amended and restated senior secured credit facility may limit our ability to make such borrowings. Although the Indenture will limit the Incurrence of Indebtedness by the Company and the Restricted Subsidiaries and the issuance of Preferred Stock by the Restricted Subsidiaries, such limitation is subject to a number of significant qualifications. The Company and its Subsidiaries may be able to Incur substantial amounts of additional Indebtedness in certain circumstances. Such Indebtedness may be Senior Indebtedness. In addition, the Indenture will not limit the Incurrence of Indebtedness by Holding or have any other restrictions on Holding. "Senior Indebtedness" of the Company or any Note Guarantor means Bank Indebtedness and the principal of, premium (if any) and accrued and unpaid interest on (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization of the Company or any Note Guarantor, regardless of whether or not a claim for post-filing interest is allowed in such proceedings), and fees and other amounts owing in respect of, all other Indebtedness of the Company or any Note Guarantor, as applicable, whether outstanding on the Closing Date or thereafter Incurred, unless in the instrument creating or evidencing the same or pursuant to which the same is outstanding it is provided that such obligations are pari passu with or subordinated in right of payment to the Notes or such Note Guarantor's Note 93 Guarantee, as applicable; provided, however, that Senior Indebtedness of the Company or any Note Guarantor shall not include: (1) any obligation of the Company or any Subsidiary of the Company or of such Note Guarantor to the Company or any other Subsidiary of the Company; (2) any liability for federal, state, local or other taxes owed or owing by the Company or such Note Guarantor, as applicable; (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including Guarantees thereof or instruments evidencing such liabilities); (4) any Indebtedness or obligation of the Company or such Note Guarantor, as applicable (and any accrued and unpaid interest in respect thereof) that by its terms is subordinate in right of payment to any other Indebtedness or obligation of the Company or such Note Guarantor, as applicable, including any Senior Subordinated Indebtedness and any Subordinated Obligations of the Company or such Note Guarantor, as applicable; (5) any obligations with respect to any Capital Stock; or (6) any Indebtedness (or portion thereof) Incurred in violation of the Indenture. Only Indebtedness of the Company that is Senior Indebtedness will rank senior to the Notes. The Notes will rank equally in all respects with all other Senior Subordinated Indebtedness of the Company. The Company will not Incur, directly or indirectly, any Indebtedness which is subordinate in right of payment to Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness. Unsecured Indebtedness is not deemed to be subordinate in right of payment to Secured Indebtedness merely because it is unsecured and Indebtedness which has different security or different priorities in the same security will not be deemed subordinate in right of payment to Secured Indebtedness due to such differences. The Company may not pay principal of, premium (if any) or interest on the Notes, or make any further deposit pursuant to the provisions described under "Defeasance" below, and may not otherwise purchase, repurchase, redeem or otherwise acquire or retire for value any Notes (collectively, "pay the Notes") (except in Permitted Junior Securities or except from a previously created trust described under "Defeasance") if: (1) any Designated Senior Indebtedness of the Company is not paid when due, whether upon acceleration or otherwise, or (2) any other default on Designated Senior Indebtedness of the Company occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (x) the default has been cured or waived and any such acceleration has been rescinded, or (y) such Designated Senior Indebtedness has been paid in full; provided, however, that the Company may pay the Notes without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of the Designated Senior Indebtedness with respect to which either of the events set forth in clause (1) or (2) above has occurred and is continuing. 94 In addition, during the continuance of any default (other than a default described in clause (1) or (2) of the immediately preceding paragraph) with respect to any Designated Senior Indebtedness of the Company pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, we may not pay the Notes (except in Permitted Junior Securities or except from a previously created trust described under "Defeasance") for a period (a "Payment Blockage Period") commencing upon the receipt by the Trustee (with a copy to us) of written notice (a "Blockage Notice") of such default from the Representative of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated: (1) by written notice to the Trustee and the Company from the Person or Persons who gave such Blockage Notice, (2) by repayment in full of such Designated Senior Indebtedness, or (3) because the default giving rise to such Blockage Notice is no longer continuing). Notwithstanding the provisions described in the immediately preceding paragraph (but subject to the provisions contained in the second preceding and in the immediately succeeding paragraph), unless the holders of such Designated Senior Indebtedness or the Representative of such holders have accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the Notes after the end of such Payment Blockage Period, including any missed payments. Not more than one Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period. However, if any Blockage Notice within such 360-day period is given by or on behalf of any holders of Designated Senior Indebtedness other than the Bank Indebtedness, the Representative of the Bank Indebtedness may give another Blockage Notice within such period. In no event, however, may the total number of days during which any Payment Blockage Period or Periods (including any periods in respect of any additional Blockage Notices delivered by the Representative pursuant to the prior sentence) is in effect exceed 179 days in the aggregate during any 360 consecutive day period. For purposes of this paragraph, no default or event of default that existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness initiating such Payment Blockage Period shall be, or be made, the basis of the commencement of a subsequent Payment Blockage Period by the Representative of such Designated Senior Indebtedness, whether or not within a period of 360 consecutive days, unless such default or event of default shall have been cured or waived for a period of not less than 90 consecutive days. Upon any payment or distribution of the assets of the Company to creditors upon a total or partial liquidation or a total or partial dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property (except that Holders of Notes may receive and retain Permitted Junior Securities and payments made from the trust described under "Defeasance"): (1) the holders of Senior Indebtedness of the Company will be entitled to receive payment in full of such Senior Indebtedness before the Holders are entitled to receive any payment of principal of or interest on the Notes; and 95 (2) until such Senior Indebtedness is paid in full any payment or distribution to which Holders would be entitled but for the subordination provisions of the Indenture will be made to holders of such Senior Indebtedness as their interests may appear. If a distribution is made to Holders that due to the subordination provisions of the Indenture should not have been made to them, such Holders will be required to hold it in trust for the holders of Senior Indebtedness of the Company and pay it over to them as their interests may appear. If payment of the Notes is accelerated because of an Event of Default, the Company or the Trustee (provided that the Trustee shall have received written notice from the Company, on which notice the Trustee shall be entitled to conclusively rely) shall promptly notify the holders of the Designated Senior Indebtedness of the Company (or their Representative) of the acceleration. If any Designated Senior Indebtedness of the Company is outstanding, the Company may not pay the Notes until five Business Days after such holders or the Representative of such Designated Senior Indebtedness receive notice of such acceleration and, thereafter, may pay the Notes only if the subordination provisions of the Indenture otherwise permit payment at that time. By reason of the subordination provisions of the Indenture, in the event of insolvency, creditors of the Company who are holders of Senior Indebtedness of the Company may recover more, ratably, than the Holders, and creditors of the Company who are not holders of Senior Indebtedness of the Company or of Senior Subordinated Indebtedness of the Company (including the Notes) may recover less, ratably, than holders of Senior Indebtedness of the Company and may recover more, ratably, than the holders of Senior Subordinated Indebtedness of the Company. The Indenture will contain substantially identical subordination provisions relating to each Guarantor's obligations under its Note Guarantee. NOTE GUARANTEES BPC Holding Corporation, each of the Company's Domestic Subsidiaries, and certain future subsidiaries of the Company (as described below), as primary obligors and not merely as sureties, will jointly and severally irrevocably and unconditionally Guarantee on an unsecured senior subordinated basis the performance and full and punctual payment when due, whether at Stated Maturity, by acceleration or otherwise, of all obligations of the Company under the Indenture (including obligations to the Trustee) and the Notes, whether for payment of principal of, interest (including Additional Interest) on, if any, in respect of the Notes, expenses, indemnification or otherwise (all such obligations guaranteed by such Note Guarantors being herein called the "Guaranteed Obligations"). Such Note Guarantors will agree to pay, in addition to the amount stated above, any and all costs and expenses (including reasonable counsel fees and expenses) Incurred by the Trustee or the Holders in enforcing any rights under the Note Guarantees. Each Note Guarantee will be limited in amount to an amount not to exceed the maximum amount that can be Guaranteed by the applicable Note Guarantor without rendering the Note Guarantee, as it relates to such Note Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. After the Closing Date, the Company will cause (1) each Domestic Subsidiary, other than a Domestic Subsidiary the only activity of which is to participate in a Receivables Facility, and (2) each Foreign Subsidiary that enters into a Guarantee of any Senior Indebtedness (other than a Foreign Subsidiary that Guarantees Senior 96 Indebtedness Incurred by another Foreign Subsidiary), to execute and deliver to the Trustee a supplemental indenture pursuant to which such Subsidiary will Guarantee payment of the Notes to the extent described in "Certain covenants--Future note guarantors and release of note guarantees" below. A Note Guarantor will be released from its obligations under the Indenture, the Note Guarantee and the registration rights agreement if (x) the Company designates such Note Guarantor as an Unrestricted Subsidiary and such designation complies with the other applicable provisions of the Indenture or (y) such Subsidiary is sold in accordance with the Indenture. See "Certain covenants--Future note guarantors and release of note guarantees." The obligations of a Note Guarantor under its Note Guarantee are senior subordinated obligations. As such, the rights of Holders to receive payment by a Note Guarantor pursuant to its Note Guarantee will be subordinated in right of payment to the rights of holders of Senior Indebtedness of such Note Guarantor. The terms of the subordination provisions described above with respect to the Company's obligations under the Notes apply equally to a Note Guarantor and the obligations of such Note Guarantor under its Note Guarantee. Each Note Guarantee is a continuing guarantee and shall (a) remain in full force and effect until payment in full of all the Guaranteed Obligations, (b) be binding upon each Note Guarantor and its successors and (c) inure to the benefit of, and be enforceable by, the Trustee, the Holders and their successors, transferees and assigns. CHANGE OF CONTROL Upon the occurrence of any of the following events (each a "Change of Control"), each Holder will have the right to require the Company to purchase all or any part of such Holder's Notes at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest, including Additional Interest, if any, due on the relevant interest payment date); provided, however, that notwithstanding the occurrence of a Change of Control, the Company shall not be obligated to purchase the Notes pursuant to this section in the event that it has mailed the notice to exercise its right to redeem all the Notes under the terms of the section titled "Optional redemption" at any time prior to the requirement to consummate the Change of Control and redeem the Notes in accordance with such notice: (1) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Company or Holding, whether as a result of issuance of securities of Holding or the Company, any merger, consolidation, liquidation or dissolution of Holding or the Company, any direct or indirect transfer of securities by any Permitted Holder or otherwise; (2) the sale, lease or transfer, in one transaction or a series of related transactions, of all or substantially all the assets of the Company and its Subsidiaries, taken as a whole, to a "person" (as defined above) other than one or more Permitted Holders; (3) during any period of two consecutive years, individuals who at the beginning of such period constituted the board of directors of the Company or Holding, as the case may be (together with any new directors whose election by such board of directors of the Company or Holding, as the case may be, or whose nomination for election by the 97 shareholders of the Company or Holding, as the case may be, was approved by a vote of a majority of the directors of the Company or Holding, as the case may be, then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved), and any directors who are designees of a Principal or a Related Party of a Principal or were nominated by a Principal or a Related Party of a Principal, cease for any reason to constitute a majority of the board of directors of the Company or Holding, as the case may be, then in office; or (4) the merger or consolidation of the Company or Holding with or into another Person or the merger of another Person with or into the Company or Holding, other than, in each case, a transaction following which securities that represented at least a majority of the voting power of the Voting Stock of the Company immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) constitute at least a majority of the voting power of the Voting Stock of the surviving Person. In the event that at the time of such Change of Control the terms of the Bank Indebtedness restrict or prohibit the repurchase of Notes pursuant to this covenant, then prior to the mailing of the notice to Holders provided for in the immediately following paragraph but in any event within 30 days following any Change of Control, the Company shall: (1) repay in full all Bank Indebtedness or, if doing so will allow the purchase of Notes, offer to repay in full all Bank Indebtedness and repay the Bank Indebtedness of each lender who has accepted such offer, or (2) obtain the requisite consent under the agreements governing the Bank Indebtedness to permit the repurchase of the Notes as provided for in the immediately following paragraph. Within 30 days following any Change of Control, or, at the Company's option, prior to such Change of Control but after it is publicly announced, the Company shall mail a notice to each Holder with a copy to the Trustee (the "Change of Control Offer") stating: (1) that a Change of Control has occurred and that such Holder has the right to require the Company to purchase all or a portion of such Holder's Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest, including Additional Interest, if any, on the relevant interest payment date); (2) the circumstances and relevant facts and financial information regarding such Change of Control; (3) the purchase date (which shall be no earlier than the greater of (x) 30 days and (y) the Change of Control date and no later than 60 days from the date such notice is mailed); (4) that the Change of Control Offer is conditioned on the Change of Control occurring if the notice is mailed prior to a Change of Control; and (5) the instructions determined by the Company, consistent with this covenant, that a Holder must follow in order to have its Notes purchased. The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and 98 otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the purchase of Notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this covenant by virtue thereof. The Change of Control purchase feature is a result of negotiations between the Company and the initial purchasers of the outstanding notes. Management has no present intention to engage in a transaction involving a Change of Control, although it is possible that the Company would decide to do so in the future. Subject to the limitations discussed below, the Company could, in the future, enter into certain transactions, including acquisitions, refinancings or recapitalizations, that would not constitute a Change of Control under the Indenture, but that could increase the amount of indebtedness outstanding at such time or otherwise affect the Company's capital structure or credit ratings. Restrictions on the ability of the Company to Incur additional Indebtedness are contained in the covenant described under "--Limitation on indebtedness." Such restrictions can only be waived with the consent of the Holders of a majority in principal amount of the Notes then outstanding. Except for the limitations contained in such covenant, however, the Indenture will not contain any covenants or provisions that may afford Holders protection in the event of a highly leveraged transaction. The occurrence of certain of the events which would constitute a Change of Control would constitute a default under the Credit Agreement. Future Senior Indebtedness of the Company may contain prohibitions of certain events which would constitute a Change of Control or require such Senior Indebtedness to be repurchased or repaid upon a Change of Control. Moreover, the exercise by the Holders of their right to require the Company to purchase the Notes could cause a default under such Senior Indebtedness, even if the Change of Control itself does not, due to the financial effect of such repurchase on the Company. Finally, the Company's ability to pay cash to the Holders upon a purchase may be limited by the Company's then existing financial resources. There can be no assurance that sufficient funds will be available when necessary to make any required purchases. The provisions under the Indenture relative to the Company's obligation to make an offer to purchase the Notes as a result of a Change of Control may be waived or modified with the written consent of the Holders of a majority in principal amount of the Notes. CERTAIN COVENANTS The Indenture contains covenants including, among others, the following: LIMITATION ON INDEBTEDNESS. (a) The Company will not, and will not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness; provided, however, that the Company or any Restricted Subsidiary that is a Note Guarantor may Incur Indebtedness (including any Receivables Facility) if, on the date of such Incurrence and after giving effect thereto the Consolidated Coverage Ratio would be greater than 2:1. 99 (b) Notwithstanding the foregoing paragraph (a), the Company and its Restricted Subsidiaries may Incur the following Indebtedness: (1) Indebtedness in an aggregate principal amount Incurred pursuant to any Credit Facility and Indebtedness in an aggregate amount outstanding under any Receivables Facility which together do not exceed $555.0 million less the aggregate amount of all mandatory repayments of the principal of any term Indebtedness under the Credit Agreement that have been made by the Company or any of its Restricted Subsidiaries since the date of the Indenture with the Net Available Cash of an Asset Disposition pursuant to clause (a)(3)(A) of "Certain covenants--Limitation on sales of assets and subsidiary stock"; provided, however, that Indebtedness in excess of $505.0 million may be Incurred only if at the time of Incurrence (or at the time of any other Incurrence of Indebtedness pursuant to this clause (1) in excess of $505.0 million) the Company receives an amount equal to such excess in cash from the issue or sale of Capital Stock (other than Disqualified Stock) or from other capital contributions; (2) Indebtedness of the Company owed to and held by any Restricted Subsidiary or Indebtedness of a Restricted Subsidiary owed to and held by the Company or any Restricted Subsidiary; provided, however, that (A) any subsequent issuance or transfer of any Capital Stock or any other event that results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of any such Indebtedness (except to the Company or a Restricted Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the issuer thereof, (B) if the Company is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations with respect to the Notes and (C) if a Restricted Subsidiary that is a Note Guarantor is the obligor on such Indebtedness and such Indebtedness is owed to and held by a Restricted Subsidiary that is not a Note Guarantor, such Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations of such Restricted Subsidiary with respect to its Note Guarantee; (3) Indebtedness (A) represented by the Notes (not including any Additional Notes) and the Note Guarantees, (B) represented by the exchange Notes to be issued in exchange for the Notes pursuant to the registration rights agreement, (C) outstanding on the Closing Date (other than the Indebtedness described in clauses (1) and (2) above), (D) consisting of Refinancing Indebtedness Incurred in respect of any Indebtedness described in this clause (3) or the foregoing paragraph (a) (including in any such case Indebtedness that is Refinancing Indebtedness) and (E) consisting of Guarantees of any Indebtedness permitted under the foregoing paragraph (a) or this paragraph (b); (4) Indebtedness (A) in respect of workers' compensation self-insurance obligations, indemnities, performance bonds, bankers' acceptances, letters of credit and surety, appeal or similar bonds provided by the Company and the Restricted Subsidiaries in the ordinary course of their business and in any such case any reimbursement obligations in connection therewith, (B) under Interest Rate Agreements entered into for bona fide hedging purposes of the Company in the ordinary course of business; provided, however, that such Interest Rate Agreements do not increase the Indebtedness of the Company outstanding at any time other than as a result of fluctuations in interest rates or by reason of fees, indemnities and compensation payable thereunder, (C) under any Currency Agreements; provided that such agreements are designed to protect the Company or its Subsidiaries against fluctuations in foreign currency exchange rates or interest rates or by reason of fees, 100 indemnities and compensation payable under Currency Agreements or (D) under any Commodity Price Protection Agreements; provided that such agreements are designed to protect the Company or its Subsidiaries against fluctuations in commodity prices or by reason of fees, indemnities and compensation payable under such Commodity Price Protection Agreements; (5) Purchase Money Indebtedness and Capitalized Lease Obligations in an aggregate principal amount not in excess of $30.0 million at any time outstanding; (6) Indebtedness of any Foreign Subsidiary in an aggregate principal amount which does not exceed $15.0 million plus any Indebtedness of a Foreign Subsidiary existing at the time it is acquired by the Company and not Incurred in contemplation thereof, so long as after giving effect to such acquisition, the Company could Incur $1.00 of additional Indebtedness under paragraph (a) of this covenant; (7) obligations arising from agreements by the Company or a Restricted Subsidiary to provide for indemnification, adjustment of purchase price or similar obligations, earn-outs or other similar obligations or from guarantees or letters of credit, surety bonds or performance bonds securing any obligation of the Company or a Restricted Subsidiary pursuant to such an agreement, in each case, Incurred in connection with the acquisition or disposition of any business, assets or Capital Stock of a Restricted Subsidiary; (8) shares of Preferred Stock of a Restricted Subsidiary issued to the Company or another Restricted Subsidiary; provided that any subsequent transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such shares of Preferred Stock (except to the Company or another Restricted Subsidiary) shall be deemed, in each case, to be an issuance of Preferred Stock; (9) Indebtedness of the Company and any Restricted Subsidiary to the extent the net proceeds thereof are promptly deposited to defease the Notes as described below under "Defeasance;" (10) contingent liabilities arising out of endorsements of checks and other negotiable instruments for deposit or collection or overdraft protection in the ordinary course of business; and (11) Indebtedness (other than Indebtedness permitted to be Incurred pursuant to the foregoing paragraph (a) or any other clause of this paragraph (b)) in an aggregate principal amount on the date of Incurrence that, when added to all other Indebtedness Incurred pursuant to this clause (11) and then outstanding, will not exceed $30.0 million. (c) The Company may not Incur any Indebtedness if such Indebtedness is subordinate in right of payment to any Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness. Unsecured Indebtedness is not deemed to be subordinate in right of payment to Secured Indebtedness merely because it is unsecured and Indebtedness which has different security or different priorities in the same security will not be deemed subordinate in right of payment to Secured Indebtedness due to such differences. The Company may not Incur any Secured Indebtedness which is not Senior Indebtedness unless contemporaneously therewith effective provision is made to secure the Notes equally and ratably with (or on a senior basis to, in the case of Indebtedness subordinated in right of payment to the Notes) such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. A Note Guarantor 101 may not Incur any Indebtedness if such Indebtedness is by its terms expressly subordinate in right of payment to any Senior Indebtedness of such Note Guarantor unless such Indebtedness is Senior Subordinated Indebtedness of such Note Guarantor or is expressly subordinated in right of payment to Senior Subordinated Indebtedness of such Note Guarantor. Unsecured Indebtedness is not deemed to be subordinate in right of payment to Secured Indebtedness merely because it is unsecured and Indebtedness which has different security or different priorities in the same security will not be deemed subordinate in right of payment to Secured Indebtedness due to such differences. A Note Guarantor may not Incur any Secured Indebtedness that is not Senior Indebtedness of such Note Guarantor unless contemporaneously therewith effective provision is made to secure the Note Guarantee of such Note Guarantor equally and ratably with (or on a senior basis to, in the case of Indebtedness subordinated in right of payment to such Note Guarantee) such Secured Indebtedness for as long as such Secured Indebtedness is secured by a Lien. (d) For purposes of determining compliance with this covenant: (1) Indebtedness Incurred pursuant to the Credit Agreement prior to or on the Closing Date shall be treated as Incurred pursuant to clause (1) of paragraph (b) above; (2) Indebtedness permitted by this covenant need not be permitted solely by reference to one provision permitting such Indebtedness but may be permitted in part by one such provision and in part by one or more other provisions of this covenant permitting such Indebtedness; (3) in the event that Indebtedness meets the criteria of more than one of the types of Indebtedness described in this covenant, the Company, in its sole discretion, shall classify such Indebtedness on the date of Incurrence and shall later be permitted to reclassify all or a portion of such item of Indebtedness, in any manner that complies with this covenant, and only be required to include the amount of such Indebtedness in one of such clauses; (4) for purpose of determining compliance with any dollar-denominated restriction on the Incurrence of Indebtedness, denominated in a foreign currency, the dollar-equivalent principal amount of such Indebtedness Incurred pursuant thereto shall be calculated based on the relevant currency exchange rate in effect on the date that such Indebtedness was Incurred, and any such foreign denominated Indebtedness may be refinanced or replaced, or subsequently refinanced or replaced, in an amount equal to the dollar-equivalent principal amount of such Indebtedness on the date of such refinancing or replacement whether or not such amount is greater or less than the dollar equivalent principal amount of the Indebtedness on the date of initial Incurrence; (5) if Indebtedness is secured by a letter of credit that serves only to secure such Indebtedness, then the total amount deemed Incurred shall be equal to the greater of (x) the principal of such Indebtedness and (y) the amount that may be drawn under such letter of credit; and (6) the amount of Indebtedness issued at a price less than the amount of the liability thereof shall be determined in accordance with GAAP. LIMITATION ON RESTRICTED PAYMENTS. (a) The Company will not, and will not permit any Restricted Subsidiary, directly or indirectly, to: (1) declare or pay any dividend, make any distribution on or in respect of its Capital Stock or make any similar payment on or in respect of its Capital Stock (including any payment in 102 connection with any merger or consolidation involving the Company or any Subsidiary of the Company) to the direct or indirect holders of its Capital Stock, except (x) dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock or Preferred Stock) or in options, warrants or rights to purchase such Capital Stock and (y) dividends or distributions payable to the Company or a Restricted Subsidiary (and, if such Restricted Subsidiary has shareholders other than the Company or other Restricted Subsidiaries, to its other shareholders on a pro rata basis), (2) purchase, repurchase, redeem, retire or otherwise acquire for value any Capital Stock of Holding, the Company or any Restricted Subsidiary held by Persons other than the Company or a Restricted Subsidiary, (3) purchase, repurchase, redeem, retire, defease or otherwise acquire for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment any Subordinated Obligations, except a purchase, repurchase, redemption, retirement, defeasance or acquisition within one year of the final maturity thereof, or (4) make any Investment (other than a Permitted Investment) in any Person (any such dividend, distribution, payment, purchase, redemption, repurchase, defeasance, retirement, or other acquisition or Investment set forth in these clauses (1) through (4) being herein referred to as a "Restricted Payment") if at the time the Company or such Restricted Subsidiary makes such Restricted Payment: (A) a Default will be continuing (or would result therefrom); (B) the Company could not Incur at least $1.00 of additional Indebtedness under paragraph (a) of the covenant described under "--Limitation on indebtedness"; or (C) the aggregate amount of such Restricted Payment and all other Restricted Payments (the amount so expended, if other than in cash, to be determined in good faith by the Board of Directors, whose determination will be conclusive and delivered to the Trustee and evidenced by a resolution of the Board of Directors) declared or made subsequent to the Closing Date would exceed the sum, without duplication, of: (i) 50% of the sum of Consolidated Net Income and Consolidated Step-Up Depreciation and Amortization accrued during the period (treated as one accounting period) from the beginning of the fiscal quarter in which the Closing Date occurs to the end of the most recent fiscal quarter for which financial statements are available (or, in case such Consolidated Net Income will be a deficit, minus 100% of such deficit); (ii) 100% of the aggregate Net Cash Proceeds and Fair Market Value of property or assets (other than Indebtedness and Capital Stock, except that Capital Stock of a Person that is or becomes a Restricted Subsidiary shall be valued in accordance with the Company's interest in the Fair Market Value of such Person's property and assets, exclusive of goodwill or any similar intangible asset) received by the Company from the issue or sale of its Capital Stock (other than Disqualified Stock) or from other capital contributions subsequent to the Closing Date (other than an issuance or sale (x) to a Subsidiary of the Company, (y) to an employee stock ownership plan or other trust established by the Company or any of its Subsidiaries with respect to amounts funded or guaranteed by the Company or (z) in exchange for the proceeds of loans or advances made pursuant to clause (17) under the definition "Permitted Investment"); 103 (iii) the amount by which Indebtedness of the Company or its Restricted Subsidiaries is reduced on the Company's balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to the Closing Date of any Indebtedness of the Company or its Restricted Subsidiaries issued after the Closing Date which is convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash or the Fair Market Value of other property distributed by the Company or any Restricted Subsidiary upon such conversion or exchange); (iv) the amount equal to the net reduction in Investments in Unrestricted Subsidiaries resulting from (x) payments of dividends, repayments of the principal of loans or advances or other transfers of assets to the Company or any Restricted Subsidiary from Unrestricted Subsidiaries or (y) the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investment"); (v) the net reduction in any Investment (other than a Permitted Investment) that was made after the date of the Indenture resulting from payments of dividends, repayments of the principal of loans or advances or other transfers of assets to the Company or any Restricted Subsidiary and the cash return of capital with respect to any Investment (other than a Permitted Investment); and (vi) any amount which previously qualified as a Restricted Payment on account of any Guarantee entered into by the Company or any Restricted Subsidiary; provided that such Guarantee has not been called upon and the obligation arising under such Guarantee no longer exists. (b) The provisions of the foregoing paragraph (a) will not prohibit: (1) any purchase, repurchase, redemption, retirement or other acquisition for value of Capital Stock of the Company made by exchange for, or out of the proceeds of the sale within 30 days of, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of the Company or an employee stock ownership plan or other trust established by the Company or any of its Subsidiaries with respect to amounts funded or guaranteed by the Company); provided, however, that: (A) such purchase, repurchase, redemption, retirement or other acquisition for value will be excluded in the calculation of the amount of Restricted Payments, and (B) the Net Cash Proceeds from such sale applied in the manner set forth in this clause (1) will be excluded from the calculation of amounts under clause (4)(C)(ii) of paragraph (a) above; (2) any prepayment, repayment, purchase, repurchase, redemption, retirement, defeasance or other acquisition for value of Subordinated Obligations of the Company made by exchange for, or out of the proceeds of the sale within 30 days of, Subordinated Obligations or Capital Stock (other than Disqualified Stock) of the Company that is permitted to be Incurred pursuant to the covenant described under "--Limitation on indebtedness"; provided, however, that: (A) such prepayment, repayment, purchase, repurchase, redemption, retirement, defeasance or other acquisition for value will be excluded in the calculation of the amount of Restricted Payments; and 104 (B) the Net Cash Proceeds from such sale applied in the manner set forth in this clause (2) will be excluded from the calculation of amounts under clause (4)(C)(ii) of paragraph (a) above to the extent Capital Stock is used in such prepayment, repayment, purchase, repurchase, redemption, retirement, defeasance or other acquisition for value; (3) any prepayment, repayment, purchase, repurchase, redemption, retirement, defeasance or other acquisition for value of Subordinated Obligations from Net Available Cash to the extent permitted by the covenant described under "--Limitation on sales of assets and subsidiary stock"; provided, however, that such prepayment, repayment, purchase, repurchase, redemption, retirement, defeasance or other acquisition for value will be excluded in the calculation of the amount of Restricted Payments; (4) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividends would have complied with this covenant; provided, however, that such dividends will be included in the calculation of the amount of Restricted Payments; (5) any payment of dividends, other distributions or other amounts by the Company for the purposes set forth in clauses (A) through (C) below; provided, however, that such dividend, distribution or other amount set forth in clauses (A) and (B) will be excluded and in clause (C) will be included in the calculation of the amount of Restricted Payments: (A) other fees required to maintain its corporate existence and provide for other operating costs of up to $1.0 million per fiscal year; (B) to Holding in amounts equal to amounts required for Holding to pay federal, state, local and foreign income taxes to the extent such income taxes are attributable to the income of the Company and its Restricted Subsidiaries (and, to the extent of amounts actually received from its Unrestricted Subsidiaries, in amounts required to pay such taxes to the extent attributable to the income of such Unrestricted Subsidiaries) or otherwise in accordance with the Tax Sharing Agreement as in effect on the date of the Indenture, as the same may be amended from time to time to add additional Subsidiaries or in a manner not materially less favorable to the Holders of the Notes; (C) to Holding in amounts equal to amounts expended by Holding to purchase, repurchase, redeem, retire or otherwise acquire for value Capital Stock of Holding owned by employees, former employees, directors or former directors, consultants or foreign consultants of the Company or any of its Subsidiaries (or permitted transferees of such employees, former employees, directors or former directors, consultants or foreign consultants); provided, however, that the aggregate amount paid, loaned or advanced to Holding pursuant to this clause (C) will not, in the aggregate, exceed $2.5 million per fiscal year of the Company, plus any amounts contributed by Holding to the Company as a result of sales of shares of Capital Stock to employees, directors and consultants, plus the net proceeds of any key person life insurance received by the Company after the date of the Indenture; (6) the repurchase of any Subordinated Obligation or Disqualified Stock of the Company at a purchase price not greater than 101% of the principal amount or liquidation preference of such Subordinated Obligation or Disqualified Stock in the event of a Change of Control pursuant to a provision similar to "Change of Control"; provided that prior to consummating any such repurchase, the Company has made the Change of Control Offer required by 105 the Indenture and has repurchased all Notes validly tendered for payment in connection with such Change of Control Offer; provided, however, that such repurchase will be included in the calculation of the amount of Restricted Payments; (7) the repurchase of any Subordinated Obligation or Disqualified Stock of the Company at a purchase price not greater than 100% of the principal amount or liquidation preference of such Subordinated Obligation or Disqualified Stock in the event of an Asset Sale pursuant to a provision similar to the "--Limitation on sales of assets and subsidiary stock" covenant; provided that prior to consummating any such repurchase, the Company has made the Asset Sale Offer required by the Indenture and has repurchased all Notes validly tendered for payment in connection with such Asset Sale Offer; provided, however, that such repurchase will be included in the calculation of the amount of Restricted Payments; (8) repurchases of Capital Stock deemed to occur upon exercise of stock options to the extent that shares of such Capital Stock represent a portion of the exercise price of such options; provided, however, that such repurchases will be excluded in the calculation of the amount of Restricted Payments; (9) the declaration and payment of dividends or distributions to holders of any class or series of Disqualified Stock of the Company or Preferred Stock of its Restricted Subsidiaries issued or Incurred in accordance with the covenant "--Limitation on indebtedness"; provided, however, that such declaration and payment of dividends or distributions to holders will be excluded in the calculation of the amount of Restricted Payments; (10) any of the transactions completed in connection with the Acquisition and the financing thereof; provided, however, that such transactions will be excluded in the calculation of the amount of Restricted Payments; (11) any purchase, redemption, retirement or other acquisition for value of Disqualified Stock of the Company made by exchange for, or out of the proceeds of the sale within 30 days of, Disqualified Stock of the Company; provided that any such new Disqualified Stock is issued in accordance with paragraph (a) of the covenant "--Limitation on indebtedness" and has an aggregate liquidation preference that does not exceed the aggregate liquidation preference of the amount so refinanced; provided, however, such purchase, repurchase, redemption, retirement or other acquisition for value will be excluded in the calculation of the amount of Restricted Payments; or (12) other Restricted Payments in an aggregate amount not to exceed $15.0 million since the date of the Indenture; provided, however, that such other Restricted Payments will be included in the calculation of the amount of Restricted Payments. The amount of all Restricted Payments (other than cash) will be the Fair Market Value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The Fair Market Value of any assets or securities that are required to be valued by this covenant will be determined by the Board of Directors whose resolution with respect thereto will be conclusive and delivered to the Trustee and evidenced by a resolution of the Board of Directors. LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED SUBSIDIARIES. The Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or 106 become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to: (1) pay dividends or make any other distributions on its Capital Stock or pay any Indebtedness or other obligations owed to the Company; (2) make any loans or advances to the Company; or (3) transfer any of its property or assets to the Company, except: (A) any encumbrance or restriction pursuant to applicable law; (B) any encumbrance or restriction in any agreement with respect to Indebtedness (including the Credit Agreement) as in effect or entered into on the Closing Date, and any amendments, modifications, restatements, renewals, extensions, replacements and financings thereof on terms and conditions with respect to such encumbrances and restrictions that are not materially more restrictive, taken as a whole, than those encumbrances and restrictions with respect to such Indebtedness as in effect on the date of the Indenture; (C) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by such Restricted Subsidiary prior to the date on which such Restricted Subsidiary was acquired by the Company (other than Indebtedness Incurred as consideration in or in contemplation of, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was otherwise acquired by the Company) and outstanding on such date; (D) any encumbrance or restriction pursuant to an agreement for the sale or other disposition of a Restricted Subsidiary or assets that restrict distributions by that Restricted Subsidiary or distributions of those assets pending the sale or other disposition; (E) any encumbrance or restriction existing by reason of provisions with respect to the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, stock sale agreements and other similar agreements; (F) any encumbrance or restriction existing by reason of restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; (G) any encumbrance or restriction existing by reason of restrictions on the transfer of assets that are the subject of a Capitalized Lease Obligation permitted under "--Limitation on indebtedness"; (H) in the case of clause (3), any encumbrance or restriction (i) that restricts in a customary manner the subletting, assignment or transfer of any property or asset that is subject to a lease, license or similar contract, (ii) contained in security agreements securing Indebtedness of a Restricted Subsidiary to the extent such encumbrance or restriction restricts the transfer of the property subject to such security agreements or (iii) pursuant to Purchase Money Indebtedness for property acquired in the ordinary course of business that imposes restrictions on that property; 107 (I) encumbrances or restrictions that are or were created by virtue of any transfer of, agreement to transfer, or option or right with respect to any property or assets of the Company or any Restricted Subsidiary not otherwise prohibited by the Indenture; (J) encumbrances and restrictions contained in Indebtedness of Foreign Subsidiaries permitted pursuant to the covenant described under "--Limitation on indebtedness" or industrial revenue or similar bonds Incurred by the Company or any Restricted Subsidiary and permitted pursuant to the covenant described under "--Limitation on indebtedness"; (K) encumbrances or restrictions contained in indentures or other debt instruments, facilities or arrangements that are not materially more restrictive, taken as a whole, than those contained in the Indenture governing the Notes or the Credit Agreement on the date of the Indenture; (L) encumbrances and restrictions on the date of the Acquisition (and not Incurred in contemplation thereof) with respect to any assets or other property acquired by the Company or any Restricted Subsidiary (including pursuant to the acquisition of the Capital Stock of a Person); (M) customary restrictions imposed on the transfer of, or in licenses related to, copyrighted or patented materials or other intellectual property and customary provisions in agreements that restrict the assignment of such agreements or any rights thereunder or the use of any such rights; (N) customary restrictions on real property interests set forth in easements and similar arrangements of the Company or any Restricted Subsidiary; (O) any encumbrance or restriction existing under or by reason of a Receivables Facility or other contractual requirements of a Receivables Facility permitted pursuant to the covenant described under "--Limitation on indebtedness"; provided that such restrictions apply only to such Receivables Facility; and (P) any encumbrance or restriction pursuant to (x) an agreement effecting a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in clauses (A) through (P) of this covenant or contained in any amendment, modification or replacement to an agreement referred to in clauses (A) through (P) of this covenant, in each case as applicable; provided, however, that the encumbrances and restrictions contained in any such Refinancing agreement or amendment, modification or replacement are no less favorable to the Holders taken as a whole than the encumbrances and restrictions contained in such predecessor agreements or (y) any Credit Facility which is no less favorable to the Holders taken as a whole than the encumbrances contained in the Credit Agreement on the date of the Indenture. LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK. (a) The Company will not, and will not permit any Restricted Subsidiary to, make any Asset Disposition unless: (1) the Company or such Restricted Subsidiary receives consideration (including by way of relief from, or by any other Person assuming sole responsibility for, any liabilities, contingent or otherwise) at the time of such Asset Disposition at least equal to the Fair Market Value of the shares and assets subject to such Asset Disposition, (2) at least 75% of the consideration thereof received by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents, and 108 (3) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Restricted Subsidiary, as the case may be) (A) first, to the extent the Company elects (or is required by the terms of any Indebtedness), to prepay, repay, purchase, repurchase, redeem, retire, defease or otherwise acquire for value (i) Senior Indebtedness of the Company or Senior Indebtedness (other than obligations in respect of Preferred Stock) of a Restricted Subsidiary or (ii) any Indebtedness of a non-guarantor Restricted Subsidiary only if the assets sold were of a non-guarantor Restricted Subsidiary (in each case other than Indebtedness owed to the Company or an Affiliate of the Company and other than obligations in respect of Disqualified Stock), in each case, within 365 days after the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (B) second, to the extent of the balance of Net Available Cash after application in accordance with clause (A), to the extent the Company or such Restricted Subsidiary elects, to reinvest in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary) within 365 days from the later of such Asset Disposition or the receipt of such Net Available Cash or pursuant to arrangements in place within the 365-day period; (C) third, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A) and (B), to make an Offer (as defined in paragraph (b) of this covenant below) to purchase Notes pursuant to and subject to the conditions set forth in paragraph (b) of this covenant; provided, however, that if the Company elects (or is required by the terms of any other Senior Subordinated Indebtedness), such Offer may be made ratably to purchase the Notes and other Senior Subordinated Indebtedness of the Company, and (D) fourth, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A), (B) and (C), for any general corporate purpose not restricted by the terms of the Indenture; provided, however that in connection with any prepayment, repayment, purchase, repurchase, redemption, retirement, defeasance or other acquisition for value of Indebtedness pursuant to clause (A) above, the Company or such Restricted Subsidiary will retire such Indebtedness and will cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid, purchased, repurchased, redeemed, retired, defeased or otherwise acquired for value. Pending the final application of the Net Available Cash, the Company and its Restricted Subsidiaries may temporarily reduce revolving credit borrowings or otherwise invest the Net Available Cash in any manner that is not prohibited by the Indenture. Notwithstanding the foregoing provisions of this covenant, the Company and the Restricted Subsidiaries will not be required to apply any Net Available Cash in accordance with this covenant except to the extent that the aggregate Net Available Cash from all Asset Dispositions that is not applied in accordance with this covenant exceeds $5.0 million. For the purposes of this covenant, the following are deemed to be cash: - the assumption of Indebtedness of the Company (other than obligations in respect of Disqualified Stock of the Company) or any Restricted Subsidiary (other than obligations 109 in respect of Disqualified Stock and Preferred Stock of a Restricted Subsidiary that is a Note Guarantor) and the release of the Company or such Restricted Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition; - any Designated Noncash Consideration received by the Company or any of its Restricted Subsidiaries in the Asset Disposition; and - securities or other obligations received by the Company or any Restricted Subsidiary from the transferee that are (subject to ordinary settlement periods) converted, sold or exchanged within 30 days of receipt by the Company or such Restricted Subsidiary into cash (to the extent of the cash received in that conversion, sale or exchange). In the case of an Asset Swap constituting part of an Asset Disposition, the Company or any such Restricted Subsidiary shall only be required to receive cash in an amount equal to at least 75% of the proceeds of the Asset Disposition which are not received in connection with the Asset Swap. (b) In the event of an Asset Disposition that requires the purchase of Notes pursuant to clause (a)(3)(C) of this covenant, the Company will be required (i) to purchase Notes tendered pursuant to an offer by the Company for the Notes (the "Offer") at a purchase price of 100% of their principal amount plus accrued and unpaid interest and Additional Interest thereon, if any, to the date of purchase (subject to the right of Holders of record on the relevant date to receive interest due on the relevant interest payment date) in accordance with the procedures (including prorating in the event of oversubscription) set forth in the Indenture and (ii) to purchase other Senior Subordinated Indebtedness of the Company on the terms and to the extent contemplated thereby (provided that in no event shall the Company offer to purchase such other Senior Subordinated Indebtedness of the Company at a purchase price in excess of 100% of its principal amount, plus accrued and unpaid interest thereon). If the aggregate purchase price of Notes (and other Senior Subordinated Indebtedness) tendered pursuant to the Offer is less than the Net Available Cash allotted to the purchase of the Notes (and other Senior Subordinated Indebtedness), the Company will apply the remaining Net Available Cash in accordance with clause (a)(3)(D) of this covenant. The Company will not be required to make an Offer for Notes (and other Senior Subordinated Indebtedness) pursuant to this covenant if the Net Available Cash available therefor (after application of the proceeds as provided in clauses (a)(3)(A) and (B)) is less than $5.0 million for any particular Asset Disposition (which lesser amount will be carried forward for purposes of determining whether an Offer is required with respect to the Net Available Cash from any subsequent Asset Disposition). (c) The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of any covenant of the Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Indenture by virtue thereof. LIMITATION ON TRANSACTIONS WITH AFFILIATES. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into or conduct any transaction or series of related transactions (including the purchase, sale, lease or exchange of any property or the 110 rendering of any service) with any Affiliate of the Company (an "Affiliate Transaction") unless such transaction is on terms: (1) that are no less favorable, taken as a whole, to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained at the time of such transaction in arm's-length dealings with a Person who is not such an Affiliate, (2) that, in the event such Affiliate Transaction involves an aggregate amount in excess of $5.0 million, (A) are set forth in writing, and (B) have been approved in good faith by a majority of the members of the Board of Directors and, (3) that, in the event such Affiliate Transaction involves an aggregate amount in excess of $20.0 million, (A) are set forth in writing, and (B) have either (x) been approved in good faith by a majority of the members of the Board of Directors or (y) have been determined by a recognized appraisal or investment banking firm to be fair, from a financial standpoint, to the Company and its Restricted Subsidiaries. (b) The provisions of the foregoing paragraph (a) will not prohibit or restrict: (1) any Restricted Payment or Investment permitted to be made pursuant to the covenant described under "--Limitation on restricted payments," (2) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors, (3) the grant of stock options or similar rights to employees, directors and consultants of the Company pursuant to plans approved by the Board of Directors, (4) loans or advances to employees in the ordinary course of business (or guarantees in respect thereof or otherwise made on their behalf (including payment on any such guarantees)), but in any event not to exceed $3.0 million in the aggregate outstanding at any one time, plus any amounts loaned pursuant to clause (17) under the definition of "Permitted Investment," (5) the payment of reasonable fees paid to, and indemnity provided on behalf of, officers, directors, employees or consultants of the Company and its Subsidiaries, (6) any transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries, (7) any transaction effected in connection with a Receivables Facility permitted under the covenant "--Limitation on indebtedness," (8) any redemption of Capital Stock held by current or former employees, directors or consultants upon death, disability or termination of employment at a price not in excess of the Fair Market Value thereof or pursuant to the terms of any agreement entered into in accordance with the Indenture with such Person, 111 (9) sales or issuances of Capital Stock (other than Disqualified Stock) to Affiliates of the Company, (10) transactions involving the Company or any of its Restricted Subsidiaries, on the one hand, and J.P. Morgan Securities Inc. or Goldman, Sachs & Co. or any of their respective affiliates, on the other hand, in connection with the Acquisition and transactions related thereto, Bank Indebtedness and any amendment, modification, supplement, extension, refinancing, replacement, work-out, restructuring and other transactions related thereto, or any management, financial advisory, financing, underwriting or placement services or any other investment banking, banking or similar services, which payments are approved by a majority of the Board of Directors in good faith, (11) transactions pursuant to the Stockholders' Agreement as in effect on the date of the Indenture as the same may be amended from time to time in any manner not materially less favorable taken as a whole to the Holders of the Notes, (12) transactions pursuant to any agreement disclosed in the Offering Memorandum, including any agreement entered into in connection with the Buyout, as in effect on the date of the Indenture as the same may be amended from time to time in any manner not materially less favorable taken as a whole to the Holders of the Notes, (13) any employment, compensation or indemnification agreements entered into by the Company or any of its Restricted Subsidiaries, in the ordinary course of business with employees, directors, or consultants, or (14) sales of inventory or other product to any Affiliate in the ordinary course of business. SEC REPORTS. Notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company will file with the SEC (unless the SEC will not accept such a filing) and provide the Trustee and Holders and prospective Holders (upon request) within 15 days after it files them with the SEC, copies of its annual report and the information, documents and other reports that are specified in Sections 13 and 15(d) of the Exchange Act. The Company also will comply with the other provisions of Section 314(a) of the TIA. FUTURE NOTE GUARANTORS AND RELEASE OF NOTE GUARANTEES. (a) The Company will cause (1) each Domestic Subsidiary, other than a Domestic Subsidiary the only activity of which is to participate in a Receivables Facility, and (2) each Foreign Subsidiary that enters into a Guarantee of any Senior Indebtedness (other than a Foreign Subsidiary that Guarantees Senior Indebtedness Incurred by another Foreign Subsidiary), to become a Note Guarantor, and if applicable, execute and deliver to the Trustee a supplemental indenture in the form set forth in the Indenture pursuant to which such Subsidiary will Guarantee payment of the Notes; provided that this covenant shall not apply to any Subsidiary that has been properly designated as an Unrestricted Subsidiary in accordance with the Indenture. Each Note Guarantee will be limited to an amount not to exceed the maximum amount that can be Guaranteed by that Note Guarantor, without rendering the Note Guarantee, as it relates to such Note Guarantor voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. (b) The Note Guarantee of a Note Guarantor will be released: (1) in connection with any sale or other disposition of all or substantially all of the assets of that Note Guarantor (including by way of merger or consolidation) to a Person that is not 112 (either before or after giving effect to such transaction) a Subsidiary of the Company, if the sale or other disposition complies with the "Asset Sale" provisions of the Indenture; (2) in connection with any sale of Capital Stock of a Note Guarantor to a Person that is not (either before or after giving effect to such transaction) a Subsidiary of the Company, if the sale complies with the "Asset Sale" provisions of the Indenture; (3) if the Company designates any Restricted Subsidiary that is a Note Guarantor as an Unrestricted Subsidiary in accordance with the applicable provisions of the Indenture; or (4) if the Note Guarantor participates in a Receivables Facility and such participation is such Note Guarantor's only on-going activity. MERGER AND CONSOLIDATION The Company will not consolidate with or merge with or into, or convey, transfer or lease all or substantially all its assets, in one or more related transactions, to, any Person, unless: (1) the resulting, surviving or transferee Person (the "Successor Company") will be a corporation, limited liability company, trust, partnership or similar entity organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) will expressly assume, by a supplemental indenture, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all the obligations of the Company under the Notes and the Indenture; provided that if the Successor Company is not a corporation, the Notes will also be assumed by a corporate co-obligor; (2) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Restricted Subsidiary as a result of such transaction as having been Incurred by the Successor Company or such Restricted Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; (3) immediately after giving effect to such transaction, the Successor Company would be able to Incur an additional $1.00 of Indebtedness under paragraph (a) of the covenant described under "--Limitation on indebtedness"; and (4) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indenture. The Successor Company will succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture, but the predecessor Company in the case of a lease of all or substantially all its assets will not be released from the obligation to pay the principal of and interest on the Notes. In addition, the Company will not permit any Note Guarantor to consolidate with or merge with or into, or convey, transfer or lease all or substantially all of its assets to any Person unless: (1) the resulting, surviving or transferee Person (the "Successor Guarantor") will be a corporation, limited liability company, trust, partnership or similar entity organized and existing under the laws of the United States of America, any State thereof or the District of Columbia, and such Person (if not such Note Guarantor) will expressly assume, by a 113 supplemental indenture, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all the obligations of such Note Guarantor under its Note Guarantee; (2) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Guarantor or any Restricted Subsidiary as a result of such transaction as having been Incurred by the Successor Guarantor or such Restricted Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; and (3) the Company will have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indenture. Notwithstanding the foregoing: (A) any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company or any Restricted Subsidiary and (B) the Company may merge with an Affiliate incorporated solely for the purpose of reincorporating the Company in another jurisdiction to realize tax or other benefits. DEFAULTS Each of the following is an Event of Default: (1) a default in any payment of interest on any Note when due and payable or in any payment of Additional Interest whether or not prohibited by the provisions described under "Ranking" above, continued for 30 days, (2) a default in the payment of principal of any Note when due and payable at its Stated Maturity, upon required redemption or repurchase, upon declaration or otherwise, whether or not such payment is prohibited by the provisions described under "Ranking" above, (3) the failure by the Company or any Note Guarantor to comply with its obligations under the covenant described under "Merger and consolidation" above, (4) the failure by the Company or any Restricted Subsidiary to comply for 60 days after notice with any of its obligations under the covenants described under "Change of control" or "Certain covenants" above (in each case, other than a failure to purchase Notes), (5) the failure by the Company or any Restricted Subsidiary to comply for 60 days after notice with its other agreements contained in the Notes, the Indenture or the Note Guarantees, (6) the failure by the Company or any Significant Subsidiary to pay any Indebtedness within any applicable grace period after final maturity or the acceleration of any such Indebtedness by the holders thereof because of a default if the total amount of such Indebtedness unpaid or accelerated exceeds $20.0 million or its foreign currency equivalent (the "cross acceleration provision"), (7) certain events of bankruptcy, insolvency or reorganization of the Company or a Significant Subsidiary (the "bankruptcy provisions"), (8) the rendering of any judgment or decree for the payment of money in excess of $20.0 million or its foreign currency equivalent (net of any amounts covered by insurance) 114 against the Company or a Significant Subsidiary if such judgment or decree remains outstanding for a period of 60 days following such judgment and is not discharged, waived or stayed (the "judgment default provision") or (9) any Note Guarantee of a Significant Subsidiary ceases to be in full force and effect (except as contemplated by the terms thereof) or any Significant Subsidiary Note Guarantor or Person acting by or on behalf of such Significant Subsidiary Note Guarantor denies or disaffirms such Significant Subsidiary Note Guarantor's obligations under the Indenture or any Significant Subsidiary Note Guarantee and such Default continues for 10 days after receipt of the notice specified in the Indenture. The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. However, a default under clauses (4), (5) or (6) will not constitute an Event of Default until the Trustee notifies the Company or the Holders of at least 25% in principal amount of the outstanding Notes notify the Company and the Trustee of the default and the Company or the Note Guarantor, as applicable, does not cure such default within the time specified in clauses (4), (5) or (6) hereof after receipt of such notice. If an Event of Default (other than an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes by notice to the Company and the Trustee may declare the principal of and accrued but unpaid interest on all the Notes to be due and payable. Upon such a declaration, such principal and interest will be due and payable immediately. If an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company occurs, the principal of and interest on all the Notes will become immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. Under certain circumstances, the Holders of a majority in principal amount of the outstanding Notes may rescind any such acceleration with respect to the Notes and its consequences. Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to the Indenture or the Notes unless: (1) such Holder has previously given the Trustee notice that an Event of Default is continuing, (2) Holders of at least 25% in principal amount of the outstanding Notes have requested the Trustee in writing to pursue the remedy, (3) such Holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense, (4) the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity and 115 (5) the Holders of a majority in principal amount of the outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period. Subject to certain restrictions, the Holders of a majority in principal amount of the outstanding Notes will be given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability. Prior to taking any action under the Indenture, the Trustee will be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. If a Default occurs and is continuing and is known to the Trustee, the Trustee must mail to each Holder notice of the Default within the earlier of 90 days after it occurs or 30 days after it is known to a Trust Officer or written notice of it is received by the Trustee. Except in the case of a Default in the payment of principal of, premium (if any) or interest on any Note (including payments pursuant to the redemption provisions of such Note), the Trustee may withhold notice if and so long as a committee of its Trust Officers in good faith determines that withholding notice is in the interests of the Holders. In addition, the Company will be required to deliver to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any Default that occurred during the previous year. The Company will also be required to deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any event which would constitute certain Events of Default, their status and what action the Company is taking or proposes to take in respect thereof. AMENDMENTS AND WAIVERS Subject to certain exceptions, the Indenture, the Notes or the Note Guarantees may be amended with the written consent of the Holders of a majority in principal amount of the Notes then outstanding and any past default or compliance with any provisions may be waived with the consent of the Holders of a majority in principal amount of the Notes then outstanding. However, without the consent of each Holder of an outstanding Note affected, no amendment may, among other things: (1) reduce the amount of Notes whose Holders must consent to an amendment, (2) reduce the rate of or extend the time for payment of interest, including Additional Interest, if any, on any Note, (3) reduce the principal of or extend the Stated Maturity of any Note, (4) reduce the premium payable upon the redemption of any Note or change the time at which any Note may be redeemed as described under "Optional redemption" above, (5) make any Note payable in money other than that stated in the Note, (6) make any change to the subordination provisions of the Indenture that adversely affects the rights of any Holder, (7) impair the right of any Holder to receive payment of principal of, and interest, including Additional Interest, if any, on, such Holder's Notes on or after the due dates 116 therefore or to institute suit for the enforcement of any payment on or with respect to such Holder's Notes, (8) make any change in the amendment provisions which require each Holder's consent or in the waiver provisions or (9) release the Note Guarantees, other than in accordance with the Indenture, or modify the Note Guarantees in any manner adverse to the Holders. Without the consent of any Holder, the Company, the Note Guarantors and the Trustee may amend the Indenture, the Notes or the Note Guarantees to: - cure any ambiguity, omission, defect or inconsistency, - provide for the assumption by a successor of the obligations of the Company under the Indenture, - provide for uncertificated Notes in addition to or in place of certificated Notes (provided, however, that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code), - to make any change in the subordination provisions of the Indenture that would limit or terminate the benefits available to any holder of Senior Indebtedness of the Company or a Note Guarantor (or any Representative thereof under such subordination provisions, - add additional Guarantees with respect to the Notes, - secure the Notes, - add to the covenants of the Company or provide any additional rights or benefits to the Holders or to surrender any right or power conferred upon the Company, - make any change that does not adversely affect the rights of any Holder, - provide for the issuance of the Exchange Notes or Additional Notes, - comply with any requirement of the SEC in connection with the qualification of the Indenture under the TIA or - to evidence and provide the acceptance of the appointment of a successor Trustee under the Indenture. However, no amendment may be made to the subordination provisions of the Indenture that adversely affects the rights of any holder of Senior Indebtedness of the Company or a Note Guarantor then outstanding unless the holders of such Senior Indebtedness (or any group or Representative thereof authorized to give a consent) consent to such change. The consent of the Holders will not be necessary to approve the particular form of any proposed amendment. It will be sufficient if such consent approves the substance of the proposed amendment. After an amendment becomes effective, the Company is required to mail to Holders a notice briefly describing such amendment. However, the failure to give such notice to all Holders, or any defect therein, will not impair or affect the validity of the amendment. 117 TRANSFER AND EXCHANGE A Holder will be able to transfer or exchange Notes. Upon any transfer or exchange, the registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes required by law or permitted by the Indenture. The Company will not be required to transfer or exchange any Note selected for redemption or to transfer or exchange any Note for a period of 15 days prior to a selection of Notes to be redeemed. The Notes will be issued in registered form and the Holder will be treated as the owner of such Note for all purposes. DEFEASANCE The Company may at any time terminate all its obligations under the Notes and the Indenture ("legal defeasance"), except for certain obligations, including those respecting the defeasance trust and obligations to register the transfer or exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes and to maintain a registrar and paying agent in respect of the Notes. In addition, the Company may at any time terminate: (1) its obligations under the covenants described under "Certain covenants," (2) the operation of the covenant default provisions, cross acceleration provision, the bankruptcy provisions with respect to Significant Subsidiaries and the judgment default provision described under "Defaults" above and the limitations contained in clauses (3) and (4) under the first paragraph of "Merger and consolidation" above ("covenant defeasance"). In the event that the Company exercises its legal defeasance option or its covenant defeasance option, each Note Guarantor will be released from all of its obligations with respect to its Note Guarantee. The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the Notes may not be accelerated because of an Event of Default with respect thereto. If the Company exercises its covenant defeasance option, payment of the Notes may not be accelerated because of an Event of Default specified in clause (3), (4), (6) or (7) (with respect only to Significant Subsidiaries), (8) or (9) under "Defaults" above or because of the failure of the Company to comply with clause (3) or (4) under the first paragraph of "Merger and consolidation" above. In order to exercise either defeasance option, the Company must irrevocably deposit in trust (the "defeasance trust") with the Trustee money in an amount sufficient or United States Government Obligations, the principal of and interest on which will be sufficient, or a combination thereof sufficient, to pay the principal of, premium, if any, and interest (including Additional Interest) on, if any, in respect of the Notes to redemption or maturity, as the case may be, and must comply with certain other conditions, including delivery to the Trustee of an Opinion of Counsel to the effect that Holders will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and defeasance and will be subject to Federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred (and, in the case of legal defeasance only, such Opinion of Counsel must be based on a ruling of the Internal Revenue Service or other change in applicable federal income tax law). 118 CONCERNING THE TRUSTEE United States Bank Trust National Association is the Trustee under the Indenture and has been appointed by the Company as Registrar and Paying Agent with regard to the Notes. GOVERNING LAW The Indenture and the Notes will be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No director, officer, employee, incorporator or stockholder of the Company, as such, shall have any liability for any obligations of the Company under the Notes, the Indenture or the Note Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy. SATISFACTION AND DISCHARGE The Indenture will be discharged and will cease to be of further effect as to all Notes issued thereunder, when: (1) either (a) all Notes that have been authenticated, except lost, stolen or destroyed Notes that have been replaced or paid, have been delivered to the Trustee for cancellation; or (b) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year and the Company or any Note Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in United States dollars, non-callable United States Government Obligations, or a combination of cash in United States dollars and non-callable United States Government Obligations, in amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire Indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium, if any, and accrued and unpaid interest (including Additional Interest), if any, to the date of maturity or redemption; (2) no Default or Event of Default has occurred and is continuing on the date of the deposit; (3) the Company or any Note Guarantor has paid or caused to be paid all sums payable by it under the Indenture; and (4) the Company has delivered irrevocable instructions to the Trustee under the Indenture to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be. 119 In addition, in the case of paragraph (b) above, (i) the Company must deliver an Officers' Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied and (ii) the Company's obligations that would survive legal defeasance will remain outstanding. CERTAIN DEFINITIONS "Additional Assets" means: (1) any property or assets (other than Indebtedness and Capital Stock) acquired or constructed to be used by the Company or a Restricted Subsidiary; (2) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or (3) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary. "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of the provisions described under "Certain covenants--Limitation on transactions with affiliates" and "Certain covenants--Limitation on sales of assets and subsidiary stock" only, "Affiliate" shall also mean any beneficial owner of shares representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of Holding or the Company or of rights or warrants to purchase such Voting Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "Asset Disposition" means any sale, lease (other than an operating lease entered into in the ordinary course of business), transfer or other disposition (or series of related sales, leases, transfers or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation, or similar transaction (each referred to for the purposes of this definition as a "disposition"), of: (1) any shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary), (2) all or substantially all the assets of any division or line of business of the Company or any Restricted Subsidiary or (3) any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary other than, in the case of (1), (2) and (3) above, (A) a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary, (B) for purposes of the provisions described under "Certain covenants--Limitation on sales of assets and subsidiary stock" only, a disposition subject to the covenant described under "--Limitation on restricted payments," 120 (C) a disposition of assets with a Fair Market Value of less than $3.0 million, (D) transactions permitted under "Merger and consolidation," (E) an issuance of Capital Stock by a Restricted Subsidiary of the Company to the Company or to another Restricted Subsidiary, (F) a sale of accounts receivable and related assets pursuant to a Receivables Facility, (G) the licensing or sublicensing of intellectual property or other general intangibles to the extent that such license does not prohibit the licensor from using the intellectual property and licenses, leases or subleases of other property in the ordinary course of business, and (H) any disposition in the ordinary course of business of obsolete, worn-out, surplus or other property not useful in the conduct of the business. "Asset Swap" means the exchange by the Company or a Restricted Subsidiary of a portion of its property, business or assets, for property, businesses, assets or Capital Stock of a Person (or any combination thereof, as well as cash or cash equivalents), all or substantially all of the assets of which, are of a type used in the business of the Company or of a Restricted Subsidiary. "Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the Notes, compounded annually) of the total obligations of the lessee for rental payments (excluding, however, any amounts required to be paid by such lessee, whether or not designated as rent or additional rent, on account of maintenance and repairs, insurance, taxes, assessments, water rates or similar charges or any amounts required to be paid by such lessee thereunder contingent upon the amount of sales or similar contingent amounts) during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended). "Average Life" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing: (1) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or scheduled redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by (2) the sum of all such payments. "Bank Indebtedness" means (1) any and all amounts payable under or in respect of the Credit Agreement and any Refinancing Indebtedness with respect thereto, as amended from time to time, including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement and indemnification obligations, guarantees and all other amounts payable thereunder or in respect thereof and (2) any Hedging Obligations of Holding, the Company or any of its Subsidiaries in favor of any holder of Indebtedness under the Credit Agreement or any Refinancing Indebtedness with respect thereto. It is understood and agreed that Refinancing Indebtedness in respect of the Credit Agreement may be Incurred from time to time after termination of the Credit Agreement. 121 "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of the Board of Directors of the Company. "Business Day" means each day which is not a Legal Holiday. "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 any Preferred Stock, but excluding any debt securities including those convertible into such equity. "Capitalized Lease Obligations" means an obligation that is required to be classified and accounted for as a capitalized lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be prepaid by the lessee without payment of a penalty. "Cash Equivalents" means: (1) United States dollars; (2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than six months from the date of acquisition; (3) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months from the date of acquisition and overnight bank deposits, in each case, with any lender party to the Credit Facility or with any domestic commercial bank having capital and surplus in excess of $500.0 million; (4) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above; and (5) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Rating Services, a division of the McGraw-Hill Companies, Inc. ("S&P"), and in each case maturing within six months after the date of acquisition. "Closing Date" means the date of the Indenture. "Code" means the Internal Revenue Code of 1986, as amended. "Commodity Price Protection Agreement" means any forward contract, commodity swap, commodity option or other similar agreement or arrangement relating to, or the value of which is dependent upon or which is designed to protect such Person against, fluctuations in commodity prices. "Consolidated Coverage Ratio" as of any date of determination means the ratio of: (1) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters ending prior to the date of such determination for which financial statements are available to 122 (2) Consolidated Interest Expense for such four fiscal quarters; provided, however, that: (A) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period (except that in making such computation, the amount of Indebtedness under any revolving credit facility outstanding on the date of such calculation will be computed based on (i) the average daily balance of such Indebtedness during such four fiscal quarters or such shorter period for which such facility was outstanding or (ii) if such facility was created after the end of such four fiscal quarters, the average daily balance of such Indebtedness during the period from the date of creation of such facility to the date of such calculation) and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period, (B) if the Company or any Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of such period or if any Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) on the date of the transaction giving rise to the need to calculate the Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall be calculated on a pro forma basis as if such discharge had occurred on the first day of such period and as if the Company or such Restricted Subsidiary has not earned the interest income actually earned during such period in respect of cash or Temporary Cash Investments used to repay, repurchase, defease or otherwise discharge such Indebtedness, (C) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets that are the subject of such Asset Disposition for such period or increased by an amount equal to the EBITDA (if negative) directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Disposition for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale), (D) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction causing a 123 calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business (including an operating plant or other similar facility), EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period, and (E) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Asset Disposition or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (C) or (D) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition, Investment or acquisition of assets occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to any calculation under this definition, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Company. Any such pro forma calculations may include operating expense reductions (net of associated expenses) for such period resulting from the acquisition or other Investment which is being given pro forma effect that (a) would be permitted pursuant to Rule 11-02 of Regulation S-X under the Securities Act or (b) have been realized or for which substantially all the steps necessary for realization have been taken or at the time of determination are reasonably expected to be taken within six months following any such acquisition or other Investment, including, but not limited to, the execution, termination, renegotiation or modification of any contracts, the termination of any personnel or the closing of any facility, or lower material costs, as applicable, provided that, in any case, such adjustments shall be calculated on an annualized basis and such adjustments are set forth in an Officers' Certificate signed by the Company's chief financial officer and another Officer which states in detail (i) the amount of such adjustment or adjustments, (ii) that such adjustment or adjustments are based on the reasonable good faith beliefs of the officers executing such Officers' Certificate at the time of such execution and (iii) that such adjustment or adjustments and the plan or plans related thereto have been reviewed and approved by the Board of Directors. Any such Officers' Certificate will be provided to the Trustee if the Company Incurs any Indebtedness or takes any other action under the Indenture in reliance thereon. If any Indebtedness, whenever Incurred, bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term as at the date of determination in excess of 12 months). "Consolidated Interest Expense" means, for any period, the total interest expense of the Company and its Consolidated Restricted Subsidiaries, minus any amortization of debt issuance costs, plus, to the extent Incurred by the Company and its Consolidated Restricted Subsidiaries in such period but not included in such interest expense, without duplication: (1) interest expense attributable to Capitalized Lease Obligations and the interest expense attributable to leases constituting part of a Sale/Leaseback Transaction; (2) amortization of debt discount; 124 (3) capitalized interest; (4) noncash interest expense; (5) commissions, discounts and other fees and charges attributable to letters of credit and bankers' acceptance financing; (6) interest accruing on any Indebtedness of any other Person to the extent such Indebtedness is Guaranteed by the Company or any Restricted Subsidiary; (7) net costs associated with Hedging Obligations (including amortization of fees); (8) dividends in respect of all Disqualified Stock of the Company and all Preferred Stock of any of the Subsidiaries of the Company, to the extent held by Persons other than the Company or a Wholly Owned Subsidiary (except to the extent paid in Capital Stock (other than Disqualified Stock)); (9) interest Incurred in connection with investments in discontinued operations; and (10) commissions, discounts, yield and other financing fees and financing charges Incurred in connection with any transaction (including, without limitation, a Receivables Facility) pursuant to which the Company or any Restricted Subsidiary of the Company may sell, convey or otherwise transfer or grant a security interest in any accounts receivable or related assets of the type specified in the definition of "Receivables Facility." For purposes of the foregoing, total interest expense will be determined after giving effect to any net proceeds paid or received by the Company and its Subsidiaries with respect to Interest Rate Agreements. "Consolidated Net Income" means, for any period, the net income of the Company and its Consolidated Subsidiaries for such period; provided, however, that there shall not be included in such Consolidated Net Income: (1) any net income of any Person (other than the Company) if such Person is not a Restricted Subsidiary, except that: (A) subject to the limitations contained in clause (4) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution made to a Restricted Subsidiary, to the limitations contained in clause (3) below) and (B) the Company's equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income to the extent such loss has been funded in such period with cash from the Company or a Restricted Subsidiary; (2) any net income (or loss) of any Person acquired by the Company or a Subsidiary of the Company in a pooling of interests transaction for any period prior to the date of such acquisition; (3) any net income (or loss) of any Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of 125 distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that: (A) subject to the limitations contained in clause (4) below, the Company's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution made to another Restricted Subsidiary, to the limitation contained in this clause) and (B) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income; (4) any net gain or loss realized upon the sale or other disposition of any asset of the Company or its Consolidated Subsidiaries (including pursuant to any Sale/Leaseback Transaction) that is not sold or otherwise disposed of in the ordinary course of business and any net gain or loss realized upon the sale or other disposition of any Capital Stock of any Person; (5) any net extraordinary gain or loss; (6) the cumulative effect of a change in accounting principles; (7) any noncash compensation charges or other noncash expenses or charges arising from the grant of or issuance or repricing of stock, stock options or other equity-based awards or any amendment, modification, substitution or change of any such stock, stock options or other equity-based awards; and (8) any non-recurring fees, charges or other expenses (including bonus and retention payments) made or incurred in connection with the Acquisition and the transactions contemplated thereby. Notwithstanding the foregoing, for the purpose of the covenant described under "--Limitation on restricted payments" only, there shall be excluded from Consolidated Net Income any dividends, repayments of loans or advances or other transfers of assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the extent such dividends, repayments or transfers increase the amount of Restricted Payments permitted under such covenant pursuant to clause (a)(4)(C)(iv) thereof. "Consolidated Step-Up Depreciation and Amortization" means, with respect to any Person for any period, the total amount of depreciation and amortization related to the write-up of assets for such period on a consolidated basis in accordance with GAAP to the extent (i) such depreciation and amortization results from purchase accounting adjustments in connection with the Acquisition and (ii) such depreciation and amortization was deducted in computing Consolidated Net Income. "Consolidation" means the consolidation of the accounts of each of the Restricted Subsidiaries with those of the Company in accordance with GAAP consistently applied; provided, however, that "Consolidation" will not include consolidation of the accounts of any Unrestricted Subsidiary, but the interest of the Company or any Restricted Subsidiary in an Unrestricted Subsidiary will be accounted for as an investment. The term "Consolidated" has a correlative meaning. 126 "Credit Agreement" means the credit agreement dated as of July 22, 2002, as amended, restated, supplemented, waived, replaced (whether or not upon termination, and whether with the original lenders or otherwise), refinanced, restructured or otherwise modified from time to time, among the Company, Holding, the lenders from time to time party thereto, Goldman Sachs Credit Partners L.P., as administrative agent, JPMorgan Chase Bank, as syndication agent, Fleet National Bank, as collateral agent, issuing bank and swing line lender, and the Royal Bank of Scotland plc and General Electric Capital Corporation, as co-documentation agents. "Credit Facility" means, one or more debt facilities (including, without limitation, the Credit Agreement), commercial paper facilities or other debt instruments, indentures or agreements, providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables), letters of credit or other debt obligations, in each case, as amended, restated, modified, renewed, refunded, restructured, supplemented, replaced or refinanced in whole or in part from time to time, including, without limitation, any amendment increasing the amount of Indebtedness Incurred or available to be borrowed thereunder, extending the maturity of any Indebtedness Incurred thereunder or contemplated thereby or deleting, adding or substituting one or more parties thereto (whether or not such added or substituted parties are banks or other institutional lenders). "Currency Agreement" means with respect to any Person any foreign exchange contract, currency swap agreements, futures contract, options contract, synthetic cap or other similar agreement or arrangement to which such Person is a party or of which it is a beneficiary for the purpose of hedging foreign currency risk. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Designated Noncash Consideration" means the Fair Market Value of non-cash consideration received by the Company or any of its Restricted Subsidiaries in connection with an Asset Disposition that is designated as such pursuant to an Officers' Certificate. The aggregate Fair Market Value of the Designated Noncash Consideration, taken together with the Fair Market Value at the time of receipt of all other Designated Noncash Consideration then held by the Company, may not exceed $5.0 million at the time of the receipt of the Designated Noncash Consideration (with the Fair Market Value being measured at the time received and without giving effect to subsequent changes in value). "Designated Senior Indebtedness" of the Company means (1) the Bank Indebtedness and (2) any other Senior Indebtedness of the Company that, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to at least $15.0 million and is specifically designated by the Company in the instrument evidencing or governing such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of the Indenture. "Designated Senior Indebtedness" of a Note Guarantor has a correlative meaning. 127 "Disqualified Stock" means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable) or upon the happening of any event: (1) matures or is mandatorily redeemable at the option of the holder thereof, in whole or in part, pursuant to a sinking fund obligation or otherwise, (2) is convertible or exchangeable at the option of the holder thereof, in whole or in part, for Indebtedness or Disqualified Stock (excluding Capital Stock convertible or exchangeable solely at the option of the Company or a Restricted Subsidiary; provided, however, that any such conversion or exchange shall be deemed an occurrence of Indebtedness or Disqualified Stock, as applicable) or (3) is redeemable at the option of the holder thereof, in whole or in part, in the case of each of clauses (1), (2) and (3), on or prior to the 91st day after the Stated Maturity of the Notes; provided, however, that only the portion of Capital Stock that so matures or is mandatorily redeemable, is so convertible or exchangeable or is redeemable at the option of the holder thereof prior to such date will be deemed Disqualified Stock and any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the 91st day after the Stated Maturity of the Notes shall not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are not more favorable to the holders of such Capital Stock than the provisions of the covenants described under "Change of control" and "--Limitation on sale of assets and subsidiary stock"; provided, further that any class of Capital Stock of such Person that, by its terms, authorized such Person to satisfy in full its obligations with respect to payment of dividends or upon maturity, redemption (pursuant to a sinking fund or otherwise) or repurchase thereof or other payment obligations or otherwise by delivery of Capital Stock that is not Disqualified Stock, and that is not convertible, puttable or exchangeable for Disqualified Stock or Indebtedness, shall not be deemed Disqualified Stock so long as such Person satisfied its obligations with respect thereto solely by the delivery of Capital Stock that is not Disqualified Stock. "Domestic Subsidiary" means any Restricted Subsidiary of the Company other than a Foreign Subsidiary. "EBITDA" for any period means the Consolidated Net Income for such period, plus, without duplication, the following to the extent deducted in calculating such Consolidated Net Income: (1) income tax expense of the Company and its Consolidated Restricted Subsidiaries; (2) Consolidated Interest Expense; (3) depreciation expense of the Company and its Consolidated Restricted Subsidiaries; (4) amortization expense of the Company and its Consolidated Restricted Subsidiaries (excluding amortization expense attributable to a prepaid cash item that was paid in a prior period); (5) plant shutdown costs and acquisition integration costs; and (6) all other noncash charges of the Company and its Consolidated Restricted Subsidiaries (excluding any such noncash charge to the extent it represents an accrual of or reserve for 128 cash expenditures in any future period) less all non-cash items of income (other than accrual of revenue in the ordinary course of business) of the Company and its Restricted Subsidiary in each case for such period. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization and noncash charges of, a Restricted Subsidiary of the Company shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income of such Restricted Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Restricted Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Restricted Subsidiary or its stockholders. "Equity Offering" means a public or private sale for cash of Capital Stock (other than Disqualified Stock). "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Fair Market Value" means, with respect to any asset or property, the price which could be negotiated in an arm's-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair Market Value will be determined in good faith by the Board of Directors, whose determination will be conclusive and evidenced by a resolution of the Board of Directors; provided, however, that for purposes of clause (a)(4)(C)(ii) of the covenant described under "--Limitation on restricted payments," if the Fair Market Value of the property or assets in question is so determined to be in excess of $20.0 million, such determination must be confirmed by a recognized appraisal or investment banking firm. "Foreign Subsidiary" means any Restricted Subsidiary of the Company (x) that is not organized under the laws of the United States of America or any State thereof or the District of Columbia or (y) was organized under the laws of the United States of America or any state thereof or the District of Columbia that has no material assets other than Capital Stock of one or more foreign entities of the type described in clause (x) above and is not a guarantor of Indebtedness under the Credit Agreement. "GAAP" means generally accepted accounting principles in the United States of America as in effect (i) with respect to periodic reporting requirements, from time to time, and (ii) otherwise on the Closing Date, including those set forth in: (1) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (2) statements and pronouncements of the Financial Accounting Standards Board, (3) such other statements by such other entities as approved by a significant segment of the accounting profession, and (4) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC. 129 All ratios and computations based on GAAP contained in the Indenture shall be computed in conformity with GAAP. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person: (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing any obligation. "Hedging Obligations" of any Person means the obligations of such Person pursuant to any Interest Rate Agreement, Currency Agreement or Commodity Price Protection Agreement. "Holder" means the Person in whose name a Note is registered on the Registrar's books. "Incur" means issue, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Restricted Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Restricted Subsidiary. The term "Incurrence" when used as a noun shall have a correlative meaning. The accretion of principal of a non-interest bearing or other discount security and payment of interest on any Indebtedness in the form of additional Indebtedness or the payment on Disqualified Capital Stock in the form of additional shares of Capital Stock, shall not be deemed the Incurrence of Indebtedness. "Indebtedness" means, with respect to any Person on any date of determination, without duplication: (1) the principal of and premium (if any) in respect of indebtedness of such Person for borrowed money; (2) the principal of and premium (if any) in respect of obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (3) the principal component of all obligations of such Person in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto except to the extent such reimbursement obligation arises in the ordinary course of business and relates to a Trade Payable); (4) the principal component of all obligations of such Person to pay the deferred and unpaid purchase price of property or services, which purchase price is due more than one year after the date of placing such property in service or taking delivery and title thereto or the completion of such services other than earn-outs, indemnities and similar provisions; 130 (5) all Capitalized Lease Obligations and all Attributable Debt of such Person; (6) the principal component or liquidation preference of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary of such Person, any Preferred Stock (but excluding, in each case, any accrued dividends); (7) the principal component of all Indebtedness of other Persons secured by a Lien on any asset of the Person the Indebtedness of which is being determined, whether or not such Indebtedness is assumed by such Person; provided, however, that the amount of Indebtedness of such Person shall be the lesser of: (A) the Fair Market Value of such asset at such date of determination and (B) the amount of such Indebtedness of such other Persons; (8) to the extent not otherwise included in this definition, net obligations of such Person under Hedging Obligations of such Person (the amount of any such obligations to be equal at any time to the termination value of such agreement or arrangement giving rise to such obligations that would be payable by such Person at such time); (9) all amounts outstanding and other obligations of such Person in respect of a Receivables Facility; and (10) all obligations of the type referred to in clauses (1) through (9) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. Notwithstanding anything in this definition to the contrary, characterization of any Receivables Facility as Indebtedness is for purposes of the Indenture covenants only, and such characterization shall not preclude the Company or any Restricted Subsidiary from characterizing any Receivables Facility as a sale for GAAP or any other purpose. "Interest Rate Agreement" means with respect to any Person any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement to which such Person is party or of which it is a beneficiary. "Investment" in any Person means any direct or indirect advance, loan (other than advances and extensions of credit to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the lender) or other extension of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or 131 other similar instruments issued by such Person; provided that none of the following will be deemed to be an Investment: (1) Hedging Obligations entered into in compliance with clause (b)(4) of "Certain covenants--Limitation on indebtedness"; and (2) endorsements of negotiable instruments and documents in the ordinary course of business. For purposes of the definition of "Unrestricted Subsidiary" and the covenant described under "--Limitation on restricted payments": (1) "Investment" shall include the portion (proportionate to the Company's equity interest in such Restricted Subsidiary) of the Fair Market Value of the net assets of any Restricted Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to: (A) the Company's "Investment" in such Subsidiary at the time of such redesignation less (B) the portion (proportionate to the Company's equity interest in such Subsidiary) of the Fair Market Value of the net assets of such Subsidiary at the time of such redesignation; and (2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its Fair Market Value at the time of such transfer. "Landis Acquisition" means that transaction defined in the "Landis Acquisition" section of the Prospectus. "Legal Holiday" means a Saturday, Sunday or other day on which banking institutions are not required by law or regulation to be open in the State of New York. "Lien" means any mortgage, pledge, security interest, encumbrance, lien (statutory or otherwise) or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof and any agreement to give any security interest) upon or with respect to any property of any kind, real or personal, movable or immovable. "Net Available Cash" from an Asset Disposition means payments of cash or Cash Equivalents received (including any payments of cash or Cash Equivalents received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise and proceeds from the sale or other disposition of any securities received as consideration, but in each case only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to the properties or assets that are the subject of such Asset Disposition or received in any other noncash form) therefrom, in each case net of: (1) all legal, accounting, investment banking, title and recording tax expenses, commissions and other fees and expenses incurred, and all federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP, as a consequence of such Asset Disposition, 132 (2) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law be repaid out of the proceeds from such Asset Disposition, (3) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Disposition and (4) appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the property or other assets disposed of in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition. "Net Cash Proceeds," with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, listing fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Note Guarantee" means each Guarantee of the obligations with respect to the Notes issued by a Person pursuant to the terms of the Indenture. "Note Guarantor" means any Person that has issued a Note Guarantee. "Offering Memorandum" means the offering memorandum relating to the issuance of the Notes dated July 17, 2002. "Officer" means the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer or the Secretary of the Company. "Officer" of a Note Guarantor has a correlative meaning. "Officers' Certificate" means a certificate signed by two Officers. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company, a Note Guarantor or the Trustee. "Permitted Holders" means Principals and Related Parties and any Person acting in the capacity of an underwriter in connection with a public or private offering of the Company's or Holding's Capital Stock. "Permitted Investment" means an Investment by the Company or any Restricted Subsidiary in: (1) the Company, a Restricted Subsidiary or a Person that will, upon the making of such Investment, become a Restricted Subsidiary; (2) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; (3) Temporary Cash Investments; (4) receivables owing to the Company or any Restricted Subsidiary if created or acquired in the ordinary course of business; 133 (5) payroll, travel, commission and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (6) loans or advances to employees, directors and consultants not exceeding $2.0 million in the aggregate outstanding at any one time; (7) loans, deposits, prepayments and other credits or advances to customers or suppliers in the ordinary course of business; (8) stock, obligations or securities received in settlement or good faith compromise of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of a debtor; (9) any Person to the extent such Investment represents the noncash portion of the consideration received for an Asset Disposition that was made pursuant to and in compliance with the covenant described under "--Limitation on sales of assets and subsidiary stock"; (10) Investments in prepaid expenses, negotiable instruments held for collection and lease utility and worker's compensation, performance and other similar deposits provided to third parties in the ordinary course of business; (11) Currency Agreements, Interest Rate Agreements and Commodity Price Protection Agreements and other Hedging Obligations permitted by the Indenture that are entered into in the ordinary course of business and not for speculative purposes; (12) Investments acquired in exchange for the issuance of Capital Stock (other than Disqualified Stock) of the Company or acquired with the Net Cash Proceeds received by the Company after the date of the Indenture from the issuance and sale of Capital Stock (other than Disqualified Stock); provided that such Net Cash Proceeds are used to make such Investment within 90 days of the receipt thereof and the amount of all such Net Cash Proceeds will be excluded from clause (4)(C)(ii) of paragraph (a) of the covenant described under the caption "--Limitation on restricted payments"; (13) Investments in existence on the date of the Indenture or made pursuant to a legally binding written commitment in existence on the date of the Indenture; (14) Guarantees issued in accordance with "Certain covenants--Limitation on indebtedness"; (15) Investments in a trust, limited liability company, special purpose entity or other similar entity in connection with a Receivables Facility permitted under the covenant "--Limitation on indebtedness"; provided that such Investment is necessary or advisable to effect such Receivables Facility; (16) Investments in joint ventures or similar projects by the Company and its Restricted Subsidiaries on the date of the investment in an aggregate amount not to exceed $20.0 million; (17) loans or advances to employees, directors or consultants the proceeds of which are used to purchase Capital Stock (other than Disqualified Stock) of the Company or Holding (and, with respect to purchases of the Capital Stock of Holding, the proceeds of which are paid or contributed to the Company); and 134 (18) Indebtedness of the Company or a Restricted Subsidiary under clause (b)(2) of the covenant "--Limitation on indebtedness." For purposes of this definition, the value of any Investment will be the Fair Market Value on the date made without any subsequent changes for any increases or decreases in the Fair Market Value of such Investment. "Permitted Junior Securities" means: (1) Equity Interests in the Company or any Guarantor; or (2) debt securities that are subordinated to all Senior Indebtedness and any debt securities issued in exchange for Senior Indebtedness to substantially the same extent as, or to a greater extent than, the Notes and the Note Guarantees are subordinated to Senior Indebtedness under the terms of the Indenture. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock," as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person. "principal" of a Note means the principal of the Note plus the premium, if any, payable on the Note which is due or overdue or is to become due at the relevant time. "Principals" means each of GS Capital Partners 2000, L.P., GS Capital Partners 2000 Offshore, L.P., GS Capital Partners 2000 GmbH & Co. Beteiligungs KG, Bridge Street Special Opportunities Fund 2000, L.P., GS Capital Partners 2000 Employee Fund, L.P., Stone Street Fund 2000 L.P., J.P. Morgan Partners Global Investors, L.P., J.P. Morgan Partners Global Investors (Cayman), L.P., J.P. Morgan Partners Global Investors A, L.P., J.P. Morgan Partners Global Investors (Cayman) II, L.P. and J.P. Morgan Partners (BHCA), L.P. "Purchase Money Indebtedness" means Indebtedness: (1) consisting of the deferred purchase price of an asset (or Capital Stock of a corporation substantially all the assets of which consist of such asset), conditional sale obligations, obligations under any title retention agreement and other purchase money obligations (including obligations to a third party to finance the amount being paid to the seller), in each case where the maturity of such Indebtedness does not exceed the anticipated useful life of the asset being financed, and (2) Incurred to finance the acquisition by the Company or a Restricted Subsidiary of such asset (or such Capital Stock), including additions and improvements; provided, however, that such Indebtedness is Incurred within 180 days after the acquisition by the Company or such Restricted Subsidiary of such asset (or such Capital Stock). "Receivables Facility" means one or more receivables financing facilities, as amended from time to time, pursuant to which the Company and/or any of its Restricted Subsidiaries, directly or indirectly through another Subsidiary, sells or otherwise transfers rights in its accounts receivable pursuant to arrangements customary in the industry. 135 "Refinance" means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Indebtedness" means Indebtedness that is Incurred to refund, refinance, replace, renew, repay or extend (including pursuant to any defeasance or discharge mechanism) (or the net proceeds of which are used to do any of the foregoing) any Indebtedness of the Company or any Restricted Subsidiary existing on the Closing Date or Incurred in compliance with the Indenture (including Indebtedness of the Company that Refinances Indebtedness of any Restricted Subsidiary and Indebtedness of any Restricted Subsidiary that Refinances Indebtedness of another Restricted Subsidiary, including Indebtedness that Refinances Refinancing Indebtedness); provided, however, that: (1) the Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced, (2) the Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being Refinanced, (3) such Refinancing Indebtedness is Incurred in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) then outstanding of the Indebtedness being Refinanced (plus all accrued interest on the Indebtedness and the amount of all expenses and premiums Incurred in connection therewith) and (4) if the Indebtedness being Refinanced is subordinated in right of payment to the Notes, such Refinancing Indebtedness is subordinated in right of payment to the Notes at least to the same extent as the Indebtedness being Refinanced; provided further, however, that Refinancing Indebtedness shall not include: (A) Indebtedness of a Restricted Subsidiary that is not a Note Guarantor that Refinances Indebtedness of the Company or (B) Indebtedness of the Company or a Restricted Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary. "Related Party" means, (1) any controlling stockholder or 80% (or more) owned Subsidiary of any Principal; or (2) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Principals and/or such other Persons referred to in the immediately preceding clause (1). "Representative" means the trustee, agent or representative (if any) for an issue of Senior Indebtedness. "Restricted Subsidiary" means any Subsidiary of the Company other than an Unrestricted Subsidiary. "Sale/Leaseback Transaction" means an arrangement relating to property now owned or hereafter acquired by the Company or a Restricted Subsidiary whereby the Company or a 136 Restricted Subsidiary transfers such property to a Person and the Company or such Restricted Subsidiary leases it from such Person, other than leases between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Secured Indebtedness" means any Indebtedness of the Company or any Subsidiary secured by a Lien. "Secured Indebtedness" of a Note Guarantor has a correlative meaning. "Senior Subordinated Indebtedness" of the Company means the Notes and any other Indebtedness of the Company that specifically provides that such Indebtedness is to rank equally with the Notes in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of the Company which is not Senior Indebtedness. "Senior Subordinated Indebtedness" of a Note Guarantor has a correlative meaning. "Significant Subsidiary" means any Restricted Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC in effect on the date of the Indenture. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred). "Stockholders' Agreement" means the stockholders' agreement entered into in connection with the Acquisition. "Subordinated Obligation" means any Indebtedness of the Company (whether outstanding on the Closing Date or thereafter Incurred) that is subordinate or junior in right of payment to the Notes pursuant to a written agreement. "Subordinated Obligation" of a Note Guarantor has a correlative meaning. "Subsidiary" of any Person means 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: (1) such Person, (2) such Person and one or more Subsidiaries of such Person or (3) one or more Subsidiaries of such Person. "Tax Sharing Agreement" means the Amended and Restated Tax Sharing Agreement, made as of March 15, 2001, by and among Holding and its Subsidiaries. "Temporary Cash Investments" means any of the following: (1) United States dollars or eurodollars or any investment in direct obligations of the United States of America or any agency thereof or obligations Guaranteed or insured by the United States of America or any agency or instrumentality thereof, 137 (2) investments in time deposit accounts, certificates of deposit and eurodollar time deposits, banker acceptances and money market deposits (or in the case of Foreign Subsidiaries, the foreign equivalent) maturing within 270 days of the date of acquisition thereof issued by a bank or trust company that is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America having capital, surplus and undivided profits aggregating in excess of $250,000,000 (or the foreign currency equivalent thereof) and whose long-term debt is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act), (3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (1) or (2) above entered into with a bank meeting the qualifications described in clause (2) above, (4) investments in commercial paper, maturing not more than 270 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P, (5) investments in securities with maturities of 270 days or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by S&P or "A" by Moody's, (6) money market funds at least 95% of the assets of which constitute Temporary Cash Investments of the kinds described in clauses (1) through (5) of this definition and (7) solely in respect of the ordinary course cash management activities of the Foreign Subsidiaries, equivalents of the investments described in clause (1) above to the extent guaranteed by the United Kingdom, the European Union or the country in which the Foreign Subsidiary operates and equivalents of the investments described in clause (2) above issued, accepted or offered by (a) the local office of any commercial bank meeting the requirements of clause (4) above in the jurisdiction of organization of the applicable Foreign Subsidiary or (b) the local office of any commercial bank organized under the laws of the jurisdiction of organization of the applicable Foreign Subsidiary which commercial bank (1) has combined capital and surplus and undivided profits of not less than $250.0 million, (2) a long-term rating for Dollar-denominated obligations of at least "A-1" from S&P or the equivalent rating from Moody's or (3) is organized in the country in which the Foreign Subsidiary operates. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. sec.sec. 77aaa-77bbbb) as in effect on the Closing Date. "Trade Payables" means, with respect to any Person, any accounts payable or any indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person arising in the ordinary course of business in connection with the acquisition of goods or services. "Transactions" has the meaning set forth in the "Summary" section of the Prospectus. 138 "Trustee" means the party named as such in the Indenture until a successor replaces it and, thereafter, means the successor. "Trust Officer" means the Chairman of the Board, the President or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "Unrestricted Subsidiary" means: (1) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary of the Company or Person becoming a Subsidiary through merger or consolidation or Investment therein) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that either: (A) the Subsidiary to be so designated has total Consolidated assets of $1,000 or less or (B) if such Subsidiary has Consolidated assets greater than $1,000, then such designation would be permitted under the covenant entitled "--Limitation on restricted payments." The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation: (x) the Company could Incur $1.00 of additional Indebtedness under paragraph (a) of the covenant described under "--Limitation on indebtedness" and (y) no Default shall have occurred and be continuing. Any such designation of a Subsidiary as a Restricted Subsidiary or Unrestricted Subsidiary by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "United States Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option. "Voting Stock" of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. "Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company all the Capital Stock of which (other than directors' qualifying shares) is owned by the Company or another Wholly Owned Subsidiary. 139 REGISTRATION RIGHTS; ADDITIONAL INTEREST We and the note guarantors entered into a registration rights agreement with the initial purchasers on the closing date for the outstanding notes. In that agreement, we agreed for the benefit of the holders of the outstanding notes that we will use our reasonable best efforts to file with the SEC and cause to become effective a registration statement relating to an offer to exchange the outstanding notes for an issue of SEC-registered notes with terms identical to the outstanding notes (except that the exchange notes will not be subject to restrictions on transfer or to any increase in annual interest rate as described below). When the SEC declares this exchange offer registration statement effective, we will offer the exchange notes in return for the outstanding notes. The exchange offer will remain open for at least 20 business days after the date we mail notice of the exchange offer to noteholders. For each outstanding note surrendered to us under the exchange offer, the noteholder will receive an exchange note of equal principal amount. Interest on each exchange note will accrue from the last interest payment date on which interest was paid on the notes or, if no interest has been paid on the notes, from the closing date for the outstanding notes. If applicable interpretations of the staff of the SEC do not permit us to effect the exchange offer, we will use our reasonable best efforts to cause to become effective a shelf registration statement relating to resales of the notes and to keep that shelf registration statement effective until the expiration of the time period referred to in Rule 144(k) under the Securities Act, or such shorter period that will terminate when all notes covered by the shelf registration statement have been sold. We will, in the event of such a shelf registration, provide to each noteholder copies of a prospectus, notify each noteholder when the shelf registration statement has become effective and take certain other actions to permit resales of the notes. A noteholder that sells notes under the shelf registration statement generally will be required to make certain representations to us (as described in the registration rights agreement), to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with those sales and will be bound by the provisions of the registration rights agreement that are applicable to such a noteholder (including certain indemnification obligations). Holder of notes will also be required to suspend their use of the prospectus included in the shelf registration statement under specified circumstances upon receipt of notice from us. In addition, at the request of Goldman, Sachs & Co. or J.P. Morgan Securities Inc. we will file a shelf registration statement to enable them to act as a market maker in the notes. If the exchange offer is not completed (or, if required, the shelf registration statement is not declared effective) on or before the later of the date that is 210 days after the closing date the annual interest rate borne by the outstanding notes will be increased by .25% per annum, increasing an additional ..25% per annum every 90 days thereafter, up to a maximum aggregate increase of 1.0% per annum, until the exchange offer is completed or the shelf registration statement is declared effective. Following the cure of all registration defaults, the accrual of this interest will cease. If we effect the exchange offer, we will be entitled to close the exchange offer 20 business days after its commencement, provided that we have accepted all notes validly surrendered in accordance with the terms of the exchange offer. Notes not tendered in the exchange offer shall bear interest at the rate set forth on the cover page of this prospectus and be subject to all the terms and conditions specified in the indenture, including transfer restrictions. This 140 summary of the provisions of the registration rights agreement does not purport to be complete and is subject to, and is qualified in its entirely by reference to, all the provisions of the registration rights agreement, which has been filed as an exhibit to the registration rights agreement of which this prospectus is a part. 141 CERTAIN MATERIAL UNITED STATES FEDERAL TAX CONSIDERATIONS The following summary describes certain material United States federal income tax consequences and, in the case of a holder that is a non-United States holder (as defined below), certain material United States federal estate tax consequences, of purchasing, owning and disposing of the exchange notes and exchanging the outstanding notes for the exchange notes. This summary deals only with exchange notes held as capital assets (generally, investment property) and does not deal with special tax situations such as: - dealers in securities or currencies; - traders in securities; - United States holders (as defined below) whose functional currency is not the United States dollar; - persons holding exchange notes as part of a hedge, straddle, conversion or other integrated transaction; - certain United States expatriates; - financial institutions; - insurance companies; and - entities that are tax-exempt for United States federal income tax purposes. This summary does not discuss all of the aspects of United States federal income and estate taxation that may be relevant to you in light of your particular investment or other circumstances. In addition, this summary does not discuss any United States state, local or foreign income tax consequences or any non-income tax consequences. This summary is based on United States federal income tax law, including the provisions of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), Treasury regulations, administrative rulings and judicial authority, all as in effect as of the date of this prospectus. Subsequent developments in United States federal tax law, including changes in law or differing interpretations, which may be applied retroactively, could have a material effect on the United States federal tax consequences of purchasing, owning and disposing of exchange notes as set forth in this summary. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR REGARDING THE PARTICULAR UNITED STATES FEDERAL, STATE AND LOCAL AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF ACQUIRING, OWNING AND DISPOSING OF EXCHANGE NOTES THAT MAY BE APPLICABLE TO YOU. UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER The exchange of the outstanding notes for the exchange notes in the exchange offer will not be a taxable exchange for United States federal income tax purposes and, accordingly, for such purposes you will not recognize any taxable gain or loss as a result of such exchange and you will have the same tax basis and holding period in the exchange notes as you had in your outstanding notes immediately before the exchange. UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS FOR UNITED STATES HOLDERS The following summary applies to you only if you are a United States holder (as defined below). 142 DEFINITION OF A UNITED STATES HOLDER A "United States holder" is a beneficial owner of an exchange note or notes who or which is for United States federal income tax purposes: - an individual citizen or resident of the United States; - a corporation (or other entity classified as a corporation for these purposes) or a partnership (or other entity classified as a partnership for these purposes) created or organized in or under the laws of the United States or of any political subdivision of the United States, including any State; - an estate, the income of which is subject to United States federal income taxation regardless of the source of that income; or - a trust if (1) a United States court is able to exercise primary supervision over the trust's administration and one or more United States persons (within the meaning of the Internal Revenue Code) has the authority to control all of the trust's substantial decisions or (2) the trust has a valid election in effect under applicable Treasury regulations to be treated as a United States person. If a partnership or other entity treated as a partnership for United States federal income tax purposes holds an exchange note or notes, the tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. If you are a partner of a partnership holding an exchange note or notes, we suggest that you consult your tax advisor. PAYMENTS OF STATED INTEREST Payments of stated interest on your exchange notes will be taxed as ordinary interest income. In addition: - if you use the cash method of accounting for United States federal income tax purposes, you will have to include the stated interest on your exchange notes in your gross income at the time you receive the interest; and - if you use the accrual method of accounting for United States federal income tax purposes, you will have to include the stated interest on your exchange notes in your gross income at the time the interest accrues. MARKET DISCOUNT AND BOND PREMIUM If you purchase an exchange note (or purchased the outstanding note for which the exchange note was exchanged, as the case may be) at a price that is less than its principal amount, the excess of the principal amount over your purchase price will be treated as "market discount." However, the market discount will be considered to be zero if it is less than 1/4 of 1% of the principal amount multiplied by the number of complete years to maturity from the date you purchased the exchange note or outstanding note, as the case may be. Under the market discount rules of the Internal Revenue Code, you generally will be required to treat any principal payment on, or any gain realized on the sale, exchange, retirement or other disposition of, an exchange note as ordinary income (generally treated as interest income) to the extent of the market discount which accrued but was not previously included in income. In addition, you may be required to defer, until the maturity of the exchange note or 143 its earlier disposition in a taxable transaction, the deduction of all or a portion of your interest expense on any indebtedness incurred or continued to purchase or carry the exchange note (or the outstanding note for which the exchange note was exchanged, as the case may be). In general, market discount will be considered to accrue ratably during the period from the date of the purchase of the exchange note (or outstanding note for which the exchange note was exchanged, as the case may be) to the maturity date of the exchange note, unless you make an irrevocable election (on an instrument-by-instrument basis) to accrue market discount under a constant yield method. You may elect to include market discount in income currently as it accrues (under either a ratable or constant yield method), in which case the rules described above regarding the treatment as ordinary income of gain upon the disposition of the exchange note and upon the receipt of certain payments and the deferral of interest deductions will not apply. The election to include market discount in income currently, once made, applies to all market discount obligations acquired on or after the first day of the first taxable year to which the election applies, and may not be revoked without the consent of the Internal Revenue Service. If you purchase an exchange note (or purchased the outstanding note for which the exchange note was exchanged, as the case may be) for an amount in excess of the amount payable at maturity of the exchange note, you will be considered to have purchased the exchange note (or outstanding note) with "bond premium" equal to the excess of your purchase price over the amount payable at maturity (or on an earlier call date if it results in a smaller amortizable bond premium). You may elect to amortize the premium using a constant yield method over the remaining term of the exchange note (or until an earlier call date, as applicable). The amortized amount of the premium for a taxable year generally will be treated first as a reduction of interest on the exchange note included in such taxable year to the extent thereof, then as a deduction allowed in that taxable year to the extent of your prior interest inclusions on the exchange note, and finally as a carryforward allowable against your future interest inclusions on the exchange note. The election, once made, is irrevocable without the consent of the Internal Revenue Service and applies to all taxable bonds held during the taxable year for which the election is made or subsequently acquired. CONSTANT YIELD ELECTION As an alternative to the above-described rules for including interest payments and market discount in income and amortizing bond premium, you may elect to include in gross income all interest that accrues on an exchange note, including stated interest, market discount (including de minimis market discount) and adjustments for bond premium, on the constant yield method. If such an election were made, you would be deemed to have made an election to amortize bond premium, which as discussed above applies to all debt instruments held or subsequently acquired by you. Particularly for United States holders who are on the cash method of accounting, a constant yield election may have the effect of causing you to include interest in income earlier than would be the case if no such election were made, and the election may not be revoked without the consent of the Internal Revenue Service. You should consult your own tax advisor before making this election. SALE OR OTHER DISPOSITION OF THE EXCHANGE NOTES Upon the sale, exchange, retirement, redemption or other disposition of an exchange note, you generally will recognize taxable gain or loss in an amount equal to the difference, if any, between the amount realized on the disposition and your adjusted tax basis in the exchange 144 note. Your adjusted tax basis in an exchange note will generally equal the cost of the exchange note (or, in the case of an exchange note acquired in exchange for an outstanding note in the exchange offer, the basis of the outstanding note), increased by the amount of any market discount previously included in your gross income, and reduced by the amount of any amortizable bond premium applied to reduce, or allowed as a deduction against, interest with respect to your exchange note. Your gain or loss generally will be capital gain or loss (except with respect to any amount received that is attributable to accrued but unpaid interest, which will be taxable in the manner described above under "--United States federal income tax considerations for United States holders--Payments of stated interest" and except with respect to accrued market discount that has not previously been included in income, as discussed above under "--United States federal income tax considerations for United States holders--Market discount and bond premium"). Such capital gain or loss will be long-term capital gain or loss if the exchange note has been held for more than one year at the time of the disposition (taking into account for this purpose, in the case of an exchange note received in exchange for an outstanding note in the exchange offer, the period of time that the outstanding note was held). Subject to limited exceptions, your capital losses cannot be used to offset your ordinary income. If you are a non-corporate United States holder, your long-term capital gain generally will be subject to a maximum tax rate of 15%, scheduled to increase to 20% for dispositions occurring in taxable years that begin on or after January 1, 2009. BACKUP WITHHOLDING AND INFORMATION REPORTING In general, backup withholding currently at a rate of 28%, scheduled to increase to 31% for taxable years beginning on or after January 1, 2011, may apply: - to any payments made to you of principal of and interest on your exchange note, and - to payment of the proceeds of a sale or other disposition of your exchange note, if you are a non-corporate United States holder and fail to provide a correct taxpayer identification number or otherwise comply with applicable requirements of the backup withholding rules. Information reporting may also apply to payments made with respect to your exchange note. Backup withholding is not an additional tax and may be credited against your United States federal income tax liability, provided that correct information is provided to the Internal Revenue Service. UNITED STATES FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS FOR NON-UNITED STATES HOLDERS The following summary applies to you if you are a beneficial owner of an exchange note who or which is not a resident alien and not otherwise a United States holder (a "non-United States holder"). Resident aliens are subject to United States federal income tax as if they were United States citizens. An individual may, subject to exceptions, be deemed to be a resident alien, as opposed to a non-resident alien, by among other ways being present in the United States: - for at least 31 days in the calendar year, and - for an aggregate of at least 183 days during a three-year period ending in the current calendar year, counting for such purposes all of the days present in the current year, 145 one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding year. UNITED STATES FEDERAL WITHHOLDING TAX If you are a non-United States holder, under current United States federal income tax laws, and subject to the discussion below, United States federal withholding tax will not apply to payments by us or our paying agent (in its capacity as such) of principal of your exchange notes, and will not apply to payments of interest on your exchange notes, under the "portfolio interest" exception of the Internal Revenue Code, provided that you comply with the following requirements: - you do not, directly or indirectly, actually or constructively, own 10% or more of the total combined voting power of all classes of our stock entitled to vote within the meaning of section 871(h)(3) of the Internal Revenue Code and the Treasury regulations thereunder; - you are not a controlled foreign corporation for United States federal income tax purposes that is related, directly or indirectly, to us through sufficient stock ownership (as provided in the Internal Revenue Code); - you are not a bank receiving interest described in section 881(c)(3)(A) of the Internal Revenue Code; - such interest is not effectively connected with your conduct of a United States trade or business; and - you provide a properly completed Internal Revenue Service Form W-8BEN, signed under penalties of perjury, which can reliably be related to you, certifying that you are not a United States person within the meaning of the Internal Revenue Code and providing your name and address to: (A) us or our paying agent; or (B) a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business and holds your exchange notes on your behalf and that certifies to us or our paying agent under penalties of perjury that it, or the bank or financial institution between it and you, has received from you your Form W-8BEN and provides us or our paying agent with a copy of this statement. Certain Treasury regulations provide alternative methods for satisfying the certification requirement described in this section. In addition, under these Treasury regulations: - if you are a foreign partnership, the certification requirement will generally apply to partners in you, and you will be required to provide certain information; - if you are a foreign trust, the certification requirement will generally be applied to you or your beneficial owners depending on whether you are a "foreign complex trust," "foreign simple trust," or "foreign grantor trust" as defined in the Treasury regulations; and - look-through rules will apply for tiered partnerships, foreign simple trusts and foreign grantor trusts. 146 If you are a foreign partnership or a foreign trust, you should consult your own tax advisor regarding your status under these Treasury regulations and the certification requirements applicable to you. If you do not satisfy the requirements described above, payments of interest made to you will be subject to the 30% United States federal withholding tax, unless you provide us with a properly executed (1) Internal Revenue Service Form W-8BEN claiming an exemption from or reduction in withholding under the benefit of an applicable tax treaty or (2) Internal Revenue Service Form W-8ECI stating that the interest paid on an exchange note is not subject to withholding tax because it is effectively connected with your conduct of a trade or business in the United States. UNITED STATES FEDERAL INCOME TAX Except for the possible application of United States withholding tax (see "United States federal withholding tax" above) and backup withholding tax (see "Backup withholding and information reporting" below), you generally will not have to pay United States federal income tax on payments of principal of and interest on your exchange notes, or on any gain or income realized from the sale, redemption, retirement at maturity or other disposition of your exchange notes (provided that, in the case of proceeds representing accrued interest, the conditions described in "United States federal withholding tax" are met) unless: - in the case of gain, you are an individual who is present in the United States for 183 days or more during the taxable year of the sale or other disposition of your exchange notes, and specific other conditions are met; or - the interest, gain or other income is effectively connected with your conduct of a United States trade or business, and, if an income tax treaty applies, is generally attributable to a United States "permanent establishment" maintained by you. If you are engaged in a trade or business in the United States and interest, gain or any other income in respect of your exchange notes is effectively connected with the conduct of your trade or business, and, if an income tax treaty applies, you maintain a United States "permanent establishment" to which the interest, gain or other income is generally attributable, you generally will be subject to United States income tax on a net basis on the interest, gain or income in the same manner as if you were a United States holder (although interest is exempt from the withholding tax discussed in the preceding paragraphs provided that you provide a properly executed applicable Internal Revenue Service Form W-8ECI on or before any payment date to claim the exemption). In addition, if you are a foreign corporation, you may be subject to a branch profits tax equal to 30% of your effectively connected earnings and profits for the taxable year, as adjusted for certain items, unless a lower rate applies to you under a United States income tax treaty with your country of residence. For this purpose, you must include interest, gain or income on your exchange notes in the earnings and profits subject to the branch profits tax if these amounts are effectively connected with the conduct of your United States trade or business. UNITED STATES FEDERAL ESTATE TAX If you are an individual and are not a United States citizen or a resident of the United States (as specially defined for United States federal estate tax purposes) at the time of your death, 147 your exchange notes will generally not be subject to the United States federal estate tax, unless, at the time of your death: - you directly or indirectly, actually or constructively, own 10% or more of the total combined voting power of all classes of our stock entitled to vote within the meaning of section 871(h)(3) of the Internal Revenue Code and the Treasury regulations thereunder; or - your interest on the exchange notes is effectively connected with your conduct of a United States trade or business. BACKUP WITHHOLDING AND INFORMATION REPORTING Under current Treasury regulations, backup withholding and information reporting will not apply to payments made by us or our paying agent (in its capacity as such) to you if you have provided the required certification that you are a non-United States holder as described in "--United States federal withholding tax" above, and provided that neither we nor our paying agent has actual knowledge that you are a United States holder (as described in "--Definition of a United States holder" above). We or our paying agent may, however, report payments of interest on the exchange notes that are made to you. The gross proceeds from the disposition of your exchange notes may be subject to information reporting and backup withholding tax at a rate that is currently 28%, scheduled to increase to 31% for taxable years beginning on or after January 1, 2011. If you sell your exchange notes outside the United States through a non-United States office of a broker and the sales proceeds are paid to you outside the United States, then the United States backup withholding and information reporting requirements generally (except as provided in the following sentence) will not apply to that payment. However, United States information reporting, but not backup withholding, will apply to a payment of sales proceeds, even if that payment is made outside the United States, if you sell your exchange notes through a non-United States office of a broker that: - is a United States person (as defined in the Internal Revenue Code); - derives 50% or more of its gross income in specific periods from the conduct of a trade or business in the United States; - is a "controlled foreign corporation" for United States federal income tax purposes; or - is a foreign partnership, if at any time during its tax year: - one or more of its partners are United States persons who in the aggregate hold more than 50% of the income or capital interests in the partnership; or - the foreign partnership is engaged in a United States trade or business, unless the broker has documentary evidence in its files that you are a non-United States person and certain other conditions are met or you otherwise establish an exemption. If you receive payments of the proceeds of a sale of your exchange notes to or through a United States office of a broker, the payments are subject to both United States backup withholding and information reporting unless you provide a Form W-8BEN certifying that you are a non-United States person or you otherwise establish an exemption. 148 You should consult your own tax advisor regarding application of backup withholding in your particular circumstances and the availability of and procedure for obtaining an exemption from backup withholding under current Treasury regulations. Any amounts withheld under the backup withholding rules from a payment to you will be allowed as a refund or credit against your United States federal income tax liability, provided the required information is furnished to the Internal Revenue Service. 149 ERISA CONSIDERATIONS The following is a summary of certain considerations associated with the exchange of the outstanding notes, or the purchase or holding of the exchange notes, by employee benefit plans that are subject to Title I of the U.S. Employee Retirement Income Security Act of 1974, as amended ("ERISA"), individual retirement accounts and other arrangements that are subject to Section 4975 of the Internal Revenue Code or provisions under any federal, state, local, non-U.S. or other laws or regulations that are similar to such provisions of the Internal Revenue Code or ERISA, and entities whose underlying assets are considered to include "plan assets" of such plans, accounts and arrangements. GENERAL FIDUCIARY MATTERS ERISA and the Code impose certain duties on persons who are fiduciaries of a plan subject to Title I of ERISA or Section 4975 of the Internal Revenue Code and prohibit certain transactions involving the assets of a plan and its fiduciaries or other interested parties. Under ERISA and the Code, any person who exercises any discretionary authority or control over the administration of such a plan or the management or disposition of the assets of such a plan, or who renders investment advice to such a plan for a fee or other compensation, may be considered to be a fiduciary of the plan. When considering investing a portion of the assets of any plan in the exchange notes, a fiduciary should determine whether the investment is in accordance with the documents and instruments governing the plan and the applicable provisions of ERISA, the Internal Revenue Code or any similar law relating to a fiduciary's duties to the plan including, without limitation, the prudence, diversification, delegation of control and prohibited transaction provisions of ERISA, the Internal Revenue Code and any other applicable similar laws. The prudence of a particular investment should be determined by the responsible fiduciary of a plan by taking into account the plan's particular circumstances and all of the facts and circumstances of an investment in an exchange note including, but not limited to, particular risks associated with the investment and the fact that in the future there may be no market in which such fiduciary will be able to sell or otherwise dispose of any exchange notes it may purchase. Any insurance company proposing to invest assets of its general account in the exchange notes should consider the extent to which such investment would be subject to the requirements of ERISA in light of the U.S. Supreme Court's decision in John Hancock Mutual Life Insurance Co. v. Harris Trust and Savings Bank and under any subsequent legislation or other guidance that has or may become available relating to that decision, including Section 401(c) of ERISA and any regulations thereunder published by the U.S. Department of Labor. PROHIBITED TRANSACTION ISSUES Section 406 of ERISA and Section 4975 of the Internal Revenue Code prohibit plans subject to Title I of ERISA or Section 4975 of the Internal Revenue Code from engaging in specified transactions involving plan assets with persons or entities who are "parties in interest" within the meaning of ERISA, or "disqualified persons," within the meaning of Section 4975 of the Internal Revenue Code, unless an exemption is available. A party in interest or disqualified person who engages in a non-exempt prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the Internal Revenue Code and, in many circumstances, the transaction must be unwound. In addition, the fiduciary of the plan that engages in such a non-exempt prohibited transaction may be subject to penalties and liabilities 150 under ERISA and the Internal Revenue Code. The acquisition and/or holding of exchange notes by a plan with respect to which we, our affiliates or the initial purchaser is considered a party in interest or disqualified person may constitute or result in a direct or indirect prohibited transaction under ERISA and/or the Internal Revenue Code, unless the investment is acquired and is held in accordance with an applicable statutory, class or individual prohibited transaction exemption. In this regard, the U.S. Department of Labor has issued prohibited transaction class exemptions, or "PTCEs", that may apply to the acquisition and holding of the exchange notes. These class exemptions include PTCE 84-14 respecting transactions determined by independent qualified professional asset managers, PTCE 90-1 respecting insurance company pooled separate accounts, PTCE 91-38 respecting bank collective investment funds, PTCE 95-60 respecting transactions involving life insurance company general accounts and PTCE 96-23 respecting transactions determined by in-house asset managers. However, there can be no assurance that all of the conditions of any such exemptions will be satisfied, or, if satisfied, that the scope of the relief will cover all acts that might be construed as prohibited transactions. Because of the foregoing, the exchange notes should not be acquired or held by any person investing "plan assets" of any plan, if such acquisition and holding will constitute a non-exempt prohibited transaction under ERISA and the Internal Revenue Code or similar violation of any applicable similar laws. Each initial investor of an exchange note and each subsequent transferee will, by its acquisition and/or holding be deemed to have represented and warranted that (1) it is not a plan, or other entity that is subject to prohibited transaction rules of ERISA, the Code or similar law or (2) its acquisition and/or holding of such note will not result in a non-exempt prohibited transaction under Section 406 of ERISA, Section 4975 of the Internal Revenue Code or any similar provision of similar laws. The foregoing discussion is general in nature and is not intended to be all-inclusive. Due to the complexity of these rules and the penalties that may be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries, or other persons considering an investment in the exchange notes on behalf of, or with the assets of any plan, consult with their counsel regarding the potential applicability of ERISA, Section 4975 of the Internal Revenue Code and any similar laws to such investment and whether an exemption would be applicable to the acquisition and holding of the exchange notes. 151 PLAN OF DISTRIBUTION Based on interpretations by the staff of the SEC set forth in no-action letters issued to third parties, we believe that the exchange notes issued pursuant to the exchange offer in exchange for the outstanding notes may be offered for resale, resold and otherwise transferred by holders thereof, other than any holder which is (A) an "affiliate" of our company within the meaning of Rule 405 under the Securities Act, (B) a broker-dealer who acquired notes directly from our company or (C) broker-dealers who acquired notes as a result of market-making or other trading activities, without compliance with the registration and prospectus delivery provisions of the Securities Act provided that such exchange notes are acquired in the ordinary course of such holders' business, and such holders are not engaged in, and do not intent to engage in, and have no arrangement or understanding with any person to participate in, a distribution of such exchange notes. However, broker-dealers receiving the exchange notes in the exchange offer will be subject to a prospectus delivery requirement with respect to resales of such exchange notes. To date, the staff of the SEC has taken the position that these broker-dealers may fulfill their prospectus delivery requirements with respect to transactions involving an exchange of securities such as the exchange pursuant to the exchange offer, other than a resale of an unsold allotment from the sale of the outstanding notes to the initial purchasers thereof, with the prospectus contained in the exchange offer registration statement. Pursuant to the registration rights agreement, we have agreed to permit these broker-dealers to use this prospectus in connection with the resale of such exchange notes. We have agreed that, for a period of 180 days after the exchange offer has been completed, we will make this prospectus, and any amendment or supplement to this prospectus, available to any broker-dealer that requests such documents in the letter of transmittal. Each holder of the outstanding notes who wishes to exchange its outstanding notes for exchange notes in the exchange offer will be required to make certain representations to us as set forth in "The exchange offer." Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for outstanding notes where such outstanding notes were acquired as a result of market-making activities or other trading activities. We will not receive any proceeds from any sale of exchange notes by broker-dealers. Exchange notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such exchange notes. Any broker-dealer that resells exchange notes that were received by it for its own account in the exchange offer and any broker or dealer that participates in a distribution of such exchange notes may be deemed to be an "underwriter" within the meaning of the Securities Act, and any profit on any such resale of exchange notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that, by acknowledging that it will 152 deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. We have agreed to pay certain expenses incident to the exchange offer and will indemnify the holders of the exchange notes, including any broker-dealers, against certain liabilities, including liabilities under the Securities Act, as set forth in the registration rights agreement. LEGAL MATTERS The validity of the exchange notes will be passed upon for us by Fried, Frank, Harris, Shriver & Jacobson LLP, New York, New York. INDEPENDENT AUDITORS The consolidated balance sheets of BPC Holding Corporation as of December 28, 2002 (Company) and December 29, 2001 (Predecessor), and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for the periods from July 22, 2002 to December 28, 2002 (Company), December 30, 2001 to July 21, 2002 (Predecessor), and each of the two years in the period ended December 29, 2001 (Predecessor) included in this prospectus, have been audited by Ernst & Young LLP, independent auditors, as stated in their report appearing herein. The balance sheets of Landis Plastics Inc., as of December 31, 2002, 2001, 2000 and 1999, and the related statements of income and retained earnings, and cash flows for the years then ended, included in this prospectus, have been audited by Roche, Scholz, Roche & Walsh, Ltd., independent auditors, as stated in their reports appearing herein. WHERE YOU CAN FIND MORE INFORMATION This prospectus is part of a registration statement of Form S-4 that we filed with the Securities and Exchange Commission (the "SEC"). This prospectus does not contain all of the information in that registration statement. For further information with respect to us and the notes, see the registration statement, including the exhibits. We are subject to the reporting requirements of the Securities Exchange Act of 1934 and in accordance with its requirements file annual, quarterly and current reports, proxy statements and other information with the SEC. These reports, proxy statements and other information may be obtained: - at the public reference room of the SEC, Room 1024-Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; - from the SEC, Public Reference Room, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; or - from the Internet site maintained by the SEC at http://.www.sec.gov, which contains reports, proxy and information statements and other information regarding issuers, including us, that file electronically with the SEC. 153 Some locations may charge prescribed rates or modest fees for copies. For more information on the public reference room, call the SEC at 1-800-SEC-0330. Our filings will also be available to the public from commercial document retrieval services. You may obtain these reports, proxy statements and other information at no cost by writing or telephoning us at the following address and telephone number: Berry Plastics Corporation 101 Oakley Street Evansville, Indiana 47710 Attn: Mark Miles (812) 424-2904 Statements made in this prospectus as to the contents of any contract, agreement, or other documents referred to are not necessarily complete. For a more complete understanding and description of each contract, agreement or other document filed as an exhibit to the registration statement, we encourage you to read the documents contained in the exhibits. Following the consummation of the exchange offer, whether or not required by the SEC, we will file a copy of all the information mentioned above with the SEC for public availability within the time periods specified in the SEC's rule and regulations (unless the SEC will not accept such a filing) and make such information available to securities analysts and prospectus investors upon request. In addition, we have agreed that we will furnish to holders and securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act of 1933, as amended (the "Securities Act") until such time as we have either exchanged the notes pursuant to the exchange offer or until such time as holders of the notes have disposed of their notes pursuant to an effective registration statement under the Securities Act. 154 BPC HOLDING CORPORATION INDEX TO FINANCIAL STATEMENTS BPC HOLDING CORPORATION AUDITED FINANCIAL STATEMENTS
PAGE Report of Independent Auditors.............................. F-3 Consolidated Balance Sheets at December 28, 2002 and December 29, 2001........................................ F-4 Consolidated Statements of Operations for the periods from July 22, 2002 to December 28, 2002, December 30, 2001 to July 21, 2002, and each of the two years in the period ended December 29, 2001.................................. F-5 Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the periods from July 22, 2002 to December 28, 2002, December 30, 2001 to July 21, 2002, and each of the two years in the period ended December 29, 2001...... F-6 Consolidated Statements of Cash Flows for the periods from July 22, 2002 to December 28, 2002, December 30, 2001 to July 21, 2002, and each of the two years in the period ended December 29, 2001.................................. F-7 Notes to Consolidated Financial Statements.................. F-8 BPC HOLDING CORPORATION UNAUDITED INTERIM FINANCIAL STATEMENTS Consolidated Balance Sheets at September 27, 2003 and December 28, 2002........................................ F-35 Consolidated Statements of Operations for the thirteen and thirty-nine weeks ended September 27, 2003, for the periods from July 22, 2002 to September 28, 2002, June 30, 2002 to July 21, 2002 and December 30, 2001 to July 21, 2002................................................. F-36 Consolidated Statements of Changes in Stockholders' Equity for the period from December 28, 2002 to September 27, 2003..................................................... F-37 Consolidated Statements of Cash Flows for the periods from December 29, 2002 to September 27, 2003, July 22, 2002 to September 28, 2002 and December 30, 2001 to July 21, 2002..................................................... F-38 Notes to Consolidated Financial Statements.................. F-39 LANDIS PLASTICS, INC. INDEX TO FINANCIAL STATEMENTS LANDIS PLASTICS, INC. AUDITED FINANCIAL STATEMENTS Report of Independent Auditors.............................. F-51 Balance Sheets at December 31, 2002 and 2001................ F-52 Statements of Income and Retained Earnings for the years ended December 31, 2002 and 2001......................... F-53 Statements of Cash Flows for the years ended December 31, 2002 and 2001............................................ F-54 Notes to Financial Statements............................... F-55 Report of Independent Auditors.............................. F-65 Balance Sheets at December 31, 2000 and 1999................ F-66 Statements of Income and Retained Earnings for the years ended December 31, 2000 and 1999......................... F-67 Statements of Cash Flows for the years ended December 31, 2000 and 1999............................................ F-68 Notes to Financial Statements............................... F-69
F-1
PAGE LANDIS PLASTICS, INC. UNAUDITED INTERIM FINANCIAL STATEMENTS Balance Sheets at September 28, 2003 and December 31, 2002..................................................... F-79 Statements of Income and Retained Earnings for the thirty-nine weeks ended September 28, 2003 and September 29, 2002................................................. F-80 Statements of Cash Flows for the thirty-nine weeks ended September 28, 2003 and September 29, 2002................ F-81 Notes to Financial Statements............................... F-82
F-2 REPORT OF INDEPENDENT AUDITORS The Stockholders and Board of Directors BPC Holding Corporation We have audited the accompanying consolidated balance sheets of BPC Holding Corporation ("Holding") as of December 28, 2002, and December 29, 2001, and the related consolidated statements of operations, changes in stockholders' equity (deficit) and cash flows for the periods from July 22, 2002 to December 28, 2002 (Company), December 30, 2001 to July 21, 2002 (Predecessor), and each of the two years in the period ended December 29, 2001 (Predecessor). These financial statements are the responsibility of Holding's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of BPC Holding Corporation at December 28, 2002 and December 29, 2001, and the consolidated results of its operations and its cash flows for the periods from July 22, 2002 to December 28, 2002, December 30, 2001 to July 21, 2002 and each of the two years in the period ended December 29, 2001, in conformity with accounting principles generally accepted in the United States. As discussed in Note 2 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets" on December 30, 2001. /s/ Ernst & Young LLP Indianapolis, Indiana February 14, 2003 F-3 BPC HOLDING CORPORATION CONSOLIDATED BALANCE SHEETS
- ----------------------------------------------------------------------------------------- COMPANY PREDECESSOR ------------ ------------ DECEMBER 28, DECEMBER 29, (DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION) 2002 2001 - ----------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents................................ $ 15,613 $ 1,232 Accounts receivable (less allowance for doubtful accounts of $1,990 at December 28, 2002 and $2,070 at December 29, 2001).............................................. 56,765 48,623 Inventories: Finished goods........................................ 50,002 43,048 Raw materials and supplies............................ 14,730 13,009 --------------------------- 64,732 56,057 Prepaid expenses and other current assets................ 7,018 5,280 --------------------------- Total current assets........................................ 144,128 111,192 Property and equipment: Land..................................................... 7,040 9,443 Buildings and improvements............................... 49,966 72,722 Machinery, equipment and tooling......................... 139,486 201,357 Construction in progress................................. 12,232 22,647 --------------------------- 208,724 306,169 Less accumulated depreciation............................ 15,592 102,952 --------------------------- 193,132 203,217 Intangible assets: Deferred financing fees, net............................. 20,116 8,475 Customer relationships, net.............................. 33,890 - Goodwill, net............................................ 336,260 119,923 Trademarks............................................... 27,048 - Other intangibles, net................................... 5,883 1,955 --------------------------- 423,197 130,353 Other....................................................... 119 2,114 --------------------------- Total assets................................................ $ 760,576 $ 446,876 --------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable......................................... $ 31,204 $ 34,862 Accrued expenses and other liabilities................... 9,926 8,955 Accrued interest......................................... 14,239 7,964 Employee compensation and payroll taxes............... 15,917 17,792 Current portion of long-term debt........................ 8,641 22,292 --------------------------- Total current liabilities................................... 79,927 91,865 Long-term debt, less current portion........................ 601,302 463,589 Accrued dividends on preferred stock........................ - 27,446 Deferred income taxes....................................... 640 489 Other liabilities........................................... 3,544 3,088 --------------------------- Total liabilities........................................... 685,413 586,477 Stockholders' equity (deficit): Preferred stock (Predecessor)............................ - 47,789 Common stock (Predecessor)............................... - 6 Treasury stock (Predecessor)............................. - (405) Warrants (Predecessor)................................... - 9,386 Preferred stock; $.01 par value: 500,000 shares authorized; 0 shares issued and outstanding............ - - Common Stock; $.01 par value: 5,000,000 shares authorized; 2,767,879 shares issued and outstanding.... 28 - Additional paid-in capital............................... 281,816 25,315 Adjustment of the carryover basis of continuing stockholders........................................... (196,603) - Notes receivable - common stock.......................... (14,399) - Retained earnings (deficit).............................. 3,179 (220,263) Accumulated other comprehensive income (loss)............ 1,142 (1,429) --------------------------- Total stockholders' equity (deficit)........................ 75,163 (139,601) --------------------------- Total liabilities and stockholders' equity (deficit)........ $ 760,576 $ 446,876 - -----------------------------------------------------------------------------------------
See notes to consolidated financial statements F-4 BPC HOLDING CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
- ---------------------------------------------------------------------------------------------- COMPANY PREDECESSOR ----------- ----------------------------------------- PERIOD FROM PERIOD FROM YEAR ENDED YEAR ENDED 7/22/02- 12/30/01- DECEMBER 29, DECEMBER 30, (DOLLARS IN THOUSANDS) 12/28/02 7/21/02 2001 2000 - ---------------------------------------------------------------------------------------------- Net sales............................ $ 213,626 $ 280,677 $ 461,659 $ 408,088 Cost of goods sold................... 163,815 207,458 338,000 312,119 ------------------------------------------------------- Gross profit......................... 49,811 73,219 123,659 95,969 Operating expenses: Selling........................... 10,129 12,080 21,996 21,630 General and administrative........ 7,664 15,750 28,535 24,408 Research and development.......... 1,450 1,438 1,948 2,606 Amortization of intangibles....... 1,159 1,249 12,802 10,579 Merger expenses (Predecessor)..... - 20,987 - - Other expenses.................... 2,757 2,804 4,911 6,639 ------------------------------------------------------- Operating income..................... 26,652 18,911 53,467 30,107 Other expenses: Loss on disposal of property and equipment...................... 8 291 473 877 ------------------------------------------------------- Income before interest and taxes..... 26,644 18,620 52,994 29,230 Interest: Expense........................... (20,887) (28,747) (54,397) (51,553) Income............................ 375 5 42 96 ------------------------------------------------------- Income (loss) before income taxes and extraordinary item................ 6,132 (10,122) (1,361) (22,227) Income taxes (benefit)............... 2,953 345 734 (142) ------------------------------------------------------- Income (loss) before extraordinary item.............................. 3,179 (10,467) (2,095) (22,085) Extraordinary item (less applicable income taxes of $0)............... - 25,328 - 1,022 ------------------------------------------------------- Net income (loss).................... 3,179 (35,795) (2,095) (23,107) Preferred stock dividends............ - (6,468) (9,790) (6,655) Amortization of preferred stock discount.......................... - (574) (1,024) (768) ------------------------------------------------------- Net income (loss) attributable to common stockholders............... $ 3,179 $ (42,837) $ (12,909) $ (30,530) - ----------------------------------------------------------------------------------------------
See notes to consolidated financial statements F-5 BPC HOLDING CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
- ---------------------------------------------------------------------------------------------------------------------- COMMON PREFERRED TREASURY ADDITIONAL STOCK STOCK STOCK WARRANTS COMMON PAID-IN (DOLLARS IN THOUSANDS)) (PREDECESSOR) (PREDECESSOR) (PREDECESSOR) (PREDECESSOR) STOCK CAPITAL - ---------------------------------------------------------------------------------------------------------------------- Balance at January 1, 2000....... $ 6 $ 17,093 $ (256) $ 3,511 $ - $ 41,559 ----------------------------------------------------------------------------------- Net loss......................... - - - - - - Purchase treasury stock from management.................... - - (149) - - - Translation loss................. - - - - - - Stock-based compensation......... - - - - - 905 Issuance of preferred stock...... - 25,000 - - - - Issuance of private warrants..... - (5,875) - 5,875 - - Accrued dividends on preferred stock......................... - - - - - (6,655) Amortization of preferred stock discount...................... - 768 - - - (768) ----------------------------------------------------------------------------------- Balance at December 30, 2000..... 6 36,986 (405) 9,386 - 35,041 ----------------------------------------------------------------------------------- Net loss......................... - - - - - - Translation loss................. - - - - - - Stock-based compensation......... - - - - - 796 Issuance of preferred stock...... - 9,779 - - - - Issuance of common stock......... - - - - - 292 Accrued dividends on preferred stock......................... - - - - - (9,790) Amortization of preferred stock discount...................... - 1,024 - - - (1,024) ----------------------------------------------------------------------------------- Balance at December 29, 2001..... 6 47,789 (405) 9,386 - 25,315 ----------------------------------------------------------------------------------- Net loss......................... - - - - - - Translation gain................. - - - - - - Amortization of preferred stock discount...................... - 574 - - - (574) Accrued dividends on preferred stock......................... - - - - - (6,468) Stock-based compensation......... - - - - - 1,920 Redemption of predecessor stock.. (6) (48,363) 405 (9,386) - (20,193) ----------------------------------------------------------------------------------- Balance at July 21, 2002 (Predecessor)................. - - - - - - ----------------------------------------------------------------------------------- Fair value of rolled stock options....................... - - - - 5,056 Issuance of common stock......... - - - - 28 276,760 Notes receivable--common stock... - - - - - - Interest on notes receivable..... - - - - - - Adjustment of the carryover basis of continuing stockholders.... - - - - - - Translation gain................. - - - - - - Other comprehensive losses....... - - - - - - Net income....................... - - - - - - ----------------------------------------------------------------------------------- Balance at December 28, 2002 (Company)..................... $ - $ - $ - $ - $ 28 $ 281,816 - ---------------------------------------------------------------------------------------------------------------------- - --------------------------------- -------------------------------------------------------------------------------------- ADJUSTMENT OF THE CARRYOVER NOTES ACCUMULATED BASIS OF RECEIVABLE-- RETAINED OTHER COMPREHENSIVE CONTINUING COMMON EARNINGS COMPREHENSIVE INCOME (DOLLARS IN THOUSANDS)) STOCKHOLDERS STOCK (DEFICIT) LOSS TOTAL (LOSS) - --------------------------------- -------------------------------------------------------------------------------------- Balance at January 1, 2000....... $ - $ - $(195,061) $ (323) $(133,471) -------------------------------------------------------------------------------------- Net loss......................... - - (23,107) - (23,107) (23,107) Purchase treasury stock from management.................... - - - - (149) - Translation loss................. - - - (520) (520) (520) Stock-based compensation......... - - - - 905 - Issuance of preferred stock...... - - - - 25,000 - Issuance of private warrants..... - - - - - - Accrued dividends on preferred stock......................... - - - - (6,655) - Amortization of preferred stock discount...................... - - - - - - -------------------------------------------------------------------------------------- Balance at December 30, 2000..... - - (218,168) (843) (137,997) (23,627) -------------------------------------------------------------------------------------- Net loss......................... - - (2,095) - (2,095) (2,095) Translation loss................. - - - (586) (586) (586) Stock-based compensation......... - - - - 796 - Issuance of preferred stock...... - - - - 9,779 - Issuance of common stock......... - - - - 292 - Accrued dividends on preferred stock......................... - - - - (9,790) - Amortization of preferred stock discount...................... - - - - - - -------------------------------------------------------------------------------------- Balance at December 29, 2001..... - - (220,263) (1,429) (139,601) (2,681) -------------------------------------------------------------------------------------- Net loss......................... - - (35,795) - (35,795) (35,795) Translation gain................. - - - 1,429 1,429 1,429 Amortization of preferred stock discount...................... - - - - - - Accrued dividends on preferred stock......................... - - - - (6,468) - Stock-based compensation......... - - - - 1,920 - Redemption of predecessor stock.. - - 256,058 - 178,515 - -------------------------------------------------------------------------------------- Balance at July 21, 2002 (Predecessor)................. - - - - - (34,366) -------------------------------------------------------------------------------------- Fair value of rolled stock options....................... - - - 5,056 - Issuance of common stock......... - - - - 276,788 - Notes receivable--common stock... - (14,079) - - (14,079) - Interest on notes receivable..... - (320) - - (320) - Adjustment of the carryover basis of continuing stockholders.... (196,603) - - - (196,603) - Translation gain................. - - - 2,091 2,091 2,091 Other comprehensive losses....... - - - (949) (949) (949) Net income....................... - - 3,179 - 3,179 3,179 -------------------------------------------------------------------------------------- Balance at December 28, 2002 (Company)..................... $ (196,603) $ (14,399) $ 3,179 $ 1,142 $ 75,163 $ 4,321 - ---------------------------------
See notes to consolidated financial statements F-6 BPC HOLDING CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------------------------------- COMPANY PREDECESSOR ----------- ----------------------------------------- PERIOD FROM PERIOD FROM YEAR ENDED YEAR ENDED 7/22/02- 12/30/01- DECEMBER 29, DECEMBER 30, (DOLLARS IN THOUSANDS) 12/28/02 7/21/02 2001 2000 - --------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income (loss)............................... $ 3,179 $ (35,795) $ (2,095) $ (23,107) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation................................. 16,031 23,526 38,105 31,569 Non-cash interest expense.................... 1,077 1,399 11,268 18,047 Amortization of intangibles.................. 1,159 1,249 12,802 10,579 Non-cash compensation........................ - 1,920 796 905 Extinguishment of debt....................... - 25,328 - 1,022 Loss on sale of property and equipment....... 8 291 473 877 Deferred income taxes........................ 2,710 - - (349) Changes in operating assets and liabilities: Accounts receivable, net.................. 8,717 (15,986) 2,869 (1,475) Inventories............................... (4,091) (4,255) (4,017) 7,383 Prepaid expenses and other receivables.... (1,280) (603) (50) (1,163) Other assets.............................. (354) 2,042 (2,000) - Accounts payable and accrued expenses..... (11,108) 11,476 (3,803) (8,182) ------------------------------------------------------- Net cash provided by operating activities....... 16,048 10,592 54,348 36,106 INVESTING ACTIVITIES Additions to property and equipment............. (11,287) (17,396) (32,834) (31,530) Proceeds from disposal of property and equipment.................................... 8 9 93 1,666 Transaction costs............................... (12,398) - - - Acquisitions of businesses...................... - (3,834) (23,549) (78,851) ------------------------------------------------------- Net cash used for investing activities.......... (23,677) (21,221) (56,290) (108,715) FINANCING ACTIVITIES Proceeds from long-term borrowings.............. 580,000 24,492 15,606 80,032 Payments on long-term borrowings................ (507,314) (13,924) (24,088) (31,543) Purchase of treasury stock from management...... - - - (149) Proceeds from issuance of preferred stock and warrants..................................... - - 9,779 25,000 Proceeds from issuance of common stock.......... 260,902 - 292 - Redemption of predecessor stock................. (290,672) - - - Debt financing costs............................ (21,103) - (1,009) (1,303) ------------------------------------------------------- Net cash provided by financing activities....... 21,813 10,568 580 72,037 Effect of exchange rate changes on cash......... 1,073 (815) 540 80 ------------------------------------------------------- Net increase (decrease) in cash and cash equivalents.................................. 15,257 (876) (822) (492) Cash and cash equivalents at beginning of period....................................... 356 1,232 2,054 2,546 ------------------------------------------------------- Cash and cash equivalents at end of period...... $ 15,613 $ 356 $ 1,232 $ 2,054 - ---------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements F-7 BPC HOLDING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT AS OTHERWISE NOTED) NOTE 1. ORGANIZATION BPC Holding Corporation ("Holding"), through its subsidiary Berry Plastics Corporation ("Berry" or the "Company") and its subsidiaries Berry Iowa Corporation, Berry Tri-Plas Corporation, Aerocon, Inc., PackerWare Corporation, Berry Plastics Design Corporation, Venture Packaging, Inc. and its subsidiaries Venture Packaging Midwest, Inc. and Berry Plastics Technical Services, Inc., NIM Holdings Limited and its subsidiary Berry Plastics U.K. Limited, Knight Plastics, Inc., CPI Holding Corporation and its subsidiary Cardinal Packaging, Inc., Poly-Seal Corporation, CBP Holdings, S.r.l. and its subsidiaries Capsol S.p.a. and Ociesse S.r.l., and Pescor, Inc. manufactures and markets plastic packaging products through its facilities located in Evansville, Indiana; Henderson, Nevada; Iowa Falls, Iowa; Charlotte, North Carolina; Suffolk, Virginia; Lawrence, Kansas; Monroeville, Ohio; Norwich, England; Woodstock, Illinois; Streetsboro, Ohio; Baltimore, Maryland; and Milan, Italy. In connection with the acquisition of CPI Holding Corporation in July 1999, the Company acquired manufacturing facilities in Ontario, California and Minneapolis, Minnesota. The Ontario facility was closed in 1999, and all production was removed from the Minneapolis facility in 2000. Also in 2000, the Company closed its manufacturing facility in York, Pennsylvania. In 2002, the Company closed its Fort Worth, Texas facility, which was acquired in connection with the acquisition of Pescor Plastics, Inc. in May 2001. The business from these closed locations has been distributed throughout Berry's facilities. Holding's fiscal year is a 52/53 week period ending generally on the Saturday closest to December 31. All references herein to "2002," "2001," and "2000," relate to the fiscal years ended December 28, 2002, December 29, 2001, and December 30, 2000, respectively. Due to the Merger (see Note 3), fiscal 2002 consists of two separate periods of December 30, 2001 to July 21, 2002 (Predecessor) and July 22, 2002 to December 28, 2002 (Company). 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 three primary segments: containers, closures, and consumer products. The Company's customers are located principally throughout the United States, without significant concentration in any one region or with any one customer. The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. Purchases of various densities of plastic resin used in the manufacture of the Company's products aggregated approximately $113.0 million in 2002. Dow Chemical Corporation is the largest supplier (approximately 43%) of the Company's total resin material requirements. The Company also uses other suppliers such as Equistar, Atofina, Chevron, Basell, ExxonMobil, and Nova to meet its resin requirements. F-8 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 maturity of three months or less at the date of purchase are considered to be cash equivalents. ACCOUNTS RECEIVABLE The allowance for doubtful accounts is analyzed in detail on a quarterly basis and all significant customers with delinquent balances are reviewed to determine future collectibility. The determinations are based on legal issues (such as bankruptcy status), past history, current financial and credit agency reports, and the experience of the credit representatives. Reserves are established in the quarter in which the Company makes the determination that the account is deemed uncollectible. The Company maintains additional reserves based on its historical bad debt experience. 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 15 to 25 years for buildings and improvements and two to 10 years for machinery, equipment, and tooling. Repairs and maintenance costs are charged to expense as incurred. INTANGIBLE ASSETS Deferred financing fees are being amortized using the straight-line method over the lives of the respective debt agreements. Customer relationships are being amortized using the straight-line method over the estimated life of the relationships of 20 years. Goodwill represents the excess purchase price over the fair value of the net assets acquired in the Merger (see Note 3 below). These costs are reviewed annually for impairment pursuant to SFAS No. 142, Goodwill and Other Intangible Assets. Trademarks are reviewed for impairment annually pursuant to SFAS No. 142. Other intangibles, which include covenants not to compete and technology-based intangibles, are being amortized using the straight-line method over the respective lives of the agreements or estimated life of the technology ranging from one to twenty years. F-9 LONG-LIVED ASSETS Holding evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable based on expected undiscounted cash flows attributed to that asset. The amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. No impairments were recorded during 2002, 2001, or 2000. DERIVATIVE FINANCIAL INSTRUMENTS The Company uses an interest rate collar to manage a portion of its interest rate exposures. The instrument was entered into to manage market risk exposures and is not used for trading purposes. Management routinely reviews the effectiveness of the use of derivative instruments. The Company has recognized the interest rate collar at its fair value in the consolidated balance sheets. FOREIGN CURRENCY TRANSLATION Assets and liabilities of most foreign subsidiaries are translated at exchange rates in effect at the balance sheet date, and the statements of operations are translated at the average monthly exchange rates for the period. Translation gains and losses are recorded as a component of accumulated other comprehensive income (loss) in stockholders' equity. Foreign currency transaction gains and losses are included in net income. REVENUE RECOGNITION Revenue from sales of products is recognized at the time product is shipped to the customer, at which time title and risk of ownership transfer to the purchaser. STOCK-BASED COMPENSATION Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS No. 148, "Accounting for Stock-Based Compensation--Transition and Disclosure," established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans. As provided for under SFAS 123, the Company accounts for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion 25, "Accounting for Stock Issued to Employees." Compensation cost for stock options, if any, is measured as the excess of the fair value of the Company's stock at the date of grant over the amount an employee must pay to acquire the stock. The fair value for options granted by Holding have F-10 been estimated at the date of grant using a Black Scholes option pricing model with the following weighted average assumptions:
- ---------------------------------------------------------------------------------------------- COMPANY PREDECESSOR ----------- ----------------------------------------- PERIOD FROM PERIOD FROM YEAR ENDED YEAR ENDED 7/22/02- 12/30/01- DECEMBER 29, DECEMBER 30, 12/28/02 7/21/02 2001 2000 - ---------------------------------------------------------------------------------------------- Risk-free interest rate.............. 4.0% 4.0% 5.5% 6.5% Dividend yield....................... 0.0% 0.0% 0.0% 0.0% Volatility factor.................... .25 .25 .28 .20 Expected option life................. 5.0 years 5.0 years 6.5 years 6.5 years
For purposes of the pro forma disclosures, the estimated fair value of the stock options are amortized to expense over the related vesting period. Because compensation expense is recognized over the vesting period, the initial impact on pro forma net income (loss) may not be representative of compensation expense in future years, when the effect of amortization of multiple awards would be reflected in the Consolidated Statement of Operations. The following is a reconciliation of reported net income (loss) to net income (loss) as if the Company used the fair value method of accounting for stock-based compensation.
- ---------------------------------------------------------------------------------------------- COMPANY PREDECESSOR ----------- ----------------------------------------- PERIOD FROM PERIOD FROM YEAR ENDED YEAR ENDED 7/22/02- 12/30/01- DECEMBER 29, DECEMBER 30, 12/28/02 7/21/02 2001 2000 - ---------------------------------------------------------------------------------------------- Reported net income (loss)........... $3,179 $(35,795) $(2,095) $(23,107) Stock-based employee compensation expense included in reported income (loss), net of tax................. - 1,920 796 459 Total stock-based employee compensation expense determined under fair value based method, for all awards, net of tax............. (856) (371) (1,401) (866) ------------------------------------------------------- Pro forma net income (loss).......... $2,323 $(34,246) $(2,700) $(23,514) - ----------------------------------------------------------------------------------------------
INCOME TAXES The Company accounts for income taxes under the asset and liability approach, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequence of events that have been recognized in the Company's financial statements or income tax returns. Income taxes are recognized during the year in which the underlying transactions are reflected in the Consolidated Statements of Operations. Deferred taxes are provided for temporary differences between amounts of assets and liabilities as recorded for financial reporting purposes and such amounts as measured by tax laws. F-11 COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) is comprised of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains or losses on derivative financial instruments, unrealized gains or losses resulting from currency translations of foreign investments, and the adjustment to record the minimum pension liability. 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 in the prior year financial statements and related notes have been reclassified to conform to the current year presentation. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In June 2001, the FASB issued SFAS No. 141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible Assets. These pronouncements significantly change the accounting for business combinations, goodwill, and intangible assets. SFAS No. 141 eliminates the pooling-of-interests method of accounting for business combinations and further clarifies the criteria to recognize intangible assets separately from goodwill. The requirements of SFAS No. 141 became effective for any business combination completed after June 30, 2001. SFAS No. 142 states goodwill and indefinite lived intangible assets are no longer amortized but are reviewed for impairment annually (or more frequently if impairment indicators arise). Separable intangible assets that are deemed to have a finite life will continue to be amortized over their estimated useful lives. The Company adopted the provisions of SFAS Nos. 141 and 142 as of the beginning of fiscal 2002. Application of the nonamortization provisions of SFAS No. 142 is expected to result in an increase in net income (or decrease in net loss) of approximately $10.5 million per year based on goodwill related to acquisitions prior to the adoption of the new rules. The Merger (see Note 3) has been accounted for under the purchase method of accounting, and accordingly, the purchase price has been allocated to the identifiable assets and liabilities based on estimated fair values at the acquisition date. The allocation is preliminary and is subject to change pending the finalization of expenses related to the Merger. The following table presents the results of the Company on a comparable basis:
- ---------------------------------------------------------------------------------------------- COMPANY PREDECESSOR ----------- ----------------------------------------- PERIOD FROM PERIOD FROM YEAR ENDED YEAR ENDED 7/22/02- 12/30/01- DECEMBER 29, DECEMBER 30, 12/28/02 7/21/02 2001 2000 - ---------------------------------------------------------------------------------------------- Reported net income (loss)........... $3,179 $(35,795) $(2,095) $(23,107) Goodwill amortization, net of tax.... - - 9,964 7,701 ------------------------------------------------------- Adjusted net income (loss)........... $3,179 $(35,795) $ 7,869 $(15,406) - ----------------------------------------------------------------------------------------------
F-12 In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This statement addresses the financial accounting and reporting for the impairment and disposal of long-lived assets. It supercedes and addresses significant issues relating to the implementation of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. SFAS No. 144 retains many of the fundamental provisions of SFAS No. 121 and establishes a single accounting model, based on the framework established in SFAS No. 121, for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. The Company adopted this standard as of the beginning of fiscal 2002. The application of SFAS No. 144 did not have a material impact on the Company's results of operations and financial position. In April 2002, the FASB issued Statement of Financial Accounting Standards No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections (SFAS No. 145). Upon the adoption of SFAS No. 145, all gains and losses on the extinguishment of debt for periods presented in the financial statements will be classified as extraordinary items only if they meet the criteria in APB Opinion No. 30, Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions (APB No. 30). The provisions of SFAS No. 145 related to the rescission of FASB Statement No. 4 and FASB Statement No. 64 shall be applied for fiscal years beginning after May 15, 2002. As a result, the Company will reclassify the extraordinary item in the Statements of Operations to continuing operations in its 2003 financial statements. The provisions of SFAS No. 145 related to the rescission of FASB Statement No. 44, the amendment of FASB Statement No. 113 and Technical Corrections became effective as of May 15, 2002 and did not have a material impact on the Company. In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities (SFAS No.146). SFAS No. 146 nullifies Emerging Issues Task Force (EITF) Issue No, 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146 generally requires companies to recognize costs associated with exit activities when they are incurred rather than at the date of a commitment to an exit or disposal plan and is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The Company does not believe that this standard will have a material impact on its results of operations and financial position. In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation--Transition and Disclosure (SFAS No. 148). SFAS No. 148 amends FASB Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS No. 123), to provide alternative methods of transition to SFAS No. 123's fair value method of accounting for stock-based employee compensation. SFAS No. 148 also amends the disclosure provisions of SFAS No. 123 and Accounting Principles Board (APB) Opinion No. 28, Interim Financial Reporting, to require disclosure in the summary of significant accounting policies of the effect of an entity's accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. SFAS No. 148 is applicable to all companies with stock-based employee compensation, regardless of whether they account for that compensation using the fair value method of SFAS No. 123 or the intrinsic value method of APB Opinion No. 25, Accounting for Stock Issued to Employees. The Company uses the intrinsic value method of accounting for stock issued to employees. See Note 2 and Note 10 to the Consolidated Financial Statements for details related to stock-based compensation. F-13 NOTE 3. THE MERGER On July 22, 2002, GS Berry Acquisition Corp., (the "Buyer") a newly formed entity controlled by various private equity funds affiliated with Goldman, Sachs & Co., merged (the "Merger") with and into BPC Holding, pursuant to an agreement and plan of merger, dated as of May 25, 2002. At the effective time of the Merger, (i) each share of common stock of BPC Holding Corporation issued and outstanding immediately prior to the effective time of the Merger was converted into the right to receive cash pursuant to the terms of the merger agreement, and (ii) each share of common stock of the Buyer issued and outstanding immediately prior to the effective time of the Merger was converted into one share of common stock of BPC Holding. The total amount of funds required to consummate the Merger and to pay estimated fees and expenses related to the Merger, including amounts related to the repayment of indebtedness, the redemption of the outstanding preferred stock and accrued dividends, the redemption of outstanding warrants, and the payment of transaction costs incurred by Holding, were approximately $870.2 million (which includes the amount of certain indebtedness which remained outstanding and the value of certain shares of Holding common stock held by employees that were contributed to the Buyer immediately prior to the Merger). The Buyer and its affiliates own approximately 63% of the common stock of Holding. The remaining common stock of Holding is held by J.P. Morgan Partners Global Investors, L.P. and other private equity funds affiliated with J.P. Morgan Partners, LLC, the private equity investment arm of J.P. Morgan Chase & Co., which own approximately 29% of Holding's common stock and by members of Berry's management, which own the remaining 8%. The Merger has been accounted for under the purchase method of accounting, and accordingly, the purchase price has been allocated to the identifiable assets and liabilities based on estimated fair values at the acquisition date. The allocation is preliminary and is subject to change pending the finalization of expenses related to the Merger. The Company has applied the provisions of Emerging Issues Task Force 88-16, Basis in Leveraged Buyout Transactions, whereby, the carryover equity interests of certain shareholders from the Predecessor to the Company were recorded at their Company basis. The application of these provisions reduced stockholder's equity and intangibles by $196.6 million. In connection with the Merger, the Predecessor incurred Merger related expenses of approximately $21.0 million, consisting primarily of investment banking fees, bonuses to management, non-cash modification of stock option awards, legal costs, and fees to the largest voting stockholder of the Predecessor. In addition, as a result of extinguishing debt in connection with the Merger, $6.6 million of existing deferred financing fees and $18.7 million of prepayment fees and related charges were charged to expense in 2002 as an extraordinary item. The following table summarizes the preliminary allocation of purchase price.
- ----------------------------------------------------------------------- Purchase price.............................................. $ 836,692 Estimated Buyer transaction costs........................... 12,398 Net tangible assets acquired................................ (249,182) Intangible assets acquired.................................. (67,045) Adjustment for carryover basis of continuing stockholders... (196,603) --------- Goodwill.................................................... $ 336,260 - -----------------------------------------------------------------------
F-14 NOTE 4. ACQUISITIONS On May 14, 2001, Berry acquired all of the outstanding capital stock of Pescor Plastics, Inc. ("Pescor") for aggregate consideration of approximately $24.8 million. The purchase was financed through the issuance by Holding of $9.8 million of 14% predecessor preferred stock and additional borrowings under the retired senior credit facility. The operations of Pescor are included in Berry's operations since the acquisition date using the purchase method of accounting. On January 24, 2002, Berry acquired the Alcoa Flexible Packaging injection molding assets of Mt. Vernon Plastics Corporation ("Mount Vernon") for aggregate consideration of approximately $2.6 million. The purchase price was allocated to fixed assets ($2.0 million) and inventory ($0.6 million). The purchase was financed through borrowings under the Company's revolving line of credit under its retired senior credit facility. The operations of Mount Vernon are included in Berry's operations since the acquisition date using the purchase method of accounting. On January 31, 2002, Berry entered into a sale/leaseback arrangement with respect to the Mt. Vernon fixed assets. Pro forma results for 2002 have not been presented as they do not differ materially from reported historical results. For 2001, pro forma net sales and pro forma net loss would have been $489,724 and $3,057, respectively. This information was calculated as if the Pescor acquisition and Mount Vernon acquisition occurred at the beginning of 2001. The pro forma financial information above is presented for informational purposes only and is not necessarily indicative of the operating results that would have occurred had the acquisitions been consummated at the above dates, nor are they necessarily indicative of future operating results. Further, the information obtained 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 (amortization through December 29, 2001), net of the applicable income tax effects. NOTE 5. INTANGIBLE ASSETS Intangible assets consist of the following:
- ----------------------------------------------------------------------------------------- COMPANY PREDECESSOR ------------ ------------ DECEMBER 28, DECEMBER 29, 2002 2001 - ----------------------------------------------------------------------------------------- Deferred financing fees..................................... $ 21,411 $ 20,894 Customer relationships...................................... 34,664 - Goodwill.................................................... 336,260 146,494 Trademarks.................................................. 27,048 - Covenants not to compete and other.......................... 1,656 7,376 Technology-based............................................ 4,982 - Accumulated amortization.................................... (2,824) (44,411) --------------------------- $ 423,197 $ 130,353 - -----------------------------------------------------------------------------------------
The changes in intangible assets are a result of the Merger and the application of SFAS No. 141 and SFAS No. 142. F-15 Future amortization expense for definite lived intangibles at December 28, 2002 for the next five fiscal years is approximately $4.3 million, $3.8 million, $3.8 million, $3.7 million, and $3.7 million for fiscal 2003, 2004, 2005, 2006, and 2007, respectively. NOTE 6. LONG-TERM DEBT Long-term debt consists of the following:
- ----------------------------------------------------------------------------------------- COMPANY PREDECESSOR ------------ ------------ DECEMBER 28, DECEMBER 29, 2002 2001 - ----------------------------------------------------------------------------------------- Berry 10 3/4% Senior Subordinated Notes..................... $ 250,000 $ - Term loans.................................................. 329,175 54,596 Revolving lines of credit................................... 692 49,053 Nevada Industrial Revenue Bonds............................. 2,500 3,000 Capital leases.............................................. 27,576 18,131 Holding 12.50% Senior Secured Notes......................... - 135,714 Berry 12.25% Senior Subordinated Notes...................... - 125,000 Berry 11% Senior Subordinated Notes......................... - 75,000 Second Lien Senior Credit Facility.......................... - 25,000 Debt premium, net........................................... - 387 --------------------------- 609,943 485,881 Less current portion of long-term debt...................... 8,641 22,292 --------------------------- $ 601,302 $ 463,589 - -----------------------------------------------------------------------------------------
BERRY 10 3/4% SENIOR SUBORDINATED NOTES On July 22, 2002, Berry completed an offering of $250.0 million aggregate principal amount of 10 3/4% Senior Subordinated Notes due 2012 (the "2002 Notes"). The net proceeds to Berry from the sale of the 2002 Notes, after expenses, were $239.4 million. The proceeds from the 2002 Notes were used in the financing of the Merger. The 2002 Notes mature on July 15, 2012, and interest is payable semi-annually on January 15 and July 15 of each year beginning January 15, 2003. Holding and all of Berry's domestic subsidiaries fully, jointly, severally, and unconditionally guarantee on a senior subordinated basis the 2002 Notes. The 2002 Notes are not guaranteed by the foreign subsidiaries: Berry Plastics Acquisition Corporation II, NIM Holdings Limited, Berry Plastics U.K. Limited, Norwich Acquisition Limited, CBP Holdings S.r.l., Capsol Berry Plastics S.p.a., or Ociesse S.r.l. Berry is not required to make mandatory redemption or sinking fund payments with respect to the 2002 Notes. On or subsequent to July 15, 2007, the 2002 Notes may be redeemed at the option of Berry, in whole or in part, at redemption prices ranging from 105.375% in 2007 to 100% in 2010 and thereafter. Prior to July 15, 2005, up to 35% of the 2002 Notes may be redeemed at 110.75% of the principal amount at the option of Berry in connection with an equity offering. Upon a change in control, as defined in the indenture entered into in connection with the 2002 Notes (the "2002 Indenture"), each holder of notes will have the F-16 right to require Berry to repurchase all or any part of such holder's notes at a repurchase price in cash equal to 101% of the aggregate principal amount thereof plus accrued interest. CREDIT FACILITY In connection with the Merger, the Company entered into a credit and guaranty agreement and a related pledge security agreement with a syndicate of lenders led by Goldman Sachs Credit Partners L.P., as administrative agent (the "Credit Facility"). The Credit Facility provides (i) a $330.0 million term loan, (ii) a $50.0 million delayed draw term loan facility, and (iii) a $100.0 million revolving credit facility. The maturity date of the term loan is July 22, 2010, and the maturity date of the revolving credit facility is July 22, 2008. The term loan was funded on the closing date. The indebtedness under the Credit Facility is guaranteed by Holding and all of its domestic subsidiaries. The obligations of the Company and the subsidiaries under the Credit Facility and the guarantees thereof are secured by substantially all of the assets of such entities. The Credit Facility contains significant financial and operating covenants, including prohibitions on the ability to incur certain additional indebtedness or to pay dividends, and restrictions on the ability to make capital expenditures. Amounts available under the delayed draw term loan facility may be borrowed in connection with permitted acquisitions (but not reborrowed) during the 18-month period that began on July 22, 2002, subject to certain conditions. The Credit Facility also contains borrowing conditions and customary events of default, including nonpayment of principal or interest, violation of covenants, inaccuracy of representations and warranties, cross-defaults to other indebtedness, bankruptcy and other insolvency events (other than in the case of certain foreign subsidiaries). The Company was in compliance with all the financial and operating covenants at December 28, 2002. The term loan amortizes quarterly as follows: $825,000 each quarter beginning September 30, 2002 and ending June 30, 2009 and $76,725,000 each quarter beginning September 30, 2009 and ending June 30, 2010. The delayed draw term loan facility will amortize quarterly commencing March 31, 2004 based on the amounts outstanding as of that date as follows: (i) 2% per quarter in 2004, (ii) 4% per quarter in 2005, (iii) 6% per quarter in 2006, (iv) 8% per quarter in 2007 and (v) 10% per quarter in each of the first two quarters in 2008. Borrowings under the Credit Facility bear interest, at the Company's option, at either (i) a base rate (equal to the greater of the prime rate and the federal funds rate plus 0.5%) plus the applicable margin (the "Base Rate Loans") or (ii) an adjusted eurodollar LIBOR (adjusted for reserves) plus the applicable margin (the "Eurodollar Rate Loans"). With respect to the term loan, the "applicable margin" is (i) with respect to Base Rate Loans, 2.00% per annum and (ii) with respect to Eurodollar Rate Loans, 3.00% per annum (4.6% at December 28, 2002). With respect to the delayed draw term loan facility and the revolving credit facility, the "applicable margin" is, with respect to Eurodollar Rate Loans, initially 2.75% per annum. After the end of the quarter ending March 30, 2003, the "applicable margin" with respect to Eurodollar Rate Loans will be subject to a pricing grid which ranges from 2.75% per annum to 2.00% per annum, depending on the leverage ratio. The "applicable margin with respect to Base Rate Loans will always be 1.00% per annum less than the "applicable margin" for Eurodollar Rate Loans. In October 2002, Berry entered into an interest rate collar arrangement to protect $50.0 million of the outstanding variable rate term loan debt from future interest rate volatility. The collar floor is set at 1.97% LIBOR (London Interbank Offering Rate) and capped at 6.75% LIBOR. The agreement is effective January 15, 2003. At December 28, 2002, shareholders' equity has been reduced by $0.6 million to adjust the agreement to fair market F-17 value. At December 28, 2002, the Company had unused borrowing capacity under the Credit Facility's revolving line of credit of $92.6 million. However, the covenants under our amended and restated senior secured credit facility may limit our ability to make such borrowings and as of December 28, 2002, we could have borrowed $30.9 million. NEVADA INDUSTRIAL REVENUE BONDS The Nevada Industrial Revenue Bonds bear interest at a variable rate (1.7% at December 28, 2002 and 1.7% at December 29, 2001), require annual principal payments of $0.5 million on April 1, are collateralized by irrevocable letters of credit issued under the amended and restated senior secured credit facility and mature in April 2007. HOLDING 12.50% SENIOR SECURED NOTES (PREDECESSOR) On June 18, 1996, Holding issued 12.50% Senior Secured Notes due 2006 for net proceeds, after expenses, of approximately $100.2 million. These notes were exchanged in October 1996 for the 12.50% Series B Senior Secured Notes due 2006 (the "1996 Notes"). Interest was payable semi-annually on June 15 and December 15 of each year. In addition, from December 15, 1999 until June 15, 2001, Holding paid interest, at an increased rate of 0.75% per annum, in additional 1996 Notes valued at 100% of the principal amount thereof. Holding issued an additional approximately $30.7 million ($8.4 million in 2001 and $15.3 million in 2000) aggregate principal amount of 1996 Notes in satisfaction of its interest obligation. The 1996 Notes were retired in connection with the Merger and the associated premium for early retirement and net deferred financing fees were charged as an extraordinary item. BERRY 12.25% SENIOR SUBORDINATED NOTES (PREDECESSOR) 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 the Predecessor's common stock. The net proceeds to Berry from the sale of the 1994 Notes, after expenses, were $93.0 million. On August 24, 1998, Berry completed an additional offering of $25.0 million aggregate principal amount of 12.25% Series B Senior Subordinated Notes due 2004 (the "1998 Notes"). The net proceeds to Berry from the sale of the 1998 Notes, after expenses, were $25.2 million. Interest was payable semi-annually on October 15 and April 15 of each year and commenced on October 15, 1994 and October 15, 1998 for the 1994 Notes and 1998 Notes, respectively. The 1994 Notes and 1998 Notes were retired in connection with the Merger and the associated premium for early retirement and net deferred financing fees were expensed as an extraordinary item. BERRY 11% SENIOR SUBORDINATED NOTES (PREDECESSOR) On July 6, 1999, Berry completed an offering of $75.0 million aggregate principal amount of 11% Berry Plastics Corporation Senior Subordinated Notes, due 2007 (the "1999 Notes"). The net proceeds to Berry from the sale of the 1999 Notes, after expenses, were $72.0 million. Interest was payable semi-annually on January 15 and July 15 of each year and commenced on January 15, 2000. The 1999 Notes were retired in connection with the Merger and the associated premium for early retirement and net deferred financing fees were charged as an extraordinary item. F-18 RETIRED CREDIT FACILITY (PREDECESSOR) The Company had a financing and security agreement (the "Retired Financing Agreement") with a syndicate of lenders led by Bank of America for a senior secured credit facility (the "Retired Credit Facility"). The Retired Financing Agreement amended the prior agreement as additional funds were made available in connection with the acquisition of Poly-Seal. The amendment resulted in an extraordinary charge in fiscal 2000 of $1.0 million of deferred financing costs associated with the Retired Financing Agreement and the prior financing agreement. As of December 29, 2001, the Retired Credit Facility provided the Company with (i) an $80.0 million revolving line of credit, subject to a borrowing base formula, (ii) a $2.2 million (using the December 29, 2001 exchange rate) revolving line of credit denominated in British Sterling in the U.K., subject to a separate borrowing base formula, (iii) a $52.6 million term loan facility, (iv) a $2.0 million (using the December 29, 2001 exchange rate) term loan facility denominated in British Sterling in the U.K. and (v) a $3.2 million standby letter of credit facility to support the Company's and its subsidiaries' obligations under the Nevada Bonds. The Retired Credit Facility matured on January 21, 2004 unless previously terminated by the Company or by the lenders upon an Event of Default as defined in the Retired Financing Agreement. The Retired Credit Facility was extinguished in connection with the Merger and the associated net deferred financing fees were charged as an extraordinary item. SECOND LIEN SENIOR CREDIT FACILITY (PREDECESSOR) On July 17, 2000, Berry obtained a second lien senior credit facility from General Electric Capital Corporation for an aggregate principal amount of $25.0 million (the "Second Lien Senior Facility"), resulting in net proceeds of $24.3 million after fees and expenses. The Second Lien Credit Facility was extinguished in connection with the Merger and the associated net deferred financing fees were charged as an extraordinary item. OTHER Future maturities of long-term debt are as follows: 2003, $8,641; 2004, $8,337; 2005, $8,986; 2006, $6,119; 2007, $6,493 and $571,367 thereafter. Interest paid was $40,883, $44,171, and $32,836, for 2002, 2001, and 2000, respectively. Interest capitalized was $844, $589, and $1,707, for 2002, 2001, and 2000, respectively. NOTE 7. LEASE AND OTHER COMMITMENTS Certain property and equipment are leased using capital and operating leases. In 2002 and 2001, Berry entered into various capital lease obligations with no immediate cash flow effect resulting in capitalized property and equipment of $21,169 and $18,737, respectively. Total capitalized lease property consists of manufacturing equipment and a building with a cost of $32,462 and $22,342 and related accumulated amortization of $4,247 and $3,442 at December 28, 2002 and December 29, 2001, respectively. Capital lease amortization is included in depreciation expense. Total rental expense from operating leases was approximately $9,761, $8,292, and $9,183 for 2002, 2001, and 2000, respectively. F-19 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, 2002 --------------------------------- CAPITAL LEASES OPERATING LEASES - ----------------------------------------------------------------------------------------------- 2003........................................................ $ 6,416 $ 6,925 2004........................................................ 6,333 5,280 2005........................................................ 6,104 3,906 2006........................................................ 2,839 2,386 2007........................................................ 2,720 724 Thereafter.................................................. 8,689 - --------------------------------- 33,101 $ 19,221 ---------------- Less: amount representing interest....................... (5,525) -------------- Present value of net minimum lease payments.............. $ 27,576 - -----------------------------------------------------------------------------------------------
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 our financial condition. NOTE 8. INCOME TAXES For financial reporting purposes, income (loss) before income taxes and extraordinary item, by tax jurisdiction, is comprised of the following:
- ---------------------------------------------------------------------------------------------- COMPANY PREDECESSOR ----------- ----------------------------------------- PERIOD FROM PERIOD FROM YEAR ENDED YEAR ENDED 7/22/02- 12/30/01- DECEMBER 29, DECEMBER 30, 12/28/02 7/21/02 2001 2000 - ---------------------------------------------------------------------------------------------- United States........................ $ 7,331 $ (8,087) $ 5,046 $ (18,506) Foreign.............................. (1,199) (2,035) (6,407) (3,721) ------------------------------------------------------- $ 6,132 $ (10,122) $ (1,361) $ (22,227) - ----------------------------------------------------------------------------------------------
F-20 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 assets and liabilities are as follows:
- ----------------------------------------------------------------------------------------- DECEMBER 28, DECEMBER 29, 2002 2001 - ----------------------------------------------------------------------------------------- Deferred tax assets: Allowance for doubtful accounts.......................... $ 583 $ 654 Inventory................................................ 1,517 1,422 Compensation and benefit accruals........................ 2,753 2,871 Insurance reserves....................................... 637 657 Net operating loss carryforwards......................... 28,297 14,102 Alternative minimum tax (AMT) credit carryforwards.......... 3,055 3,055 Other....................................................... 875 - --------------------------- Total deferred tax assets................................ 37,717 22,761 Valuation allowance...................................... (9,561) (3,629) --------------------------- Deferred tax assets, net of valuation allowance............. 28,156 19,132 Deferred tax liabilities: Depreciation and amortization............................ 28,796 19,621 --------------------------- Net deferred tax liability............................... $ (640) $ (489) - -----------------------------------------------------------------------------------------
Income tax expense (benefit) consists of the following:
- ---------------------------------------------------------------------------------------------- COMPANY PREDECESSOR ----------- ----------------------------------------- PERIOD FROM PERIOD FROM YEAR ENDED YEAR ENDED 7/22/02- 12/30/01- DECEMBER 29, DECEMBER 30, 12/28/02 7/21/02 2001 2000 - ---------------------------------------------------------------------------------------------- Current: Federal........................... $ - $ - $ 154 $ - Foreign........................... 26 375 125 - State............................. 217 (30) 455 207 Deferred: Federal........................... 2,280 - - - Foreign........................... - - - (349) State............................. 430 - - ------------------------------------------------------- Income tax expense (benefit)......... $ 2,953 $ 345 $ 734 $ (142) - ----------------------------------------------------------------------------------------------
Holding has unused operating loss carryforwards of approximately $72.3 million for federal and state income tax purposes which begin to expire in 2010. AMT credit carryforwards are available to Holding indefinitely to reduce future years' federal income taxes. As a result of the Merger, the amount of the carryforward which can be used in any given year will be limited to approximately $12 million. F-21 Income taxes paid during 2002, 2001, and 2000 approximated $531, $314, and $329, respectively. A reconciliation of income tax expense (benefit), computed at the federal statutory rate, to income tax expense (benefit), as provided for in the financial statements, is as follows:
- ---------------------------------------------------------------------------------------------- COMPANY PREDECESSOR ----------- ----------------------------------------- PERIOD FROM PERIOD FROM YEAR ENDED YEAR ENDED 7/22/02- 12/30/01- DECEMBER 29, DECEMBER 30, 12/28/02 7/21/02 2001 2000 - ---------------------------------------------------------------------------------------------- Income tax expense (benefit) computed at statutory rate.................. $ 2,081 $ (12,170) $ (463) $ (7,557) State income tax expense (benefit), net of federal taxes............... 434 (1,035) 795 (403) Amortization of goodwill............. - - 2,399 2,262 Expenses not deductible for income tax purposes....................... 60 3,823 36 119 Change in valuation allowance........ - 9,160 (2,978) 5,340 Other................................ 378 567 945 97 ------------------------------------------------------- Income tax expense (benefit)......... $ 2,953 $ 345 $ 734 $ (142) - ----------------------------------------------------------------------------------------------
NOTE 9. EMPLOYEE RETIREMENT PLANS Berry sponsors a defined contribution 401(k) retirement plan covering substantially all employees. Contributions are based upon a fixed dollar amount for employees who participate and percentages of employee contributions at specified thresholds. Contribution expense for this plan was approximately $1,462, $1,349, and $1,301, for 2002, 2001, and 2000, respectively. The Company also maintains a defined benefit pension plan covering the Poly-Seal employees under a collective bargaining agreement. At December 28, 2002, stockholders' equity has been reduced by $395 as a result of recording the minimum pension liability. NOTE 10. STOCKHOLDERS' EQUITY COMMON AND PREFERRED STOCK On July 22, 2002, GS Berry Acquisition Corp., (the "Buyer") a newly formed entity controlled by various private equity funds affiliated with Goldman, Sachs & Co., merged (the "Merger") with and into BPC Holding, pursuant to an agreement and plan of merger, dated as of May 25, 2002. At the effective time of the Merger, (i) each share of common stock of BPC Holding Corporation issued and outstanding immediately prior to the effective time of the Merger was converted into the right to receive cash pursuant to the terms of the merger agreement, and (ii) each share of common stock of the Buyer issued and outstanding immediately prior to the effective time of the Merger was converted into one share of common stock of BPC Holding. The authorized capital stock of Holding consists of 5,500,000 shares of capital stock, including 5,000,000 shares of Common Stock, $.01 par value (the "Holding Common Stock") and 500,000 shares of Preferred Stock, $.01 par value. F-22 NOTES RECEIVABLE FROM MANAGEMENT In connection with the Merger, certain senior employees of BPC Holding acquired shares of BPC Holding Common Stock pursuant to an employee stock purchase program. Such employees paid for these shares with any combination of (i) shares of BPC Holding common stock that they held prior to the Merger; (ii) their cash transaction bonus, if any; and (iii) a promissory note. In addition, BPC Holding adopted an employee stock purchase program pursuant to which a number of employees had the opportunity to invest in BPC Holding on a leveraged basis. Employees participating in this program were permitted to finance two-thirds of their purchases of shares of BPC Holding common stock under the program with a promissory note. The promissory notes are secured by the shares purchased and such notes accrue interest which compounds semi-annually at rates ranging from 4.97% to 5.50% per year. Principal and all accrued interest is due and payable on the earlier to occur of (i) the end of the ten-year term, (ii) the ninetieth day following such employee's termination of employment due to death, "disability", "redundancy" (as such terms are defined in the 2002 Option Plan) or retirement, or (iii) the thirtieth day following such employee's termination of employment for any other reason. As of December 28, 2002, the Company had $14,399 in outstanding notes (principal and interest), which has been classified as a reduction to stockholders' equity in the consolidated balance sheet, due from employees under this program. STOCK OPTION PLANS BPC Holding maintains the Amended and Restated BPC Holding Corporation 1996 Stock Option Plan ("1996 Option Plan") pursuant to which nonqualified options to purchase 150,536 shares are outstanding. All outstanding options under the 1996 Option Plan are scheduled to expire on July 22, 2012 and no additional options will be granted under it. Option agreements issued pursuant to the 1996 Option Plan generally provide that options become vested and exercisable at a rate of 10% per year based on continued service. Additional options also vest in years during which certain financial targets are attained. Notwithstanding the vesting provisions in the option agreements, all options that were scheduled to vest prior to December 31, 2002 accelerated and became vested immediately prior to the Merger. BPC Holding has adopted a new employee stock option plan ("2002 Option Plan") pursuant to which options to acquire up to 437,566 shares of BPC Holding's common stock may be granted to its employees, directors and consultants. Options granted under the 2002 Option Plan will have an exercise price per share that either (1) is fixed at the fair market value of a share of common stock on the date of grant or (2) commences at the fair market value of a share of common stock on the date of grant and increases at the rate of 15% per year during the term. Generally, options will have a ten-year term, subject to earlier expiration upon the termination of the optionholder's employment and other events. Some options granted under the plan will become vested and exercisable over a five-year period based on continued service with BPC Holding. Other options will become vested and exercisable based on the achievement by BPC Holding of certain financial targets, or if such targets are not achieved, based on continued service with BPC Holding. Upon a change in control of BPC Holding, the vesting schedule with respect to certain options may accelerate for a portion of the shares subject to such options. 395,437 options were granted in 2002 at fair market value, none of which were exercisable at December 28, 2002. Financial Accounting Standards Board Statement 123, Accounting for Stock-Based Compensation ("Statement 123"), prescribes accounting and reporting standards for all stock-based compensation plans. Statement 123 provides that companies may elect to continue using F-23 existing accounting requirements for stock-based awards or may adopt a new fair value method to determine their intrinsic value. Holding has elected to continue following Accounting Principles Board Opinion No. 25, Accounting For Stock Issued to Employees ("APB 25") to account for its employee stock options. Under APB 25, because the exercise price of Holding's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized at the grant date. Information related to the 1996 Option Plan and 2002 Option Plan is as follows:
- ----------------------------------------------------------------------------------------------------------------- COMPANY PREDECESSOR PREDECESSOR PREDECESSOR -------------------- -------------------- -------------------- -------------------- DECEMBER 28, 2002 JULY 21, 2002 DECEMBER 29, 2001 DECEMBER 30, 2000 -------------------- -------------------- -------------------- -------------------- WEIGHTED WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE AVERAGE NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE - ----------------------------------------------------------------------------------------------------------------- Options outstanding, beginning of year... 48,218 $ 157 60,420 $ 132 60,774 $ 132 51,479 $ 107 Options converted..... 102,329 (107) - - - - - - Options granted....... 395,137 100 15,345 277 10,975 226 16,225 226 Options exercised..... - - (18,134) 177 (2,713) 107 - - Options canceled...... - - (9,413) 389 (8,616) 116 (6,930) 158 ----------------------------------------------------------------------------------------- Options outstanding, end of year......... 545,684 86 48,218 157 60,420 155 60,774 132 ----------------------------------------------------------------------------------------- Option price range at end of period....... $32-$100 $100-$226 $100-$226 $100-$226 Options exercisable at end of period....... 120,448 38,573 39,487 34,641 Options available for grant at period end................. 42,429 0 13,487 15,846 Weighted average fair value of options granted during year................ $100 $389 $226 $226 - -----------------------------------------------------------------------------------------------------------------
The following table summarizes information about the options outstanding at December 28, 2002:
- ------------------------------------------------------------------------------------------------- WEIGHTED AVERAGE NUMBER RANGE OF NUMBER OUTSTANDING REMAINING WEIGHTED AVERAGE EXERCISABLE AT EXERCISE PRICES AT DECEMBER 28, 2002 CONTRACTUAL LIFE EXERCISE PRICE DECEMBER 28, 2002 - ------------------------------------------------------------------------------------------------- $32-$72 150,547 10 years $ 50 120,448 $100 395,137 10 years $ 100 0 - ------------------------------------------------------------------------------------------------- 545,684 120,448 - -------------------------------------------------------------------------------------------------
STOCKHOLDERS AGREEMENTS In connection with the Merger, Holding entered into a stockholders' agreement with GSCP 2000 and other private equity funds affiliated with Goldman, Sachs & Co., which in the aggregate own a majority of the common stock, and J.P. Morgan Partners Global Investors, L.P. and other private equity funds affiliated with J.P. Morgan Securities Inc., which own F-24 approximately 29% of the common stock. GSCP 2000 and other private equity funds affiliated with Goldman, Sachs & Co., have the right to designate five members of the board of directors, one of which shall be a member of management, and J.P. Morgan Partners Global Investors, L.P. and other private equity funds affiliated with J.P. Morgan Securities Inc. have the right to designate two members of the board of directors, one of which will be designated by J.P. Morgan Partners Global Investors, L.P. The stockholders' agreement contains customary terms including terms regarding transfer restrictions, rights of first offer, tag along rights, drag along rights, preemptive rights and veto rights. PREFERRED STOCK (PREDECESSOR) In June 1996, for aggregate consideration of $15.0 million, Holding 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 Predecessor's 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 accrued at a rate of 14% per annum, compounding and payable quarterly in arrears (each date of payment, a "Dividend Payment Date"). The exercise price of the Warrants was $.01 per Warrant and were exercisable immediately. In conjunction with the acquisition of Venture Packaging, Inc. in 1997, Holding authorized and issued 200,000 shares of Series B Cumulative Preferred Stock to certain selling shareholders of Venture Packaging, Inc. The Preferred Stock had a stated value of $25 per share, and dividends accrued at a rate of 14.75% per annum. The Preferred Stock ranked 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 Predecessor's Class B Non-Voting Common Stock at $108 per share were issued to the same selling shareholders of Venture Packaging, Inc. Additional warrants to purchase 386 shares of Predecessor's Class B Non-Voting Common Stock at $108 per share were issued in fiscal 2000 to the same selling shareholders of Venture Packaging, Inc. In connection with the Poly-Seal acquisition in 2000, Holding issued 1,000,000 shares of Series A-1 Preferred Stock to JPMP(SBIC) and The Northwestern Mutual Life Insurance Company (collectively, the "Purchasers"). The Series A-1 Preferred Stock has a stated value of $25 per share, and dividends accrued at a rate of 14% per annum. In addition, Warrants to purchase an aggregate of 25,997 shares of Class B Non-Voting Common Stock at $0.01 per share were issued to the Purchasers. In connection with the Pescor acquisition on May 14, 2001, Holding issued 13,168 shares of Series C Preferred Stock, as defined below, to certain selling shareholders of Pescor. The Series C Preferred Stock was comprised of 3,063 shares of Series C-1 Preferred Stock, 1,910 shares of Series C-2 Preferred Stock, 2,135 shares of Series C-3 Preferred Stock, 3,033 shares of Series C-4 Preferred Stock, and 3,027 shares of Series C-5 Preferred Stock. The Series C Preferred Stock has stated values ranging from $639 per share to $1,024 per share, and dividends accrued at a rate of 14% per annum. In addition, the holders of the Series C Preferred had options beginning on December 31, 2001 to convert the Series C Preferred Stock to Series D Preferred Stock and Class B Nonvoting Common Stock. All of the Predecessor's Preferred Stock was retired in connection with the Merger. F-25 COMMON STOCK (PREDECESSOR) At the effective time of the Merger, (i) each share of common stock of BPC Holding Corporation issued and outstanding immediately prior to the effective time of the Merger was converted into the right to receive cash pursuant to the terms of the merger agreement, and (ii) each share of common stock of the Buyer issued and outstanding immediately prior to the effective time of the Merger was converted into one share of common stock of BPC Holding. NOTE 11. RELATED PARTY TRANSACTIONS Prior to the Merger, Atlantic Equity Partners International II, L.P. ("International") was our largest voting stockholder and International engaged First Atlantic Capital, Ltd. ("First Atlantic") to provide certain financial and management consulting services to the Company. Pursuant to a management agreement, First Atlantic received advisory fees of approximately $250, $139, and $580 in June 2001, March 2001, and May 2000, respectively, for originating, structuring and negotiating the acquisitions of Poly-Seal, Capsol, and Pescor, respectively. In consideration of financial advisory and management consulting services, the Company paid First Atlantic fees and expenses of $385, $756, and $821 for fiscal 2002, 2001, and 2000, respectively. In consideration of services performed in connection with the Merger, the Company paid First Atlantic fees and expenses of $1,786 in July 2002. In connection with the Merger, the Company paid $8.0 million to entities affiliated with Goldman, Sachs & Co. and $5.2 million to J.P. Morgan Securities Inc., an affiliate of J.P. Morgan Chase & Co., for advisory and other services. Goldman Sachs and J.P. Morgan acted as joint book-running managers in the issuance of the 2002 Notes and received fees of approximately $4.4 million and $3.2 million, respectively, for services performed. Goldman Sachs Credit Partners, L.P., an affiliate of Goldman Sachs, acted as the administrative agent, joint lead arranger and joint bookrunner for the Credit Facility and received fees of $3.6 million in July 2002 for services provided. JP Morgan Chase Bank, an affiliate of J.P. Morgan, acted as the joint lead arranger and joint bookrunner for the Credit Facility for consideration of approximately $3.6. million. In October 2002, the Company entered into an interest rate collar agreement with Goldman Sachs Capital Markets to protect $50.0 million of the outstanding variable rate term loan debt from future interest rate volatility. The collar floor is set at 1.97% LIBOR and capped at 6.75% LIBOR. NOTE 12. FAIR VALUE OF FINANCIAL INSTRUMENTS INFORMATION Holding's and the Company's financial instruments generally consist of cash and cash equivalents and long-term debt. The carrying amounts of Holding's and the Company's financial instruments approximate fair value at December 28, 2002, except for the 2002 Notes for which the fair value exceeded the carrying value by $13.8 million. F-26 NOTE 13. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The accumulated balances related to each component of the other comprehensive income (loss) consist of the following:
- ----------------------------------------------------------------------------------------- COMPANY PREDECESSOR ------------ ------------ DECEMBER 28, DECEMBER 29, 2002 2001 - ----------------------------------------------------------------------------------------- Currency translation........................................ $ 2,091 $ (1,429) Minimum pension liability adjustment........................ (394) - Unrealized loss on interest rate collar..................... (555) - --------------------------- $ 1,142 $ (1,429) - -----------------------------------------------------------------------------------------
NOTE 14. OPERATING SEGMENTS The Company has three reportable segments: containers, closures, and consumer products. The Company evaluates performance and allocates resources based on operating income before depreciation and amortization of intangibles adjusted to exclude (i) Merger expenses, (ii) Holding's legal and professional expenses, (iii) drink cup patent litigation expenses, (iv) uncompleted acquisition expense, (v) acquisition integration expense, (vi) plant shutdown expense, (vii) non-cash compensation, and (iii) management fees and reimbursed expenses paid to First Atlantic ("Adjusted EBITDA"). The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. F-27
- --------------------------------------------------------------------------------------------- YEAR ENDED ------------------------------------------ COMPANY/ PREDECESSOR PREDECESSOR PREDECESSOR ------------ ------------ ------------ DECEMBER 28, DECEMBER 29, DECEMBER 30, 2002 2001 2000 - --------------------------------------------------------------------------------------------- Net sales: Containers.................................... $ 250,423 $ 234,441 $ 231,209 Closures...................................... 133,892 132,384 112,202 Consumer Products............................. 109,988 94,834 64,677 Adjusted EBITDA: Containers.................................... 67,079 63,997 47,578 Closures...................................... 30,555 28,444 23,646 Consumer Products............................. 16,773 18,411 9,167 Total assets: Containers.................................... 359,635 204,001 188,129 Closures...................................... 229,962 158,009 178,768 Consumer Products............................. 170,979 84,866 45,225 Total cost over net assets acquired, net: Containers.................................... 170,892 61,048 65,443 Closures...................................... 87,066 39,682 44,507 Consumer Products............................. 78,302 19,193 4,740 Reconciliation of Adjusted EBITDA to loss before income taxes and extraordinary item: Adjusted EBITDA for reportable segments....... $ 114,407 $ 110,852 $ 80,391 Net interest expense.......................... (49,254) (54,355) (51,457) Depreciation.................................. (39,557) (38,105) (31,569) Amortization.................................. (2,408) (12,802) (10,579) Loss on disposal of property and equipment.... (299) (473) (877) Merger expenses............................... (20,987) - - Holding's legal and professional expense...... - (134) (165) Drink cup patent litigation expense........... - - (700) Uncompleted acquisition expense............... (216) - - Acquisition integration expense............... (1,353) (2,690) (2,237) Plant shutdown expense........................ (3,992) (2,221) (3,702) Non-cash compensation......................... - (796) (459) Management fees............................... (331) (637) (873) ------------------------------------------ Loss before income taxes and extraordinary item........................................ $ (3,990) $ (1,361) $ (22,227) - ---------------------------------------------------------------------------------------------
F-28 NOTE 15. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (IN THOUSANDS) Holding conducts its business through its wholly owned subsidiary, Berry. Holding and all of Berry's domestic subsidiaries fully, jointly, severally, and unconditionally guarantee on a senior subordinated basis the 2002 Notes issued by Berry. Berry and all of Berry's subsidiaries are 100% owned by Holding. Separate narrative information or financial statements of guarantor subsidiaries have not been included as management believes they would not be material to investors. Presented below is condensed consolidating financial information for Holding, Berry, and its subsidiaries at December 28, 2002 and December 29, 2001 and for the fiscal years ended December 28, 2002, December 29, 2001, and December 30, 2000. The equity method has been used with respect to investments in subsidiaries.
- ----------------------------------------------------------------------------------------------------------------- DECEMBER 28, 2002 (COMPANY) ------------------------------------------------------------------------------------------ BPC HOLDING BERRY PLASTICS COMBINED COMBINED CORPORATION CORPORATION GUARANTOR NON-GUARANTOR CONSOLIDATING (PARENT) (ISSUER) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED - ----------------------------------------------------------------------------------------------------------------- CONSOLIDATING BALANCE SHEETS Current assets....... $ 1 $ 58,995 $ 73,940 $ 11,192 $ - $ 144,128 Net property and equipment......... - 68,431 108,567 16,134 - 193,132 Other noncurrent assets............ 74,021 650,613 314,099 11,129 (626,546) 423,316 ------------------------------------------------------------------------------------------ Total assets......... $ 74,022 $ 778,039 $ 496,606 $ 38,455 $ (626,546) $ 760,576 ------------------------------------------------------------------------------------------ Current liabilities....... $ - $ 52,111 $ 21,142 $ 6,674 $ - $ 79,927 Noncurrent liabilities....... (1,141) 600,539 449,814 22,925 (466,651) 605,486 Equity (deficit)..... 75,163 125,389 25,650 8,856 (159,895) 75,163 ------------------------------------------------------------------------------------------ Total liabilities and equity (deficit)......... $ 74,022 $ 778,039 $ 496,606 $ 38,455 $ (626,546) $ 760,576 - -----------------------------------------------------------------------------------------------------------------
F-29
- ----------------------------------------------------------------------------------------------------------------- DECEMBER 29, 2001 (PREDECESSOR) ------------------------------------------------------------------------------------------ BPC HOLDING BERRY PLASTICS COMBINED COMBINED CORPORATION CORPORATION GUARANTOR NON-GUARANTOR CONSOLIDATING (PARENT) (ISSUER) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED - ----------------------------------------------------------------------------------------------------------------- CONSOLIDATING BALANCE SHEETS Current assets....... $ 440 $ 32,459 $ 68,518 $ 9,775 $ - $ 111,192 Net property and equipment......... -- 71,437 117,176 14,604 - 203,217 Other noncurrent assets............ 23,980 289,764 91,272 18,360 (290,909) 132,467 ------------------------------------------------------------------------------------------ Total assets......... $ 24,420 $ 393,660 $ 276,966 $ 42,739 $ (290,909) $ 446,876 ------------------------------------------------------------------------------------------ Current liabilities....... $ 861 $ 60,212 $ 22,555 $ 8,237 $ - $ 91,865 Noncurrent liabilities....... 163,160 311,574 310,244 35,555 (325,921) 494,612 Equity (deficit)..... (139,601) 21,874 (55,833) (1,053) 35,012 (139,601) ------------------------------------------------------------------------------------------ Total liabilities and equity (deficit)......... $ 24,420 $ 393,660 $ 276,966 $ 42,739 $ (290,909) $ 446,876 - -----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 28, 2002 (COMPANY/PREDECESSOR) ------------------------------------------------------------------------------------------ BPC HOLDING BERRY PLASTICS COMBINED COMBINED CORPORATION CORPORATION GUARANTOR NON-GUARANTOR CONSOLIDATING (PARENT) (ISSUER) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED - ----------------------------------------------------------------------------------------------------------------------- CONSOLIDATING STATEMENTS OF OPERATIONS Net sales.................. $ - $ 173,570 $ 300,149 $ 20,584 $ - $ 494,303 Cost of goods sold......... - 116,354 236,169 18,750 - 371,273 ------------------------------------------------------------------------------------------ Gross profit............... - 57,216 63,980 1,834 - 123,030 Operating expenses......... 1,920 27,857 44,894 2,796 - 77,467 ------------------------------------------------------------------------------------------ Operating income (loss).... (1,920) 29,359 19,086 (962) - 45,563 Other expenses............. - 145 249 (95) - 299 Interest expense, net...... 9,443 3,172 34,481 2,158 - 49,254 Income taxes (benefit)..... (8,234) 11,016 115 401 - 3,298 Extraordinary item......... 9,282 6,339 9,498 209 - 25,328 Equity in net (income) loss from subsidiary......... 20,205 28,892 3,635 - (52,732) - ------------------------------------------------------------------------------------------ Net income (loss).......... $ (32,616) $ (20,205) $ (28,892) $ (3,635) $ 52,732 $ (32,616) ------------------------------------------------------------------------------------------
F-30
- ----------------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 28, 2002 (COMPANY/PREDECESSOR) ------------------------------------------------------------------------------------------ BPC HOLDING BERRY PLASTICS COMBINED COMBINED CORPORATION CORPORATION GUARANTOR NON-GUARANTOR CONSOLIDATING (PARENT) (ISSUER) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED - ----------------------------------------------------------------------------------------------------------------------- CONSOLIDATING STATEMENTS OF CASH FLOWS Net income (loss).......... $ (32,616) $ (20,205) $ (28,892) $ (3,635) $ 52,732 $ (32,616) Non-cash expenses.......... 11,451 23,799 36,178 3,270 - 74,698 Equity in net (income) loss from subsidiary......... 20,205 28,892 3,635 - (52,732) - Changes in working capital................. (320) (6,290) (7,557) (1,275) - (15,442) ------------------------------------------------------------------------------------------ Net cash provided by (used for) operating activities.............. (1,280) 26,196 3,364 (1,640) - 26,640 Net cash used for investing activities.............. - (18,023) (25,704) (1,171) - (44,898) Net cash provided by financing activities.... 841 6,863 22,194 2,483 - 32,381 Effect on exchange rate changes on cash......... - - - 258 - 258 ------------------------------------------------------------------------------------------ Net increase (decrease) in cash and cash equivalents............. (439) 15,036 (146) (70) - 14,381 Cash and cash equivalents at beginning of year.... 440 121 410 261 - 1,232 ------------------------------------------------------------------------------------------ Cash and cash equivalents at end of year.......... $ 1 $ 15,157 $ 264 $ 191 $ - $ 15,613 - -----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 29, 2001 (PREDECESSOR) ------------------------------------------------------------------------------------------ BPC HOLDING BERRY PLASTICS COMBINED COMBINED CORPORATION CORPORATION GUARANTOR NON-GUARANTOR CONSOLIDATING (PARENT) (ISSUER) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED - ----------------------------------------------------------------------------------------------------------------------- CONSOLIDATING STATEMENTS OF OPERATIONS Net sales.................. $ - $ 159,783 $ 279,533 $ 22,343 $ - $ 461,659 Cost of goods sold......... - 103,867 213,355 20,778 - 338,000 ------------------------------------------------------------------------------------------ Gross profit............... - 55,916 66,178 1,565 - 123,659 Operating expenses......... 924 23,113 40,889 5,266 - 70,192 ------------------------------------------------------------------------------------------ Operating income (loss).... (924) 32,803 25,289 (3,701) - 53,467 Other expenses............. - 46 481 (54) - 473 Interest expense, net...... 17,469 7,277 26,848 2,761 - 54,355 Income taxes (benefit)..... (8,307) 8,682 234 125 - 734 Equity in net (income) loss from subsidiary......... (7,991) 8,807 6,533 - (7,349) - ------------------------------------------------------------------------------------------ Net income (loss).......... $ (2,095) $ 7,991 $ (8,807) $ (6,533) $ 7,349 $ (2,095) ------------------------------------------------------------------------------------------
F-31
- ----------------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 29, 2001 (PREDECESSOR) ------------------------------------------------------------------------------------------ BPC HOLDING BERRY PLASTICS COMBINED COMBINED CORPORATION CORPORATION GUARANTOR NON-GUARANTOR CONSOLIDATING (PARENT) (ISSUER) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED - ----------------------------------------------------------------------------------------------------------------------- CONSOLIDATING STATEMENTS OF CASH FLOWS Net income (loss).......... $ (2,095) $ 7,991 $ (8,807) $ (6,533) $ 7,349 $ (2,095) Non-cash expenses.......... 9,775 16,146 33,072 4,451 - 63,444 Equity in net (income) loss from subsidiary......... (7,991) 8,807 6,533 - (7,349) - Changes in working capital................. 154 5,882 (11,258) (1,779) - (7,001) ------------------------------------------------------------------------------------------ Net cash provided by (used for) operating activities.............. (157) 38,826 19,540 (3,861) - 54,348 Net cash used for investing activities.............. - (30,688) (22,395) (3,207) - (56,290) Net cash provided by (used for) financing activities.............. 377 (9,199) 3,014 6,388 - 580 Effect on exchange rate changes on cash......... - 540 (540) 540 - 540 ------------------------------------------------------------------------------------------ Net increase (decrease) in cash and cash equivalents............. 220 (521) (381) (140) - (822) Cash and cash equivalents at beginning of year.... 220 642 791 401 - 2,054 ------------------------------------------------------------------------------------------ Cash and cash equivalents at end of year.......... $ 440 $ 121 $ 410 $ 261 $ - $ 1,232 - -----------------------------------------------------------------------------------------------------------------------
F-32
- ----------------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 30, 2000 (PREDECESSOR) ------------------------------------------------------------------------------------------ BPC HOLDING BERRY PLASTICS COMBINED COMBINED CORPORATION CORPORATION GUARANTOR NON-GUARANTOR CONSOLIDATING (PARENT) (ISSUER) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED - ----------------------------------------------------------------------------------------------------------------------- CONSOLIDATING STATEMENTS OF OPERATIONS Net sales.................. $ - $ 158,055 $ 234,944 $ 15,089 $ - $ 408,088 Cost of goods sold......... - 108,739 189,872 13,508 - 312,119 ------------------------------------------------------------------------------------------ Gross profit............... - 49,316 45,072 1,581 - 95,969 Operating expenses......... 616 23,303 37,852 4,091 - 65,862 ------------------------------------------------------------------------------------------ Operating income (loss).... (616) 26,013 7,220 (2,510) - 30,107 Other expenses............. - 258 619 - - 877 Interest expense, net...... 16,025 11,221 23,000 1,211 - 51,457 Income taxes (benefit)..... 18 168 22 (350) - (142) Extraordinary item......... - 1,022 - - - 1,022 Equity in net (income) loss from subsidiary......... 6,448 19,792 3,371 - (29,611) - ------------------------------------------------------------------------------------------ Net income (loss).......... $ (23,107) $ (6,448) $ (19,792) $ (3,371) $ 29,611 $ (23,107) ------------------------------------------------------------------------------------------ CONSOLIDATING STATEMENTS OF CASH FLOWS Net income (loss).......... $ (23,107) $ (6,448) $ (19,792) $ (3,371) $ 29,611 $ (23,107) Non-cash expenses.......... 16,958 13,332 30,372 1,988 - 62,650 Equity in net (income) loss from subsidiary......... 6,448 19,792 3,371 - (29,611) - Changes in working capital................. (646) 2,931 (2,928) (2,794) - (3,437) ------------------------------------------------------------------------------------------ Net cash provided by (used for) operating activities.............. (347) 29,607 11,023 (4,177) - 36,106 Net cash used for investing activities.............. - (78,328) (27,218) (3,169) - (108,715) Net cash provided by (used for) financing activities.............. (136) 48,307 16,671 7,195 - 72,037 Effect on exchange rate changes on cash......... - 80 (80) 80 - 80 ------------------------------------------------------------------------------------------ Net increase (decrease) in cash and cash equivalents............. (483) (334) 396 (71) - (492) Cash and cash equivalents at beginning of year.... 703 976 395 472 - 2,546 ------------------------------------------------------------------------------------------ Cash and cash equivalents at end of year.......... $ 220 $ 642 $ 791 $ 401 $ - $ 2,054 - -----------------------------------------------------------------------------------------------------------------------
F-33 NOTE 16. QUARTERLY FINANCIAL DATA (UNAUDITED) The following table contains selected unaudited quarterly financial data for fiscal years 2002 and 2001.
- ----------------------------------------------------------------------------------------------------------- 2002 2001 ----------------------------------------- ---------------------------------------- FIRST SECOND THIRD* FOURTH FIRST SECOND THIRD FOURTH - ----------------------------------------------------------------------------------------------------------- Net sales............ $122,934 $127,989 $127,575 $115,805 $116,016 $124,997 $121,910 $98,736 Cost of sales........ 90,299 94,974 97,492 88,508 83,927 89,092 91,311 73,670 ------------------------------------------------------------------------------------ Gross profit......... $ 32,635 $ 33,015 $ 30,083 $ 27,297 $ 32,089 $ 35,905 $ 30,599 $25,066 Net income (loss).... $ 4,766 $ 5,216 $(42,071) $ (527) $ 1,022 $ 1,907 $ 176 $(5,200) - -----------------------------------------------------------------------------------------------------------
* For comparison purposes, the period from June 30, 2002 to July 21, 2002 (Predecessor) has been combined with the period from July 22, 2002 to September 28, 2002 (Company). Net loss in the third quarter of 2002 includes merger expenses of $20,987 and an extraordinary expense of $25,328 incurred in connection with the Merger. F-34 BPC HOLDING CORPORATION CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------------------ SEPTEMBER 27, DECEMBER 28, (DOLLARS IN THOUSANDS) 2003 2002 - ------------------------------------------------------------------------------------------ (UNAUDITED) ASSETS Current assets: Cash and cash equivalents................................ $ 26,452 $ 15,613 Accounts receivable (less allowance for doubtful accounts of $2,270 at September 27, 2003 and $1,990 at December 28, 2002).............................................. 67,854 56,765 Inventories: Finished goods........................................ 41,409 50,002 Raw materials and supplies............................ 16,410 14,730 ---------------------------- 57,819 64,732 Prepaid expenses and other current assets................ 8,502 7,018 ---------------------------- Total current assets........................................ 160,627 144,128 Property and equipment: Land..................................................... 7,052 7,040 Buildings and improvements............................... 50,519 49,966 Machinery, equipment and tooling......................... 153,909 139,486 Construction in progress................................. 23,949 12,232 ---------------------------- 235,429 208,724 Less accumulated depreciation............................ 44,594 15,592 ---------------------------- 190,835 193,132 Intangible assets: Deferred financing fees, net............................. 18,085 20,116 Customer relationships, net.............................. 33,200 33,890 Goodwill................................................. 328,561 336,260 Trademarks............................................... 27,048 27,048 Other intangibles, net................................... 6,147 5,883 ---------------------------- 413,041 423,197 Other....................................................... 102 119 ---------------------------- Total assets................................................ $ 764,605 $ 760,576 ---------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable......................................... $ 33,266 $ 31,204 Accrued expenses and other current liabilities........... 10,852 9,926 Accrued interest......................................... 6,623 14,239 Employee compensation and payroll taxes.................. 17,631 15,917 Current portion of long-term debt........................ 9,000 8,641 ---------------------------- Total current liabilities................................... 77,372 79,927 Long-term debt, less current portion........................ 595,435 601,302 Deferred income taxes....................................... 676 640 Other long-term liabilities................................. 4,020 3,544 ---------------------------- Total liabilities........................................... 677,503 685,413 Stockholders' equity: Preferred Stock; $.01 par value: 500,000 shares authorized; 0 shares issued and outstanding............ - - Common Stock; $.01 par value: 5,000,000 shares authorized; 2,777,639 shares issued and 2,757,922 shares outstanding..................................... 28 28 Additional paid-in capital............................... 282,370 281,816 Adjustment of the carryover basis of continuing stockholders........................................... (196,603) (196,603) Notes receivable - common stock.......................... (13,966) (14,399) Treasury stock: 19,717 shares of common stock............ (1,972) - Retained earnings........................................ 15,018 3,179 Accumulated other comprehensive income................... 2,227 1,142 ---------------------------- Total stockholders' equity.................................. 87,102 75,163 ---------------------------- Total liabilities and stockholders' equity.................. $ 764,605 $ 760,576 - ------------------------------------------------------------------------------------------
See notes to consolidated financial statements. F-35 BPC HOLDING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------ COMPANY PREDECESSOR COMPANY PREDECESSOR ------------------------- ----------- ------------------------- ----------- THIRTEEN PERIOD PERIOD THIRTY-NINE PERIOD PERIOD WEEKS FROM FROM WEEKS FROM FROM ENDED 7/22/02- 6/30/02- ENDED 7/22/02- 12/30/01- (IN THOUSANDS OF DOLLARS) 9/27/03 9/28/02 7/21/02 9/27/03 9/28/02 7/21/02 - ------------------------------------------------------------------------------------------------------------ (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) Net sales............... $ 139,306 $ 97,822 $ 29,753 $ 411,555 $ 97,822 $ 280,677 Cost of goods sold...... 106,845 75,309 22,183 313,221 75,309 207,458 --------------------------------------------------------------------------------- Gross profit............ 32,461 22,513 7,570 98,334 22,513 73,219 Operating Expenses: Selling.............. 5,510 4,612 1,146 17,714 4,612 12,080 General and administrative.... 5,653 4,050 1,540 18,142 4,050 15,750 Research and development....... 842 553 133 2,459 553 1,438 Amortization of intangibles....... 750 102 374 2,188 102 1,249 Merger expenses (Predecessor)..... - - 20,987 - - 20,987 Other expenses....... 683 596 679 2,673 596 2,804 --------------------------------------------------------------------------------- Operating income (loss).. 19,023 12,600 (17,289) 55,158 12,600 18,911 Other expenses: Loss on disposal of property and equipment......... - 56 - - 56 291 --------------------------------------------------------------------------------- Income (loss) before interest and taxes... 19,023 12,544 (17,289) 55,158 12,544 18,620 Interest: Expense.............. (11,467) (8,876) (3,160) (34,403) (8,876) (28,747) Loss on extinguished debt (Predecessor)..... - - (25,328) - - (25,328) Income............... 202 123 2 609 123 5 --------------------------------------------------------------------------------- Income (loss) before income taxes......... 7,758 3,791 (45,775) 21,364 3,791 (35,450) Income taxes............ 3,540 87 - 9,525 87 345 --------------------------------------------------------------------------------- Net income (loss)....... 4,218 3,704 (45,775) 11,839 3,704 (35,795) Preferred stock dividends............ - - (848) - - (6,468) Amortization of preferred stock discount....... - - (62) - - (574) --------------------------------------------------------------------------------- Net income (loss) attributable to common stockholders......... $ 4,218 $ 3,704 $ (46,685) $ 11,839 $ 3,704 $ (42,837) - ------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. F-36 BPC HOLDING CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------------------------------------- ADJUSTMENT OF THE CARRYOVER NOTES ACCUMULATED ADDITIONAL BASIS OF RECEIVABLE - OTHER COMMON PAID-IN CONTINUING COMMON TREASURY RETAINED COMPREHENSIVE (IN THOUSANDS OF DOLLARS) STOCK CAPITAL STOCKHOLDERS STOCK STOCK EARNINGS INCOME TOTAL - --------------------------------------------------------------------------------------------------------------------------------- Balance at December 28, 2002...................... $ 28 $ 281,816 $ (196,603) $ (14,399) $ - $ 3,179 $ 1,142 $75,163 -------------------------------------------------------------------------------------------------- Interest on notes receivable................ - - - (566) - - - (566) Exercise of stock options, redemption of notes receivable, and purchase of treasury stock......... - 554 - 999 (1,994) - - (441) Sale of treasury stock....... - - - - 22 - - 22 Translation gain............. - - - - - - 1,279 1,279 Other comprehensive losses... - - - - - - (194) (194) Net income................... - - - - - 11,839 - 11,839 -------------------------------------------------------------------------------------------------- Balance at September 27, 2003...................... $ 28 $ 282,370 $ (196,603) $ (13,966) $ (1,972) $ 15,018 $ 2,227 $87,102 -------------------------------------------------------------------------------------------------- - ----------------------------- ------------- COMPREHENSIVE (IN THOUSANDS OF DOLLARS) INCOME (LOSS) - ----------------------------- ------------- Balance at December 28, 2002...................... ------------- Interest on notes receivable................ $ - Exercise of stock options, redemption of notes receivable, and purchase of treasury stock......... - Sale of treasury stock....... - Translation gain............. 1,279 Other comprehensive losses... (194) Net income................... 11,839 ------------- Balance at September 27, 2003...................... $ 12,924 -------------
See notes to consolidated financial statements. F-37 BPC HOLDING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------------------------------- COMPANY PREDECESSOR ---------------------------------- ---------------- PERIOD FROM PERIOD FROM PERIOD FROM (IN THOUSANDS OF DOLLARS) 12/29/02-9/27/03 7/22/02-9/28/02 12/30/01-7/21/02 - -------------------------------------------------------------------------------------------------------- (UNAUDITED) (UNAUDITED) (UNAUDITED) OPERATING ACTIVITIES Net income (loss)................................ $ 11,839 $ 3,704 $ (35,795) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation.................................. 28,866 8,176 23,526 Non-cash interest expense..................... 1,800 446 1,399 Amortization.................................. 2,188 102 1,249 Non-cash compensation expense................. - - 1,920 Loss on extinguished debt (Predecessor)....... - - 25,328 Loss on sale of property and equipment........ - 57 291 Deferred income taxes......................... 9,336 - - Changes in operating assets and liabilities: Accounts receivable, net................... (11,195) 2,138 (15,986) Inventories................................ 7,154 (5,582) (4,255) Prepaid expenses and other receivables..... (1,366) (50) (603) Other assets............................... - - 2,042 Accrued interest........................... (7,616) 7,049 (6,508) Payables and accrued expenses.............. 4,907 (11,561) 17,984 ----------------------------------------------------- Net cash provided by operating activities........ 45,913 4,479 10,592 INVESTING ACTIVITIES Additions to property and equipment.............. (21,110) (5,371) (17,396) Proceeds from disposal of property and equipment..................................... - 6 9 Transaction costs................................ - (12,715) - Acquisitions of businesses....................... (5,755) - (3,834) ----------------------------------------------------- Net cash used for investing activities........... (26,865) (18,080) (21,221) FINANCING ACTIVITIES Proceeds from long-term borrowings............... - 580,000 24,492 Payments on long-term borrowings................. (7,385) (503,082) (13,924) Issuance of common stock......................... - 257,047 - Purchase of treasury stock....................... (441) - - Issuance of treasury stock....................... 22 - - Redemption of predecessor stock.................. - (287,999) - Debt financing costs............................. - (19,810) - ----------------------------------------------------- Net cash provided by (used for) financing activities.................................... (7,804) 26,156 10,568 Effect of exchange rate changes on cash.......... (405) 320 (815) ----------------------------------------------------- Net increase (decrease) in cash and cash equivalents................................... 10,839 12,875 (876) Cash and cash equivalents at beginning of period........................................ 15,613 356 1,232 ----------------------------------------------------- Cash and cash equivalents at end of period....... $ 26,452 $ 13,231 $ 356 - --------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. F-38 BPC HOLDING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT AS OTHERWISE NOTED) (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of BPC Holding Corporation (the "Company") have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full fiscal year. The accompanying financial statements include the results of BPC Holding Corporation ("Holding") and its wholly-owned subsidiary, Berry Plastics Corporation ("Berry"), and its wholly-owned subsidiaries: Berry Iowa Corporation, Berry Tri-Plas Corporation, AeroCon, Inc., PackerWare Corporation, Berry Plastics Design Corporation, Venture Packaging, Inc. and its subsidiaries Venture Packaging Midwest, Inc. and Berry Plastics Technical Services, Inc., NIM Holdings Limited and its subsidiary Berry Plastics U.K. Limited, Knight Plastics, Inc., CPI Holding Corporation and its subsidiary Cardinal Packaging, Inc., Poly-Seal Corporation, and Oceisse S.r.l. and its subsidiary Capsol S.p.a. As a result of the Merger described in Note 2 below, certain financial information has been presented separately for Holding's prior ownership through the Merger date ("Predecessor") and subsequent to the Merger ("Company"). For further information, refer to the consolidated financial statements and footnotes thereto included in Holding's and Berry's Form 10-K filed with the Securities and Exchange Commission for the year ended December 28, 2002. 2. THE MERGER On July 22, 2002, GS Berry Acquisition Corp., (the "Buyer") a newly formed entity controlled by various private equity funds affiliated with Goldman, Sachs & Co., merged (the "Merger") with and into Holding, pursuant to an agreement and plan of merger dated as of May 25, 2002. At the effective time of the Merger, (i) each share of common stock of Holding issued and outstanding immediately prior to the effective time of the Merger was converted into the right to receive cash pursuant to the terms of the merger agreement, and (ii) each share of common stock of the Buyer issued and outstanding immediately prior to the effective time of the Merger was converted into one share of common stock of Holding. The total amount of funds required to consummate the Merger and to pay estimated fees and expenses related to the Merger, including amounts related to the repayment of indebtedness, the redemption of the outstanding preferred stock and accrued dividends, the redemption of outstanding warrants, and the payment of transaction costs incurred by Holding, were approximately $870.4 million (which includes the amount of certain indebtedness which remained outstanding and the value of certain shares of Holding common stock held by employees that were contributed to the Buyer immediately prior to the Merger). As a result of the Merger, private equity funds affiliated with Goldman Sachs own approximately 63% of the F-39 common stock of Holding. The remaining common stock of Holding is held by J.P. Morgan Partners Global Investors, L.P. and other private equity funds affiliated with J.P. Morgan Partners, LLC, the private equity investment arm of J.P. Morgan Chase & Co., which own approximately 29% of Holding's common stock and by members of Berry's management, which own the remaining 8%. The Merger has been accounted for under the purchase method of accounting, and accordingly, the purchase price has been allocated to the identifiable assets and liabilities based on estimated fair values at the acquisition date. The Company has applied the provisions of Emerging Issues Task Force 88-16, Basis in Leveraged Buyout Transactions, whereby, the carryover equity interests of certain shareholders from Holding prior to the Merger to the Company were recorded at their Company basis. The application of these provisions reduced stockholder's equity and intangibles by $196.6 million. 3. RECENT ACQUISITIONS On January 24, 2002, Berry acquired the Alcoa Flexible Packaging injection molding assets of Mount Vernon Plastics Corporation ("Mount Vernon") for consideration, excluding transition expenses, of approximately $2.6 million. The purchase price was allocated to fixed assets ($2.0 million) and inventory ($0.6 million). The purchase was financed through borrowings under the Company's revolving line of credit under its retired senior credit facility. The operations of Mount Vernon are included in Berry's operations since the acquisition date using the purchase method of accounting. On January 31, 2002, Berry entered into a sale/leaseback arrangement with respect to the Mount Vernon fixed assets. On February 25, 2003, Berry acquired the 400 series continuous threaded injection molded closure assets from CCL Plastic Packaging located in Los Angeles, California ("CCL Acquisition") for aggregate consideration, including expenses, of approximately $4.6 million. The purchase price was allocated to fixed assets ($2.7 million), inventory ($1.1 million), customer relationships ($0.5 million), goodwill ($0.2 million), and other intangibles ($0.1 million). The fair value of the net assets acquired was based on preliminary estimates and may be revised at a later date upon completion of the integration and finalization of expenses related to the acquisition. The purchase was financed through borrowings under the Company's revolving line of credit. The operations from the CCL Acquisition are included in Berry's operations since the acquisition date using the purchase method of accounting. On May 30, 2003, Berry acquired the injection molded overcap lid assets from APM Inc. located in Benicia, California ("APM Acquisition") for aggregate consideration, including expenses, of approximately $0.7 million. The purchase price was allocated to fixed assets ($0.4 million), inventory ($0.1 million), customer relationships ($0.1 million), and goodwill ($0.1 million). The fair value of the net assets acquired was based on preliminary estimates and may be revised at a later date upon completion of the integration and finalization of expenses related to the acquisition. The purchase was financed through cash provided by operations. The operations from the APM Acquisition are included in Berry's operations since the acquisition date using the purchase method of accounting. Pro forma results for the thirteen and thirty-nine weeks ended September 27, 2003 and September 28, 2002 have not been presented, as they do not differ materially from reported historical results. F-40 4. LONG-TERM DEBT Long-term debt consists of the following:
- ------------------------------------------------------------------------------------------ SEPTEMBER 27, DECEMBER 28, 2003 2002 - ------------------------------------------------------------------------------------------ Berry 10 3/4% senior subordinated notes..................... $ 250,000 $ 250,000 Term loans.................................................. 326,700 329,175 Revolving lines of credit................................... 429 692 Nevada Industrial Revenue Bonds............................. 2,000 2,500 Capital leases.............................................. 25,306 27,576 ---------------------------- 604,435 609,943 Less current portion of long-term debt...................... 9,000 8,641 ---------------------------- $ 595,435 $ 601,302 - ------------------------------------------------------------------------------------------
The current portion of long-term debt consists of $3.3 million of quarterly installments on the term loans, $0.5 million in repayments of the industrial bonds, and $5.2 million of principal payments related to capital lease obligations. In connection with the Merger, the Company entered into a credit and guaranty agreement and a related pledge security agreement with a syndicate of lenders led by Goldman Sachs Credit Partners L.P., as administrative agent (the "Credit Facility"). As of September 27, 2003, the Credit Facility provides (i) a $326.7 million term loan, (ii) a $50.0 million delayed draw term loan facility, and (iii) a $100.0 million revolving credit facility. The maturity date of the term loan is July 22, 2010, and the maturity date of the revolving credit facility is July 22, 2008. The indebtedness under the Credit Facility is guaranteed by Holding and all of its domestic subsidiaries. The obligations of the Company and the subsidiaries under the Credit Facility and the guarantees thereof are secured by substantially all of the assets of such entities. The Credit Facility contains significant financial and operating covenants, including prohibitions on the ability to incur certain additional indebtedness or to pay dividends, and restrictions on the ability to make capital expenditures. Amounts available under the delayed draw term loan facility may be borrowed in connection with permitted acquisitions (but not reborrowed) during the 18-month period that began on July 22, 2002, subject to certain conditions. The Credit Facility also contains borrowing conditions and customary events of default, including nonpayment of principal or interest, violation of covenants, inaccuracy of representations and warranties, cross-defaults to other indebtedness, bankruptcy and other insolvency events (other than in the case of certain foreign subsidiaries). The Company was in compliance with all the financial and operating covenants at September 27, 2003. The term loan amortizes quarterly as follows: $0.8 million each quarter through June 30, 2009 and $76.7 million each quarter beginning September 30, 2009 and ending June 30, 2010. The delayed draw term loan facility will amortize quarterly commencing March 31, 2004 based on the amounts outstanding as of that date as follows: (i) 2% per quarter in 2004, (ii) 4% per quarter in 2005, (iii) 6% per quarter in 2006, (iv) 8% per quarter in 2007 and (v) 10% per quarter in each of the first two quarters in 2008. Borrowings under the Credit Facility bear interest, at the Company's option, at either (i) a base rate (equal to the greater of the prime rate and the federal funds rate plus 0.5%) plus the F-41 applicable margin (the "Base Rate Loans") or (ii) an adjusted eurodollar LIBOR (adjusted for reserves) plus the applicable margin (the "Eurodollar Rate Loans"). With respect to the term loan, the "applicable margin" is (i) with respect to Base Rate Loans, 2.00% per annum and (ii) with respect to Eurodollar Rate Loans, 3.00% per annum. With respect to the delayed draw term loan facility and the revolving credit facility, the "applicable margin" is, with respect to Eurodollar Rate Loans, subject to a pricing grid which ranges from 2.75% per annum to 2.00% per annum (2.75% based on results through September 27, 2003), depending on the leverage ratio. The "applicable margin" with respect to Base Rate Loans is 1.00% per annum less than the "applicable margin" for Eurodollar Rate Loans. In October 2002, Berry entered into an interest rate collar arrangement to protect $50.0 million of the outstanding variable rate term loan debt from future interest rate volatility. The collar floor is set at 1.97% LIBOR (London Interbank Offering Rate) and capped at 6.75% LIBOR. At September 27, 2003, shareholders' equity has been reduced by $0.7 million to adjust the agreement to fair market value. At September 27, 2003, the Company had unused borrowing capacity under the Credit Facility's revolving line of credit of $94.3 million. However, covenants under the Credit Facility limit the Company's ability to make such borrowings and as of September 27, 2003, the Company could have borrowed $27.4 million. 5. STOCK-BASED COMPENSATION The Company has adopted the disclosure provisions of Statement of Financial Accounting Standards (SFAS) No. 148, "Accounting for Stock-Based Compensation--Transition and Disclosure, an amendment of FASB Statement No. 123". The Statement requires prominent disclosures in both annual and interim financial statements regarding the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company accounts for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion 25, "Accounting for Stock Issued to Employees." Under the intrinsic method, no compensation expense has been recognized for stock options granted to employees. The fair value for options granted by Holding have been estimated at the date of grant using a Black Scholes option pricing model with the following weighted average assumptions:
- -------------------------------------------------------------------------------------------------------- COMPANY PREDECESSOR COMPANY PREDECESSOR ----------------------- ----------- ----------------------- ----------- PERIOD PERIOD PERIOD PERIOD THIRTEEN FROM FROM THIRTY-NINE FROM FROM WEEKS ENDED 7/22/02- 6/30/02- WEEKS ENDED 7/22/02- 12/30/01- 9/27/03 9/28/02 7/21/02 9/27/03 9/28/02 7/21/02 - -------------------------------------------------------------------------------------------------------- Risk-free interest rate.................. 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% Dividend yield........... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Volatility factor........ .25 .25 .25 .25 .25 .25 Expected option life..... 5.0 years 5.0 years 5.0 years 5.0 years 5.0 years 5.0 years - ------------------------------------------------------------ -------------------------------------------
For purposes of the pro forma disclosures, the estimated fair value of the stock options are amortized to expense over the related vesting period. Because compensation expense is recognized over the vesting period, the initial impact on pro forma net income may not be representative of compensation expense in future years, when the effect of amortization of multiple awards would be reflected in the Consolidated Statement of Operations. The F-42 following is a reconciliation of reported net income (loss) to net income (loss) as if the Company used the fair value method of accounting for stock-based compensation.
- -------------------------------------------------------------------------------------------------------- COMPANY PREDECESSOR COMPANY PREDECESSOR ---------------------- ----------- ------------------------- ----------- PERIOD PERIOD PERIOD PERIOD THIRTEEN FROM FROM THIRTY-NINE FROM FROM WEEKS ENDED 7/22/02- 6/30/02- WEEKS ENDED 7/22/02- 12/30/01- 9/27/03 9/28/02 7/21/02 9/27/03 9/28/02 7/21/02 - -------------------------------------------------------------------------------------------------------- Reported net income (loss)............... $ 4,218 $ 3,704 $ (45,775) $ 11,839 $ 3,704 $ (35,795) Stock-based employee compensation expense included in reported income, net of tax... - - - - - - Total stock-based employee compensation expense determined under fair value based method, for all awards, net of tax... (500) (366) (60) (1,518) (366) (287) ------------------------------------------------------------------------------ Pro forma net income (loss)............... $ 3,718 $ 3,338 $ (45,835) $ 10,321 $ 3,338 $ (36,082) - --------------------------------------------------------------------------------------------------------
6. OPERATING SEGMENTS The Company has three reportable segments: containers, closures, and consumer products. The Company evaluates performance and allocates resources based on operating income before depreciation and amortization of intangibles adjusted to exclude (i) Merger expense, (ii) uncompleted acquisition expense, (iii) acquisition integration expense, (iv) plant shutdown expense, and (v) management fees and reimbursed expenses paid to First Atlantic Capital, Ltd. ("Adjusted EBITDA"). Adjusted EBITDA is not a measure of performance under GAAP and has been presented because we believe that investors use Adjusted EBITDA to analyze operating performance, which includes the company's ability to incur additional indebtedness and to service existing indebtedness. Adjusted EBITDA should not be considered in isolation or as a substitute for net income, net cash from operating activities or other income or cash flow statement data prepared in accordance with GAAP. In addition, comparability to other companies using similarly titled measures is not recommended due to differences in the definitions and methods of calculation used by various companies. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies in the Company's Form 10-K filed with the Securities and Exchange Commission for the year ended December 28, 2002. F-43
- ---------------------------------------------------------------------------------------------- THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED ----------------------------- ----------------------------- COMPANY/ COMPANY/ COMPANY PREDECESSOR COMPANY PREDECESSOR ------------- ------------- ------------- ------------- SEPTEMBER 27, SEPTEMBER 28, SEPTEMBER 27, SEPTEMBER 28, 2003 2002 2003 2002 - ---------------------------------------------------------------------------------------------- Net sales: Containers.................. $ 70,275 $ 65,767 $ 205,196 $ 188,382 Closures.................... 38,100 32,833 111,116 100,661 Consumer Products........... 30,931 28,975 95,243 89,456 Adjusted EBITDA: Containers.................. 18,220 17,885 51,982 51,065 Closures.................... 8,101 7,232 23,574 23,161 Consumer Products........... 3,764 3,489 13,329 15,057 Total assets: Containers.................. 350,259 379,164 350,259 379,164 Closures.................... 238,044 260,062 238,044 260,062 Consumer Products........... 176,302 163,504 176,302 163,504 Reconciliation of Adjusted EBITDA to income (loss) before income taxes: Adjusted EBITDA for reportable segments...... $ 30,085 $ 28,606 $ 88,885 $ 89,283 Net interest expense..... (11,265) (11,912) (33,794) (37,495) Depreciation............. (9,629) (10,604) (28,866) (31,702) Amortization............. (750) (476) (2,188) (1,351) Loss on disposal of property and equipment............. - (56) - (348) Uncompleted acquisition expense............... (28) (300) (1,028) (300) Merger expense........... - (20,987) - (20,987) Acquisition integration expense............... (366) (165) (886) (867) Plant shutdown expense... (289) (762) (759) (2,233) Management fees.......... - - - (331) ------------------------------------------------------------- Income (loss) before income taxes.......... $ 7,758 $ (16,656) $ 21,364 $ (6,331) - ----------------------------------------------------------------------------------------------
7. CONDENSED CONSOLIDATING FINANCIAL INFORMATION Holding conducts its business through its wholly owned subsidiary, Berry. Holding and all of Berry's domestic subsidiaries fully, jointly, severally, and unconditionally guarantee on a senior subordinated basis the $250.0 million aggregate principal amount of 10 3/4% Berry Plastics Corporation Senior Subordinated Notes due 2012. Berry and all of Berry's subsidiaries are 100% F-44 owned by Holding. Separate narrative information or financial statements of guarantor subsidiaries have not been included as management believes they would not be material to investors. Presented below is condensed consolidating financial information for Holding, Berry, and its subsidiaries at September 27, 2003 and December 28, 2002 and for the thirteen and thirty-nine week periods ended September 27, 2003 and September 28, 2002. The equity method has been used with respect to investments in subsidiaries.
- ------------------------------------------------------------------------------------------------------------------------ SEPTEMBER 27, 2003 (COMPANY) ------------------------------------------------------------------------------------------ BPC HOLDING BERRY PLASTICS COMBINED COMBINED CORPORATION CORPORATION GUARANTOR NON-GUARANTOR CONSOLIDATING (PARENT) (ISSUER) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED - ------------------------------------------------------------------------------------------------------------------------ CONSOLIDATING BALANCE SHEET Current assets.............. $ - $ 73,471 $ 72,354 $ 14,802 $ - $ 160,627 Net property and equipment.. - 72,325 101,524 16,986 - 190,835 Other noncurrent assets..... 87,102 578,970 256,163 11,162 (520,254) 413,143 ------------------------------------------------------------------------------------------ Total assets................ $ 87,102 $ 724,766 $ 430,041 $ 42,950 $ (520,254) $ 764,605 ------------------------------------------------------------------------------------------ Current liabilities......... $ - $ 42,047 $ 26,850 $ 8,475 $ - $ 77,372 Noncurrent liabilities...... - 595,346 443,111 26,786 (465,112) 600,131 Equity (deficit)............ 87,102 87,373 (39,920) 7,689 (55,142) 87,102 ------------------------------------------------------------------------------------------ Total liabilities and equity (deficit)................ $ 87,102 $ 724,766 $ 430,041 $ 42,950 $ (520,254) $ 764,605 - ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------ DECEMBER 28, 2002 (COMPANY) ------------------------------------------------------------------------------------------ BPC HOLDING BERRY PLASTICS COMBINED COMBINED CORPORATION CORPORATION GUARANTOR NON-GUARANTOR CONSOLIDATING (PARENT) (ISSUER) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED - ------------------------------------------------------------------------------------------------------------------------ CONSOLIDATING BALANCE SHEET Current assets.............. $ 1 $ 58,995 $ 73,940 $ 11,192 $ - $ 144,128 Net property and equipment.. - 68,431 108,567 16,134 - 193,132 Other noncurrent assets..... 74,021 650,613 314,099 11,129 (626,546) 423,316 ------------------------------------------------------------------------------------------ Total assets................ $ 74,022 $ 778,039 $ 496,606 $ 38,455 $ (626,546) $ 760,576 ------------------------------------------------------------------------------------------ Current liabilities......... $ - $ 52,111 $ 21,142 $ 6,674 $ - $ 79,927 Noncurrent liabilities...... (1,141) 600,539 449,814 22,925 (466,651) 605,486 Equity (deficit)............ 75,163 125,389 25,650 8,856 (159,895) 75,163 ------------------------------------------------------------------------------------------ Total liabilities and equity (deficit)................ $ 74,022 $ 778,039 $ 496,606 $ 38,455 $ (626,546) $ 760,576 - ------------------------------------------------------------------------------------------------------------------------
F-45
- ------------------------------------------------------------------------------------------------------------------------ THIRTEEN WEEKS ENDED SEPTEMBER 27, 2003 (COMPANY) ------------------------------------------------------------------------------------------ BPC HOLDING BERRY PLASTICS COMBINED COMBINED CORPORATION CORPORATION GUARANTOR NON-GUARANTOR CONSOLIDATING (PARENT) (ISSUER) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED - ------------------------------------------------------------------------------------------------------------------------ CONSOLIDATING STATEMENT OF OPERATIONS Net sales................... $ - $ 53,815 $ 80,287 $ 5,204 $ - $ 139,306 Cost of goods sold.......... - 38,546 63,394 4,905 - 106,845 ------------------------------------------------------------------------------------------ Gross profit................ - 15,269 16,893 299 - 32,461 Operating expenses.......... - 6,088 6,376 974 - 13,438 ------------------------------------------------------------------------------------------ Operating income (loss)..... - 9,181 10,517 (675) - 19,023 Interest expense, net....... (181) 153 10,933 360 - 11,265 Income taxes................ 24 3,476 19 21 - 3,540 Equity in net (income) loss from subsidiary........... (4,061) 1,491 1,056 - 1,514 - ------------------------------------------------------------------------------------------ Net income (loss)........... $ 4,218 $ 4,061 $ (1,491) $ (1,056) $ (1,514) $ 4,218 - ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------ THIRTEEN WEEKS ENDED SEPTEMBER 28, 2002 (COMBINED COMPANY AND PREDECESSOR) ------------------------------------------------------------------------------------------ BPC HOLDING BERRY PLASTICS COMBINED COMBINED CORPORATION CORPORATION GUARANTOR NON-GUARANTOR CONSOLIDATING (PARENT) (ISSUER) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED - ------------------------------------------------------------------------------------------------------------------------ CONSOLIDATING STATEMENT OF OPERATIONS Net sales................... $ - $ 44,125 $ 78,358 $ 5,092 $ - $ 127,575 Cost of goods sold.......... - 30,452 62,295 4,745 - 97,492 ------------------------------------------------------------------------------------------ Gross profit................ - 13,673 16,063 347 - 30,083 Operating expenses.......... 20,655 6,149 7,339 629 - 34,772 ------------------------------------------------------------------------------------------ Operating income (loss)..... (20,655) 7,524 8,724 (282) - (4,689) Other expenses.............. - - 56 - - 56 Interest expense, net....... 10,202 19,517 6,571 949 - 37,239 Income taxes (benefit)...... 5 109 15 (42) - 87 Equity in net (income) loss from subsidiary........... 11,209 (893) - - (10,316) - ------------------------------------------------------------------------------------------ Net income (loss)........... $ (42,071) $ (11,209) $ 2,082 $ (1,189) $ 10,316 $ (42,071) - ------------------------------------------------------------------------------------------------------------------------
F-46
- -------------------------------------------------------------------------------------------------------------------- THIRTY-NINE WEEKS ENDED SEPTEMBER 27, 2003 (COMPANY) ------------------------------------------------------------------------------------------ BPC HOLDING BERRY PLASTICS COMBINED COMBINED CORPORATION CORPORATION GUARANTOR NON-GUARANTOR CONSOLIDATING (PARENT) (ISSUER) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED - -------------------------------------------------------------------------------------------------------------------- CONSOLIDATING STATEMENT OF OPERATIONS Net sales............... $ - $ 155,230 $ 240,064 $ 16,261 $ - $ 411,555 Cost of goods sold...... - 108,766 189,344 15,111 - 313,221 ------------------------------------------------------------------------------------------ Gross profit............ - 46,464 50,720 1,150 - 98,334 Operating expenses...... - 19,436 21,233 2,507 - 43,176 ------------------------------------------------------------------------------------------ Operating income (loss)............... - 27,028 29,487 (1,357) - 55,158 Interest expense, net... (572) 8 33,275 1083 - 33,794 Income taxes (benefit)............ 22 9,407 89 7 - 9,525 Equity in net (income) loss from subsidiary........... (11,289) 6,324 2,447 - 2,518 - ------------------------------------------------------------------------------------------ Net income (loss)....... $ 11,839 $ 11,289 $ (6,324) $ (2,447) $ (2,518) $ 11,839 ------------------------------------------------------------------------------------------ CONSOLIDATING STATEMENT OF CASH FLOWS Net income (loss)....... $ 11,839 $ 11,289 $ (6,324) $ (2,447) $ (2,518) $ 11,839 Non-cash expenses....... (566) 20,507 19,795 2,454 - 42,190 Equity in net (income) loss from subsidiary........... (11,289) 6,324 2,447 - 2,518 - Changes in working capital.............. - (13,605) 6,517 (1,028) - (8,116) ------------------------------------------------------------------------------------------ Net cash provided by (used for) operating activities........... (16) 24,515 22,435 (1,021) - 45,913 Net cash used for investing activities........... - (13,348) (11,397) (2,120) - (26,865) Net cash provided by (used for) financing activities........... 15 (767) (10,900) 3,848 - (7,804) Effect on exchange rate changes on cash...... - - - (405) - (405) ------------------------------------------------------------------------------------------ Net increase (decrease) in cash and cash equivalents.......... (1) 10,400 138 302 - 10,839 Cash and cash equivalents at beginning of period.. 1 15,156 264 192 - 15,613 ------------------------------------------------------------------------------------------ Cash and cash equivalents at end of period............... $ - $ 25,556 $ 402 $ 494 $ - $ 26,452 - --------------------------------------------------------------------------------------------------------------------
F-47
- -------------------------------------------------------------------------------------------------------------------- THIRTY-NINE WEEKS ENDED SEPTEMBER 28, 2002 (COMBINED COMPANY AND PREDECESSOR) ------------------------------------------------------------------------------------------ BPC HOLDING BERRY PLASTICS COMBINED COMBINED CORPORATION CORPORATION GUARANTOR NON-GUARANTOR CONSOLIDATING (PARENT) (ISSUER) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED - -------------------------------------------------------------------------------------------------------------------- CONSOLIDATING STATEMENT OF OPERATIONS Net sales............... $ - $ 131,165 $ 231,894 $ 15,440 $ - $ 378,499 Cost of goods sold...... - 87,270 181,465 14,032 - 282,767 ------------------------------------------------------------------------------------------ Gross profit............ - 43,895 50,429 1,408 - 95,732 Operating expenses...... 20,706 18,032 23,426 2,057 - 64,221 ------------------------------------------------------------------------------------------ Operating income (loss)............... (20,706) 25,863 27,003 (649) - 31,511 Other expenses.......... - 98 249 - - 347 Interest expense, net... 18,933 20,892 20,658 2,340 - 62,823 Income taxes (benefit)............ (8,248) 8,228 118 334 - 432 Equity in net (income) loss from subsidiary........... 700 (2,655) - - 1,955 - ------------------------------------------------------------------------------------------ Net income (loss)....... $ (32,091) $ (700) $ 5,978 $ (3,323) $ (1,955) $ (32,091) ------------------------------------------------------------------------------------------ CONSOLIDATING STATEMENT OF CASH FLOWS Net income (loss)....... $ (32,091) $ (700) $ 5,978 $ (3,323) $ (1,955) $ (32,091) Non-cash expenses....... 24,770 14,270 20,947 2,507 - 62,494 Equity in net (income) loss from subsidiary........... 700 (2,655) - - 1,955 - Changes in working capital.............. (114) (8,638) (4,780) (1,800) - (15,332) ------------------------------------------------------------------------------------------ Net cash provided by (used for) operating activities........... (6,735) 2,277 22,145 (2,616) - 15,071 Net cash used for investing activities........... - (18,425) (20,516) (360) - (39,301) Net cash provided by (used for) financing activities........... 6,296 28,587 (1,752) 3,593 - 36,724 Effect on exchange rate changes on cash...... - - - (495) - (495) ------------------------------------------------------------------------------------------ Net increase (decrease) in cash and cash equivalents.......... (439) 12,439 (123) 122 - 11,999 Cash and cash equivalents at beginning of period.. 440 (700) 1,231 261 - 1,232 ------------------------------------------------------------------------------------------ Cash and cash equivalents at end of period............... $ 1 $ 11,739 $ 1,108 $ 383 $ - $ 13,231 - --------------------------------------------------------------------------------------------------------------------
F-48 8. COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) is comprised of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized losses on derivative financial instruments and gains or losses resulting from currency translations of foreign investments. The details of comprehensive income (loss) are as follows:
- --------------------------------------------------------------------------------------------------------------- COMPANY PREDECESSOR COMPANY PREDECESSOR ------------------------- ----------- ------------------------- ----------- THIRTEEN PERIOD FROM PERIOD FROM THIRTY-NINE PERIOD FROM PERIOD FROM WEEKS ENDED 7/22/02- 6/30/02- WEEKS ENDED 7/22/02- 12/30/01- 9/27/2003 9/28/02 7/21/02 9/27/03 9/28/02 7/21/02 - --------------------------------------------------------------------------------------------------------------- Net income (loss)........... $ 4,218 $ 3,704 $ (45,775) $ 11,839 $ 3,704 $ (35,795) Unrealized gain (loss) on derivatives.............. 147 - - (194) - - Currency translation........ (181) 896 (25) 1,279 896 795 --------------------------------------------------------------------------------- Comprehensive income (loss)................... $ 4,184 $ 4,600 $ (45,800) $ 12,924 $ 4,600 $ (35,000) - ---------------------------------------------------------------------------------------------------------------
9. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In April 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections ("SFAS No. 145"). Upon the adoption of SFAS No. 145, all gains and losses on the extinguishment of debt for periods presented in the financial statements will be classified as extraordinary items only if they meet the criteria in APB Opinion No. 30, Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions ("APB No. 30"). The provisions of SFAS No. 145 related to the rescission of FASB Statement No. 4 and FASB Statement No. 64 shall be applied for fiscal years beginning after May 15, 2002. Any gain or loss on extinguishment of debt that was classified as an extraordinary item in prior periods presented that does not meet the criteria in Opinion 30 for classification as an extraordinary item must be reclassified. As a result, the Company has reclassified the extraordinary item in the Statements of Operations to continuing operations in these quarterly financial statements. The provisions of SFAS No. 145 related to the rescission of FASB Statement No. 44, the amendment of FASB Statement No. 13 and Technical Corrections became effective as of May 15, 2002 and did not have a material impact on the Company. In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities ("SFAS No. 146"). SFAS No. 146 nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS No. 146 generally requires companies to recognize costs associated with exit activities when they are incurred rather than at the date of a commitment to an exit or disposal plan and is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The initial adoption of this statement did not have a material impact on the Company. In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities ("FIN No. 46"). FIN No. 46 clarifies the application of Accounting Research Bulletin F-49 No. 51, Consolidated Financial Statements, in determining whether a reporting entity should consolidate certain legal entities, including partnerships, limited liability companies, or trusts, among others, collectively defined as variable interest entities ("VIEs"). This interpretation applies to VIEs created or obtained after January 31, 2003, and as of July 1, 2003, to VIEs in which an enterprise holds a variable interest that it acquired before February 1, 2003. The initial adoption of this statement did not have a material impact on the Company. In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities ("SFAS No. 149"). SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under Statement 133 and is to be applied prospectively to contracts entered into or modified after June 30, 2003. Initial adoption of this statement did not have a material impact on the Company. In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity ("SFAS No. 150"). This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003. The adoption of this statement does not result in any material change to the Company's existing reporting. 10. SUBSEQUENT EVENT On October 15, 2003, Berry announced that it has entered into a definitive agreement to acquire Landis Plastics, Inc. ("Landis") for $228.0 million, including repayment of existing indebtedness. The purchase price will be funded with a combination of debt, an equity investment from Berry's existing investors and Landis management, and cash on Berry's balance sheet. The transaction is scheduled to close in the fourth quarter of 2003 and is subject to customary closing conditions. Berry has also agreed to acquire four facilities currently leased by Landis from affiliates of Landis. Berry currently intends to assign its right to purchase these facilities to a third party and lease them from that third party. F-50 INDEPENDENT AUDITOR'S REPORT Board of Directors Landis Plastics, Inc. Gentlemen: We have audited the accompanying balance sheets of Landis Plastics, Inc. (an Illinois Corporation), as of December 31, 2002 and 2001, and the related statements of income and retained earnings, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 financial statements referred to above present fairly, in all material respects, the financial position of Landis Plastics, Inc., as of December 31, 2002 and 2001, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. /s/ Roche, Scholz, Roche & Walsh, Ltd. February 14, 2003 F-51 LANDIS PLASTICS, INC. BALANCE SHEETS
- ----------------------------------------------------------------------------------------- DECEMBER 31, 2002 AND 2001 2002 2001 - ----------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents-unrestricted................... $ 10,028,817 $ 7,613,855 Restricted cash for accrued EEOC settlements............. - 707,493 --------------------------- Total cash and cash equivalents....................... 10,028,817 8,321,348 Receivables: Trade accounts........................................ 17,605,401 14,255,703 Short-term notes...................................... 133,698 105,924 Current portion of long-term notes.................... 631,935 348,752 Inventory................................................ 19,990,143 18,233,350 Other current assets..................................... 2,401,038 1,873,065 --------------------------- Total current assets.................................. 50,791,032 43,138,142 --------------------------- Property, plant and equipment: Land and improvements.................................... 848,776 848,776 Buildings and improvements............................... 13,219,540 12,959,854 Machinery and equipment.................................. 156,996,769 150,903,651 Less: accumulated depreciation........................... (99,539,537) (87,129,592) --------------------------- Total property, plant and equipment, net.............. 71,525,548 77,582,689 --------------------------- Other assets: Long-term notes receivable, net of current portion....... 2,690,062 3,250,096 Other receivables........................................ 684,521 489,864 Deposits................................................. 1,259,788 1,046,922 Other assets............................................. 360,392 506,403 --------------------------- Total other assets.................................... 4,994,763 5,293,285 --------------------------- Total assets................................................ $127,311,343 $126,014,116 --------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable......................................... $ 6,169,359 $ 6,623,046 Short-term borrowings.................................... 746,762 1,546,586 Current portion of long-term debt........................ 2,200,000 2,200,000 Customer deposits........................................ 108,999 484,334 Accrued payroll and vacation............................. 4,000,774 3,801,105 Accrued property taxes................................... 1,241,500 1,196,500 Other current liabilities................................ 4,098,844 4,804,296 --------------------------- Total current liabilities............................. 18,566,238 20,655,867 --------------------------- Long-term liabilities: Long-term debt, net of current portion................... 32,036,504 35,636,504 Other long-term liabilities.............................. 83,195 - --------------------------- Total long-term liabilities............................... 32,119,699 35,636,504 --------------------------- Stockholders' equity: Common stock............................................. 53,600 53,600 Additional paid-in capital............................... 253,976 98,540 Retained earnings........................................ 76,317,830 69,569,605 --------------------------- Total stockholders' equity............................ 76,625,406 69,721,745 --------------------------- Total liabilities and stockholders' equity.................. $127,311,343 $126,014,116 - -----------------------------------------------------------------------------------------
See accompanying notes to financial statements F-52 LANDIS PLASTICS, INC. STATEMENTS OF INCOME AND RETAINED EARNINGS
- ----------------------------------------------------------------------------------------- FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001 2002 2001 - ----------------------------------------------------------------------------------------- Revenue Product sales............................................ $207,824,698 $199,575,739 Other sales.............................................. 3,787,896 1,602,902 --------------------------- Total revenue......................................... 211,612,594 201,178,641 --------------------------- Cost of goods sold Materials................................................ 74,392,010 70,899,138 Direct labor............................................. 20,771,431 20,226,641 Manufacturing overhead................................... 71,813,423 66,463,619 --------------------------- Total cost of goods sold.............................. 166,976,864 157,589,398 --------------------------- Gross profit................................................ 44,635,730 43,589,243 --------------------------- General expenses Selling and marketing.................................... 5,015,742 4,629,641 Administrative........................................... 12,554,492 12,712,399 Transportation........................................... 3,094,584 3,149,317 Warehousing.............................................. 10,382,683 10,486,478 Asset impairment loss.................................... - 531,557 --------------------------- Total general expenses................................ 31,047,501 31,509,392 --------------------------- Operating income............................................ 13,588,229 12,079,851 Other income (expense) Interest income.......................................... 417,965 598,968 Interest expense......................................... (3,111,649) (3,688,284) Loss on derivative valuation............................. (128,517) - Miscellaneous income (expense)........................... 47,296 (65,393) --------------------------- Net income before income taxes.............................. 10,813,324 8,925,142 Provision for state income taxes............................ 22,887 6,980 --------------------------- Net income.................................................. 10,790,437 8,918,162 Retained earnings--beginning of year........................ 69,569,605 65,926,224 Stockholder distributions................................... (4,042,212) (5,274,781) --------------------------- Retained earnings--end of year.............................. $ 76,317,830 $ 69,569,605 - -----------------------------------------------------------------------------------------
See accompanying notes to financial statements. F-53 LANDIS PLASTICS, INC. STATEMENTS OF CASH FLOWS
- ---------------------------------------------------------------------------------------- FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001 2002 2001 - ---------------------------------------------------------------------------------------- Cash flows from operating activities: Net income............................................... $10,790,437 $ 8,918,162 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation.......................................... 12,561,305 12,303,665 Amortization.......................................... - 142,871 Non-cash interest on related party loans.............. 34,630 - Employee stock-based compensation..................... 155,436 - Asset impairment loss................................. - 531,557 (Gain) loss on sale of equipment...................... (18,755) 19,922 Loss on derivative valuation.......................... 128,517 - Change in provision for losses on accounts receivable......................................... 73,003 4,491 (Increase) decrease in: Accounts receivable................................ (3,422,701) 3,175,379 Inventory.......................................... (1,756,793) (1,496,619) Other assets....................................... (381,962) 583,469 Increase (decrease) in: Accounts payable................................... (453,684) 277,146 Customer deposits.................................. (375,335) 74,267 Other current liabilities.......................... (676,701) 145,516 -------------------------- Net cash provided by operating activities....... 16,657,397 24,679,826 -------------------------- Cash flows from investing activities: Capital acquisitions and equipment deposits.............. (6,579,245) (9,805,814) Proceeds from sale of equipment.......................... 51,563 11,450 Net short-term loans to related parties.................. (22,929) 12,421 Long-term loan to related parties........................ (71,901) (171,820) Principal payments from related parties on long-term loans.................................................. 348,752 353,712 Increase in other receivables............................ (194,657) (195,463) -------------------------- Net cash used in investing activities........... (6,468,417) (9,795,514) -------------------------- Cash flows from financing activities: Net short-term borrowings from related parties........... (839,299) (528,240) Principal payments on long-term debt..................... (3,600,000) (8,114,059) Stockholder distributions................................ (4,042,212) (5,274,781) -------------------------- Net cash used in financing activities........... (8,481,511) (13,917,080) -------------------------- Net increase in cash........................................ 1,707,469 967,232 Cash and cash equivalents at beginning of year.............. 8,321,348 7,354,116 -------------------------- Cash and cash equivalents at end of year.................... $10,028,817 $ 8,321,348 - ----------------------------------------------------------------------------------------
See accompanying notes to financial statements. F-54 LANDIS PLASTICS, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2002 AND 2001 NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS Landis Plastics, Inc. is a closely held corporation that manufactures plastic products. Offices and plants are located in Chicago Ridge and Alsip, Illinois; Monticello and Richmond, Indiana; Solvay, New York; and Tolleson, Arizona. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ACCOUNTS RECEIVABLE Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation allowance based on its assessments of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to trade accounts receivable. Accounts receivable are reduced by an allowance for doubtful accounts of $114,400 at December 31, 2002, and $41,397 at December 31, 2001. INVENTORIES The Company values substantially all of its inventories at cost determined on a last-in, first-out (LIFO) basis. The LIFO method resulted in a valuation below cost of $1,759,388 at December 31, 2002, and $144,201 at December 31, 2001. PROPERTY, PLANT AND EQUIPMENT Land, buildings and equipment are stated at cost. Depreciation is computed on the straight-line basis for financial statement purposes over the estimated useful lives of the assets as follows:
- -------------------------------------------------------------------------- Machinery................................................... 10 Years Transportation equipment.................................... 5-10 Years Other equipment and fixtures................................ 5-10 Years Land improvements........................................... 20 Years Leasehold improvements...................................... 10-40 Years Buildings................................................... 40 Years - --------------------------------------------------------------------------
F-55 ASSET IMPAIRMENT LOSS As required by Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the impairment of long-lived assets and for long-lived assets to be disposed of," the Company recorded losses on long-lived assets. The total impairment of long-lived assets in 2001 was $531,557 related to a robotic parts handling system that did not meet performance criteria. The impairment charge was the difference between the carrying value and the estimated fair value of the assets. The Company estimated fair values based on discounted future cash flows. AMORTIZATION The discounts relating to the non-interest bearing notes will be amortized over the two year terms of the notes using the interest expense method. CASH AND CASH EQUIVALENT For financial statement presentation purposes, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The carrying value of cash equivalents approximates fair value due to the short term, highly liquid nature of cash equivalents. CASH FLOW STATEMENT Cash used by operating activities included payments for interest and income taxes as follows:
- ------------------------------------------------------------------------------------- 2002 2001 - ------------------------------------------------------------------------------------- Interest paid............................................... $3,130,273 $3,554,208 Income taxes paid........................................... 16,271 35,539 - -------------------------------------------------------------------------------------
Supplemental disclosures of noncash investing and financing activities: Noncash investing and financing transactions consisting of the cost of acquiring machinery and equipment and the related obligations have been included in fixed assets and notes payable, respectively, in the accompanying financial statements at a discounted value. Amortization of the loan discount increased the note payable by $142,871 during 2001. Additional noncash investing and financing activities consist of the following:
- --------------------------------------------------------------------------------- 2002 2001 - --------------------------------------------------------------------------------- Capital expenditures included in other accrued liabilities.............................................. $170,596 $552,698 Stock-based compensation and related credit to additional paid-in capital.......................................... 155,436 -- - ---------------------------------------------------------------------------------
DERIVATIVE FINANCIAL INSTRUMENTS In accordance with SFAS No. 133, derivative financial instruments are reported on the balance sheet at fair value, and changes in the derivative's fair value are recognized currently in earnings. The derivative financial instruments are not designated as hedging instruments. Derivatives are utilized by the Company in the management of its interest rate exposures. The Company does not use derivative financial instruments for trading or speculative purposes. F-56 The Company enters into interest rate swap agreements, which effectively exchange variable interest rate debt for fixed interest rate debt. The agreements are used to reduce the exposure to possible increases in interest rates. The Company enters into these swap agreements with a major financial institution on a portion of its long-term borrowings. The interest rate swap agreements involve the periodic exchange of payments without the exchange of the notional amount upon which the payments are based. The differential to be received or paid is accrued, as interest rates change, and recognized currently in the statement of income and retained earnings. INCOME TAXES Landis Plastics, Inc. has elected by unanimous consent of its stockholders to be taxed as an "S" corporation under Section 1362 of the Internal Revenue Code. Accordingly, no provision or liability for federal income taxes is reflected in the accompanying statements. Instead, the stockholders are liable for individual federal income taxes on their respective share of the Company's taxable income. However, the Company is liable for certain state income taxes. General investment and employment tax credit carryforwards are available in various states of approximately $900,000. These credits expire between 2004 and 2017. NOTE 2. RETIREMENT PLAN The Company provides a qualified 401(k) savings plan. Eligible employees may defer between 2% and 10% of compensation each year, not to exceed the maximum allowed by law. The. Company will match the employee contribution on a 50% basis up to 6% contributed. In addition, for non-highly compensated employees, the Company will match the employee contribution 100% for compensation deferrals between 6% and 8%. No matching contributions will be made for compensation deferrals in excess of 8%. Company contributions to the plan were $884,763 for 2002, and $854,530 for 2001. NOTE 3. NOTES RECEIVABLE Short-Term notes receivable are as follows at December 31:
- --------------------------------------------------------------------------------- 2002 2001 - --------------------------------------------------------------------------------- Due from officers of the Company and beneficiaries of qualified stockholders' trusts, interest at 4.0% in 2002 and 4.0% in 2001, due on demand, unsecured............... $133,698 $105,924 ------------------- Total short-term notes receivable........................... $133,698 $105,924 - ---------------------------------------------------------------------------------
F-57 Long-Term notes receivable from related parties are as follows at December 31:
- ------------------------------------------------------------------------------------- 2002 2001 - ------------------------------------------------------------------------------------- Due from beneficiaries of qualified stockholders' trusts; interest at 6.5%; annual principal payments of $176,792 plus interest until maturity in December, 2006; secured by stock certificates of Landis Plastics, Inc............ $ 707,167 $ 883,958 Due from various trusts with common beneficiaries as the qualified stockholders' trusts; interest at 9.0%; payments including principal and interest of $143,809 in 2003 and $143,809 annually thereafter until maturity in January, 2006; unsecured, security in real estate is optional to the company.................................. 465,901 559,367 Due from a trust whose trustee is an officer of the company; interest at 9.0%; principal payments of $90,543 in arrears at December 31, 2002; entire balance classified as short-term as of December 31, 2002; unsecured, security in real estate is optional to the company....... 218,353 218,353 Due from a trust whose trustee is an officer of the Company; interest at 6.0%; principal payments of $40,260 in arrears at December 31, 2002; entire balance classified as short-term as of December 31, 2002; unsecured, security in real estate is optional to the Company....... 50,325 50,325 Due from a partnership comprised of trusts with common beneficiaries as the qualified stockholders' trusts; interest at 7.5%; payments including principal and interest of 18,112 monthly until maturity in 2016, unsecured................................................ 1,808,350 1,886,845 Due from beneficiaries of qualified stockholders' trusts; interest at 4.0%; principal due on demand; unsecured..... 71,901 - ----------------------- Total notes receivable...................................... 3,321,997 3,598,848 Less: current portion....................................... (631,935) (348,752) ----------------------- Notes Receivable, Long-Term................................. $2,690,062 $3,250,096 - -------------------------------------------------------------------------------------
NOTE 4. OTHER RECEIVABLES On November 30, 1999, the Company entered into a certain Split Dollar Life Insurance Agreement to fund an irrevocable insurance trust of an officer of the Company. In addition, a Collateral Assignment Agreement was simultaneously executed, providing the Company a security interest in the cash surrender value of the policy upon its surrender, or, if not surrendered, in the proceeds payable upon the death of the second to die under the terms of the policy. The annual premium due under the terms of the policy currently approximates $202,500. The Company, at the option of the owner of the policy, can be called upon each year to pay all or a portion of this premium. The Company is prohibited from borrowing against the cash surrender value, and cannot assign its security interest in the policy to anyone except the policy owner or the owner's nominee. The owner of the policy is the trustee of the irrevocable trust. The premium balance owed to the Company on December 31, 2002 and 2001, was $684,521 and $489,864, respectively, and is presented as other receivables on the balance sheet. F-58 NOTE 5. SHORT-TERM BORROWINGS Short-Term borrowings at December 31, 2002 and 2001, consist of the following:
- ----------------------------------------------------------------------------------- 2002 2001 - ----------------------------------------------------------------------------------- Due to officers of the Company and beneficiaries of qualified stockholders' trusts, interest at 4.0% in 2002 and 4.0% in 2001, due on demand, unsecured............... $746,762 $1,546,586 --------------------- Total Short-Term Borrowings................................. $746,762 $1,546,586 - -----------------------------------------------------------------------------------
NOTE 6. LONG-TERM DEBT Notes payable as of December 31, 2002 and 2001, are as follows:
- --------------------------------------------------------------------------------------- 2002 2001 - --------------------------------------------------------------------------------------- Bank One, interest at the lesser of prime or LIBOR + 1.5%, monthly principal payments of $83,333 plus interest, due in 2005, secured by equipment............................ $ 2,836,504 $ 3,836,504 Bank One, interest at the lesser of prime or LIBOR + 1.5%, monthly principal payments of $100,000 plus interest, due March 1, 2004, secured by equipment...................... 1,400,000 2,600,000 Due to officer/stockholder of Landis Plastics, Inc.; interest at 7.0%, semi-annual interest payments of $49,000, due May 1, 2004, retired in 2002 before maturity, unsecured...................................... - 1,400,000 C.M. Life Insurance Company, semi-annual interest payments at 8.88% on senior note until maturity, annual principal payments of $371,429 beginning in March of 2004 until maturity in March of 2010, unsecured..................... 2,600,000 2,600,000 Massachusetts Mutual Life Insurance Company, semi-annual interest payments at 8.88% on three separate senior notes until maturity, annual principal payments of $2,485,714 beginning in March of 2004 until maturity in March of 2010, unsecured.......................................... 17,400,000 17,400,000 Northern Life Insurance Company, semi-annual interest payments at 8.88% on senior note until maturity, annual principal payments of $571,429 beginning in March of 2004 until maturity in March of 2010, unsecured............... 4,000,000 4,000,000 Reliastar Life Insurance Company, semi-annual interest payments at 8.88% on senior note until maturity, annual principal payments of $428,571 beginning in March of 2004 until maturity in March of 2010, unsecured............... 3,000,000 3,000,000
F-59
- --------------------------------------------------------------------------------------- 2002 2001 - --------------------------------------------------------------------------------------- Sigler and Company, semi-annual interest payments at 8.88% on senior note until maturity, annual principal payments of $428,571 beginning in March of 2004 until maturity in March 2010, unsecured.................................... 3,000,000 3,000,000 ------------------------- Total Notes Payable......................................... 34,236,504 37,836,504 Less: Current Portion....................................... (2,200,000) (2,200,000) ------------------------- Long-Term Debt.............................................. $32,036,504 $35,636,504 - ---------------------------------------------------------------------------------------
Maturities of long-term debt for the next five years are as follows:
- -------------------------------------------------------------- 2003 2004 2005 2006 2007 - -------------------------------------------------------------- $2,200,000 $5,485,714 $5,122,218 $4,285,714 $4,285,714 - --------------------------------------------------------------
The provisions of the Company's loan and credit agreements with Bank One require the maintenance of at least $5,500,000 of working capital, and at each calendar quarter end a ratio of current assets to current liabilities of not less than 1.22 to 1.0, a ratio of indebtedness to tangible net worth of not greater than 1.0 to 1.0, and a debt service ratio equal or greater than 1.2 to 1.0. The Company is also required to maintain minimum tangible net worth of at least $59,000,000 in 2002 and $61,500,000 in 2003. The Company was in compliance with the aforementioned covenants as of December 31, 2002. The provisions of the senior notes under the private placement agreement requires the Company to maintain specified levels of consolidated net worth and certain financial performance ratios. The covenants also stipulate certain limitations on additional indebtedness, mergers or consolidations, asset sales, investments, and transactions with affiliates. At December 31, 2002, the Company was in compliance with all of these provisions. NOTE 7. BANK LINE OF CREDIT Under terms of an unsecured revolving credit agreement with Bank One, the Company may borrow up to $10,000,000. The agreement expires March 27, 2003. All borrowings under this agreement will be evidenced by one or more demand notes of the Company and will bear interest at the lesser of prime or LIBOR +1.5%. Nothing was borrowed against this agreement as of December 31, 2002 and 2001. F-60 NOTE 8. COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL The aggregate number of shares which the Company is authorized to issue is 100,000, divided into two classes of no par value shares. The designation of each class and the number of shares of each class are as follows:
- ------------------------------------------------------------------------------------------------------ SHARES 2001 SHARES 2002 SHARES SERIES SHARES OUTSTANDING SHARES OUTSTANDING SHARES OUTSTANDING CLASS ------ AUTHORIZED 12-31-00 ISSUED 12-31-01 ISSUED 12-31-02 - ------------------------------------------------------------------------------------------------------ Common............... A 50,000 536.00 - 536.00 - 536.00 Common............... B 50,000 4,846.43 79.00 4,925.43 66.00 4,991.43 ------------------------------------------------------------------------------- 100,000 5,382.43 79.00 5,461.43 66.00 5,527.43 - ------------------------------------------------------------------------------------------------------
The Common A and Common B stock are collectively referred to as common stock. Except for exclusive voting rights and powers, all shares of Common A and Common B stock are identical in all respects and entitle the holders thereof to the same rights and privileges. The holders of Common A stock issued and outstanding possess the exclusive right to notice of stockholders' meetings and the exclusive voting rights and powers. The holders of Common B stock issued and outstanding are not entitled to any notice of stockholders' meetings or to vote upon any question affecting the affairs of the Company. Changes in additional paid-in capital for the years ended December 31, 2002 and 2001, are as follows:
- ---------------------------------------------------------------------- Additional paid-in capital at December 31, 2000 and 2001.... $ 98,540 Stock-based compensation award to employees in 2002......... 155,436 -------- Additional paid-in capital at December 31, 2002............. $253,976 - ----------------------------------------------------------------------
NOTE 9. RESTRICTED STOCK PLAN AND STOCK-BASED COMPENSATION In May of 2000 the Company adopted a restricted stock plan under which it may grant shares of non-voting common stock to certain executive employees. The plan is administered by the Compensation Committee of the Board of Directors and covers the period from January 1, 2000, to December 31, 2005. The maximum number of shares of non-voting common stock which may be subject to restricted stock awards under the plan is 5,000. However, no individual recipient is entitled to receive an aggregate total of more than ten percent of the shares available under the plan. The shares awarded pursuant to this plan are subject to certain restrictions on transfer. Such restrictions will lapse with respect to one-fourth of the shares awarded during each of the four consecutive calendar years beginning one year after the date of issuance, but only if on the date the restrictions are to lapse the recipient has been an employee of the Company continuously from the time of the restricted stock award to such date of lapse. For the years ended December 31, 2002 and 2001, the Company awarded shares of non-voting common stock to various executive employees subject to the terms of the restricted stock plan. A total of 66 shares were issued pursuant to the plan in 2002, and 79 shares were issued in 2001. The weighted-average grant-date fair value of the awarded stock amounted to $7,809 and $6,406 per share for 2002 and 2001, respectively. Compensation cost was not recognized F-61 for stock-based employer compensation awards in 2001 because of the vesting restrictions. Such compensation cost will be recognized in subsequent years as the restrictions lapse. Compensation cost of $155,436 was recognized in 2002 for stock-based employer compensation awards related to the shares on which restrictions lapsed. NOTE 10. FINANCIAL INSTRUMENTS The Company has a number of financial instruments, none of which are held for trading purposes. The Company estimates that the fair value of all financial instruments at December 31, 2002, except as noted in the following paragraph, does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying balance sheet. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value, and, accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange. Based on the borrowing rates currently available to the Company for long-term debt with similar terms and average maturities, the fair value of long-term debt is approximately $1.75 million greater than the carrying value as of December 31, 2002. The Company has entered into an interest rate swap contract with the intent of managing its exposure to interest rate risk. The contract fixes the interest rate on approximately $2.84 million and $3.83 million of the Company's floating rate obligations at December 31, 2002 and 2001, respectively, at an average base rate of 4.97% per annum until expiration in 2005. Gains and losses from interest rate swaps are recognized currently in the statement of income and retained earnings. The fair value of the interest rate swap agreement is provided to the Company by a bank known to be a high volume participant in this market. The value represents the estimated amount the Company would receive or pay to terminate the agreement taking into consideration current interest rates. In the unlikely event that the counterparty fails to perform under the contract, the Company bears the credit risk that payments due to the Company may not be collected. NOTE 11. CONCENTRATIONS OF CREDIT RISK The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and trade receivables. The Company maintains cash and cash equivalent balances at several financial institutions located in the Chicago area. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $100,000. The Company's uninsured cash and cash equivalent balances total $11,753,654 and $11,739,636 at December 31, 2002 and 2001, respectively. Concentrations of credit risk with respect to trade accounts receivable are limited due to the Company's routine assessments of the financial strength of its customers. The Company maintains a provision for potential credit losses based upon collectibility of all accounts receivable. The Company's historical experience in collection of accounts receivable falls within the recorded allowances. Two major customers in the food industry accounted for approximately 49% of the Company's product sales in 2002, and 44% of the Company's product sales in 2001. Also, two major F-62 suppliers accounted for approximately 83% of the Company's raw material purchases in 2002, and 87% of the Company's raw material purchases in 2001. NOTE 12. SELF INSURANCE Landis Plastics, Inc. maintains outside insurance coverage for worker's compensation claims in the states of Indiana and Arizona, but is self insured in the states of Illinois and New York. The Company does, however, maintain outside insurance coverage for Illinois and New York claims that exceed $300,000 per occurrence, and $778,819 in aggregate for all claims in a policy year. In accordance with Illinois state requirements, the Company maintains an irrevocable standby letter of credit in the amount of $250,000 from Bank One for the benefit of the Industrial Commission of Illinois. In accordance with New York state requirements, the Company maintains an irrevocable standby letter of credit in the amount of $1,010,613 from Bank One for the benefit of the state of New York Workmen's Compensation Board. No funds were drawn under either letter of credit in 2002 or 2001. All approved claims of approximately $519,000 and $487,000 were paid by the Company in 2002 and 2001, respectively. The Company has recorded an accrued liability of $719,266 for pending claims as of December 31, 2002. NOTE 13. LEASE COMMITMENTS The plants in Chicago Ridge and Alsip, Illinois, are owned by related parties and leased to the Company under annual agreements expiring December 31, 2003. The annual rental is $289,000 for the Chicago Ridge facility and $2,810,100 for the Alsip facility. The Company is liable for property taxes and insurance. The plants in Indiana are owned by the Company. The facility in Solvay, New York, is owned by related parties and leased to the Company under a ten year lease expiring in June, 2004. The annual rental is $600,000 and the Company is also liable for property taxes and insurance. The lease provides an option to the Company for two renewal terms for successive periods of five years each with annual rentals remaining the same. The facility in Tolleson, Arizona, is owned by related parties and leased to the Company under an annual agreement expiring December 31, 2003. The annual rental is $1,200,000 and the Company is also liable for property taxes and insurance. Minimum future rental payments under noncancelable operating leases having remaining terms in excess of one year as of December 31, 2002, for each of the next five years are as follows:
- ---------------------------------------------------------------------- YEAR AMOUNT - ---------------------------------------------------------------------- 2003........................................................ $600,000 2004........................................................ 300,000 2005........................................................ - 2006........................................................ - 2007........................................................ - - ----------------------------------------------------------------------
The Company also leases warehouses under several operating leases on a month to month basis. Total rent expense for all operating leases approximated $6 million for 2002, and $6 million for 2001. F-63 NOTE 14. STOCKHOLDERS' AGREEMENT The stockholders of the Company have an agreement stipulating, among other things, the terms under which the Company's stock can be sold or transferred. The agreement provides that a stockholder intending to dispose of an interest in the Company must first obtain written consent of the Company and all other stockholders. The Company has the option to redeem shares upon the death, disability, or termination of employment of a stockholder if certain other stockholders do not exercise their options to purchase. The Company is not required to redeem shares under any circumstances. NOTE 15. OTHER COMMITMENTS AND CONTINGENCIES The Company was a party to several related claims involving employment matters. In December of 2000, the Company entered into a Consent Decree with the Equal Employment Opportunity Commission (EEOC) to settle the claims. Under the Consent Decree, the Company established a claims settlement fund at a bank for $782,000 for the benefit of various claimants. The interest bearing bank account had a balance of $0 and $707,493 as of December 31, 2002 and 2001, respectively. The balance in the account is reflected in the financial statements as of December 31, 2002 and 2001, as "restricted cash for accrued EEOC settlements" and the related current liability is included in "other accrued expenses." The Company was also a defendant in a third party action arising out of an injury to an employee. The parties reached a settlement in February of 2002, and liability was apportioned to an equipment manufacturer and the Company. Landis Plastics, Inc. agreed to contribute $140,000 to the total settlement of $425,000. This liability of $140,000 was properly accrued for in the financial statements as of December 31, 2001, and paid in 2002. Other claims, suits, and complaints arising in the ordinary course of operations have been filed or are pending against the Company. In the opinion of management, such matters are without merit or are of such kind, or involve such amounts, as would not have a significant effect on the financial position or results of operations of the Company if disposed of unfavorably. NOTE 16. RECLASSIFICATIONS Certain amounts for 2001 have been reclassified to conform with 2002 classifications. Such reclassifications had no effect on reported net income. F-64 INDEPENDENT AUDITOR'S REPORT Board of Directors Landis Plastics, Inc. Gentlemen: We have audited the accompanying balance sheets of Landis Plastics, Inc. (an Illinois Corporation), as of December 31, 2000 and 1999, and the related statements of income and retained earnings, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our 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 financial statements referred to above present fairly, in all material respects, the financial position of Landis Plastics, Inc., as of December 31, 2000 and 1999, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ ROCHE, SCHOLZ, ROCHE & WALSH, LTD. February 21, 2001 F-65 LANDIS PLASTICS, INC. BALANCE SHEETS
- ----------------------------------------------------------------------------------------- DECEMBER 31, 2000 AND 1999 2000 1999 - ----------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents--unrestricted.................. $ 6,672,749 $ 1,877,886 Restricted cash for accrued EEOC Settlements............. 681,367 - --------------------------- Total cash and cash equivalents....................... 7,354,116 1,877,886 Receivables: Trade accounts........................................... 17,435,573 12,734,681 Short-term notes......................................... 118,345 321,917 Current portion of long-term notes....................... 365,703 325,035 Inventory................................................ 16,736,731 19,138,563 Other current assets..................................... 2,681,187 1,843,650 --------------------------- Total current assets.................................. 44,691,655 36,241,732 --------------------------- Property, plant and equipment: Land and improvements.................................... 828,926 947,014 Buildings and improvements............................... 12,835,190 11,836,436 Machinery and equipment.................................. 140,392,672 122,882,230 Less: accumulated depreciation........................... (75,877,431) (65,192,708) --------------------------- Total property plant and equipment, net............... 78,179,357 70,472,972 --------------------------- Other assets: Long-term notes receivable, net of current portion....... 3,415,035 3,569,229 Other receivables........................................ 294,401 101,239 Deposits................................................. 2,958,338 5,608,594 Other assets............................................. 281,750 5,902 --------------------------- Total other assets.................................... 6,949,524 9,284,964 --------------------------- Total assets................................................ $129,820,536 $115,999,668 --------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable......................................... $ 6,345,900 $ 8,198,108 Short-term borrowings.................................... 2,074,826 1,894,073 Current portion of long-term debt........................ 7,371,188 6,036,198 Customer deposits........................................ 410,067 2,783,605 Accrued payroll and vacation............................. 3,059,246 2,988,201 Accrued property taxes................................... 1,281,500 1,136,770 Other accrued expenses................................... 4,762,941 2,814,957 --------------------------- Total current liabilities............................. 25,305,668 25,851,912 --------------------------- Long-term liabilities: Bank line of credit...................................... - 4,000,000 Long-term debt, net of current portion................... 38,436,504 26,416,685 --------------------------- Total long-term liabilities........................... 38,436,504 30,416,685 --------------------------- Stockholders' equity: Common stock............................................. 53,600 53,600 Additional paid-in capital............................... 98,540 3,213 Retained earnings........................................ 65,926,224 59,674,258 --------------------------- Total stockholders' equity............................ 66,078,364 59,731,071 --------------------------- Total liabilities and stockholders' equity.................. $129,820,536 $115,999,668 - -----------------------------------------------------------------------------------------
See accompanying notes to financial statements. F-66 LANDIS PLASTICS, INC. STATEMENTS OF INCOME AND RETAINED EARNINGS
- ----------------------------------------------------------------------------------------- FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 2000 1999 - ----------------------------------------------------------------------------------------- Revenue Product sales............................................ $185,967,238 $157,412,421 Other sales.............................................. 8,340,428 10,614,003 --------------------------- Total revenue......................................... 194,307,666 168,026,424 --------------------------- Cost of goods sold Materials................................................ 72,795,045 56,964,595 Direct labor............................................. 18,635,870 17,532,696 Manufacturing overhead................................... 63,653,075 59,356,910 --------------------------- Total cost of goods sold.............................. 155,083,990 133,854,201 --------------------------- Gross profit................................................ 39,223,676 34,172,223 --------------------------- General expenses Selling and marketing.................................... 4,107,158 3,907,364 Administrative........................................... 11,361,379 10,526,110 Transportation........................................... 2,324,249 2,483,610 Warehousing.............................................. 8,286,324 7,290,601 Asset impairment loss.................................... 425,556 - --------------------------- Total general expenses................................ 26,504,666 24,207,685 --------------------------- Operating income............................................ 12,719,010 9,964,538 Other income (expense) Interest income.......................................... 847,980 466,981 Interest expense......................................... (3,974,909) (2,245,476) Miscellaneous............................................ 5,291 - Gain (loss) on sale of equipment......................... 936,990 (4,993) --------------------------- Net income before income taxes.............................. 10,534,362 8,181,050 Provision for state income taxes............................ 12,348 155,400 --------------------------- Net income.................................................. 10,522,014 8,025,650 Retained earnings--beginning of year........................ 59,674,258 55,258,608 Stockholder distributions................................... (4,270,048) (3,610,000) --------------------------- Retained earnings--end of year.............................. $ 65,926,224 $ 59,674,258 - -----------------------------------------------------------------------------------------
See accompanying notes to financial statements. F-67 LANDIS PLASTICS, INC. STATEMENTS OF CASH FLOWS
- ----------------------------------------------------------------------------------------- FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 2000 1999 - ----------------------------------------------------------------------------------------- Cash flows from operating activities: Net income............................................... $ 10,522,014 $ 8,025,650 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation.......................................... 11,267,089 9,407,211 Amortization.......................................... 504,594 672,539 Employee stock-based compensation..................... 95,327 - Asset impairment loss................................. 425,556 - (Gain) loss on sale of equipment...................... (936,990) 4,993 Loss on disposal of intangible asset.................. 10,942 - Reduction in provision for losses on accounts receivable......................................... (11,714) (5,433) (Increase) decrease in: Accounts receivable................................... (4,689,178) (1,136,098) Inventory............................................. 2,401,832 (1,970,101) Other assets.......................................... (1,113,385) (1,046,396) Other receivables..................................... (193,162) (101,239) Increase (decrease) in: Accounts payable...................................... (3,171,873) (904,814) Customer deposits..................................... (2,373,538) 329,445 Other current liabilities............................. 2,163,759 1,100,841 --------------------------- Net cash provided by operating activities.......... 14,901,273 14,376,598 --------------------------- Cash flows from investing activities: Capital acquisitions and equipment deposits.............. (16,632,800) (15,631,896) Proceeds from sale of equipment.......................... 1,187,770 5,350 Long-term loan to related parties........................ (150,000) (1,632,000) Principal payments from related parties on long-term loans................................................. 263,526 1,966,187 --------------------------- Net cash used in investing activities.............. (15,331,504) (15,292,359) --------------------------- Cash flows from financing activities: Net short-term borrowings from related parties........... 384,325 818,755 Proceeds from long-term debt............................. 30,000,000 18,000,000 Net proceeds or repayment on line of credit.............. (4,000,000) 3,000,000 Principal payments on long-term debt..................... (16,207,816) (9,983,953) Principal payments on short-term debt.................... - (413,232) Stockholder distributions................................ (4,270,048) (3,610,000) Redemption of common stock............................... - (6,604,780) --------------------------- Net cash provided by financing activities.......... 5,906,461 1,206,790 --------------------------- Net increase in cash........................................ 5,476,230 291,029 Cash and cash equivalents at beginning of year.............. 1,877,886 1,586,857 --------------------------- Cash and cash equivalents at end of year.................... $ 7,354,116 $ 1,877,886 - -----------------------------------------------------------------------------------------
See accompanying notes to financial statements. F-68 LANDIS PLASTICS, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS Landis Plastics, Inc. is a closely held corporation that manufactures plastic products. Offices and plants are located in Chicago Ridge and Alsip, Illinois; Monticello and Richmond, Indiana; Solvay, New York; and Tolleson, Arizona. Two major customers in the food industry accounted for approximately 41% of the Company's product sales in 2000 and 37% of the Company's product sales in 1999. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ACCOUNTS RECEIVABLE Accounts receivable are reduced by an allowance for doubtful accounts of $36,906 at December 31, 2000, and $48,620 at December 31, 1999. INVENTORIES The Company values substantially all of its inventories at cost determined on a last-in, first-out (LIFO) basis. The LIFO method resulted in a valuation below cost of $1,245,042 at December 31, 2000 and $1,907,495 at December 31, 1999. PROPERTY, PLANT AND EQUIPMENT Land, buildings and equipment are stated at cost. Depreciation is computed on the straight-line basis for financial statement purposes over the estimated useful lives of the assets as follows: - ------------------------------------------------------------------------- Machinery................................................... 10 Years Transportation equipment.................................... 5-10 Years Other equipment and fixtures................................ 5-10 Years Land improvements........................................... 20 Years Leasehold improvements...................................... 10-40 Years Buildings................................................... 40 Years
F-69 ASSET IMPAIRMENT LOSS In 2000, as required by Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the impairment of long-lived assets and for long-lived assets to be disposed of," the Company recorded losses on long-lived assets. The total impairment of long-lived assets was $425,556 related to stacking and handling equipment that did not meet performance criteria. The impairment charge was the difference between the carrying value and the estimated fair value of the assets. The Company estimated fair values based on discounted future cash flows. AMORTIZATION The discounts relating to the non-interest bearing notes will be amortized over the two year terms of the notes using the interest expense method. CASH AND CASH EQUIVALENTS For financial statement presentation purposes, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. They may include cash, money market funds, and short-term investments in commercial paper. CASH FLOW STATEMENT Cash used by operating activities included payments for interest and income taxes as follows:
- ------------------------------------------------------------------------------------- 2000 1999 - ------------------------------------------------------------------------------------- Interest paid............................................... $2,673,667 $1,565,318 Income taxes paid........................................... 2,348 35,885
Supplemental disclosures of noncash investing and financing activities: Noncash investing and financing transactions consisting of the cost of acquiring machinery and equipment and the related obligations have been included in fixed assets and notes payable, respectively, in the accompanying financial statements at a discounted value of $4,648,032 at December 31, 1999. Amortization of the loan discount increased the note payable by $504,594 during 2000, and $672,539 during 1999. Additional noncash investing and financing activities consist of the following:
- ------------------------------------------------------------------------------------- 2000 1999 - ------------------------------------------------------------------------------------- Capital expenditures included in accounts payable........... $1,319,665 $2,431,743 Long-term debt retired from sale of assets.................. 941,969 - Stock-based compensation costs and related credit to additional paid-in-capital............................... 95,327 -
RETIREMENT PLAN The Company provides a qualified 401(k) savings plan. Eligible employees may defer between 2% and 10% of compensation each year, not to exceed the maximum allowed by law. The Company will match the employee contribution on a 50% basis up to 6% contributed. In addition, for non-highly compensated employees, the Company will match the employee F-70 contribution 100% for compensation deferrals between 6% and 8%. No matching contributions will be made for compensation deferrals in excess of 8%. Company contributions to the plan were $815,835 for 2000, and $743,254 for 1999. INCOME TAXES Landis Plastics, Inc. has elected by unanimous consent of its stockholders to be taxed as an "S" corporation under Section 1362 of the Internal Revenue Code for years beginning after December 31, 1986. Accordingly, no provision or liability for federal income taxes is reflected in the accompanying statements. Instead, the stockholders are liable for individual federal income taxes on their respective share of the Company's taxable income. However, the Company is liable for certain state income taxes. General investment and employment tax credit carryforwards are available in various states of approximately $760,000. These credits expire between 2003 and 2014. NOTE 2. NOTES RECEIVABLE Short-Term notes receivable are as follows at December 31:
- --------------------------------------------------------------------------------- 2000 1999 - --------------------------------------------------------------------------------- Due from officers of the company and beneficiaries of qualified stockholders' trusts, interest at 7.0%, due on demand, unsecured........................................ $118,345 $321,917 ------------------- Total short-term notes receivable........................... $118,345 $321,917 - ---------------------------------------------------------------------------------
Long-Term notes receivable from related parties are as follows at December 31:
- ------------------------------------------------------------------------------------- 2000 1999 - ------------------------------------------------------------------------------------- Due from beneficiaries of qualified stockholders' trusts; interest at 6.5%; annual principal payments of $176,792 plus interest until maturity in December, 2006; secured by stock certificates of Landis Plastics, Inc............ $1,060,750 $1,237,542 Due from various trusts with common beneficiaries as the qualified stockholders' trusts; interest at 9.0%; payments including principal and interest of $262,161 in 2001 and $183,260 annually thereafter until maturity in January, 2006; unsecured, security in real estate is optional to the company.................................. 863,468 942,137 Due from various trusts with common beneficiaries as the qualified stockholders' trusts; interest at 6.0%; principal payments of $38,260 plus interest due in 2001 and $18,130 plus interest annually thereafter until maturity in March, 2003; unsecured, security in real estate is optional to the company........................ 74,520 82,585 Due from a partnership comprised of trusts with common beneficiaries as the qualified stockholders' trusts; interest at 7.0%; principal due on January 1, 2002; unsecured................................................ 29,000 29,000 Due from a partnership comprised of trusts with common beneficiaries as the qualified stockholders' trusts; interest at 7.0%; principal due on January 1, 2002; unsecured................................................ 116,000 116,000
F-71
- ------------------------------------------------------------------------------------- 2000 1999 - ------------------------------------------------------------------------------------- Due from a partnership comprised of trusts with common beneficiaries as the qualified stockholders' trusts; interest at 7.0%; principal due on January 1, 2002; unsecured................................................ 1,044,000 1,044,000 Due from a partnership comprised of trusts with common beneficiaries as the qualified stockholders' trusts; interest at 7.0%; principal due on January 1, 2002; unsecured................................................ 243,000 243,000 Due from a partnership comprised of trusts with common beneficiaries as the qualified stockholders' trusts; interest at 7.0%; principal due on January 1, 2002; unsecured................................................ 200,000 200,000 Due from a partnership comprised of trusts with common beneficiaries as the qualified stockholders' trusts; interest at 7.0%; principal due on January 1, 2002; unsecured................................................ 150,000 - ----------------------- Total notes receivable...................................... 3,780,738 3,894,264 Less: current portion....................................... (365,703) (325,035) ----------------------- Notes receivable, long-term................................. $3,415,035 $3,569,229 - -------------------------------------------------------------------------------------
NOTE 3. OTHER RECEIVABLES On November 30, 1999, the Company entered into a certain Split Dollar Life Insurance Agreement to fund an irrevocable insurance trust of an officer of the Company. In addition, a Collateral Assignment Agreement was simultaneously executed, providing the Company a security interest in the cash surrender value of the policy upon its surrender, or, if not surrendered, in the proceeds payable upon the death of the second to die under the terms of the policy. The annual premium due under the terms of the policy currently approximates $202,500. The Company, at the option of the owner of the policy, can be called upon each year to pay all or a portion of this premium. The Company is prohibited from borrowing against the cash surrender value, and cannot assign its security interest in the policy to anyone except the policy owner or the owner's nominee. The owner of the policy is the trustee of the irrevocable trust. The premium balance owed to the Company on December 31, 2000 and 1999, was $294,401 and $101,239, respectively, and is presented as other receivables on the balance sheet. NOTE 4. SHORT-TERM BORROWINGS Short-Term borrowings at December 31, 2000 and 1999, consist of the following:
- ------------------------------------------------------------------------------------- 2000 1999 - ------------------------------------------------------------------------------------- Due to officers of the company and beneficiaries of qualified stockholders' trusts, interest at 7.0%, due on demand, unsecured........................................ $2,074,826 $1,894,073 ----------------------- Total short-term borrowings................................. $2,074,826 $1,894,073 - -------------------------------------------------------------------------------------
F-72 NOTE 5. LONG-TERM DEBT Notes payable as of December 31, 2000 and 1999, are as follows:
- --------------------------------------------------------------------------------------- 2000 1999 - --------------------------------------------------------------------------------------- American National Bank and Trust Company of Chicago, interest at the lesser of prime or LIBOR + 1.5%, quarterly principal payments of $125,000, retired in 2000 before maturity, secured by equipment; the 1999 outstanding principal balance was classified as non-current pursuant to the Company's intention and ability to refinance this obligation on a long-term basis.................................................... $ - $ 720,086 American National Bank and Trust Company of Chicago, interest at the lesser of prime or LIBOR + 1.5%, monthly principal payments of $83,333 plus interest, due in 2004, secured by equipment..................................... 4,836,504 5,823,282 Export Development Corporation, imputed interest on ten separate notes ranging from 6.9375% to 7.44%, principal balance is due at maturity ranging from February of 1999 to January of 2000, net of unamortized discounts of $0 and $2,000 at December 31, 2000 and 1999, respectively, unsecured................................................ - 651,536 Export Development Corporation, imputed interest on four separate notes ranging from 6.9975% to 7.3250%, principal balance is due at maturity ranging from February of 2000 to December of 2000, net of unamortized discounts of $0 and $125,736 at December 31, 2000 and 1999, respectively, unsecured................................................ - 2,951,466 Cessna Finance Corporation, interest at prime less 1.25% included in monthly payments of $6,085.70, retired in 2000 before maturity, secured by equipment............... - 945,441 Export Development Corporation, imputed interest on eight separate notes ranging from 6.6575% to 7.6675%, principal balance is due at maturity ranging from January of 2001 to September of 2001, net of unamortized discounts of $142,871 and $476,797 at December 31, 2000 and 1999, respectively, unsecured.................................. 5,171,188 4,837,262 American National Bank and Trust Company of Chicago, interest at the lesser of prime or LIBOR + 1.5%, monthly principal payments of $119,048 plus interest, retired in 2000 before maturity, secured by equipment; $5,000,000 of the 1999 outstanding principal balance was classified as non-current pursuant to the Company's intention and ability to refinance this obligation on a long-term basis.................................................... - 9,523,810 American National Bank and Trust Company of Chicago, interest at the lesser of prime or LIBOR + 1.5%, monthly principal payments of $100,000 plus interest, due March 1, 2004, secured by equipment............................ 3,800,000 5,000,000 Due to officer/stockholder of Landis Plastics, Inc.; interest at 7.0%, semi-annual interest payments of $49,000, due May 1, 2004, unsecured...................... 1,400,000 1,400,000
F-73
- --------------------------------------------------------------------------------------- 2000 1999 - --------------------------------------------------------------------------------------- Due to officer/stockholder of Landis Plastics, Inc.; interest at 7.0%, semi-annual interest payments of $21,000, due May 1, 2004, unsecured...................... 600,000 600,000 C.M. Life Insurance Company, semi-annual interest payments at 8.88% on senior note until maturity, annual principal payments of $371,429 beginning in March of 2004 until maturity in March of 2010, unsecured..................... 2,600,000 - Massachusetts Mutual Life Insurance company, semi-annual interest payments at 8.88% on three separate senior notes until maturity, annual principal payments of $2,485,714 beginning in March of 2004 until maturity in March of 2010, unsecured.......................................... 17,400,000 - Northern Life Insurance Company, semi-annual interest payments at 8.88% on senior note until maturity, annual principal payments of $571,429 beginning in March of 2004 until maturity in March of 2010, unsecured............... 4,000,000 - Reliastar Life Insurance Company, semi-annual interest payments at 8.88% on senior note until maturity, annual principal payments of $428,571 beginning in March of 2004 until maturity in March of 2010, unsecured............... 3,000,000 - Sigler and Company, semi-annual interest payments at 8.88% on senior note until maturity, annual principal payments of $428,571 beginning in March of 2004 until maturity in March of 2010, unsecured................................. 3,000,000 - ------------------------- Total notes payable......................................... 45,807,692 32,452,883 Less: current portion....................................... (7,371,188) (6,036,198) ------------------------- Long-term debt.............................................. $38,436,504 $26,416,685 - ---------------------------------------------------------------------------------------
Maturities of long-term debt for the next five years are as follows:
- -------------------------------------------------------------- 2001 2002 2003 2004 2005 - -------------------------------------------------------------- $7,371,188 $2,200,000 $2,200,000 $7,485,714 $5,122,218
The provisions of the Company's loan and credit agreements with American National Bank and Trust Company of Chicago require the maintenance of at least $5,500,000 of working capital, and at each calendar quarter end a ratio of current assets to current liabilities of not less than 1.22 to 1.0, a ratio of indebtedness to tangible net worth of not greater than 1.0 to 1.0, and a debt service ratio equal or greater than 1.2 to 1.0. The Company is also required to maintain minimum tangible net worth of at least $54,000,000 in 2000 and $56,500,000 in 2001. The Company was in compliance with the aforementioned covenants as of December 31, 2000. The provisions of the senior notes under the private placement agreement requires the Company to maintain specified levels of consolidated net worth and certain financial performance ratios. The covenants also stipulate certain limitations on additional indebtedness, mergers or consolidations, asset sales, investments, and transactions with affiliates. At December 31, 2000, the Company was in compliance with all of these provisions. F-74 NOTE 6. BANK LINE OF CREDIT Under terms of an unsecured revolving credit agreement with American National Bank and Trust Company of Chicago, the Company may borrow up to $5,000,000. The agreement has no expiration date. All borrowings under this agreement will be evidenced by one or more demand notes of the Company and will bear interest at the bank's prime rate. Nothing was borrowed against this agreement as of December 31, 2000. $4,000,000 was borrowed as of December 31, 1999, and was classified as non-current pursuant to the Company's intention and ability to refinance this obligation on a long-term basis. NOTE 7. COMMON STOCK AND ADDITIONAL PAID-IN-CAPITAL The aggregate number of shares which the Company is authorized to issue is 100,000, divided into two classes. The designation of each class, the number of shares of each class, and the par value, if any, are as follows:
- ----------------------------------------------------------------------------------------------- SHARES NEW SHARES SHARES OUTSTANDING SHARES OUTSTANDING CLASS SERIES PAR VALUE AUTHORIZED 12-31-99 ISSUED 12-31-00 - ----------------------------------------------------------------------------------------------- Common................ A No par value 50,000 536.00 - 536.00 Common................ B No par value 50,000 4,824.00 22.43 4,846.43 ----------------------------------------------- 100,000 5,360.00 22.43 5,382.43 - -----------------------------------------------------------------------------------------------
The Common A and Common B stock are collectively referred to as common stock. Except for exclusive voting rights and powers, all shares of Common A and Common B stock are identical in all respects and entitle the holders thereof to the same rights and privileges. The holders of Common A stock issued and outstanding possess the exclusive right to notice of stockholders' meetings and the exclusive voting rights and powers. The holders of Common B stock issued and outstanding are not entitled to any notice of stockholders' meetings or to vote upon any question affecting the affairs of the Company. Changes in additional paid-in-capital for the years ended December 31, 2000 and 1999, are as follows:
- --------------------------------------------------------------------- Additional paid-in-capital at December 31, 1998 and 1999.... $ 3,213 Stock-based compensation award to an employee............... 95,327 ------- Additional paid-in-capital at December 31, 2000............. $98,540 - ---------------------------------------------------------------------
NOTE 8. RESTRICTED STOCK PLAN AND STOCK-BASED COMPENSATION In May of 2000 the Company adopted a restricted stock plan under which it may grant shares of non-voting common stock to certain executive employees. The plan is administered by the Compensation Committee of the Board of Directors and covers the period from January 1, 2000, to December 31, 2005. The maximum number of shares of non-voting common stock which may be subject to restricted stock awards under the plan is 5,000. However, no individual recipient is entitled to receive an aggregate total of more than ten percent of the shares available under the plan. F-75 The shares awarded pursuant to this plan are subject to certain restrictions on transfer. Such restrictions will lapse with respect to one-fourth of the shares awarded on April 30 during each of the four consecutive calendar years beginning with the first April 30th following the calendar year during which the award is made, but only if on the date the restrictions are to lapse the recipient has been an employee of the Company continuously from the time of the restricted stock award to such date of lapse. For the year ended December 31, 2000, there were no stock awards subject to the terms and restrictions of this plan. However, the Company issued 22.43 shares of non-voting common stock to an executive employee during 2000 which was not subject to the restricted stock plan. This transaction was recorded in accordance with SEAS No. 123, "Accounting for Stock-Based Compensation," which encourages entities to account for various equity instruments using a fair value approach. An independent appraisal of the Company was utilized to determine fair value. The total compensation cost recognized for stock-based employee compensation awards in 2000 was $95,327. NOTE 9. FAIR VALUES OF FINANCIAL INSTRUMENTS The Company has a number of financial instruments, none of which are held for trading purposes. The Company estimates that the fair value of all financial instruments at December 31, 2000, does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying balance sheet. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value, and, accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange. NOTE 10. CONCENTRATIONS OF CREDIT RISK The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and trade receivables. The Company maintains cash and cash equivalent balances at several financial institutions located in the Chicago area. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $100,000. The Company's uninsured cash and cash equivalent balances total $10,503,189 at December 31, 2000. Concentrations of credit risk with respect to trade accounts receivable are limited due to the Company's routine assessments of the financial strength of its customers. The Company's historical experience in collection of accounts receivable falls within the recorded allowances. NOTE 11. SELF INSURANCE Landis Plastics, Inc. maintains outside insurance coverage for worker's compensation claims in the states of Indiana and Arizona, but is self insured in the states of Illinois and New York. The company does, however, maintain outside insurance coverage for Illinois and New York claims that exceed $300,000 per occurrence, and $778,819 in aggregate for all claims in a policy year. In accordance with Illinois state requirements, the Company maintains an irrevocable standby letter of credit in the amount of $250,000 from American National Bank and Trust Company of Chicago for the benefit of the Industrial Commission of Illinois. In accordance with New York F-76 state requirements, the Company maintains an irrevocable standby letter of credit in the amount of $1,010,613 from American National Bank and Trust Company of Chicago for the benefit of the state of New York Workmen's Compensation Board. No funds were drawn under either letter of credit in 2000 or 1999. All approved claims of approximately $504,000 and $563,300 were paid by the Company in 2000 and 1999, respectively. The Company has recorded an accrued liability of $548,091 for pending claims as of December 31, 2000. NOTE 12. LEASE COMMITMENTS The plants in Chicago Ridge and Alsip, Illinois, are owned by related parties and leased to the Company under annual agreements expiring December 31, 2001. The annual rental is $289,000 for the Chicago Ridge facility and $2,810,100 for the Alsip facility. The Company is liable for property taxes and insurance. The plants in Indiana are owned by the Company. The facility in Solvay, New York, is owned by related parties and leased to the Company under a ten year lease expiring in June, 2004. The annual rental is $600,000 and the Company is also liable for property taxes and insurance. The lease provides an option to the Company for two renewal terms for successive periods of five years each with annual rentals remaining the same. The facility in Tolleson, Arizona, is owned by related parties and leased to the Company under an annual agreement expiring December 31, 2001. The annual rental is $1,200,000 and the Company is also liable for property taxes and insurance. Minimum future rental payments under noncancelable operating leases having remaining terms in excess of one year as of December 31, 2000, for each of the next five years are as follows:
- ---------------------------------------------------------------------- YEAR AMOUNT - ---------------------------------------------------------------------- 2001........................................................ $600,000 2002........................................................ 600,000 2003........................................................ 600,000 2004........................................................ 300,000 2005........................................................ -- - ----------------------------------------------------------------------
The Company also leases warehouses under several operating leases on a month to month basis. Total rent expense for all operating leases amounted to $4,732,454 and $4,177,775 for 2000 and 1999, respectively. NOTE 13. STOCKHOLDERS' AGREEMENT The stockholders of the Company have an agreement stipulating, among other things, the terms under which the Company's stock can be sold or transferred. The agreement provides that a stockholder intending to dispose of an interest in the Company must first obtain written consent of the Company and all other stockholders. The Company has the option to redeem shares upon the death, disability, or termination of employment of a stockholder if certain other stockholders do not exercise their options to purchase. The Company is not required to redeem shares under any circumstances. F-77 NOTE 14. OTHER COMMITMENTS AND CONTINGENCIES In addition to the standby letters of credit required for self insurance purposes as identified in Note 11, the Company is contingently liable for performance under standby letters of credit to collateralize its obligations to a third party for the purchase of equipment. These irrevocable standby letters of credit in the amount of $1,381,230 from American National Bank and Trust Company of Chicago as of December 31, 2000, are for the benefit of an equipment manufacturing vendor. Management does not expect any material losses to result from these off-balance-sheet instruments and, therefore, is of the opinion that the fair value of these instruments is zero. The Company was a party to several related claims involving employment matters. In December of 2000, the Company entered into a Consent Decree with the Equal Employment Opportunity Commission (EEOC) to settle the claims. Under the Consent Decree, the Company established a claims settlement fund for $782,000, of which, $681,367 remained in the fund as of December 31, 2000, for the benefit of various claimants. The $681,367 is reflected in the financial statements as of December 31, 2000, as "restricted cash for accrued EEOC settlements" and the related current liability is included in "other accrued expenses." The Company is also a defendant in a third party action arising out of an injury to an employee. The plaintiff is seeking $3,000,000 in damages, but the Company denies any liability for the accident. However, there is a reasonable possibility that liability would be apportioned to an equipment manufacturer and the Company. Management believes its potential exposure to be in the range of $200,000 to $250,000. Other claims, suits, and complaints arising in the ordinary course of operations have been filed or are pending against the Company. In the opinion of management, such matters are without merit or are of such kind, or involve such amounts, as would not have a significant effect on the financial position or results of operations of the Company if disposed of unfavorably. F-78 LANDIS PLASTICS, INC. BALANCE SHEETS
- --------------------------------------------------------------------------------------------- (IN THOUSANDS OF DOLLARS) SEPTEMBER 28, 2003 DECEMBER 31, 2002 - --------------------------------------------------------------------------------------------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents.......................... $ 6,903 $ 10,029 Accounts receivable and short-term notes........... 24,868 18,371 Inventories........................................ 22,299 19,990 Other current assets............................... 2,106 2,401 -------------------------------------- Total current assets............................ 56,176 50,791 Property and equipment; net.......................... 64,681 71,526 Other assets......................................... 10,369 4,994 -------------------------------------- Total assets......................................... $131,226 $127,311 -------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable................................... $ 10,113 $ 6,169 Accrued interest................................... 105 792 Other current liabilities.......................... 12,505 9,405 Current portion of long-term debt.................. 5,786 2,200 -------------------------------------- Total current liabilities....................... 28,509 18,566 Long-term liabilities: Long-term debt, net of current portion............. 26,801 32,037 Other long-term liabilities........................ 83 83 -------------------------------------- Total liabilities.................................... 55,393 50,686 -------------------------------------- Stockholders' equity: Preferred stock.................................... - - Common stock....................................... 54 54 Additional paid-in capital......................... 1,258 253 Retained earnings.................................. 74,521 76,318 -------------------------------------- Total stockholders' equity........................... 75,833 76,625 -------------------------------------- Total liabilities and stockholders' equity........... $131,226 $127,311 - ---------------------------------------------------------------------------------------------
See accompanying notes to financial statements F-79 LANDIS PLASTICS, INC. STATEMENTS OF INCOME AND RETAINED EARNINGS
- ---------------------------------------------------------------------------------------------- FOR THE THIRTY-NINE WEEKS ENDED (IN THOUSANDS OF DOLLARS) SEPTEMBER 28, 2003 SEPTEMBER 29, 2002 - ---------------------------------------------------------------------------------------------- (UNAUDITED) REVENUE Product sales..................................... $161,010 $152,964 Other sales....................................... 3,515 2,658 --------------------------------------- Total revenue.................................. 164,525 155,622 --------------------------------------- COST OF GOODS SOLD Materials......................................... 63,931 54,994 Labor and overhead................................ 70,440 68,235 --------------------------------------- Total cost of goods sold....................... 134,371 123,229 --------------------------------------- Gross profit......................................... 30,154 32,393 --------------------------------------- GENERAL EXPENSES Selling and marketing............................. 4,451 3,524 Administrative.................................... 10,155 8,825 Transportation.................................... 2,618 2,290 Warehousing....................................... 8,424 7,682 --------------------------------------- Total general expenses......................... 25,648 22,321 --------------------------------------- Operating income..................................... 4,506 10,072 Other income (expense) Interest income................................... 277 411 Interest expense.................................. (2,163) (2,297) --------------------------------------- Net income before income taxes....................... 2,620 8,186 Provision for state income taxes..................... 77 82 --------------------------------------- Net income........................................... 2,543 8,104 Retained earnings--beginning of year................. 76,318 69,570 Stockholder distributions............................ (4,340) (4,043) --------------------------------------- Retained earnings--end of period..................... $ 74,521 $73,631 - ----------------------------------------------------------------------------------------------
See accompanying notes to financial statements F-80 LANDIS PLASTICS, INC. STATEMENTS OF CASH FLOWS
- ---------------------------------------------------------------------------------------------- FOR THE THIRTY-NINE WEEKS ENDED (IN THOUSANDS OF DOLLARS) SEPTEMBER 28, 2003 SEPTEMBER 29, 2002 - ---------------------------------------------------------------------------------------------- (UNAUDITED) Cash flows from operating activities: Net income........................................ $ 2,543 $ 8,104 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation...................................... 9,586 9,224 Gain on sale of equipment......................... - (37) (Increase) decrease in: Accounts receivable............................ (6,914) (4,562) Inventory...................................... (2,309) (5,318) Other assets................................... 187 (675) Increase (decrease) in: Accounts payable............................... 7,549 4,417 Other current liabilities...................... (631) (631) --------------------------------------- Net cash provided by operating activities... 10,011 10,522 --------------------------------------- Cash flows from investing activities: Capital acquisitions and equipment deposits....... (7,718) (4,199) Proceeds from sale of equipment................... 7 35 Receipts from long term investments............... (15) 46 --------------------------------------- Net cash used in investing activities.......... (7,726) (4,118) --------------------------------------- Cash flows from financing activities: Net borrowings from related parties............... (427) (736) Equity compensation............................... 1,006 - Principal payments on long-term debt.............. (1,650) (3,050) Stockholder distributions......................... (4,340) (4,042) --------------------------------------- Net cash used in financing activities......... (5,411) (7,828) --------------------------------------- Net decrease in cash................................. (3,126) (1,424) Cash and cash equivalents at beginning of year....... 10,029 8,321 --------------------------------------- Cash and cash equivalents at end of period........... $ 6,903 $ 6,897 - ----------------------------------------------------------------------------------------------
See accompanying notes to financial statements F-81 LANDIS PLASTICS, INC. NOTES TO THE FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT AS OTHERWISE NOTED) (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Landis Plastics, Inc. have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full fiscal year. 2. LONG-TERM DEBT Notes payable as of September 28, 2003 and December 31, 2002, are as follows:
- -------------------------------------------------------------------------------- 9/28/03 12/31/02 - -------------------------------------------------------------------------------- Bank One, interest at the lesser of prime or LIBOR + 1.5%, monthly principal payments of $83 plus interest, due in 2005, secured by equipment.................................. $ 2,087 $ 2,837 Bank One, interest at the lesser of prime or LIBOR + 1.5%, monthly principal payments of $100 plus interest, due March 1, 2004, secured by equipment............................... 500 1,400 C.M. Life Insurance Company, semi-annual interest payments at 8.88% on senior note until maturity, annual principal payments of $371 beginning in March of 2004 until maturity in March of 2010, unsecured................................. 2,600 2,600 Massachusetts Mutual Life Insurance Company, semi-annual interest payments at 8.88% on three separate senior notes until maturity, annual principal payments of $2,486 beginning in March of 2004 until maturity in March of 2010, unsecured................................................... 17,400 17,400 Northern Life Insurance Company, semi-annual interest payments at 8.88% on senior note until maturity, annual principal payments of $571 beginning in March of 2004 until maturity in March of 2010, unsecured........................ 4,000 4,000 Reliastar Life Insurance Company, semi-annual interest payments at 8.88% on senior note until maturity, annual principal payments of $429 beginning in March of 2004 until maturity in March of 2010, unsecured........................ 3,000 3,000 Sigler and Company, semi-annual interest payments at 8.88% on senior note until maturity, annual principal payments of $429 beginning in March of 2004 until maturity in March 2010, unsecured............................................. 3,000 3,000 ------------------ Total notes payable......................................... 32,587 34,237 Less: current portion....................................... (5,786) (2,200) ------------------ Long-term debt.............................................. $26,801 $32,037 - --------------------------------------------------------------------------------
F-82 Maturities of long-term debt for the next five years are as follows:
- ---------------------------------------- 2003 2004 2005 2006 2007 - ---------------------------------------- $550 $5,486 $5,122 $4,286 $4,286 - ----------------------------------------
The provisions of the Company's loan and credit agreements with Bank One require the maintenance of at least $5.5 million of working capital, and at each calendar quarter end a ratio of current assets to current liabilities of not less than 1.22 to 1.0, a ratio of indebtedness to tangible net worth of not greater than 1.0 to 1.0, and a debt service ratio equal or greater than 1.2 to 1.0. The Company is also required to maintain minimum tangible net worth of at least $61.5 million in 2003. The Company was in compliance with the aforementioned covenants as of September 28, 2003. The provisions of the senior notes under the private placement agreement requires the Company to maintain specified levels of consolidated net worth and certain financial performance ratios. The covenants also stipulate certain limitations on additional indebtedness, mergers or consolidations, asset sales, investments, and transactions with affiliates. At September 28, 2003, the Company was in compliance with all of these provisions. 3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In April 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections ("SFAS No. 145"). Upon the adoption of SFAS No. 145, all gains and losses on the extinguishment of debt for periods presented in the financial statements will be classified as extraordinary items only if they meet the criteria in APB Opinion No. 30, Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions ("APB No. 30"). The provisions of SFAS No. 145 related to the rescission of FASB Statement No. 4 and FASB Statement No. 64 shall be applied for fiscal years beginning after May 15, 2002. Any gain or loss on extinguishment of debt that was classified as an extraordinary item in prior periods presented that does not meet the criteria in Opinion 30 for classification as an extraordinary item must be reclassified. The provisions of SFAS No. 145 related to the rescission of FASB Statement No. 44, the amendment of FASB Statement No. 13 and Technical Corrections became effective as of May 15, 2002 and did not have a material impact on the Company. In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities ("SFAS No. 146"). SFAS No. 146 nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS No. 146 generally requires companies to recognize costs associated with exit activities when they are incurred rather than at the date of a commitment to an exit or disposal plan and is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The initial adoption of this statement did not have a material impact on the Company. In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities ("FIN No. 46"). FIN No. 46 clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, in determining whether a reporting entity should F-83 consolidate certain legal entities, including partnerships, limited liability companies, or trusts, among others, collectively defined as variable interest entities ("VIEs"). This interpretation applies to VIEs created or obtained after January 31, 2003, and as of July 1, 2003, to VIEs in which an enterprise holds a variable interest that it acquired before February 1, 2003. The initial adoption of this statement did not have a material impact on the Company. In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities ("SFAS No. 149"). SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under Statement 133 and is to be applied prospectively to contracts entered into or modified after June 30, 2003. Initial adoption of this statement did not have a material impact on the Company. In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity ("SFAS No. 150"). This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003. The adoption of this statement does not result in any material change to the Company's existing reporting. 4. SUBSEQUENT EVENT On October 15, 2003, Berry Plastics Corporation ("Berry") announced that it has entered into a definitive agreement to acquire Landis Plastics, Inc. ("Landis") for $228.0 million, including repayment of existing indebtedness. The purchase price will be funded with a combination of debt, an equity investment from Berry's existing investors and Landis management, and cash on Berry's balance sheet. The transaction is scheduled to close in the fourth quarter of 2003 and is subject to customary closing conditions. Berry has also agreed to acquire four facilities currently leased by Landis from affiliates of Landis. Berry currently intends to assign its right to purchase these facilities to a third party and lease them from that third party. F-84 [Berry Logo] THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. [ALTERNATE FRONT COVER PAGE FOR MARKET-MAKER PROSPECTUS] SUBJECT TO COMPLETION. DATED , 2004 Preliminary Prospectus [BERRY PLASTICS CORPORATION LOGO] Berry Plastics Corporation $85,000,000 10 3/4% Senior Subordinated Notes due 2012 Interest payable January 15 and July 15 The 10 3/4% Senior Subordinated Notes due 2012 offered hereby were issued on , 2004 in exchange for the 10 3/4% Senior Subordinated Notes due 2012 originally issued on November 20, 2003. We refer to the notes issued in the exchange and the original notes collectively as notes. The notes mature on July 15, 2012. Interest on the notes offered hereby will accrue from July 15, 2003. We may redeem the notes, in whole or in part, at any time beginning on July 15, 2007. In addition, before July 15, 2005, we may redeem up to 35% of the notes with the net cash proceeds of certain equity offerings. The redemption prices are described on page 91. If we sell certain of our assets or experience specific kinds of changes of control, we must offer to purchase the notes. The notes will be guaranteed by BPC Holding Corporation, and all of our existing and future domestic subsidiaries, except as provided herein. The notes will not be guaranteed by our foreign subsidiaries: Berry Plastics Acquisition Corporation II, NIM Holdings Limited, Berry Plastics U.K. Limited, Norwich Acquisition Limited, Capsol Berry Plastics S.p.a. or Ociesse S.r.l. The notes will not be guaranteed by any foreign subsidiaries in the future unless any such foreign subsidiary guarantees any senior indebtedness of ours or any of our subsidiaries (other than that of another foreign subsidiary). The notes will be subordinated in right of payment to all obligations of our non-guarantors subsidiaries. The notes will also be subordinated in right of payment to all existing and future senior indebtedness, will rank equally in right of payment with any existing and future senior subordinated indebtedness and will be senior in right of payment to all future subordinated obligations. The notes will also be effectively subordinated to all of our secured indebtedness and our subsidiaries' to the extent of the value of the assets securing such indebtedness. We do not intend to apply for listing of the notes on any securities exchange or automated quotation system. Certain private equity funds managed by affiliates of Goldman, Sachs & Co. and J.P. Morgan Securities Inc. own a substantial majority of the equity of BPC Holding, our parent company. SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN RISKS THAT YOU SHOULD CONSIDER IN CONNECTION WITH AN INVESTMENT IN THE NOTES. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------------- This prospectus has been prepared for and will be used by J.P. Morgan Securities Inc. and Goldman, Sachs & Co. in connection with offers and sales of the notes in market-making transactions. These transactions may occur in the open market or may be privately negotiated at prices related to prevailing market prices at the time of sales or at negotiated prices. J.P. Morgan Securities Inc. and Goldman, Sachs & Co. may act as principal or agent in these transactions. We will not receive any proceeds of such sales. JPMORGAN GOLDMAN, SACHS & CO. , 2004 [ALTERNATE TABLE OF CONTENTS FOR MARKET-MAKER PROSPECTUS] TABLE OF CONTENTS
PAGE Prospectus summary.................... 1 Risk factors.......................... 8 Use of proceeds....................... 20 Capitalization........................ 21 Unaudited pro forma financial information......................... 22 Selected consolidated financial data................................ 30 Management's discussion and analysis of financial condition and results of operations....................... 33 Business.............................. 48 Management............................ 61 Principal stockholders................ 69
PAGE Related party transactions............ 71 Description of other indebtedness..... 75 Description of notes.................. 79 Certain material U.S. federal tax considerations...................... 142 ERISA considerations.................. 150 Plan of distribution.................. 152 Legal matters......................... 153 Independent auditors.................. 153 Where you can find more information... 153 Index to financial statements......... F-1
--------------------- Berry Plastics Corporation is a Delaware corporation. Our principal executive offices are located at 101 Oakley Street, Evansville, Indiana 47710, and our telephone number at that address is 812-424-2904. In this prospectus, unless the context otherwise requires, "BPC Holding" or "Holding" refers to BPC Holding Corporation, "we," "our" or "us" refers to BPC Holding Corporation together with its consolidated subsidiaries (not including Landis, unless the context otherwise requires), "Berry Plastics" or "the Company" refers to Berry Plastics Corporation, a wholly owned subsidiary of BPC Holding and the issuer of the notes, "Landis" refers to Landis Plastics, Inc., and "initial purchasers" refers to the firms listed on the cover of this prospectus. Unless otherwise indicated, all references in this prospectus to our fiscal years are to the 52/53 week period ending on the Saturday closest to December 31. Unless the context requires otherwise, all references in this prospectus to "2002," "2001," "2000," "1999," and "1998," or to such periods as our fiscal years, relate to our fiscal years ended December 28, 2002, December 29, 2001, December 30, 2000, January 1, 2000 and January 2, 1999, respectively. For 2002, the results under Holding's prior ownership have been combined with results subsequent to the merger of GS Berry Acquisition Corp. with and into BPC Holding on July 22, 2002, which is referred to in this prospectus as "the Buyout." --------------------- "Outstanding notes" refers to all the 10 3/4% Senior Subordinated Notes due 2012 that were issued on November 20, 2003 and "exchange notes" refers to the 10 3/4% Senior Subordinated Notes due 2012 offered pursuant to this prospectus. We sometimes refer to the outstanding notes and the exchange notes collectively as the "notes". In addition, we may issue additional notes, under the Indenture subject to the terms of the Indenture, and these additional notes would also be included in the term "notes". --------------------- NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH AN OFFER TO SELL OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS. [ALTERNATE PAGE FOR MARKET-MAKER PROSPECTUS] USE OF PROCEEDS This prospectus is delivered in connection with the sale of notes by Goldman, Sachs & Co. or J.P. Morgan Securities Inc. in market-making transactions. We will not receive any of the proceeds from such transaction. [ALTERNATE PAGE FOR MARKET-MAKER PROSPECTUS] PLAN OF DISTRIBUTION This prospectus is to be used by Goldman, Sachs & Co. and J.P. Morgan Securities Inc. in connection with offers and sales of the notes in market-making transactions effected from time to time. Goldman, Sachs & Co. and J.P. Morgan Securities Inc. may act as principal or agent in such transactions. Such sales will be made at prevailing market prices at the time of sale, at prices related thereto or at negotiated prices. We will not receive any of the proceeds from such sales. Private equity funds managed by Goldman, Sachs & Co. own more than a majority of our common stock and private equity funds managed by affiliates of J.P. Morgan Securities Inc. own approximately 29% of our common stock. See "Principal stockholders." Christopher Behrens and Mathew Lori, two of our directors, are partner and principal, respectively, of J.P Morgan Partners, LLC, an affiliate of J.P. Morgan Securities Inc. Joseph Gleberman and Douglas Londal are managing directors, and Patrick Dalton is a vice president, of Goldman, Sachs & Co. and all three are directors. Goldman, Sachs & Co. and J.P. Morgan Securities Inc. and their affiliates have provided us with commercial banking, investment banking or other financial advisory services in the past and may provide such services to us in the future. J.P. Morgan Securities Inc., acted as our financial advisor in connection with the Buyout. Goldman, Sachs & Co. and J.P. Morgan Securities Inc. acted as initial purchasers in connection with the sale of the existing notes and the outstanding notes and received customary fees, incurred in connection therewith. In addition, Goldman Sachs Credit Partners L.P., an affiliate of Goldman, Sachs & Co., acted as joint lead arranger, joint book runner and administrative agent under our senior secured credit facility and act in the same capacity under our amended and restated senior secured credit facility. J.P. Morgan Securities Inc. acted as joint lead arranger and joint book runner and JPMorgan Chase Bank, an affiliate of J.P. Morgan Securities Inc., acted as syndication agent and a lender under our senior secured credit facility and they act in the same capacities under our amended and restated senior secured credit facility. See also "Related party transactions." We have been advised by Goldman, Sachs & Co. and J.P. Morgan Securities that, subject to applicable laws and regulations, they currently intend to make a market in the notes following the completion of the exchange offer. However, Goldman, Sachs & Co. and J.P. Morgan Securities Inc. are not obligated to do so, and any such market-making may be interrupted or discontinued at any time without notice. We, Goldman, Sachs & Co. and J.P. Morgan Securities Inc. have entered into a registration rights agreement with respect to the use by Goldman, Sachs & Co. and J.P. Morgan Securities Inc. of this prospectus. Pursuant to such agreement, we agreed to indemnify Goldman, Sachs & Co. and J.P. Morgan Securities Inc. against certain liabilities, including liabilities under the Securities Act and to contribute to payments which Goldman, Sachs & Co. and J.P. Morgan Securities Inc. might be required to make in respect thereof. Pursuant to a stockholders' agreement entered into in connection with the Landis Acquisition, GSCP 2000 and other private equity funds affiliated with Goldman, Sachs & Co. have the right to designate seven members of our board of directors, one of which shall be a member of our management, and J.P. Morgan Partners Global Investors, L.P. and other private equity funds affiliated with J.P. Morgan Securities Inc. have the right to designate two members of our board, one of which will be designated by J.P. Morgan Partners Global Investors, L.P. See "Related party transactions--Stockholders' agreements." PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. We are incorporated under the laws of the State of Delaware. Section 145 of the Delaware General Corporation Law ("DGCL") provides that a Delaware corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with specified actions, suits and proceedings, whether civil, criminal, administrative or investigative (other than action by or in the right of the Corporation--a "derivative action"), if they acted in good faith an in a manner they reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. A similar standard is applicable in the case of derivative actions, except that indemnification only extends to expenses (including attorneys' fees) incurred in connection with the defense or settlement of such action, and the statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation. The statute provides that it is not exclusive of other indemnification that may be granted by a corporation's certificate of incorporation, bylaws, disinterested director vote, stockholder vote, agreement, or otherwise. The DGCL further authorizes a Delaware corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise, against any liability asserted against him and incurred by him in any such capacity, arising out of his status as such, whether or not the corporation would otherwise have the power to indemnify him under Section 145. The Company's Certificate of Incorporation and Bylaws provide for the indemnification of the Company's directors to the fullest extent permitted under Delaware law. The Company's Certificate of Incorporation limits the personal liability of a director to the corporation or its stockholders to damages for breach of the director's fiduciary duty. The Company has purchased insurance on behalf of its directors and officers. II-1 ITEM 21. EXHIBITS AND FINANCIAL DATA SCHEDULES (A) EXHIBITS The following is a list of all the documents filed as part of the Registration Statement
NUMBER DESCRIPTION - ------ ----------- 2.1* The Agreement and Plan of Merger dated as of October 15, 2003, by and among the Company, Berry Plastics Acquisition Corporation IV, Landis, all the shareholders of Landis, the Real Estate Sellers (as defined therein) and Gregory J. Landis, as the Shareholder Representative (as defined therein) (filed as Exhibit 2.1 to the Current Report on Form 8-K filed on December 5, 2003 (the "Form 8-K") and incorporated herein by reference) 3.1 Certificate of Incorporation of the Company (filed as Exhibit 3.3 to the Registration Statement on Form S-1 filed on February 24, 1994 (the "Form S-1") and incorporated herein by reference) 3.2 Bylaws of the Company (filed as Exhibit 3.4 to the Form S-1 and incorporated herein by reference) 3.3 Amended and Restated Certificate of Incorporation of BPC Holding Corporation ("Holding") (filed as Exhibit 4.1 to the Form S-8 filed on August 6, 2002 (the "Form S-8") and incorporated herein by reference) 3.4 Amended and Restated Bylaws of Holding (filed as Exhibit 4.2 to the Form S-8 and incorporated herein by reference) 4.1 The Indenture, dated as of July 22, 2002, among BPC Holding Corporation, the Company, the other guarantors listed on the signature page thereof, and U.S. Bank Trust National Association, as trustee relating to the 10 3/4% Senior Subordinated Notes due 2012 (filed as Exhibit 4.1 to the Registration Statement on Form S-4 filed on August 8, 2002 (the "2002 Form S-4") and incorporated herein by reference) 4.2* The Registration Rights Agreement, dated November 20, 2003, among the Company, BPC Holding, the other guarantors listed on the signature page thereof, and J.P. Morgan Securities Inc., Goldman Sachs & Co., as Initial Purchasers relating to the 10 3/4% Senior Subordinated Notes due 2012 4.3 Supplemental Indenture, dated as of August 6, 2002, among the Company, BPC Holding Corporation, Berry Iowa Corporation, Packerware Corporation, Knight Plastics, Inc., Berry Sterling Corporation, Berry Plastic Design Corporation, Poly-Seal Corporation, Berry Plastics Acquisitions Corporation III, Venture Packaging, Inc., Venture Packaging Midwest, Inc., Berry Plastics Technical Services, Inc., CPI Holding Corporation, Aerocon, Inc., Pescor, Inc., Berry Tri-Plas Corporation and Cardinal Packaging, Inc., Berry Plastics Acquisition Corporation IV, Berry Plastics Acquisition Corporation V, Berry Plastics Acquisition Corporation VI, Berry Plastics Acquisition Corporation VII, Berry Plastics Acquisition Corporation VIII, Berry Plastics Acquisition Corporation IX, Berry Plastics Acquisition Corporation X, Berry Plastics Acquisition Corporation XI, Berry Plastics Acquisition Corporation XII, Berry Plastics Acquisition Corporation XIII, Berry Plastics Acquisition Corporation XIV, LLC, Berry Plastics Acquisition Corporation XV, LLC, and U.S. Bank Trust National Association, as trustee (filed as Exhibit 4.3 to the 2002 Form S-4 and incorporated herein by reference)
II-2
NUMBER DESCRIPTION - ------ ----------- 4.4* Second Supplemental Indenture, dated as of November 20, 2003, among Landis Plastics, Inc., the Company, BPC Holding Corporation, Berry Iowa Corporation, Packerware Corporation, Knight Plastics, Inc., Berry Sterling Corporation, Berry Plastic Design Corporation, Poly-Seal Corporation, Berry Plastics Acquisitions Corporation III, Venture Packaging, Inc., Venture Packaging Midwest, Inc., Berry Plastics Technical Services, Inc., CPI Holding Corporation, Aerocon, Inc., Pescor, Inc., Berry Tri-Plas Corporation, Cardinal Packaging, Inc., Berry Plastics Acquisition Corporation IV, Berry Plastics Acquisition Corporation V, Berry Plastics Acquisition Corporation VI, Berry Plastics Acquisition Corporation VII, Berry Plastics Acquisition Corporation VIII, Berry Plastics Acquisition Corporation IX, Berry Plastics Acquisition Corporation X, Berry Plastics Acquisition Corporation XI, Berry Plastics Acquisition Corporation XII, Berry Plastics Acquisition Corporation XIII, Berry Plastics Acquisition Corporation XIV, LLC, Berry Plastics Acquisition Corporation XV, LLC, and U.S. Bank Trust National Association, as trustee 4.5 Form of Initial Note and Form of Exchange Note (included within the Indenture filed as Exhibit 4.1 to the 2002 Form S-4 and incorporated herein by reference) 5.1* Opinion of Fried, Frank, Harris, Shriver & Jacobson LLP as to the legality of the securities 10.1 Stockholders Agreement dated as of July 22, 2002, among BPC Holding Corporation, GS Capital Partners 2000, L.P., GS Capital Partners Offshore, L.P., GS Capital Partners 2000 GmbH & Co. Beteiligungs KG, GS Capital Partners 2000 Employee Fund, L.P., Stone Street Fund 2000, L.P., Bridge Street Special Opportunities Fund 2000, L.P., Goldman Sachs Direct Investment Fund 2000, L.P., J.P. Morgan Partners (BHCA), L.P., J.P. Morgan Partners Global Investors, L.P., J.P. Morgan Partners Global Investors (Cayman), L.P., J.P. Morgan Partners Global Investors (Cayman) II, L.P. and J.P. Morgan Partners Global Investors A, L.P. trustee (filed as Exhibit 4.3 to the 2002 Form S-4 and incorporated herein by reference) 10.2 Stockholders Agreement dated as of July 22, 2002, among BPC Holding Corporation, and those stockholders listed on Schedule A attached thereto (filed as Exhibit 4.6 to the Form S-8 and incorporated herein by reference) 10.3* Amended and Restated Credit and Guaranty Agreement, dated as of November 10, 2003, by and among the Company, Holding, certain subsidiaries of the Company, the lenders named therein (the "Lenders"), Goldman Sachs Credit Partners L.P., as Administrative Agent (the "Administrative Agent"), JPMorgan Chase Bank, as Syndication Agent (the "Syndication Agent"), Fleet National Bank, as Collateral Agent, Issuing Bank and Swing Line Lender (the "Collateral Agent") and the Royal Bank of Scotland and General Electric Capital Corporation, as Co-Documentation Agents (the "Co-Documentation Agents") 10.4* Counterpart Agreement dated as of November 20, 2003, by and among the Company, Holding, certain subsidiaries of the Company (including Landis), the Lenders, the Administrative Agent, the Syndication Agent, the Collateral Agent and the Co-Documentation Agents 10.5* Pledge Supplement, dated as of November 20, 2003, among the Company, the other Grantors named therein, and Fleet National Bank, as the Collateral Agent 10.6 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)
II-3
NUMBER DESCRIPTION - ------ ----------- 10.7 Amendment to Beeler Employment Agreement dated November 30, 1995 (filed as Exhibit 10.8 to the Annual report on Form 10-K filed on March 28, 1996 (the "1995 Form 10-K") and incorporated herein by reference) 10.8 Amendment to Beeler Employment Agreement dated June 30, 1996 (filed as Exhibit 10.7 to the Registration Statement on Form S-4 filed on July 17, 1996 (the "1996 Form S-4") and incorporated herein by reference) 10.9 Amendment to Beeler Employment Agreement dated as of June 30, 2001 (filed as Exhibit 10.19 to the 2002 Form S-4 and incorporated herein by reference) 10.10 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) 10.11 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) 10.12 Amendment to Kratochvil Employment Agreement dated June 30, 1996 (filed as Exhibit 10.13 to the 1996 Form S-4 and incorporated herein by reference) 10.13 Amendment to Kratochvil Employment Agreement dated June 30, 2001 (filed as Exhibit 10.21 to the 2002 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 1996 Form S-4 and incorporated herein by reference) 10.17 Amendment to Boots Employment Agreement dated June 30, 2001 (filed as Exhibit 10.20 to the 2002 Form S-4 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 Employment Agreement dated as of August 14, 2000, between the Company and William J. Herdrich (filed as Exhibit 10.15 to the 2002 Form S-4 and incorporated herein by reference) 10.20 BPC Holding Corporation 2002 Stock Option Plan dated August 5, 2002 (filed as Exhibit 4.7 to the Form S-8 and incorporated herein by reference) 10.21 BPC Holding Corporation Key Employee Equity Investment Program dated August 6, 2002 (filed as Exhibit 4.6 to the Form S-8 and incorporated herein by reference) 12.1* Ratio of earnings to fixed charges 21.1* List of Subsidiaries 23.1* Consent of Fried, Frank, Harris, Shriver & Jacobson LLP (included in Exhibit 5.1) 23.2* Consent of Ernst & Young LLP 23.3* Consent of Roche, Scholz, Roche & Walsh, Ltd. 24.1* Powers of Attorney (included in the signature pages to this Registration Statement) 25.1* Statement of Eligibility and Qualification of Trustee on Form T-1 of U.S. Bank Trust National Association under the Trust Indenture Act of 1939 99.1* Form of Letter of Transmittal, with respect to outstanding notes and exchange notes
II-4
NUMBER DESCRIPTION - ------ ----------- 99.2* Form of Notice of Guaranteed Delivery, with respect to outstanding notes and exchange notes 99.3* Form of Instructions to Registered Holder and/or Book-Entry Transfer Facility Participant From Beneficial Owners 99.4* Letter to Our Clients
- --------------- * Filed herewith. (B) FINANCIAL STATEMENT SCHEDULE: Schedule II Valuation and Qualifying Accounts. ITEM 22. UNDERTAKINGS The Registrant hereby undertakes: (1) to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement. (i) to include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424Ib) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in effective registration statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) that, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; (3) to remove from registration means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; (4) to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request; II-5 (5) to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective; and (6) to file an application for purposes of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the SEC under Section 305(b)(20) of the Trust Indenture Act. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer of controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, Berry Plastics Corporation has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Evansville, State of Indiana on January 9, 2004. Berry Plastics Corporation By: /s/ JAMES M. KRATOCHVIL ------------------------------------ James M. Kratochvil Executive Vice President, Chief Financial Officer, Treasurer and Secretary The undersigned directors and officers of Berry Plastics Corporation hereby constitute and appoint James M. Kratochvil and Ira G. Boots and each of them with full power to act without the other and with full power of substitution and resubstitution, our true and lawful attorneys-in-fact with full power to execute in our name and behalf in the capacities indicated below this Registration Statement on Form S-4 and any and all amendments thereto, including post-effective amendments to this Registration Statement and to sign any and all additional registration statements relating to the same offering of securities as this Registration Statement that are filed pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission and hereby ratify and confirm that all such attorneys-in- fact, or any of them, or their substitutes shall lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on January 9, 2004.
SIGNATURE TITLE - --------- ----- /s/ IRA G. BOOTS President, Chief Executive Officer, and - ----------------------------------------------------- Director (Principal Executive Officer) IRA G. BOOTS /s/ JAMES M. KRATOCHVIL Executive Vice President, Chief Financial - ----------------------------------------------------- Officer, Treasurer and Secretary (Principal JAMES M. KRATOCHVIL Financial Officer) /s/ JOSEPH GLEBERMAN Chairman of the Board - ----------------------------------------------------- JOSEPH GLEBERMAN /s/ CHRISTOPHER C. BEHRENS Director - ----------------------------------------------------- CHRISTOPHER C. BEHRENS
II-7
SIGNATURE TITLE - --------- ----- /s/ PATRICK J. DALTON Director - ----------------------------------------------------- PATRICK J. DALTON /s/ DOUGLAS F. LONDAL Director - ----------------------------------------------------- DOUGLAS F. LONDAL /s/ MATHEW J. LORI Director - ----------------------------------------------------- MATHEW J. LORI /s/ GREGORY J. LANDIS Director - ----------------------------------------------------- GREGORY J. LANDIS
II-8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, BPC Holding Corporation has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Evansville, State of Indiana on January 9, 2004. BPC Holding Corporation By: /s/ JAMES M. KRATOCHVIL ------------------------------------ James M. Kratochvil Executive Vice President, Chief Financial Officer, Treasurer and Secretary The undersigned directors and officers of BPC Holding Corporation hereby constitute and appoint James M. Kratochvil and Ira G. Boots and each of them with full power to act without the other and with full power of substitution and resubstitution, our true and lawful attorneys-in-fact with full power to execute in our name and behalf in the capacities indicated below this Registration Statement on Form S-4 and any and all amendments thereto, including post-effective amendments to this Registration Statement and to sign any and all additional registration statements relating to the same offering of securities as this Registration Statement that are filed pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission and hereby ratify and confirm that all such attorneys-in- fact, or any of them, or their substitutes shall lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on January 9, 2004.
SIGNATURE TITLE - --------- ----- /s/ IRA G. BOOTS President, Chief Executive Officer and - ----------------------------------------------------- Director (Principal Executive Officer) IRA G. BOOTS /s/ JAMES M. KRATOCHVIL Executive Vice President, Chief Financial - ----------------------------------------------------- Officer, Treasurer and Secretary (Principal JAMES M. KRATOCHVIL Financial Officer) /s/ JOSEPH GLEBERMAN Chairman of the Board - ----------------------------------------------------- JOSEPH GLEBERMAN /s/ CHRISTOPHER C. BEHRENS Director - ----------------------------------------------------- CHRISTOPHER C. BEHRENS
II-9
SIGNATURE TITLE - --------- ----- /s/ PATRICK J. DALTON Director - ----------------------------------------------------- PATRICK J. DALTON /s/ DOUGLAS F. LONDAL Director - ----------------------------------------------------- DOUGLAS F. LONDAL /s/ MATHEW J. LORI Director - ----------------------------------------------------- MATHEW J. LORI /s/ GREGORY J. LANDIS Director - ----------------------------------------------------- GREGORY J. LANDIS
II-10 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, Berry Iowa Corporation, Packerware Corporation, Knight Plastics, Inc., Berry Sterling Corporation, Berry Plastics Design Corporation, Poly-Seal Corporation, Venture Packaging, Inc., Venture Packaging Midwest, Inc., Berry Plastics Technical Services, Inc., CPI Holding Corporation, Cardinal Packaging, Inc., Aero Con, Inc., Berry Tri-Plas Corporation, Berry Plastics Acquisition Corporation III, Pescor, Inc., Berry Plastics Acquisition Corporation V, Berry Plastics Acquisition Corporation VI, Berry Plastics Acquisition Corporation VII, Berry Plastics Acquisition Corporation VIII, Berry Plastics Acquisition Corporation IX, Berry Plastics Acquisition Corporation X, Berry Plastics Acquisition Corporation XI, Berry Plastics Acquisition Corporation XII, Berry Plastics Acquisition Corporation XIII and Landis Plastics, Inc. each has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Evansville, State of Indiana on January 9, 2004. BERRY IOWA CORPORATION PACKERWARE CORPORATION KNIGHT PLASTICS, INC. BERRY STERLING CORPORATION BERRY PLASTICS DESIGN CORPORATION POLY-SEAL CORPORATION VENTURE PACKAGING, INC. VENTURE PACKAGING MIDWEST, INC. BERRY PLASTICS TECHNICAL SERVICES, INC. CPI HOLDING CORPORATION CARDINAL PACKAGING, INC. AERO CON, INC. BERRY TRI-PLAS CORPORATION BERRY PLASTICS ACQUISITION CORPORATION III PESCOR, INC. BERRY PLASTICS ACQUISITION CORPORATION V BERRY PLASTICS ACQUISITION CORPORATION VI BERRY PLASTICS ACQUISITION CORPORATION VII BERRY PLASTICS ACQUISITION CORPORATION VIII BERRY PLASTICS ACQUISITION CORPORATION IX BERRY PLASTICS ACQUISITION CORPORATION X BERRY PLASTICS ACQUISITION CORPORATION XI BERRY PLASTICS ACQUISITION CORPORATION XII BERRY PLASTICS ACQUISITION CORPORATION XIII LANDIS PLASTICS, INC. By: /s/ JAMES M. KRATOCHVIL ----------------------------------------- James M. Kratochvil Executive Vice President, Chief Financial Officer, Treasurer and Secretary II-11 The undersigned directors and officers of Berry Iowa Corporation, Packerware Corporation, Knight Plastics, Inc., Berry Sterling Corporation, Berry Plastics Design Corporation, Poly-Seal Corporation, Venture Packaging, Inc., Venture Packaging Midwest, Inc., Berry Plastics Technical Services, Inc., CPI Holding Corporation, Cardinal Packaging, Inc., Aero Con, Inc., Berry Tri-Plas Corporation, Berry Plastics Acquisition Corporation III, Pescor, Inc., Berry Plastics Acquisition Corporation IV, Berry Plastics Acquisition Corporation V, Berry Plastics Acquisition Corporation VI, Berry Plastics Acquisition Corporation VII, Berry Plastics Acquisition Corporation VIII, Berry Plastics Acquisition Corporation IX, Berry Plastics Acquisition Corporation X, Berry Plastics Acquisition Corporation XI, Berry Plastics Acquisition Corporation XII, and Berry Plastics Acquisition Corporation XIII constitute and appoint James M. Kratochvil and Ira G. Boots and each of them with full power to act without the other and with full power of substitution and resubstitution, our true and lawful attorneys-in-fact with full power to execute in our name and behalf in the capacities indicated below this Registration Statement on Form S-4 and any and all amendments thereto, including post-effective amendments to this Registration Statement and to sign any and all additional registration statements relating to the same offering of securities as this Registration Statement that are filed pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission and hereby ratify and confirm that all such attorneys-in-fact, or any of them, or their or their substitutes shall lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on January 9, 2004.
SIGNATURE TITLE - --------- ----- /s/ IRA G. BOOTS President, Chief Executive Officer, Director - ----------------------------------------------------- (Principal Executive Officer) IRA G. BOOTS /s/ JAMES M. KRATOCHVIL Executive Vice President, Chief Financial - ----------------------------------------------------- Officer, Treasurer, Secretary and Director JAMES M. KRATOCHVIL (Principal Financial Officer)
II-12 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, Berry Plastics Acquisition Corporation XIV, LLC., and Berry Plastics Acquisition Corporation XV, LLC., each has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Evansville, State of Indiana on January 9, 2004. BERRY PLASTICS ACQUISITION CORPORATION XIV, LLC BERRY PLASTICS ACQUISITION CORPORATION XV, LLC By: /s/ JAMES M. KRATOCHVIL ------------------------------------ James M. Kratochvil Executive Vice President, Chief Financial Officer, Treasurer and Secretary The undersigned managers and officers of Berry Plastics Acquisition Corporation XIII, LLC., and Berry Plastics Acquisition Corporation, L.L.C. constitute and appoint James M. Kratochvil and Ira G. Boots and each of them with full power to act without the other and with full power of substitution and resubstitution, our true and lawful attorneys-in-fact with full power to execute in our name and behalf in the capacities indicated below this Registration Statement on Form S-4 and any and all amendments thereto, including post-effective amendments to this Registration Statement and to sign any and all additional registration statements relating to the same offering of securities as this Registration Statement that are filed pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission and hereby ratify and confirm that all such attorneys-in-fact, or any of them, or their or their substitutes shall lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on January 9, 2004.
SIGNATURE TITLE - --------- ----- /s/ IRA G. BOOTS President Chief Executive Officer, and Manager - ----------------------------------------------------- (Principal Executive Officer) IRA G. BOOTS /s/ JAMES M. KRATOCHVIL Executive Vice President, Chief Financial - ----------------------------------------------------- Officer, Treasurer, Secretary and Manager JAMES M. KRATOCHVIL (Principal Financial Officer)
II-13 SCHEDULE II BPC HOLDING CORPORATION 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 PERIOD - ------------------------------------------------------------------------------------------------ Period from July 22, 2002 to December 28, 2002 Allowance for doubtful accounts................... $ 2,063 $ (291) $ - $ (218)(1) $ 1,990 ---------------------------------------------------------------- Period from December 30, 2001 to July 21, 2002 Allowance for doubtful accounts................... $ 2,070 $ 164 $ - $ 171(1) $ 2,063 ---------------------------------------------------------------- Year ended December 29, 2001 Allowance for doubtful accounts................... $ 1,724 $ 337 $ 295(2) $ 286(1) $ 2,070 ---------------------------------------------------------------- Year ended December 30, 2000 Allowance for doubtful accounts................... $ 1,386 $ 79 $ 510(2) $ 251(1) $ 1,724 - ------------------------------------------------------------------------------------------------
(1) Uncollectible accounts written off, net of recoveries. (2) Primarily relates to purchase of accounts receivable and related allowance through acquisitions. II-14 EXHIBIT INDEX
NUMBER DESCRIPTION - ------ ----------- 2.1* The Agreement and Plan of Merger dated as of October 15, 2003, by and among the Company, Berry Plastics Acquisition Corporation IV, Landis, all the shareholders of Landis, the Real Estate Sellers (as defined therein) and Gregory J. Landis, as the Shareholder Representative (as defined therein) (filed as Exhibit 2.1 to the Current Report on Form 8-K filed on December 5, 2003 (the "Form 8-K") and incorporated herein by reference) 3.1 Certificate of Incorporation of the Company (filed as Exhibit 3.3 to the Registration Statement on Form S-1 filed on February 24, 1994 (the "Form S-1") and incorporated herein by reference) 3.2 Bylaws of the Company (filed as Exhibit 3.4 to the Form S-1 and incorporated herein by reference) 3.3 Amended and Restated Certificate of Incorporation of BPC Holding Corporation ("Holding") (filed as Exhibit 4.1 to the Form S-8 filed on August 6, 2002 (the "Form S-8") and incorporated herein by reference) 3.4 Amended and Restated Bylaws of Holding (filed as Exhibit 4.2 to the Form S-8 and incorporated herein by reference) 4.1 The Indenture, dated as of July 22, 2002, among BPC Holding Corporation, the Company, the other guarantors listed on the signature page thereof, and U.S. Bank Trust National Association, as trustee relating to the 10 3/4% Senior Subordinated Notes due 2012 (filed as Exhibit 4.1 to the Registration Statement on Form S-4 filed on August 8, 2002 (the "2002 Form S-4") and incorporated herein by reference) 4.2* The Registration Rights Agreement, dated November 20, 2003, among the Company, BPC Holding, the other guarantors listed on the signature page thereof, and J.P. Morgan Securities Inc., Goldman Sachs & Co., as Initial Purchasers relating to the 10 3/4% Senior Subordinated Notes due 2012 4.3 Supplemental Indenture, dated as of August 6, 2002, among the Company, BPC Holding Corporation, Berry Iowa Corporation, Packerware Corporation, Knight Plastics, Inc., Berry Sterling Corporation, Berry Plastic Design Corporation, Poly-Seal Corporation, Berry Plastics Acquisitions Corporation III, Venture Packaging, Inc., Venture Packaging Midwest, Inc., Berry Plastics Technical Services, Inc., CPI Holding Corporation, Aerocon, Inc., Pescor, Inc., Berry Tri-Plas Corporation and Cardinal Packaging, Inc., Berry Plastics Acquisition Corporation IV, Berry Plastics Acquisition Corporation V, Berry Plastics Acquisition Corporation VI, Berry Plastics Acquisition Corporation VII, Berry Plastics Acquisition Corporation VIII, Berry Plastics Acquisition Corporation IX, Berry Plastics Acquisition Corporation X, Berry Plastics Acquisition Corporation XI, Berry Plastics Acquisition Corporation XII, Berry Plastics Acquisition Corporation XIII, Berry Plastics Acquisition Corporation XIV, LLC, Berry Plastics Acquisition Corporation XV, LLC, and U.S. Bank Trust National Association, as trustee (filed as Exhibit 4.3 to the 2002 Form S-4 and incorporated herein by reference)
NUMBER DESCRIPTION - ------ ----------- 4.4* Second Supplemental Indenture, dated as of November 20, 2003, among Landis Plastics, Inc., the Company, BPC Holding Corporation, Berry Iowa Corporation, Packerware Corporation, Knight Plastics, Inc., Berry Sterling Corporation, Berry Plastic Design Corporation, Poly-Seal Corporation, Berry Plastics Acquisitions Corporation III, Venture Packaging, Inc., Venture Packaging Midwest, Inc., Berry Plastics Technical Services, Inc., CPI Holding Corporation, Aerocon, Inc., Pescor, Inc., Berry Tri-Plas Corporation, Cardinal Packaging, Inc., Berry Plastics Acquisition Corporation IV, Berry Plastics Acquisition Corporation V, Berry Plastics Acquisition Corporation VI, Berry Plastics Acquisition Corporation VII, Berry Plastics Acquisition Corporation VIII, Berry Plastics Acquisition Corporation IX, Berry Plastics Acquisition Corporation X, Berry Plastics Acquisition Corporation XI, Berry Plastics Acquisition Corporation XII, Berry Plastics Acquisition Corporation XIII, Berry Plastics Acquisition Corporation XIV, LLC, Berry Plastics Acquisition Corporation XV, LLC, and U.S. Bank Trust National Association, as trustee 4.5 Form of Initial Note and Form of Exchange Note (included within the Indenture filed as Exhibit 4.1 to the 2002 Form S-4 and incorporated herein by reference) 5.1* Opinion of Fried, Frank, Harris, Shriver & Jacobson LLP as to the legality of the securities 10.1 Stockholders Agreement dated as of July 22, 2002, among BPC Holding Corporation, GS Capital Partners 2000, L.P., GS Capital Partners Offshore, L.P., GS Capital Partners 2000 GmbH & Co. Beteiligungs KG, GS Capital Partners 2000 Employee Fund, L.P., Stone Street Fund 2000, L.P., Bridge Street Special Opportunities Fund 2000, L.P., Goldman Sachs Direct Investment Fund 2000, L.P., J.P. Morgan Partners (BHCA), L.P., J.P. Morgan Partners Global Investors, L.P., J.P. Morgan Partners Global Investors (Cayman), L.P., J.P. Morgan Partners Global Investors (Cayman) II, L.P. and J.P. Morgan Partners Global Investors A, L.P. trustee (filed as Exhibit 4.3 to the 2002 Form S-4 and incorporated herein by reference) 10.2 Stockholders Agreement dated as of July 22, 2002, among BPC Holding Corporation, and those stockholders listed on Schedule A attached thereto (filed as Exhibit 4.6 to the Form S-8 and incorporated herein by reference) 10.3* Amended and Restated Credit and Guaranty Agreement, dated as of November 10, 2003, by and among the Company, Holding, certain subsidiaries of the Company, the lenders named therein (the "Lenders"), Goldman Sachs Credit Partners L.P., as Administrative Agent (the "Administrative Agent"), JPMorgan Chase Bank, as Syndication Agent (the "Syndication Agent"), Fleet National Bank, as Collateral Agent, Issuing Bank and Swing Line Lender (the "Collateral Agent") and the Royal Bank of Scotland and General Electric Capital Corporation, as Co-Documentation Agents (the "Co-Documentation Agents") 10.4* Counterpart Agreement dated as of November 20, 2003, by and among the Company, Holding, certain subsidiaries of the Company (including Landis), the Lenders, the Administrative Agent, the Syndication Agent, the Collateral Agent and the Co-Documentation Agents 10.5* Pledge Supplement, dated as of November 20, 2003, among the Company, the other Grantors named therein, and Fleet National Bank, as the Collateral Agent 10.6 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) 10.7 Amendment to Beeler Employment Agreement dated November 30, 1995 (filed as Exhibit 10.8 to the Annual report on Form 10-K filed on March 28, 1996 (the "1995 Form 10-K") and incorporated herein by reference)
NUMBER DESCRIPTION - ------ ----------- 10.8 Amendment to Beeler Employment Agreement dated June 30, 1996 (filed as Exhibit 10.7 to the Registration Statement on Form S-4 filed on July 17, 1996 (the "1996 Form S-4") and incorporated herein by reference) 10.9 Amendment to Beeler Employment Agreement dated as of June 30, 2001 (filed as Exhibit 10.19 to the 2002 Form S-4 and incorporated herein by reference) 10.10 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) 10.11 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) 10.12 Amendment to Kratochvil Employment Agreement dated June 30, 1996 (filed as Exhibit 10.13 to the 1996 Form S-4 and incorporated herein by reference) 10.13 Amendment to Kratochvil Employment Agreement dated June 30, 2001 (filed as Exhibit 10.21 to the 2002 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 1996 Form S-4 and incorporated herein by reference) 10.17 Amendment to Boots Employment Agreement dated June 30, 2001 (filed as Exhibit 10.20 to the 2002 Form S-4 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 Employment Agreement dated as of August 14, 2000, between the Company and William J. Herdrich (filed as Exhibit 10.15 to the 2002 Form S-4 and incorporated herein by reference) 10.20 BPC Holding Corporation 2002 Stock Option Plan dated August 5, 2002 (filed as Exhibit 4.7 to the Form S-8 and incorporated herein by reference) 10.21 BPC Holding Corporation Key Employee Equity Investment Program dated August 6, 2002 (filed as Exhibit 4.6 to the Form S-8 and incorporated herein by reference) 12.1* Ratio of earnings to fixed charges 21.1* List of Subsidiaries 23.1* Consent of Fried, Frank, Harris, Shriver & Jacobson LLP (included in Exhibit 5.1) 23.2* Consent of Ernst & Young LLP 23.3* Consent of Roche, Scholz, Roche & Walsh, Ltd. 24.1* Powers of Attorney (included in the signature pages to this Registration Statement) 25.1* Statement of Eligibility and Qualification of Trustee on Form T-1 of U.S. Bank Trust National Association under the Trust Indenture Act of 1939 99.1* Form of Letter of Transmittal, with respect to outstanding notes and exchange notes 99.2* Form of Notice of Guaranteed Delivery, with respect to outstanding notes and exchange notes 99.3* Form of Instructions to Registered Holder and/or Book-Entry Transfer Facility Participant From Beneficial Owners 99.4* Letter to Our Clients
- --------------- * Filed herewith. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- EXHIBITS TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- BERRY PLASTICS CORPORATION (Exact name of registrant as specified in its charter) ------------------------------ VOLUME I - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EX-2.1 3 y92946exv2w1.txt AGREEMENT AND PLAN OF MERGER Exhibit 2.1 EXECUTION COPY AGREEMENT AND PLAN OF MERGER by and among BERRY PLASTICS CORPORATION, BERRY PLASTICS ACQUISITION CORPORATION IV, LANDIS PLASTICS, INC. and THE PARTIES LISTED ON THE SIGNATURE PAGE HERETO Dated as of October 15, 2003 TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS.............................................................................................1 1.1 Definitions...........................................................................................1 ARTICLE II PURCHASE AND SALE OF BUSINESS.........................................................................14 2.1 The Merger...........................................................................................14 2.2 Effective Time.......................................................................................14 2.3 Certificate of Incorporation and Bylaws..............................................................14 2.4 Directors and Officers of the Surviving Corporation..................................................15 2.5 Effects of the Merger................................................................................15 2.6 Subsequent Actions...................................................................................15 2.7 Purchase and Sale of Transferred Real Properties.....................................................16 2.8 Payments at Closing..................................................................................16 2.9 Working Capital Adjustment...........................................................................16 ARTICLE III CLOSING..............................................................................................19 3.1 Closing Date.........................................................................................19 3.2 Payment of Per Share Merger Consideration............................................................19 3.3 Buyer's and Sub's Deliveries.........................................................................19 3.4 The Company's and Shareholders' Deliveries...........................................................20 3.5 Stock Transfer Books.................................................................................21 ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING THE SHAREHOLDERS............................................22 4.1 Authority of Shareholder.............................................................................22 4.2 Ownership of Company Securities......................................................................22 4.3 Consents and Approvals; No Violations................................................................22 4.4 No Finder............................................................................................23 4.5 Insolvency...........................................................................................23 ARTICLE V REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY..................................................23 5.1 Organization of the Company..........................................................................24 5.2 Subsidiaries and Investments.........................................................................24 5.3 Authority of the Company.............................................................................24 5.4 Capitalization.......................................................................................25 5.5 Shareholders of the Company..........................................................................25 5.6 Records..............................................................................................26 5.7 Financial Statements.................................................................................26 5.8 Company Debt.........................................................................................26
-i- 5.9 Operations Since the Balance Sheet Date..............................................................26 5.10 No Undisclosed Liabilities...........................................................................26 5.11 Inventories..........................................................................................27 5.12 Receivables and Payables.............................................................................27 5.13 Compliance with Laws and Governmental Permits........................................................27 5.14 Assets...............................................................................................28 5.15 Personal Property Leases.............................................................................28 5.16 Intellectual Property................................................................................28 5.17 Real Property and Real Property Leases...............................................................30 5.18 Employees and Related Agreements; ERISA..............................................................31 5.19 Labor and Employment Matters.........................................................................33 5.20 Insurance............................................................................................34 5.21 Contracts............................................................................................35 5.22 Taxes................................................................................................36 5.23 Litigation or Regulatory Action......................................................................37 5.24 Environmental and Health/Safety Matters..............................................................37 5.25 Product Warranty and Product Liability...............................................................38 5.26 Bank Accounts........................................................................................39 5.27 Customers and Suppliers..............................................................................39 5.28 Disclosure...........................................................................................40 5.29 No Finder............................................................................................40 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER AND SUB.......................................................41 6.1 Organization of Buyer and Sub........................................................................41 6.2 Authority of Buyer...................................................................................41 6.3 Securities Laws Representations......................................................................42 6.4 Available Funds......................................................................................42 6.5 Litigation...........................................................................................42 6.6 No Finder............................................................................................43 6.7 No Activities........................................................................................43 ARTICLE VII CONDUCT OF BUSINESS PENDING THE CLOSING..............................................................43 7.1 Investigation of the Business by Buyer...............................................................43 7.2 Preserve Accuracy of Representations and Warranties..................................................43 7.3 Governmental Approvals...............................................................................44 7.4 Operations Prior to the Closing Date.................................................................44 7.5 No Solicitations.....................................................................................47 7.6 Notification of Changes; Disclosure Schedule Update..................................................48 7.7 Further Assurances...................................................................................48 7.8 Antitrust Law Compliance.............................................................................49 7.9 Transfer of Transferred Real Properties..............................................................49
-ii- 7.10 Title and Survey Matters, Title Commitments..........................................................49 7.11 Leases...............................................................................................50 7.12 Excluded Assets......................................................................................50 7.13 Monticello Environmental Permits.....................................................................50 7.14 Financing............................................................................................50 7.15 FIRPTA Certificate...................................................................................51 7.16 Transfer.............................................................................................51 7.17 Owned Real Properties................................................................................51 7.18 Shareholder Approval.................................................................................51 7.19 Plas-Tool License....................................................................................51 ARTICLE VIII ADDITIONAL AGREEMENTS...............................................................................52 8.1 Transfer Taxes.......................................................................................52 8.2 Tax Matters..........................................................................................52 8.3 WARN Act.............................................................................................55 8.4 Confidentiality......................................................................................55 8.5 Prohibited Marks.....................................................................................55 8.6 Appointment of Shareholder Representative............................................................56 8.7 Severance Costs......................................................................................56 ARTICLE IX CONDITIONS TO THE OBLIGATIONS OF BUYER AND SUB........................................................57 9.1 No Misrepresentation or Breach of Covenants and Warranties...........................................57 9.2 No Restraint of Litigation...........................................................................57 9.3 Necessary Consents...................................................................................57 9.4 Purchase of Transferred Real Properties..............................................................57 9.5 Documents............................................................................................58 9.6 Funding..............................................................................................58 9.7 Non-Competition Agreements...........................................................................58 9.8 Related Party Agreements.............................................................................58 ARTICLE X CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND SHAREHOLDERS....................................58 10.1 No Misrepresentation or Breach of Covenants and Warranties...........................................58 10.2 No Restraint or Litigation...........................................................................58 10.3 Purchase of Transferred Real Properties..............................................................58 10.4 Documents............................................................................................59 ARTICLE XI INDEMNIFICATION.......................................................................................59 11.1 Indemnification for Company Matters..................................................................59 11.2 Indemnification for Shareholder Matters..............................................................61 11.3 Indemnification for Solvay Environmental Matters.....................................................62 11.4 Indemnification by Buyer.............................................................................63
-iii- 11.5 Notice of Claims.....................................................................................63 11.6 Third Party Claims...................................................................................64 11.7 Exclusivity of Indemnification.......................................................................65 11.8 Knowledge of Breach..................................................................................65 ARTICLE XII TERMINATION..........................................................................................66 12.1 Termination..........................................................................................66 12.2 Notice of Termination................................................................................67 12.3 Effect of Termination................................................................................67 ARTICLE XIII GENERAL PROVISIONS..................................................................................67 13.1 Survival of Obligations..............................................................................67 13.2 Confidential Nature of Information...................................................................67 13.3 No Public Announcement...............................................................................67 13.4 Notices..............................................................................................68 13.5 Successors and Assigns...............................................................................69 13.6 Entire Agreement; Amendments.........................................................................69 13.7 Interpretation.......................................................................................70 13.8 Waivers..............................................................................................70 13.9 Expenses.............................................................................................70 13.10 Partial Invalidity...................................................................................70 13.11 Execution in Counterparts............................................................................70 13.12 Specific Performance.................................................................................71 13.13 Governing Law........................................................................................71 13.14 Submission to Jurisdiction...........................................................................71
-iv- INDEX OF EXHIBITS Exhibit A Bridge Financing Commitment Letter Exhibit B Escrow Agreement Exhibit C Non-Competition Agreement Exhibit D Shareholders Representative Agreement Exhibit E-1 Certificate of Incorporation of Surviving Corporation Exhibit E-2 By-laws of Surviving Corporation Exhibit F Real Estate Purchase Agreement Exhibit G Transition Lease Exhibit H Shop Lease Exhibit I Equity Commitment Letters Exhibit J Lease Termination Agreement
-v- AGREEMENT AND PLAN OF MERGER This Agreement and Plan of Merger (the "AGREEMENT") is entered into effective as of October 15, 2003, by and among Berry Plastics Corporation, a Delaware corporation ("BUYER"), Berry Plastics Acquisition Corporation IV, a Delaware corporation ("SUB"), Landis Plastics, Inc., an Illinois corporation (the "COMPANY"), all of the shareholders of the Company as set forth on the signature page hereto (collectively the "SHAREHOLDERS," and individually, a "SHAREHOLDER"), the Real Estate Sellers (as defined below) and Gregory J. Landis, as the Shareholder Representative (as defined below). RECITALS A. The Company is engaged in the business of manufacturing plastic containers and lids for yogurt, cultured dairy, margarine and certain other food products, as well as other industrial purposes (the "BUSINESS"); B. The Shareholders own, and until the Closing (as defined herein) will own, all of the issued and outstanding shares of capital stock of the Company (the "COMPANY SECURITIES"); C. The Board of Directors of each of Buyer, Sub and the Company has approved, and deems it advisable and in the best interests of its stockholders to consummate, the acquisition of the Company by Buyer, which acquisition is to be effected by the merger of Sub with and into the Company, with the Company being the surviving entity (the "MERGER"), upon the terms and subject to the conditions set forth in this Agreement; and D. As a condition to the Merger, Buyer shall (or shall cause its designee to) purchase, and the Real Estate Sellers shall sell, certain real property containing certain of the Company's operation facilities currently leased by the Company from such Affiliates. NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements contained herein, it is hereby agreed among the parties hereto as follows: ARTICLE I DEFINITIONS 1.1 Definitions. In this Agreement, the following terms have the meanings specified or referred to in this Section 1.1 and such meanings shall be equally applicable to both the singular and plural forms. Any agreement referred to below shall mean such agreement as amended, supplemented and modified from time to time to the extent permitted by the applicable provisions thereof and by this Agreement. "AFFILIATE" means, with respect to any Person, any other Person which, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. "AGGREGATE PURCHASE PRICE" means the Total Enterprise Value, less the Funded Obligations as of the Closing, less the Transaction Costs. As of the Closing, the Company shall furnish to Buyer a schedule (the "FUNDED OBLIGATIONS SCHEDULE") setting forth the amount of each component of Funded Obligations (i.e., Funded Indebtedness, Capital Lease Amount, Related Party Receivable Amount and Unused Cap Ex Amount) and as of the Closing, the amount of Transaction Costs and setting forth in reasonable detail the basis for such amounts. "ANTITRUST IMPROVEMENTS ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder. "BALANCE SHEET" means the audited balance sheet of the Company as of December 31, 2002 included in Schedule 5.7. "BALANCE SHEET DATE" means December 31, 2002. "BANK ONE" means Bank One, N.A., a national banking association. "BANK ONE INDEBTEDNESS AMOUNT" means the amount, as of the Closing, necessary to pay off in full and extinguish all loans, advances, indebtedness, obligations, fees, penalties and liabilities of the Company owed under the Bank One Loan Documents. "BANK ONE LOAN DOCUMENTS" means that certain Second Amended and Restated Loan Agreement dated March 28, 2001, as amended, by and between the Company and American National Bank and Trust Company of Chicago (which was subsequently acquired by Bank One who is the successor-in-interest to the Bank One Loan Documents) and all other documents relating thereto. "BASIS" means any past or present fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incidence, action, failure to act, or transaction that forms or is reasonably likely to form the basis for any specified consequence. "BRIDGE FINANCING" means the financing contemplated by the Commitment Letter dated as of the date hereof and the term sheet attached thereto, a copy of which is attached hereto as Exhibit A. "BUSINESS DAY" means a day other than Saturday, Sunday or any day on which the principal commercial banks located in the State of Illinois are authorized or obligated to close under the laws of such state. "BUYER ANCILLARY AGREEMENTS" means all agreements, instruments, and documents being or to be executed and delivered by Buyer or its Affiliates under this Agreement or in connection herewith, including each Real Estate Purchase Agreement and the Buyer Funding Documents. -2- "BUYER FUNDING DOCUMENTS" means all of the agreements, notes, certificates, instruments, and other documents being or to be executed and delivered by Buyer or its Affiliates necessary to effect the Financing contemplated by the Commitment Letters. "CAPITAL LEASE" means a lease of property by the Company which, in conformity with GAAP, is required to be accounted for as a capital lease. "CAPITAL LEASE AMOUNT" means the aggregate amount required to be accounted for as Capital Leases in accordance with GAAP as of the Closing. "CHICAGO RIDGE CORPORATE OFFICE" means that real property located at 10800 South Central Avenue, Chicago Ridge, Illinois 60415. "CHICAGO RIDGE TOOL SHOP" means the real property located at 5632 Pleasant Boulevard, Chicago Ridge, Illinois 60415. "CODE" means the Internal Revenue Code of 1986, as amended. "COMPANY ANCILLARY AGREEMENTS" means all agreements, instruments, and documents being or to be executed and delivered by the Company under this Agreement or in connection herewith. "COMPANY ASSETS" means all of the properties and assets of the Company, other than the Leased Assets, whether personal, real or mixed, tangible or intangible, wherever located. "COMPANY BENEFIT PLAN" means each plan, program, contract, agreement or other arrangement providing for compensation, severance, termination pay, retirement benefits, performance awards, stock or stock-related awards, fringe benefits or other employee benefits of any kind, whether formal or informal, funded or unfunded, written or oral, including, without limitation, each "employee benefit plan," within the meaning of Section 3(3) of ERISA (other than an Employee Agreement) which is now or previously has been sponsored, maintained, contributed to, or required to be contributed to, by the Company for the benefit of any Employee, or pursuant to which the Company has any liability, contingent or otherwise. "COMPANY INTELLECTUAL PROPERTY" means all Intellectual Property that is currently used or has been used in the Business as presently conducted. "CONFIDENTIAL INFORMATION" means all information (whether or not reduced to written, electronic, magnetic or other tangible form) acquired by the Company or any Shareholder, concerning the products, services, projects, activities, business or affairs of the Company or its customers or suppliers, including (a) all information concerning Company Intellectual Property, including computer programs, system documentation, special hardware, product hardware, related software development, manuals, formulae, processes, methods, machines, compositions, -3- ideas, improvements or inventions, (b) all sales and financial information, (c) all independent contractor, client, customer and supplier lists, (d) all information concerning services, clients, customers, cases, projects or marketing plans for any of those services, clients, customers, cases or projects, and (e) all information relating to the transactions contemplated by this Agreement, including the terms and conditions hereof. Notwithstanding the foregoing, the term Confidential Information shall not include information that is generally available to the public or becomes generally available to the public other than as a result of a breach of Section 8.4. "CONFIDENTIALITY AGREEMENT" means the Confidentiality Agreement between Buyer and the Company. "CONTRACT" means any contract, agreement, commitment, undertaking or arrangement (whether written or oral). "COURT ORDER" means any judgment, order, award or decree of any federal, state, local or other court or tribunal and any award in any arbitration proceeding. "DE MINIMIS LOSSES" means any Losses resulting from a single set of facts and circumstances that do not exceed $50,000 in the aggregate. "DGCL" means the General Corporation Law of the State of Delaware. "DROP DEAD DATE" means January 15, 2004. "EMPLOYEE" means each current, former, or retired employee, officer, consultant, independent contractor, agent or director of the Company. "EMPLOYEE AGREEMENT" means each management, employment, bonus, loan or other extension of credit, change in control, retention, severance, consulting, non-compete, confidentiality, or similar agreement or contract between the Company and any Employee pursuant to which the Company has any liability, contingent or otherwise. "ENCUMBRANCE" means any encumbrance, lien, claim, charge, security interest, mortgage, pledge, easement, conditional sale or other title retention agreement, defect in title, covenant, option, proxy, voting trust, voting agreement or other restriction of any kind. "ENVIRONMENTAL LAW" means all Requirements of Law derived from or relating to the environment, health or safety, including but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendment and Reauthorization Act of 1986, 42 U.S.C.Section 9601, et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and subsequent Hazardous and Solid Waste Amendments of 1984, 42 U.S.C.Section 6901 et seq. ("SARA") (hereinafter, collectively "RCRA"); the Hazardous Materials Transportation Act, as amended, 49 U.S.C. -4- Section 1801, et seq.; the Clean Water Act, as amended, 33 U.S.C.Section 1311, et seq.; the Clean Air Act, as amended (42 U.S.C.Section 7401-7642); Toxic SubstanceS COntrol Act, as amended, 15 U.S.C.Section 2601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act as amended, 7 U.S.C.Section 136-136y; the Emergency Planning and Community Right-to-Know Act of 1986 as amended, 42 U.S.C.Section 11001, et seq. (Title III of SARA); THE Occupational Safety and Health Act of 1970, as amended, 29 U.S.C.Section 651, et seq. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ESCROW ACCOUNT," "ESCROW AGENT" and "ESCROW AGREEMENT" have the meanings set forth under the definition of "Holdback Amount." "EXPENSES" means any and all reasonable expenses incurred in connection with investigating, defending or asserting any claim, action, suit or proceeding incident to any matter indemnified against hereunder (including, without limitation, court filing fees, court costs, arbitration fees or costs, witness fees, and reasonable fees and disbursements of legal counsel (whether such legal fees and disbursements are incurred in connection with a claim against a party hereto or in connection with a Third Party Claim), investigators, expert witnesses, consultants, accountants and other professionals). "FIRST ESCROW RELEASE DATE" means the 10 month anniversary of the Closing Date, on which the amount equal to (a) fifty percent (50%) of the Indemnification Holdback Amount less (b) the sum of (i) the Reserved Amount and (ii) any indemnification payments previously made to any Buyer Indemnitee pursuant to Sections 8.2, 11.1 and 11.2 hereof shall be released (such amount, the "FIRST ESCROW RELEASE AMOUNT"). "FIRST SOLVAY ENVIRONMENTAL ESCROW RELEASE DATE" means the five year anniversary of the Closing Date, on which the amount equal to the difference, if any, between (a) the amount then remaining in the Solvay Environmental Indemnification Holdback Amount and (b) the sum of (i) $2,000,000 and (ii) the Reserved Solvay Amount shall be released (such amount, the "FIRST SOLVAY ESCROW RELEASE AMOUNT"). "FIRST SOLVAY ESCROW RELEASE AMOUNT" has the meaning set forth under the definition of "First Solvay Environmental Escrow Release Date." "FUNDED INDEBTEDNESS" means the amount, as of the Closing, necessary to pay off in full and extinguish all Indebtedness of the Company (including, but not limited to, the Bank One Indebtedness Amount and the Senior Note Indebtedness Amount) and all related obligations, fees, penalties and liabilities owed by the Company, as such amount may be reduced by amounts paid by the Company immediately prior to Closing. -5- "FUNDED OBLIGATIONS" means, without duplication, the sum of the Funded Indebtedness, the Capital Lease Amount, the Related Party Receivable Amount and the Unused Cap Ex Amount. "GAAP" means United States generally accepted accounting principles as in effect from time to time applied on a consistent basis. "GOVERNMENTAL BODY" means any federal, state, local, foreign or other governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal) or any body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority power of any nature. "HAZARDOUS SUBSTANCES" means any substance, chemical or waste that is listed, or contains amounts of one or more components that are defined, designated, classified, considered or listed, as hazardous, toxic or radioactive or are otherwise regulated or subject to imposition of liability under any Environmental Law; as well as any asbestos or asbestos-containing material, petroleum, petroleum product or by-product, crude oil or any fraction thereof, natural gas, natural gas liquids, liquefied natural gas, synthetic gas usable as fuel, or polychlorinated biphenyls ("PCBS"). "HOLDBACK AMOUNT" means the sum of the Working Capital Holdback Amount, the Indemnification Holdback Amount and the Solvay Environmental Indemnification Holdback Amount, which shall be deposited into an escrow account (the "ESCROW ACCOUNT") to be established with Bank One (the "ESCROW AGENT") pursuant to the terms of an escrow agreement in the form attached hereto as Exhibit B (the "ESCROW AGREEMENT"). "IBCA" means the Illinois Business Corporation Act. "INDEBTEDNESS" means (a) all indebtedness for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (b) any other indebtedness that is evidenced by a note, bond, debenture or similar instrument, (c) all obligations under financing leases and Capital Leases, (d) all obligations in respect of acceptances issued or created, (e) all liabilities secured by any lien on any Company Asset, and (f) all guarantee obligations. "INDEMNIFICATION HOLDBACK AMOUNT" means $19,500,000, which will be used to fund indemnification payments, if any, made pursuant to Sections 8.2, 11.1 and 11.2 hereof and in accordance with the Escrow Agreement. "INTELLECTUAL PROPERTY" means (i) all names, brands, logos and slogans embodying business or product goodwill or indications of origin, and all trademarks, corporate names, trade -6- names, service marks, trade dress, domain names and universal resource locators, together with all translations, adaptations, derivations and combinations thereof and all applications, registrations and renewals in connection therewith, and all of the goodwill associated therewith; (ii) all patents, patent applications, patent disclosures, inventions (whether patentable or unpatentable and whether or not reduced to practice) and all improvements thereof, including, but not limited to, any provisional, utility, continuation, continuation-in-part or divisional applications filed in the U.S. or other jurisdictions and all reissues, revisions and extensions thereof and all reexamination certificates issuing therefrom; (iii) all websites, copyrights, and copyrightable works both published and unpublished, including all registrations, applications and renewals in connection therewith; (iv) all computer and electronic data processing programs and software programs (in both source code and object code form), data, databases and related documentation; (v) all inventions, improvements, developments, modifications, derivative works, know-how, trade secrets, and confidential information (including research and development, know-how formulas, compositions, manufacturing and production processes and techniques, methods, schematics, technology, technical data, designs, drawings, flowcharts, block diagrams, specifications, customer and supplier lists, pricing and cost information and business and marketing plans and proposals); (vi) all licenses, sublicenses, permissions and other agreements relating to any of the foregoing; and (vii) all other intellectual property rights (in whatever form or medium) relating to any of the foregoing (including remedies and recoveries against infringement hereof and rights of protection of interest therein under the laws of all jurisdictions). "IRS" means the Internal Revenue Service. "KNOWLEDGE," "TO THE COMPANY'S KNOWLEDGE," or words to that effect as used herein refer to the actual or constructive knowledge of H. Richard Landis, Gregory J. Landis, William VanMeter, John Sabey, Bimal Kalvani and Steven Pace after reasonable inquiry. "LEASED ASSETS" collectively refers to the machinery, equipment and other personal property the Company leases to carry on its operations as set forth on Schedule 5.15, and the Leased Real Properties. "LOSSES" means any loss, cost, obligation, liability, settlement payment, award, judgment, fine, penalty, damage, expense, deficiency or other charge, but not including Expenses. "MATERIAL ADVERSE EFFECT" means any condition, circumstance, change in or effect on the Company that, individually or in the aggregate with any other condition, circumstance, change in or effect on the Company, has or would reasonably be expected to have a material adverse effect on the assets, properties, business, operations, prospects, financial condition, or results of operations of the Company; provided, however, that none of the following, to the extent arising after the date of this Agreement, shall be deemed to have a Material Adverse -7- Effect: (i) events affecting the United States or the economy generally; or (ii) events affecting the plastic container industry generally, but, in each case, only to the extent that the events discussed in (i) and (ii) do not have a disproportionate adverse effect on the assets, properties, business, operations, prospects, financial condition, or results of operations of the Company relative to other companies engaged in businesses similar to the Business. "NON-COMPETITION AGREEMENT" means a non-competition agreement in the form attached as Exhibit C hereto. "NOTE HOLDERS" means with respect to any Senior Note the Person in whose name such Senior Note is registered and maintained by the Company pursuant to Section 13.1 of the Note Purchase Agreement. "NOTE PURCHASE AGREEMENT" means that certain Note Purchase Agreement dated as of March 1, 2000, as amended, between the Company and each of the Persons listed as "Purchasers" on Schedule A thereto, providing for, among other things, the sale by the Company of the Senior Notes. "OWNERSHIP PERCENTAGE" of any Shareholder, shall mean the percentage for such Shareholder set forth on Schedule 5.5. "PCBS" has the meaning set forth under the definition of "Hazardous Substances". "PERMITTED ENCUMBRANCES" means (i) liens for taxes and other governmental charges and assessments which are not yet due and payable, (ii) liens of landlords and liens of carriers, warehousemen, mechanics and materialmen and other like liens arising in the ordinary course of business for sums not yet due and payable and (iii) other liens or imperfections on property which are not material in amount and do not materially detract from the value of or materially impair the existing use of the property affected by such lien or imperfection. "PER SHARE MERGER CONSIDERATION" means the quotient obtained by dividing (i) the Aggregate Purchase Price less the Transferred Real Property Purchase Price, by (ii) the total number of shares of the Company's capital stock outstanding on the Closing Date. "PER SHARE PAID OUT MERGER CONSIDERATION" means the quotient obtained by dividing (i) the Aggregate Purchase Price, less the sum of (a) the Transferred Real Properties Purchase Price and (b) the Holdback Amount, by (ii) the total number of shares of the Company's capital stock outstanding on the Closing Date. "PERSON" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or Governmental Body. -8- "PROPERTY" means any real or personal property, plant, building, facility, structure, underground storage tank, equipment, furniture, inventory, building system or unit, or other asset owned, leased, operated or erected by the Company, any Shareholder, Real Estate Seller, or any Affiliate thereof, on or prior to the Closing Date (including any surface water thereon or adjacent thereto, and any soil minerals, oil and gas rights, air rights, water or development rights or groundwater thereunder). "RCRA" has the meaning set forth under the definition of "Environmental Law." "REAL ESTATE SELLERS" means the Persons designated as such and set forth on the signature page hereto. "REAL PROPERTIES" collectively refers to the parcels of real property, and any and all easements, rights of way, reservations, privileges, appurtenances, strips, gores and alleys adjoining or pertaining thereto constituting the Owned Real Properties and the Leased Real Properties. "RELATED PARTY RECEIVABLE AMOUNT" means the aggregate amount of Indebtedness owed to the Company by any Shareholder, Affiliate of any Shareholder or Affiliate of the Company. "RELEASE" means release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration of a Hazardous Substance into the indoor or outdoor environment or into or out of any Property, including the movement of Hazardous Substances through or in the air, soil, surface water, groundwater or Property. "REMEDIAL ACTION" means actions to (i) clean up, remove, treat or in any other way address Hazardous Substances in the indoor or outdoor environment; (ii) prevent the Release or threatened Release or minimize the further Release of Hazardous Substances; or (iii) investigate and determine if a remedial response is needed and to design such a response and post-remedial investigation, monitoring, operation and maintenance and care. "REPRESENTATIVES" means, as to any Person, such Person's affiliates, partners, officers, directors, employees, agents, advisors (legal, accounting and financial), consultants, financing sources and financing sources' advisors. "REQUIREMENTS OF LAWS" means any federal, state and local laws, statutes, regulations, judgments, writs, orders, injunctions, rules, codes or ordinances or other legal requirements enacted, adopted, issued or promulgated by any Governmental Body (including, without limitation, those pertaining to building, zoning, environmental, Tax and occupational safety and health requirements) or common law. -9- "RESERVED AMOUNT" means, as of each of the First Escrow Release Date and the Second Escrow Release Date, the aggregate amount of all unresolved and/or unpaid indemnification claims made by any Buyer Indemnitee pursuant to Sections 8.2, 11.1 and 11.2 as of such date. "RESERVED SOLVAY AMOUNT" means, as of each of the First Solvay Environmental Escrow Release Date and the Second Solvay Environmental Escrow Release Date, the aggregate amount of all unresolved and/or unpaid indemnification claims made by any Buyer Indemnitee pursuant to Section 11.3 hereof as of such date. "SARA" has the meaning set forth under the definition of "Environmental Law". "SECOND ESCROW RELEASE DATE" means the 19 month anniversary of the Closing Date, on which the balance of the Indemnification Holdback Amount then remaining in the Escrow Account, less the Reserved Amount, shall be released. "SECOND SOLVAY ENVIRONMENTAL ESCROW RELEASE DATE" means the ten year anniversary of the Closing Date, on which the balance of the Solvay Environmental Indemnification Holdback Amount then remaining in the Escrow Account, less the Reserved Solvay Amount, shall be released. "SECTION 338(H)(10) ELECTION" means an election by the Shareholders and Buyer under Section 338(h)(10) of the Code (and under any applicable similar provision of state, local or foreign law) with respect to the acquisition of the Company Securities pursuant to the Merger. "SENIOR NOTE INDEBTEDNESS AMOUNT" means the amount, as of the Closing Date, necessary to pay off in full and extinguish all loans, advances, indebtedness, obligations, fees, penalties and liabilities of the Company owed to the Note Holders under the Senior Notes. "SENIOR NOTES" means those certain 8.8% Senior Notes in the aggregate original principal amount of $30,000,000 which mature on March 15, 2010 and were issued by the Company to certain Persons pursuant to terms and conditions of the Note Purchase Agreement. "SHAREHOLDER ANCILLARY AGREEMENTS" means all agreements, instruments, and documents being or to be executed and delivered by any Shareholder or his, her or its Affiliate under this Agreement or in connection herewith, including any Real Estate Purchase Agreement. "SHAREHOLDERS REPRESENTATIVE AGREEMENT" means the Shareholders' Representative Agreement dated as of the date hereof, attached hereto as Exhibit D. "SOLVAY ENVIRONMENTAL INDEMNIFICATION HOLDBACK ACCOUNT" means the portion of the Escrow Account in which the Solvay Environmental Indemnification Holdback Amount is deposited. -10- "SOLVAY ENVIRONMENTAL INDEMNIFICATION HOLDBACK AMOUNT" means $3,000,000 which will be used to fund indemnification payments, if any, made pursuant to Section 11.3 hereof and in accordance with the Escrow Agreement. "SOLVAY FACILITY PROPERTY" means the real property located at 1500 Milton Avenue, Solvay, New York 13209. "TARGET WORKING CAPITAL" means $27,016,199, plus the aggregate amount of accrued customer rebates as of Closing (currently estimated to be $2,700,000), less the aggregate amount of accrued supplier rebates as of the Closing (currently estimated to be $1,200,000). A hypothetical calculation of (A) Closing Working Capital (using an example balance sheet as of Closing), (B) Target Working Capital (using accrued customer and supplier rebates as of Closing from the example balance sheet) and (C) the Working Capital Shortfall is attached hereto as Schedule A. "TAX" means any tax (including without limitation, income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Section 59A), capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative, estimated or add-on minimum tax, or other tax of any kind whatsoever, or levies or other like assessments, customs duties, escheat or unclaimed property taxes, imposts, charges or fees with respect thereto) and any related fine, interest, penalty, or addition thereto, whether disputed or not, imposed, assessed or collected by or under the authority of any Governmental Body. "TAX RETURN" means any return, report, notice, form or similar statement required to be filed with respect to any Tax (including any attached schedules), including, without limitation, any information return, claim for refund, amended return and declaration of estimated Tax. "TITLE COMMITMENTS" means the commitment letters or binders set forth on Schedule B from the Title Company to issue to Buyer (or its designee) Title Policies insuring good and marketable fee title to each of the Transferred Real Properties and the Owned Real Properties. "TITLE COMPANY" means Chicago Title Insurance Company and/or any of its Affiliates, or such other reputable, nationally-recognized and financially sound title company as shall be acceptable to the Company and Buyer. "TOTAL ENTERPRISE VALUE" means $260,000,000. "TRANSACTION COSTS" means all the out-of-pocket costs and expenses of the Shareholders and the Company relating to the transactions contemplated by this Agreement and the Real Estate Purchase Agreements, which categories of items are set forth in Schedule 1.1 of the Company Disclosure Schedules (which schedules will be updated on the Closing Date), but -11- specifically excluding any costs and expenses (i) included in the definition of "Funded Obligations," or (ii) allocated to Buyer pursuant to the terms of this Agreement or any Real Estate Purchase Agreement; provided that any item set forth on such schedule or allocated to Buyer shall not be included on the Closing Working Capital Statement. "TRANSFERRED REAL PROPERTIES" means the real properties located at the following addresses: (a) 8400 West Washington Street, Tolleson, Arizona 85353, (b) 5750-5751 118 Street, Alsip, Illinois 60482, (c) 11600 South Central Avenue, Alsip, Illinois 60658 and (d) 1500 Milton Avenue, Solvay, New York 13209. "UNUSED CAP EX AMOUNT" means the excess of (i) the budgeted amount of capital expenditures of the Company and the Real Estate Sellers for the period from January 1, 2003 to and including the Closing Date (with budgeted capital expenditures prorated based upon the number of days in 2003 actually elapsed as of and including the Closing Date based on a full year budget of $14.2 million) over (ii) the actual capital expenditures of the Company and the Real Estate Sellers for the period beginning January 1, 2003 and ending on the Closing Date. In each case, "capital expenditures" shall be determined in accordance with GAAP and consistent with the historical practices of the Company and the Real Estate Sellers; provided, however, that the parties agree that new molds and tooling that have been expensed by the Company during 2003 have been included in the 2003 budget of $14.2 million and shall be included in the calculation of actual capital expenditures as of the Closing Date. "WORKING CAPITAL HOLDBACK AMOUNT" means $2,000,000, which will be used to fund payments made by the Shareholders, if any, pursuant to the working capital adjustment set forth in Section 2.9 hereof and the Escrow Agreement. INDEX OF TERMS DEFINED IN OTHER SECTIONS 1933 Act Section 6.3(a) Acquisition Transaction Section 7.5 Agreement Preamble Alternative Financing Section 7.14(a) Articles of Merger Section 2.2 Audited Financial Statements Section 5.7 Business Recital A Buyer Preamble Buyer Indemnitees Section 11.1(a) Certificate of Merger Section 2.2 Claim Notice Section 11.5(a) Closing Section 3.1 Closing Date Section 3.1
-12- Closing Working Capital Section 2.9(a) Closing Working Capital Statement Section 2.9(a) Commitment Letters Section 6.4 Company Preamble Company Disclosure Schedules Section 4.2 Company Securities Recital B Compliance Costs Section 7.13 Deductible Section 11.1(b) Designated Contracts Section 5.21 Disclosure Schedule Update Section 7.6(a) Effective Time Section 2.2 Equipment Lease Section 5.15 Equity Commitment Letters Section 6.4 Final Closing Working Capital Section 2.9(c) Financial Statements Section 5.7 Financing Section 6.4 First Escrow Release Amount Definition of "First Escrow Release Date" Funded Obligations Schedule Definition of Aggregate Purchase Price Governmental Permits Section 5.13(b) Indemnified Party Section 11.5(a) Indemnitor Section 11.5(a) Insurance Contracts Section 5.20 Interim Financial Statements Section 5.7 Leased Real Properties Section 5.17(a) Lease Termination Agreement Section 7.11 Licensed Intellectual Property Rights Section 5.16(b) Material Customer Section 5.27(a) Merger Recitals Neutral Auditors Section 2.9(c) Owned Intellectual Property Section 5.16(a) Owned Real Properties Section 5.17(b) Plas-Tool License Section 7.19 Prohibited Marks Section 8.5 PT Section 7.19 Real Estate Purchase Agreement Section 2.7 Real Property Leases Section 5.17(a) Resolution Period Section 2.9(b) Shareholder Indemnitees Section 11.4
-13- Shareholder(s) Preamble Shareholders' Agreement Section 4.2 Shareholder Representative Section 8.6(a) Shop Lease Section 3.3(e) Surviving Corporation Section 2.1 Tax Package Section 8.2(a)(v) Third Party Claim Section 11.5(a) Transferred Real Properties Purchase Price Section 2.7 Transition Lease Section 3.3(d) Termination Fee Section 12.1(d) WARN Act Section 5.19(c) Working Capital Shortfall Section 2.9(d)(ii)
ARTICLE II PURCHASE AND SALE OF BUSINESS 2.1 The Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the IBCA and the DGCL, the Merger shall be effected and Sub shall be merged with and into the Company at the Effective Time with the separate corporate existence of Sub ceasing and the Company continuing as the surviving corporation. The surviving corporation of the Merger shall be herein referred to as the "SURVIVING CORPORATION". The Surviving Corporation shall become a direct wholly-owned subsidiary of Buyer and shall succeed to and assume all the rights and obligations of Sub and the Company in accordance with the IBCA and the DGCL. 2.2 Effective Time. Subject to the provisions of this Agreement, as soon as practicable on the Closing Date, the parties shall file concurrently (a) articles of merger (the "ARTICLES OF MERGER") with the Secretary of State of the State of Illinois in accordance with the relevant provisions of the IBCA and (b) a certificate of merger (the "CERTIFICATE OF MERGER") with the Secretary of State of the State of Delaware in accordance with the relevant provisions of the DGCL and shall make all other filings or recordings required under the IBCA and the DGCL (the time of such filings, or such later time as may be agreed in writing by the Company and Buyer and specified in the Articles of Merger and Certificate of Merger, being the "EFFECTIVE TIME"). 2.3 Certificate of Incorporation and Bylaws. (a) The Certificate of Incorporation set forth on Exhibit E-1 shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended as provided therein or by applicable law. -14- (b) The Bylaws set forth on Exhibit E-2, shall be the Bylaws of the Surviving Corporation until thereafter amended as provided therein or by applicable law. 2.4 Directors and Officers of the Surviving Corporation. (a) The directors of Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. (b) The officers of Sub immediately prior to the Effective Time shall be the officers of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. 2.5 Effects of the Merger. (a) At and after the Effective Time, the Merger shall have the effects set forth in the IBCA and DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the property, rights, privileges, powers and franchises of the Company and Sub shall be vested in the Surviving Corporation, and all debts, liabilities and duties of the Company and Sub shall become the debts, liabilities and duties of the Surviving Corporation. (b) As of the Effective Time, by virtue of the Merger and without any action on the part of the holder of any Company Securities or any shares of capital stock of Sub: (i) each issued and outstanding share of capital stock of Sub shall be converted into and become one validly issued, fully paid and non-assessable share of common stock of the Surviving Corporation; (ii) each Company Security that is owned by the Company, Buyer or Sub shall automatically be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor; and (iii) each Company Security issued and outstanding immediately prior to the Effective Time (other than Company Securities to be canceled in accordance with Section 2.5(b)(ii)) shall be converted into the right to receive the Per Share Merger Consideration. 2.6 Subsequent Actions. If, at any time after the Effective Time, any deeds, bills of sale, assignments, assurances or any other actions or things are reasonably necessary to vest, perfect or confirm of record or otherwise in the Surviving Corporation its right, title or interest in, to or under any of the rights, properties or assets of either of the Company or Sub acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger, then the officers and directors of the Surviving Corporation shall be authorized to execute and -15- deliver, in the name and on behalf of either the Company or Sub, all such deeds, bills of sale, instruments of conveyance, assignments and assurances and to take and do, in the name and on behalf of each such corporation or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title or interest in, to and under such rights, properties or assets in the Surviving Corporation. 2.7 Purchase and Sale of Transferred Real Properties. Subject to the terms and conditions of the Real Estate Purchase Agreements, each in the form attached hereto as Exhibit F (each, a "REAL ESTATE PURCHASE AGREEMENT"), Buyer (or its designee) agrees to purchase, and the Real Estate Sellers agree to sell, transfer and convey, the Transferred Real Properties. In consideration for the Transferred Real Properties, Buyer (or its designee) shall pay to the Real Estate Sellers U.S. $32,000,000 (the "TRANSFERRED REAL PROPERTIES PURCHASE PRICE"), allocated as set forth on Schedule 2.7. 2.8 Payments at Closing. At the Closing: (a) The Company will deliver to the holders of the Funded Indebtedness an amount sufficient to repay all Funded Indebtedness, with the result that following the Closing there will be no further monetary obligations of the Company with respect to the Funded Indebtedness. On or prior to the Closing Date, the Company shall provide Buyer with customary pay-off letters from all holders of such Funded Indebtedness and make arrangements reasonably satisfactory to Buyer for such holders to provide Buyer recordable form mortgage and lien releases, cancelled notes and other documents reasonably requested by Buyer prior to Closing. If the Closing occurs, Buyer shall provide the Company with sufficient funds to repay the Funded Indebtedness at the Closing. (b) Buyer shall pay to each Shareholder an amount equal to the product of (i) the Per Share Paid Out Merger Consideration and (ii) the number of shares of capital stock held by such Shareholder immediately prior to the Effective Time (as set forth on Schedule 5.5) by wire transfer of immediately available funds to accounts designated by the Shareholders in writing not later than two days prior to the Closing Date. (c) The Transferred Real Properties Purchase Price shall be payable at Closing as provided for in the Real Estate Purchase Agreements with respect to each of the Transferred Real Properties. (d) Buyer will deposit the Holdback Amount in the Escrow Account. 2.9 Working Capital Adjustment. (a) As soon as practicable, but in no event later than 45 days following the Closing, Buyer shall prepare a calculation of Closing Working Capital of the Company as of the Closing Date (the "CLOSING WORKING CAPITAL STATEMENT"). The Closing Working Capital -16- Statement shall be prepared in accordance with GAAP applied consistently with the application thereof in the Financial Statements (to the extent that such Financial Statements complied with GAAP). The term "CLOSING WORKING CAPITAL" means, as of the Closing Date, the difference between (A) the Company's current assets less (i) cash and cash equivalents, (ii) interest receivables and (iii) current portion of notes, and (B) the Company's current liabilities less (i) short term notes payable, (ii) current portion of long term debt, (iii) current portion of long term leases, (iv) notes payable to Shareholders and (v) accrued interest. (b) Buyer shall deliver a copy of the Closing Working Capital Statement to the Shareholder Representative promptly after it has been prepared. After receipt of the Closing Working Capital Statement, the Shareholder Representative shall have 30 days to review the Closing Working Capital Statement, together with the work papers used in the preparation thereof. Buyer shall (i) provide the Shareholder Representative and its Representatives reasonable access during normal business hours to all relevant work papers, trial balances and other financial information to the extent necessary or useful to complete their review of the Closing Working Capital Statement, and (ii) cooperate with the Shareholder Representative's and its Representatives' reasonable requests with respect to the review of the Closing Working Capital Statement, including by providing on a timely basis all information necessary or useful in reviewing the Closing Working Capital Statement. Unless the Shareholder Representative delivers written notice to Buyer on or prior to the 30th day after the Shareholder Representative's receipt of the Closing Working Capital Statement specifying in reasonable detail the amount, nature and basis of all disputed items, the Shareholder Representative shall be deemed to have accepted and agreed to the calculation of the Closing Working Capital on behalf of all Shareholders. If the Shareholder Representative (or one of its Representatives) notifies Buyer of an objection to the calculation of the Closing Working Capital, the Shareholder Representative and Buyer shall, within 20 days (or such longer period as the parties may agree in writing) following such notice (the "RESOLUTION PERIOD"), attempt to resolve their differences and any resolution by them as to any disputed amounts shall be final, binding and conclusive (other than as a result of manifest error or fraud). (c) If, at the conclusion of the Resolution Period, there are any amounts remaining in dispute, then such amounts remaining in dispute shall be submitted to the Chicago, Illinois office of Deloitte & Touche or another nationally recognized public accounting firm agreed by Buyer and the Shareholder Representative (the "NEUTRAL AUDITORS"). Buyer and the Shareholder Representative (on behalf of all Shareholders) shall execute, if requested by the Neutral Auditors, a reasonable engagement letter, including customary indemnities. The Neutral Auditors shall act as an arbitrator to determine, based solely on the provisions of this Section 2.9 and the presentations by the Shareholder Representative and Buyer, and not by independent review, only those issues still in dispute. The Neutral Auditors' determination shall be made within 30 days of the dispute being submitted for their determination, shall be set forth in a written statement delivered to the Shareholder Representative and Buyer and shall be final, non- appealable and binding on the parties hereto, absent manifest error or fraud. A judgment of a -17- court of competent jurisdiction may be entered upon the Neutral Auditors' determination. The Neutral Auditors shall have exclusive jurisdiction over, and resort to the Neutral Auditors as provided in this Section 2.9(c) shall be the only recourse and remedy of the parties against one another with respect to, any disputes arising out of or relating to the adjustments pursuant to this Section 2.9(c). The fees, costs and expenses of the Neutral Auditors shall be borne by Buyer, on the one hand, and by the Shareholder Representative, on the other, based upon the percentage which the portion of the contested amount not awarded to each party bears to the amount actually contested by such party. For example, if the Shareholder Representative claims that the Closing Working Capital is $1,000 greater than the amount determined by Buyer, and Buyer contests only $500 of the amount claimed by the Shareholder Representative, and if the Neutral Auditors ultimately resolve the dispute by awarding the Shareholders $300 of the $500 contested, then the costs and expenses of the Neutral Auditors will be allocated 60% (i.e., 300 -- 500) to Buyer and 40% (i.e., 200 +/- 500) to the Shareholders. The term "FINAL CLOSING WORKING CAPITAL" shall mean the definitive Closing Working Capital agreed to (or deemed to be agreed to) by Buyer and the Shareholder Representative in accordance with Section 2.9(b) hereof or resulting from the determinations made by the Neutral Auditors in accordance with this Section 2.9(c) (in addition to those items theretofore agreed to by the Shareholder Representative and Buyer). (d) In the event the Final Closing Working Capital (i) exceeds the Target Working Capital, the Company shall pay the excess to the Shareholders pro rata based upon each Shareholder's Ownership Percentage and the Escrow Agent shall pay the Working Capital Holdback Amount out of the Escrow Account to the Shareholders pro rata based upon each Shareholder's Ownership Percentage; (ii) is less than the Target Working Capital (the difference between the Target Working Capital and the Final Closing Working Capital, the "WORKING CAPITAL SHORTFALL") and the Working Capital Shortfall is less than or equal to the Working Capital Holdback Amount, the Working Capital Shortfall shall be paid to the Company by the Escrow Agent out of the Escrow Account and the balance of the Working Capital Holdback Amount, if any, shall be paid to the Shareholders, pro rata based on each Shareholder's Ownership Percentage, by the Escrow Agent out of the Escrow Account; or (iii) is less than the Target Working Capital and the Working Capital Shortfall is greater than the Working Capital Holdback Amount, the Working Capital Holdback Amount shall be paid to the Company by the Escrow Agent out of the Escrow Account and the Shareholders shall pay the difference between the Working Capital Shortfall and the Working Capital Holdback Amount to the Company pro rata based upon each Shareholder's Ownership Percentage. -18- All payments made pursuant to this Section 2.9 shall be made by wire transfer of immediately available funds within five (5) days of the determination of the Final Closing Working Capital to accounts previously designated in writing by Buyer and the Shareholder Representative, and shall include interest at a rate equal to the rate at which interest accrues on the Working Capital Holdback Amount in the Escrow Account between the Closing Date and the date of payment. In no event shall any portion of the Indemnification Holdback Amount or the Solvay Environmental Indemnification Holdback Amount be applied toward the satisfaction, in whole or in part, of the Working Capital Shortfall. ARTICLE III CLOSING 3.1 Closing Date. The closing (the "CLOSING") of the transactions contemplated by this Agreement shall be consummated at 10:00 A.M., local time, two Business Days after the conditions set forth in Articles IX and X have been satisfied or waived, or such later time or date as may be agreed upon by Buyer and the Shareholder Representative, at the offices of Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New York, New York 10004 or at such other place as shall be agreed upon by Buyer and the Shareholder Representative; provided, however, that the parties hereto will use their commercially reasonable efforts to take, or cause to be taken, all actions necessary to make effective and consummate the transactions contemplated by this Agreement on or prior to November 14, 2003; provided, further, that nothing in this Agreement shall obligate (x) Buyer to draw down the Bridge Financing prior to December 23, 2003 or (y) any party to waive any condition to the obligation of such party under this Agreement. The time and date on which the Closing is actually held is sometimes referred to herein as the "CLOSING DATE." 3.2 Payment of Per Share Merger Consideration. Subject to fulfillment or waiver of the conditions set forth in Article IX, at Closing, Buyer shall pay the Per Share Paid Out Merger Consideration with respect to all of the Company Securities. 3.3 Buyer's and Sub's Deliveries. Subject to fulfillment or waiver of the conditions set forth in Article IX, at Closing, each of Buyer and Sub shall (or, in the case of the Real Estate Purchase Agreements, shall cause its designees to) deliver to the Shareholder Representative all the following: (a) A certificate of good standing for each of Buyer and Sub issued as of a recent date by the Secretary of State of the State of Delaware; (b) A certificate of the secretary of each of Buyer and Sub, dated the Closing Date, in form and substance reasonably satisfactory to the Company, as to (i) no amendments to the certificate of incorporation of Buyer or Sub since a specified date; (ii) the bylaws of Buyer and Sub; (iii) the resolutions of the Board of Directors of Buyer and Sub authorizing the execution and performance of this Agreement and the Buyer Ancillary Agreements and the -19- transactions contemplated hereby and thereby; and (iv) incumbency and signatures of the officers of Buyer and Sub executing this Agreement and any Buyer Ancillary Agreement; (c) The certificate contemplated by Section 10.1, duly executed by an officer of each of Buyer and Sub; (d) An amendment in the form attached hereto as Exhibit G, amending the existing lease of the Chicago Ridge Corporate Office, to extend the term thereunder for a period of six months after the Closing Date (the "TRANSITION LEASE"), duly executed by Buyer; (e) A lease in the form attached hereto as Exhibit H relating to the Chicago Ridge Tool Shop (the "SHOP LEASE"), duly executed by Buyer; (f) A Real Estate Purchase Agreement with respect to each of the Transferred Real Properties, duly executed by Buyer (or its designees) as contemplated by Section 7.9; (g) The Escrow Agreement, duly executed by Buyer; and (h) Such other documents and instruments as may be required by any other provision of this Agreement or as may be reasonably requested by counsel to the Shareholders to consummate the transactions contemplated by this Agreement and any Buyer Ancillary Agreement. 3.4 The Company's and Shareholders' Deliveries. Subject to fulfillment or waiver of the conditions set forth in Article X, at Closing, the Company, the Shareholders and the Real Estate Sellers, as the case may be, shall deliver to Buyer and Sub all the following: (a) Stock certificates evidencing the Company Securities; (b) A certificate of good standing of the Company issued as of a recent date by the Secretary of State of the State of Illinois and each state in which the Company is required to do business as a foreign corporation; (c) A certificate of the secretary of the Company, dated the Closing Date, in form and substance reasonably satisfactory to Buyer, as to: (i) no amendments to the articles of incorporation of the Company since a specified date; (ii) the bylaws of the Company; (iii) the resolutions of the Board of Directors of the Company authorizing the execution and performance of this Agreement, the Company Ancillary Agreements, and the transactions contemplated hereby and thereby; and (iv) incumbency and signatures of the officers of the Company executing this Agreement and any Company Ancillary Agreement; (d) The certificate contemplated by Section 9.1, duly executed by the authorized officer of the Company; -20- (e) The resignations of all of the directors and officers of the Company effective as of the Closing Date. (f) The stock books, stock ledgers, minute books, corporate seal and other books and records of the Company; (g) The Transition Lease, duly executed by the lessor thereunder; (h) The Shop Lease, duly executed by the lessor thereunder; (i) Agreements terminating the leases to the Leased Real Properties as contemplated by Section 7.11, duly executed by the Company and the lessor thereunder; (j) A Real Estate Purchase Agreement with respect to each Transferred Real Property as contemplated by Section 7.9 and any and all deeds, assignments, bills of sale, transfer forms, transfer tax forms and all other documents in connection with the sales and conveyances as contemplated by the Real Estate Purchase Agreements executed by the Real Estate Sellers thereunder; (k) Pay-off letters with respect to the Funded Indebtedness as contemplated by Section 2.8(a); (l) The Funded Obligations Schedule; (m) Cancelled notes with respect to the Related Party Receivable Amount; (n) Forms 8023 and 8883 and any other form or document required to give effect to the Section 338(h)(10) Election, executed by all of the Shareholders; (o) The Escrow Agreement, duly executed by the Shareholder Representative; and (p) Such other documents and instruments as may be required by any other provision of this Agreement or as may reasonably be requested by counsel to Buyer to consummate the transactions contemplated by this Agreement and any Company Ancillary Agreement or Shareholder Ancillary Agreement. 3.5 Stock Transfer Books. The stock transfer books of the Company shall be closed immediately upon the Effective Time and there shall be no further registration of transfers of Company Securities thereafter on the records of the Company. -21- ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING THE SHAREHOLDERS As an inducement to Buyer and Sub to enter into this Agreement and the Real Estate Purchase Agreements, and to consummate the transactions contemplated hereby and thereby, each Shareholder, with respect to himself, herself, or itself only, severally, and not jointly, represents and warrants to Buyer and Sub that all of the statements contained in this Article IV are true as of the date of this Agreement and as of the Closing Date (or, if made as of a specific date, as of such date): 4.1 Authority of Shareholder. Such Shareholder has full legal right, power, capacity and authority to enter into this Agreement and each Shareholder Ancillary Agreement to which he, she or it is a party, and perform his, her or its obligations hereunder and each of the Shareholder Ancillary Agreements to which he, she or it is a party, and to consummate the transactions contemplated hereby and thereby. This Agreement and each of the Shareholder Ancillary Agreements to which such Shareholder is a party has been, or at Closing will be, duly executed and delivered by such Shareholder and does constitute, or at Closing will constitute, a valid and binding obligation of such Shareholder, enforceable against such Shareholder in accordance with its terms. The execution and delivery of this Agreement and each Shareholder Ancillary Agreement to which such Shareholder is a party will not (i) violate or conflict with any Requirements of Law or Court Order which is applicable to, binding upon or enforceable against such Shareholder or (ii) violate or constitute a default, or require a notice and/or consent under, any mortgage, lease, contract or agreement to which such Shareholder is a party or by which such Shareholder's assets or properties are bound. 4.2 Ownership of Company Securities. The shares of Company Securities listed on Schedule 5.5 of the schedules to this Agreement (the "COMPANY DISCLOSURE SCHEDULES") opposite such Shareholder's name: (i) are owned on the date of this Agreement legally, beneficially and of record by such Shareholder, and such Shareholder has good and marketable title to such shares, free and clear of any Encumbrances, and (ii) will be owned legally, beneficially and of record immediately prior to the Closing by such Shareholder, free and clear of any Encumbrance. Except for the Shareholders' Agreement dated April 1, 2003 (the "SHAREHOLDERS' AGREEMENT"), such Shareholder has not granted to any Person any rights (including without limitation proxy rights or options with respect to any Company Securities) and such Shareholder is not a party to any voting trust or other agreement or understanding with respect to such shares of Company Securities. Such Shareholder has no claim against the Company or any of its officers, directors, the other Shareholders or any other Person with respect to the issuance of any shares of capital stock of the Company. 4.3 Consents and Approvals; No Violations. Neither the execution and delivery of this Agreement by such Shareholder or each of the Shareholder Ancillary Agreements to which -22- he, she or it is a party nor delivery and performance of this Agreement or each of the Shareholder Ancillary Agreements to which he, she or it is a party, nor the consummation of any of the transactions contemplated hereby or thereby, nor compliance by such Shareholder with or fulfillment by such Shareholder of the terms, conditions and provisions hereof or thereof will conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights, or result in the creation or imposition of any Encumbrance, under (1) the charter or bylaws or other governing instruments of such Shareholder, if applicable, (2) any of the terms, conditions or provisions of any contract, agreement, commitment, undertaking, or understanding or arrangement (whether written or oral) to which such Shareholder is a party, (3) any Court Order to which such Shareholder is a party or by which such Shareholder or any of its assets or properties are bound, or (4) any Requirements of Laws affecting such shareholder or any of its assets or properties, except in the cases of clauses (2)-(4) above as would not have or be reasonably expected to have a material adverse effect on the ability of such Shareholder to perform its obligations under this Agreement and each Shareholder Ancillary Agreement to which such Shareholder is a party. 4.4 No Finder. Except for Robert W. Baird & Co., whose fees will be paid by the Shareholders, neither such Shareholder nor any Person acting on its behalf has paid, become obligated to pay or will become obligated to pay any fee or commission to any broker, finder or intermediary for or on account of the transactions contemplated by this Agreement. 4.5 Insolvency. Such Shareholder has not (i) commenced a voluntary case, or had entered against it a petition for relief under any federal bankruptcy act or similar petition order or decree under any federal or state law or statute relative to bankruptcy, insolvency or other relief for debtors, (ii) caused, suffered or consented to the appointment of a receiver, trustee, administrator, conservator, liquidator, or similar official in any federal, state or foreign judicial or nonjudicial proceeding, to hold, administer and/or liquidate all or substantially all of its asset, or (iii) made an assignment for the benefit of creditors. ARTICLE V REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY As an inducement to Buyer and Sub to enter into this Agreement and the Real Estate Purchase Agreements and to consummate the transactions contemplated hereby and thereby, the Company, on behalf of the Shareholders and the Real Estate Sellers, represents and warrants to Buyer and Sub that all of the statements contained in this Article V, as modified by the disclosures and exceptions set forth in the Company Disclosure Schedules, are true as of the date of this Agreement and as of the Closing Date (or, if made as of a specific date, as of such date): -23- 5.1 Organization of the Company. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Illinois. The Company has been duly qualified as a foreign corporation for the transaction of business in, and is in good standing in, each jurisdiction in which it owns or leases property or conducts any business so as to require such qualification, except where the failure to so qualify has not had and would not reasonably be expected to have a Material Adverse Effect and the Company can become so qualified in such jurisdiction without the occurrence of a Material Adverse Effect. Schedule 5.1 lists all of the states or other jurisdictions where the Company is qualified or licensed as a foreign corporation. The Company has full power and authority to own or lease and to operate its assets and properties and to carry on its business as now conducted. 5.2 Subsidiaries and Investments. The Company does not, directly or indirectly, (i) own, of record or beneficially, any outstanding voting securities or other equity interests in any corporation, partnership, joint venture or other entity or (ii) control any corporation, partnership, joint venture or other entity. 5.3 Authority of the Company. The Company has full corporate power and authority to execute, deliver and perform this Agreement and the Company Ancillary Agreements and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the Company Ancillary Agreements by the Company and the transactions contemplated hereby and thereby have been duly authorized and approved by all necessary corporate action of the Company and do not require any further authorization or consent of the Company or the Shareholders, subject to the approval of this Agreement by the Shareholders. This Agreement has been duly authorized, executed and delivered by the Company and is the legal, valid and binding obligation of the Company enforceable in accordance with its terms and each of the Company Ancillary Agreements has been duly authorized by the Company and upon execution and delivery by the Company will be a legal, valid and binding obligation of the Company enforceable in accordance with its terms. Except as set forth in Schedule 5.3 neither the execution and delivery of this Agreement by the Company or the Shareholders or any Company Ancillary Agreement by the Company, nor delivery and performance of this Agreement or any Company Ancillary Agreement, nor the consummation of any of the transactions contemplated hereby or thereby, nor compliance by the Company or Shareholders with or fulfillment by any of them of the terms, conditions and provisions hereof or thereof will: (a) Conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights under, or result in the creation or imposition of any Encumbrance, under (1) the charter or bylaws of the Company, (2) any Designated Contract, (3) any Court Order to which the Company is a party or by which the Company or any of its assets or properties are bound, or (4) any Requirements of Laws affecting the Company or any of its -24- assets or properties, except in the cases of clauses (2)-(4) above as would not have or be reasonably expected to have a Material Adverse Effect; or (b) Except for any applicable requirements under the Antitrust Improvements Act, require the approval, consent, authorization or act of, or the making by the Company of any declaration, filing or registration with, any Governmental Body, the failure to obtain or make which would not prevent or materially alter or delay any of the transactions contemplated by this Agreement. 5.4 Capitalization. The authorized capital stock of the Company consists of: (i) 50,000 shares of Class A Common Stock, of which 536 shares are issued and outstanding; and (ii) 50,000 shares of Class B Common Stock, of which 5,007.03 shares are issued and outstanding. All of the issued and outstanding shares of capital stock of the Company (i) have been duly authorized and validly issued and are fully paid and non-assessable, (ii) were issued in compliance with all applicable state and federal securities laws, and (iii) were not issued in violation of any preemptive rights or rights of first refusal. No rights of first refusal exist with respect to the shares of capital stock of the Company, and no such rights arise by virtue of or in connection with the transactions contemplated hereby. Except as set forth above, as of the date hereof, (x) there are no shares of capital stock of the Company authorized, issued or outstanding and (y) there are no outstanding or authorized rights, options, warrants, convertible securities, subscription rights, conversion rights, exchange rights or other agreements or commitments of any kind that could require the Company to issue or sell any shares of its capital stock (or securities convertible into or exchangeable for shares of its capital stock). There are no outstanding stock appreciation, phantom stock, profit participation or other similar rights pursuant to any agreement of the Company. Except for the Shareholders' Agreement and the Restricted Stock Plan dated May 1, 2000, there are no proxies, voting rights or other agreements or understandings with respect to the voting or transfer of the capital stock of the Company. The Company is not obligated to redeem or otherwise acquire any of its outstanding shares of capital stock. 5.5 Shareholders of the Company. Schedule 5.5 sets forth, with respect to the Company, (i) the name, address and federal taxpayer identification number of, and the number of outstanding shares of each class of its capital stock owned by, each shareholder of record as of the close of business on the date of this Agreement; and (ii) the name, address and federal taxpayer identification number of, and number of shares of each class of its capital stock beneficially owned by, each beneficial owner of outstanding shares of capital stock (to the extent that record and beneficial ownership of any such shares are different). The Shareholders are the holders of 100% of the issued and outstanding shares of capital stock of the Company. Except as set forth on Schedule 5.5, such shares are not subject to any voting trust agreement, proxy or other Contract. -25- 5.6 Records. Copies of the articles of incorporation and bylaws of the Company have been provided to Buyer and such copies are true, accurate and complete and reflect all amendments made through the date of this Agreement. The stock ledgers of the Company have been provided to Buyer and contain accurate and complete records of all issuances, transfers and cancellations of shares of the capital stock of the Company. 5.7 Financial Statements. Schedule 5.7 contains (i) the balance sheet of the Company as of December 31, 2001 and December 31, 2002 and the related statements of income and retained earnings and cash flows for the years then ended audited by the independent certified public accounting firm regularly engaged by the Company to prepare its year-end financial statement (the "AUDITED FINANCIAL STATEMENTS"); and (ii) the unaudited balance sheet as of August 24, 2003 and the related statement of income for the fiscal eight months then ended (the "INTERIM FINANCIAL STATEMENTS" and together with the Audited Financial Statements, the "FINANCIAL STATEMENTS"). Except as set forth therein or in the notes thereto and, in the case of the Interim Financial Statements, except for normal year end accruals, the Financial Statements have been prepared in conformity with GAAP consistently applied, and the Financial Statements present fairly the financial position and results of operations of the Company as of the dates and for the periods covered thereby. 5.8 Company Debt. (a) No Indebtedness of the Company contains any material restriction upon (i) the prepayment of Indebtedness of the Company, (ii) the incurrence of Indebtedness by the Company or (iii) the ability of the Company to grant any material lien on the properties or assets of the Company. Schedule 5.8 sets forth, as of August 24, 2003, the amount of principal and unpaid interest outstanding under each instrument evidencing Indebtedness, including any Capital Lease, of the Company. (b) As of the Closing, and immediately prior to any repayment of the Funded Indebtedness, the Company will not have any Indebtedness other than the Funded Indebtedness and the Capital Leases. 5.9 Operations Since the Balance Sheet Date. Except as (a) set forth in Schedule 5.9(a), or (b) in the case of clause (ii) only, expressly required by this Agreement, since the Balance Sheet Date, (i) no event, circumstance, or condition has occurred that individually or in the aggregate with other events, circumstances and conditions, has had or would reasonably be expected to have a Material Adverse Effect and, since August 24, 2003, (ii) the Company has not taken action that, if taken after the date hereof, would constitute a violation of Section 7.4. 5.10 No Undisclosed Liabilities. Except as set forth in Schedule 5.10, and for the liabilities and obligations (i) for which adequate reserves have been recorded on the Balance Sheet or which are reflected in the footnotes thereto and for which reserves are not required under GAAP, or (ii) incurred in the ordinary course of business since the Balance Sheet Date which do not, and would not reasonably be expected to, individually or in the aggregate, have a -26- Material Adverse Effect, the Company has not incurred any liabilities or obligations, whether absolute or contingent, matured or unmatured, or otherwise. 5.11 Inventories. The inventories of the Company (including raw materials, supplies, work-in-process, finished goods and other materials) are of a quality and quantity usable and/or saleable in the ordinary course of business of the Company. The values of the inventory are reflected in the Balance Sheet, reflect the normal inventory valuation policies of the Company, and were determined at the lower of cost or market in accordance with the LIFO method of accounting pursuant to GAAP, consistently applied. 5.12 Receivables and Payables. Except for receivables constituting the Related Party Receivable Amount, all notes and accounts receivable and accounts payable of the Company have arisen from bona fide transactions in the ordinary course of business consistent with past practice. All notes and accounts receivable of the Company are reflected properly on its books and records. 5.13 Compliance with Laws and Governmental Permits. (a) The Company has complied in a timely manner and is currently in compliance in all respects with all Requirements of Laws and Court Orders that apply to the business, properties or assets of the Company, except such instances of non-compliance that, individually or in the aggregate, have not had, and would not reasonably be expected to have, a Material Adverse Effect. (b) The Company owns, holds or possesses all licenses, franchises, permits, privileges, immunities, approvals and other authorizations from a Governmental Body which are necessary to entitle it to own or lease, operate and use the Company Assets and the Leased Assets and to carry on and conduct its business as currently conducted (herein collectively called "GOVERNMENTAL PERMITS"), except for such Governmental Permits as to which the failure to own, hold or possess would not have or be reasonably expected to have a Material Adverse Effect. Schedule 5.13 sets forth a list and brief description of each Governmental Permit, except for such incidental licenses, permits and other authorizations which would be readily obtainable by any qualified applicant without undue burden in the event of any lapse, termination, cancellation or forfeiture thereof. (c) The Company has performed its obligations under each Governmental Permit, and no Basis exists by reason of any action or omission by or on behalf of the Company or, to the Company's knowledge, by reason of any action or omission by or on behalf of any third party, which constitutes or, after notice or lapse of time or both, would constitute, a breach or default under any such Governmental Permit or which permits or, after notice or lapse of time or both, would permit, revocation or termination of any such Governmental Permit, or which would have or be reasonably expected to have a material adverse effect on the rights of the Company under any such Governmental Permit. No notice of cancellation, of default or of any -27- dispute concerning any Governmental Permit, or of any event, condition or state of facts described in the preceding sentence, has been received by, or is known to, the Company, including notice of any proceeding in respect thereof. Each Governmental Permit is valid, subsisting and in full force and effect and the consummation of the transactions contemplated hereby will not result in the occurrence of any breach, default or forfeiture of rights thereunder, or require the consent, approval, or act of, or the making of any filing with, any Governmental Body. 5.14 Assets. The Company's machinery, equipment and other Company Assets and Leased Assets used in the Business are in good working order and repair in all material respects, ordinary wear and tear and ordinary course maintenance and replacement excepted. The Company has good and marketable title to all of the Company's tangible personal property, free and clear of any Encumbrances except for Permitted Encumbrances. The Company Assets, including the Company Intellectual Property, and the Leased Assets constitute, in the aggregate, all of the assets and properties necessary for the conduct of the business of the Company in the manner in which and to the extent to which such business is currently being conducted. 5.15 Personal Property Leases. Schedule 5.15 contains a brief description of each lease or other Contract with an annual rent exceeding $100,000 (including in each case the annual rent, the expiration date thereof and a brief description of the property covered), under which the Company is lessee of, or holds or operates, any machinery, equipment, vehicle or other tangible personal property owned by a third Person and used in or relating to the Company's business (an "EQUIPMENT LEASE"). The assets being leased pursuant to the Equipment Leases are in good working order and repair in all material respects, ordinary wear and tear and ordinary course maintenance and replacement excepted. The Company has complied in all material respects with the terms and conditions of each Equipment Lease and, to the Company's knowledge, all of the covenants to be performed by any other party thereto have been fully performed and there are no claims for breach or indemnification or notice of default or termination under any Equipment Lease. The Company is not, nor will it be, as a result of the execution and delivery of this Agreement or the performance of its obligations under this Agreement, in breach of any Equipment Lease. 5.16 Intellectual Property. (a) The Company owns all right, title, and interest in (free and clear of all Encumbrances) ("OWNED INTELLECTUAL PROPERTY"), or is licensed or otherwise possesses legally enforceable and unencumbered rights to use in the manner in which it is using it, all Company Intellectual Property, and the Company Intellectual Property is sufficient to enable the Company to conduct its business as currently conducted and proposed to be conducted and the consummation of the transactions contemplated hereby will not alter or impair such rights. -28- (b) Schedule 5.16(b) lists (i) all patents and patent applications and all registered and material unregistered trademarks, trade names and service marks, registered and material unregistered copyrights, and mask works included in the Company Intellectual Property, including the jurisdictions in which each such Intellectual Property right has been issued or registered or in which any application for such issuance and registration has been filed; (ii) all licenses, sublicenses and other agreements to which the Company is a party pursuant to which any Person is authorized to use any Company Intellectual Property (excluding commercially available, off-the-shelf software); and (iii) all licenses, sublicenses and other agreements to which the Company is a party pursuant to which the Company is authorized to use any third-party (including without limitation for the purposes of this Section 5.16 any Employees) Company Intellectual Property which is not Owned Intellectual Property, or which is incorporated in, is, or forms a part of, any product, process or service of the Company (excluding commercially available, off-the-shelf software, including, for each such item, an identification of the Intellectual Property that the Company is authorized to use and the product, process, or service in which it is used or is currently proposed to be used) ("LICENSED INTELLECTUAL PROPERTY RIGHTS"). No royalties or other continuing payment obligations are due in respect of Licensed Intellectual Property Rights. All patents and registrations or applications therefor included in Company Intellectual Property are valid and subsisting and in full force and effect and are applied for and owned in the name of the Company. (c) The Company is not, nor will it be, as a result of the execution and delivery of this Agreement or the performance of its obligations under this Agreement, in breach of any license, sublicense or other agreement relating to Licensed Intellectual Property Rights or other Company Intellectual Property. (d) The Company and the operation of the Business as presently conducted and proposed to be conducted, does not dilute, misuse, infringe, misappropriate or otherwise come into conflict with any Intellectual Property of any other Person (including without limitation any Employee), except for such dilutions, misuses, infringements, misappropriations or other conflicts which, individually or in the aggregate, would not have or be reasonably expected to have a Material Adverse Effect. No charge, complaint, demand, notice or claim is pending or has been made to such effect and the Company has not received written notice so alleging (including any claim that the Company must license or refrain from using any Intellectual Property of any other such Person). No action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand is pending or, to the Company's knowledge, threatened, that challenges the legality, validity, enforceability, use or ownership of any item of Company Intellectual Property, nor is any Company Intellectual Property subject to any outstanding injunction, judgment, order, decree, ruling or charge. (e) To the Company's knowledge, no third party has interfered with, infringed upon, misappropriated, misused, diluted or otherwise come into conflict with any Company Intellectual Property. -29- 5.17 Real Property and Real Property Leases. (a) Schedule 5.17(a) contains a true, complete and correct list (designating the relevant owners) of all real property (other than the Owned Real Properties) leased, subleased or occupied by the Company in connection with the operation of the Business as tenant (the "LEASED REAL PROPERTIES") and the Company has delivered to Buyer true, correct and complete copies of the leases for all of the Leased Real Properties (the "REAL PROPERTY LEASES"). Except for the Transition Lease, all of the Real Property Leases will be terminated as of the Closing Date, and any and all liability under the Real Property Leases will be extinguished except as provided in the Lease Termination Agreements. Except for the Transition Lease and the Shop Lease, all of the real property that is the subject of the Real Property Leases will be conveyed to Buyer or its designees pursuant to the Real Estate Purchase Agreements. (b) Schedule 5.17(b) contains a true, complete and correct list of all real property legally or beneficially owned by the Company (the "OWNED REAL PROPERTIES"). (c) Except as set forth on Schedule 5.17(c), with respect to each parcel constituting the Real Properties: (i) The Company, the Shareholders and the Real Estate Sellers have not received written notice of any pending or threatened condemnation, eminent domain or similar proceedings with respect to the Real Properties and have no knowledge that any such proceedings are threatened or contemplated. (ii) Except for Permitted Encumbrances, there are no Contracts granting to any party or parties (other than the Company) the right of use or occupancy of any portion of the Real Properties. There are no outstanding options or rights of first refusal to purchase any parcel of the Real Properties. (iii) All improvements and buildings on the Real Properties are in good repair, ordinary wear and tear excepted; and the structural components and systems (including plumbing, electrical, air conditioning/heating and sprinklers) are in good working order in all material respects, ordinary wear and tear and ordinary course maintenance and replacement excepted. (iv) The Company has title to the Owned Real Properties, free and clear of all liens, encumbrances, security interests and adverse claims of any kind or character, other than the Permitted Encumbrances. (v) Neither the Company nor any Real Estate Seller or Affiliate thereof has requested, and, to the knowledge of the Company, there is no pending request for, rezoning of the Owned Real Properties or any other zoning variance for the Owned Real Properties. -30- (vi) Schedule 5.17(c)(vi) sets forth a list of all material work in progress at the Real Properties. (vii) There are no material pending tax certiorari proceedings with respect to the Real Properties, or any tax abatements or exemptions affecting the Real Properties. Neither the Company, nor any Real Estate Seller nor any Affiliate has received in the twelve months prior to the Closing Date any notice of, or has any knowledge of, any proposed increase in the assessed valuation of the Real Properties or of any proposed public improvement assessment. (viii) Within the past two years, no casualty has occurred at the Real Properties. 5.18 Employees and Related Agreements; ERISA. (a) List of Plans. Schedule 5.18(a) contains a true and complete list of each Company Benefit Plan and each Employee Agreement. The Company has no plan or commitment, whether legally binding or not, to establish any new Company Benefit Plan, to enter into any Employee Agreement or to modify or to terminate any Company Benefit Plan or Employee Agreement (except to the extent required by law as previously disclosed to Buyer, or as required by this Agreement), nor has any intention to do any of the foregoing been communicated to Employees. (b) Documents. The Company has provided to Buyer (i) current, accurate and complete copies of all documents embodying each Company Benefit Plan and each Employee Agreement, including all amendments thereto, and trust or funding agreements with respect thereto; (ii) the two most recent annual actuarial valuations, if any, prepared for each Company Benefit Plan; (iii) the two most recent annual reports (Series 5500 and all schedules thereto), if any, required under ERISA in connection with each Company Benefit Plan or related trust; (iv) a statement of alternative form of compliance pursuant to Department of Labor Regulation Section 2520.104-23, if any, filed for each Company Benefit Plan which is an "employee pension benefit plan" as defined in Section 3(2) of ERISA for a select group of management or highly compensated employees; (v) the most recent determination letter received from the IRS, if any, for each Company Benefit Plan and related trust which is intended to satisfy the requirements of Section 401(a) of the Code; (vi) if the Company Benefit Plan is funded, the most recent annual and periodic accounting of Company Benefit Plan assets; (vii) the most recent summary plan description together with the most recent summary of material modifications, if any, required under ERISA with respect to each Company Benefit Plan; and (viii) all material communications to any Employee or Employees relating to each Company Benefit Plan. (c) Compliance. (i) The Company has performed in all material respects all obligations required to be performed by it under each Company Benefit Plan and Employee Agreement and is not in default under or in violation of any Company Benefit Plan or Employee -31- Agreement; (ii) each Company Benefit Plan has been established and maintained in all material respects in accordance with its terms and in compliance with all Requirements of Law; (iii) each Company Benefit Plan intended to qualify under Section 401 of the Code is, and since its inception has been, so qualified and a determination letter has been issued by the IRS to the effect that each such Company Benefit Plan is so qualified and that each trust forming a part of any such Company Benefit Plan is exempt from tax pursuant to Section 501(a) of the Code and, to the Company's knowledge, no circumstances exist which could reasonably be expected to adversely affect this qualification or exemption; (iv) no "prohibited transaction," within the meaning of Section 4975 of the Code or Section 406 of ERISA, has occurred with respect to any Company Benefit Plan; (v) there are no actions, proceedings, arbitrations, suits or claims pending or, to the knowledge of the Company, threatened or anticipated (other than routine claims for benefits), with respect to any Company Benefit Plan or Employee Agreement; (vi) no event or transaction has occurred with respect to any Company Benefit Plan that would result in the imposition of any tax under Chapter 43 of Subtitle D of the Code; (vii) each Company Benefit Plan can be amended, terminated or otherwise discontinued without liability to the Company, other than for accrued benefits; (viii) no Company Benefit Plan is under audit or investigation by the IRS, the Department of Labor or other governmental authority and, to the knowledge of the Company, no such audit or investigation is pending or threatened; (ix) no liability under any Company Benefit Plan has been funded nor has any such obligation been satisfied with the purchase of a contract from an insurance company as to which the Company has received notice that such insurance company is insolvent or is in rehabilitation or any similar proceeding; (x) the Company has timely deposited and transmitted all amounts withheld from Employees for contributions or premium payments for each Company Benefit Plan into the appropriate trusts or accounts; (xi) each Company Benefit Plan that allows loans to plan participants has been operated in all material respects in accordance with the plan's written loan policy; in addition, all outstanding loans from such Company Benefit Plans are current as of the Closing Date, and there are no loans in default; and (xii) the Company has either amended each Company Benefit Plan intended to be qualified under Section 401(a) of the Code for new GUST law changes within the remedial amendment period under Code Section 401(b) or by December 31, 2001, certified its intention to adopt a GUST plan. (d) Pension Plans. The Company does not presently sponsor, maintain, contribute to, is not required to contribute to, has no liability in respect of, and has never sponsored, maintained, contributed to, nor had any liability in respect of, or been required to contribute to, an "employee pension benefit plan" within the meaning of Section 3(2) of ERISA that is subject to Title IV of ERISA, or a "multiple employer plan" (within the meaning of Section 413 of the Code). (e) No Post-Employment Obligations. The Company (i) does not maintain or contribute to any Company Benefit Plan that provides, or has any liability to provide, life insurance, medical, severance or other employee welfare benefits to any Employee upon his retirement or termination of employment, except as may be required by Section 4980B of the -32- Code; and (ii) does not have any obligation or agreement (whether in oral or written form) to any Employee (either individually or to Employees as a group) that such Employee(s) would be provided with life insurance, medical, severance or other employee welfare benefits upon their retirement or termination of employment, except to the extent required by Section 49 of the Code. (f) Effect of Transaction. The execution of, and performance of the transactions contemplated in, this Agreement will not (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any Company Benefit Plan, Employee Agreement, trust or loan or otherwise that will or may result in any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any Employee. No payment or benefit which will or may be made by the Company, Buyer or any of their respective Affiliates with respect to any Employee will be characterized as an "excess parachute payment," within the meaning of Section 280G(b)(1) of the Code. (g) 501(c)(9) Trust. No Company Benefit Plan or Employee Agreement is funded by a trust described in Section 501(c)(9) of the Code. (h) Controlled Group Liability. The Company is not and has never been (i) a member of a "controlled group of corporations," or an "affiliated service group" within the meanings of Sections 414 (b) or (m) of the Code, (ii) required to be aggregated with any Person under Section 414(o) of the Code; or (iii) under "common control," with any Person within the meaning of Section 4001(a)(14) of ERISA or Section 414(c) of the Code. (i) HIPAA. The Company has complied in all material respects with the requirements of the HIPAA Medical Privacy Regulations with respect to each Company Benefit Plan that is subject to such requirements and with respect to the Company's status as a "covered entity" as defined therein. 5.19 Labor and Employment Matters. (a) Except as set forth in Schedule 5.19(a), the Company has complied in all material respects with all Requirements of Law which relate to employment, prices, wages, hours, discrimination in employment and collective bargaining and is not liable for any arrears of wages or any Taxes or penalties for failure to comply with any of the foregoing, including, but not limited to, the Civil Rights Act of 1964, the Fair Labor Standards Act, the Workers Adjustment and Retraining Notification Act of 1988, the Americans with Disability Act, the Age Discrimination in Employment Act of 1967, the Family and Medical Leave Act, and the Pregnancy Discrimination Act (each act, as amended). To the Company's knowledge, the Company does not employ any un-documented non-United States citizens. The Company believes that its relations with its employees are satisfactory. No work stoppage or labor strike against the Company is pending or threatened. No Employees are currently represented by any -33- labor union for purposes of collective bargaining and no activities the purpose of which is to achieve such representation of all or some of such Employees are ongoing or, to the Company's knowledge, threatened. (b) Except as set forth in Schedule 5.19(b), (i) to the Company's knowledge, neither the Company nor any of the Shareholders is involved in any transaction or other situation with any Employees or Affiliates of the Company which may be generally characterized as a conflict of interest including, but not limited to, direct or indirect interests in the business of competitors, suppliers or customers of the Company, and (ii) there is no situation which involved or involves (A) the use of any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to political activity, (B) the making of any direct or indirect unlawful payments to government officials or others from corporate funds or the establishment or maintenance of any unlawful or unrecorded funds, (C) the violation of any of the provisions of The Foreign Corrupt Practices Act of 1977, or any rules or regulations promulgated thereunder, (D) the receipt of any illegal discounts or rebates or any other violation of the antitrust laws, or (E) any investigation by the Securities and Exchange Commission or any other federal, foreign, state or local government agency or authority. (c) Schedule 5.19(c) contains a complete list of each Employee who has experienced an "employment loss" within the meaning of the Worker Adjustment and Retraining Notification Act (the "WARN ACT") during the last 90 days. (d) The Company has not classified any individual as an "independent contractor" or of similar status who, according to a Company Benefit Plan or the law of the jurisdiction, should have been classified as an employee or of similar status. The Company has no liability, actual or contingent, by reason of any individual who provides or provided services to the Company or any of its Affiliates, in any capacity, who was improperly excluded from participating in any Company Benefit Plan. 5.20 Insurance. Schedule 5.20 contains a complete and accurate list of all liability, property, workers' compensation, directors' and officers' liability, "key man" life and other insurance policies in effect that are owned by the Company or under which the Company is a named insured (the "INSURANCE CONTRACTS"). The Company previously has delivered or otherwise made available to Buyer all Insurance Contracts. There is no claim pending under any such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds. All premiums due and payable under all such policies and bonds have been paid and the Company is otherwise in compliance in all material respects with the terms of such policies and bonds and such policies and bonds and the coverages thereunder are in full force and effect. The Company has no knowledge of any threatened termination of, or premium increase with respect to, any of such policies. -34- 5.21 Contracts. Schedule 5.21 sets forth a complete and correct list of the following Contracts (the "DESIGNATED CONTRACTS") to which the Company is a party or under which it is otherwise bound by the terms thereof: (a) loan agreements, indentures, mortgages, pledges, hypothecations, deeds of trust, conditional sale or title retention agreements, security agreements, equipment financing obligations or guarantees, indemnification agreements or other sources of liability (whether or not contingent) in respect of any indebtedness or obligations to any other Person, or letters of intent or commitment letters with respect to same; (b) agreements pursuant to which the Company is purchasing or selling products or services in excess of $500,000 annually; (c) distribution, sales agency or franchise or similar agreements, or agreements providing for an independent contractor's services, or letters of intent with respect to same involving payments in excess of $100,000 annually; (d) the Equipment Leases; (e) any Contract relating to pending capital expenditures by the Company in excess of $100,000; (f) any Contract with a Shareholder or Affiliate of the Company; (g) any agreement that restricts the Company from engaging in the Business anywhere in the world; (h) any powers of attorney (other than a power of attorney given in the ordinary course of business with respect to routine Tax matters); (i) any Contract that relates to any material acquisition, divestiture, merger or similar transaction that has not been consummated or that has been consummated, but contains representations, warranties, covenants, indemnities or other obligations that are still in effect; and (j) other Contracts, not entered into in the ordinary course of business by the Company and not otherwise disclosed on the Company Disclosure Schedules and involving payments in excess of $100,000 individually. Except as set forth on Schedule 5.21, the Company has complied in all material respects with the terms and conditions of each Designated Contract and, to the Company's knowledge, the other party thereto has complied in all material respects with the terms and conditions of the Designated Contracts, and there are no claims for breach or indemnification or notice of default or termination under any Designated Contract. Except as set forth on Schedule 5.21, no event -35- has occurred which constitutes, or, after notice or the passage of time, or both, would constitute, a material default by the Company under any Designated Contract and, to the Company's knowledge, no such event has occurred which constitutes or would constitute a material default by any other party. 5.22 Taxes. The Company has properly elected to be an S corporation pursuant to Section 1362 of the Code and for federal income tax purposes, is and has been properly classified as an "S Corporation" under Section 1361(a) of the Code and the Treasury Regulations promulgated thereunder (and any applicable predecessor provisions) for all periods ended on or after January 1, 1987, and has been so classified for state and local purposes pursuant to analogous state and local provisions for the periods and the jurisdictions listed on Schedule 5.22. Except as set forth in Schedule 5.22 hereto, all Tax Returns required to be filed with respect to the Company, or any of its income, properties, franchises or operations have been timely filed, each such Tax Return has been prepared in compliance in all material respects with all applicable laws and regulations, and all such Tax Returns are true, complete and accurate in all material respects. All Taxes due and payable by or with respect to the Company have been paid or accrued on its books and records as of the Closing. Except as set forth in Schedule 5.22 hereto: (i) with respect to each taxable period of the Company, no taxable period has been audited by the relevant taxing authority; (ii) no deficiency or proposed adjustment which has not been settled or otherwise resolved for any amount of Taxes has been asserted or assessed by any taxing authority; (iii) the Company has not consented to extend the time in which any Taxes may be assessed or collected by any taxing authority; (iv) the Company has not requested or been granted an extension of the time for filing any Tax Return to a date later than the Closing Date; (v) there is no action, suit, taxing authority proceeding, or audit or claim for refund now in progress, pending or, to the Company's knowledge, threatened against or with respect to the Company regarding Taxes; (vi) there are no Encumbrances for Taxes (other than for current Taxes not yet due and payable) upon the assets of the Company; (vii) no claim has ever been made by a taxing authority in a jurisdiction where the Company does not file Tax Returns that it is or may be subject to Taxes assessed by such jurisdiction, except for any claim which has been fully resolved; (viii) the Company will not be subject to any Taxes for the period ending at the Closing Date for any period for which a Tax Return has not been filed that are imposed pursuant to Section 1374 or Section 1375 of the Code (or any corresponding provision of state, local or foreign law); (ix) prior to the date hereof, the Company has made available to Buyer complete copies of all Tax Returns filed by the Company, revenue agent's reports and other written assertions of deficiencies or other liabilities for Taxes of the Company, and tax rulings, requests for rulings, or closing agreements relating to the Company; (x) all amounts required to be collected or withheld by the Company with respect to Taxes have been duly collected or withheld and any such amounts that are required to be remitted to any taxing authority have been duly remitted; (xi) the Company has not been a party to any Tax sharing agreement, has not taken any deduction or received any Tax benefit arising from participation in a tax shelter as defined for purposes of Section 6111(c) of the Code, and has not participated in a reportable transaction as defined in Treasury Regulation Section 1.6011 - 4(b) and (c)(3) or Treasury -36- Regulation Section 1.6011-4T(a) and (b) (as promulgated in T.D. 8877); (xii) the Company is not, nor has it ever been, a United States real property holding company within the meaning of Section 897(c)(2) of the Code; (xiii) the Company will not be required as a result of any adjustment under Section 481 of the Code, or any "closing agreement" as described in Section 7121 of the Code (or any similar provision of state, local or foreign law), to include any item of income in, or exclude any item of deduction from, any Tax period ending on or after the Closing Date; and (xiv) the Company has not made any consent under Section 341 of the Code and has not taken a deduction for Tax purposes that is subject to disallowance by reason of Section 163(e)(5) of the Code or any analogous provision of state, local or foreign law. 5.23 Litigation or Regulatory Action. Except as set forth in Schedule 5.23: (a) There are no lawsuits, claims, suits, proceedings or investigations pending or, to the knowledge of the Company, threatened against or affecting the Company in respect of the Company Assets, the Leased Assets, its properties or the Business nor, to the knowledge of the Company, is there any Basis for the same, and there is no lawsuit, suit or proceeding pending in which the Company is the plaintiff or claimant which relates to any Company Assets, Leased Assets or the Business; and (b) There is no action, lawsuit, claim, suit, inquiry or proceeding, pending or, to the knowledge of the Company, threatened which questions the legality, validity or propriety of this Agreement or the transactions contemplated by this Agreement. 5.24 Environmental and Health/Safety Matters. (a) The operations of the Company are and have at all times been in compliance in all material respects with all applicable Environmental Laws. Neither the Company nor any of the Shareholders has received notice of any violation of, or liability under, any Environmental Laws or Court Orders applicable to the Company Assets, Leased Assets, the Real Properties or the Business; (b) The Company has in all material respects obtained, maintained and complied with all Governmental Permits required by Environmental Laws and necessary for the operation of the Business; (c) No Hazardous Substances have been generated, transported, stored, treated, recycled or otherwise handled in any way in the operation of the Company's business, except for inventories of raw materials and supplies used or to be used in the ordinary and normal course of operating the business (all of which were or are stored in all material respects in accordance with applicable Environmental Laws); -37- (d) There are no locations not owned or operated by the Company where Hazardous Substances generated by the Company have been stored, treated, recycled or disposed of; (e) No Hazardous Substances generated by the Company are located on, contained in or otherwise form a part of the Property of the Company, except for inventories of raw materials and supplies used or to be used in the ordinary and normal course of operating the Business (all of which were or are stored in all material respects in accordance with applicable Environmental Laws); (f) There is no past or ongoing Release (except for federally permitted Releases) or condition of contamination by Hazardous Substances at, beneath or from any of the Properties, or at, beneath or from other locations where Hazardous Substances associated with the operation of the Business have been or are located; (g) The Company has not treated, stored for more than ninety (90) days, or disposed of any hazardous waste (as such term is used within the meaning of the RCRA or similar applicable state or municipal law) associated with the operation of the Business; (h) The Company has not received any notice from any Governmental Body or other Person advising that any of them is potentially responsible for Remedial Action (or costs thereof) with respect to a Release or threatened Release; (i) No underground storage tanks are or, to the Company's knowledge, ever were located on any properties owned or leased by the Company; (j) No Court Order, litigation, settlement or citation with respect to Hazardous Substances exists with respect to or in connection with the operation of the Company's business; (k) (i) To the Company's knowledge, there has been no environmental investigation conducted by any Governmental Body or with respect to the Properties or the operation of the Company's business; and (ii) the Company has furnished to Buyer copies of all environmental reports, audits or studies with respect to the Real Properties which are in its possession or under its reasonable control; and (l) There are no PCBs or asbestos which are located on, contained in or otherwise form a part of any of the Company Assets, the Leased Assets or the Real Properties, and no Basis exists for the imposition of liability with respect to asbestos containing material in any product of the Company or at or upon any Property or with respect to the Business. 5.25 Product Warranty and Product Liability. Except as set forth on Schedule 5.25, there are no product warranty or product liability claims pending or, to the Company's -38- knowledge, threatened, against the Company and, to the Company's knowledge, there is no Basis for any such product warranty or product liability or other tort claim. Schedule 5.25 sets forth a complete and accurate list of all product liability and product warranty claims made against the Company within the past three (3) years. 5.26 Bank Accounts. Schedule 5.26 contains a complete and accurate list of (a) all bank accounts, lock boxes and safe deposit boxes relating to the business and operations of the Company (including the name of the bank or other institution where such account or box is located and the name of each authorized signatory thereto), (b) all outstanding letters of credit issued by financial institutions for the account of the Company (setting forth, in each case, the financial institution issuing such letter of credit, the maximum amount available under such letter of credit, the terms (including the expiration date) of such letter of credit and the party or parties in whose favor such letter of credit was issued), and (c) the name and address of each Person who has a power of attorney to act on behalf of the Company, and who is authorized to draw on such accounts, or make withdrawals on such accounts or have access to such accounts or boxes. 5.27 Customers and Suppliers. (a) Except as set forth on Schedule 5.27(a), since January 1, 2003, there has not been any material adverse change in the business relationship of the Company with any customer or customers who, individually or in the aggregate, accounted for more than 3.5% of the Company's net sales (on a consolidated basis) during (y) the year 2002 or (z) the period from January 1, 2003 to the date of this Agreement (a "MATERIAL CUSTOMER"). No Material Customer has advised the Company that it is (i) terminating or considering terminating its business relationship with the Company, (ii) materially reducing or planning to materially reduce, its future purchases from the Company (on a net basis taking into account any purchases of the Company's other existing products but not including purchases of newly developed products), or (iii) taking or considering taking any action or planning to take any action that would materially lower the Company's margin with respect to such Material Customer. Except as set forth on Schedule 5.27(a), (i) since January 1, 2003, the Company has not received actual notice that, and (ii) since August 24, 2003 the Company has not, to its knowledge, received notice that, any material customer is soliciting or considering soliciting bids from third parties for any material amount of goods or services currently purchased from the Company. No Material Customer has advised the Company that it intends to materially alter the terms of its business relationship with the Company. The Company currently maintains sufficient resin inventory to conduct its business as it has been, and is presently proposed to be, conducted. The Company has access to sufficient amounts of resin supply, purchasable at then prevailing market prices, necessary to conduct its business as it has been, and is presently proposed to be, conducted. (b) The Company has previously disclosed in writing to Buyer the current terms of any rebates or similar provisions with certain Material Customers and there is no current agreement or understanding to modify any of such terms. -39- 5.28 Disclosure. (a) None of (i) the representations or warranties of the Company contained herein, (ii) the information contained in the Company Disclosure Schedules referred to in Article V, or (iii) the certificate furnished by the Company pursuant to Section 3.4 of this Agreement, is false or misleading in any material respect or omits to state a fact herein or therein necessary to make the statements herein or therein not misleading in any material respect. (b) In connection with Buyer's investigation of the Company, Buyer may have received from the Company and its advisors certain projections and other forecasts. Buyer acknowledges that there are uncertainties inherent in attempting to make such projections and other forecasts, that Buyer is familiar with such uncertainties, that Buyer is taking full responsibility for making its own evaluation of the adequacy and accuracy of all projections and other forecasts so furnished to it, and that Buyer shall have no claim against the Company or its advisors with respect thereto. (c) NONE OF THE COMPANY, THE SHAREHOLDERS, THE REAL ESTATE SELLERS OR THEIR ADVISORS MAKES ANY REPRESENTATION OR WARRANTY TO BUYER, EXPRESS OR IMPLIED, WITH RESPECT TO THE COMPANY, INCLUDING WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY AS TO TITLE, OWNERSHIP, USE, POSSESSION, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, QUANTITY, VALUE, CONDITION, LIABILITIES, OPERATION, CAPACITY, FUTURE RESULTS OR OTHERWISE, OTHER THAN AS EXPRESSLY PROVIDED IN THIS AGREEMENT, THE REAL ESTATE PURCHASE AGREEMENTS AND THE OTHER COMPANY ANCILLARY AGREEMENTS AND THE SHAREHOLDER ANCILLARY AGREEMENTS. WITHOUT LIMITING THE FOREGOING, OTHER THAN AS EXPRESSLY PROVIDED IN THIS AGREEMENT, NONE OF THE COMPANY OR SHAREHOLDERS MAKES ANY REPRESENTATION OR WARRANTY TO BUYER, EXPRESS OR IMPLIED, WITH RESPECT TO (A) THE INFORMATION SET FORTH IN THE CONFIDENTIAL MEMORANDUM DISTRIBUTED BY OR ON BEHALF OF THE COMPANY IN CONNECTION WITH THE SALE OF THE COMPANY AND THE TRANSFERRED REAL PROPERTIES OR (B) ANY FINANCIAL PROJECTION OR FORECAST RELATING TO THE COMPANY OR (C) INFORMATION COMMUNICATED OR PRESENTED IN ANY MANAGEMENT PRESENTATION TO BUYER. 5.29 No Finder. Except for Robert W. Baird & Co., whose fees will be paid by the Shareholders, neither the Company nor any Person acting on its behalf has paid or become obligated to pay to pay any fee or commission to any broker, finder or intermediary for or on account of the transactions contemplated by this Agreement. -40- ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER AND SUB As an inducement to the Company, the Shareholders, and the Real Estate Sellers to enter into this Agreement and to consummate the transactions contemplated hereby, Buyer and Sub hereby jointly and severally represent and warrant to the Company that all of the statements contained in this Article VI are true as of the date of this Agreement and as of the Closing Date (or, if made as of a specific date, as of such date): 6.1 Organization of Buyer and Sub. Each of Buyer and Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full power and authority to own or lease and to operate and use its properties and assets and to carry on its business as now conducted. 6.2 Authority of Buyer. Each of Buyer and Sub has full power and authority to execute, deliver and perform this Agreement and Buyer Ancillary Agreements and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the Buyer Ancillary Agreements and the transactions contemplated hereby and thereby have been duly authorized and approved by all necessary corporate action of Buyer and Sub and do not require any further authorization or consent of Buyer, Sub or their respective stockholders. This Agreement has been duly authorized, executed and delivered by each of Buyer and Sub and is the legal, valid and binding agreement of Buyer and Sub enforceable in accordance with its terms and each of the Buyer Ancillary Agreements has been duly authorized by Buyer and upon execution and delivery by Buyer will be a legal, valid and binding obligation of Buyer enforceable in accordance with its terms. Neither the execution and delivery of this Agreement or of any Buyer Ancillary Agreements, nor delivery and performance of this Agreement or any Buyer Ancillary Agreements nor the consummation of any of the transactions contemplated hereby or thereby nor compliance with or fulfillment of the terms, conditions and provisions hereof or thereof will: (a) Conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights under, or result in the creation or imposition of any Encumbrance upon any of Buyer's or Sub's assets, under (1) Buyer's or Sub's bylaws or articles of incorporation, (2) any material note, instrument, agreement, mortgage, lease, license, franchise, permit or other authorization, right, restriction or obligation to which Buyer or Sub is a party or any of Buyer's or Sub's assets is subject or by which Buyer or Sub is bound, (3) any Court Order to which Buyer or Sub is a party or any of its assets is subject or by which Buyer or Sub is bound, or (4) any Requirements of Laws affecting Buyer, Sub or their respective assets, except in the cases of clauses (2)-(4) as would not have or be reasonably expected to have a -41- material adverse effect on Buyer's or Sub's ability to consummate the transactions contemplated by this Agreement and the Buyer Ancillary Agreements; or (b) Except for any applicable requirements under the Antitrust Improvements Act, require the approval, consent, authorization or act of, or the making by Buyer or Sub of any declaration, filing or registration with, any Person. 6.3 Securities Laws Representations. (a) Buyer is acquiring the Company Securities in good faith solely for its own account with the present intention of holding such Company Securities for purposes of investment, and Buyer is not acquiring the Company Securities with a view to or for subdivision, distribution, fractionalization or distribution thereof, in whole or in part, or as an underwriter or conduit to other beneficial owners or subsequent purchasers. Buyer is an "accredited investor" as defined in Regulation D of the Securities Act of 1933, as amended (the "1933 ACT"). Buyer has such knowledge and experience in financial and business matters in general, and in investments in the Company Securities in particular, that it is capable of evaluating the merits, risks and other facets of the transactions contemplated by this Agreement. (b) Restricted. Buyer acknowledges and understands that (i) the Company Securities have not been registered under the 1933 Act, or qualified under the securities or "blue sky" laws of applicable states in reliance upon exemptions from registration or qualification thereunder, and (ii) the Company Securities may not be sold, offered, transferred, assigned, pledged, hypothecated or otherwise disposed of or encumbered, except in compliance with the 1933 Act and such laws. 6.4 Available Funds. Buyer has received debt and equity financing commitments that, when funded and together with funds provided by Buyer and the committed and undrawn funds under Buyer's current credit facilities, are sufficient to enable it to consummate the transactions contemplated by this Agreement and Buyer Ancillary Agreements. True and correct copies of the equity commitments are attached hereto as Exhibit I (the "EQUITY COMMITMENT LETTERS" and, together with the Bridge Financing Commitment Letter, the "COMMITMENT LETTERS") (such financing, the "FINANCING"). The Commitment Letters are not subject to any conditions other than as set forth therein, have been duly executed by all parties thereto, and are in full force and effect on the date hereof. Buyer is not aware of and does not anticipate any Basis upon which the conditions set forth in the Commitment Letters will not be fully satisfied on the Closing Date. 6.5 Litigation. There is no action, suit or proceeding, at law or in equity, by any Person or any arbitration or any administrative or other proceeding before any Governmental Body, pending or, to the knowledge of Buyer, threatened in writing, which is reasonably likely to materially affect Buyer's or Sub's ability to consummate the transactions contemplated by this Agreement. -42- 6.6 No Finder. Except for Goldman, Sachs & Co. and J.P. Morgan Securities Co., and their respective affiliates, whose fees and expenses will be paid by Buyer, neither Buyer, Sub nor any Person acting on Buyer's or Sub's behalf has paid or become obligated to pay any fee or commission to any broker, finder or intermediary for or on account of the transactions contemplated by this Agreement. 6.7 No Activities. Sub was formed solely for the purpose of engaging in a merger. Except for obligations or liabilities incurred in connection with its organization and the transactions contemplated by this Agreement, Sub has no obligations or liabilities of any nature (whether accrued, absolute, contingent or otherwise) and has not engaged in any business activities of any type or kind whatsoever or entered into any agreements or arrangements with any person (other than this Agreement). ARTICLE VII CONDUCT OF BUSINESS PENDING THE CLOSING 7.1 Investigation of the Business by Buyer. (a) The Company shall (i) afford to the officers, employees and authorized representatives of Buyer (including, without limitation, independent public accountants and attorneys) reasonable access to the offices, properties, employees and business and financial records (including computer files, retrieval programs and similar documentation) of the Company and shall cause its auditors to give Buyer access to the audit work papers relating to the years ended December 31, 2001 and 2002, to the extent reasonably obtainable, (ii) furnish to Buyer all information in the possession of the Company or any of the Shareholders concerning the Business as Buyer may reasonably request, (iii) instruct its Representatives to cooperate with Buyer in its investigation of the Business and (iv) afford access to the Real Properties for inspection, testing and other matters as set forth in the Real Estate Purchase Agreements; provided that Buyer and its Representatives shall not conduct any environmental sampling of the soil, groundwater and/or other environmental media of the sort commonly referred to as Phase II environmental work without the prior written consent of the Company. Buyer shall coordinate any requests for information and access to the Company through Robert W. Baird & Co., and any investigation or access shall be conducted in a manner and at times as mutually agreed by the Company and Buyer. (b) Each of Buyer and Sub will hold, and shall cause its Affiliates and their agents to hold, all documents and information concerning the Company furnished to them by the Company and its agents in connection with its investigation in accordance with Section 13.2. 7.2 Preserve Accuracy of Representations and Warranties. The Company and the Shareholders shall refrain from taking any action which would render any representation or warranty contained in Articles IV or V of this Agreement inaccurate in any material respect as of the Closing Date. The Company or the Shareholders, as the case may be, shall promptly notify -43- Buyer and Sub of any action, suit or proceeding that shall be instituted or threatened against the Company or the Shareholders to restrain, prohibit or otherwise challenge the legality of any transaction contemplated by this Agreement. The Company shall promptly notify Buyer and Sub of any lawsuit, claim, proceeding or investigation that may be threatened, brought, asserted or commenced against the Company which would have been listed in Schedule 5.22 if such lawsuit, claim, proceeding or investigation had arisen prior to the date hereof. 7.3 Governmental Approvals. During the period prior to the Closing Date, the Company, the Shareholder Representative, Buyer and Sub shall act diligently and reasonably, and shall cooperate with each other, to secure any consents and approvals of any Governmental Body required to consummate the transactions contemplated by this Agreement, or to otherwise satisfy the conditions set forth in Section 9.3; provided that the Company shall not make any agreement or understanding affecting its assets, property or business as a condition for obtaining any such consents or approvals except with the prior written consent of Buyer and Sub. 7.4 Operations Prior to the Closing Date. (a) The Company shall operate and carry on its business only in the ordinary course and substantially as presently operated. Consistent with the foregoing, the Company shall keep and maintain the Company Assets and the Leased Assets in good operating condition and repair and shall use its commercially reasonable efforts consistent with good business practice to (i) preserve the goodwill of and existing relationships with the suppliers, contractors, licensors, employees, customers and others having business relations with the Company, (ii) preserve intact its business organization, goodwill and ongoing operations, (iii) make capital expenditures substantially in compliance with its 2003 budget, (iv) retain the services of its key employees and (v) perform in all material respects its obligations under the Designated Contracts. (b) Notwithstanding Section 7.4(a), except as expressly contemplated by this Agreement or except with the express written approval of Buyer, which approval shall not be unreasonably withheld, the Company shall not: (i) make any capital expenditure or enter into any Contract or commitment therefor other than as previously budgeted in the Company's 2003 budget; (ii) enter into any Contract other than in the ordinary course of business consistent with past practice, or any Contract which is not terminable by the Company on no more than 30 days prior notice without payment or premium; (iii) enter into any Contract for the purchase or lease of real property or the sale of any Real Properties; (iv) sell, lease (as lessor), transfer or otherwise dispose of, or mortgage or pledge, or impose or suffer to be imposed any Encumbrance on, any of the Company's -44- Assets, other than (1) inventory and minor amounts of personal property sold or otherwise disposed of for fair value in the ordinary course of business consistent with past practice, (2) Permitted Encumbrances, and (3) as contemplated by Section 7.11; (v) cancel any debts owed to or claims held by the Company (including the settlement of any claims or litigation) other than in the ordinary course of business consistent with past practice; (vi) create, incur or assume, or modify the terms of, or agree to create, incur, assume, or modify the terms of, any Indebtedness in an amount in excess of $100,000; (vii) delay or accelerate payment of any account payable or other liability of the Company beyond or in advance of its due date or the date when such liability would have been paid in the ordinary course of business consistent with past practice; (viii) maintain the levels of raw materials, supplies, work-in-process or other material included in the inventory of the Company other than in accordance with historical business practices; (ix) institute any increase in compensation or benefits to Employees other than salary or wage increases to non-executive employees in the ordinary course of business consistent with past practice, or adopt, award or terminate any Company Benefit Plan or enter into any Employee Agreement; (x) amend or otherwise change its articles of incorporation or bylaws; (xi) issue, sell, pledge, dispose of, grant, encumber, or authorize the issuance, sale, pledge, disposition, grant or encumbrance of (i) any shares of its capital stock of any class, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest, of it, or, (ii) any of its assets, tangible or intangible, except in the ordinary course of business consistent with past practice; (xii) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock other than for distributions to pay taxes attributable to (i) the Company's income and/or (ii) the rental income related to the Leased Real Properties and as contemplated by Section 7.11; (xiii) reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock; -45- (xiv) (1) acquire (including, without limitation, for cash or shares of stock, by merger, consolidation, or acquisition of stock or assets) any interest in any corporation, partnership or other business organization or division thereof or any assets, or make any investment either by purchase of stock or securities, contributions of capital or property transfer, or, except in the ordinary course of business, consistent with past practice, purchase any property or assets of any other Person, or (2) incur any Indebtedness or issue any debt securities or assume, guarantee or endorse or otherwise, as an accommodation, become responsible for, the obligations of any Person, or make any loans or advances except in the ordinary course of business; (xv) increase or accelerate the compensation payable or to become payable to its respective officers or directors, except as presently bound to do, or establish, adopt or enter into any collective bargaining agreement; (xvi) take any action other than in the ordinary course of business and in a manner consistent with past practice with respect to accounting policies or procedures; (xvii) pay, discharge or satisfy any existing claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice of due and payable liabilities reflected or reserved against in its financial statements, as appropriate, or liabilities incurred after the date hereof in the ordinary course of business and consistent with past practice; (xviii) increase or decrease prices charged to its respective customers, except for previously announced price changes or except in the ordinary course of business, or take any other action which might reasonably result in any material increase in the loss of customers through non-renewal or termination of contracts or other causes; (xix) voluntarily permit any insurance policy naming the Company as a beneficiary or a loss payable payee to be cancelled or terminated prior to the Closing Date, except policies providing coverage for losses not in excess of $1,000,000 which are replaced without diminution of or gaps in coverage; (xx) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company; (xxi) file any Tax Return or make any Tax election other than in a manner consistent with past practice or settle any audit with respect to a material amount of Taxes; (xxii) make any loan to, or enter into any Contract with, any officer, director, employee, consultant or Shareholder (other than advances to such persons in the -46- ordinary course of business in connection with salary, wages, travel and travel related expenses or other customary expenses); (xxiii) enter into any transaction or Contract (other than in the ordinary course of business or pursuant to any Contract existing as of the date of this Agreement) that provides for aggregate future payments to or by the Company of more than $250,000 with respect to any particular transaction or Contract or more than $500,000 in the aggregate with respect to all such transactions and Contracts entered into by the Company after the date of this Agreement (or any material amendment to or termination of any material Contract), or fail to renew (to the extent such Contract can be unilaterally renewed by the Company) any material Contract, including, but not limited to, customer, supplier, distributor, licensing, or other material Contracts, to which the Company is a party (other than amendments or terminations of Contracts pursuant to or contemplated by this Agreement); (xxiv) make or rescind any express or deemed election or take any other discretionary position relating to Taxes, settle or compromise any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to Taxes, or change any of their methods of reporting income or deductions for Tax purposes, in each case, if such action could affect the Company's Taxes after the Closing Date; or (xxv) agree, in writing or otherwise, to take or authorize any of the foregoing actions. 7.5 No Solicitations. None of the Shareholders or the Company, or any of their respective Affiliates shall, nor shall they authorize or permit any Representative retained by or acting for or on behalf of the Shareholders, the Company or any of their respective Affiliates to, directly or indirectly, initiate, solicit, encourage, take any action to facilitate or participate in any discussions or negotiations regarding, furnish any information in connection with, afford any access to the properties, books or records of the Company, endorse or otherwise cooperate with, assist, participate in or facilitate the making of any proposal or offer for, or which may reasonably be expected to lead to, an Acquisition Transaction (as defined below), by any Person or group. The Company or the applicable Shareholder shall promptly inform Buyer and Sub, orally and in writing, of the material terms and conditions of any proposal or offer for, or which may reasonably be expected to lead to, an Acquisition Transaction that it receives. The Company will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted on or prior to the date of this Agreement heretofore with respect to any Acquisition Transaction. As used in this Agreement, "ACQUISITION TRANSACTION" means any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company, or any direct or indirect acquisition in any manner of all or a portion of the equity of, or all or a substantial portion of the -47- assets of, the Company, whether for cash, securities or any other consideration or combination thereof, other than pursuant to the transactions contemplated by this Agreement. 7.6 Notification of Changes; Disclosure Schedule Update. (a) The Company or the Shareholder Representative may promptly notify Buyer and Sub in writing by an update to the Company's Disclosure Schedules of any event or circumstance arising after the date of this Agreement which results in, or will result in, the representations and warranties set forth in Articles IV and V of this Agreement ceasing to be true and correct (each written notification and such additional written disclosure being hereafter referred to as a "DISCLOSURE SCHEDULE UPDATE"); provided, however, that Buyer shall have the right, following receipt of any Disclosure Schedule Update, to terminate this Agreement pursuant to Section 12.1(b)(ii). (b) The Company or the Shareholder Representative shall promptly notify Buyer and Sub in writing of the existence or happening or failure to occur of any fact, event circumstance or condition which causes or could reasonably be expected to cause a failure of any of the conditions set forth in Article IX. The Company or the Shareholder Representative shall notify Buyer and Sub of any notice or other communication from any third Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement. (c) The Company shall promptly notify Buyer and Sub of the Company's breach of any of its covenants in this Agreement or the occurrence of any event that may reasonably be expected to make the satisfaction of the conditions in Article IX impossible or unlikely. (d) Each of the Company and the Shareholders shall make commercially reasonable efforts to cure, before the Closing, any breach of a representation or warranty (prior to giving effect to any Disclosure Schedule Update), covenant or agreement made by it, whether occurring or arising prior to, on or after the date of this Agreement. 7.7 Further Assurances. Subject to the terms and conditions of this Agreement, each of Buyer, Sub, the Company and the Shareholders will take or cause to be taken all commercially reasonable steps necessary or desirable and proceed diligently and in good faith and cooperate with each other in order to satisfy each condition to the other's obligations contained in this Agreement as promptly as practicable, including the preparation and filing of all forms, registrations and notices required to be filed to consummate the transactions contemplated by this Agreement, the taking of such actions as are necessary to obtain any requisite approvals, authorizations, consents, orders, licenses, permits, qualifications, exemptions or waivers by any third party or Governmental Body and the seeking of the vacation or reversal of any preliminary injunction, temporary restraining order, stay or other legal restraint or prohibition entered or imposed by any court or other Governmental Body that is not yet final and nonappealable. In -48- addition, no party hereto shall take any action after the date hereof that could reasonably be expected to materially delay the obtaining of, or result in not obtaining any permission, approval or consent from any Governmental Body or other Person required to be obtained prior to Closing. Each of the parties hereto shall execute such documents and other instruments and take such further actions as may be reasonably required or desirable to carry out the provisions hereof and consummate the transactions contemplated hereby. 7.8 Antitrust Law Compliance. In addition to and without limiting the agreements of the parties contained in Section 7.7, as promptly as practicable after the date hereof, Buyer, Sub and the Company shall each file or consent to be filed with the Federal Trade Commission and the Antitrust Division of the United States Department of Justice any notifications or other information required to be filed by their respective "ultimate parent" companies under the Antitrust Improvements Act with respect to the transactions contemplated herein. Each of Buyer, Sub and the Company warrants that all such filings by it will be, as of the date filed, true and accurate and in accordance with the requirements of the Antitrust Improvements Act and any such rules and regulations. Each of the Company, Buyer and Sub agree to make available to the other such information as each of them may reasonably request relative to their business, assets and property as may be required of each of them to file any additional information requested by such agencies under the Antitrust Improvements Act. 7.9 Transfer of Transferred Real Properties. The Company and the Real Estate Sellers shall take all action necessary to cause the Transferred Real Properties to be conveyed to Buyer (or its designee). Each of the Transferred Real Properties shall be conveyed to Buyer (or its designee) pursuant to a Real Estate Purchase Agreement. 7.10 Title and Survey Matters, Title Commitments. Concurrently with the execution of this Agreement, the Company has delivered to Buyer: (i) the Title Commitments; (ii) copies of all documents recorded with respect to the Transferred Real Properties and the Owned Real Properties which appear on the Title Commitments certified by the Title Company; and (iii) a survey for each of the Transferred Real Properties and the Owned Real Properties, prepared by a registered land surveyor, licensed where such Transferred Real Properties and the Owned Real Properties are located; provided, however, with respect to the Title Commitments, Buyer shall be liable for and shall pay all costs and expenses related to extended coverage (other than costs and expenses relating to deleting all "standard exceptions" to coverage, which the Company shall pay). The Company shall pay the title insurance premium, one-half of the closing escrow fee, one-half of the "New York" closing fee, and the costs of obtaining and recording any releases. Buyer shall pay one-half of the closing escrow fee, one-half of the "New York" closing fee, the lenders' escrow fee, the lenders' insurance policy, and the recording fees other than releases. The Company and the Shareholders shall clear, at their sole cost and expense, all Encumbrances in the title (other than Permitted Encumbrances) disclosed by the Title Commitments. -49- 7.11 Leases. The Company and the Shareholders shall cause the Real Property Leases (except the Transition Lease) to be terminated and all liabilities and claims thereunder waived and released, pursuant termination agreements, in the form attached hereto as Exhibit J (each a "LEASE TERMINATION AGREEMENT"). With respect to the Chicago Ridge Corporate Office and the Chicago Ridge Tool Shop, Buyer and the Shareholders shall cause the owners of such properties to enter into the Transition Lease and the Shop Lease in the forms attached hereto as Exhibits G and H, respectively. 7.12 Excluded Assets. (a) On or prior to Closing Date, the Company shall transfer to certain Shareholders, for no consideration, the personal items listed on Schedule 7.12(a). (b) On or prior to the Closing Date, the Company shall transfer the life insurance policy identified on Schedule 7.12(b) to H. Richard Landis, and shall forgive the receivable for premiums paid by the Company with respect thereto. (c) On or prior to the Closing Date, the Company will assign and the applicable Shareholder shall assume the automobile leases identified on Schedule 7.12(c). 7.13 Monticello Environmental Permits. The Company shall use its commercially reasonable efforts to either obtain governmental permits authorizing current discharges of stormwater and wastewater from the Monticello, Indiana facility or otherwise attain compliance with legal requirements applicable to such discharges in a manner acceptable to Buyer (in its reasonable discretion). The Company shall be responsible for, and shall pay, the fees and costs of obtaining such permits and any governmental fines or penalties accruing prior to the obtaining such permits or otherwise attaining such compliance (collectively, the "COMPLIANCE COSTS"). To the extent that the Compliance Costs have not been paid prior to Closing or reflected in the Closing Working Capital Statement, then the Shareholders shall indemnify the Surviving Corporation for the Compliance Costs. 7.14 Financing. (a) Buyer shall use its reasonable best efforts to obtain the proceeds of the Financing. To the extent that any portion of the Financing is unavailable for any reason, Buyer shall use its reasonable best efforts to obtain alternative financing (the "ALTERNATIVE FINANCING") as necessary to effect the transactions contemplated by this Agreement; provided, that such Alternative Financing shall have a capital structure and be in an amount that is comparable to that set forth in the Commitment Letters and shall be on terms and conditions no less favorable to Buyer than those provided in the Commitment Letters, or otherwise on terms and conditions reasonably acceptable to Buyer. If Buyer is unable to issue senior subordinated notes such that the Closing occurs on or prior to December 23, 2003, Buyer shall be required to utilize the Bridge Financing so that the Closing occurs on or prior to the Drop Dead Date. -50- (b) In order to assist with Buyer's financing, the Company shall provide such assistance and cooperation as Buyer may reasonably request, including, but not limited to, cooperation in the preparation of any offering memorandum or similar document, using its best efforts to obtain customary "comfort" letters, accountant's consents and legal opinions, cooperating with initial purchasers or placements agents, entering into customary agreements with underwriters, and initial purchasers or placement agents, and making senior management of the Company available for customary "roadshow" presentations; provided, however, that the foregoing assistance and cooperation shall be at the Buyer's sole cost and expense, and subject to the Company and its Representatives receiving indemnity and hold harmless agreements with respect to any liability or potential liability relating thereto as they may reasonably request; provided that no such indemnity or hold harmless agreement shall apply to any matter for which the Buyer Indemnitees are entitled to indemnification under Article XI or would be so entitled but for the limitations in paragraphs (b) or (c) of Section 11.1. 7.15 FIRPTA Certificate. At the Closing, the Company shall deliver to Buyer, in a form reasonably satisfactory to Buyer, an affidavit of the Company, issued pursuant to and in compliance with Treasury Regulations 1.897-2(h) and 1.1445-2(c)(3) and dated as of the Closing Date, certifying that an interest in the Company is not a U.S. real property interest within the meaning of Section 897 of the Code. 7.16 Transfer. Each Shareholder agrees that from the date hereof until the Closing, he, she or it will not, directly or indirectly, offer, sell, transfer, assign, pledge, hypothecate or otherwise dispose of beneficial ownership of any Company Securities owned by him, her or it. 7.17 Owned Real Properties. If requested by Buyer, the Company shall immediately prior to the Closing, sell any or all of the Owned Real Properties to such third persons as Buyer may designate for a price to be agreed upon between Buyer and such third party. The sale of the Owned Real Properties shall be made pursuant to the form of Real Estate Purchase Agreement attached hereto as Exhibit F. The Total Enterprise Value will be reduced by the amount of the proceeds of such sale of Owned Real Properties and such proceeds will be applied against the Funded Obligations. 7.18 Shareholder Approval. Each Shareholder hereby irrevocably commits to vote in favor of the approval and adoption of this Agreement and the Merger contemplated hereby. The Company shall call and hold a meeting of stockholders as promptly as reasonably practicable following the date of this Agreement for the purpose of voting on this Agreement and the Merger contemplated hereby. 7.19 Plas-Tool License. The Company will use its reasonable best efforts to obtain prior to the Closing the written agreement of the Plas-Tool Co. and John Von Holdt or any of their applicable successors or assigns (together, "PT") confirming that (1) the Plas-Tool License will continue in effect after the Closing, and (2) the Company is permitted to sublicense after the -51- Closing all of the Company's rights under the Plas-Tool License to Buyer and any of Buyer's or the Company's Affiliates. For the purposes of this Section 7.19, the "PLAS-TOOL LICENSE" shall mean the royalty-free license granted by PT to the Company granting the Company the right to produce or manufacture products, and sell and offer to sell such products, from molds sold by the Plas-Tool Co. to the Company that incorporate any embodiments of, or are otherwise covered by, U.S. Patent No. 4,735,337 (including all patents of PT embodied in such molds), so long as the lid is also covered by at least one claim of the Company's U.S. Patent No. 5,238,135. ARTICLE VIII ADDITIONAL AGREEMENTS 8.1 Transfer Taxes. Any Taxes solely relating to the transfer and conveyance of the Company Securities from the Shareholders to Buyer pursuant to the Merger (including documentary stamps or transfer taxes) shall be paid by Buyer. 8.2 Tax Matters. (a) Tax Returns. (i) Subject to Section 8.1 and paragraph (a)(iv) of this Section 8.2, the Shareholder Representative shall prepare and file or cause to be filed when due (taking into account all extensions properly obtained) all Tax Returns that are required to be filed by or with respect to the Company for taxable years or periods ending on or before the Closing Date and the Shareholders shall remit or cause to be remitted any Taxes due in respect of such Tax Returns, and Buyer shall prepare and file or cause to be filed when due (taking into account all extensions properly obtained) all Tax Returns that are required to be filed by or with respect to the Surviving Corporation for taxable years or periods ending after the Closing Date and Buyer shall remit or cause to be remitted any Taxes due in respect of such Tax Returns. (ii) From and after the Closing, the Shareholders shall be jointly and severally liable for and shall indemnify Buyer for all (a) Taxes imposed on the Company for any taxable year or period, or portion thereof, that ends on or before the Closing Date and (b) Taxes of any Person (other than the Company) imposed on the Company as a transferee or successor, by contract or pursuant to any Requirement of Laws, which Taxes relate to a fact, event or transaction occurring before the Closing Date. In the case of any taxable period that includes (but does not end on) the Closing Date, the Taxes of the Company (or Taxes for which the Company is liable) for the portion of the period ending on the Closing Date (for which the Shareholders are liable) shall be determined based on an interim closing of the books as of the close of business on the Closing Date (and for such purpose, the taxable period of any partnership or other pass-through entity in which the Company holds a beneficial interest shall be deemed to terminate at such time), except that the amount of any such Taxes that are imposed on a periodic basis and -52- are not based on or measured by income or receipts shall be determined by reference to the percentage that the number of days in the portion of such period ending on the Closing Date bears to the total number of days in such period beginning after the Closing Date. (iii) The Shareholders (pro rata based on their Ownership Percentages) shall reimburse Buyer for any Taxes of the Company which are the responsibility of the Shareholders pursuant to this Section 8.2(a) within 15 days after payment of such Taxes by the Surviving Corporation. At the election of Buyer or the Surviving Corporation, either Buyer or the Surviving Corporation may seek reimbursement for any Taxes owed pursuant to this Section 8.2(a) from the Indemnification Holdback Amount. (iv) Except to the extent required by applicable Requirements of Laws, none of Buyer, the Surviving Corporation or any Affiliate of either shall (or shall cause or permit the Surviving Corporation to) amend, refile or otherwise modify (or grant an extension of any statute of limitation with respect to) any Tax Return relating in whole or in part to the Company with respect to any taxable year or period ending on or before the Closing Date without the prior written consent of Shareholder Representative, which consent shall not be unreasonably withheld. (v) Buyer shall promptly cause the Surviving Corporation to prepare and provide to the Shareholder Representative a package of Tax information materials, including, without limitation, schedules and work papers (the "TAX PACKAGE") required by the Shareholder Representative to enable the Shareholder Representative to prepare and file all Tax Returns required to be prepared and filed by it pursuant to paragraph (a)(i) of this Section 8.2. The Tax Package shall be completed in accordance with past practice, including past practice as to providing such information and as to the method of computation of separate taxable income or other relevant measure of income of the Company. Buyer and the Surviving Corporation shall cause the Tax Package to be delivered to the Shareholder Representative within 60 days after the Closing Date. (b) Contest Provisions. (i) Buyer shall promptly notify the Shareholder Representative in writing upon receipt by Buyer, the Surviving Corporation or any of their respective Affiliates of notice of any pending or threatened federal, state, local or foreign Tax audits, examinations or assessments which might affect the Tax liabilities for which the Shareholders may be liable pursuant to paragraph (a)(i) of this Section 8.2. (ii) The Shareholder Representative shall have the sole right to represent the Company's interests in any Tax audit or administrative or court proceeding relating to taxable periods ending on or before the Closing Date or otherwise relating to Taxes for which the Shareholders may be liable pursuant to paragraph (a)(i) of this -53- Section 8.2, and to employ counsel of its choice at its expense. The Surviving Corporation and its Representatives shall have the right to fully participate in any such audit or proceeding and to consent to any settlement which affects a Tax period (or portion of a period) ending after the Closing Date. None of Buyer, any of Buyer's Affiliates, or the Surviving Corporation may settle any Tax claim for any Taxes for which the Shareholders may be liable pursuant to paragraph (a)(i) of this Section 8.2, without the prior written consent of the Shareholder Representative, which consent may not be unreasonably withheld or delayed, to the extent such settlement would be reasonably expected to trigger indemnification by the Shareholders pursuant to Section 8.2 or Article XI of this Agreement. (c) Assistance and Cooperation. After the Closing Date, each of the Shareholder Representative, Buyer and the Surviving Corporation shall (and cause their respective Affiliates to): (i) assist the other party in preparing any Tax Returns which such other party is responsible for preparing and filing in accordance with paragraph (a) of this Section 8.2; (ii) cooperate fully in preparing for any audits of, or disputes with taxing authorities regarding, any Tax Returns of the Company; (iii) make available to the other and to any taxing authority as reasonably requested all information, records, and documents relating to Taxes of the Company; (iv) provide timely notice to the other in writing of any pending or threatened Tax audits or assessments of the Company for taxable periods for which the other may have a liability under this Section 8.2; (v) furnish the other with copies of all correspondence received from any taxing authority in connection with any Tax audit or information request with respect to any such taxable period; (vi) timely sign and deliver such certificates or forms as may be necessary or appropriate to establish an exemption from (or otherwise reduce), or file Tax Returns or other reports with respect to, Taxes relating to sales, transfer and similar Taxes; and (vii) timely provide to the other powers of attorney or similar authorizations necessary to carry out the purposes of this Section 8.2. -54- (d) Section 338(h)(10) Election. The Shareholders, Buyer and Sub shall make a Section 338(h)(10) Election and Forms 8023 and 8883 shall be completed and filed in the forms as set forth on Schedule 8.2(d). (e) S Corporation. The Company and the Shareholders shall not revoke the Company's election to be taxed as an S Corporation within the meaning of Code Sections 1361 and 1362. The Company and the Shareholders shall not take or allow any action that would result in the termination of the Company's status as a validly electing S Corporation within the meaning of Code Sections 1361 and 1362. 8.3 WARN Act. Buyer and the Company shall indemnify and hold each of the Shareholders harmless from any Losses and Expenses relating to the failure or alleged failure to provide any required notice under the WARN Act and any similar state or local statute, and to otherwise comply with the WARN Act and similar state or local statute with respect to any "plant closing" or "mass layoff" (as defined in the WARN Act) or similar event affecting the Company's employees and occurring on or after the Closing Date. 8.4 Confidentiality. Each of the Shareholders agrees that it will hold in confidence the Confidential Information and will not, directly or indirectly, disclose, publish, or otherwise make available any of the Confidential Information to the public or to any Person or use any of the Confidential Information for its own benefit or for the benefit of any other Person, other than Buyer, Sub and their respective Affiliates; provided that a Shareholder may disclose Confidential Information if, but only to the extent, required by a Requirement of Law or Court Order; provided, however that in such case, such Shareholder will provide Buyer and Sub with prompt written notice thereof so that Buyer or Sub may seek an appropriate protective order and/or waive such Shareholder's compliance with the provisions of this Agreement in respect thereof. 8.5 Prohibited Marks. On and after the Closing Date, the Shareholders shall not, and shall not assist others to, in any way adopt, use, seek to use, apply to register or register the name, service mark or trademark "Landis" whether alone or in combination with other words or designs, or any combinations, derivations, translations or adaptations thereof (the "PROHIBITED MARKS") on or in connection with any product, service, corporate name, trade name, or domain name, or otherwise as a trademark or service mark, in any business (or products or services thereof) which is the same as, similar to or competitive with the Business as currently conducted or as proposed to be conducted or the business of Buyer as currently conducted or as proposed to be conducted, or otherwise infringe the rights of Buyer and its Affiliates in the Prohibited Marks. On and after the Closing Date, the Shareholders further shall not challenge, and shall not assist any other party in challenging, by cancellation, opposition or otherwise, the validity of the Prohibited Marks or any Company Intellectual Property which are trademarks or service marks, or any current or future applications for registration or registrations thereof or Buyer's, the Surviving Corporation's or any of their respective Affiliates' ownership thereof or title thereto. -55- 8.6 Appointment of Shareholder Representative. (a) Each of the Shareholders hereby irrevocably appoints Gregory J. Landis as its true and lawful attorney(s)-in-fact, to act as its representatives (the "SHAREHOLDER REPRESENTATIVE") under this Agreement and, as such, to act, as such Shareholder's agent (with full power of substitution), to take such action on such Shareholder's behalf with respect to all matters relating to this Agreement and the Shareholder Ancillary Agreements, including without limitation, to make all determinations, agreements and settlements relating to Closing Working Capital, to initiate, negotiate, settle, file suit with respect to and compromise indemnification claims made pursuant to Article XI and the terms of the Escrow Agreement, to sign receipts, consents and other documents to effect any of the transactions contemplated by this Agreement or the Shareholder Ancillary Agreements and to take all actions necessary or appropriate in connection with the foregoing. All such determinations, agreements, settlements and compromises made by the Shareholder Representative shall be binding on all of the Shareholders. Mr. Landis accepts his appointment as initial Shareholder Representative and the authorization set forth above. (b) Buyer and the Escrow Agent shall be entitled to conclusively rely on the instructions, decisions and acts of the Shareholder Representative required, permitted or contemplated to be taken by the Shareholder Representative hereunder or under the Escrow Agreement, and the Escrow Agent and Buyer are hereby relieved from any liability to any Person for any acts done by them in accordance with any instructions, decisions or acts of the Shareholder Representative. Buyer and the Escrow Agent shall be entitled to treat as genuine, and as the document it purports to be, any letter, paper or other document furnished to it by or on behalf of the Shareholder Representative, and reasonably believed by Buyer or the Escrow Agent to be genuine and to have been signed and presented by the proper party or parties. (c) The Shareholder Representative shall be entitled to rely, and shall be fully protected in relying, upon any statements furnished to it by Buyer or any Shareholder, or any other evidence deemed by the Shareholder Representative to be reliable, and the Shareholder Representative shall be entitled to act on the advice of counsel selected by it. 8.7 Severance Costs. The Company and the Shareholders hereby agree that (a) prior to the Closing, the Company shall pay all severance costs relating to Employees who are terminated or resign prior to the Closing (to the extent that such severance costs are not included in Final Closing Working Capital) and (b) the Shareholders shall be responsible and shall indemnify and hold harmless Buyer and the Surviving Corporation for all severance costs incurred by Buyer or the Surviving Corporation from and after the Closing relating to Employees who are given notice of termination prior to the Closing or who give notice of resignation prior to the Closing (to the extent that such severance costs are not included in Final Closing Working Capital). -56- ARTICLE IX CONDITIONS TO THE OBLIGATIONS OF BUYER AND SUB The obligations of Buyer and Sub hereunder shall be subject to the fulfillment at or prior to the Closing of the following conditions, any or all of which may be waived in whole or in part by Buyer: 9.1 No Misrepresentation or Breach of Covenants and Warranties. There shall have been no breach by the Company, any of the Shareholders or any Real Estate Sellers in any material respect in the performance of any of their respective covenants and agreements herein; each of the representations and warranties of the Company, the Shareholders and any Real Estate Sellers contained or referred to herein shall be true and correct in all material respects (if not qualified by materiality or reference to a Material Adverse Effect) and in all respects (if qualified by materiality or by reference to a Material Adverse Effect) on the Closing Date as though made on the Closing Date (in each case without giving effect to any Disclosure Schedule Update), except for changes therein specifically permitted by this Agreement or resulting from any transaction expressly consented to in writing by Buyer and Sub and there shall have been delivered to Buyer and Sub a certificate or certificates to such effect, dated the Closing Date, signed on behalf of the Company by the President or any Vice President of the Company and the Shareholder Representative. 9.2 No Restraint of Litigation. No temporary restraining order, preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or Governmental Body preventing the consummation of the transactions contemplated by this Agreement shall be in effect, nor shall any proceeding brought by an administrative agency or commission or other Governmental Body seeking any of the foregoing be pending; nor shall there be any action taken, or Requirements of Laws or orders enacted, entered, enforced or deemed applicable to the transactions contemplated by this Agreement, which prevents or prohibits the consummation of the transactions contemplated by this Agreement. In addition, the waiting period under the Antitrust Improvements Act shall have expired or been terminated. 9.3 Necessary Consents. The parties shall have received all approvals and actions of or by all Governmental Bodies which are necessary to consummate the transactions contemplated hereby, which are either specified in Schedule 5.3 or 5.13 or otherwise required to be obtained prior to the Closing by applicable Requirements of Law or which are necessary to prevent a Material Adverse Effect. 9.4 Purchase of Transferred Real Properties. The sale of each Transferred Real Properties shall been consummated in accordance with the terms of each Real Estate Purchase Agreement. -57- 9.5 Documents. Buyer and Sub shall have received all of the agreements, documents and items specified in Section 3.4. 9.6 Funding. Buyer shall have received the proceeds of the Financing. 9.7 Non-Competition Agreements. The Company shall have entered into a Non- Competition Agreement with each of the persons listed on Schedule 9.7. 9.8 Related Party Agreements. Except as otherwise expressly contemplated by this Agreement, the Company shall have terminated, without further liability to the Company, all Contracts with any Shareholder, Affiliate of the Company or Affiliate of any Shareholder. ARTICLE X CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND SHAREHOLDERS The obligations of the Company and the Shareholders under this Agreement shall be subject to the fulfillment, at or prior to the Closing, of the following conditions, any or all of which may be waived in whole or in part by the Company and the Shareholder Representative: 10.1 No Misrepresentation or Breach of Covenants and Warranties. There shall have been no material breach by Buyer or Sub in the performance of any of their covenants and agreements herein; each of the representations and warranties of Buyer and Sub contained or referred to in this Agreement shall be true and correct in all material respects on the Closing Date as though made on the Closing Date, except for changes therein specifically permitted by this Agreement or resulting from any transaction expressly consented to in writing by the Company or the Shareholders; and there shall have been delivered to the Company or Shareholders a certificate or certificates to such effect, dated the Closing Date and signed by Buyer. 10.2 No Restraint or Litigation. No temporary restraining order, preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or Government Body preventing the consummation of the transactions contemplated by this Agreement shall be in effect, nor shall any proceeding brought by an administrative agency or commission or other Governmental Body seeking any of the foregoing be pending; nor shall there be any action taken, or Requirements of Laws or orders enacted, entered, enforced or deemed applicable to the transactions contemplated by this Agreement, which prevents or prohibits the consummation of the transactions contemplated by this Agreement. In addition, the waiting period under the Antitrust Improvements Act shall have expired or been terminated. 10.3 Purchase of Transferred Real Properties. The sale of each of the Transferred Real Properties shall been consummated in accordance with the terms of the Real Estate Purchase Agreements. -58- 10.4 Documents. The Shareholders shall have received all of the agreements, documents and items specified in Section 3.3. ARTICLE XI INDEMNIFICATION 11.1 Indemnification for Company Matters. (a) Except as otherwise provided by this Article XI, and subject to the limitations set forth herein, from and after the Closing Date, the Shareholders, jointly and severally, shall indemnify and hold harmless Buyer, the Surviving Corporation, their Affiliates, directors, officers, employees and agents (the "BUYER INDEMNITEES") from and against any and all Losses and Expenses incurred by such Buyer Indemnitees in connection with or arising from: (i) Any breach by the Company of any of its covenants in this Agreement or in any Company Ancillary Agreement, or any failure of the Company to perform any of its obligations in this Agreement or in any Company Ancillary Agreement; (ii) Any breach of any warranty or the inaccuracy of any representation of the Company contained or referred to in this Agreement, any Company Ancillary Agreement or any certificate or schedule delivered by or on behalf of the Company pursuant hereto or thereto; (iii) Any agreement whereby the Company has agreed to indemnify any trustees of (A) any trust that is a Shareholder or (B) any trust the beneficiaries of which are (x) Shareholders or (y) relatives of (1) any Shareholder or (2) any beneficiary of any trust that is a Shareholder; (iv) Any breach by any Real Estate Seller of its covenants in any Real Estate Purchase Agreement, or any failure of any Real Estate Seller, to perform any of its obligations in this Agreement or any Real Estate Purchase Agreement; (v) Any breach of any warranty or the inaccuracy of any representation of any Real Estate Seller contained or referred to in any Real Estate Purchase Agreement or any certificate or schedule delivered by or on behalf of the Real Estate Seller pursuant thereto; and (vi) The encroachment of the railroad spur track at the Solvay Facility Property onto any adjacent real property. Each Shareholder's liability in respect of any claim for indemnification under this Section 11.1(a) shall equal the product of (x) its respective Ownership Percentage and (y) the aggregate -59- amount of Losses and Expenses incurred in respect of such claim for which the Buyer Indemnitees are entitled to indemnification under this Section 11.1(a); provided, however, each Shareholder's liability under this Section 11.1 (and together with any of such Shareholder's liability under Sections 8.2 and 11.2) shall not exceed such Shareholder's Ownership Percentage of the Aggregate Purchase Price. (b) Notwithstanding anything contained in paragraph (a) of this Section 11.1, the Buyer Indemnitees shall have no right to be indemnified with respect to any item disclosed in any Disclosure Schedule Update or any breach of a covenant to be performed by the Company or any Real Estate Seller prior to the Closing which is waived in writing by Buyer as provided in Article IX of this Agreement on or prior to the Closing; provided, further, that the Buyer Indemnitees shall only be entitled to indemnification under clauses (ii) and (v) of paragraph (a) of this Section 11.1 with respect to Losses and Expenses incurred by the Buyer Indemnitees, if the aggregate amount of such Losses and Expenses exceeds $2,600,000 in the aggregate (the "DEDUCTIBLE"), in which case the Buyer Indemnitees shall be entitled to be indemnified for only the amount in excess thereof; provided, further, that the aggregate maximum amount for which the Buyer Indemnitees shall be entitled to indemnification pursuant to clauses (ii) and (v) of paragraph (a) of this Section 11.1 shall not exceed $19,500,000 in the aggregate. Each Shareholder's liability in respect of any claim for indemnification under this Section 11.1 shall equal the product of (x) its respective Ownership Percentage and (y) the aggregate amount of Losses and Expenses incurred in respect of such claim for which the Buyer Indemnitees are entitled to indemnification under this Section 11.1. In addition, the Buyer Indemnitees shall have no right to be indemnified pursuant to clauses (ii) and (v) of paragraph (a) of this Section 11.1 with respect to De Minimis Losses unless and until the aggregate amount of all De Minimis Losses exceeds $500,000, in which case the aggregate amount of all De Minimis Losses shall count towards the Deductible. For purposes of this Section 11.1, the breach of any warranty or the inaccuracy of any representation of the Company, any Shareholder or any Real Estate Seller contained in this Agreement or any Real Estate Purchase Agreement shall be determined without regard to any "Material Adverse Effect" or any other "materiality" qualifications set forth in such representation or warranty. Notwithstanding the foregoing, the limitations set forth in this paragraph (b) shall not apply to any indemnification with respect to breaches of any warranty or inaccuracies in any representation set forth in (i) Section 5.18(e)(ii), 5.18(h) or 5.22 of this Agreement or (ii) the Funded Obligations Schedule. (c) The indemnification provided for in clauses (a)(ii) and (v) of this Section 11.1 shall terminate on the 19 month anniversary of the Closing Date (and no claims shall be made by the Buyer Indemnitees under clauses (a)(ii) or (v) of this Section 11.1 thereafter); except that the indemnification shall continue as to: (i) (A) the representations and warranties set forth in Sections 5.1, 5.3, 5.4 and 5.18(h) of this Agreement, which shall survive indefinitely, (B) the representations and warranties set forth in Section 5.24, which shall survive until the third -60- anniversary of the Closing Date, and (C) the representations and warranties set forth in Section 5.22, which shall survive for 60 days following the expiration of the applicable statute of limitations; and (ii) any claim for indemnification of which any Buyer Indemnitee has notified the Shareholder Representative in accordance with the requirements of Section 11.5 on or prior to the date such indemnification would otherwise terminate in accordance with this Section 11.1 shall continue until the amount of the indemnification, if any, shall have been determined pursuant to this Article XI and Buyer Indemnitee shall have been reimbursed for the full amount of all Losses and Expenses relating thereto in accordance with, and subject to, this Article XI. (d) In the event that the Surviving Corporation actually recovers any amounts under insurance policies with third parties (i.e. actual insurance policies and not self insurance or retention policies), including title insurance, for any Loss or Expense for which Buyer is claiming or has received, indemnification pursuant to this Article XI, the amount of such insurance recovery (subject to offset for any increase in premiums or other costs attributable to such Losses or other Expenses incurred in collection of such amounts) shall (i) reduce the amount of Loss and Expense the Buyer Indemnitees are entitled to recover hereunder if the insurance proceeds are received prior to the Buyer Indemnitees being reimbursed for such Loss and Expense hereunder, and (ii) be paid to the Shareholder Representative for the Shareholders' benefit if the insurance proceeds are received after the Buyer Indemnitees have been reimbursed for such Loss and Expense. Buyer and the Surviving Corporation shall use their commercially reasonable efforts to make the appropriate claims and collect any such proceeds due under the applicable insurance policies. (e) As set forth in the Escrow Agreement, on the First Escrow Release Date the First Escrow Release Amount shall be released and the balance remaining in said Escrow Account, less the Reserved Amount, shall be released on the Second Escrow Release Date. 11.2 Indemnification for Shareholder Matters. Each Shareholder severally, and not jointly, agrees to indemnify and hold harmless the Buyer Indemnitees from and against any and all Losses and Expenses incurred by such Buyer Indemnitees in connection with or arising from: (a) Any breach by such Shareholder or Shareholder's Affiliates of any of the covenants of such Shareholder in this Agreement or in any Shareholder Ancillary Agreement to which such Shareholder or Shareholder's Affiliate is a party, or any failure of such Shareholder or Shareholder's Affiliates to perform any of his, her or its obligations in this Agreement or in any Shareholder Ancillary Agreement; and (b) Any breach of any warranty or the inaccuracy of any representation of such Shareholder or Shareholder's Affiliate contained in Article IV of this Agreement, any certificate or schedule delivered by or on behalf of such Shareholder pursuant hereto, any Real -61- Estate Purchase Agreement, or any other Shareholder Ancillary Agreement to which such Shareholder or Shareholder's Affiliate is a party; provided; however; each Shareholder's liability under this Section 11.2 (and together with any of Shareholder's liability under Sections 8.2 and 11.1) shall not exceed such Shareholder's Ownership Percentage of the Aggregate Purchase Price. The indemnification provided for in this Section 11.2 shall survive indefinitely. Any Losses or Expenses for which the Buyer Indemnitees are entitled to indemnification under this Section 11.2 shall be either credited against such Shareholder's portion of the Indemnification Holdback Amount then held in the Escrow Account or paid directly from such Shareholder. 11.3 Indemnification for Solvay Environmental Matters. (a) Subject to the limitations set forth in herein, from and after the Closing Date, the Shareholders, jointly and severally, shall indemnify and hold harmless the Buyer Indemnitees from and against any and all Losses and Expenses incurred by such Buyer Indemnitees in connection with or arising from any releases of, or conditions of contamination by, Hazardous Substances at or affecting the Solvay Facility Property, except for any such Losses or Expenses arising from any such releases or contamination first caused or occurring as a result of the operations of the Company after March 16, 1993; (b) The Buyer Indemnitees shall only be entitled to indemnification under paragraph (a) of this Section 11.3 with respect to Losses and Expenses incurred by the Buyer Indemnitees, if the aggregate amount of such Losses and Expenses exceeds $300,000 in the aggregate, in which case the Buyer Indemnitees shall be entitled to be indemnified for only the amount in excess thereof; provided, further, that the maximum amount for which the Buyer Indemnitees shall be entitled to indemnification to pursuant to paragraph (a) of this Section 11.3 shall be, at any time, the balance remaining in the Solvay Environmental Indemnification Holdback Account. (c) The indemnification provided for in this Section 11.3 shall terminate on the ten (10) year anniversary of the Closing Date (and no claims shall be made by the Buyer Indemnitees under this Section 11.3 thereafter); except that the indemnification shall continue as to any claim for indemnification of which any Buyer Indemnitee has notified the Shareholder Representative in accordance with the requirements of Section 11.5 on or prior to the date such indemnification would otherwise terminate in accordance with this Section 11.3, as to which the obligation of the Shareholders shall continue until the amount of the indemnification, if any, shall have been determined pursuant to this Article XI and the Buyer Indemnitees shall have been reimbursed for the full amount of all Losses and Expenses relating thereto in accordance with, and subject to, this Article XI. (d) As set forth in the Escrow Agreement, on the First Solvay Environmental Escrow Release Date the First Solvay Environmental Escrow Release Amount shall be released -62- and the balance remaining in said Escrow Account, less the Reserved Solvay Amount, shall be released on the Second Solvay Environmental Escrow Release Date. 11.4 Indemnification by Buyer. Buyer agrees to indemnify and hold harmless each of the Shareholders, the Real Estate Sellers, and their respective Affiliates, heirs, personal representatives, assigns and agents (the "SHAREHOLDER INDEMNITEES") from and against any and all Losses and Expenses incurred by such Shareholder Indemnitees in connection with or arising from: (a) Any breach by Buyer, Sub or their respective Affiliates of any of their covenants or agreements in this Agreement or any Buyer Ancillary Agreement or any failure by Buyer, Sub or their respective Affiliates to perform any of their obligations in this Agreement or in any Buyer Ancillary Agreement; and (b) Any breach of any warranty or the inaccuracy of any representation of Buyer, Sub or their respective Affiliates contained or referred to in this Agreement, in any certificate delivered by or on behalf of Buyer or Sub pursuant hereto, or in any Buyer Ancillary Agreement. The indemnification provided for in this Section 11.4 shall terminate on the 19 month anniversary of the Closing Date (and no claims shall be made by the Shareholder Indemnitees under this Section 11.4 thereafter), except that the indemnification by Buyer shall continue as to any Loss or Expense of which Shareholder Indemnitees have notified Buyer in accordance with the requirements of Section 11.5 on or prior to the date such indemnification would otherwise terminate in accordance with this Section 11.4, as to which the obligation of Buyer and Sub shall continue until the liability of Buyer or Sub shall have been determined pursuant to this Article XI, and Buyer and Sub shall have reimbursed all the Shareholder Indemnitees for the full amount of such Loss and Expense in accordance with this Article XI. 11.5 Notice of Claims. (a) Any Buyer Indemnitee or Shareholder Indemnitee (the "INDEMNIFIED PARTY") seeking indemnification shall give the party obligated to provide indemnification the ("INDEMNITOR") to such Indemnified Party a notice (a "CLAIM NOTICE") (provided that, in the case of a claim for which the Shareholders are the Indemnitors, this Claim Notice shall be given to the Shareholder Representative) describing in reasonable detail the facts giving rise to any claim for indemnification and shall include in such Claim Notice (if then known) the amount or the method of computation of the amount of such claim, and a reference to the provision upon which such claim is based; provided, that a Claim Notice in respect of any action at law or suit in equity by or against a third Person (a "THIRD PARTY CLAIM") as to which indemnification will be sought shall be given promptly after the action or suit is commenced; provided further that failure to give such notice shall not relieve the Indemnitor of its obligations under this Agreement except to the extent it shall have been prejudiced by such failure. -63- (b) After the Indemnified Party gives a Claim Notice, the amount of indemnification to which an Indemnified Party shall be entitled under this Article XI shall be determined: (i) by the written agreement between the Indemnified Party and the Indemnitor; or (ii) by a final judgment or decree of any court of competent jurisdiction. The Indemnified Party shall have the burden of proof in establishing the amount of Loss and Expense suffered by it. (c) If a Buyer Indemnitee is entitled to indemnification under Section 11.1 or Section 11.2 and the amount of indemnification to which the Buyer Indemnitee is entitled has been determined as provided for in Section 11.5(b), the Buyer Indemnitee shall first seek reimbursement of such amount from the Indemnification Holdback Amount in accordance with the procedures set forth in the Escrow Agreement, and then, following the Second Escrow Release Date or to the extent that the amount the Buyer Indemnitee is entitled to receive exceeds the Indemnification Holdback Amount, the Buyer Indemnitee may require the Shareholders and/or the Real Estate Sellers to directly pay the Buyer Indemnitee in accordance with Section 11.1 and Section 11.2. If a Buyer Indemnitee is entitled to indemnification under Section 11.2, and the amount of indemnification to which the Buyer Indemnitee is entitled has been determined as provided for in Section 11.5(b), the Buyer Indemnitee may either seek reimbursement of such amount from the Indemnification Holdback Amount then held in the Escrow Account in accordance with the procedures set forth in the Escrow Agreement, or require such Shareholder to directly pay the Buyer Indemnitee such amount promptly after it has been determined. If a Shareholder Indemnitee is entitled to indemnification hereunder, Buyer shall pay to the Shareholder Indemnitee the amount of indemnification to which the Shareholder Indemnitee is entitled promptly after it has been determined as provided for in Section 11.5(b). (d) If a Buyer Indemnitee is entitled to indemnification under Section 11.3, and the amount of indemnification to which the Buyer Indemnitee is entitled has been determined as provided for in Section 11.5(b), the Buyer Indemnitee shall seek reimbursement of such amount from the Solvay Environmental Indemnification Holdback Amount in accordance with the procedures set forth in the Escrow Agreement 11.6 Third Party Claims. The Indemnitor shall have the right to conduct and control, through counsel of its choosing reasonably acceptable to the indemnified party, the defense, compromise or settlement of any Third Party Claim, action or suit against the Indemnified Party as to which indemnification will be sought by any Indemnified Party if the Indemnitor has acknowledged and agreed in writing that the Indemnitor has an obligation to provide indemnification if the claim is adversely determined so long as the Indemnitor (a) gives the Indemnified Party written notice of its intention to assume the defense of such Third Party Claim and (b) assumes the defense of such Third Party Claim, in each case within 30 days after receiving notice of such Third Party Claim. In any such case, the Indemnified Party shall cooperate in connection with such claim and shall furnish at the Indemnitor's cost and expense, such records, information and testimony and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested by the Indemnitor. The Indemnified -64- Party may participate, through counsel chosen by it and at its own expense, in the defense of any such claim, action or suit. Notwithstanding the foregoing, if (a) the Indemnitor shall not have taken any action to defend such Third Party Claim within 30 days after being notified by the Indemnified Party of such Third Party Claim, or (b) the Indemnified Party shall have received the advice of counsel that there is a conflict of interest between the Indemnified Party and the Indemnitor in the conduct of the defense of such Third Party Claim, the Indemnified Party shall be entitled to conduct and control the defense thereof and the reasonable fees and disbursements of such Indemnified Party's counsel shall be at the expense of the Indemnitor. The Indemnitor, if it has assumed the defense of any Third Party Claim as provided in this Section 11.6, shall not consent to a settlement of, or the entry of any judgment arising from, any such Third Party Claim without the Indemnified Party's prior written consent (which consent shall not be unreasonably withheld or delayed) unless such settlement or judgment (a) relates solely to monetary damages for which the Indemnitor shall be responsible, (b) includes as an unconditional term thereof the release of the Indemnified Party from all liability with respect to such Third Party Claim and (c) will not otherwise have a material effect on the Indemnified Party. 11.7 Exclusivity of Indemnification. Indemnification under Sections 11.1, 11.2, and 11.3 of this Agreement shall be the sole post-closing remedy available to Buyer, the Surviving Corporation Company, the Real Estate Sellers and Shareholders or any of their Affiliates in respect of any Losses and Expenses incurred by Buyer, the Shareholders, the Real Estate Sellers or the Surviving Corporation arising out of, resulting from or incurred in connection with any breach of any warranty or the inaccuracy of any representation made by the Company, the Shareholders, the Real Estate Sellers, Buyer or Sub in this Agreement, any Real Estate Purchase Agreement or any certificate or schedule or delivered pursuant hereto; provided, however, that nothing contained in this Agreement or the Real Estate Purchase Agreements shall preclude a party from bringing an action for fraud or willful misconduct. 11.8 Knowledge of Breach. Except as set forth in this Agreement, regardless of whether any party or any of its Affiliates or any of their respective representatives had or should have had knowledge or notice of any facts or circumstances which would result in the breach of, or inaccuracy in, any representation or warranty of the other parties or the failure of any condition for its benefit to be satisfied or the breach of any covenants for its benefit, for purposes of this Agreement, such party shall not be deemed to have waived such breach or inaccuracy or condition. Actual or constructive knowledge, diligence investigations, access to information of the party seeking indemnification hereunder, sophistication, experience, notices and any other actual or deemed sources of information outside the express provisions of this Agreement shall in no way limit the scope of any representation, warranty or condition or heighten any materiality or Material Adverse Effect threshold herein. -65- ARTICLE XII TERMINATION 12.1 Termination. Anything contained in this Agreement to the contrary notwithstanding, this Agreement may be terminated at any time prior to the Closing Date: (a) By the mutual written consent of Buyer, the Shareholder Representative and the Company; (b) By Buyer (i) in the event of any material breach by the Company or any of the Shareholders of any of the Company's or the Shareholders' agreements, representations, or warranties contained herein and the failure of the Company or the Shareholders to cure such breach within ten (10) days after receipt of notice from Buyer requesting such breach to be cured or (ii) within ten (10) days following the receipt of any Disclosure Schedule Update delivered to Buyer by the Company or the Shareholder Representative pursuant to Section 7.6(a); (c) By the Company or the Shareholder Representative in the event of any material breach by Buyer or Sub of any of Buyer's or Sub's agreements, representations, or warranties contained herein and the failure of Buyer or Sub to cure such breach within ten (10) days after receipt of notice from the Company requesting such breach to be cured; (d) By Buyer, on the one hand, or the Company or the Shareholder Representative, on the other, if the Closing shall not have occurred on or prior to the Drop Dead Date (or such later date as may be mutually agreed to by Buyer and the Company); provided however, the right to terminate this Agreement under this Section 12.1(d) shall not be available to (a) the Company or any of the Shareholders if the failure by the Company or any Shareholder to fulfill any obligation under this Agreement has been the cause of or resulted in, the failure of the Closing to occur on or prior to such date and (b) Buyer if the failure by Buyer to fulfill any obligation under this Agreement has been the cause of or resulted in, the failure of the Closing to occur on or prior to such date; provided, further, if this Agreement is terminated pursuant to this Section 12.1(d), and at the time of such termination, all conditions to the obligations of Buyer under this Agreement other than the conditions set forth in Section 9.6 were satisfied, Buyer shall pay the Company the amount of $2,000,000 (the "TERMINATION FEE") within two Business Days of the notice of termination; or (e) By Buyer, on the one hand, or the Company or the Shareholder Representative, on the other hand, if any Governmental Body shall have issued an order, decree or ruling or taken any other action (which order, decree, ruling or other action the parties hereto shall use all commercially reasonable efforts to lift) which permanently restrains, enjoins or otherwise prohibits the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and non-appealable. -66- 12.2 Notice of Termination. Any party desiring to terminate this Agreement pursuant to Section 12.1 shall give notice of such termination to the other party to this Agreement. 12.3 Effect of Termination. In the event that this Agreement shall be terminated pursuant to this Article XII all further obligations of the parties under this Agreement (other than Sections 12.1(d), 13.2, 13.9, 13.13 and 13.14) shall be terminated without further liability of any party to the other; provided, however, that nothing herein shall relieve any party from liability for its intentional misrepresentation or intentional breach of its obligations hereunder; provided further, that Buyer and Sub shall have no further obligation under this Agreement or liability whatsoever to the Company, the Shareholder Representative, the Shareholders or the Real Estate Sellers if this Agreement is terminated by the Company or the Shareholder Representative pursuant to Section 12.1(d) and Buyer has paid the Termination Fee to the Company. ARTICLE XIII GENERAL PROVISIONS 13.1 Survival of Obligations. All representations, and warranties, contained in this Agreement shall survive for such time as the indemnity for the breach thereof shall survive as set forth in Sections 11.1, 11.2 and 11.3. All covenants and obligations contained in this Agreement to be fully performed or complied with at or prior to Closing shall not survive Closing. All covenants and obligations contained in this Agreement to be performed or complied with after Closing (and any right to indemnification for breach thereof) shall survive for the periods specified therein, or if no such period is specified, indefinitely 13.2 Confidential Nature of Information. The provisions of the Confidentiality Agreement shall remain binding and in full force and effect. The information contained herein, in the Company Disclosure Schedules or delivered to Buyer or its authorized Representatives pursuant hereto shall be deemed to be Evaluation Material (as defined and subject to the exceptions contained in the Confidentiality Agreement) until the Closing. Notwithstanding anything in this Agreement, the Confidentiality Agreement or in each Real Estate Purchase Agreement to the contrary, beginning on the earliest of (i) the date of the public announcement of discussions relating to the transaction contemplated by this Agreement, (ii) the date of public announcement of such transaction, or (iii) the date of the execution of this Agreement, the parties (and each Representative of the parties) may disclose to any and all persons, without limitation of any kind, the purported or claimed Federal income tax treatment of the transaction contemplated by, or undertaken pursuant to, this Agreement, any facts that may be relevant to understanding such tax treatment, and all materials of any kind (including opinions or other tax analyses) relating to such tax treatment or facts. 13.3 No Public Announcement. From the date hereof through the day after the Closing Date, neither Buyer, Sub or the Company nor any Shareholder shall, without the approval of the other (which approval shall not be unreasonably withheld), make any press release or other -67- public announcement concerning the transactions contemplated by this Agreement, except as and to the extent that any such party shall be so obligated by Requirements of Law, in which case the other party shall be advised and the parties shall use their best efforts (subject to the Requirements of Law) to cause a mutually agreeable release or announcement to be issued. 13.4 Notices. All notices or other communications required or permitted hereunder shall be in writing and shall be deemed given, delivered and received (a) when delivered, if delivered personally by a commercial messenger delivery service with verification of delivery, (b) four (4) days after mailing, when sent by registered or certified mail, return receipt requested and postage prepaid, (c) one business day after delivery to a private courier service, when delivered to a private courier service providing documented overnight service, (d) on the date of delivery if delivered by facsimile or electronic mail and confirmed before 5:00 p.m. (local time) on any business day, or (e) on the next business day if delivered by facsimile and electronic mail and confirmed either after 5:00 p.m. (local time) or on a non-business day, in each case addressed as follows: If to the Company, the Shareholders or the Real Estate Sellers (prior to the Closing Date): Landis Plastics, Inc. 10800 South Central Avenue Chicago Ridge, IL 60415 Attn: Gregory J. Landis PH: (773) 239-2390 FAX: (708) 422-7513 with a copy to: Shefsky & Froelich Ltd. 444 N. Michigan Avenue Suite 2500 Chicago, IL 60611 Attn: Jeffry A. Melnick PH: (312) 836-4010 FAX: (312) 527-5921 Email: jmelnick@shefskylaw.com If to the Shareholders or the Real Estate Sellers (after the Closing): Gregory J. Landis, as Shareholder Representative, c/o Landis Plastics, Inc. 10800 South Central Avenue Chicago Ridge, IL 60415 -68- PH: (773) 239-2390 FAX: (708) 422-7513 If to Buyer, Sub, and after the Closing date, the Surviving Corporation: Berry Plastics Corporation 101 Oakley Street Evansville, IN 47710 Attn: Ira G. Boots PH: (812) 424-2904 (ext. 11301) FAX: (812) 421-9604 Email: IraBoots@BerryPlastics.com with a copy to: Fried, Frank, Harris, Shriver & Jacobson One New York Plaza New York, NY 10004 Attn: Warren S. de Wied, Esq. PH: (212) 859-8296 FAX: (212) 859-4000 Email: dewiewa@ffhsj.com or to such other address or addresses as may hereafter be specified by notice given by any of the above to the others. 13.5 Successors and Assigns. (a) The rights of any party under this Agreement shall not be assignable by such party hereto prior to the Closing without the written consent of the other parties, except that the rights of Buyer hereunder may be assigned prior to the Closing, without the consent of the Company or Shareholders, to any entity controlled by Buyer, provided Buyer shall remain primarily liable hereunder. (b) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors and permitted assigns. Nothing in this Agreement, expressed or implied, is intended or shall be construed to confer upon any Person other than the parties hereto and their respective successors any right, remedy or claim under or by reason of this Agreement. 13.6 Entire Agreement; Amendments. This Agreement and the Exhibits and Schedules referred to herein, the documents delivered pursuant hereto and the Confidentiality Agreement -69- contain the entire understanding of the parties hereto with regard to the subject matter contained herein or therein, and supersede all prior agreements, understandings or letters of intent between or among any of the parties hereto. This Agreement shall not be amended, modified or supplemented except by a written instrument signed by an authorized representative of each of the parties hereto. 13.7 Interpretation. Article titles and headings to sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. The Schedules and Exhibits referred to herein shall be construed with and as an integral part of this Agreement to the same extent as if they were set forth verbatim herein. 13.8 Waivers. Any term or provision of this Agreement may be waived, or the time for its performance may be extended, by the party or parties entitled to the benefit thereof. Any such waiver shall be validly and sufficiently authorized for the purposes of this Agreement if, as to any party, it is authorized in writing by an authorized representative of such party. The failure of any party hereto to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of any party thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach. 13.9 Expenses. The Company, Buyer and Sub shall pay their respective legal and other expenses incurred by it, in connection with the negotiation and preparation of this Agreement and the transactions contemplated herein, it being understood that the costs and expenses of the Company incurred on behalf of the Shareholders in connection with the transactions contemplated hereby shall be borne by the Shareholders after the Closing to the extent not included in Transaction Costs. The expenses of the Shareholder Representative shall be paid by the Shareholders as provided in the Shareholders Representative Agreement. 13.10 Partial Invalidity. Whenever possible, each provision hereof shall be interpreted in such manner as to be effective and valid under applicable law, but in case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such provision shall be ineffective to the extent, but only to the extent, of such invalidity, illegality or unenforceability without invalidating the remainder of such invalid, illegal or unenforceable provision or provisions or any other provisions hereof, unless such a construction would be unreasonable. 13.11 Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be considered an original instrument, but all of which shall be considered one and the same agreement, and shall become binding when one or more -70- counterparts have been signed by each of the parties hereto and delivered to each of the Shareholders and Buyer. 13.12 Specific Performance. Notwithstanding anything in this Agreement to the contrary, the Shareholders represent and warrant that, because of the unique nature of the business operations conducted by the Company, the failure of them to carry out their obligations to perform this Agreement and to consummate the Merger on the Closing Date would cause Buyer and Sub to incur damages for which there is no adequate remedy at law; the parties hereto accordingly agree that, in addition to any other remedies available to Buyer and Sub, any such failure by the Shareholders to perform this Agreement shall be subject to the remedy of specific performance. 13.13 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws (as opposed to the conflicts of law provisions) of the State of Illinois, provided that the Merger shall be governed by the IBCA and the DGCL. 13.14 Submission to Jurisdiction. The Company, each of the Shareholders, Buyer and Sub hereby irrevocably submit in any suit, action or proceeding arising out of or related to this Agreement, the Buyer Ancillary Agreements, the Company Ancillary Agreements, the Shareholder Ancillary Agreements or all or any of the transactions contemplated hereby or thereby to the exclusive jurisdiction of either (a) the United States District Court for the Northern District of Illinois or (b) any court of the State of Illinois located in Cook County, Illinois, and waive any and all objections to jurisdiction that they may have under the laws of the State of Illinois or the United States. -71- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written. BERRY PLASTICS CORPORATION By: /s/ Ira G. Boots ---------------------------- Name: Ira G. Boots ---------------------------- Title: President & CEO ---------------------------- BERRY PLASTICS ACQUISITION CORPORATION IV By: /s/ Ira G. Boots ---------------------------- Name: Ira G. Boots ---------------------------- Title: President & CEO ---------------------------- LANDIS PLASTICS, INC. By: /s/ H. Richard Landis ---------------------------- Name: H. Richard Landis ---------------------------- Title: CEO ---------------------------- SHAREHOLDERS OF LANDIS PLASTICS /s/ H. Richard Landis /s/ Bonita R. Landis - ------------------------------------- ---------------------------------------- H. Richard Landis Bonita R. Landis HENRY R. LANDIS II GRANTOR RETAINED HENRY R. LANDIS II GRANTOR RETAINED ANNUITY TRUST #1, DATED ANNUITY TRUST #2, DATED DECEMBER 19, 1997 DECEMBER 19, 1997 By: /s/ H. Richard Landis By: /s/ H. Richard Landis ---------------------------------- ------------------------------------- H. Richard Landis, a/k/a Henry R. H. Richard Landis, a/k/a Henry R. Landis II as Trustee Landis II as Trustee HENRY R. LANDIS II GRANTOR RETAINED ANNUITY TRUST #3, DATED DECEMBER 19, 1997 By: /s/ H. Richard Landis ---------------------------------- H. Richard Landis, a/k/a Henry R. Landis II as Trustee GREGORY J. LANDIS IRREVOCABLE TRUST, DAVID A. LANDIS IRREVOCABLE TRUST, DATED DECEMBER 23, 1988 DATED DECEMBER 23, 1988 By: /s/ Gregory J. Landis By: /s/ Gregory J. Landis ---------------------------------- ------------------------------------- Gregory J. Landis, as Co-Trustee Gregory J. Landis, as Co-Trustee By: /s/ David A. Landis By: /s/ David A. Landis ---------------------------------- ------------------------------------- David A. Landis, as Co-Trustee David A. Landis, as Co-Trustee JAMES M. LANDIS IRREVOCABLE TRUST, RUSSEL J. LANDIS IRREVOCABLE TRUST, DATED DECEMBER 23, 1988 DATED DECEMBER 23, 1988 By: /s/ James M. Landis By: /s/ Russel J. Landis ---------------------------------- ------------------------------------- James M. Landis, as Co-Trustee Russel J. Landis, as Co-Trustee By:/s/ David A. Landis By: /s/ H. Richard Landis ---------------------------------- ------------------------------------- David A. Landis, as Co-Trustee H. Richard Landis, as Co-Trustee EDWARD D. LANDIS IRREVOCABLE TRUST, YVONNE T. LANDIS IRREVOCABLE TRUST, DATED DECEMBER 23, 1988 DATED DECEMBER 23, 1988 By: /s/ Edward D. Landis By: /s/ Yvonne T. Martello ---------------------------------- ------------------------------------- Edward D. Landis, as Co-Trustee Yvonne T. Martello f/k/a Yvonne T. Landis, as Co-Trustee By: /s/ H. Richard Landis By: /s/ Gregory J. Landis ---------------------------------- ------------------------------------- H. Richard Landis, as Co-Trustee Gregory J. Landis, as Co-Trustee JAMES M. LANDIS TRUST 2000, DATED YVONNE T. MARTELLO TRUST 2000, NOVEMBER 6, 2000 DATED September 25, 2000 By: /s/ Russel J. Landis By: /s/ David A. Landis ---------------------------------- ------------------------------------- Russel J. Landis as Co-Trustee David A. Landis as Co-Trustee By: /s/ James M. Landis By: /s/ Yvonne T. Martello ---------------------------------- ------------------------------------- James M. Landis, as Co-Trustee Yvonne T. Martello as Co-Trustee DAVID A. LANDIS TRUST 2000, DATED GREGORY J. LANDIS TRUST 2000, SEPTEMBER 25, 2000 DATED JUNE 9, 2000 By:/s/ Gregory J. Landis By:/s/ David A. Landis ---------------------------------- ------------------------------------- Gregory J. Landis as Co-Trustee David A. Landis as Co-Trustee By:/s/ David A. Landis By:/s/ Gregory J. Landis ---------------------------------- ------------------------------------- David A. Landis, as Co-Trustee Gregory J. Landis, as Co-Trustee RUSSEL J. LANDIS TRUST 2000, DATED September 25, 2000 By:/s/ James M. Landis ---------------------------------- James M. Landis as Co-Trustee By:/s/ Russel J. Landis ---------------------------------- Russel J. Landis, as Co-Trustee DANIEL J. LANDIS IRREVOCABLE TRUST, GREGORY P. LANDIS IRREVOCABLE TRUST, DATED APRIL 1, 2003 DATED APRIL 1, 2003 By:/s/ Gregory J. Landis By:/s/ Gregory J. Landis ---------------------------------- ------------------------------------- Gregory J. Landis, as Co-Trustee Gregory J. Landis, as Co-Trustee By:/s/ Denise E. Landis By:/s/ Denise E. Landis ---------------------------------- ------------------------------------- Denise E. Landis, as Co-Trustee Denise E. Landis, as Co-Trustee KATHRYN T. LANDIS IRREVOCABLE TRUST, JULIE A. LANDIS IRREVOCABLE TRUST, DATED, MAY 15, 2003 DATED MAY 15, 2003 By:/s/ David A. Landis By:/s/ David A. Landis ---------------------------------- ------------------------------------- David A. Landis, as Co-Trustee David A. Landis, as Co-Trustee By:/s/ Marianne Landis By:/s/ Marianne Landis ---------------------------------- ------------------------------------- Marianne Landis, Co-Trustee Marianne Landis, as Co-Trustee STEVEN R. LANDIS IRREVOCABLE TRUST, DAVID T. LANDIS IRREVOCABLE TRUST, DATED DATED MAY 15, 2003 MAY 15, 2003 By:/s/ David A. Landis By:/s/ David A. Landis ---------------------------------- ------------------------------------- David A. Landis, as Co-Trustee David A. Landis, as Co-Trustee By:/s/ Marianne Landis By:/s/ Marianne Landis ---------------------------------- ------------------------------------- Marianne Landis, Co-Trustee Marianne Landis, as Co-Trustee MANAGEMENT SHAREHOLDERS By:/s/ William VanMeter By:/s/ James Torgerson ---------------------------------- ------------------------------------- William VanMeter, Individually James Torgerson, Individually By:/s/ Stephen Pace By:/s/ Ross Neininger ---------------------------------- ------------------------------------- Stephen Pace, Individually Ross Neininger, Individually By:/s/ Bruno Rudolf By:/s/ Zigmond Kossakowski ---------------------------------- ------------------------------------- Bruno Rudolf, Individually Zigmond Kossakowski, Individually By:/s/ Bimal Kalvani By:/s/ Mike Clark ---------------------------------- ------------------------------------- Bimal Kalvani, Individually Mike Clark, Individually By:/s/ Steve Ellis By:/s/ Greg Clinton ---------------------------------- ------------------------------------- Steve Ellis, Individually Greg Clinton, Individually By:/s/ Doug Bridwell By:/s/ John Sabey ---------------------------------- ------------------------------------- Doug Bridwell, Individually John Sabey, Individually LANDIS FAMILY NEW YORK PARTNERSHIP, an Illinois general partnership GREGORY J. LANDIS and DAVID A. GREGORY J. LANDIS and DAVID A. LANDIS, Co-Trustees of the Gregory J. Landis, LANDIS, Co-Trustees of the Henry J. Landis II, share of the LANDIS FAMILY TRUST NO. 2 share of the LANDIS FAMILY TRUST NO. 2 By:/s/ Gregory J. Landis By:/s/ Gregory J. Landis ------------------------------------------- ------------------------------------------- GREGORY J. LANDIS, Co-Trustee GREGORY J. LANDIS, Co-Trustee By:/s/ David A. Landis By:/s/ David A. Landis ------------------------------------------- ------------------------------------------- DAVID A. LANDIS, Co-Trustee DAVID A. LANDIS, Co-Trustee GREGORY J. LANDIS and DAVID A. LANDIS, GREGORY J. LANDIS and DAVID A. LANDIS, Co-Trustees of the David A. Landis share Co-Trustees of the James M. Landis share of the of the LANDIS FAMILY TRUST NO. 2 LANDIS FAMILY TRUST NO. 2 By:/s/ Gregory J. Landis By:/s/ Gregory J. Landis ------------------------------------------- ------------------------------------------- GREGORY J. LANDIS, Co-Trustee GREGORY J. LANDIS, Co-Trustee By:/s/ David A. Landis By:/s/ David A. Landis ------------------------------------------- ------------------------------------------- DAVID A. LANDIS, Co-Trustee DAVID A. LANDIS, Co-Trustee GREGORY J. LANDIS and DAVID A. LANDIS, GREGORY J. LANDIS and DAVID A. LANDIS, Co-Trustees of the Yvonne T. Landis share Co-Trustees of the Russell J. Landis share of the of the LANDIS FAMILY TRUST NO. 2 LANDIS FAMILY TRUST NO. 2 By:/s/ Gregory J. Landis By:/s/ Gregory J. Landis ------------------------------------------- ------------------------------------------- GREGORY J. LANDIS, Co-Trustee GREGORY J. LANDIS, Co-Trustee By:/s/ David A. Landis By:/s/ David A. Landis ------------------------------------------- ------------------------------------------- DAVID A. LANDIS, Co-Trustee DAVID A. LANDIS, Co-Trustee
LANDIS FAMILY ALSIP PARTNERSHIP, an Illinois general partnership GREGORY J. LANDIS and DAVID A. GREGORY J. LANDIS and DAVID A. LANDIS, Co-Trustees of the David A. Landis LANDIS, Co-Trustees of the James M. Landis share of the LANDIS FAMILY TRUST share of the LANDIS FAMILY TRUST By:/s/ Gregory J. Landis By:/s/ Gregory J. Landis ------------------------------------------- ------------------------------------------- GREGORY J. LANDIS, Co-Trustee GREGORY J. LANDIS, Co-Trustee By:/s/ David A. Landis By:/s/ David A. Landis ------------------------------------------- ------------------------------------------- DAVID A. LANDIS, Co-Trustee DAVID A. LANDIS, Co-Trustee GREGORY J. LANDIS and DAVID A. GREGORY J. LANDIS and DAVID A. LANDIS, Co-Trustees of the Yvonne T. LANDIS, Co-Trustees of the Edward D. Landis share of the LANDIS FAMILY TRUST Landis share of the LANDIS FAMILY TRUST By:/s/ Gregory J. Landis By:/s/ Gregory J. Landis ------------------------------------------- ------------------------------------------- GREGORY J. LANDIS, Co-Trustee GREGORY J. LANDIS, Co-Trustee By:/s/ David A. Landis By:/s/ David A. Landis ------------------------------------------- ------------------------------------------- DAVID A. LANDIS, Co-Trustee DAVID A. LANDIS, Co-Trustee GREGORY J. LANDIS and DAVID A. LANDIS, Co-Trustees of the Russell J. Landis share of the LANDIS FAMILY TRUST By:/s/ Gregory J. Landis ------------------------------------------- GREGORY J. LANDIS, Co-Trustee By:/s/ David A. Landis ------------------------------------------- DAVID A. LANDIS, Co-Trustee
LANDIS FAMILY ARIZONA PARTNERSHIP, an Illinois general partnership GREGORY J. LANDIS and DAVID A. LANDIS, Co-Trustees of the GREGORY J. LANDIS and DAVID A. LANDIS, Co-Trustees of the Gregory J. Landis share of the LANDIS FAMILY TRUST Henry J. Landis, II share of the LANDIS FAMILY TRUST By:/s/ Gregory J. Landis By:/s/ Gregory J. Landis ------------------------------------------------------- ------------------------------------------------------ GREGORY J. LANDIS, Co-Trustee GREGORY J. LANDIS, Co-Trustee By:/s/ David A. Landis By:/s/ David A. Landis ------------------------------------------------------- ------------------------------------------------------ DAVID A. LANDIS, Co-Trustee DAVID A. LANDIS, Co-Trustee GREGORY J. LANDIS and DAVID A. LANDIS, Co-Trustees GREGORY J. LANDIS and DAVID A. LANDIS, Co-Trustees of the of the David A. Landis share of the LANDIS FAMILY TRUST James M. Landis share of the LANDIS FAMILY TRUST By:/s/ Gregory J. Landis By:/s/ Gregory J. Landis ------------------------------------------------------- ------------------------------------------------------ GREGORY J. LANDIS, Co-Trustee GREGORY J. LANDIS, Co-Trustee By:/s/ David A. Landis By:/s/ David A. Landis ------------------------------------------------------- ------------------------------------------------------ DAVID A. LANDIS, Co-Trustee DAVID A. LANDIS, Co-Trustee GREGORY J. LANDIS and DAVID A. LANDIS, Co-Trustees of the GREGORY J. LANDIS and DAVID A. LANDIS, Co-Trustees of the Yvonne T. Landis share of the LANDIS FAMILY TRUST Edward D. Landis share of the LANDIS FAMILY TRUST By:/s/ Gregory J. Landis By: /s/ Gregory J. Landis ------------------------------------------------------- ------------------------------------------------------ GREGORY J. LANDIS, Co-Trustee GREGORY J. LANDIS, Co-Trustee By:/s/ David A. Landis By:/s/ David A. Landis ------------------------------------------------------- ------------------------------------------------------ DAVID A. LANDIS, Co-Trustee DAVID A. LANDIS, Co-Trustee GREGORY J. LANDIS and DAVID A. LANDIS, Co-Trustees of the Russell J. Landis share of the LANDIS FAMILY TRUST By: /s/ Gregory J. Landis ------------------------------------------------------- GREGORY J. LANDIS, Co-Trustee By:/s/ David A. Landis -------------------------------------------------------
DAVID A. LANDIS, Co-Trustee GREGORY J. LANDIS, as Shareholder Representative /s/ Gregory J. Landis - ------------------------------------------------------------ EX-4.2 4 y92946exv4w2.txt REGISTRATION RIGHTS AGREEMENT EXECUTION COPY Exhibit 4.2 This REGISTRATION RIGHTS AGREEMENT dated November 20, 2003 (the "Agreement") is entered into by and among Berry Plastics Corporation, a Delaware corporation (the "Company"), BPC Holding Corporation, a Delaware corporation ("Holding"), the other guarantors listed on the signature page hereof (together with Holding, the "Guarantors"), and J.P. Morgan Securities Inc. ("JPMorgan") and Goldman, Sachs & Co. ("Goldman, Sachs") (together with JPMorgan, the "Initial Purchasers"). The Company, Holding, the other Guarantors and the Initial Purchasers are parties to the Purchase Agreement dated November 10, 2003 (the "Purchase Agreement"), which provides for the sale by the Company to the Initial Purchasers of $85,000,000 aggregate principal amount of the Company's 10-3/4% Senior Subordinated Notes due 2012 (the "Securities"), which will be guaranteed on an unsecured senior subordinated basis by each of the Guarantors. As an inducement to the Initial Purchasers to enter into the Purchase Agreement, the Company and the Guarantors have agreed to provide to the Initial Purchasers, the Market-Makers (as defined herein) and their direct and indirect transferees the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the closing under the Purchase Agreement. In consideration of the foregoing, the parties hereto agree as follows: SECTION 1. Definitions. As used in this Agreement, the following terms shall have the following meanings: "Business Day" shall mean any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed. "Closing Date" shall mean the Closing Date as defined in the Purchase Agreement. "Company" shall have the meaning set forth in the preamble and shall also include the Company's successors. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "Exchange Dates" shall have the meaning set forth in Section 2(a)(ii) hereof. "Exchange Offer" shall mean the exchange offer by the Company and the Guarantors of Exchange Securities for Registrable Securities pursuant to Section 2(a) hereof. "Exchange Offer Registration" shall mean a registration under the Securities Act effected pursuant to Section 2(a) hereof. 2 "Exchange Offer Registration Statement" shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form) and all amendments and supplements to such registration statement, in each case including the Prospectus contained therein, all exhibits thereto and any document incorporated by reference therein. "Exchange Securities" shall mean senior subordinated notes issued by the Company and guaranteed by the Guarantors under the Indenture containing terms identical to the Securities (except that the Exchange Securities will not be subject to restrictions on transfer or to any increase in annual interest rate for failure to comply with this Agreement) and to be offered to Holders of Securities in exchange for Securities pursuant to the Exchange Offer. "Goldman, Sachs" shall have the meaning set forth in the preamble. "Guarantors" shall have the meaning set forth in the preamble and shall also include any Guarantor's successors. "Holders" shall mean the Initial Purchasers, for so long as they own any Registrable Securities, and each of their successors, assigns and direct and indirect transferees who become owners of Registrable Securities under the Indenture; provided that for purposes of Sections 4 and 6 of this Agreement, the term "Holders" shall include Participating Broker-Dealers; and provided, further, that for the purposes of Section 6 of this Agreement, the term "Holders" shall include the Market-Makers. "Initial Purchasers" shall have the meaning set forth in the preamble. "Indenture" shall mean the Indenture relating to the Securities dated as of July 22, 2002, among the Company, Holding, the other Guarantors and U.S. Bank Trust National Association, as trustee, and as the same may be amended from time to time in accordance with the terms thereof. "JPMorgan" shall have the meaning set forth in the preamble. "Majority Holders" shall mean the Holders of a majority of the aggregate principal amount of outstanding Registrable Securities; provided that whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities owned directly or indirectly by Holding or any of its affiliates shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage or amount; provided, further, however, that the foregoing proviso shall not apply to Section 5 hereof. "Market-Maker" shall have the meaning set forth in Section 5(a) hereof. "Market-Maker's Information" shall have the meaning set forth in Section 5(e) hereof. 3 "Market-Making Registration Statement" shall have the meaning set forth in Section 5(a)(i) hereof. "Participating Broker-Dealers" shall have the meaning set forth in Section 4(a) hereof. "Person" shall mean an individual, partnership, limited liability company, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. "Prospectus" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to such prospectus, and in each case including any document incorporated by reference therein. "Purchase Agreement" shall have the meaning set forth in the preamble. "Registrable Securities" shall mean the Securities; provided that the Securities shall cease to be Registrable Securities (i) when a Registration Statement with respect to such Securities has been declared effective under the Securities Act and such Securities have been exchanged or disposed of pursuant to such Registration Statement, (ii) when such Securities are eligible to be sold pursuant to Rule 144(k) (or any similar provision then in force, but not Rule 144A) under the Securities Act, (iii) when such securities are sold pursuant to Rule 144 under circumstances in which any legend borne by such Securities relating to restrictions on transferability thereof, under the Securities Act or otherwise, is removed by the Company or pursuant to the Indenture in accordance with the Securities Act or (iv) when such Securities cease to be outstanding. "Registration Expenses" shall mean any and all expenses incident to performance of or compliance by the Company and the Guarantors with this Agreement, including without limitation: (i) all SEC, stock exchange or National Association of Securities Dealers, Inc. registration and filing fees, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws (including reasonable fees and disbursements of counsel for any Underwriters or Holders in connection with blue sky qualification of any Exchange Securities or Registrable Securities, in any case, not to exceed $10,000), (iii) all expenses relating to preparing, printing and distributing any Registration Statement, any Prospectus and any amendments or supplements thereto, any underwriting agreements, securities sales agreements or other similar agreements and any other documents relating to the performance of and compliance with this Agreement, (iv) all rating agency fees, (v) all fees and disbursements relating to the qualification of the Indenture under applicable securities laws, (vi) the fees and disbursements of the Trustee and its counsel, (vii) the fees and disbursements of counsel for the Company and the Guarantors and, in the case of a Shelf Registration Statement, the reasonable fees and disbursements of one counsel for the Holders (which counsel shall be selected by the 4 Majority Holders and which counsel may also be counsel for the Initial Purchasers), (viii) the reasonable fees and disbursements of one counsel in connection with a Market-Making Registration Statement (which counsel shall be mutually agreeable to the Market-Makers) and (ix) the fees and disbursements of the independent public accountants of the Company and the Guarantors, including the expenses of any special audits or "comfort" letters required by or incident to the performance of and compliance with this Agreement, but excluding fees and expenses of counsel to the Underwriters (other than fees and expenses set forth in clause (ii) above) or the Holders and underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Securities by a Holder. "Registration Statement" shall mean any registration statement of the Company and the Guarantors that covers any of the Exchange Securities or Registrable Securities pursuant to the provisions of this Agreement, including, without limitation, any Market-Making Registration Statement, and all amendments and supplements to any such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and any document incorporated by reference therein. "SEC" shall mean the Securities and Exchange Commission. "Securities Act" shall mean the Securities Act of 1933, as amended from time to time. "Shelf Effectiveness Period" shall have the meaning set forth in Section 2(b) hereof. "Shelf Registration" shall mean a registration effected pursuant to Section 2(b) hereof. "Shelf Registration Statement" shall mean a "shelf" registration statement of the Company and the Guarantors that covers all the Registrable Securities (but no other securities unless approved by the Holders whose Registrable Securities are to be covered by such Shelf Registration Statement) on an appropriate form under Rule 415 under the Securities Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and any document incorporated by reference therein. "Staff" shall mean the staff of the SEC. "Trust Indenture Act" shall mean the Trust Indenture Act of 1939, as amended from time to time. "Trustee" shall mean the trustee with respect to the Securities under the Indenture. "Underwriter" shall have the meaning set forth in Section 3 hereof. 5 "Underwritten Offering" shall mean an offering in which Registrable Securities are sold to an Underwriter for reoffering to the public. SECTION 2. Registration Under the Securities Act. (a) To the extent not prohibited by any applicable law or applicable interpretations of the Staff, the Company and the Guarantors shall use their reasonable best efforts to (i) cause to be filed an Exchange Offer Registration Statement covering an offer to the Holders to exchange all the Registrable Securities for Exchange Securities and (ii) have such Registration Statement remain effective until 180 days after the closing of the Exchange Offer. The Company and the Guarantors shall commence the Exchange Offer reasonably promptly after the Exchange Offer Registration Statement is declared effective by the SEC and use their reasonable best efforts to complete the Exchange Offer not later than 60 days after such effective date. The Company and the Guarantors shall commence the Exchange Offer by mailing the related Prospectus, appropriate letters of transmittal and other accompanying documents to each Holder stating, in addition to such other disclosures as are required by applicable law: (i) that the Exchange Offer is being made pursuant to this Agreement and that all Registrable Securities validly tendered and not properly withdrawn will be accepted for exchange; (ii) the dates of acceptance for exchange (which shall be a period of at least 20 Business Days from the date such notice is mailed) (the "Exchange Dates"); (iii) that any Registrable Security not tendered will remain outstanding and continue to accrue interest but will not retain any rights under this Agreement; (iv) that any Holder electing to have a Registrable Security exchanged pursuant to the Exchange Offer will be required to surrender such Registrable Security, together with the appropriate letters of transmittal, to the institution and at the address (located in the Borough of Manhattan, The City of New York) and in the manner specified in the notice, prior to the close of business on the last Exchange Date; and (v) that any Holder will be entitled to withdraw its election, not later than the close of business on the last Exchange Date, by sending to the institution and at the address (located in the Borough of Manhattan, The City of New York) specified in the notice, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Securities delivered for exchange and a statement that such Holder is withdrawing its election to have such Securities exchanged. As a condition to participating in the Exchange Offer, a Holder will be required to represent to the Company and the Guarantors that (i) any Exchange Securities to be received by 6 it will be acquired in the ordinary course of its business, (ii) at the time of the commencement of the Exchange Offer it has no arrangement or understanding with any Person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Securities in violation of the provisions of the Securities Act, (iii) it is not an "affiliate" (within the meaning of Rule 405 under Securities Act) of the Company or any Guarantor and (iv) if such Holder is a broker-dealer that will receive Exchange Securities for its own account in exchange for Registrable Securities that were acquired as a result of market-making or other trading activities, then such Holder will deliver a Prospectus in connection with any resale of such Exchange Securities. As soon as practicable after the last Exchange Date, the Company and the Guarantors shall: (i) accept for exchange Registrable Securities or portions thereof validly tendered and not properly withdrawn pursuant to the Exchange Offer; and (ii) deliver, or cause to be delivered, to the Trustee for cancellation all Registrable Securities or portions thereof so accepted for exchange by the Company and issue, and cause the Trustee to promptly authenticate and deliver to each Holder, Exchange Securities equal in principal amount to the principal amount of the Registrable Securities surrendered by such Holder. The Company and the Guarantors shall use their reasonable best efforts to complete the Exchange Offer as provided above and shall comply with the applicable requirements of the Securities Act, the Exchange Act and other applicable laws and regulations in connection with the Exchange Offer. The Exchange Offer shall not be subject to any conditions, other than that the Exchange Offer does not violate any applicable law or applicable interpretations of the Staff of the SEC. (b) In the event that (i) the Company and the Guarantors determine that the Exchange Offer Registration provided for in Section 2(a) above is not available or may not be completed as soon as practicable after the last Exchange Date because it would violate any applicable law or applicable interpretations of the Staff of the SEC, (ii) the Exchange Offer is not for any other reason completed by the Target Registration Date (as defined herein) or (iii) the Exchange Offer has been completed and in the opinion of counsel for the Initial Purchasers a Registration Statement must be filed and a Prospectus must be delivered by the Initial Purchasers in connection with any offering or sale of Registrable Securities originally purchased and still held by the Initial Purchasers, the Company and the Guarantors shall use their reasonable best efforts to cause to be filed as soon as practicable after such determination, date or notice of such opinion of counsel is given to the Company, as the case may be, a Shelf Registration Statement providing for the sale of all the Registrable Securities by the Holders thereof and to have such Shelf Registration Statement declared effective by the SEC. To the extent a Shelf Registration Statement is required to be filed pursuant to clause (ii) but the Exchange Offer is completed on a date later than the Target Registration Date, upon completion of the Exchange Offer the 7 Company and the Guarantors will no longer be required to file, make effective or continue the effectiveness of the Shelf Registration Statement. In the event that the Company and the Guarantors are required to file a Shelf Registration Statement pursuant to clause (iii) of the preceding sentence, the Company and the Guarantors shall use their reasonable best efforts to file and have declared effective by the SEC both an Exchange Offer Registration Statement pursuant to Section 2(a) with respect to all Registrable Securities and a Shelf Registration Statement (which may be a combined Registration Statement with the Exchange Offer Registration Statement) with respect to offers and sales of Registrable Securities held by the Initial Purchasers after completion of the Exchange Offer. The Company and the Guarantors agree to use their reasonable best efforts to keep the Shelf Registration Statement continuously effective until the expiration of the period referred to in Rule 144(k) under the Securities Act with respect to the Registrable Securities or such shorter period that will terminate when the Exchange Offer has been consummated or all the Registrable Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or are no longer outstanding (the "Shelf Effectiveness Period"). The Company and the Guarantors further agree to supplement or amend the Shelf Registration Statement and the related Prospectus if required by the rules, regulations or instructions applicable to the registration form used by the Company and the Guarantors for such Shelf Registration Statement or by the Securities Act or by any other rules and regulations thereunder for shelf registration or if reasonably and timely requested by a Holder of Registrable Securities with respect to information relating to such Holder, and to use their reasonable best efforts to cause any such amendment to become effective and such Shelf Registration Statement and Prospectus to become usable as soon as thereafter practicable. The Company and the Guarantors agree to furnish to the Holders of Registrable Securities copies of any such supplement or amendment promptly after its being used or filed with the SEC. (c) The Company and the Guarantors shall pay all Registration Expenses in connection with the registration pursuant to Section 2(a) and Section 2(b) hereof. Each Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Securities pursuant to the Shelf Registration Statement. (d) An Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the SEC. In the event that either the Exchange Offer is not completed or the Shelf Registration Statement, if required hereby, is not declared effective on or prior to the later of (i) June 17, 2004 and (ii) 60 days after the release to the Company of the funds held in escrow pursuant to the Escrow Agreement (as defined in the Purchase Agreement) (the "Target Registration Date"), the interest rate on the Registrable Securities will be increased by (i) 0.25% per annum for the first 90-day period immediately following the Target Registration Date and (ii) 8 an additional 0.25% per annum with respect to each subsequent 90-day period, in each case until the Exchange Offer is completed or the Shelf Registration Statement, if required hereby, is declared effective by the SEC or the Securities become freely tradable under the Securities Act, up to a maximum aggregate increase of 1.00% per annum of additional interest. If the Shelf Registration Statement has been declared effective and thereafter either ceases to be effective or the Prospectus contained therein ceases to be usable at any time during the Shelf Effectiveness Period, and such failure to remain effective or usable exists for more than 45 consecutive days or more than 60 days (whether or not consecutive) in any 12-month period, then the interest rate on the Registrable Securities will be increased by 0.25% per annum commencing on the 46th or 61st day in such 12-month period, with further increases, subject to a maximum of 1.00% per annum of additional interest, in accordance with the schedule in the prior paragraph, and ending on such date that the Shelf Registration Statement has again been declared effective or the Prospectus again becomes usable. (e) Without limiting the remedies available to the Initial Purchasers and the Holders, the Company and the Guarantors acknowledge that any failure by the Company or the Guarantors to comply with their obligations under Section 2(a) and Section 2(b) hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, although any monetary damages will be limited to the amounts specified in Section 2(d) hereof, in the event of any such failure, the Initial Purchasers or any Holder may obtain such other relief as may be required to specifically enforce the Company's and the Guarantors' obligations under Section 2(a) and Section 2(b) hereof. SECTION 3. Registration Procedures. In connection with their obligations pursuant to Section 2(a) and Section 2(b) hereof, the Company and the Guarantors shall use commercially reasonable efforts to: (a) prepare and file with the SEC a Registration Statement on the appropriate form under the Securities Act, which form (x) shall be selected by the Company and the Guarantors, (y) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Securities by the selling Holders thereof and (z) shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith; and use their commercially reasonable efforts to cause such Registration Statement to become effective within the timeframe required under this Agreement and remain effective for the applicable period in accordance with Section 2 hereof; (b) prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period in accordance with Section 2 hereof and cause each Prospectus to be supplemented by any required prospectus supplement and, as so supplemented, to be filed pursuant to Rule 424 under the Securities Act; and keep each Prospectus current during the period described in Section 9 4(3) of and Rule 174 under the Securities Act that is applicable to transactions by brokers or dealers with respect to the Registrable Securities or Exchange Securities; (c) in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, to counsel for such Holders and to each Underwriter of an Underwritten Offering of Registrable Securities, if any, without charge, as many copies of each Prospectus as reasonably requested, including each preliminary Prospectus, and any amendment or supplement thereto, in order to facilitate the sale or other disposition of the Registrable Securities thereunder; and the Company and the Guarantors consent to the use of such Prospectus and any amendment or supplement thereto in accordance with applicable law by each of the selling Holders of Registrable Securities and any such Underwriters in connection with the offering and sale of the Registrable Securities covered by and in the manner described in such Prospectus or any amendment or supplement thereto in accordance with applicable law; (d) endeavor to register or qualify the Registrable Securities under all applicable state securities or blue sky laws of such jurisdictions as any Holder of Registrable Securities covered by a Registration Statement shall reasonably request in writing by the time the applicable Registration Statement is declared effective by the SEC; cooperate with the Holders in connection with any filings required to be made with the National Association of Securities Dealers, Inc.; and do any and all other acts and things that may be reasonably necessary or advisable to enable each Holder to complete the disposition in each such jurisdiction of the Registrable Securities owned by such Holder; provided that neither the Company nor any Guarantor shall be required to (i) qualify as a foreign corporation or other entity or as a dealer in securities in any such jurisdiction where it would not otherwise be required to so qualify, (ii) file any general consent to service of process in any such jurisdiction or (iii) subject itself to taxation in any such jurisdiction if it is not so subject; (e) in the case of a Shelf Registration, notify each Holder of Registrable Securities and counsel for such Holders promptly and, if requested by any such Holder or counsel, confirm such advice in writing (i) when a Registration Statement has become effective and when any post-effective amendment thereto has been filed and becomes effective, (ii) of any request by the SEC or any state securities authority for amendments and supplements to a Registration Statement and Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) if, between the effective date of a Registration Statement and the closing of any sale of Registrable Securities covered thereby, the representations and warranties of the Company or any Guarantor contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to an offering of such Registrable Securities cease to be true and correct in all material respects or if the Company or any Guarantor receives any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation 10 of any proceeding for such purpose, (v) of the happening of any event during the period a Shelf Registration Statement is effective that makes any statement made in such Registration Statement or the related Prospectus untrue in any material respect or that requires the making of any changes in such Registration Statement or Prospectus in order to make the statements therein not misleading and (vi) of any determination by the Company or any Guarantor that a post-effective amendment to a Registration Statement would be appropriate; (f) use their reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment and provide immediate notice to each Holder of the withdrawal of any such order; (g) in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto (without any documents incorporated therein by reference or exhibits thereto, unless requested); (h) in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends and enable such Registrable Securities to be issued in such denominations and registered in such names (consistent with the provisions of the Indenture) as the selling Holders may reasonably request at least one Business Day prior to the closing of any sale of Registrable Securities; (i) in the case of a Shelf Registration, upon the occurrence of any event contemplated by Section 3(e)(v) hereof, use their reasonable best efforts to prepare and file with the SEC a supplement or post-effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to purchasers of the Registrable Securities, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and the Company and the Guarantors shall notify the Holders of Registrable Securities to suspend use of the Prospectus as promptly as practicable after the occurrence of such an event, and such Holders hereby agree to suspend use of the Prospectus until the Company and the Guarantors have amended or supplemented the Prospectus to correct such misstatement or omission; (j) a reasonable time prior to the filing of any Registration Statement, any Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus or of any document that is to be incorporated by reference into a Registration Statement or a Prospectus after initial filing of a Registration Statement, provide copies of such document to the Initial Purchasers and their counsel (and, in the case of a Shelf Registration Statement, to the Holders of Registrable Securities and their 11 counsel) and make such of the representatives of the Company and the Guarantors as shall be reasonably requested by the Initial Purchasers or their counsel (and, in the case of a Shelf Registration Statement, the Holders of Registrable Securities or their counsel) available for discussion of such document; and the Company and the Guarantors shall not, at any time after initial filing of a Registration Statement, file any Prospectus, any amendment of or supplement to a Registration Statement or a Prospectus, or any document that is to be incorporated by reference into a Registration Statement or a Prospectus, of which the Initial Purchasers and their counsel (and, in the case of a Shelf Registration Statement, the Holders of Registrable Securities and their counsel) shall not have previously been advised and furnished a copy or to which the Initial Purchasers or their counsel (and, in the case of a Shelf Registration Statement, the Holders or their counsel) shall object; (k) obtain a CUSIP number for all Exchange Securities or Registrable Securities, as the case may be, not later than the effective date of a Registration Statement; (l) cause the Indenture to be qualified under the Trust Indenture Act in connection with the registration of the Exchange Securities or Registrable Securities, as the case may be; cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the Trust Indenture Act; and execute, and use their reasonable best efforts to cause the Trustee to execute, all documents as may be required to effect such changes and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner; (m) in the case of a Shelf Registration, make available for inspection by an appropriate representative of the Holders of the Registrable Securities (an "Inspector") who is not a direct or indirect competitor of the Company or any Guarantor, any Underwriter participating in any disposition pursuant to such Shelf Registration Statement, and attorneys and accountants designated by the Holders, at reasonable times and in a reasonable manner, all pertinent financial and other records, documents and properties of the Company and the Guarantors, and cause the respective officers, directors and employees of the Company and the Guarantors to supply all information reasonably requested by any such Inspector, Underwriter, attorney or accountant in connection with a Shelf Registration Statement; provided that if any such information is identified by the Company or any Guarantor as being confidential or proprietary, prior to being given such information, each Person receiving such information shall take such actions as are reasonably necessary to protect the confidentiality of such information, including executing a customary confidentiality agreement that is not inconsistent with the rights and interests of any Inspector, Holder or Underwriter; (n) in the case of a Shelf Registration, use their reasonable best efforts to cause all Registrable Securities to be listed on any securities exchange or any automated quotation system on which similar securities issued or guaranteed by the Company or 12 any Guarantor are then listed if requested by the Majority Holders, to the extent such Registrable Securities satisfy applicable listing requirements; (o) if reasonably requested by any Holder of Registrable Securities covered by a Registration Statement, promptly incorporate in a Prospectus supplement or post-effective amendment such information with respect to such Holder as such Holder reasonably requests to be included therein and make all required filings of such Prospectus supplement or such post-effective amendment as soon as the Company and the Guarantors have received notification of the matters to be incorporated in such filing; and (p) in the case of a Shelf Registration, enter into such customary agreements and take all such other actions in connection therewith (including those requested by the Holders of a majority in principal amount of the Registrable Securities being sold) in order to expedite or facilitate the disposition of such Registrable Securities including, but not limited to, an Underwritten Offering and in such connection, (i) to the extent possible, make such representations and warranties to the Holders and any Underwriters of such Registrable Securities with respect to the business of Holding and its subsidiaries, the Registration Statement, Prospectus and documents incorporated by reference or deemed incorporated by reference, if any, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings and confirm the same if and when requested, (ii) obtain opinions of counsel to the Company and the Guarantors (which counsel and opinions, in form, scope and substance, shall be reasonably satisfactory to the Holders and such Underwriters and their respective counsel) addressed to each selling Holder and Underwriter of Registrable Securities, covering the matters customarily covered in opinions requested in underwritten offerings, (iii) obtain "comfort" letters from the independent certified public accountants of the Company and the Guarantors (and, if necessary, any other certified public accountant of any subsidiary of the Company or any Guarantor, or of any business acquired by the Company or any Guarantor for which financial statements and financial data are or are required to be included in the Registration Statement) addressed to each selling Holder and Underwriter of Registrable Securities to the extent permitted by appropriate accounting standards, such letters to be in customary form and covering matters of the type customarily covered in "comfort" letters in connection with underwritten offerings and (iv) deliver such documents and certificates as may be reasonably requested by the Holders of a majority in principal amount of the Registrable Securities being sold or the Underwriters, and which are customarily delivered in underwritten offerings, to evidence the continued validity of the representations and warranties of the Company and the Guarantors made pursuant to clause (i) above and to evidence compliance with any customary conditions contained in an underwriting agreement. In the case of a Shelf Registration Statement, the Company or any Guarantor may require each Holder of Registrable Securities to furnish to the Company and the Guarantors such information regarding such Holder and the proposed disposition by such Holder of such 13 Registrable Securities as the Company and the Guarantors may from time to time reasonably request in writing. In the case of a Shelf Registration Statement, each Holder of Registrable Securities agrees that, upon receipt of any notice from the Company and the Guarantors of the happening of any event of the kind described in Section 3(e)(iii) or 3(e)(v) hereof or a notice pursuant to the last sentence of this paragraph, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to a Shelf Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(i) hereof and, if so directed by the Company and the Guarantors, such Holder will deliver to the Company and the Guarantors all copies in its possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities that is current at the time of receipt of such notice. In addition, the Company may give notice of the suspension of the offering and sale under the Shelf Registration Statement for a period or periods the Board of Directors of the Company reasonably determines to be necessary, if the Board of Directors determines in good faith that such action is in the best interests of the Company. If the Company and the Guarantors shall give any such notice to suspend the disposition of Registrable Securities pursuant to a Registration Statement, the Company and the Guarantors shall extend the period during which the Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from and including the date of the giving of such notice to and including the date when the Holders shall have received copies of the supplemented or amended Prospectus necessary to resume such dispositions. The Company and the Guarantors may give any such notice only twice during any 365-day period and any such suspensions shall not exceed 45 days for each suspension and there shall not be more than two suspensions in effect during any 365-day period. The Holders of Registrable Securities covered by a Shelf Registration Statement who desire to do so may sell such Registrable Securities in an Underwritten Offering. In any such Underwritten Offering, the investment banker or investment bankers and manager or managers (the "Underwriters") that will administer the offering will be selected by the Majority Holders of the Registrable Securities included in such offering, subject to the consent of the Company, not to be unreasonably withheld. SECTION 4. Participation of Broker-Dealers in Exchange Offer. (a) The Staff of the SEC has taken the position that any broker-dealer that receives Exchange Securities for its own account in the Exchange Offer in exchange for Securities that were acquired by such broker-dealer as a result of market-making or other trading activities (a "Participating Broker-Dealer") may be deemed to be an "underwriter" within the meaning of the Securities Act and must deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Securities. The Company and the Guarantors understand that it is the Staff's position that if the Prospectus contained in the Exchange Offer Registration Statement includes a plan of distribution containing a statement to the above effect and the means by which Participating 14 Broker-Dealers may resell the Exchange Securities, without naming the Participating Broker-Dealers or specifying the amount of Exchange Securities owned by them, such Prospectus may be delivered by Participating Broker-Dealers to satisfy their prospectus delivery obligation under the Securities Act in connection with resales of Exchange Securities for their own accounts, so long as the Prospectus otherwise meets the requirements of the Securities Act. (b) In light of the above, and notwithstanding the other provisions of this Agreement, the Company and the Guarantors agree to amend or supplement the Prospectus contained in the Exchange Offer Registration Statement, as would otherwise be contemplated by Section 3(i), for a period of up to 180 days after the last Exchange Date (as such period may be extended pursuant to the penultimate paragraph of Section 3 of this Agreement), if requested by the Initial Purchasers or by one or more Participating Broker-Dealers, in order to expedite or facilitate the disposition of any Exchange Securities by Participating Broker-Dealers consistent with the positions of the Staff recited in Section 4(a) above. The Company and the Guarantors further agree that Participating Broker-Dealers shall be authorized to deliver such Prospectus during such period in connection with the resales contemplated by this Section 4. (c) The Initial Purchasers shall have no liability to the Company, any Guarantor or any Holder with respect to any request that they may make pursuant to Section 4(b) above. SECTION 5. Market-Making. (a) For so long as any of the Securities or Exchange Securities are outstanding and Goldman, Sachs or JPMorgan (each, a "Market-Maker" and, together, the "Market-Makers") or any of their respective affiliates are an affiliate of the Company, Holding or the Guarantors and proposes to make a market in the Securities or Exchange Securities as part of their business in the ordinary course, the following provisions shall apply for the sole benefit of the Market-Makers: (i) The Company and the Guarantors shall (A) on the date that the Exchange Offer Registration Statement is filed with the SEC, file a registration statement (the "Market-Making Registration Statement") (which may be the Exchange Offer Registration Statement or the Shelf Registration Statement if permitted by the rules and regulations of the SEC) and use its commercially reasonable efforts to cause such Market-Making Registration Statement to be declared effective by the SEC on or prior to the consummation of the Exchange Offer; (B) periodically amend such Market-Making Registration Statement to the extent required so that the information contained therein complies with the requirements of Section 10(a) under the Securities Act; (C) within 45 days following the end of each of Holding's and its subsidiaries' fiscal quarters (or within 90 days following the end of their fiscal year), file a supplement to the prospectus contained in the Market-Making Registration Statement that sets forth the financial results of Holding and its subsidiaries for such quarter, unless such information is incorporated by reference in the prospectus; (D) amend the Market-Making Registration Statement or supplement the related prospectus when necessary to reflect any material changes in the information provided therein in order to comply with applicable laws; and (E) amend the Market-Making Registration Statement when required to do so in order to comply with Section 10(a)(3) of the Securities Act; provided, however, that (1) prior to filing the Market-Making Registration Statement, any amendment thereto or any supplement to the related 15 prospectus (other than a supplement filed pursuant to clause (C) of this paragraph), the Company and the Guarantors will furnish to each Market-Maker copies of all such documents proposed to be filed, which documents will be subject to the review of each Market-Maker and its respective counsel, (2) the Company and the Guarantors will not file the Market-Making Registration Statement, any amendment thereto or any amendment or supplement to the related prospectus (other than a supplement filed pursuant to clause (C) of this paragraph) to which either Market-Maker and its respective counsel shall reasonably object unless the Company and the Guarantors are advised by counsel that such Market-Making Registration Statement, amendment or supplement is required to be filed and (3) the Company and the Guarantors will provide each Market-Maker and its respective counsel with copies of the Market-Making Registration Statement and each amendment and supplement filed. (ii) The Company and the Guarantors shall notify each Market-Maker and, if requested by either Market-Maker, confirm such advice in writing, (A) when any post-effective amendment to the Market-Making Registration Statement or any amendment or supplement to the related prospectus has been filed, and, with respect to any post-effective amendment, when the same has become effective; (B) of any request by the SEC for any post-effective amendment to the Market-Making Registration Statement, any supplement or amendment to the related prospectus or for additional information; (C) the issuance by the SEC of any stop order suspending the effectiveness of the Market-Making Registration Statement or the initiation of any proceedings for that purpose; (D) of the receipt by the Company or any Guarantor of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceedings for such purpose; and (E) of the happening of any event that makes any statement made in the Market-Making Registration Statement, the related prospectus or any amendment or supplement thereto untrue or that requires the making of any changes in the Market-Making Registration Statement, such prospectus or any amendment or supplement thereto, in order to make the statements therein not misleading. (iii) If any event contemplated by Section 5(a)(ii)(B) through (E) occurs during the period for which the Company and the Guarantors are required to maintain an effective Market-Making Registration Statement, the Company and the Guarantors shall promptly prepare and file with the SEC a post-effective amendment to the Market-Making Registration Statement or an amendment or supplement to the related prospectus or file any other required document so that the prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (iv) In the event of the issuance of any stop order suspending the effectiveness of the Market-Making Registration Statement or of any order suspending the qualification of the Securities or Exchange Securities for sale in any jurisdiction, the Company and the Guarantors shall use promptly their commercially reasonable efforts to obtain its withdrawal. (v) The Company and the Guarantors shall furnish to each Market-Maker, without charge, (i) at least one conformed copy of the Market-Making Registration Statement 16 and any post-effective amendment thereto; and (ii) as many copies of the related prospectus and any amendment or supplement thereto as each Market-Maker may reasonably request. (vi) The Company and the Guarantors shall consent to the use of the prospectus contained in the Market-Making Registration Statement or any amendment or supplement thereto by either Market-Maker in connection with the offering and sale of the Securities or Exchange Securities. (vii) Notwithstanding the foregoing provisions of this Section 5, the Company and the Guarantors may for valid business reasons, including without limitation, a potential acquisition, divestiture of assets or other material corporate transaction, issue a notice that the Market-Making Registration Statement is no longer effective or the prospectus included therein is no longer usable for offers and sales of the Securities or Exchange Securities and may issue any notice suspending use of the Market-Making Registration Statement required under applicable securities laws to be issued; provided that the use of the Market-Making Registration Statement shall not be suspended for more than 60 days in the aggregate in any consecutive 12 month period, unless otherwise agreed to in writing by each Market-Maker. Each Market-Maker agrees that upon receipt of any notice from the Company pursuant to this Section 5(a)(vii), it will discontinue use of the Market-Making Registration Statement until receipt of copies of the supplemented or amended prospectus relating thereto or until advised in writing by the Company that the use of the Market-Making Registration Statement may be resumed and will not disclose the existence of the notice or the facts related thereto. (b) In connection with the Market-Making Registration Statement, the Company and the Guarantors shall make reasonably available for inspection, at reasonable times and in a reasonable manner by a representative of, and counsel acting for, each Market-Maker all relevant financial and other records, pertinent corporate documents and properties of the Company and the Guarantors and (ii) use their reasonable best efforts to have their officers, directors, employees, accountants and counsel supply all relevant information reasonably requested by such representative or counsel or either Market-Maker; provided that if any such information is identified by the Company or any Guarantor as being confidential or proprietary, prior to being given such information, each Person receiving such information shall take such actions as are reasonably necessary to protect the confidentiality of such information, including executing a customary confidentiality agreement that is not inconsistent with the rights and interests of any Market-Maker, representative thereof or counsel thereto; (c) Prior to the effective date of the Market-Making Registration Statement, the Company and the Guarantors will endeavor to register or qualify, or cooperate with each Market-Maker and its counsel in connection with the registration or qualification of, the Securities or Exchange Securities for offer and sale under the securities or blue sky laws of such jurisdictions as each Market-Maker reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities or Exchange Securities covered by the Market-Making Registration Statement; provided that neither the Company nor any Guarantor shall be required to (i) qualify as a foreign corporation or other entity or as a dealer of securities in any such jurisdiction where it would not otherwise 17 be required to so qualify, (ii) file any general consent to service of process in any such jurisdiction or (iii) subject itself to taxation in any such jurisdiction if it is not so subject. (d) Each of the Company and the Guarantors represents and agrees that the Market-Making Registration Statement, any post-effective amendments thereto, any amendments or supplements to the related prospectus and any documents filed by it under the Exchange Act will, when they become effective or are filed with the SEC, as the case may be, conform in all material respects to the requirements of the Securities Act and the Exchange Act and the rules and regulations of the SEC thereunder and will not, as of the effective date of such Market-Making Registration Statement or post-effective amendments and as of the filing date of amendments or supplements to such prospectus or filings under the Exchange Act, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided that no representation or warranty is made as to information contained in or omitted from the Market-Making Registration Statement or the related prospectus in reliance upon and in conformity with written information furnished to the Company and the Guarantors by either Market-Maker specifically for inclusion therein, which information the parties hereto agree will be limited to the statements concerning the market-making activities of such Market-Maker to be set forth on the cover page and in the "Plan of Distribution" section of the prospectus (the "Market-Maker's Information"). (e) At the time of effectiveness of the Market-Making Registration Statement and concurrently with each time the Market-Making Registration Statement or the related prospectus shall be amended or such prospectus shall be supplemented, the Company and the Guarantors shall (if requested by either Market-Maker) furnish each Market-Maker and its respective counsel with a certificate of its Chairman of the Board of Directors and Chief Financial Officer to the effect that: (i) the Market-Making Registration Statement has been declared effective; (ii) in the case of an amendment to the Market-Making Registration Statement, such amendment has become effective under the Securities Act as of the date and time specified in such certificate, if applicable; and, in the case of an amendment or supplement to the Prospectus, such amendment or supplement to the prospectus was filed with the SEC pursuant to the subparagraph of Rule 424(b) under the Securities Act specified in such certificate on the date specified therein; (iii) to the knowledge of such officers, no stop order suspending the effectiveness of the Market-Making Registration Statement has been issued and no proceeding for that purpose is pending or threatened by the SEC; and (iv) such officers have examined the Market-Making Registration Statement and the prospectus (and, in the case of an amendment or supplement, such amendment or supplement) and as of the date of such Market-Making Registration Statement, amendment or supplement, as applicable, the Market-Making Registration Statement and the prospectus, as amended or supplemented, if applicable, did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. 18 (f) At the time of effectiveness of the Market-Making Registration Statement and concurrently with each time the Market-Making Registration Statement or the related prospectus shall be amended or such prospectus shall be supplemented, the Company and the Guarantors shall (if requested by either Market-Maker) furnish each Market-Maker and its respective counsel with the written opinion of counsel for the Company and the Guarantors satisfactory to each Market-Maker to the effect that: (i) the Market-Making Registration Statement has been declared effective; (ii) in the case of an amendment to the Market-Making Registration Statement, such amendment has become effective under the Securities Act as of the date and time specified in such opinion, if applicable; and, in the case of an amendment or supplement to the Prospectus, such amendment or supplement to the prospectus was filed with the SEC pursuant to the subparagraph of Rule 424(b) under the Securities Act specified in such opinion on the date specified therein; (iii) to the knowledge of such counsel, no stop order suspending the effectiveness of the Market-Making Registration Statement has been issued and no proceeding for that purpose is pending or threatened by the SEC; and (iv) such counsel has reviewed the Market-Making Registration Statement and the prospectus (and, in the case of an amendment or supplement, such amendment or supplement) and participated with officers of the Company and the Guarantors and independent public accountants for the Company and the Guarantors in the preparation of such Market-Making Registration Statement and prospectus (and, in the case of an amendment or supplement, such amendment or supplement) and has no reason to believe that (except for the financial statements and other financial data contained therein as to which no belief is required) as of the date of such Market-Making Registration Statement, amendment or supplement, as applicable, the Market-Making Registration Statement and the prospectus, as amended or supplemented, if applicable, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Such opinion shall be consistent with the form of opinion delivered in connection with the Purchase Agreement. (g) At the time of effectiveness of the Market-Making Registration Statement and concurrently with each time the Market-Making Registration Statement or the related prospectus shall be amended or such prospectus shall be supplemented to include audited annual financial information, the Company and the Guarantors shall (if requested in writing by either Market-Maker) furnish each Market-Maker and its respective counsel with a letter of Ernst & Young, LLP (or other independent public accountants for the Company and the Guarantors of nationally recognized standing), in form satisfactory to each Market-Maker, addressed to each Market-Maker and dated the date of delivery of such letter, (i) confirming that they are independent public accountants within the meaning of the Securities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the SEC and, (ii) in all other respects, substantially in the form of the letter delivered to the Initial Purchasers pursuant to Section 5(e) of the Purchase Agreement, with, in the case of an amendment or supplement to include audited financial information, such changes as may be necessary to reflect the amended or supplemented financial information. 19 (h) The Company and the Guarantors, on the one hand, and the Market- Makers, on the other hand, hereby agree to indemnify each other, and, if applicable, contribute to the other, in accordance with Section 6 of this Agreement. (i) The Company and the Guarantors will comply with the provisions of this Section 5 at their own expense and will reimburse the Market-Makers for their documented Registration Expenses associated with this Section 5. (j) For purposes of this Section 5, (i) any reference to the terms "amend", "amendment" or "supplement" with respect to the Market-Making Registration Statement or the prospectus contained therein shall be deemed to refer to and include the filing under the Exchange Act of any document deemed to be incorporated therein by reference and (ii) any reference to the terms "Securities" or "Exchange Securities" shall be deemed to refer to and include any securities issued in exchange for or with respect to such Securities or Exchange Securities. SECTION 6. Indemnification and Contribution. (a) The Company and each Guarantor, jointly and severally, agree to indemnify and hold harmless (x) each Initial Purchaser and each Holder (including each Market-Maker), their respective affiliates, directors and officers and each Person, if any, who controls any Initial Purchaser or any Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (including, without limitation, legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim asserted, as such fees and expenses are incurred), joint or several, that arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (including any Market-Making Registration Statement) or any Prospectus or any omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages or liabilities arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to any Initial Purchaser or any Holder furnished to the Company in writing through JPMorgan or such selling Holder expressly for use therein; provided that with respect to any such untrue statement in or omission from any preliminary prospectus, the indemnity agreement contained in this paragraph (a) shall not inure to the benefit of any Initial Purchaser or any Holder (including any Market-Maker) from whom the person asserting any such loss, claim, damage or liability received Securities or Exchange Securities to the extent that any such loss, claim, damage or liability of or with respect to such Initial Purchaser or Holder results from the fact that both (i) a copy of the final prospectus was not sent or given to such person at or prior to the written confirmation of the sale of such Securities or Exchange Securities to such person and (ii) the untrue statement in or omission from such preliminary prospectus was corrected in the final prospectus unless, in either case, such failure to deliver the final prospectus was a result of non-compliance by the Company or any Guarantor with the provisions of Section 3 or 5 hereof; and (y) the Market-Makers from and against any and all losses, claims, damages and liabilities (including, without limitation, legal fees and other expenses incurred in connection with any suit, action or proceeding or any 20 claim asserted, as such fees and expenses are incurred), joint or several that arise out of, or are based upon, any breach by the Company or the Guarantors of their representations, warranties and agreements contained in Section 5 of this Agreement. In connection with any Underwritten Offering permitted by Section 3, the Company and the Guarantors, jointly and severally, will also indemnify the Underwriters, if any, selling brokers, dealers and similar securities industry professionals participating in the distribution, their respective affiliates and each Person who controls such Persons (within the meaning of the Securities Act and the Exchange Act) to the same extent as provided above with respect to the indemnification of the Holders, if requested in connection with any Registration Statement. (b) Each Holder (including each Market-Maker) agrees, severally and not jointly, to indemnify and hold harmless the Company, the Guarantors, the Initial Purchasers and the other selling Holders, their respective affiliates, the directors of the Company and the Guarantors, each officer of the Company and the Guarantors who signed the Registration Statement or Market-Making Registration Statement, as the case may be, and each Person, if any, who controls the Company, the Guarantors, any Initial Purchaser and any other selling Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the indemnity set forth in paragraph (a) above, but only with respect to any losses, claims, damages or liabilities that arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to such Holder furnished to the Company in writing by such Holder expressly for use in any Registration Statement (including any Market-Making Registration Statement) and any Prospectus. (c) If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Person in respect of which indemnification may be sought pursuant to paragraph (a) or (b) above, such Person (the "Indemnified Person") shall promptly notify the Person against whom such indemnification may be sought (the "Indemnifying Person") in writing; provided that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have under this Section 6 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided, further, that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have to an Indemnified Person otherwise than under this Section 6. If any such proceeding shall be brought or asserted against an Indemnified Person and it shall have notified the Indemnifying Person thereof, the Indemnifying Person shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others entitled to indemnification pursuant to this Section 6 that the Indemnifying Person may designate in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding, as incurred. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the contrary; (ii) the Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Person; (iii) the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available 21 to the Indemnifying Person; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood and agreed that the Indemnifying Person shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reimbursed as they are incurred after receipt by the Company of appropriate documentation specifically identifying this Section 6 of this Agreement. Any such separate firm (w) for any Initial Purchaser, its affiliates, directors and officers and any control Persons of such Initial Purchaser shall be designated in writing by JPMorgan, (x) for any Market-Maker, its affiliates, directors and officers and any control Persons of such Market-Maker shall be designated in writing by such Market-Maker, (y) for any other Holder, its affiliates, directors and officers and any control Persons of such Holder shall be designated in writing by the Majority Holders and (z) in all other cases shall be designated in writing by the Company. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Person agrees to indemnify each Indemnified Person from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Person shall have requested in writing, with such request specifically identifying this Section 6 of this Agreement, that an Indemnifying Person reimburse the Indemnified Person for fees and expenses of counsel as contemplated by this paragraph, the Indemnifying Person shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by the Indemnifying Person of such request and (ii) the Indemnifying Person shall not have reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement, except with respect to amounts reasonably challenged. No Indemnifying Person shall, without the written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnification could have been sought hereunder by such Indemnified Person, unless such settlement (A) includes an unconditional release of such Indemnified Person, in form and substance reasonably satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and (B) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Person. (d) If the indemnification provided for in paragraphs (a) and (b) above is unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors from the offering of the Securities and the Exchange Securities, on the one hand, and by the Holders from receiving Securities or Exchange Securities registered under the Securities Act, on the other hand, or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits 22 referred to in clause (i) but also the relative fault of the Company and the Guarantors on the one hand and the Holders on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company and the Guarantors on the one hand and the Holders on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Guarantors or by the Holders and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (e) The Company, the Guarantors, the Holders agree that it would not be just and equitable if contribution pursuant to this Section 6 were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Person in connection with any such action or claim. Notwithstanding the provisions of this Section 6, in no event shall a Holder be required to contribute any amount in excess of the amount by which the total price at which the Securities or Exchange Securities sold by such Holder exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, nor shall the Market-Makers be required to contribute any amount in excess of its commission from the market-making transactions at issue. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (f) The remedies provided for in this Section 6 are not exclusive and shall not limit any rights or remedies that may otherwise be available to any Indemnified Person at law or in equity. (g) The indemnity and contribution provisions contained in this Section 6 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of the Initial Purchasers, the Market-Makers or any Holder, their respective affiliates or any Person controlling any Initial Purchaser or any Holder, or by or on behalf of the Company or the Guarantors, their respective affiliates or the officers or directors of or any Person controlling the Company or the Guarantors, (iii) acceptance of any of the Exchange Securities and (iv) any sale of Registrable Securities pursuant to a Shelf Registration Statement or a Market-Making Registration Statement. SECTION 7. General. (a) No Inconsistent Agreements. The Company and the Guarantors represent, warrant and agree that (i) the rights granted to the Holders or the Market-Makers hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of any 23 other outstanding securities issued or guaranteed by the Company or any Guarantor under any other agreement and (ii) neither the Company nor any Guarantor has entered into, or on or after the date of this Agreement will enter into, any agreement that is inconsistent with the rights granted to the Holders of Registrable Securities or the Market-Makers in this Agreement or otherwise conflicts with the provisions hereof. (b) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company and the Guarantors have obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Registrable Securities affected by such amendment, modification, supplement, waiver or consent or, with respect to the provisions of Section 5, the written consent of each Market-Maker; provided that no amendment, modification, supplement, waiver or consent to any departure from the provisions of Section 6 hereof shall be effective as against any Holder of Registrable Securities or either Market-Maker unless consented to in writing by such Holder or such Market-Maker, as applicable. Any amendments, modifications, supplements, waivers or consents pursuant to this Section 7(b) shall be by a writing executed by each of the parties hereto. (c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder or a Market-Maker, at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 7(c), which address initially is, with respect to the Initial Purchasers and the Market-Makers, the address of the Initial Purchasers (including the Market-Makers) set forth in the Purchase Agreement; (ii) if to the Company and the Guarantors, initially at the Company's address set forth in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 7(c); and (iii) to such other persons at their respective addresses as provided in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 7(c). All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next Business Day if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee, at the address specified in the Indenture. (d) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Registrable Securities in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all the terms of 24 this Agreement, and by taking and holding such Registrable Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such Person shall be entitled to receive the benefits hereof. The Initial Purchasers (in their capacity as Initial Purchasers) shall have no liability or obligation to the Company or the Guarantors with respect to any failure by a Holder to comply with, or any breach by any Holder of, any of the obligations of such Holder under this Agreement. (e) Purchases and Sales of Securities. The Company and the Guarantors shall not, and shall use their reasonable best efforts to cause their affiliates (as defined in Rule 405 under the Securities Act) not to, purchase and then resell or otherwise transfer any Registrable Securities. (f) Third Party Beneficiaries. Each Holder shall be a third party beneficiary to the agreements made hereunder (excluding those agreements made in Section 5 herein) between the Company and the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights or the rights of other Holders hereunder. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only, are not a part of this Agreement and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. (j) Miscellaneous. This Agreement contains the entire agreement between the parties relating to the subject matter hereof and supersedes all oral statements and prior writings with respect thereto. If any term, provision, covenant or restriction contained in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable or against public policy, the remainder of the terms, provisions, covenants and restrictions contained herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated. The Company, the Guarantors and the Initial Purchasers shall endeavor in good faith negotiations to replace the invalid, void or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, void or unenforceable provisions. 25 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. BPC HOLDING CORPORATION, By:/s/ James M. Kratochvil -------------------------- Name: James M. Kratochvil Title: Executive Vice President, Chief Financial Officer BERRY PLASTICS CORPORATION, By:/s/ James M. Kratochvil -------------------------- Name: James M. Kratochvil Title: Executive Vice President, Chief Financial Officer BERRY IOWA CORPORATION, PACKERWARE CORPORATION, KNIGHT PLASTICS, INC., BERRY STERLING CORPORATION, BERRY PLASTICS DESIGN CORPORATION, POLY-SEAL CORPORATION, VENTURE PACKAGING, INC., VENTURE PACKAGING MIDWEST, INC., BERRY PLASTICS TECHNICAL SERVICES, INC., CPI HOLDING CORPORATION, CARDINAL PACKAGING, INC., AEROCON, INC., BERRY TRI-PLAS CORPORATION, BERRY PLASTICS ACQUISITION CORPORATION III, PESCOR, INC., BERRY PLASTICS ACQUISITION CORPORATION IV, BERRY PLASTICS ACQUISITION CORPORATION V, BERRY PLASTICS ACQUISITION CORPORATION VI, BERRY PLASTICS ACQUISITION CORPORATION VII, BERRY PLASTICS ACQUISITION CORPORATION VIII, BERRY PLASTICS ACQUISITION CORPORATION IX, BERRY PLASTICS ACQUISITION CORPORATION X, BERRY PLASTICS ACQUISITION CORPORATION XI, BERRY PLASTICS ACQUISITION CORPORATION XII, 26 BERRY PLASTICS ACQUISITION CORPORATION XIII, BERRY PLASTICS ACQUISITION CORPORATION XIV, LLC, BERRY PLASTICS ACQUISITION CORPORATION XV, LLC, By:/s/ James M. Kratochvil -------------------------- Name: James M. Kratochvil Title: Executive Vice President, Chief Financial Officer 27 Confirmed and accepted as of the date first above written: J.P. MORGAN SECURITIES INC. For itself and on behalf of the Initial Purchasers, and for itself and on behalf of Goldman, Sachs & Co. as Market-Makers By:/s/ Pierre Maman - ------------------- Authorized Signatory The foregoing agreement is hereby agreed to and accepted as of the closing date of the Landis Acquisition (as defined in the Purchase Agreement). LANDIS PLASTICS, INC. By:/s/ James M. Kratochvil - -------------------------- Name: James M. Kratochvil Title: Executive Vice President, Chief Financial Officer EX-4.4 5 y92946exv4w4.txt SECOND SUPPLEMENTAL INDENTURE Exhibit 4.4 EXECUTION COPY SECOND SUPPLEMENTAL INDENTURE (this "Second Supplemental Indenture") dated as of November 20, 2003, among LANDIS PLASTICS, INC., an Illinois corporation (the "New Guarantor"), a subsidiary of BERRY PLASTICS CORPORATION (or its successor), a Delaware corporation (the "Company"), the Company, BPC HOLDING CORPORATION, BERRY IOWA CORPORATION, PACKERWARE CORPORATION, KNIGHT PLASTICS, INC., BERRY STERLING CORPORATION, BERRY PLASTICS DESIGN CORPORATION, POLY-SEAL CORPORATION, BERRY PLASTICS ACQUISITION CORPORATION III, VENTURE PACKAGING, INC., VENTURE PACKAGING MIDWEST, INC., BERRY PLASTICS TECHNICAL SERVICES, INC., CPI HOLDING CORPORATION, AEROCON, INC., PESCOR, INC., BERRY TRI-PLAS CORPORATION, BERRY PLASTICS ACQUISITION CORPORATION V, BERRY PLASTICS ACQUISITION CORPORATION VI, BERRY PLASTICS ACQUISITION CORPORATION VII, BERRY PLASTICS ACQUISITION CORPORATION VIII, BERRY PLASTICS ACQUISITION CORPORATION IX, BERRY PLASTICS ACQUISITION CORPORATION X, BERRY PLASTICS ACQUISITION CORPORATION XI, BERRY PLASTICS ACQUISITION CORPORATION XII, BERRY PLASTICS ACQUISITION CORPORATION XIII, each a Delaware corporation, BERRY PLASTICS ACQUISITION CORPORATION XIV, LLC and BERRY PLASTICS ACQUISITION CORPORATION XV, LLC, each a Delaware limited liability company, and CARDINAL PACKAGING, INC., an Ohio corporation (each, an "Existing Guarantor" and, collectively the "Existing Guarantors"), and U.S. BANK TRUST NATIONAL ASSOCIATION, a national banking association, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H : WHEREAS the Company and BPC HOLDING CORPORATION, BERRY IOWA CORPORATION, PACKERWARE CORPORATION, KNIGHT PLASTICS, INC., BERRY STERLING CORPORATION, BERRY PLASTICS DESIGN CORPORATION, POLY-SEAL CORPORATION, BERRY PLASTICS ACQUISITION CORPORATION III, VENTURE PACKAGING, INC., VENTURE PACKAGING MIDWEST, INC., BERRY PLASTICS TECHNICAL SERVICES, INC., CPI HOLDING CORPORATION, AEROCON, INC., PESCOR, INC., BERRY TRI-PLAS CORPORATION, CARDINAL PACKAGING, INC. have heretofore executed and delivered to the Trustee an Indenture (the "Indenture") dated as of July 22, 2002, providing for the issuance of an unlimited aggregate principal amount of 10-3/4% Senior Subordinated Notes due 2012 (the "Notes"); WHEREAS the Indenture was amended and supplemented pursuant to the terms of a Supplemental Indenture dated as of August 6, 2002 causing BERRY PLASTICS 2 ACQUISITION CORPORATION IV, a Delaware corporation ("BPAC IV"), BERRY PLASTICS ACQUISITION CORPORATION IV, BERRY PLASTICS ACQUISITION CORPORATION V, BERRY PLASTICS ACQUISITION CORPORATION VI, BERRY PLASTICS ACQUISITION CORPORATION VII, BERRY PLASTICS ACQUISITION CORPORATION VIII, BERRY PLASTICS ACQUISITION CORPORATION IX, BERRY PLASTICS ACQUISITION CORPORATION X, BERRY PLASTICS ACQUISITION CORPORATION XI, BERRY PLASTICS ACQUISITION CORPORATION XII, BERRY PLASTICS ACQUISITION CORPORATION XIII, BERRY PLASTICS ACQUISITION CORPORATION IV, LLC, and BERRY PLASTICS ACQUISITION CORPORATION XV, LLC, to become Note Guarantors (as defined in the Indenture). WHEREAS, BPAC IV has on this date merged with and into New Guarantor; WHEREAS, Section 5.01(b) of the Indenture requires New Guarantor to expressly assume the obligations of BPAC IV under the Indenture; and WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the Company and the Existing Guarantors are authorized to execute and deliver this Second Supplemental Indenture; NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Guarantor, the Company, the Existing Guarantors and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Notes as follows: 1. Agreement to Guarantee and Assumption of Obligations. The New Guarantor hereby expressly assumes all obligations of BPAC IV under the Indenture and agrees, jointly and severally with all the Existing Guarantors, to unconditionally guarantee the Company's obligations under the Notes on the terms and subject to the conditions set forth in Articles 11 and 12 of the Indenture and to be bound by all other applicable provisions of the Indenture and the Notes. 2. Ratification of Indenture; Supplemental Indentures Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Second Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby. 3. Governing Law. THIS SECOND SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 4. Trustee Makes No Representation. The Trustee makes no representation as to the validity or sufficiency of this Second Supplemental Indenture. 3 5. Counterparts. The parties may sign any number of copies of this Second Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 6. Effect of Headings. The Section headings herein are for convenience only and shall not effect the construction thereof. 4 IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed as of the date first above written. LANDIS PLASTICS, INC., By:/s/ James M. Kratochvil -------------------------- Name: James M. Kratochvil Title: EVP & CFO BERRY PLASTICS CORPORATION, By:/s/ James M. Kratochvil -------------------------- Name: James M. Kratochvil Title: EVP & CFO 5 BPC HOLDING CORPORATION, BERRY IOWA CORPORATION, PACKERWARE CORPORATION, KNIGHT PLASTICS, INC., BERRY STERLING CORPORATION, BERRY PLASTICS DESIGN CORPORATION, POLY-SEAL CORPORATION, BERRY PLASTICS ACQUISITION CORPORATION III, VENTURE PACKAGING, INC., VENTURE PACKAGING MIDWEST, INC., BERRY PLASTICS TECHNICAL SERVICES, INC., CPI HOLDING CORPORATION, AEROCON, INC., PESCOR, INC., BERRY TRI-PLAS CORPORATION, CARDINAL PACKAGING, INC., BERRY PLASTICS ACQUISITION CORPORATION V, BERRY PLASTICS ACQUISITION CORPORATION VI, BERRY PLASTICS ACQUISITION CORPORATION VII, BERRY PLASTICS ACQUISITION CORPORATION VIII, BERRY PLASTICS ACQUISITION CORPORATION IX, BERRY PLASTICS ACQUISITION CORPORATION X, BERRY PLASTICS ACQUISITION CORPORATION XI, BERRY PLASTICS ACQUISITION CORPORATION XII, BERRY PLASTICS ACQUISITION CORPORATION XIII, BERRY PLASTICS ACQUISITION CORPORATION XIV, LLC, BERRY PLASTICS ACQUISITION CORPORATION XV, LLC, By:/s/ James M. Kratochvil -------------------------- Name: James M. Kratochvil Title: EVP & CFO U.S.BANK TRUST NATIONAL ASSOCIATION, as Trustee, By:/s/ Beverly A. Freeney ------------------------- Name: Beverly A. Freeney Title: Vice-President EX-5.1 6 y92946exv5w1.txt OPINION OF FRIED, FRANK , HARRIS, ET. AL. Exhibit 5.1 [FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LLP LETTERHEAD] 212-859-8000 (FAX: 212-859-4000) January 9, 2004 Berry Plastics Corporation 101 Oakley Street Evansville, IN 47710 Ladies and Gentlemen: We have acted as special counsel to Berry Plastics Corporation, a Delaware corporation (the "Company"), BPC Holding Corporation ("Holding") and each of the guarantors listed on Schedule A hereto (the "Guarantors") in connection with the Company's offer to exchange up to $85,000,000 in aggregate principal amount of its 10 -3/4 % Senior Subordinated Notes due 2012 (the "Exchange Notes") which are being registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like principal amount of its 10 -3/4 % Senior Subordinated Notes due 2012 (the "Outstanding Notes" and together with the Exchange Notes, the "Notes") pursuant to the Registration Statement on Form S-4 filed with the Securities and Exchange Commission on January 9, 2004. Pursuant to the Indenture (as defined below) the Outstanding Notes are, and the Exchange Notes will be, unconditionally guaranteed, jointly and severally, on the terms and subject to the conditions set forth in the Indenture. All capitalized terms used herein that are defined in, or by reference in, the Indenture have the meanings assigned to such terms therein or by reference therein, unless otherwise defined herein. With your permission, all assumptions and statements of reliance herein have been made without any independent investigation or verification on our part except to the extent otherwise expressly stated, and we express no opinion with respect to the subject matter or accuracy of such assumptions or items relied upon. In connection with this opinion, we have (i) investigated such questions of law, (ii) examined originals or certified, conformed or reproduction copies of such agreements, instruments, documents and records of the Company and the Guarantors, such certificates of public officials and such other documents and (iii) received such information from officers and representatives of the Company and the Guarantors and others, as we have deemed necessary or appropriate for the purposes of this opinion. We have examined, among other documents, the following: (a) the Indenture dated July 22, 2002 {as supplemented by the supplemental indenture dated as of August 6, 2002 (the "Supplemental Indenture"), as further supplemented by the second supplemental indenture dated as of November 20, 2003 (the "Second Supplemental Indenture"), the "Indenture"}, among the Company, the Guarantors and U.S. Bank Trust National Association, as trustee (the "Trustee"); and (b) the Notes. The documents referred to in items (a) through (b) above are collectively referred to as the "Documents." In all such examinations, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of original or certified documents and the conformity to original or certified documents of all copies submitted to us as conformed or reproduction copies. As to various questions of fact relevant to the opinions expressed herein, we have relied upon, and assume the accuracy of, representations and warranties contained in the Documents and certificates and oral or written statements and other information of or from representatives of the Company, the Guarantors and others and assume compliance on the part of all parties to the Documents with their covenants and agreements contained therein. To the extent it may be relevant to the opinions expressed herein, we have assumed (i) that the Exchange Notes have been duly authenticated and delivered by the Trustee, (ii) that all of the parties to the Documents (other than the Company and Holding) are validly existing and in good standing under the laws of their respective jurisdictions of organization and have the power and authority to (a) execute and deliver the Documents, (b) perform their obligations thereunder and (c) consummate the transactions contemplated thereby, (iii) that the Documents have been duly authorized, executed and delivered by all of the parties thereto (other than the Company and Holding) and constitute valid and binding obligations of all the parties thereto (other than the Company and Holding ) enforceable against such parties in accordance with their respective terms, and (iv) that all of the parties to the Documents will comply with all laws applicable thereto. Based upon the foregoing, and subject to the limitations, qualifications and assumptions set forth herein, we are of the opinion that: 1. The Exchange Notes have been duly authorized, and when executed, issued and delivered in accordance with the terms of the Indenture in exchange for the Outstanding Notes, will constitute valid and binding obligations of the Company enforceable against the Company in accordance with their terms and will be entitled to the benefits of the Indenture. 2. The guarantees in the Indenture with respect to the Exchange Notes have been duly authorized, and when the Exchange Notes have been duly executed, issued and delivered in accordance with the terms of the Indenture in exchange for the Outstanding Notes, will constitute valid and binding obligations of the Guarantors, enforceable against the Guarantors in accordance with their terms and entitled to the benefits of the Indenture. The opinions set forth above are subject to the following qualifications: (A) We express no opinion as to the validity, binding effect or enforceability of any provision of the Documents relating to indemnification, contribution or exculpation. (B) We express no opinion as to the validity, binding effect or enforceability of any provision of the Documents: (i) containing any purported waiver, release, variation, disclaimer, consent or other agreement of similar effect (all of the foregoing, collectively, a "Waiver") by the Company or the Guarantors under any of such Documents to the extent limited by provisions of applicable law (including judicial decisions), or to the extent that such a Waiver applies to a right, claim, duty, defense or ground for discharge otherwise existing or occurring as a matter of law (including judicial decisions), except to the extent that such a Waiver is effective under, and is not prohibited by or void or invalid under provisions of applicable law (including judicial decisions); - 2 - (ii) related to (I) forum selection or submission to jurisdiction (including, without limitation, any waiver of any objection to venue in any court or of any objection that a court is an inconvenient forum) to the extent the validity, binding effect or enforceability of any provision is to be determined by any court other than a court of the State of New York, or (II) choice of governing law to the extent that the validity, binding effect or enforceability of any such provision is to be determined by any court other than a court of the State of New York or a federal district court sitting in the State of New York, in each case, applying the law and choice of law principles of the State of New York; (iii) specifying that provisions thereof may be waived only in writing, to the extent that an oral agreement or an implied agreement by trade practice or course of conduct has been created that modifies any provision of such agreement; and (iv) purporting to give any person or entity the power to accelerate obligations without any notice to the obligor. (C) Our opinions are subject to the following: (i) bankruptcy, insolvency, reorganization, moratorium and other laws now or hereafter in effect affecting creditors' rights generally; (ii) general equitable principles (including, without limitation, standards of materiality, good faith, fair dealing and reasonableness, equitable defenses and limits on the availability of equitable remedies) whether such principles are considered in a proceeding in equity or at law; and (iii) the application of any applicable fraudulent conveyance, fraudulent transfer, fraudulent obligation, or preferential transfer law or any law governing the distribution of assets of any person now or hereafter in effect affecting creditors' rights and remedies generally. (D) Provisions in the Indenture that provide that the Guarantors' liability thereunder shall not be affected by (i) amendments to, or waivers of, provisions of documents governing the guaranteed obligations, (ii) other actions, events or circumstances that make more burdensome or otherwise change the obligations and liabilities of the Guarantors, or (iii) actions or failures to act on the part of the holders or Trustee, might not be enforceable if such amendments, waivers, actions, events or circumstances change the essential nature of the terms and conditions of the obligation and guarantee of the Guarantors under the Indenture. (E) We have assumed that consideration that is fair and sufficient to support the guarantees of each Guarantor under the Indenture, and has been, and would be deemed by a court of competent jurisdiction to have been, duly received by each Guarantor. The opinions expressed herein are limited to the laws of the United States of America and the laws of the State of New York and, to the extent relevant, the General Corporation Law of the State of Delaware, each as currently in effect, together with applicable provisions of the Constitution of Delaware and relevant decisional law. The opinions expressed herein are given as of the date hereof, and we undertake no obligation to supplement this letter if any applicable laws change after the date hereof or if we become aware of any facts that might change the opinions expressed herein or for any other reason. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to this firm under the caption "Legal Matters" in the prospectus that is included in the Registration Statement. In giving this consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act. - 3 - The opinions expressed herein are solely for your benefit in connection with the transaction covered in the first paragraph of this letter and may not be relied upon in any manner or for any purpose by any other person or entity and may not be quoted in whole or in part without our prior written consent. Very truly yours, /s/ FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LLP ------------------------------------------------ FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LLP - 4 - SCHEDULE A BPC Holding Corporation Berry Iowa Corporation Packerware Corporation Knight Plastics, Inc. Berry Sterling Corporation Berry Plastics Design Corporation Poly-Seal Corporation Venture Packaging, Inc. Venture Packaging Midwest Berry Plastics Technical Services, Inc. CPI Holding Corporation Cardinal Packaging, Inc. Aero Con, Inc. Berry Tri-Plas Corporation Berry Plastics Acquisition Corporation III Pescor, Inc. Berry Plastics Acquisition Corporation V Berry Plastics Acquisition Corporation VI Berry Plastics Acquisition Corporation VII Berry Plastics Acquisition Corporation VIII Berry Plastics Acquisition Corporation IX Berry Plastics Acquisition Corporation X Berry Plastics Acquisition Corporation XI Berry Plastics Acquisition Corporation XII Berry Plastics Acquisition Corporation XIII Berry Plastics Acquisition Corporation XIV, LLC Berry Plastics Acquisition Corporation XV, LLC Landis Plastics, Inc. - 5 - EX-10.3 7 y92946exv10w3.txt AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT Exhibit 10.3 AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT DATED AS OF NOVEMBER 10, 2003 AMONG BERRY PLASTICS CORPORATION, BPC HOLDING CORPORATION, CERTAIN SUBSIDIARIES OF BERRY PLASTICS CORPORATION AS GUARANTORS, VARIOUS LENDERS, GOLDMAN SACHS CREDIT PARTNERS L.P., AS ADMINISTRATIVE AGENT, JPMORGAN CHASE BANK, AS SYNDICATION AGENT, FLEET NATIONAL BANK, AS COLLATERAL AGENT, ISSUING BANK AND SWING LINE LENDER, AND THE ROYAL BANK OF SCOTLAND AND GENERAL ELECTRIC CAPITAL CORPORATION, AS CO-DOCUMENTATION AGENTS -------------------------------------------------------- $480,000,000 SENIOR SECURED CREDIT FACILITIES -------------------------------------------------------- TABLE OF CONTENTS
Page SECTION 1. DEFINITIONS AND INTERPRETATION................................................... 2 1.1. Definitions...................................................................... 2 1.2. Accounting Terms................................................................. 39 1.3. Interpretation, Etc.............................................................. 40 SECTION 2. LOANS AND LETTERS OF CREDIT...................................................... 40 2.1. Term Loans....................................................................... 40 2.2. Delayed Draw Loans............................................................... 41 2.3. Revolving Loans.................................................................. 42 2.4. Issuance of Letters of Credit and Purchase of Participations Therein............. 43 2.5. Swing Line Loans................................................................. 48 2.6. Pro Rata Shares; Availability of Funds........................................... 51 2.7. Use of Proceeds.................................................................. 51 2.8. Evidence of Debt; Register; Lenders' Books and Records; Notes.................... 52 2.9. Interest on Loans................................................................ 53 2.10. Conversion/Continuation.......................................................... 54 2.11. Default Interest................................................................. 55 2.12. Fees............................................................................. 55 2.13. Scheduled Payments/Commitment Reductions......................................... 57 2.14. Voluntary Prepayments/Commitment Reductions...................................... 61 2.15. Mandatory Prepayments/Commitment Reductions...................................... 62 2.16. Application of Prepayments/Reductions............................................ 65 2.17. General Provisions Regarding Payments............................................ 66 2.18. Ratable Sharing.................................................................. 67 2.19. Making or Maintaining Eurodollar Rate Loans...................................... 68 2.20. Increased Costs; Capital Adequacy................................................ 70 2.21. Taxes; Withholding, Etc.......................................................... 71 2.22. Obligation to Mitigate........................................................... 74 2.23. Defaulting Lenders............................................................... 75 2.24. Removal or Replacement of a Lender............................................... 76 SECTION 3. CONDITIONS PRECEDENT............................................................. 77 3.1. Closing Date..................................................................... 77 3.2. Conditions to Each Credit Extension.............................................. 83 3.3. Conditions to Effectiveness...................................................... 85 3.4. Effect of Agreement on Other Credit Documents.................................... 85 SECTION 4. REPRESENTATIONS AND WARRANTIES................................................... 85
-i- 4.1. Organization; Requisite Power and Authority; Qualification....................... 86 4.2. Capital Stock and Ownership...................................................... 86 4.3. Due Authorization................................................................ 86 4.4. Guarantor Subsidiaries........................................................... 86 4.5. No Conflict...................................................................... 86 4.6. Governmental Consents............................................................ 87 4.7. Binding Obligation............................................................... 87 4.8. Historical Financial Statements.................................................. 87 4.9. Projections...................................................................... 87 4.10. No Material Adverse Change....................................................... 88 4.11. Adverse Proceedings, Etc......................................................... 88 4.12. Payment of Taxes................................................................. 88 4.13. Properties....................................................................... 88 4.14. Environmental Matters............................................................ 89 4.15. No Defaults...................................................................... 89 4.16. Governmental Regulation.......................................................... 89 4.17. Margin Stock..................................................................... 90 4.18. Employee Matters................................................................. 90 4.19. Employee Benefit Plans........................................................... 90 4.20. Solvency......................................................................... 91 4.21. [Intentionally Omitted].......................................................... 91 4.22. Compliance with Statutes, Etc.................................................... 91 4.23. Disclosure....................................................................... 91 SECTION 5. AFFIRMATIVE COVENANTS............................................................ 92 5.1. Financial Statements and Other Reports........................................... 92 5.2. Existence........................................................................ 95 5.3. Payment of Taxes and Claims...................................................... 95 5.4. Maintenance of Properties........................................................ 96 5.5. Insurance........................................................................ 96 5.6. Inspections...................................................................... 96 5.7. Lenders Meetings................................................................. 97 5.8. Compliance with Laws............................................................. 97 5.9. Environmental.................................................................... 97 5.10. Subsidiaries..................................................................... 98 5.11. Additional Material Real Estate Assets........................................... 99 5.12. Interest Rate Protection......................................................... 99 5.13. Further Assurances............................................................... 99 5.14. [Intentionally omitted.]......................................................... 100 SECTION 6. NEGATIVE COVENANTS............................................................... 100 6.1. Indebtedness..................................................................... 100 6.2. Liens............................................................................ 103 6.3. Equitable Lien................................................................... 105
-ii- 6.4. No Further Negative Pledges...................................................... 105 6.5. Restricted Junior Payments....................................................... 106 6.6. Restrictions on Subsidiary Distributions......................................... 107 6.7. Investments...................................................................... 107 6.8. Financial Covenants.............................................................. 108 6.9. Fundamental Changes; Disposition of Assets; Acquisitions......................... 113 6.10. Disposal of Subsidiary Interests................................................. 115 6.11. Sales and Lease-Backs............................................................ 115 6.12. Transactions with Shareholders and Affiliates.................................... 115 6.13. Conduct of Business.............................................................. 116 6.14. Permitted Activities of Holdings................................................. 116 6.15. Amendments or Waivers of Certain Related Agreements.............................. 116 6.16. Amendments or Waivers of or with respect to Subordinated Indebtedness............ 116 6.17. Fiscal Year...................................................................... 117 6.18. Derivative Transactions.......................................................... 117 SECTION 7. GUARANTY......................................................................... 117 7.1. Guaranty of the Obligations...................................................... 117 7.2. Contribution by Guarantors....................................................... 117 7.3. Payment by Guarantors............................................................ 118 7.4. Liability of Guarantors Absolute................................................. 119 7.5. Waivers by Guarantors............................................................ 121 7.6. Guarantors' Rights of Subrogation, Contribution, Etc............................. 122 7.7. Subordination of Other Obligations............................................... 122 7.8. Continuing Guaranty.............................................................. 123 7.9. Authority of Guarantors or Company............................................... 123 7.10. Financial Condition of Company................................................... 123 7.11. Bankruptcy, Etc.................................................................. 123 7.12. Discharge of Guaranty Upon Sale of Guarantor..................................... 124 SECTION 8. EVENTS OF DEFAULT................................................................ 124 8.1. Events of Default................................................................ 124 SECTION 9. AGENTS........................................................................... 128 9.1. Appointment of Agents............................................................ 128 9.2. Powers and Duties................................................................ 128 9.3. General Immunity................................................................. 129 9.4. Agents Entitled to Act as Lender................................................. 130 9.5. Lenders' Representations, Warranties and Acknowledgment.......................... 130 9.6. Right to Indemnity............................................................... 130 9.7. Sub-Agents....................................................................... 131 9.8. Successor Administrative Agent, Collateral Agent and Swing Line Lender........... 131
-iii- 9.9. Collateral Documents and Guaranty................................................ 132 SECTION 10. MISCELLANEOUS.................................................................... 133 10.1. Notices.......................................................................... 133 10.2. Expenses......................................................................... 133 10.3. Indemnity........................................................................ 134 10.4. Set-Off.......................................................................... 135 10.5. Amendments and Waivers........................................................... 135 10.6. Successors and Assigns; Participations........................................... 138 10.7. Independence of Covenants........................................................ 141 10.8. Survival of Representations, Warranties and Agreements........................... 141 10.9. No Waiver; Remedies Cumulative................................................... 141 10.10. Marshalling; Payments Set Aside.................................................. 142 10.11. Severability..................................................................... 142 10.12. Obligations Several; Independent Nature of Lenders' Rights....................... 142 10.13. Headings......................................................................... 142 10.14. APPLICABLE LAW................................................................... 142 10.15. CONSENT TO JURISDICTION.......................................................... 143 10.16. WAIVER OF JURY TRIAL............................................................. 143 10.17. Confidentiality.................................................................. 144 10.18. Usury Savings Clause............................................................. 145 10.19. Counterparts..................................................................... 145 10.20. Waiver of Certain Provisions Relating to the Landis Acquisition Subordinated Notes................................................... 145
-iv- APPENDICES: A-1 Term Loan Commitments A-2 Delayed Draw Commitments A-3 Revolving Commitments B Notice Addresses SCHEDULES:(1) 1.1 Redemption of Certain Existing Notes 3.1(l) Closing Date Mortgaged Properties 4.1 Jurisdictions of Organization and Qualification 4.2 Capital Stock and Ownership 4.4 Guarantors 4.13 Real Estate Assets 4.14 Environmental Matters 6.1(g) Surviving Indebtedness 6.2(l) Certain Liens 6.7 Existing Investments 6.8(d)(iv) Historical Quarters EXHIBITS:(2) A-1 Funding Notice A-2 Conversion/Continuation Notice A-3 Issuance Notice B-1 Term Loan Note B-2 Delayed Draw Loan Note B-3 Revolving Loan Note B-4 Swing Line Note C Compliance Certificate D Opinions of Counsel E Assignment Agreement F Certificate Re Non-bank Status G-1 Closing Date Certificate G-2 Solvency Certificate H Counterpart Agreement I Pledge and Security Agreement J Mortgage
- -------- (1) Schedules 4.1 through 4.14, relating to the representations and warranties of the Credit Parties, will be updated and speak as of the effective date. Other schedules will not change from the Original Agreement. (2) The Exhibits will not change from the Original Agreement. -v- K Landlord's Consent, Estoppel Certificate and Amendment L Intercompany Subordination Agreement M Joinder Agreement
-vi- AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT This AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT, dated as of November 10, 2003, is entered into by and among BERRY PLASTICS CORPORATION, a Delaware corporation ("COMPANY"), BPC HOLDING CORPORATION, a Delaware corporation ("HOLDINGS"), CERTAIN SUBSIDIARIES OF COMPANY, as Guarantors, the Lenders party hereto from time to time, GOLDMAN SACHS CREDIT PARTNERS L.P. ("GSCP"), as Administrative Agent, (together with its permitted successors in such capacity, "ADMINISTRATIVE AGENT"), JPMORGAN CHASE BANK ("JPMCB"), as Syndication Agent (together with its permitted successors and assigns in such capacity, "SYNDICATION AGENT"), FLEET NATIONAL BANK, as Collateral Agent (together with its permitted successors in such capacity, "COLLATERAL AGENT"), Issuing Bank (together with its permitted successors in such capacity, "ISSUING BANK") and Swing Line Lender (together with its permitted successors in such capacity, "SWING LINE LENDER") and THE ROYAL BANK OF SCOTLAND and GENERAL ELECTRIC CAPITAL CORPORATION, as Co-Documentation Agents (together with their permitted successors and assigns in such capacity, "CO-DOCUMENTATION AGENTS"). RECITALS: WHEREAS, capitalized terms used in these Recitals shall have the respective meanings set forth for such terms in Section 1.1 hereof; WHEREAS, Company is the borrower under the Credit and Guaranty Agreement, dated as of July 22, 2002, by and among Company, Holdings, certain Subsidiaries of Company as Guarantors, the Agents and various Lenders (the "ORIGINAL AGREEMENT"); WHEREAS, the Term Loan Lenders have agreed to extend $330,000,000 of Term Loans to Company for funding on the Effective Date, the proceeds of which will be used to prepay outstanding Term Loans (as defined in the Original Agreement) on the Term Loan Funding Date pursuant to Section 2.14 of the Original Agreement; WHEREAS, the Delayed Draw Lenders have agreed to extend $50,000,000 in Delayed Draw Commitments hereunder to replace the outstanding Delayed Draw Commitments (as defined in the Original Agreement); WHEREAS, Company has secured all of its Obligations by granting to Collateral Agent, for the benefit of Secured Parties, a First Priority Lien on substantially all of its assets, including a pledge of all of the Capital Stock of each of its Domestic Subsidiaries (except for any stock held by, or pledged for the benefit of third parties), 65% of all the Capital Stock of each of its Foreign Subsidiaries that is directly owned by Company or any Domestic Subsidiary and all Indebtedness owed to Company by any Subsidiary; WHEREAS, Guarantors have guaranteed the Obligations of Company hereunder and secured their respective Obligations by granting to Collateral Agent, for the benefit of Secured Parties, a First Priority Lien on substantially all of their respective assets, including a pledge of all of the Capital Stock of each of their respective Domestic Subsidiaries (except for any stock held by, or pledged for the benefit of third parties), and 65% of all the Capital Stock of each of their respective Foreign Subsidiaries that is directly owned by Company or any Domestic Subsidiary, and all indebtedness for borrowed money owed to any Guarantor by Company or any other Guarantors; WHEREAS, Company intends to acquire Landis Plastics, Inc., an Illinois corporation ("LANDIS"), pursuant to an agreement and plan of merger dated October 15, 2003 (the "LANDIS MERGER AGREEMENT") by and among Company, Berry Plastics Acquisition Corporation IV, a Delaware corporation and a wholly-owned subsidiary of Company ("MERGER SUB"), Landis, all shareholders of Landis and the other parties thereto, which provides for the merger of Landis with and into Merger Sub with Landis being the surviving corporation (the "LANDIS ACQUISITION"); WHEREAS, Company intends to finance the Landis Acquisition with internally-generated Cash (which would have been $25,000,000 assuming the Landis Acquisition Closing Date had occurred on September 27, 2003) together with (a) at least $80,000,000 and not more than $100,000,000 in proceeds from the issuance of additional Senior Subordinated Notes pursuant to the Senior Subordinated Notes Indenture (the "LANDIS ACQUISITION SENIOR SUBORDINATED NOTES"), (b) at least $60,000,000 in proceeds to Company from the issuance of common equity by Holdings, (c) $50,00,000 in proceeds from the borrowing of Delayed Draw Loans hereunder and (d) proceeds of the borrowing of no more than $10,000,000 in aggregate principal amount of Revolving Loans hereunder; WHEREAS, Company has requested, and Requisite Lenders have agreed, to enter into this Amended and Restated Credit and Guaranty Agreement, to amend and restate the Original Agreement in accordance with Section 10.5 thereof, effective as of the Effective Time upon satisfaction or waiver of the conditions precedent set forth in Section 3.3. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. DEFINITIONS AND INTERPRETATION 1.1. DEFINITIONS. The following terms used herein, including in the preamble, recitals, exhibits and schedules hereto, shall have the following meanings: -2- "2004 NOTES" means Company's 12-1/4% Senior Subordinated Notes due 2004 and Company's 12-1/4% Series B Senior Subordinated Notes due 2004. "2006 NOTES" means Holdings' 12-1/2% Senior Secured Notes due 2006. "ADDITIONAL ISSUING BANK" as defined in Section 2.4(i). "ADDITIONAL NET SALES" means, for any Fiscal Year, the sum of (a) for each Person directly or indirectly acquired by the Company in a Permitted Acquisition during such Fiscal Year, the product of (i) 7.5% multiplied by (ii) the historical net sales of such Person during its most recent four full Fiscal Quarters immediately preceding the Permitted Acquisition for which quarterly financial statements have been delivered to the Lenders pursuant to Section 5.1(b), multiplied by (iii) a fraction, the denominator of which is 365 and the numerator of which is the number of days from (but excluding) the date of such Permitted Acquisition to (and including) the last day of such Fiscal Year, and (b) for each Person directly or indirectly acquired by the Company in a Permitted Acquisition during any prior Fiscal Year, the product of (i) 7.5% multiplied by (ii) the historical net sales of such Person during its most recent four full Fiscal Quarters immediately preceding the Permitted Acquisition for which quarterly financial statements have been delivered to the Lenders pursuant to Section 5.1(b). "ADDITIONAL SPONSOR EQUITY" means Cash proceeds received by Holdings from the issuance of its Capital Stock to, or other capital contributions by one or more Sponsors for their own account on any day after the Closing Date, in an aggregate amount not to exceed $100,000,000 during the term of this Agreement. "ADJUSTED EURODOLLAR RATE" means, for any Interest Rate Determination Date with respect to an Interest Period for a Eurodollar Rate Loan, the rate per annum obtained by dividing (and rounding upward to the next whole multiple of 1/16 of 1%) (i) (a) the rate per annum (rounded to the nearest 1/100 of 1%) equal to the rate determined by Administrative Agent to be the offered rate which appears on the page of the Dow Jones Telerate Service which displays an average British Bankers Association Interest Settlement Rate (such page currently being page number 3740 or 3750, as applicable) for deposits (for delivery on the first day of such period) with a term equivalent to such period in Dollars, determined as of approximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date, or (b) in the event the rate referenced in the preceding clause (a) does not appear on such page or service or if such page or service shall cease to be available, the rate per annum (rounded to the nearest 1/100 of 1%) equal to the rate determined by Administrative Agent to be the offered rate on such other page or other service which displays an average British Bankers Association Interest Settlement Rate for deposits (for delivery on the first day of such period) with a term equivalent to such period in Dollars, determined as of approximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date, or (c) in the event the rates referenced in the preceding clauses (a) and (b) are not available, the -3- rate per annum (rounded to the nearest 1/100 of 1%) equal to the offered quotation rate to first class banks in the London interbank market by JPMCB for deposits (for delivery on the first day of the relevant period) in Dollars of amounts in same day funds comparable to the principal amount of the applicable Loan of Administrative Agent, in its capacity as a Lender, for which the Adjusted Eurodollar Rate is then being determined with maturities comparable to such period as of approximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date, by (ii) an amount equal to (a) one minus (b) the Applicable Reserve Requirement. "ADMINISTRATIVE AGENT" as defined in the preamble hereto. "ADVERSE PROCEEDING" means any action, suit, proceeding (whether administrative, judicial or otherwise), governmental investigation or arbitration (whether or not purportedly on behalf of Holdings or any of its Subsidiaries) at law or in equity, or before or by any Governmental Authority, domestic or foreign (including any Environmental Claims), whether pending or, to the knowledge of Holdings or any of its Subsidiaries, threatened against or affecting Holdings or any of its Subsidiaries or any property of Holdings or any of its Subsidiaries. "AFFECTED LENDER" as defined in Section 2.19(b). "AFFECTED LOANS" as defined in Section 2.19(b). "AFFILIATE" means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, that Person, provided no Person shall be an Affiliate of Holdings, Company or any of its Subsidiaries solely because such Person controls, or is under common control with, one or more of the entities constituting the Sponsors. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power (i) to vote 10% or more of the Securities having ordinary voting power for the election of directors of such Person or (ii) to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise. "AGENT" means each of Syndication Agent, Administrative Agent, Collateral Agent and Co-Documentation Agents and, solely for the purposes of Sections 9.3, 9.6, 10.2 and 10.3, the Issuing Bank and Swing Line Lender. "AGGREGATE AMOUNTS DUE" as defined in Section 2.18. "AGGREGATE PAYMENTS" as defined in Section 7.2. -4- "AGREEMENT" means this Amended and Restated Credit and Guaranty Agreement, dated as of November 10, 2003, as it may be amended, supplemented or otherwise modified from time to time. "APPLICABLE DELAYED DRAW COMMITMENT FEE PERCENTAGE" means 0.75% per annum. "APPLICABLE MARGIN" and "APPLICABLE REVOLVING COMMITMENT FEE PERCENTAGE" mean (i) with respect to Revolving Loans that are Eurodollar Rate Loans and the Applicable Revolving Commitment Fee Percentage, (a) from the Closing Date until the date of delivery of the Compliance Certificate and the financial statements for the Fiscal Quarter ending on or near March 30, 2003, a percentage, per annum, determined by reference to the following table as if the Leverage Ratio then in effect were in excess of 4.5:1.00; and (b) thereafter, a percentage, per annum, determined by reference to the Leverage Ratio in effect from time to time as set forth below:
APPLICABLE REVOLVING LEVERAGE APPLICABLE MARGIN COMMITMENT RATIO FOR REVOLVING LOANS FEE PERCENTAGE - --------------------------------------------------------------------------- > or = 4.50 : 1.00 2.75% 0.50 % - --------------------------------------------------------------------------- < 4.50 : 1.00 2.50% 0.50 % > or = 4.00 : 1.00 - --------------------------------------------------------------------------- < 4.00 : 1.00 2.25% 0.375 % > or = 3.50 : 1.00 - --------------------------------------------------------------------------- < 3.50 : 1.00 2.00% 0.375 %
and (ii) with respect to Swing Line Loans and Revolving Loans that are Base Rate Loans, an amount equal to (a) the Applicable Margin for Eurodollar Rate Loans as set forth in clause (i)(a) or (i)(b) above, as applicable, minus (b) 1.00% per annum. No change in the Applicable Margin or the Applicable Revolving Commitment Fee Percentage shall be effective until three Business Days after the date on which Administrative Agent shall have received the applicable financial statements and a Compliance Certificate pursuant to Section 5.1(d) calculating the Leverage Ratio. At any time Company has not submitted to Administrative Agent the applicable information as and when required under Section 5.1(d), the Applicable Margin and the Applicable Revolving Commitment Fee Percentage shall be determined as if the Leverage Ratio were in excess of 4.5:1.00. Within one Business Day of receipt of the applicable information under Section 5.1(d), Administrative Agent shall give each Lender telefacsimile or telephonic notice (confirmed in writing) of the Applicable Margin and the Applicable Revolving Commitment Fee Percentage in effect from such date. -5- "APPLICABLE RESERVE REQUIREMENT" means, at any time, for any Eurodollar Rate Loan, the maximum rate, expressed as a decimal, at which reserves (including, without limitation, any basic marginal, special, supplemental, emergency or other reserves) are required to be maintained for eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D of the Board of Governors of the Federal Reserve System) under regulations issued from time to time by the Board of Governors of the Federal Reserve System or other applicable banking regulator. Without limiting the effect of the foregoing, the Applicable Reserve Requirement shall reflect any other reserves required to be maintained by such member banks with respect to (i) any category of liabilities consisting of deposits by reference to which the applicable Adjusted Eurodollar Rate is to be determined, or (ii) any category of extensions of credit or other assets consisting of Eurodollar Rate Loans. A Eurodollar Rate Loan shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credit for proration, exceptions or offsets that may be available from time to time to the applicable Lender. The rate of interest on Eurodollar Rate Loans shall be adjusted automatically on and as of the effective date of any change in the Applicable Reserve Requirement. "ASSET SALE" means a sale, lease or sub-lease (as lessor or sublessor), assignment, conveyance, transfer or other disposition to, or any exchange of property with, any Person (other than Holdings, Company or any Guarantor Subsidiary), in one transaction or a series of transactions, of all or any part of Holdings' or any of its Subsidiaries' businesses, assets or properties of any kind, whether real, personal, or mixed and whether tangible or intangible, whether now owned or hereafter acquired, including, without limitation, the Capital Stock of any of Holdings' Subsidiaries, other than (i) inventory sold or leased in the ordinary course of business of Company and its Subsidiaries (excluding any such sales by operations or divisions discontinued or to be discontinued), (ii) Cash Equivalents sold for Cash or Cash Equivalents in the ordinary course of business of Company and its Subsidiaries, (iii) the sale or discount without recourse of accounts receivable only in connection with the compromise thereof or the assignment of past-due accounts receivable for collection, (iv) sale and lease-back transactions permitted under Section 6.11, and (v) sales of other assets for aggregate consideration of less than $2,000,000 with respect to any transaction or series of related transactions, provided, all sales pursuant to clause (v) during any Fiscal Year do not exceed $5,000,000 in the aggregate. "ASSIGNMENT AGREEMENT" means an Assignment and Assumption Agreement in the form of Exhibit E, with such amendments or modifications as may be approved by Administrative Agent. "AUTHORIZED OFFICER" means, as applied to any Person, any individual holding the position of chairman of the board (if an officer), chief executive officer, president or one of its vice presidents (or the equivalent thereof), and such Person's chief financial officer, controller or treasurer. -6- "BANKRUPTCY CODE" means Title 11 of the United States Code entitled "Bankruptcy," as now and hereafter in effect, or any successor statute. "BASE RATE" means, for any day, a rate per annum equal to the greater of (i) the Prime Rate in effect on such day and (ii) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "BASE RATE LOAN" means a Loan bearing interest at a rate determined by reference to the Base Rate. "BENEFICIARY" means each Agent, Issuing Bank, Lender and Lender Counterparty. "BUDGETED AMOUNT" as defined in Section 6.8(c). "BUSINESS DAY" means any day excluding (i) Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to close and (ii) solely with respect to all notices, determinations, fundings and payments in connection with the Adjusted Eurodollar Rate or any Eurodollar Rate Loans, also any day which is not a day for trading by and between banks in Dollar deposits in the London interbank market. "CAPITAL LEASE" means, as applied to any Person, any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person. "CAPITAL STOCK" means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation), including, without limitation, partnership interests and membership interests, and any and all warrants, rights or options to purchase or other arrangements or rights to acquire any of the foregoing. "CASH" means money, currency or a credit balance in any demand or Deposit Account. "CASH EQUIVALENTS" means, as at any date of determination, (i) marketable securities (A) issued or directly and unconditionally guaranteed as to interest and principal by the United States of America or (B) issued by any agency of the United States of America the obligations of which are backed by the full faith and credit of the United States of America, in each -7- case maturing within one year after such date; (ii) marketable direct obligations issued by any state of the United States of America or the District of Columbia or any political subdivision or instrumentality thereof, in each case maturing within one year after such date and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody's; (iii) commercial paper maturing no more than one year from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit, time deposits, eurodollar time deposits, overnight bank deposits or bankers' acceptances maturing within one year after such date and issued or accepted by, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia that has combined capital and surplus and undivided profits of not less than $500,000,000; (v) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (i) or (ii) above and entered into with any commercial bank satisfying the requirements of clause (iv) above; (vi) solely in respect of the ordinary course cash management activities of the Foreign Subsidiaries, equivalents of the investments described in clauses (i) and (ii) above to the extent guaranteed by the United Kingdom or the European Union and equivalents of the investments described in clause (iv) above issued, accepted or offered by (a) the local office of any commercial bank meeting the requirements of clause (iv) above in the jurisdiction of organization of the applicable Foreign Subsidiary or (b) the local office of any commercial bank organized under the laws of the jurisdiction of organization of the applicable Foreign Subsidiary which commercial bank (1) has combined capital and surplus and undivided profits of not less than $1,000,000,000 and (2) a long-term rating for Dollar-denominated obligations of at least A-1 from S&P or the equivalent rating from Moody's; and (vii) shares of any money market mutual fund that (a) complies with the criteria set forth in Securities and Exchange Commission Rule 2a-7 under the Investment Company Act of 1940, (b) has net assets of not less than $500,000,000, and (c) has the highest rating obtainable from either S&P or Moody's. "CERTIFICATE RE NON-BANK STATUS" means a certificate substantially in the form of Exhibit F. "CHANGE OF CONTROL" means, at any time, (i) at least 51% on a fully-diluted basis of the outstanding voting power of the Voting Stock of Holdings shall cease to be beneficially owned and controlled by one or more of the Sponsors; (ii) any person or "group" (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) other than one or more of the Sponsors (A) shall beneficially own a percentage of the economic interests in the Voting Stock of Holdings on a fully-diluted basis that is greater than the percentage of the economic interests in the Voting Stock of Holdings on a fully-diluted basis then held by the Sponsors, taken together, or (B) shall have obtained the power (whether or not exercised) to elect a majority of the members of the board of directors (or similar governing body) of Holdings; (iii) Holdings shall cease to beneficially own and control 100% on a fully-diluted basis of the outstanding economic and voting interest in the Capital Stock of Company; (iv) the majority of the seats (other than vacant seats) on the board of directors (or similar governing body) of Holdings cease to be occupied by -8- Persons who either (a) were members of the board of directors of the Holdings on the Closing Date or (b) were either (x) nominated for election by the board of directors of Holdings, a majority of whom were directors on the Closing Date or whose election or nomination for election was previously approved by a majority of such directors or (y) designated or appointed by Sponsor; or (v) any "change of control" or similar event under the Senior Subordinated Note Documents shall occur. "CLASS" means (i) with respect to Lenders, each of the following classes of Lenders: (a) Lenders having Delayed Draw Loan Exposure, (b) Lenders having Term Loan Exposure and (c) Lenders having Revolving Exposure (including Swing Line Lender), (ii) with respect to Loans, each of the following classes of Loans: (a) Delayed Draw Loans, (b) Term Loan, and (c) Revolving Loans and (iii) with respect to Commitments, each of the following classes of Commitments: (a) Delayed Draw Commitments, (b) Term Loan Commitments and (c) Revolving Commitments. "CLOSING DATE" means July 22, 2002, the date on which the Term Loans (as defined in the Original Agreement) were made under the Original Agreement. "CLOSING DATE CERTIFICATE" means a Closing Date Certificate substantially in the form of Exhibit G-1. "CLOSING DATE MORTGAGED PROPERTY" as defined in Section 3.1(l). "CO-DOCUMENTATION AGENTS" as defined in the preamble hereto. "COLLATERAL" means, collectively, all of the real, personal and mixed property (including Capital Stock) whether now owned or hereafter acquired in which Liens are purported to be granted pursuant to the Collateral Documents as security for the Obligations. "COLLATERAL AGENT" as defined in the preamble hereto. "COLLATERAL DOCUMENTS" means the Pledge and Security Agreement, the Mortgages, the Landlord's Consent, Estoppel Certificate and Amendments, if any, and all other instruments, documents and agreements delivered by any Credit Party pursuant to this Agreement or any of the other Credit Documents in order to grant to Collateral Agent, for the benefit of Lenders, a Lien on any real, personal or mixed property of that Credit Party as security for the Obligations. "COLLATERAL QUESTIONNAIRE" means a certificate in form satisfactory to the Collateral Agent that provides information with respect to the personal or mixed property of each Credit Party. "COMPANY" as defined in the preamble hereto. -9- "COMMITMENT" means any Revolving Commitment, Term Loan Commitment or Delayed Draw Commitment. "COMMITMENT PERIOD" means the Delayed Draw Commitment Period or the Revolving Commitment Period. "COMMITMENT TERMINATION DATE" means the Delayed Draw Commitment Termination Date or the Revolving Commitment Termination Date. "COMPLIANCE CERTIFICATE" means a Compliance Certificate substantially in the form of Exhibit C. "CONSOLIDATED ADJUSTED EBITDA" means, for any period, an amount determined for Holdings and its Subsidiaries on a consolidated basis equal to the sum, without duplication, of the amounts for such period of (i) Consolidated Net Income, plus (ii) to the extent reducing Consolidated Net Income, (a) Consolidated Interest Expense, (b) provisions for taxes based on income, (c) total depreciation expense, (d) total amortization expense, (e) other non-Cash items (excluding any such non-Cash item to the extent that it represents an accrual or reserve for potential Cash items in any future period or amortization of a prepaid Cash item that was paid in a prior period) and (f) Transaction Costs and Landis Acquisition Transaction Costs payable in Cash by Holdings and Company with respect to such period, minus (iii) non-Cash items increasing Consolidated Net Income for such period (excluding any such non-Cash item to the extent it represents the reversal of an accrual or reserve for potential Cash item in any prior period). "CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the aggregate of all expenditures of Holdings and its Subsidiaries during such period determined on a consolidated basis that, in accordance with GAAP, are included in "purchase of property and equipment" or similar items reflected in the consolidated statement of cash flows of Holdings and its Subsidiaries, other than any amount of such expenditures that constitute Permitted Acquisition Expenses or the permitted application of Net Insurance/Condemnation Proceeds in accordance with Section 2.15(b). "CONSOLIDATED CASH INTEREST EXPENSE" means, for any period, Consolidated Interest Expense for such period, excluding any amount not payable in Cash. "CONSOLIDATED CURRENT ASSETS" means, as at any date of determination, the total assets of Holdings and its Subsidiaries on a consolidated basis that may properly be classified as current assets in conformity with GAAP, excluding Cash and Cash Equivalents. "CONSOLIDATED CURRENT LIABILITIES" means, as at any date of determination, the total liabilities of Holdings and its Subsidiaries on a consolidated basis -10- that may properly be classified as current liabilities in conformity with GAAP, excluding the current portion of long term debt. "CONSOLIDATED EXCESS CASH FLOW" means, for any period, an amount (if positive) equal to: (i) the sum, without duplication, of the amounts for such period of (a) Consolidated Adjusted EBITDA, plus (b) the Consolidated Working Capital Adjustment, minus (ii) the sum, without duplication, of the amounts for such period of (a) voluntary and scheduled repayments of Consolidated Total Debt (excluding repayments of Revolving Loans or Swing Line Loans except to the extent the Revolving Commitments are permanently reduced in connection with such repayments), (b)(x) Consolidated Capital Expenditures and (y) Permitted Acquisition Expenses (excluding any Permitted Acquisition Expenses paid in respect of Cash or Cash Equivalents of an acquired Person), in each of cases (x) and (y) except to the extent financed with the proceeds of Additional Sponsor Equity, other financings or Asset Sales, (c) Consolidated Cash Interest Expense, (d) provisions for current taxes based on income of Holdings and its Subsidiaries and payable in Cash with respect to such period and (e) Transaction Costs and Landis Acquisition Transaction Costs payable in Cash by Holdings and Company with respect to such period. "CONSOLIDATED INTEREST EXPENSE" means, for any period, total interest expense (including that portion attributable to Capital Leases in accordance with GAAP and capitalized interest) of Holdings and its Subsidiaries on a consolidated basis with respect to all outstanding Indebtedness of Holdings and its Subsidiaries, including all commissions, discounts and other fees and charges owed with respect to letters of credit and net costs under Interest Rate Agreements, but excluding, however, any amounts referred to in Section 2.12(f) payable on or before the Closing Date. "CONSOLIDATED NET INCOME" means, for any period, (i) the net income (or loss) of Holdings and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP, minus (ii) (a) the income (or loss) of any Person (other than a Subsidiary of Holdings) in which any other Person (other than Holdings or any of its Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to Holdings or any of its Subsidiaries by such Person during such period, (b) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of Holdings or is merged into or consolidated with Holdings or any of its Subsidiaries or that Person's assets are acquired by Holdings or any of its Subsidiaries, (c) the income of any Subsidiary of Holdings to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary, (d) any after-tax gains or losses attributable to Asset Sales or returned surplus assets of any Pension Plan, and (e) (to the extent not included in clauses (a) through (d) above) any non-Cash net extraordinary gains or non-Cash net extraordinary losses. -11- "CONSOLIDATED TOTAL DEBT" means, as at any date of determination, the aggregate stated balance sheet amount of all Indebtedness of Holdings and its Subsidiaries determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED WORKING CAPITAL" means, as at any date of determination, the excess of Consolidated Current Assets over Consolidated Current Liabilities. "CONSOLIDATED WORKING CAPITAL ADJUSTMENT" means, for any period, the amount (which may be a negative number) of the following, without duplication, (i) Consolidated Working Capital as of the beginning of such period, minus (ii) Consolidated Working Capital as of the end of such period, excluding from such calculation the Net Current Assets of any Subsidiary acquired in a Permitted Acquisition during such period, determined at the time of such acquisition. "CONTRACTUAL OBLIGATION" means, as applied to any Person, any provision of any Security issued by that Person or of any indenture, mortgage, deed of trust, contract, written undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject. "CONTRIBUTING GUARANTORS" as defined in Section 7.2. "CONVERSION/CONTINUATION DATE" means the effective date of a continuation or conversion, as the case may be, as set forth in the applicable Conversion/Continuation Notice. "CONVERSION/CONTINUATION NOTICE" means a Conversion/ Continuation Notice substantially in the form of Exhibit A-2. "COUNTERPART AGREEMENT" means a Counterpart Agreement substantially in the form of Exhibit H delivered by a Credit Party pursuant to Section 5.10. "CREDIT DATE" means the date of a Credit Extension. "CREDIT DOCUMENT" means any of this Agreement (or, solely for the purposes of historical conditions set forth in Section 3.1, the Original Agreement), the Notes, if any, the Collateral Documents, any documents or certificates executed by Company in favor of Issuing Bank relating to Letters of Credit, and all other documents, instruments or agreements executed and delivered by a Credit Party for the benefit of any Agent, Issuing Bank or any Lender in connection herewith or therewith. "CREDIT EXTENSION" means the making of a Loan or the issuing of a Letter of Credit. -12- "CREDIT PARTY" means Company, the Guarantors and each other Person (other than any Agent, Issuing Bank or any Lender or any other representative thereof) from time to time party to a Credit Document. "CURRENCY AGREEMENT" means any foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic cap or other similar agreement or arrangement, each of which is for the purpose of hedging the foreign currency risk associated with Holdings' and its Subsidiaries' operations and not for speculative purposes. "DEFAULT" means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default. "DEFAULT EXCESS" means, with respect to any Defaulting Lender, the excess, if any, of such Defaulting Lender's Pro Rata Share of the aggregate outstanding principal amount of Loans of all Lenders (calculated as if all Defaulting Lenders (other than such Defaulting Lender) had funded all of their respective Defaulted Loans) over the aggregate outstanding principal amount of all Loans of such Defaulting Lender. "DEFAULT PERIOD" means, with respect to any Defaulting Lender, the period commencing on the date of the applicable Funding Default and ending on the earliest of the following dates: (i) the date on which all Commitments are cancelled or terminated and/or the Obligations are declared or become immediately due and payable, (ii) the date on which (a) the Default Excess with respect to such Defaulting Lender shall have been reduced to zero (whether by the funding by such Defaulting Lender of any Defaulted Loans of such Defaulting Lender or by the non-pro rata application of any voluntary or mandatory prepayments of the Loans in accordance with the terms of Section 2.14 or Section 2.15 or by a combination thereof) and (b) such Defaulting Lender shall have delivered to Company and Administrative Agent a written reaffirmation of its intention to honor its obligations hereunder with respect to its Commitments, and (iii) the date on which Company, Administrative Agent and Requisite Lenders waive all Funding Defaults of such Defaulting Lender in writing. "DEFAULTING LENDER" as defined in Section 2.23. "DEFAULTED LOAN" as defined in Section 2.23. "DELAYED DRAW COMMITMENT" means the commitment of a Lender to make or otherwise fund a Delayed Draw Loan and "DELAYED DRAW COMMITMENTS" means such commitments of all Lenders in the aggregate. The amount of each Lender's Delayed Draw Commitment, if any, is set forth in Appendix A-1 or in the applicable Assignment Agreement subject to any adjustment or reduction pursuant to the terms and conditions hereof. The aggregate amount of the Delayed Draw Commitments as of the Closing Date is $50,000,000. -13- "DELAYED DRAW COMMITMENT PERIOD" means the period from the Closing Date to but excluding the Delayed Draw Commitment Termination Date. "DELAYED DRAW COMMITMENT TERMINATION DATE" means the earliest to occur of (i) May 10, 2004, (ii) the date the Delayed Draw Commitments are permanently reduced to zero pursuant to Section 2.14(b) or 2.15 and (iii) the date of termination of the Delayed Draw Commitments pursuant to Section 8.1. "DELAYED DRAW INSTALLMENT" as defined in Section 2.13(b). "DELAYED DRAW INSTALLMENT DATE" as defined in Section 2.13(b). "DELAYED DRAW LOAN" means a Loan made by a Lender to Company pursuant to Section 2.2. "DELAYED DRAW LOAN EXPOSURE" means, with respect to any Lender, as of any date of determination, the outstanding principal amount of the Delayed Draw Loans of such Lender; provided, at any time prior to the making of the Delayed Draw Loans, the Delayed Draw Loan Exposure of any Lender shall be equal to such Lender's Delayed Draw Commitment. "DELAYED DRAW LOAN MATURITY DATE" means the earlier of (i) July 22, 2010, and (ii) the date that all Delayed Draw Loans shall become due and payable in full hereunder, whether by acceleration or otherwise. "DELAYED DRAW LOAN NOTE" means a promissory note in the form of Exhibit B-2, as it may be amended, supplemented or otherwise modified from time to time. "DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit. "DOLLARS" and the sign "$" mean the lawful money of the United States of America. "DOMESTIC SUBSIDIARY" means any Subsidiary organized under the laws of the United States of America, any State thereof or the District of Columbia, other than any such Subsidiary that has no material assets other than Capital Stock of or other Investments in one or more Foreign Subsidiaries. "EFFECTIVE DATE" as defined in Section 3.3. "ELIGIBLE ASSIGNEE" means (i) any Lender, any Affiliate of any Lender and any Related Fund (any two or more Related Funds being treated as a single Eligible -14- Assignee for all purposes hereof), and (ii) any commercial bank, insurance company, investment or mutual fund or other entity that is an "accredited investor" (as defined in Regulation D under the Securities Act) and which extends credit or buys loans as one of its businesses; provided, no Affiliate of Holdings shall be an Eligible Assignee. "EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" (as defined in Section 3(3) of ERISA) which is or was sponsored, maintained or contributed to by, or required to be contributed by, Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates. "EMPLOYEE LEVERAGE PROGRAM" means the Holdings 2002 Stock Option Plan, the Holdings Key Employee Equity Investment Plan and the agreements relating to the investments by members of management of Holdings and its subsidiaries in GS Berry Acquisition Corporation, including the contribution and subscription agreements, management stockholders agreement and promissory notes. "ENVIRONMENTAL CLAIM" means any investigation, notice, notice of violation, claim, action, suit, proceeding, demand, abatement order or other order or directive (conditional or otherwise), by any governmental authority or any other Person, arising (i) pursuant to or in connection with any actual or alleged violation of any Environmental Law; (ii) in connection with any Hazardous Material or any actual or alleged Hazardous Materials Activity; or (iii) in connection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment. "ENVIRONMENTAL LAWS" means any and all current or future foreign or domestic, federal or state (or any subdivision of either of them), statutes, ordinances, orders, rules, regulations, judgments, Governmental Authorizations, or any other requirements of Governmental Authorities relating to (i) environmental matters, including those relating to any Hazardous Materials Activity; (ii) the generation, use, storage, transportation or disposal of Hazardous Materials; or (iii) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health in any manner applicable to Holdings or any of its Subsidiaries or any Facility. "EQUITY FINANCING" means the issuance for Cash by Holdings to Sponsors and/or other investors acceptable to the Administrative Agent and the Syndication Agent of not less than $245,000,000 of common equity in connection with the Merger. "EQUITY PROCEEDS" as defined in Section 6.8(d). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto. "ERISA AFFILIATE" means, as applied to any Person, (i) any corporation which is a member of a controlled group of corporations within the meaning of Section -15- 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not incorporated) which is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member. Any former ERISA Affiliate of Holdings or any of its Subsidiaries shall continue to be considered an ERISA Affiliate of Holdings or any such Subsidiary within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of Holdings or such Subsidiary and with respect to liabilities arising after such period for which Holdings or such Subsidiary could be liable under the Internal Revenue Code or ERISA. "ERISA EVENT" means (i) a "reportable event" within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation); (ii) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the failure to make by its due date a required installment under Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in liability to Holdings, any of its Subsidiaries or any of their respective Affiliates pursuant to Section 4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which could reasonably be likely to constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (vi) the imposition of liability on Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal of Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential liability therefore, or the receipt by Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or omission which could reasonably be expected to give rise to the imposition on Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates of fines, penalties, taxes or related charges under Chapter 43 of the Internal Revenue Code or under Section 409, Section 502(c), (i) or (l), or Section -16- 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof, or against Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates in connection with any Employee Benefit Plan; (x) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Internal Revenue Code; or (xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan. "EURODOLLAR RATE LOAN" means a Loan bearing interest at a rate determined by reference to the Adjusted Eurodollar Rate. "EVENT OF DEFAULT" means each of the conditions or events set forth in Section 8.1. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute. "EXCLUDED FOREIGN SUBSIDIARIES" means one or more Foreign Subsidiaries which, together with all their Subsidiaries, have either assets, combined revenues from operations or combined income from continuing operations that exceeded 5% of the combined assets, combined revenues from operations or combined income from continuing operations of Holdings and its Subsidiaries, taken as a whole, for any Fiscal Year. "EXCLUDED TAX" means, with respect to Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any Obligation, (i) any Tax imposed as a result of a connection or former connection between any Lender and the jurisdiction imposing such tax, including without limitation, any connection arising from such Lender being or having been a citizen, domiciliary, or resident of such jurisdiction, being organized in such jurisdiction, or having had a permanent establishment or fixed place of business therein, but excluding any such connection arising from the activities of such Lender pursuant to or in respect of this Agreement or any other Credit Document, including executing, delivering or performing its obligations or receiving a payment under or enforcing this agreement or any other loan document, and (ii) in the case of a U.S. Lender or Non-U.S. Lender (other than a Replacement Lender that is an assignee pursuant to a request by Company under Section 2.24), any withholding tax that (a) is imposed on amounts payable to any such Non-U.S. Lender at the time such Non-U.S. Lender becomes a party to this Agreement or designates a new lending office, or (b) is attributable to such U.S. Lender or Non-U.S. Lender's failure to comply with Section 2.21(c), except to the extent that such U.S. -17- Lender or Non-U.S. Lender (or its assignor, if any) was entitled, at the time of assignment or designation of a new lending office, as the case may be, to receive additional amounts from Company with respect to such withholding tax pursuant to Section 2.21(c). "FACILITY" means any real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned, leased, operated or used by Holdings or any of its Subsidiaries or any of their respective predecessors or Affiliates. "FAIR SHARE" as defined in Section 7.2. "FAIR SHARE CONTRIBUTION AMOUNT" as defined in Section 7.2. "FAIR SHARE SHORTFALL" as defined in Section 7.2. "FEDERAL FUNDS EFFECTIVE RATE" means for any day, the rate per annum (expressed, as a decimal, rounded upwards, if necessary, to the next higher 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided, (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to Administrative Agent, in its capacity as a Lender, on such day on such transactions as determined by Administrative Agent. "FINANCIAL HEDGE AGREEMENT" means an Interest Rate Agreement or a Currency Agreement entered into with a Lender Counterparty in order to satisfy the requirements of this Agreement or otherwise in the ordinary course of business of Company or any of its Subsidiaries. "FINANCIAL OFFICER CERTIFICATION" means, with respect to the financial statements for which such certification is required, the certification of the chief financial officer of Holdings that such financial statements fairly present, in all material respects, the financial condition of Holdings and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments. "FINANCIAL PLAN" as defined in Section 5.1(i). "FIRST PRIORITY" means, with respect to any Lien purported to be created in any Collateral pursuant to any Collateral Document, that such Lien is the only Lien to -18- which such Collateral is subject, other than Permitted Liens described in clauses (a) through (n) of Section 6.2. "FISCAL QUARTER" means a fiscal quarter of any Fiscal Year. "FISCAL YEAR" means the fiscal year of Company, which shall be a period of 52 or 53 weeks, as applicable, ending on the Saturday nearest the end of each calendar year. "FLOOD HAZARD PROPERTY" means any Real Estate Asset subject to a mortgage in favor of Collateral Agent, for the benefit of Lenders, and located in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards. "FOREIGN SUBSIDIARY" means any Subsidiary that is not a Domestic Subsidiary. "FUNDING DEFAULT" as defined in Section 2.23. "FUNDING GUARANTORS" as defined in Section 7.2. "FUNDING NOTICE" means a notice substantially in the form of Exhibit A-1. "GAAP" means, subject to the limitations on the application thereof set forth in Section 1.2, United States generally accepted accounting principles. "GOVERNMENTAL ACTS" means any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority. "GOVERNMENTAL AUTHORITY" means any federal, state, municipal, national or other government, governmental department, commission, board, bureau, court, agency or instrumentality or political subdivision thereof or any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, or a foreign entity or government. "GOVERNMENTAL AUTHORIZATION" means any permit, license, authorization, plan, directive, consent order or consent decree of or from any Governmental Authority. "GRANTOR" as defined in the Pledge and Security Agreement. "GSCP" as defined in the preamble hereto. -19- "GUARANTEED OBLIGATIONS" as defined in Section 7.1. "GUARANTOR" means each of Holdings and each Domestic Subsidiary of Holdings (other than Company) from time to time. "GUARANTOR SUBSIDIARY" means each Guarantor other than Holdings. "GUARANTY" means the guaranty of each Guarantor set forth in Section 7. "HAZARDOUS MATERIALS" means any chemical, material or substance, exposure to which is prohibited, limited or regulated by any Governmental Authority or which may or could pose a hazard to the health and safety of the owners, occupants or any Persons in the vicinity of any Facility or to the indoor or outdoor environment. "HAZARDOUS MATERIALS ACTIVITY" means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing. "HIGHEST LAWFUL RATE" means the maximum lawful interest rate, if any, that at any time or from time to time may be contracted for, charged, or received under the laws applicable to any Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow. "HISTORICAL FINANCIAL STATEMENTS" means as of the Effective Date, (i) the audited financial statements of Holdings and its Subsidiaries, for the immediately preceding three Fiscal Years, consisting of balance sheets and the related consolidated statements of income, stockholders' equity and cash flows for such Fiscal Years, and (ii) the unaudited financial statements of Holdings and its Subsidiaries as at the most recently ended Fiscal Quarter, consisting of a balance sheet and the related consolidated statements of income, stockholders' equity and cash flows for the three-, six- or nine-month period, as applicable, ending on such date, and, in the case of clauses (i) and (ii), certified by the Chief Financial Officer of Holdings that they fairly present, in all material respects, the financial condition of Holdings and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments. "HISTORICAL QUARTER" as defined in Section 6.8(d)(iv). "HOLDINGS" as defined in the preamble hereto. -20- "INCREASED-COST LENDERS" as defined in Section 2.24. "INDEBTEDNESS", as applied to any Person, means, without duplication, (i) all indebtedness for borrowed money; (ii) that portion of obligations with respect to Capital Leases that is properly classified as a liability on a balance sheet in conformity with GAAP; (iii) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money; (iv) any obligation owed for all or any part of the deferred purchase price of property or services (excluding any such obligations incurred under ERISA or any purchase price adjustment under Section 2.9 of the Landis Merger Agreement), which purchase price is (a) due more than six months from the date of incurrence of the obligation in respect thereof or (b) evidenced by a note or similar written instrument; (v) all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person; (vi) the face amount of any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; (vii) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business of Company and its Subsidiaries), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another; (viii) any obligation of such Person the primary purpose or intent of which is to provide assurance to an obligee that the obligation of the obligor thereof will be paid or discharged, or any agreement relating thereto will be complied with, or the holders thereof will be protected (in whole or in part) against loss in respect thereof; and (ix) any liability of such Person for the obligation of another through any agreement (contingent or otherwise) (a) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (b) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (a) or (b) of this clause (ix), the primary purpose or intent thereof is as described in clause (viii) above; and (x) net obligations of such Person to a counterparty in respect of any exchange traded or over the counter derivative transaction, including, without limitation, Financial Hedge Agreements, whether entered into for hedging or speculative purposes; provided, in no event shall obligations under any Financial Hedge Agreements be deemed "Indebtedness" for any purpose under Section 6.8. "INDEMNIFIED LIABILITIES" means, collectively, any and all liabilities, obligations, losses, damages, penalties, claims (including Environmental Claims), costs (including the costs of any investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other response action necessary to remove, remediate, clean up or abate any Hazardous Materials Activity), expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened by any Person, whether or not any such Indemnitee shall be -21- designated as a party or a potential party thereto, and any fees or expenses incurred by Indemnitees in enforcing this indemnity), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of (i) this Agreement or the other Credit Documents or the transactions contemplated hereby or thereby (including Lenders' agreement to make Credit Extensions or the use or intended use of the proceeds thereof, any enforcement of any of the Credit Documents (including any sale of, collection from, or other realization upon any of the Collateral or the enforcement of the Guaranty) or the Issuing Bank's issuance of any Letter of Credit or its failure to honor a drawing under any such Letter of Credit as a result of any Governmental Act); (ii) the statements contained in the commitment letter delivered by any Lender to Sponsors with respect to the transactions contemplated by this Agreement; or (iii) any (a) Hazardous Materials Activity which can reasonably be expected to result in non-compliance with, or liability under, Environmental Laws, or (b) Environmental Claim relating to or arising from any past or present activity, operation, land ownership, or practice of Holdings or any of its Subsidiaries. "INDEMNITEE" as defined in Section 10.3. "INTERCOMPANY SUBORDINATION AGREEMENT" means an agreement in the form of Exhibit L. "INTEREST COVERAGE RATIO" means the ratio as of the last day of any Fiscal Quarter of (i) Consolidated Adjusted EBITDA for the four-Fiscal Quarter period then ended, to (ii) Consolidated Cash Interest Expense for such four-Fiscal Quarter period. "INTEREST PAYMENT DATE" means with respect to (i) any Base Rate Loan, each March 31, June 30, September 30 and December 31 of each year, commencing on the first such date to occur after the Closing Date and the final maturity date of such Loan; and (ii) any Eurodollar Rate Loan, the last day of each Interest Period applicable to such Loan; provided, in the case of each Interest Period of longer than three months "Interest Payment Date" shall also include each date that is three months, or an integral multiple thereof, after the commencement of such Interest Period. "INTEREST PERIOD" means, in connection with a Eurodollar Rate Loan, an interest period of one-, two-, three- or six-months, as selected by Company in the applicable Funding Notice or Conversion/Continuation Notice, (i) initially, commencing on the Credit Date or Conversion/Continuation Date thereof, as the case may be; and (ii) thereafter, commencing on the day on which the immediately preceding Interest Period expires; provided, (a) if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business -22- Day unless no further Business Day occurs in such month, in which case such Interest Period shall expire on the immediately preceding Business Day; (b) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clauses (c) and (d), of this definition, end on the last Business Day of a calendar month; (c) no Interest Period with respect to any portion of any Term Loans shall extend beyond the Term Loan Maturity Date; (d) no Interest Period with respect to any portion of any Delayed Draw Loan shall extend beyond the Delayed Draw Loan Maturity Date; and (e) no Interest Period with respect to any portion of the Revolving Loans shall extend beyond the Revolving Commitment Termination Date. "INTEREST RATE AGREEMENT" means any interest rate swap agreement (including any fixed rate or floating rate swap agreement), interest rate cap agreement, interest rate collar agreement, interest rate hedging agreement or other similar agreement or arrangement, each of which is for the purpose of hedging the interest rate exposure associated with Holdings' and its Subsidiaries' operations and not for speculative purposes. "INTEREST RATE DETERMINATION DATE" means, with respect to any Interest Period, the date that is two Business Days prior to the first day of such Interest Period. "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor statute. "INVESTMENT" means any (i) purchase or other acquisition (including pursuant to any merger) of the Capital Stock or other Securities of any Person, or any beneficial interest therein or (ii) loan, advance, capital contribution to, or any other investment in, any Person (other than the purchase of current accounts receivable arising in the ordinary course of business of Company and its Subsidiaries). The amount of any Investment shall be equal to the sum of (a) the original cost of such Investment, plus (b) the cost of all additions thereto, minus (c) any cash proceeds from the disposition of or other cash distributions on such Investment to the extent such proceeds or distributions do not constitute Consolidated Net Income, without any adjustments for increases or decreases in value or write-ups, write-downs or write-offs with respect to such Investment, provided that the amount of any Investment shall not be less than zero. "ISSUANCE NOTICE" means an Issuance Notice substantially in the form of Exhibit A-3. "ISSUING BANK" as defined in the preamble. "JOINDER AGREEMENT" means an agreement substantially in the form of Exhibit M. -23- "JOINT VENTURE" means a joint venture, partnership or other similar arrangement, whether in corporate, partnership or other legal form; provided, in no event shall any Subsidiary of any Person be considered a Joint Venture to which such Person is a party. "JPMCB" as defined in the preamble hereto. "LANDIS" as defined in the preamble hereto. "LANDIS ACQUISITION" as defined in the preamble hereto. "LANDIS ACQUISITION CLOSING DATE" means the date prior to the Delayed Draw Termination Commitment Date on which the Landis Acquisition is consummated. "LANDIS ACQUISITION LEASEHOLD PROPERTY" means each of the Alsip-Main, IL, Alsip-North IL, Geddes, NY and Phoenix, AZ properties to be leased pursuant to that certain Lease Agreement, to be dated as of the Landis Acquisition Closing Date, between BRY-PL (DE) Limited Partnership, a Delaware limited partnership, as Landlord, and Landis, as tenant. "LANDIS ACQUISITION DOCUMENTS" means the Landis Merger Agreement and any other agreements, instruments and other documents delivered in connection with the Landis Acquisition, including, without limitation, any leases in respect of Material Real Estate Assets. "LANDIS ACQUISITION FINANCING REQUIREMENTS" means the aggregate amount necessary to pay (i) the Cash portion of the consideration due to shareholders of Landis under the Landis Merger Agreement, (ii) the costs of prepaying, redeeming or purchasing the Indebtedness of Landis to be paid on or prior to the Landis Acquisition Closing Date and (iii) Landis Acquisition Transaction Costs, in each of cases (i), (ii) and (iii) in accordance with the Landis Merger Agreement. "LANDIS ACQUISITION SENIOR SUBORDINATED NOTES" means as defined in the recitals hereto. "LANDIS MERGER AGREEMENT" as defined in the recitals hereto. "LANDIS ACQUISITION TRANSACTION COSTS" means (a) the write-off of deferred financing costs capitalized in connection with the entering into the Original Agreement and (b) the fees, costs and expenses payable by Holdings, Company or any of Company's Subsidiaries on or before the Landis Acquisition Closing Date in connection with the transactions contemplated by the Credit Documents and the Landis Merger Agreement, which fees, costs and expenses under clause (b) hereof shall not exceed $12,000,000. -24- "LANDLORD'S CONSENT, ESTOPPEL CERTIFICATE AND AMENDMENT" means (a) with respect to each Landis Acquisition Leasehold Property, an agreement substantially in the form of the draft Landlord's Acknowledgment and Consent, draft dated the date hereof, from BRY-PL (DE) Limited Partnership and (b) with respect to any other Leasehold Property, an agreement substantially in the form of Exhibit K, in each of cases (a) and (b) with such amendments or modifications as may be approved by Collateral Agent. "LEASEHOLD PROPERTY" means any leasehold interest of any Credit Party as lessee under any lease of real property. "LENDER" means each financial institution listed on the signature pages hereto as a Lender, and any other Person that becomes a party hereto pursuant to an Assignment Agreement or a Joinder Agreement, including any Lender in its capacity as Swing Line Lender and Issuing Bank. "LENDER COUNTERPARTY" means each Lender or any Affiliate of a Lender counterparty to a Financial Hedge Agreement including, without limitation, each such Affiliate that enters into a Joinder Agreement with the Collateral Agent. "LENDER EFFECTIVE DATE" means (i) in the case of each Lender listed on the signature pages hereof, the Effective Date, and (ii) in the case of each other Lender, the effective date of the Assignment Agreement pursuant to which such Lender became a Lender. "LETTER OF CREDIT" means a commercial or standby letter of credit issued or to be issued by Issuing Bank pursuant to this Agreement. "LETTER OF CREDIT DISBURSEMENT" means a payment made by Issuing Bank pursuant to a Letter of Credit. "LETTER OF CREDIT EXPOSURE" means the aggregate Letter of Credit Usage in respect of all Letters of Credit issued by that Lender (net of any participations by Lenders in such Letters of Credit. "LETTER OF CREDIT SUBLIMIT" means the lesser of (i) $25,000,000 and (ii) the aggregate unused amount of the Revolving Commitments then in effect. "LETTER OF CREDIT USAGE" means, as at any date of determination, the sum of (i) the maximum aggregate amount which is, or at any time thereafter may become, available for drawing under all Letters of Credit then outstanding, and (ii) the aggregate amount of all drawings under Letters of Credit honored by Issuing Bank and not theretofore reimbursed by or on behalf of Company. -25- "LEVERAGE RATIO" means the ratio as of the last day of any Fiscal Quarter or other date of determination of (i) Consolidated Total Debt as of such day to (ii) Consolidated Adjusted EBITDA for the four-Fiscal Quarter period ending on such date (or if such date of determination is not the last of a Fiscal Quarter, for the four-Fiscal Quarters period ending as of the most recently concluded Fiscal Quarter). "LIEN" means (i) any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, and any lease in the nature thereof) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing and (ii) in the case of Securities, any purchase option, call or similar right of a third party with respect to such Securities. "LOAN" means a Delayed Draw Loan, a Term Loan, a Swing line Loan, and a Revolving Loan. "MARGIN STOCK" as defined in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "MATERIAL ADVERSE EFFECT" means a material adverse effect on and/or material adverse developments with respect to (i) the business, operations, properties, assets, condition (financial or otherwise) or prospects of Holdings and its Subsidiaries, taken as a whole; (ii) the ability of the Credit Parties, taken as a whole, to fully and timely perform the Obligations; (iii) the legality, validity, binding effect or enforceability of any Credit Document against the Credit Parties, taken as a whole, or the Collateral; or (iv) the rights, remedies and benefits available to, or conferred upon, any Agent, Lender or Secured Party under any Credit Document. "MATERIAL REAL ESTATE ASSET" means (i) (a) any fee-owned Real Estate Asset having a fair market value in excess of $1,000,000 as of the date of the acquisition thereof and (b) all Leasehold Properties (x) used in the operation of material production facilities of Company or any of its Subsidiaries or (y) with respect to which the aggregate rental payments under the term of the applicable lease exceed $1,000,000 per annum or (ii) any Real Estate Asset that the Requisite Lenders have determined is material to the business, operations, properties, assets, condition (financial or otherwise) or prospects of Holdings and its Subsidiaries, taken as a whole. "MERGER" means the acquisition by Sponsors of substantially all the outstanding Capital Stock of Holdings. "MERGER AGREEMENT" means the Agreement and Plan of Merger, dated as of May 25, 2002, among GS Berry Acquisition Corp., Sponsors, Holdings, Company, Sellers (as defined therein) and Sellers' Representatives (as defined therein), as in effect on the date hereof. -26- "MERGER FINANCING REQUIREMENTS" means the aggregate amount necessary to pay (i) the cash portion of the consideration due to shareholders of Holdings under the Merger Agreement, (ii) the costs of prepaying, redeeming or purchasing the Indebtedness of Holdings and Company to be paid on the Closing Date and thereafter pursuant to redemption notices to be delivered on the Closing Date and (iii) all other Transaction Costs, in each of cases (i), (ii) and (iii) in accordance with the Merger Agreement and Schedule 1.1. "MOODY'S" means Moody's Investor Services, Inc. "MORTGAGE" means a mortgage substantially in the form of Exhibit J, as it may be amended, supplemented or otherwise modified from time to time. "MULTIEMPLOYER PLAN" means any Employee Benefit Plan which is a "multiemployer plan" as defined in Section 3(37) of ERISA. "NAIC" means The National Association of Insurance Commissioners, and any successor thereto. "NARRATIVE REPORT" means, with respect to the financial statements for which such narrative report is required, a narrative report describing the operations of Holdings and its Subsidiaries in the form prepared for presentation to senior management thereof for the applicable month, Fiscal Quarter or Fiscal Year and for the period from the beginning of the then current Fiscal Year to the end of such period to which such financial statements relate. "NET ASSET SALE PROCEEDS" means, with respect to any Asset Sale, an amount equal to: (i) Cash payments (including any Cash received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) received by Holdings or any of its Subsidiaries from such Asset Sale, minus (ii) any bona fide direct costs and expenses incurred in connection with such Asset Sale, including (a) income or gains taxes payable by the seller as a result of any gain recognized in connection with such Asset Sale, (b) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness (other than the Loans) that is secured by a Lien on the stock or assets in question and that is required to be repaid under the terms thereof as a result of such Asset Sale, (c) a reasonable reserve for any indemnification payments (fixed or contingent) attributable to seller's indemnities and representations and warranties to purchaser in respect of such Asset Sale undertaken by Holdings or any of its Subsidiaries in connection with such Asset Sale, and (d) reasonable brokerage or selling commissions and fees and expenses of professional advisors and any title and recordation expenses. "NET CURRENT ASSETS" means, for any Person as at any date of determination, the difference (which may be a negative number) between (i) the total assets of such Person that may properly be classified as current assets in conformity with -27- GAAP, excluding Cash and Cash Equivalents, minus (ii) the total liabilities of such Person that may properly be classified as current liabilities in conformity with GAAP, excluding the current portion of long term debt. "NET INSURANCE/CONDEMNATION PROCEEDS" means an amount equal to: (i) any Cash payments or proceeds received by Holdings or any of its Subsidiaries (a) under any insurance policy insuring against loss or damage to assets and property used in the business of Holdings or its Subsidiaries (other than proceeds of business interruption insurance or any other insurance policy to the extent such coverage compensates Company or its Subsidiaries for lost revenue or profits) or (b) as a result of the taking of any assets of Holdings or any of its Subsidiaries by any Person pursuant to the power of eminent domain, condemnation or otherwise, or pursuant to a sale of any such assets to a purchaser with such power under threat of such a taking, minus (ii) (a) bona fide direct reasonable costs and expenses incurred by Holdings or any of its Subsidiaries in connection with the adjustment or settlement of any claims of Holdings or such Subsidiary in respect thereof (including reasonable fees and expenses of professional advisors), (b) contractually required payments of Surviving Capital Leases, Surviving IRBs and Indebtedness incurred under Sections 6.1(g), 6.1(h), 6.1(j) and 6.1(k), in each case, to the extent incurred to finance the acquisition of property subject to such loss, taking or sale, and (c) any bona fide direct costs and expenses incurred in connection with any sale of such assets as referred to in clause (i)(b) of this definition, including income taxes payable as a result of any gain recognized in connection therewith, reasonable fees and expenses of professional advisors, title and recordation expenses and reasonable indemnification reserves. "NON-CONSENTING LENDER" as defined in Section 2.24. "NON-US LENDER" as defined in Section 2.21(c). "NOTE" means a Delayed Draw Loan Note, a Term Loan Note, a Swing Line Note, or a Revolving Loan Note. "NOTICE" means a Funding Notice, an Issuance Notice, or a Conversion/Continuation Notice. "OBLIGATIONS" means all obligations of every nature of each Credit Party from time to time owed to the Agents (including former Agents), the Lenders or any Lender Counterparties, under any Credit Document or Financial Hedge Agreement (including, without limitation, with respect to a Financial Hedge Agreement, obligations owed thereunder to any person who was a Lender or an Affiliate of a Lender at the time such Financial Hedge Agreement was entered into), whether for principal, interest (including interest which, but for the filing of a petition in bankruptcy with respect to such Credit Party, would have accrued on any Obligation, whether or not a claim is allowed against such Credit Party for such interest in the related bankruptcy proceeding), -28- reimbursement of amounts drawn under Letters of Credit, payments for early termination of Financial Hedge Agreements, fees, expenses, indemnification or otherwise and all Obligations of each Credit Party under the Original Agreement that survive the amendment and restatement thereof in accordance with its terms. "OBLIGEE GUARANTOR" as defined in Section 7.7. "ORGANIZATIONAL DOCUMENTS" means (i) with respect to any corporation, its certificate or articles of incorporation or organization, as amended, and its by-laws, as amended, (ii) with respect to any limited partnership, its certificate of limited partnership, as amended, and its partnership agreement, as amended, (iii) with respect to any general partnership, its partnership agreement, as amended, and (iv) with respect to any limited liability company, its articles of organization, as amended, and its operating agreement, as amended. In the event any term or condition of this Agreement or any other Credit Document requires any Organizational Document to be certified by a secretary of state or similar governmental official, the reference to any such "Organizational Document" shall only be to a document of a type customarily certified by such governmental official. "PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto. "PENSION PLAN" means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code or Section 302 of ERISA. "PERMITTED ACQUISITION" means any acquisition by Company or any of its Wholly-Owned Guarantor Subsidiaries, whether by purchase, merger or otherwise, of all or substantially all of the assets or Capital Stock of, or of a business line or unit or a division of, any Person; provided, (i) immediately prior to, and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing or would result therefrom; (ii) all transactions in connection therewith shall be consummated, in all material respects, in accordance with all applicable laws and in conformity with all applicable Governmental Authorizations; (iii) in the case of the acquisition of Capital Stock of any Person, (A) at least 80% on a fully-diluted basis of each class of the Capital Stock acquired or otherwise issued by such Person or any newly formed Subsidiary of Company in connection with such acquisition shall be owned beneficially and as of record by Company or a Wholly-Owned Guarantor Subsidiary thereof, and all other such Capital Stock shall be owned beneficially and as of record by one or more officers, directors, employees or founders of such Person, and (B) Company -29- shall have taken, or caused to be taken, as of the date such Person becomes a Subsidiary, each of the actions set forth in Sections 5.10 and/or 5.11, as applicable; (iv) Holdings and its Subsidiaries shall be in compliance with the financial covenants set forth in Section 6.8 as of the later of (x) March 30, 2002 and (y) the last day of the most recent Fiscal Quarter for which quarterly financial statements have been delivered to the Lenders pursuant to Section 5.1(b), on a pro forma basis after giving effect to the Permitted Acquisition as a Subject Transaction in accordance with Section 6.8; (v) Company shall have delivered to Administrative Agent (for distribution to each Lender upon request) at least ten Business Days prior to such proposed acquisition: (A) solely in the case of an acquisition (x) financed in whole or in part with the proceeds of Delayed Draw Loans or (y) in respect of which the aggregate amount of Permitted Acquisition Expenses exceed, $20,000,000, a Compliance Certificate evidencing compliance with Section 6.8 as required under clause (iv) above; (B) a certificate of the Chief Financial Officer of Holdings certifying that the unused and available portion of Revolving Commitments will exceed $30,000,000 as of the date of the consummation of such acquisition, after giving effect thereto; (C) all relevant financial information with respect to such acquired assets, including, without limitation, the aggregate consideration for such acquisition and any other information required to demonstrate compliance with this Agreement; and (D) such information and due diligence materials relating to environmental matters as may be required under Section 5.9(a)(iv) or as may be otherwise reasonably requested by the Administrative Agent; and (vi) any Person, assets or business line, unit or division as acquired in accordance herewith shall be in a business or lines of business permitted for Company under Section 6.13; and (vii) in the case of a direct or indirect acquisition of a Foreign Subsidiary or any assets, business line, unit or division located outside the United States of America, on a pro forma basis after giving effect to such acquisition as of the last day of the Fiscal Quarter recently ended, Domestic Subsidiaries account for (A) at least 80% of the consolidated assets of Holdings and its -30- Subsidiaries of Holdings (including Company) as of the last day of the Fiscal Quarter recently ended and (B) at least 80% of the consolidated revenues of Holdings and its Subsidiaries for the last four full Fiscal Quarters recently ended; provided, no acquisition of assets, Capital Stock, a business line or unit or a division of any Person shall constitute a Permitted Acquisition unless made with the consent of such Person's board of directors or similar governing body. "PERMITTED ACQUISITION EXPENSES" means Cash (a) consideration paid by Company or any of its wholly-owned Subsidiaries to acquire assets, Capital Stock or a business line or unit or division in connection with a Permitted Acquisition made in accordance with Section 6.9(d), (b) bona fide direct costs and expenses incurred as a result of a Permitted Acquisition (including costs and expenses related to the shutdown of facilities and employee severance) to the extent such costs and expenses (i) are capitalized as part of the cost of the Permitted Acquisition in the consolidated financial statements of Holdings and (ii) are paid by Company or its Subsidiaries no more than 180 days from the date of such Permitted Acquisition, and (c) bona fide direct costs and expenses paid in connection with such Permitted Acquisition, including reasonable brokerage or selling commissions and fees and expenses of professional advisors and any title and recordation expenses, provided, no Restricted Junior Payment shall constitute a Permitted Acquisition Expense. "PERMITTED ADJUSTMENTS" means, with respect to any Subject Transactions, pro forma adjustments arising out of events which are directly attributable to such Subject Transactions, are factually supportable and are expected to have a continuing impact, which would include cost savings resulting from head count reduction, closure of facilities and similar restructuring charges and raw material and other cost savings, which pro forma adjustments are certified by the Chief Financial Officer of Holdings and which are determined (i) on a basis consistent with Article 11 of Regulation S-X promulgated under the Securities Act and as interpreted by the staff of the Securities and Exchange Commission or (ii) solely in the case of additional pro forma adjustments to Consolidated Adjusted EBITDA in an aggregate amount (for all Subject Transactions during the period of determination and together with any adjustments to Consolidated Adjusted EBITDA pursuant to Section 6.8(d)(ii) for the same period) not to exceed 7.5% of pro forma Consolidated Adjusted EBITDA (as reformulated) for the period of determination, on such other basis as may be certified by the Chief Financial Officer of Holdings to be in compliance with the requirements of this definition. "PERMITTED LIENS" means each of the Liens permitted pursuant to Section 6.2. "PERSON" means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, Joint Ventures, associations, companies, trusts, -31- banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and Governmental Authorities. "PLEDGE AND SECURITY AGREEMENT" means the Pledge and Security Agreement to be executed by Company and each Guarantor substantially in the form of Exhibit I, as it may be amended, supplemented or otherwise modified from time to time. "PRIME RATE" means the rate of interest per annum that GSCP announces from time to time as its prime lending rate, as in effect from time to time. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. GSCP or any other Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Rate. "PRINCIPAL OFFICE" means, for each of Administrative Agent, Swing Line Lender and Issuing Bank, such Person's "Principal Office" as set forth on Appendix B, or such other office as such Person may from time to time designate in writing to Company, Administrative Agent and each Lender. "PROJECTIONS" as defined in Section 4.9. "PRO RATA SHARE" means (i) with respect to all payments, computations and other matters relating to the Delayed Draw Loan of any Lender, the percentage obtained by dividing (a) the Delayed Draw Loan Exposure of that Lender by (b) the aggregate Delayed Draw Loan Exposure of all Lenders; (ii) with respect to all payments, computations and other matters relating to the Term Loan of any Lender, the percentage obtained by dividing (a) the Term Loan Exposure of that Lender by (b) the aggregate Term Loan Exposure of all Lenders; and (iii) with respect to all payments, computations and other matters relating to the Revolving Commitment or Revolving Loans of any Lender or any Letters of Credit issued or participations purchased therein by any Lender or any participations in any Swing Line Loans purchased by any Lender, the percentage obtained by dividing (a) the Revolving Exposure of that Lender by (b) the aggregate Revolving Exposure of all Lenders. For all other purposes with respect to each Lender, "Pro Rata Share" means the percentage obtained by dividing (A) an amount equal to the sum of the Delayed Draw Loan Exposure, the Term Loan Exposure and the Revolving Exposure of that Lender, by (B) an amount equal to the sum of the aggregate Delayed Draw Loan Exposure, the aggregate Term Loan Exposure and the aggregate Revolving Exposure of all Lenders. "REAL ESTATE ASSET" means, at any time of determination, any interest (fee, leasehold or otherwise) then owned by any Credit Party in any real property. "RECORD DOCUMENT" means, with respect to any Leasehold Property, (i) the lease evidencing such Leasehold Property or a memorandum thereof, executed and acknowledged by the owner of the affected real property, as lessor, or (ii) if such Leasehold Property was acquired or subleased from the holder of a Recorded Leasehold -32- Interest, the applicable assignment or sublease document, executed and acknowledged by such holder, in each case in form sufficient to give such constructive notice upon recordation and otherwise in form reasonably satisfactory to Collateral Agent. "RECORDED LEASEHOLD INTEREST" means a Leasehold Property with respect to which a Record Document has been recorded in all places necessary or desirable, in Administrative Agent's reasonable judgment, to give constructive notice of such Leasehold Property to third-party purchasers and encumbrancers of the affected real property. "REFUNDED SWING LINE LOANS" as defined in Section 2.5(b)(iv). "REGISTER" as defined in Section 2.8(b). "REGULATION D" means Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "RELATED AGREEMENTS" means, collectively, the Merger Agreement and the Senior Subordinated Note Documents. "RELATED FUND" means, with respect to any Lender that is an investment fund, any other investment fund that invests in commercial loans and that is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "RELEASE" means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of any Hazardous Material into the indoor or outdoor environment (including the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Material), including the migration of any Hazardous Material through the air, soil, surface water or groundwater. "REPLACEMENT LENDER" as defined in Section 2.24. "REQUISITE CLASS LENDERS" means, at any time of determination, (i) for the Class of Lenders having Delayed Draw Loan Exposure, Lenders holding more than 50% of the aggregate Delayed Draw Loan Exposure of all Lenders; (ii) for the Class of Lenders having Term Loan Exposure, Lenders holding more than 50% of the aggregate Term Loan Exposure of all Lenders; and (iii) for the Class of Lenders having Revolving Exposure, Lenders holding more than 50% of the aggregate Revolving Exposure of all Lenders. "REQUISITE LENDERS" means one or more Lenders having or holding Delayed Draw Loan Exposure, Term Loan Exposure and/or Revolving Exposure and representing more than 50% of the sum of (i) the aggregate Delayed Draw Loan -33- Exposure of all Lenders, (ii) the aggregate Term Loan Exposure of all Lenders and (iii) the aggregate Revolving Exposure of all Lenders. "RESTRICTED JUNIOR PAYMENT" means, in respect of any Person (i) any dividend or other distribution, direct or indirect, on account of any Capital Stock of such Person now or hereafter outstanding; (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any Capital Stock of such Person now or hereafter outstanding; (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any Capital Stock of such Person now or hereafter outstanding; (iv) management or similar fees payable to Sponsors or any of its Affiliates and (v) any payment or prepayment of principal of, premium, if any, or interest on, or redemption, purchase, retirement, defeasance (including in-substance or legal defeasance), sinking fund or similar payment with respect to any Subordinated Indebtedness, in each of cases (i) through (v) except a dividend, distribution, payment or prepayment payable solely in Capital Stock of such Person. "REVOLVING COMMITMENT" means the commitment of a Lender to make or otherwise fund any Revolving Loan and to acquire participations in Letters of Credit hereunder and "REVOLVING COMMITMENTS" means such commitments of all Lenders in the aggregate. The amount of each Lender's Revolving Commitment, if any, is set forth on Appendix A-3 or in the applicable Assignment Agreement, subject to any adjustment or reduction pursuant to the terms and conditions hereof. The aggregate amount of the Revolving Commitments as of the Closing Date was, and as of the Effective Date will be $100,000,000. "REVOLVING COMMITMENT PERIOD" means the period from the Closing Date to but excluding the Revolving Commitment Termination Date. "REVOLVING COMMITMENT TERMINATION DATE" means the earliest to occur of (i) July 22, 2008, (ii) the date the Revolving Commitments are permanently reduced to zero pursuant to Section 2.14(b) or 2.15, and (iii) the date of the termination of the Revolving Commitments pursuant to Section 8.1. "REVOLVING EXPOSURE" means, with respect to any Lender as of any date of determination, (i) prior to the termination of the Revolving Commitments, that Lender's Revolving Commitment; and (ii) after the termination of the Revolving Commitments, the sum of (a) the aggregate outstanding principal amount of the Revolving Loans of that Lender, (b) the aggregate amount of all participations by that Lender in any outstanding Letters of Credit or any unreimbursed drawing under any Letter of Credit, (c) in the case of Swing Line Lender, the aggregate outstanding principal amount of all Swing Line Loans (net of any participations therein by other Lenders), and (d) the aggregate amount of all participations therein by that Lender in any outstanding Swing Line Loans. -34- "REVOLVING LOAN" means a Loan made by a Lender to Company pursuant to Section 2.3. "REVOLVING LOAN NOTE" means a promissory note in the form of Exhibit B-3, as it may be amended, supplemented or otherwise modified from time to time. "S&P" means Standard & Poor's Ratings Group, a division of The McGraw Hill Corporation. "SECURED PARTIES" has the meaning assigned to that term in the Pledge and Security Agreement. "SECURITIES" means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time, and any successor statute. "SELLERS" means Atlantic Equity Partners International II, L.P., J.P. Morgan Partners (SBIC), LLC, BPC Equity, LLC and certain members of Company's management. "SENIOR SUBORDINATED NOTE DOCUMENTS" means the Senior Subordinated Note Indenture and the Senior Subordinated Notes, as each such document may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under Section 6.16. "SENIOR SUBORDINATED NOTE INDENTURE" means the indenture pursuant to which the Senior Subordinated Notes will be issued, in the form delivered to the Agents and Lenders prior to the Closing Date, as any such indenture may thereafter be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under Section 6.16. "SENIOR SUBORDINATED NOTES" means the Senior Subordinated Notes of Company in the aggregate principal amount not to exceed $440,000,000 at any time outstanding (plus (i) any such notes issued as payment of interest on Senior Subordinated Notes and (ii) any additional subordinated notes issued as permitted by clause (ii) or (iii) of Section 6.1(c)) and issued pursuant to the Senior Subordinated Note Indenture, with such changes thereto when executed as are permitted under Section 6.16 and as such -35- notes may thereafter be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under Section 6.16. "SOLVENCY CERTIFICATE" means a Solvency Certificate of the Chief Financial Officer of Holdings substantially in the form of Exhibit G-2. "SOLVENT" means, with respect to any Credit Party, that as of the date of determination both (i) (a) the sum of such Credit Party's debt (including contingent liabilities) does not exceed the present fair saleable value of all of such Credit Party's assets; (b) such Credit Party's capital is not unreasonably small in relation to its business or with respect to any transaction then contemplated; and (c) such Person has not incurred and does not intend to incur, or believe (nor should it reasonably believe) that it will incur, debts beyond its ability to pay such debts as they become due (whether at maturity or otherwise); and (ii) such Person is "solvent" within the meaning given that term and similar terms under applicable laws relating to fraudulent transfers and conveyances. For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability (irrespective of whether such contingent liabilities meet the criteria for accrual under Statement of Financial Accounting Standard No. 5). "SPONSORS" means any of GS Capital Partners 2000, L.P., GS Capital Partners 2000 Offshore, L.P., GS Capital Partners 2000 GmbH & Co., Beteiligungs KG, GS Capital Partners 2000 Employee Fund, L.P., Stone Street Fund 2000, L.P., J.P. Morgan Partners (BHCA), L.P., J.P. Morgan Partners Global Investors, L.P., J.P. Morgan Partners Global Investors (Cayman), L.P., J.P. Morgan Partners Global Investors (Cayman) II, L.P., J.P. Morgan Partners Global Investors A, L.P. and other strategic investors acceptable to Syndication Agent. "STOCKHOLDER AGREEMENTS" means (i) a stockholders agreement, dated as of the Closing Date, among Holdings and the Sponsors and (ii) a stockholders agreement, dated as of the Closing Date, among Holdings and certain employees of Holdings and its Subsidiaries parties thereto. "MERGER SUB" as defined in the recitals hereto. "SUBJECT TRANSACTION" as defined in Section 6.8(d). "SUBORDINATED INDEBTEDNESS" means the Senior Subordinated Notes and any other Indebtedness that is subordinate in right of payment and all other respects to the Obligations on subordination terms that are no less favorable to the Agents or Lenders in any respect than the subordination and related terms set forth in the Senior Subordinated Note Documents as in effect on the date hereof. -36- "SUBSIDIARY" means, with respect to any Person, any corporation, partnership, limited liability company, association, joint venture or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof; provided, in determining the percentage of ownership interests of any Person controlled by another Person, no ownership interest in the nature of a "qualifying share" of the former Person shall be deemed to be outstanding. "SURVIVING CAPITAL LEASES" mean the Capital Leases of Company that survive the consummation of the Merger in an aggregate amount not to exceed $19,300,000 as designated in Schedule 6.1(g). "SURVIVING INDEBTEDNESS" means the Surviving Capital Leases, the Surviving IRBs, and any of the 2004 Notes and the 2006 Notes that remain outstanding as of the Closing Date, in each case as disclosed in and subject to the terms and conditions of Schedule 6.1(g). "SURVIVING IRBS" means the Nevada Industrial Revenue Bonds (the "IRBS") of Company that survive the consummation of the Merger in an aggregate amount not to exceed $3,000,000 as designated in Schedule 6.1(g). "SWING LINE LENDER" as defined in the preamble.. "SWING LINE LOAN" means a Loan made by Swing Line Lender to Company pursuant to Section 2.3. "SWING LINE NOTE" means a promissory note in the form of Exhibit B-4, as it may be amended, supplemented or otherwise modified from time to time. "SWING LINE SUBLIMIT" means the lesser of (i) $10,000,000, and (ii) the aggregate unused amount of Revolving Commitments then in effect. "SYNDICATION AGENT" as defined in the preamble. "TAX" means any present or future tax, levy, impost, duty, assessment, charge, fee, deduction or withholding of any nature and whatever called, by any Governmental Authority, on whomsoever and wherever imposed, levied, collected, withheld or assessed; provided, "Tax on the overall net income" of a Person shall be construed as a reference to a tax imposed by the jurisdiction in which that Person is organized or in which that Person's applicable principal office (and/or, in the case of a -37- Lender, its lending office) is located or in which that Person (and/or, in the case of a Lender, its lending office) is deemed to be doing business on all or part of the net income, profits or gains (whether worldwide, or only insofar as such income, profits or gains are considered to arise in or to relate to a particular jurisdiction, or otherwise) of that Person (and/or, in the case of a Lender, its applicable lending office). "TERM LOAN" means a Loan made by a Lender to Company pursuant to Section 2.1. "TERM LOAN COMMITMENT" means the commitment of a Lender to make or otherwise fund any Term Loan hereunder, and "TERM LOAN COMMITMENTS" means such commitments of all Lenders in the aggregate. The amount of each Lender's Term Loan Commitment, if any, is set forth in Appendix A-1. The aggregate Term Loan Commitments shall equal $330,000,000. "TERM LOAN EXPOSURE" means, with respect to any Lender, as of any date of determination, the outstanding principal amount of the Term Loan of such Lender; provided, at any time prior to the making of the Term Loan, the Term Loan Exposure of any Lender shall be equal to such Lender's Term Loan Commitment. "TERM LOAN INSTALLMENT" as defined in Section 2.13(a). "TERM LOAN INSTALLMENT DATE" as defined in Section 2.13(a). "TERM LOAN LENDER" means each financial institution listed on the signature pages hereto as a Term Loan Lender. "TERM LOAN MATURITY DATE" means the earlier of (i) the July 22, 2010 and (ii) the date that all Term Loans shall become due and payable in full hereunder, whether by acceleration or otherwise. "TERM LOAN NOTE" means a promissory note in the form of Exhibit B-1, as it may be amended, supplemented or otherwise modified from time to time. "TERMINATED LENDER" as defined in Section 2.24. "TOTAL UTILIZATION OF REVOLVING COMMITMENTS" means, as at any date of determination, the sum of (i) the aggregate principal amount of all outstanding Revolving Loans (other than Revolving Loans made for the purpose of repaying any Refunded Swing Line Loans or reimbursing Issuing Bank for any amount drawn under any Letter of Credit, but not yet so applied), (ii) the aggregate principal amount of all outstanding Swing Line Loans and (iii) the Letter of Credit Usage. "TRANSACTION COSTS" means the fees, costs and expenses payable by Holdings, Company or any of Company's Subsidiaries on or before the Closing Date in -38- connection with the transactions contemplated by the Credit Documents and the Related Agreements. "TYPE OF LOAN" means (i) with respect to either Term Loans, Delayed Draw Loans or Revolving Loans, a Base Rate Loan or a Eurodollar Rate Loan, and (ii) with respect to Swing Line Loans, a Base Rate Loan. "UCC" means the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in any applicable jurisdiction. "UNADJUSTED EURODOLLAR RATE COMPONENT" means that component of the interest costs to Company in respect of a Eurodollar Rate Loan that is based upon the rate obtained pursuant to clause (i) of the definition of Adjusted Eurodollar Rate. "UNCOMPLETED ACQUISITION COSTS" means, for the purpose of the calculation set forth in Section 6.8(d)(ii), aggregate out-of-pocket fees, costs and expenses incurred by Company in connection with one or more proposed, but uncompleted Permitted Acquisitions. "US LENDER" means each Lender that is a United States Person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) for U.S. federal income tax purposes. "VOTING STOCK" of a Person means all classes of Capital Stock or other interests of such Person then outstanding which are normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. "WHOLLY-OWNED" means, in respect of any Subsidiary of any Person, that all Capital Stock of such Subsidiary (other than Capital Stock in the nature of directors' qualifying shares required by applicable law) is owned beneficially and as of record by such Person or one more Wholly-Owned Subsidiaries of such Person. 1.2. ACCOUNTING TERMS. Except as otherwise expressly provided herein, all accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with GAAP as in effect from time to time; provided, if Company notifies Administrative Agent that Company requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof to the operation of such provisions, regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. Subject to the foregoing, calculations in connection with the definitions, covenants and other provisions -39- hereof shall utilize accounting principles and policies in conformity with those used to prepare the Historical Financial Statements. 1.3. INTERPRETATION, ETC. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. References herein to any Section, Appendix, Schedule or Exhibit shall be to a Section, an Appendix, a Schedule or an Exhibit, as the case may be, hereof unless otherwise specifically provided. The use herein of the word "include" or "including", when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. Except as otherwise specifically provided, all reference herein to any Person shall mean such Person and its permitted successors and assigns and all references herein to any document, instrument or agreement shall mean such document, instrument or agreement as amended, supplemented or modified from time to time, to the extent not prohibited by this Agreement. SECTION 2. LOANS AND LETTERS OF CREDIT 2.1. TERM LOANS. (a) Loan Commitments. Subject to the terms and conditions hereof, each Lender severally agrees to make, on the Effective Date, a Term Loan to Company in an amount equal to such Lender's Term Loan Commitment. Company may make only one borrowing under each Lender's Term Loan Commitment which shall be on the Effective Date. Any amount borrowed under this Section 2.1(a) and subsequently repaid or prepaid may not be reborrowed. Subject to Sections 2.14(a) and 2.15, all amounts owed hereunder with respect to the Term Loans shall be paid in full no later than the Term Loan Maturity Date. Each Lender's Term Loan Commitment shall terminate immediately and without further action on the Effective Date after giving effect to the funding of such Lender's Term Loan Commitment on such date. (b) Borrowing Mechanics for Term Loans. (i) Company shall deliver to Administrative Agent a fully executed Funding Notice no later than 11:00 a.m. (New York City time) on (A) in the case of Base Rate Loans, the day prior to the Effective Date and (B) in the case of Eurodollar Loans, the third day prior to the Effective Date. Promptly upon receipt by Administrative Agent of such certificate, Administrative Agent shall notify each Lender of the proposed borrowing. -40- (ii) Each Lender shall make its Term Loan available to Administrative Agent not later than 12:00 p.m. (New York City time) on the Effective Date, by wire transfer of same day funds in Dollars, at Administrative Agent's Principal Office. Upon satisfaction or waiver of the conditions precedent specified herein, Administrative Agent shall make the proceeds of the Term Loans available to Company on the Effective Date by causing an amount of same day funds in Dollars equal to the proceeds of all such Loans received by Administrative Agent from Lenders to be credited to the account of Company at Administrative Agent's Principal Office or to such other account as may be designated in writing to Administrative Agent by Company. 2.2. DELAYED DRAW LOANS (a) Delayed Draw Commitments. On the Landis Acquisition Closing Date, each Lender severally agrees to make one or more Delayed Draw Loans in an amount up to but not exceeding such Lender's Delayed Draw Commitment. Any amount borrowed under this Section 2.2(a) and subsequently repaid or prepaid may not be reborrowed. Subject to Sections 2.14(a) and 2.15, all amounts owed hereunder with respect to the Delayed Draw Loans shall be paid in full no later than the Delayed Draw Loan Maturity Date. Each Lender's Delayed Draw Commitment shall expire on the earlier of (i) the Delayed Draw Commitment Termination Date and (ii) the Landis Acquisition Closing Date (after giving effect to the funding of such Lender's Delayed Draw Commitment on such date). (b) Borrowing Mechanics for Delayed Draw Loans. (i) Delayed Draw Loans shall be made in an aggregate minimum amount of $5,000,000 and integral multiples of $500,000 in excess of that amount. (ii) Whenever Company desires that Lenders make Delayed Draw Loans, Company shall deliver to Administrative Agent a fully executed and delivered Funding Notice no later than 11:00 a.m. (New York City time) at least three Business Days in advance of the proposed Credit Date in the case of a Eurodollar Rate Loan, and at least one Business Day in advance of the proposed Credit Date in the case of a Delayed Draw Loan that is a Base Rate Loan. For purposes of this Section 2.2(b)(ii), no Funding Notice shall be deemed to be fully executed and delivered unless such Funding Notice includes certification that the proceeds of the drawing shall be used only to pay Landis Acquisition Financing Requirements on the date of such drawing. Except as otherwise provided herein, a Funding Notice for a Delayed Draw Loan that is a Eurodollar Rate Loan shall be irrevocable on and after the related Interest Rate Determination Date, and Company shall be bound to make a borrowing in accordance therewith. -41- (iii) Notice of receipt of each Funding Notice in respect of Delayed Draw Loans, together with the amount of each Lender's Pro Rata Share thereof, if any, together with the applicable interest rate, shall be provided by Administrative Agent to each applicable Lender by telefacsimile with reasonable promptness, but (provided Administrative Agent shall have received such notice by 11:00 a.m. (New York City time)) not later than 3:00 p.m. (New York City time) on the same day as Administrative Agent's receipt of such Funding Notice from Company. (iv) Each Lender shall make the amount of its Delayed Draw Loan available to Administrative Agent not later than 12:00 p.m. (New York City time) on the applicable Credit Date by wire transfer of same day funds in Dollars, at Administrative Agent's Principal Office. Except as provided herein, upon satisfaction or waiver of the conditions precedent specified herein, Administrative Agent shall make the proceeds of such Delayed Draw Loans available to Company on the Landis Acquisition Closing Date by causing an amount of same day funds in Dollars equal to the proceeds of all such Delayed Draw Loans received by Administrative Agent from Lenders to be credited to an account designated in writing to Administrative Agent by Company. 2.3. REVOLVING LOANS. (a) Revolving Commitments. During the Revolving Commitment Period, subject to the terms and conditions hereof, each Lender severally agrees to make Revolving Loans to Company in the aggregate amount up to but not exceeding such Lender's Revolving Commitment; provided, after giving effect to the making of any Revolving Loans in no event shall the Total Utilization of Revolving Commitments exceed the Revolving Commitments then in effect. Amounts borrowed pursuant to this Section 2.3(a) may be repaid and reborrowed during the Revolving Commitment Period. Each Lender's Revolving Commitment shall expire on the Revolving Commitment Termination Date and all Revolving Loans and all other amounts owed hereunder with respect to the Revolving Loans and the Revolving Commitments shall be paid in full no later than such date. (b) Borrowing Mechanics for Revolving Loans. (i) Except pursuant to Section 2.4(d) and 2.5(b)(iv), Revolving Loans that are Base Rate Loans shall be made in an aggregate minimum amount of $1,000,000 and integral multiples of $1,000,000 in excess of that amount, and Revolving Loans that are Eurodollar Rate Loans shall be in an aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of that amount. -42- (ii) Whenever Company desires that Lenders make Revolving Loans, Company shall deliver (subject to Section 3.2(b)) to Administrative Agent a fully executed and delivered Funding Notice no later than 11:00 a.m. (New York City time) at least three Business Days in advance of the proposed Credit Date in the case of a Eurodollar Rate Loan, and at least one Business Day in advance of the proposed Credit Date in the case of a Revolving Loan that is a Base Rate Loan. Except as otherwise provided herein, a Funding Notice for a Revolving Loan that is a Eurodollar Rate Loan shall be irrevocable on and after the related Interest Rate Determination Date, and Company shall be bound to make a borrowing in accordance therewith. (iii) Notice of receipt of each Funding Notice in respect of Revolving Loans, together with the amount of each Lender's Pro Rata Share thereof, if any, together with the applicable interest rate, shall be provided by Administrative Agent to each applicable Lender by telefacsimile with reasonable promptness, but (provided Administrative Agent shall have received such notice by 11:00 a.m. (New York City time)) not later than 3:00 p.m. (New York City time) on the same day as Administrative Agent's receipt of such Funding Notice from Company. (iv) Each Lender shall make the amount of its Revolving Loan available to Administrative Agent not later than 12:00 p.m. (New York City time) on the applicable Credit Date by wire transfer of same day funds in Dollars, at Administrative Agent's Principal Office. Except as provided herein, upon satisfaction or waiver of the conditions precedent specified herein, Administrative Agent shall make the proceeds of such Revolving Loans available to Company on the applicable Credit Date by causing an amount of same day funds in Dollars equal to the proceeds of all such Revolving Loans received by Administrative Agent from Lenders to be credited to an account designated in writing to Administrative Agent by Company. 2.4. ISSUANCE OF LETTERS OF CREDIT AND PURCHASE OF PARTICIPATIONS THEREIN. (a) General. Subject to the terms and conditions set forth herein, Company (or any other Credit Party, so long as Company is a co-obligor or co-applicant in respect of each Letter of Credit issued for the account of such other Credit Party on terms reasonably acceptable to Administrative Agent and Issuing Bank) may request the issuance of Letters of Credit for its own account, such Letter of Credit to be in a form reasonably acceptable to Administrative Agent and Issuing Bank, at any time and from time to time during the Revolving Commitment Period. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by Company to, or entered into by Company with, Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control. -43- (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), Company shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by Issuing Bank) to Issuing Bank and Administrative Agent (reasonably, but in any case at least two Business Days, in advance of the requested date of issuance, amendment, renewal or extension) a fully executed Issuance Notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section 2.4), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by Issuing Bank, Company also shall submit a letter of credit application on Issuing Bank's standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit Company shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the Letter of Credit Usage shall not exceed the Letter of Credit Sublimit and (ii) the Total Utilization of Revolving Commitments shall not exceed the Revolving Commitments then in effect. All Letters of Credit shall be denominated in Dollars and the stated amount of each Letter of Credit shall not be less than $100,000 or such lesser amount as is acceptable to Issuing Bank in its sole discretion. (c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is five Business Days prior to the Revolving Commitment Termination Date. (d) Participations. By the issuance, renewal or extension of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of Issuing Bank or the Lenders, Issuing Bank hereby grants to each Lender, and each Lender hereby acquires from Issuing Bank, a participation in such Letter of Credit equal to such Lender's Pro Rata Share (with respect to the Revolving Commitments) of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to Administrative Agent, for the account of Issuing Bank, such Lender's Pro Rata Share (with respect to the Revolving Commitments) of each Letter of Credit Disbursement made by Issuing Bank and not reimbursed by Company on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to Company for any reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not -44- be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. (e) Reimbursement. If Issuing Bank shall make any Letter of Credit Disbursement in respect of a Letter of Credit, Company shall reimburse such Letter of Credit Disbursement by paying to Administrative Agent an amount equal to such Letter of Credit Disbursement not later than 2:30 p.m., New York City time, on the date that such Letter of Credit Disbursement is made, if Company shall have received notice of such Letter of Credit Disbursement prior to 10:00 a.m., New York City time, on such date, or, if such notice has not been received by Company prior to such time on such date, then not later than 2:30 p.m., New York City time, on (i) the Business Day that Company receives such notice, if such notice is received prior to 10:00 a.m., New York City time, on the day of receipt, or (ii) the Business Day immediately following the day that Company receives such notice, if such notice is not received prior to such time on the day of receipt; provided, Company may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.3 or Section 2.5 that such payment be financed with a Revolving Loan that is a Base Rate Loan or a Swing Line Loan in an equivalent amount and, to the extent so financed, Company's obligation to make such payment shall be discharged and replaced by the resulting Revolving Loan or Swing Line Loan. If Company fails to make such payment when due, Administrative Agent shall notify each Lender of the applicable Letter of Credit Disbursement, the payment then due from Company in respect thereof and such Lender's Pro Rata Share thereof. Following receipt of such notice, each Lender shall pay to Administrative Agent its Pro Rata Share of the payment then due from Company, in the same manner as provided in Section 2.5 with respect to Loans made by such Lender (and Section 2.5 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and Administrative Agent shall promptly pay to Issuing Bank the amounts so received by it from the Lenders. Promptly following receipt by Administrative Agent of any payment from Company pursuant to this paragraph, Administrative Agent shall distribute such payment to Issuing Bank or, to the extent that Lenders have made payments pursuant to this paragraph to reimburse Issuing Bank, then to such Lenders and Issuing Bank as their interests may appear. Any payment made by a Lender pursuant to this paragraph to reimburse Issuing Bank for any Letter of Credit Disbursement (other than the funding of Revolving Loans as contemplated above) shall not constitute a Loan and shall not relieve Company of its obligation to reimburse such Letter of Credit Disbursement. (f) Obligations Absolute. The Company's obligation to reimburse Letter of Credit Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented -45- under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, Company's obligations hereunder. Neither Administrative Agent, the Lenders nor Issuing Bank, nor any of their Affiliates, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the reasonable control of Issuing Bank; provided, the foregoing shall not be construed to excuse Issuing Bank from liability to Company to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by Company to the extent permitted by applicable law) suffered by Company that are caused by Issuing Bank's failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of Issuing Bank (as finally determined by a court of competent jurisdiction), Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit. (g) Disbursement Procedures. Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. Issuing Bank shall promptly notify Administrative Agent and Company by telephone (confirmed by telecopy) of such demand for payment and whether Issuing Bank has made or will make a Letter of Credit Disbursement thereunder; provided, any failure to give or delay in giving such notice shall not relieve Company of its obligation to reimburse Issuing Bank and the Lenders with respect to any such Letter of Credit Disbursement. (h) Interim Interest. If Issuing Bank shall make any Letter of Credit Disbursement, then, unless Company shall reimburse such Letter of Credit Disbursement in full on the date such Letter of Credit Disbursement is made, the unpaid amount thereof -46- shall bear interest, for each day from and including the date such Letter of Credit Disbursement is made to but excluding the date that Company reimburses such Letter of Credit Disbursement, at the rate per annum then applicable to Revolving Loans that are Base Rate Loans; provided, if Company fails to reimburse such Letter of Credit Disbursement when due pursuant to paragraph (e) of this Section, then such unpaid amount shall bear interest at a rate which is 2% per annum in excess of the rate of interest otherwise applicable to Revolving Loans that are Base Rate Loans. Interest accrued pursuant to this paragraph shall be for the account of Issuing Bank, except that interest accrued on and after the date of payment by any Lender pursuant to paragraph (e) of this Section to reimburse Issuing Bank shall be for the account of such Lender to the extent of such payment. (i) Replacement of Issuing Bank; Additional Issuing Banks. (i) Issuing Bank may be replaced at any time by written agreement among Company, Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. Administrative Agent shall notify the Lenders of any such replacement of Issuing Bank. At the time any such replacement shall become effective, Company shall pay all unpaid fees accrued for the account of the replaced Issuing Bank. From and after the effective date of any such replacement, (A) the successor Issuing Bank shall have all the rights and obligations of Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (B) references herein to the term "Issuing Bank" shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit. A Revolving Lender may become an Issuing Bank pursuant to a written agreement among Company, Administrative Agent and such Revolving Lender (an "ADDITIONAL ISSUING BANK"), but only if the Issuing Bank has an insufficiently high credit rating for the issuance of the requested Letter of Credit, whereupon Administrative Agent shall notify other Revolving Lenders of such Additional Issuing Bank. Upon becoming an Additional Issuing Bank, all references to "Issuing Bank" herein shall be deemed to include such Additional Issuing Bank for the purposes of such Letters of Credit. (j) Cash Collateralization. If any Event of Default shall occur and be continuing, on the Business Day that Company receives notice from Administrative Agent or the Requisite Class Lenders (or, if the maturity of the Loans has been accelerated, Issuing Bank) demanding the deposit of cash collateral pursuant to this paragraph, Company shall deposit in an account with Administrative Agent, in the name of Administrative Agent and for the benefit of the Lenders, an amount in cash equal to the Letter of Credit Exposure as of such date plus any accrued and unpaid interest thereon; provided, the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without -47- demand or other notice of any kind, upon the occurrence of any Event of Default with respect to Company described in Section 8.1(f) or 8.1(g). Such deposit shall be held by Administrative Agent as collateral for the payment and performance of the obligations of Company under this Agreement. Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of Administrative Agent and at Company's risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by Administrative Agent to reimburse Issuing Bank for Letter of Credit Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of Company at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Issuing Bank), be applied to satisfy other obligations of Company under this Agreement. If Company is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be promptly returned to Company after all Events of Default have been cured or waived. 2.5. SWING LINE LOANS. (a) Swing Line Loans Commitment. During the Revolving Commitment Period, subject to the terms and conditions hereof, Swing Line Lender hereby agrees to make Swing Line Loans to Company in the aggregate amount up to but not exceeding the Swing Line Sublimit; provided, after giving effect to the making of any Swing Line Loan, in no event shall the Total Utilization of Revolving Commitments exceed the Revolving Commitments then in effect. Amounts borrowed pursuant to this Section 2.5 may be repaid and reborrowed during the Revolving Commitment Period. Swing Line Lender's Revolving Commitment shall expire on the Revolving Commitment Termination Date and Company shall repay the then unpaid principal amount of each Swing Line Loan and any accrued and unpaid interest thereon as of the earlier of (i) the Revolving Commitment Termination Date, (ii) any date on which Company is borrowing Revolving Loans or Delayed Draw Loans and (iii) the first date at least two Business Days after such Swing Line Loan is made that is the 15th or last day of any calendar month. (b) Borrowing Mechanics for Swing Line Loans. (i) Swing Line Loans shall be made in an aggregate minimum amount of $1,000,000 and integral multiples of $100,000 in excess of that amount. (ii) Whenever Company desires that Swing Line Lender make a Swing Line Loan, Company shall deliver to Swing Line Lender, with a copy to -48- Agents (subject to Section 3.2(b)) a Funding Notice no later than 12:00 p.m. (New York City time) on the proposed Credit Date. (iii) Swing Line Lender shall make the amount of its Swing Line Loan available to Administrative Agent not later than 2:00 p.m. (New York City time) on the applicable Credit Date by wire transfer of same day funds in Dollars, at Administrative Agent's Principal Office. Except as provided herein, upon satisfaction or waiver of the conditions precedent specified herein, Administrative Agent shall make the proceeds of such Swing Line Loans available to Company on the applicable Credit Date by causing an amount of same day funds in Dollars equal to the proceeds of all such Swing Line Loans received by Administrative Agent from Swing Line Lender to be credited to an account designated in writing to Administrative Agent by Company. (iv) With respect to any Swing Line Loans which have not been prepaid by Company pursuant to Section 2.14 or Section 2.15, Swing Line Lender may at any time in its sole and absolute discretion, deliver to Administrative Agent (with a copy to Company), no later than 11:00 a.m. (New York City time) at least one Business Day in advance of the proposed Credit Date, a notice (which shall be deemed to be a Funding Notice given by Company) requesting that each Lender holding a Revolving Commitment make Revolving Loans that are Base Rate Loans to Company on such Credit Date in an amount equal to the amount of such Swing Line Loans (the "REFUNDED SWING LINE LOANS") outstanding on the date such notice is given which Swing Line Lender requests Lenders to prepay. Anything contained in this Agreement to the contrary notwithstanding, (1) the proceeds of such Revolving Loans made by the Lenders other than Swing Line Lender shall be immediately delivered by Administrative Agent to Swing Line Lender (and not to Company) and applied to repay a corresponding portion of the Refunded Swing Line Loans and (2) on the day such Revolving Loans are made, Swing Line Lender's Pro Rata Share of the Refunded Swing Line Loans shall be deemed to be paid with the proceeds of a Revolving Loan made by Swing Line Lender to Company, and such portion of the Swing Line Loans deemed to be so paid shall no longer be outstanding as Swing Line Loans and shall no longer be due under the Swing Line Note of Swing Line Lender but shall instead constitute part of Swing Line Lender's outstanding Revolving Loans to Company and shall be due under the Revolving Loan Note issued by Company to Swing Line Lender. Company hereby authorizes Administrative Agent and Swing Line Lender to charge Company's accounts with Administrative Agent and Swing Line Lender (up to the amount available in each such account) in order to immediately pay Swing Line Lender the amount of the Refunded Swing Line Loans to the extent the proceeds of such Revolving Loans made by Lenders, including the Revolving Loan deemed to be made by Swing Line Lender, are not sufficient to repay in full the Refunded Swing Line Loans. If any portion of any such amount paid (or deemed to be paid) to Swing Line Lender should be recovered by or on behalf of -49- Company from Swing Line Lender in bankruptcy, by assignment for the benefit of creditors or otherwise, the loss of the amount so recovered shall be ratably shared among all the Revolving Lenders. (v) If for any reason Revolving Loans are not made pursuant to Section 2.5(b)(iv) in an amount sufficient to repay any amounts owed to Swing Line Lender in respect of any outstanding Swing Line Loans on or before the third Business Day after demand for payment thereof by Swing Line Lender, each Lender holding a Revolving Commitment shall be deemed to, and hereby agrees to, have purchased a participation in such outstanding Swing Line Loans, and in an amount equal to its Pro Rata Share of the applicable unpaid amount together with accrued interest thereon. Upon one Business Day's notice from Swing Line Lender, each Lender holding a Revolving Commitment shall deliver to Swing Line Lender an amount equal to its respective participation in the applicable unpaid amount in same day funds at the Principal Office of Swing Line Lender. In order to evidence such participation each Lender holding a Revolving Commitment agrees to enter into a participation agreement at the request of Swing Line Lender in form and substance reasonably satisfactory to Swing Line Lender. In the event any Lender holding a Revolving Commitment fails to make available to Swing Line Lender the amount of such Lender's participation as provided in this paragraph, Swing Line Lender shall be entitled to recover such amount on demand from such Lender together with interest thereon for three Business Days at the rate customarily used by Swing Line Lender for the correction of errors among banks and thereafter at the Base Rate, as applicable. (vi) Notwithstanding anything contained herein to the contrary, (1) each Lender's obligation to make Revolving Loans for the purpose of repaying any Refunded Swing Line Loans pursuant to the second preceding paragraph and each Lender's obligation to purchase a participation in any unpaid Swing Line Loans pursuant to the immediately preceding paragraph shall be absolute and unconditional and shall not be affected by any circumstance, including without limitation (A) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against Swing Line Lender, any Credit Party or any other Person for any reason whatsoever; (B) the occurrence or continuation of a Default or Event of Default; (C) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of any Credit Party; (D) any breach of this Agreement or any other Credit Document by any party thereto; or (E) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing; and (2) Swing Line Lender shall not be obligated to make any Swing Line Loans (A) if it has elected not to do so after the occurrence and during the continuation of a Default or Event of Default or (B) at a time when a Funding Default exists unless Swing Line Lender has entered into arrangements satisfactory to it and Company to eliminate Swing Line Lender's risk with respect to the Defaulting -50- Lender's participation in such Swing Ling Loan, including by cash collateralizing such Defaulting Lender's Pro Rata Share of the outstanding Swing Line Loans. 2.6. PRO RATA SHARES; AVAILABILITY OF FUNDS. (a) Pro Rata Shares. All Loans shall be made, and all participations purchased, by Lenders simultaneously and proportionately to their respective Pro Rata Shares, it being understood that no Lender shall be responsible for any default by any other Lender in such other Lender's obligation to make a Loan requested hereunder or purchase a participation required hereby nor shall any Commitment of any Lender be increased or decreased as a result of a default by any other Lender in such other Lender's obligation to make a Loan requested hereunder or purchase a participation required hereby. (b) Availability of Funds. Unless Administrative Agent shall have been notified by any Lender prior to the applicable Credit Date that such Lender does not intend to make available to Administrative Agent the amount of such Lender's Loan requested on such Credit Date, Administrative Agent may assume that such Lender has made such amount available to Administrative Agent on such Credit Date and Administrative Agent may, in its sole discretion, but shall not be obligated to, make available to Company a corresponding amount on such Credit Date. If such corresponding amount is not in fact made available to Administrative Agent by such Lender, Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from such Credit Date until the date such amount is paid to Administrative Agent, at the customary rate set by Administrative Agent for the correction of errors among banks for three Business Days and thereafter at the Base Rate. If such Lender does not pay such corresponding amount forthwith upon Administrative Agent's demand therefor, Administrative Agent shall promptly notify Company and Company shall immediately pay such corresponding amount to Administrative Agent together with interest thereon, for each day from such Credit Date until the date such amount is paid to Administrative Agent, at the rate payable hereunder for Base Rate Loans for such Class of Loans. Nothing in this Section 2.6(b) shall be deemed to relieve any Lender from its obligation to fulfill its Term Loan Commitment, its Delayed Draw Commitment, its Revolving Commitment or its obligation to purchase participations in Letters of Credit pursuant to Section 2.4(d) hereunder or to prejudice any rights that Company may have against any Lender as a result of any default by such Lender hereunder. 2.7. USE OF PROCEEDS. The proceeds of the Term Loans made on the Effective Date shall be applied by Company on the Effective Date to prepay Term Loans (as defined in the Original Agreement) outstanding under the Original Agreement and, after prepayment of such Term Loans in full, otherwise for working capital and general corporate purposes of the Company and its Subsidiaries. The proceeds of the Revolving Loans, Swing Line Loans and Letters of Credit made after the Closing Date shall be -51- applied by Company for Permitted Acquisition Expenses, working capital and general corporate purposes of Company and its Subsidiaries; provided, however, in no event will the proceeds of Revolving Loans be used for the purposes of prepaying Loans as permitted under Section 2.14 hereof. The proceeds of the Delayed Draw Loans shall be used solely to pay Landis Acquisition Financing Requirements. No portion of the proceeds of any Credit Extension shall be used in any manner that causes or might cause such Credit Extension or the application of such proceeds to violate Regulation T, Regulation U or Regulation X of the Board of Governors of the Federal Reserve System or any other regulation thereof or to violate the Exchange Act. 2.8. EVIDENCE OF DEBT; REGISTER; LENDERS' BOOKS AND RECORDS; NOTES. (a) Lenders' Evidence of Debt. Each Lender shall maintain on its internal records an account or accounts evidencing the Indebtedness of Company to such Lender, including the amounts of the Loans made by it and each repayment and prepayment in respect thereof. Any such recordation shall be conclusive and binding on Company, absent manifest error; provided, failure to make any such recordation, or any error in such recordation, shall not affect any Lender's Commitments or Company's Obligations in respect of any applicable Loans; and provided further, in the event of any inconsistency between the Register and any Lender's records, the recordations in the Register shall govern. (b) Register. Administrative Agent, acting on behalf of Company, shall maintain at its Principal Office a register for the recordation of the names and addresses of Lenders and the Commitments and Loans of each Lender from time to time (the "REGISTER"). The Register shall be available for inspection by Company or any Lender at any reasonable time and from time to time upon reasonable prior request. Administrative Agent shall record in the Register the Commitments and the Loans, and each repayment or prepayment in respect of the principal amount of the Loans, and any such recordation shall be conclusive and binding on Company and each Lender, absent manifest error; provided, failure to make any such recordation, or any error in such recordation, shall not affect any Lender's Commitments or Company's Obligations in respect of any Loan. Company hereby designates GSCP to serve as Company's agent solely for purposes of maintaining the Register as provided in this Section 2.8, and Company hereby agrees that, to the extent GSCP serves in such capacity, GSCP and its officers, directors, employees, agents and affiliates shall constitute "Indemnitees." (c) Notes. If so requested by any Lender by written notice to Company (with a copy to Administrative Agent) at least two Business Days prior to the Effective Date, or at any time thereafter, Company shall execute and deliver to such Lender (and/or, if applicable and if so specified in such notice, to any Person who is an assignee of such Lender pursuant to Section 10.6) on the Effective Date (or, if such notice is delivered after the Effective Date, promptly after Company's receipt of such -52- notice) a Note or Notes to evidence such Lender's Term Loan, Delayed Draw Loan, Swing Line Loan or Revolving Loan, as the case may be. 2.9. INTEREST ON LOANS. (a) Except as otherwise set forth herein, each Class of Loan shall bear interest on the unpaid principal amount thereof from the date made through repayment (whether by acceleration or otherwise) thereof as follows: (i) in the case of Revolving Loans: (1) if a Base Rate Loan, at the Base Rate plus the Applicable Margin; or (2) if a Eurodollar Rate Loan, at the Adjusted Eurodollar Rate plus the Applicable Margin; (ii) in the case of Swing Line Loans, at the Base Rate plus the Applicable Margin; and (iii) in the case of Term Loan and Delayed Draw Loans: (1) if a Base Rate Loan, at the Base Rate plus 1.50% per annum; or (2) if a Eurodollar Rate Loan, at the Adjusted Eurodollar Rate plus 2.50% per annum. (b) The basis for determining the rate of interest with respect to any Loan (except a Swing Line Loan), and the Interest Period with respect to any Eurodollar Rate Loan, shall be selected by Company and notified to Administrative Agent and Lenders pursuant to the applicable Funding Notice or Conversion/Continuation Notice, as the case may be; provided, until the earlier of (A) the date that Administration Agent notifies Company that the primary syndication of the Term Loans and Delayed Draw Commitments has been completed and (B) the date that is 60 days following the Effective Date, the Term Loans shall be maintained as either (1) Eurodollar Rate Loans having an Interest Period of no longer than one month or (2) Base Rate Loans. If on any day a Loan is outstanding with respect to which a Funding Notice or Conversion/Continuation Notice has not been delivered to Administrative Agent in accordance with the terms hereof specifying the applicable basis for determining the rate of interest, then for that day such Loan shall be a Base Rate Loan. Swing Line Loans shall be made and maintained only as Base Rate Loans. (c) In connection with Eurodollar Rate Loans there shall be no more than ten Interest Periods outstanding at any time. In the event Company fails to specify -53- between a Base Rate Loan or a Eurodollar Rate Loan in the applicable Funding Notice or Conversion/Continuation Notice, such Loan (if outstanding as a Eurodollar Rate Loan) will be automatically converted into a Base Rate Loan on the last day of the then-current Interest Period for such Loan (or if outstanding as a Base Rate Loan will remain as, or (if not then outstanding) will be made as, a Base Rate Loan). In the event Company fails to specify an Interest Period for any Eurodollar Rate Loan in the applicable Funding Notice or Conversion/Continuation Notice, Company shall be deemed to have selected an Interest Period of one month. As soon as practicable after 10:00 a.m. (New York City time) on each Interest Rate Determination Date, Administrative Agent shall determine (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) the interest rate that shall apply to the Eurodollar Rate Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to Company and each Lender. (d) Interest payable pursuant to Section 2.8(a) shall be computed (i) in the case of Base Rate Loans on the basis of a 365-day or 366-day year, as the case may be, and (ii) in the case of Eurodollar Rate Loans, on the basis of a 360-day year, in each case for the actual number of days elapsed in the period during which it accrues. In computing interest on any Loan, the date of the making of such Loan or the first day of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate Loan, as the case may be, shall be included, and the date of payment of such Loan or the expiration date of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the case may be, shall be excluded; provided, if a Loan is repaid on the same day on which it is made, one day's interest shall be paid on that Loan. (e) Except as otherwise set forth herein, interest on each Loan shall be payable in arrears on and to (i) each Interest Payment Date applicable to that Loan; (ii) any prepayment of that Loan, whether voluntary or mandatory, to the extent accrued on the amount being prepaid; and (iii) at maturity, including final maturity; provided, however, with respect to any voluntary prepayment of a Base Rate Loan, accrued interest shall instead be payable on the applicable Interest Payment Date. 2.10. CONVERSION/CONTINUATION. (a) Subject to Section 2.19 and so long as no Default or Event of Default shall have occurred and then be continuing, Company shall have the option: (i) to convert at any time all or any part of any Loan equal to $500,000 and integral multiples of $100,000 in excess of that amount from one Type of Loan to another Type of Loan; provided, a Eurodollar Rate Loan may -54- only be converted on the expiration of the Interest Period applicable to such Eurodollar Rate Loan unless Company shall pay all amounts due under Section 2.19 in connection with any such conversion; or (ii) upon the expiration of any Interest Period applicable to any Eurodollar Rate Loan, to continue all or any portion of such Loan equal to $500,000 and integral multiples of $100,000 in excess of that amount as a Eurodollar Rate Loan. (b) The Company shall deliver a Conversion/Continuation Notice to Administrative Agent no later than 11:00 a.m. (New York City time) at least one Business Day in advance of the proposed Conversion/Continuation Notice (in the case of a conversion to a Base Rate Loan) and at least three Business Days in advance of the proposed Conversion/Continuation Date (in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan). Except as otherwise provided herein, a Conversion/ Continuation Notice for conversion to, or continuation of, any Eurodollar Rate Loans (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Company shall be bound to effect a conversion or continuation in accordance therewith. 2.11. DEFAULT INTEREST. Upon the occurrence and during the continuance of an Event of Default, the principal amount of all Loans outstanding and, to the extent permitted by applicable law, any interest payments on the Loans or any fees or other amounts owed hereunder, shall thereafter bear interest (including post-petition interest in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws) payable on demand at a rate that is 2% per annum in excess of the interest rate otherwise payable hereunder with respect to the applicable Loans (or, in the case of any such fees and other amounts, at a rate which is 2% per annum in excess of the interest rate otherwise payable hereunder for Base Rate Loans); provided, in the case of Eurodollar Rate Loans, upon the expiration of the Interest Period in effect at the time any such increase in interest rate is effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans and shall thereafter bear interest payable upon demand at a rate which is 2% per annum in excess of the interest rate otherwise payable hereunder for Base Rate Loans. Payment or acceptance of the increased rates of interest provided for in this Section 2.11 is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Administrative Agent or any Lender. 2.12. FEES. (a) Company agrees to pay to Lenders having Revolving Exposure: (i) commitment fees equal to (1) the average of the daily difference between (a) the Revolving Commitments, and (b) the sum of (x) the -55- aggregate principal amount of outstanding Revolving Loans (but not Swing Line Loans) plus (y) the Letter of Credit Usage, times (2) the Applicable Revolving Commitment Fee Percentage; and (ii) letter of credit fees equal to (1) the Applicable Margin for Revolving Loans that are Eurodollar Rate Loans, times (2) the average aggregate daily maximum amount available to be drawn under all such Letters of Credit (regardless of whether any conditions for drawing could then be met and determined as of the close of business on any date of determination). All fees referred to in Sections 2.12(a), 2.12(c) and 2.12(d) shall be paid to Administrative Agent at its Principal Office and upon receipt, Administrative Agent shall promptly distribute to each Lender its Pro Rata Share thereof. (b) Company agrees to pay directly to Issuing Bank, for its own account, the following fees: (i) a fronting fee in an amount equal to (1) an amount per annum (not to exceed 0.25%) as may be agreed by Company and Issuing Bank, times (2) the average aggregate daily maximum amount available to be drawn under all Letters of Credit (determined as of the close of business on any date of determination); and (ii) such documentary and processing charges for any issuance, amendment, transfer or payment of a Letter of Credit as are in accordance with Issuing Bank's standard schedule for such charges and as in effect at the time of such issuance, amendment, transfer or payment, as the case may be. (c) Company agrees to pay to Lenders having Delayed Draw Loan Exposure commitment fees equal to the sum of (x) the daily average Delayed Draw Commitments, times (y) the Applicable Delayed Draw Commitment Fee Percentage. (d) Company agrees to pay to each Lender having Revolving Exposure executing and delivering its signature page to this Agreement on or prior to November 10, 2003 a consent fee in an amount equal to 0.010% of such Lender's Revolving Exposure as of the Effective Date. (e) All fees referred to in Section 2.12(a), 2.12(b)(i) and 2.12(c) shall be calculated on the basis of a 360-day year and the actual number of days elapsed and shall be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year during the applicable Commitment Period, commencing on the first such date to occur after the Closing Date, and on the applicable Commitment Termination Date. -56- (f) In addition to any of the foregoing fees, Company agrees to pay to Agents such other fees in the amounts and at the times separately agreed upon. 2.13. SCHEDULED PAYMENTS/COMMITMENT REDUCTIONS. (a) Scheduled Installments. The principal amounts of the Term Loans shall be repaid in consecutive quarterly installments (each, a "TERM LOAN INSTALLMENT") in the aggregate amounts and on the dates (each, a "TERM LOAN INSTALLMENT DATE") set forth below, commencing on December 31, 2003.
TERM LOAN TERM LOAN INSTALLMENT DATE INSTALLMENT - --------------------------------------------- December 31, 2003 $ 825,000 March 31, 2004 $ 825,000 June 30, 2004 $ 825,000 September 30, 2004 $ 825,000 December 31, 2004 $ 825,000 March 31, 2005 $ 825,000 June 30, 2005 $ 825,000 September 30, 2005 $ 825,000 December 31, 2005 $ 825,000 March 31, 2006 $ 825,000 June 30, 2006 $ 825,000 September 30, 2006 $ 825,000 December 31, 2006 $ 825,000 March 31, 2007 $ 825,000 June 30, 2007 $ 825,000 September 30, 2007 $ 825,000 December 31, 2007 $ 825,000 March 31, 2008 $ 825,000 June 30, 2008 $ 825,000 September 30, 2008 $ 825,000 December 31, 2008 $ 825,000
-57-
TERM LOAN TERM LOAN INSTALLMENT DATE INSTALLMENT - --------------------------------------------- March 31, 2009 $ 825,000 June 30, 2009 $ 825,000 September 30, 2009 $77,756,250 December 31, 2009 $77,756,250 March 31, 2010 $77,756,250 June 30, 2010 $77,756,250
-58- (b) The principal amount of the Delayed Draw Loans shall be repaid in consecutive quarterly installments (each, a "DELAYED DRAW INSTALLMENT") on the dates set forth below (each, a "DELAYED DRAW INSTALLMENT DATE"), commencing on September 30, 2004.
DELAYED DRAW LOAN DELAYED DRAW INSTALLMENT DATE INSTALLMENT - ------------------ ----------- September 30, 2004 $ 125,000 December 31, 2004 $ 125,000 March 31, 2005 $ 125,000 June 30, 2005 $ 125,000 September 30, 2005 $ 125,000 December 31, 2005 $ 125,000 March 31, 2006 $ 125,000 June 30, 2006 $ 125,000 September 30, 2006 $ 125,000 December 31, 2006 $ 125,000 March 31, 2007 $ 125,000 June 30, 2007 $ 125,000 September 30, 2007 $ 125,000 December 31, 2007 $ 125,000 March 31, 2008 $ 125,000 June 30, 2008 $ 125,000 September 30, 2008 $ 125,000 December 31, 2008 $ 125,000 March 31, 2009 $ 125,000 June 30, 2009 $ 125,000 September 30, 2009 $11,875,000 December 31, 2009 $11,875,000 March 31, 2010 $11,875,000 June 30, 2010 $11,875,000
-59- (c) Notwithstanding the foregoing, (i) Term Loan Installments and Delayed Draw Installments shall be reduced in connection with any voluntary or mandatory prepayments of the Term Loans or the Delayed Draw Loans, as the case may be, in accordance with Sections 2.14, 2.15 and 2.16, as applicable; and (ii) the Term Loans and the Delayed Draw Loans, together with all other amounts owed hereunder with respect thereto, shall, in any event, be paid in full no later than the Term Loan Maturity Date and the Delayed Draw Loan Maturity Date, respectively. 2.14. VOLUNTARY PREPAYMENTS/COMMITMENT REDUCTIONS. (a) Voluntary Prepayments. (i) Any time and from time to time: (1) with respect to Base Rate Loans (other than Swing Line Loans), Company may prepay any such Loans on any Business Day in whole or in part, in an aggregate minimum amount of $1,000,000 and integral multiples of $500,000 in excess of that amount; (2) with respect to Eurodollar Rate Loans, Company may prepay any such Loans on any Business Day in whole or in part in an aggregate minimum amount of $1,000,000 and integral multiples of $500,000 in excess of that amount; and (3) with respect to Swing Line Loans, Company may prepay any such Loans on any Business Day in whole or in part in an aggregate minimum amount of $1,000,000, and in integral multiples of $100,000 in excess of that amount. (ii) All such prepayments shall be made: (1) in the case of Base Rate Loans (other than Swing Line Loans), upon not less than one Business Day's prior written or telephonic notice to Administrative Agent; (2) in the case of Eurodollar Rate Loans, upon not less than three Business Days' prior written or telephonic notice to Administrative Agent; and (3) in the case of Swing Line Loans, upon written or telephonic notice on the date of prepayment to Administrative Agent and Swing Line Lender; -60- in each case given by 12:00 p.m. (New York City time) on the date required and, if given by telephone, promptly confirmed in writing to Administrative Agent (and Administrative Agent will promptly transmit such telephonic or original notice for Term Loans or Revolving Loans, as the case may be, by telefacsimile or telephone to each Lender) and, as applicable, Swing Line Lender. Upon the giving of any such notice, the principal amount of the Loans specified in such notice shall become due and payable on the prepayment date specified therein. (b) Voluntary Commitment Reductions. (i) Company may, upon not less than three Business Days' prior written or telephonic notice confirmed in writing to Administrative Agent (which original written or telephonic notice Administrative Agent will promptly transmit by telefacsimile or telephone to each applicable Lender), at any time and from time to time terminate in whole or permanently reduce in part, without premium or penalty, (A) during the Delayed Draw Commitment Period, the Delayed Draw Commitments in an amount up to the aggregate amount of the Delayed Draw Commitments and (B) during the Revolving Commitment Period, the Revolving Commitments in an amount up to the amount by which the Revolving Commitments exceed the Total Utilization of Revolving Commitments at the time of such proposed termination or reduction; provided, any such partial reduction of Commitments shall be in an aggregate minimum amount for each Class of Commitments of $1,000,000 and integral multiples of $500,000 in excess of that amount. (ii) Company's notice to Administrative Agent shall designate the date (which shall be a Business Day) of such termination or reduction and the amount of any partial reduction, and such termination or reduction of the Commitments shall be effective on the date specified in Company's notice and shall reduce the Commitment of each Lender proportionately to its Pro Rata Share thereof. 2.15. MANDATORY PREPAYMENTS/COMMITMENT REDUCTIONS. (a) Asset Sales. No later than the first Business Day following the date of receipt by Holdings or any of its Subsidiaries of any Net Asset Sale Proceeds, Company shall prepay Loans and/or permanently reduce Commitments as set forth in Section 2.16(b) in an aggregate amount equal to 100% of such Net Asset Sale Proceeds; provided, (i) so long as no Default or Event of Default shall have occurred and be continuing and (ii) to the extent that aggregate Net Asset Sale Proceeds from the Closing Date through the applicable date of determination do not exceed $10,000,000, Company shall have the option, directly or through one or more of its Subsidiaries, to invest Net Asset Sale Proceeds within two hundred seventy days of receipt thereof in long-term productive assets of the general type used in the business of Company and its -61- Subsidiaries; provided further, pending any such investment all such Net Asset Sale Proceeds shall be applied to prepay Revolving Loans to the extent outstanding (without a reduction in Revolving Commitments). (b) Insurance/Condemnation Proceeds. No later than the first Business Day following the date of receipt by Holdings or any of its Subsidiaries, or Administrative Agent as loss payee, of any Net Insurance/Condemnation Proceeds, Company shall prepay Loans and/or reduce Commitments as set forth in Section 2.16(b) in an aggregate amount equal to such Net Insurance/Condemnation Proceeds; provided, so long as no Default or Event of Default shall have occurred and be continuing, Company shall have the option, directly or through one or more of its Subsidiaries to invest such Net Insurance/Condemnation Proceeds within two hundred seventy days of receipt thereof in the repair, restoration or replacement of the applicable assets thereof, or in long term productive assets of the general type used in the business of Holdings and its Subsidiaries with the consent of Administrative Agent, such consent not to be unreasonably withheld; provided further, pending any such investment all such Net Insurance/Condemnation Proceeds, as the case may be, shall be applied to prepay Revolving Loans to the extent outstanding (without a reduction in Revolving Commitments); provided, further, if a Default subject to a cure period under Section 8.1(e) has occurred, but such cure period has not yet expired, then (i) until the earlier of (x) the cure of the Default or (y) the expiration of such cure period, all such Net Insurance/Condemnation Proceeds, as the case may be, shall be applied to prepay Revolving Loans (without a reduction in Revolving Commitments) and, to the extent of any excess, held for the benefit of the Lenders under arrangements reasonably satisfactory to Administrative Agent, and (ii) upon the expiration of such cure period, unless the Default has been cured, all such Net Insurance/Condemnation Proceeds, as the case may be, shall be applied to prepay Indebtedness in accordance with the requirements of Section 2.16(b). (c) Issuance of Equity Securities. On the date of receipt by Holdings or any of its Subsidiaries after the Effective Date of any Cash proceeds from a capital contribution to, or the issuance of any Capital Stock of, Holdings or any of its Subsidiaries (other than pursuant to any employee stock or stock option compensation plan), to the extent such proceeds are not used to pay Permitted Acquisition Expenses or, solely in the case of proceeds from Additional Sponsor Equity, Consolidated Capital Expenditures, Company shall prepay Loans and/or reduce Commitments as set forth in Section 2.16(b) in an aggregate amount equal to 75% of such remaining proceeds, net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including reasonable fees and expenses of professional advisors; provided, during any period in which the Leverage Ratio (determined for any such period by reference to the most recent Compliance Certificate delivered pursuant to Section 5.1(d) calculating the Leverage Ratio) shall be 4.25:1.00 or less, Company shall only be required to make the prepayments and/or reductions otherwise required hereby in an amount equal to 50% of such net proceeds. -62- (d) Issuance of Debt. On the date of receipt by Holdings or any of its Subsidiaries after the Closing Date of any Cash proceeds from incurrence of any Indebtedness of Holdings or any of its Subsidiaries other than with respect to any Indebtedness permitted to be incurred pursuant to Section 6.1, excluding Section 6.1(c)(ii), Company shall prepay Loans and/or reduce Commitments as set forth in Section 2.16(b) in an aggregate amount equal to 100% of such proceeds, net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including reasonable legal fees and expenses. (e) Consolidated Excess Cash Flow. In the event that there shall be Consolidated Excess Cash Flow for any Fiscal Year, Company shall, no later than ninety days after the end of such Fiscal Year, prepay Loans and/or reduce Commitments as set forth in Section 2.16(b) in an aggregate amount equal to 75% of such Consolidated Excess Cash Flow; provided, (i) for any Fiscal Year in which the Leverage Ratio (determined for any such Fiscal Year by reference to the most recent applicable Compliance Certificate delivered pursuant to Section 5.1(d)) is less than 4.25:1.00 but equal to or greater than 3.25:1.00, Company shall only be required to make the prepayments and/or reductions otherwise required hereby in an amount equal to 50% of such Consolidated Excess Cash Flow and (ii) for any Fiscal Year in which the Leverage Ratio (determined for any such Fiscal Year by reference to the most recent applicable Compliance Certificate delivered pursuant to Section 5.1(d)) is less than 3.25:1.00, Company shall only be required to make the prepayments and/or reductions otherwise required hereby in an amount equal to 25% of such Consolidated Excess Cash Flow. (f) Revolving Loans. Company shall from time to time prepay first, the Swing Line Loans, and second, the Revolving Loans to the extent necessary so that the Total Utilization of Revolving Commitments shall not at any time exceed the Revolving Commitments then in effect. (g) Delayed Draw Loans. The Company shall prepay the Delayed Draw Loans on the date such Delayed Draw Loans are made from any proceeds of the Delayed Draw Loans that were not used on such date to fund Landis Acquisition Financing Requirements. (h) Prepayment Certificate. Concurrently with any prepayment of Loans and/or reduction of Commitments pursuant to Sections 2.15(a) through 2.15(e), Company shall deliver to Administrative Agent a certificate of an Authorized Officer demonstrating the calculation of the amount of the applicable net proceeds or Consolidated Excess Cash Flow, as the case may be. In the event that Company shall subsequently determine that the actual amount received exceeded the amount set forth in such certificate, Company shall promptly make an additional prepayment of the Loans and/or the Revolving Commitments shall be permanently reduced in an amount equal to such excess, and Company shall concurrently therewith deliver to Administrative Agent a certificate of an Authorized Officer demonstrating the derivation of such excess. -63- 2.16. APPLICATION OF PREPAYMENTS/REDUCTIONS. (a) Application of Voluntary Prepayments by Class of Loans. Any prepayment of any Loan pursuant to Section 2.14(a) shall be applied as follows: first, to repay outstanding Swing Line Loans to the full extent thereof; and second, as between outstanding Revolving Loans, on the one hand, and Delayed Draw Loans and Term Loans, on the other hand, as Company may direct, provided Term Loans and outstanding Delayed Draw Loans are prepaid on a pro rata basis in accordance with the respective outstanding principal amounts thereof. Any prepayment of any Term Loan or Delayed Draw Loan pursuant to Section 2.14(a) shall be further applied on a pro rata basis to reduce the scheduled remaining installments of principal. (b) Application of Mandatory Prepayments by Class of Loans. Any amount required to be paid pursuant to Sections 2.15(a) through 2.15(e) shall be applied as follows: first, to prepay Term Loans and Delayed Draw Loans on a pro rata basis (in accordance with the respective outstanding principal amounts thereof); second, to prepay the Swing Line Loans to the full extent thereof and to permanently reduce the Revolving Commitments by the amount of such prepayment; third, to pay outstanding reimbursement obligations with respect to drawn Letters of Credit; fourth, to prepay Revolving Loans to the full extent thereof and to permanently reduce the Revolving Commitments by the amount of such prepayment; fifth, to cash collateralize Letters of Credit and to further permanently reduce the Revolving Loan Commitments by the amount of such cash collateralization; and sixth, to further permanently reduce the Revolving Commitments and any Delayed Draw Commitments on a pro rata basis (in accordance with the aggregate amounts thereof). -64- Notwithstanding the foregoing, any prepayments of Delayed Draw Loans made pursuant to Section 2.15(g) shall be applied to reduce Delayed Draw Loans on a pro rata basis (in accordance with the respective outstanding principal amounts thereof). (c) Waivable Mandatory Prepayment. [Intentionally omitted.] (d) Application of Prepayments of Loans to Base Rate Loans and Eurodollar Rate Loans. Considering each Type of Loan being prepaid separately, any prepayment thereof shall be applied first to Base Rate Loans to the full extent thereof before application to Eurodollar Rate Loans, in each case in a manner which minimizes the amount of any payments required to be made by Company pursuant to Section 2.19(c). 2.17. GENERAL PROVISIONS REGARDING PAYMENTS. (a) All payments by Company of principal, interest, fees and other Obligations shall be made in Dollars in same day funds, without defense, setoff or counterclaim, free of any restriction or condition, and delivered to Administrative Agent not later than 12:00 p.m. (New York City time) on the date due at Administrative Agent's Principal Office for the account of Lenders; funds received by Administrative Agent after that time on such due date shall be deemed to have been paid by Company on the next succeeding Business Day. (b) All payments in respect of the principal amount of any Loan (other than voluntary prepayments of Revolving Loans) shall include payment of accrued interest on the principal amount being repaid or prepaid, and all such payments (and, in any event, any payments in respect of any Loan on a date when interest is due and payable with respect to such Loan) shall be applied to the payment of interest before application to principal. (c) Administrative Agent shall promptly distribute to each Lender at such address as such Lender shall indicate in writing, such Lender's applicable Pro Rata Share of all payments and prepayments of principal and interest due hereunder, together with all other amounts due thereto, including, without limitation, all fees payable with respect thereto, to the extent received by Administrative Agent. (d) Notwithstanding the foregoing provisions hereof, if any Conversion/Continuation Notice is withdrawn as to any Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any Eurodollar Rate Loans, Administrative Agent shall give effect thereto in apportioning payments received thereafter. (e) Subject to the provisos set forth in the definition of "Interest Period", whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business -65- Day and such extension of time shall be included in the computation of the payment of interest hereunder or of the Revolving Commitment fees hereunder. (f) Company hereby authorizes Administrative Agent to charge Company's accounts with Administrative Agent in order to cause timely payment to be made to Administrative Agent of all principal, interest, fees and expenses due hereunder (subject to sufficient funds being available in its accounts for that purpose). (g) Administrative Agent shall deem any payment by or on behalf of Company hereunder that is not made in same day funds prior to 12:00 p.m. (New York City time) to be a non-conforming payment. Any such payment shall not be deemed to have been received by Administrative Agent until the later of (i) the time such funds become available funds, and (ii) the applicable next Business Day. Administrative Agent shall give prompt telephonic notice to Company and each applicable Lender (confirmed in writing) if any payment is non-conforming. Any non-conforming payment may constitute or become a Default or Event of Default in accordance with the terms of Section 8.1(a). Interest shall continue to accrue on any principal as to which a non-conforming payment is made until such funds become available funds (but in no event less than the period from the date of such payment to the next succeeding applicable Business Day) at the rate determined pursuant to Section 2.9 from the date such amount was due and payable until the date such amount is paid in full. (h) If an Event of Default shall have occurred and not otherwise been waived, and the maturity of the Obligations shall have been accelerated pursuant to Section 8.1, all payments or proceeds received by Agents hereunder in respect of any of the Obligations, shall be applied in accordance with the application arrangements described in Section 6.5 of the Pledge and Security Agreement. 2.18. RATABLE SHARING. Lenders hereby agree among themselves that, except as otherwise provided in the Collateral Documents with respect to amounts realized from the exercise of rights with respect to Liens on the Collateral, if any of them shall, whether by voluntary payment (other than a voluntary prepayment of Loans made and applied in accordance with the terms hereof), through the exercise of any right of set-off or banker's lien, by counterclaim or cross action or by the enforcement of any right under the Credit Documents or otherwise, or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of principal, interest, amounts payable in respect of Letters of Credit, fees and other amounts then due and owing to such Lender hereunder or under the other Credit Documents (collectively, the "AGGREGATE AMOUNTS DUE" to such Lender) which is greater than the proportion received by any other Lender in respect of the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall (a) notify Administrative Agent and each other Lender of the receipt of such payment and (b) apply a portion of such payment to purchase participations (which it shall be deemed to have purchased from each seller of a -66- participation simultaneously upon the receipt by such seller of its portion of such payment) in the Aggregate Amounts Due to the other Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion to the Aggregate Amounts Due to them; provided, if all or part of such proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender upon the bankruptcy or reorganization of Company or otherwise, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to such purchasing Lender ratably to the extent of such recovery, but without interest. Company expressly consents to the foregoing arrangement and agrees that any holder of a participation so purchased may exercise any and all rights of banker's lien, set-off or counterclaim with respect to any and all monies owing by Company to that holder with respect thereto as fully as if that holder were owed the amount of the participation held by that holder. 2.19. MAKING OR MAINTAINING EURODOLLAR RATE LOANS. (a) Inability to Determine Applicable Interest Rate. In the event that Administrative Agent shall have determined (which determination shall be final and conclusive and binding upon all parties hereto absent manifest error), on any Interest Rate Determination Date with respect to any Eurodollar Rate Loans, that by reason of circumstances affecting the London interbank market adequate and reasonable means do not exist for ascertaining the interest rate applicable to such Loans on the basis provided for in the definition of Adjusted Eurodollar Rate, Administrative Agent shall on such date give notice (by telefacsimile or by telephone confirmed in writing) to Company and each Lender of such determination, whereupon (i) no Loans may be made as, or converted to, Eurodollar Rate Loans until such time as Administrative Agent notifies Company and Lenders that the circumstances giving rise to such notice no longer exist, and (ii) any Funding Notice or Conversion/Continuation Notice given by Company with respect to the Loans in respect of which such determination was made shall be deemed to be rescinded by Company. (b) Illegality or Impracticability of Eurodollar Rate Loans. In the event that on any date any Lender shall have determined (which determination shall be final and conclusive and binding upon all parties hereto but shall be made only after consultation with Company and Administrative Agent) that the making, maintaining or continuation of its Eurodollar Rate Loans (i) has become unlawful as a result of compliance by such Lender in good faith with any law, treaty, governmental rule, regulation, guideline or order (or would conflict with any such treaty, governmental rule, regulation, guideline or order not having the force of law even though the failure to comply therewith would not be unlawful), or (ii) has become impracticable, as a result of contingencies occurring after the date hereof which materially and adversely affect the London interbank market or the position of such Lender in that market, then, and in any such event, such Lender shall be an "AFFECTED LENDER" and it shall on that day give notice (by telefacsimile or by telephone confirmed in writing) to Company and -67- Administrative Agent of such determination (which notice Administrative Agent shall promptly transmit to each other Lender). Thereafter (1) the obligation of the Affected Lender to make Loans as, or to convert Loans to, Eurodollar Rate Loans shall be suspended until such notice shall be withdrawn by the Affected Lender, (2) to the extent such determination by the Affected Lender relates to a Eurodollar Rate Loan then being requested by Company pursuant to a Funding Notice or a Conversion/Continuation Notice, the Affected Lender shall make such Loan as (or continue such Loan as or convert such Loan to, as the case may be) a Base Rate Loan, (3) the Affected Lender's obligation to maintain its outstanding Eurodollar Rate Loans (the "AFFECTED LOANS") shall be terminated at the earlier to occur of the expiration of the Interest Period then in effect with respect to the Affected Loans or when required by law, and (4) the Affected Loans shall automatically convert into Base Rate Loans on the date of such termination. Notwithstanding the foregoing, to the extent a determination by an Affected Lender as described above relates to a Eurodollar Rate Loan then being requested by Company pursuant to a Funding Notice or a Conversion/Continuation Notice, Company shall have the option, subject to the provisions of Section 2.19(c), to rescind such Funding Notice or Conversion/Continuation Notice as to all Lenders by giving notice (by telefacsimile or by telephone confirmed in writing) to Administrative Agent of such rescission on the date on which the Affected Lender gives notice of its determination as described above (which notice of rescission Administrative Agent shall promptly transmit to each other Lender). Except as provided in the immediately preceding sentence, nothing in this Section 2.19(b) shall affect the obligation of any Lender other than an Affected Lender to make or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in accordance with the terms hereof. (c) Compensation for Breakage or Non-Commencement of Interest Periods. Company shall compensate each Lender, upon written request by such Lender (which request shall set forth the basis for requesting such amounts), for all reasonable losses, expenses and liabilities (including any interest paid by such Lender to lenders of funds borrowed by it to make or carry its Eurodollar Rate Loans and any loss, expense or liability sustained by such Lender in connection with the liquidation or re-employment of such funds but excluding loss of anticipated profits) which such Lender may sustain: (i) if for any reason (other than a default by such Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date specified therefor in a Funding Notice or a telephonic request for borrowing, or a conversion to or continuation of any Eurodollar Rate Loan does not occur on a date specified therefor in a Conversion/Continuation Notice or a telephonic request for conversion or continuation; (ii) if any prepayment or other principal payment or any conversion of any of its Eurodollar Rate Loans occurs on a date prior to the last day of an Interest Period applicable to that Loan (including, without limitation, pursuant to Section 2.14 hereof); or (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on any date specified in a notice of prepayment given by Company. -68- (d) Booking of Eurodollar Rate Loans. Any Lender may make, carry or transfer Eurodollar Rate Loans at, to, or for the account of any of its branch offices or the office of an Affiliate of such Lender. (e) Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation of all amounts payable to a Lender under this Section 2.19 and under Section 2.20 shall be made as though such Lender had actually funded each of its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit bearing interest at the rate obtained pursuant to clause (i) of the definition of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar Rate Loan and having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore office of such Lender to a domestic office of such Lender in the United States of America; provided, however, each Lender may fund each of its Eurodollar Rate Loans in any manner it sees fit and the foregoing assumptions shall be utilized only for the purposes of calculating amounts payable under this Section 2.19 and under Section 2.20. 2.20. INCREASED COSTS; CAPITAL ADEQUACY. (a) Compensation For Increased Costs and Taxes. Subject to the provisions of Section 2.21, in the event that any Lender (which term shall include Issuing Bank for purposes of this Section 2.20(a)) shall determine (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or governmental authority, in each case that becomes effective after the date hereof, or compliance by such Lender with any guideline, request or directive issued or made after the date hereof by any central bank or other governmental or quasi-governmental authority (whether or not having the force of law): (i) subjects such Lender (or its applicable lending office) to any additional Tax (other than any Excluded Tax) with respect to this Agreement or any of the other Credit Documents or any of its obligations hereunder or thereunder or any payments to such Lender (or its applicable lending office) of principal, interest, fees or any other amount payable hereunder; (ii) imposes, modifies or holds applicable any reserve (including any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender (other than any such reserve or other requirements with respect to Eurodollar Rate Loans that are reflected in the definition of Adjusted Eurodollar Rate); or (iii) imposes any other condition (other than with respect to a Tax matter) on or affecting such Lender (or its applicable lending office) or its obligations hereunder or the London interbank market; and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining Loans hereunder or to reduce -69- any amount received or receivable by such Lender (or its applicable lending office) with respect thereto; then, in any such case, Company shall promptly pay to such Lender, upon receipt of the statement referred to in the next sentence, such additional amount or amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as may be necessary to compensate such Lender for any such increased cost or reduction in amounts received or receivable hereunder. Such Lender shall deliver to Company (with a copy to Administrative Agent) a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to such Lender under this Section 2.20(a), which statement shall be conclusive and binding upon all parties hereto absent manifest error. (b) Capital Adequacy Adjustment. In the event that any Lender shall have determined that the adoption, effectiveness, phase-in or applicability after the Closing Date of any law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change therein or in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its applicable lending office) with any guideline, request or directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency, has or would 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, or with reference to, such Lender's Loans or Commitments or Letters of Credit, or participations therein or other obligations hereunder with respect to the Loans or the Letters of Credit to a level below that which such Lender or such controlling corporation could have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Lender or such controlling corporation with regard to capital adequacy), then from time to time, within five Business Days after receipt by Company from such Lender of the statement referred to in the next sentence, Company shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling corporation on an after-tax basis for such reduction. Such Lender shall deliver to Company (with a copy to Administrative Agent) a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to Lender under this Section 2.20(b), which statement shall be conclusive and binding upon all parties hereto absent manifest error. 2.21. TAXES; WITHHOLDING, ETC. (a) Payments to Be Free and Clear. All sums payable by any Credit Party hereunder and under the other Credit Documents shall (except to the extent required by law) be paid free and clear of, and without any deduction or withholding on account of, any Tax (other than any Excluded Tax) imposed, levied, collected, withheld or assessed by or within the United States of America or any political subdivision in or of the United States of America or any other jurisdiction from or to which a payment is -70- made by or on behalf of any Credit Party or by any federation or organization of which the United States of America or any such jurisdiction is a member at the time of payment. (b) Withholding of Taxes. If any Credit Party or any other Person is required by law to make any deduction or withholding on account of any Tax from any sum paid or payable by any Credit Party to Administrative Agent or any Lender under any of the Credit Documents: (i) Company shall notify Administrative Agent of any such requirement or any change in any such requirement as soon as Company becomes aware of it; (ii) Company shall pay any such Tax before the date on which penalties attach thereto, such payment to be made (if the liability to pay is imposed on any Credit Party) for its own account or (if that liability is imposed on Administrative Agent or such Lender, as the case may be) on behalf of and in the name of Administrative Agent or such Lender; (iii) except with respect to any Excluded Tax, the sum payable by such Credit Party in respect of which the relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, Administrative Agent or such Lender, as the case may be, receives on the due date a net sum equal to what it would have received had no such deduction, withholding or payment been required or made; and (iv) within thirty days after paying any sum from which it is required by law to make any deduction or withholding, and within thirty days after the due date of payment of any Tax which it is required by clause (ii) above to pay, Company shall deliver to Administrative Agent evidence satisfactory to the other affected parties of such deduction, withholding or payment and of the remittance thereof to the relevant taxing or other authority, provided, however, that no additional amount shall be required to be paid to any Lender under clause (iii) above except to the extent that any change after the Lender Effective Date in any such requirement for a deduction, withholding or payment as is mentioned therein shall result in an increase in the rate of such deduction, withholding or payment from that in effect at the Lender Effective Date in respect of payments to such Lender. (c) Evidence of Exemption From U.S. Withholding Tax. Except to the extent such deliveries have already been made by any Lender pursuant to the Original Agreement and such previously delivered forms continue to be accurate, (i) each Lender that is not a United States Person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) for U.S. federal income tax purposes (a "NON-US LENDER") shall deliver to Administrative Agent for transmission to Company, on or prior to the Effective Date (in the case of each Lender listed on the signature pages hereof on the Effective Date) or on or prior to the date of the Assignment Agreement pursuant to which it becomes a Lender (in the case of each other Lender), upon designation of a new lending office, and at such other times as may be necessary in the determination of Company or Administrative Agent (each in the reasonable exercise of its discretion), two original copies of Internal Revenue Service Form W-8BEN or W-8ECI (or any successor forms), properly completed and duly executed by such Lender, and such other documentation required under the Internal Revenue Code, or regulations or administrative pronouncements promulgated thereunder, and reasonably requested by Company to -71- establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to any payments to such Lender of principal, interest, fees or other amounts payable under any of the Credit Documents; (ii) each Lender that is a United States Person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) for U.S. federal income tax purposes, and that is not a person which the Company is entitled to treat as an "exempt recipient" (as such term is defined in Section 1.6049-4(c)(ii) of the United States Treasury Regulations) without receiving a certificate from such person (under current law, including, but not limited to any person whose name includes the terms "Incorporated", "Inc.", "Corporation", "Corp.", "P.C.", "insurance company", "indemnity company", "reinsurance company", "assurance company", "bank", "savings and loan association", "buildings and loan association", "homestead association", "credit union" or "industrial loan association" and their permitted foreign language equivalents, and any entity that is generally known in the investment community to be registered at all times during the taxable year under the Investment Company Act of 1940) (a "US Lender") shall deliver to the Administrative Agent for transmission to the Company, on or prior to the Effective Date (in the case of each US Lender listed on the signature pages hereof, on the Effective Date) or on or prior to the date of the Assignment Agreement pursuant to which it becomes a US Lender (in the case of each other US Lender), and at such other times as may be necessary in the determination of the Company or Administrative Agent (each in the reasonable exercise of its discretion), two original copies of Internal Revenue Service Form W-9 (or any successor forms), properly completed and duly executed by such US Lender, and such other documentation reasonably requested by the Company, to establish that such US Lender is not subject to deduction or withholding of United States federal income tax with respect to any payments to such US Lender of principal, interest, fees or other amounts payable under any of the Credit Documents; or (iii) if such Lender is not a "bank" or other Person described in Section 881(c)(3) of the Internal Revenue Code and cannot deliver either Internal Revenue Service Form W-8BEN or W-8ECI pursuant to clause (i) above, a Certificate re Non-Bank Status together with two original copies of Internal Revenue Service Form W-8 (or any successor form), properly completed and duly executed by such Lender, and such other documentation reasonably requested by Company or Administrative Agent to establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to any payments to such Lender of interest payable under any of the Credit Documents. Each Lender required to deliver any forms, certificates or other evidence with respect to United States federal income tax withholding matters pursuant to this Section 2.21(c) hereby agrees, from time to time after the initial time for delivery or potential delivery by such Lender of such forms, certificates or other evidence, whenever a lapse in time or change in circumstances renders such forms, certificates or other evidence obsolete or inaccurate in any material respect, that such Lender shall promptly deliver to Administrative Agent for transmission to Company two new original copies of Internal Revenue Service Form W-8BEN or W-8ECI (or any successor forms), or a Certificate re Non-Bank Status (or any successor forms) and two original copies of Internal Revenue Service Form W-8 or two original copies of Internal Revenue Service Form W-9, as the case may be (or any -72- successor forms), properly completed and duly executed by such Lender, and such other documentation reasonably requested by Company or Administrative Agent to confirm or establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to payments to such Lender under the Credit Documents, or notify Administrative Agent and Company of its inability to deliver any such forms, certificates or other evidence. Company shall not be required to pay any additional amount to any U.S. Lender or Non-US Lender under Section 2.21(b)(iii) if such Lender shall have failed (1) to deliver the forms, certificates or other evidence referred to in the second sentence of this Section 2.21(c), or (2) to notify Administrative Agent and Company of its inability to deliver any such forms, certificates or other evidence, as the case may be; provided, if such Lender shall have satisfied the requirements of the first sentence of this Section 2.21(c) on the Effective Date or on the date of the Assignment Agreement pursuant to which it became a Lender, as applicable, nothing in this last sentence of Section 2.21(c) shall relieve Company of its obligation to pay any additional amounts pursuant to Section 2.20(a) or Section 2.21(b) in the event that, as a result of any change in any applicable law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or application thereof, such Lender is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Lender is not subject to withholding as described herein. Each US Lender and Non-US Lender hereby agrees to indemnify and hold harmless the Company from and against any Taxes imposed on or behalf of the United States or any taxing jurisdiction thereof, and any interest, penalties or additions thereto, or costs incurred in connection therewith, incurred or payable by the Company as a result of the failure of the Company to comply with its obligations to deduct or withhold any Taxes imposed by or on behalf of the United States or any taxing jurisdiction thereof from any payments made pursuant to this Agreement to such US Lender, Non-US Lender or the Administrative Agent, which failure resulted from the Company's reliance on any form, statement, certificate or other information provided to it by such Lender pursuant to this Section 2.21 or by reason of such Lender being a "conduit entity" within the meaning of U.S. Treasury Regulation Section 1.881-3 (or any applicable successor provision). 2.22. OBLIGATION TO MITIGATE. Each Lender agrees that, as promptly as practicable after the officer of such Lender responsible for administering its Commitments, Loans or Letters of Credit, as the case may be, becomes aware of the occurrence of an event or the existence of a condition that would cause such Lender to become an Affected Lender or that would entitle such Lender to receive payments under Section 2.19, 2.20 or 2.21, it will, to the extent not inconsistent with the internal policies of such Lender and any applicable legal or regulatory restrictions, use reasonable efforts to (a) make, issue, fund or maintain its Commitments, Loans and Letters of Credit, including any Affected Loans, through another office of such Lender, or (b) take such other measures as such Lender may deem reasonable, if as a result thereof the circumstances which would cause such Lender to be an Affected Lender would cease to exist or the additional amounts which would otherwise be required to be paid to such Lender pursuant to Section 2.19, 2.20 or 2.21 would be materially reduced and if, as -73- determined by such Lender in its sole discretion, the making, issuing, funding or maintaining of such Commitments, Loans or Letters of Credit through such other office or in accordance with such other measures, as the case may be, would not otherwise adversely affect such Commitments, Loans or Letters of Credit or the interests of such Lender; provided, such Lender will not be obligated to utilize such other office pursuant to this Section 2.22 unless Company agrees to pay all incremental expenses incurred by such Lender as a result of utilizing such other office as described in clause (a) above. A certificate as to the amount of any such expenses payable by Company pursuant to this Section 2.22 (setting forth in reasonable detail the basis for requesting such amount) submitted by such Lender to Company (with a copy to Administrative Agent) shall be conclusive absent manifest error. 2.23. DEFAULTING LENDERS. Anything contained herein to the contrary notwithstanding, in the event that any Lender, at the direction or request of any regulatory agency or authority, defaults (a "DEFAULTING LENDER") in its obligation to fund (a "FUNDING DEFAULT") any Revolving Loan under Section 2.3(b)(iv) or any Delayed Draw Loan under Section 2.2(b)(iv) or its portion of any unreimbursed payment under Section 2.4(e) (in each case, a "DEFAULTED LOAN"), then (a) during any Default Period with respect to such Defaulting Lender, such Defaulting Lender shall be deemed not to be a "Lender" for purposes of voting on any matters (including the granting of any consents or waivers) with respect to any of the Credit Documents; (b) to the extent permitted by applicable law, until such time as the Default Excess with respect to such Defaulting Lender shall have been reduced to zero, (i) any voluntary prepayment of the Revolving Loans shall, if Company so directs at the time of making such voluntary prepayment, be applied to the Revolving Loans of other Lenders as if such Defaulting Lender had no Revolving Loans outstanding and the Revolving Exposure of such Defaulting Lender were zero, and (ii) any mandatory prepayment of the Revolving Loans shall, if Company so directs at the time of making such mandatory prepayment, be applied to the Revolving Loans of other Lenders (but not to the Revolving Loans of such Defaulting Lender) as if such Defaulting Lender had funded all Defaulted Loans of such Defaulting Lender, it being understood and agreed that Company shall be entitled to retain any portion of any mandatory prepayment of the Revolving Loans that is not paid to such Defaulting Lender solely as a result of the operation of the provisions of this clause (b); (c) such Defaulting Lender's Revolving Commitment and outstanding Revolving Loans and such Defaulting Lender's Pro Rata Share of the Letter of Credit Usage shall be excluded for purposes of calculating the Revolving Commitment fee payable to Lenders in respect of any day during any Default Period with respect to such Defaulting Lender, and such Defaulting Lender shall not be entitled to receive any Revolving Commitment fee pursuant to Section 2.11 with respect to such Defaulting Lender's Revolving Commitment in respect of any Default Period with respect to such Defaulting Lender; and (d) the Total Utilization of Revolving Commitments as at any date of determination shall be calculated as if such Defaulting Lender had funded all Defaulted Loans of such Defaulting Lender. No Revolving Commitment of any Lender shall be increased or otherwise affected, and, except as otherwise expressly provided in this Section 2.23, performance by Company of -74- its obligations hereunder and the other Credit Documents shall not be excused or otherwise modified as a result of any Funding Default or the operation of this Section 2.23. The rights and remedies against a Defaulting Lender under this Section 2.23 are in addition to other rights and remedies which Company may have against such Defaulting Lender with respect to any Funding Default and which Administrative Agent or any Lender may have against such Defaulting Lender with respect to any Funding Default. 2.24. REMOVAL OR REPLACEMENT OF A LENDER. Anything contained herein to the contrary notwithstanding, in the event that: (a) any Lender (an "INCREASED-COST LENDER") shall give notice to Company that such Lender is an Affected Lender or such Lender becomes entitled to receive payments under Section 2.20 or 2.21, the circumstances which have caused such Lender to be an Affected Lender or which entitle such Lender to receive such payments shall remain in effect, and such Lender shall fail to (i) withdraw such notice or (ii) waive in writing the right to receive the applicable payments, in each of cases (i) and (ii), within five Business Days after Company's request for such withdrawal or waiver; or (b) any Lender shall become a Defaulting Lender, the Default Period for such Defaulting Lender shall remain in effect, and such Defaulting Lender shall fail to cure the default as a result of which it has become a Defaulting Lender within five Business Days after Company's request that it cure such default; or (c) in connection with any proposed amendment, modification, termination, waiver or consent with respect to any of the provisions hereof as contemplated by Section 10.5(b), the consent of Requisite Lenders shall have been obtained but the consent of one or more of such other Lenders (each a "NON-CONSENTING LENDER") whose consent is required shall not have been obtained; then, with respect to each such Increased-Cost Lender, Defaulting Lender or Non-Consenting Lender (the "TERMINATED LENDER"), Company may, by giving written notice to Administrative Agent and any Terminated Lender of its election to do so, elect to cause such Terminated Lender (and such Terminated Lender hereby irrevocably agrees) to assign its outstanding Loans and its Revolving Commitments, if any, in full to one or more Eligible Assignees (each a "REPLACEMENT LENDER") in accordance with the provisions of Section 10.6 and Terminated Lender shall pay any fees payable thereunder in connection with such assignment; provided, (1) on the date of such assignment, the Replacement Lender shall pay to Terminated Lender an amount equal to the sum of (A) an amount equal to the principal of, and all accrued interest on, all outstanding Loans of the Terminated Lender, (B) an amount equal to all unreimbursed drawings that have been funded by such Terminated Lender, together with all then unpaid interest with respect thereto at such time and (C) an amount equal to all accrued, but theretofore unpaid fees owing to such Terminated Lender pursuant to Section 2.12; (2) on the date of such assignment, Company shall pay any amounts payable to such Terminated Lender pursuant to Section 2.19, 2.20 or 2.21 or otherwise as if it were a prepayment; and (3) in the event such Terminated Lender is a Non-Consenting Lender, each Replacement Lender shall consent, at the time of such assignment, to each matter in respect of which such Terminated Lender was a Non-Consenting Lender; provided, Company may not make -75- such election with respect to any Terminated Lender that is also an Issuing Bank unless, prior to the effectiveness of such election, Company shall have caused each outstanding Letter of Credit issued thereby to be cancelled. Upon the prepayment of all amounts owing to any Terminated Lender and the termination of such Terminated Lender's Revolving Commitments, if any, such Terminated Lender shall no longer constitute a "Lender" for purposes hereof; provided, any rights of such Terminated Lender to indemnification hereunder shall survive as to such Terminated Lender. SECTION 3. CONDITIONS PRECEDENT 3.1. CLOSING DATE. The obligation of any Lender to make a Credit Extension under the Original Agreement on the Closing Date was subject to the satisfaction, or waiver in accordance with Section 10.5, of the following conditions on or before the Closing Date. Solely for purposes of the historical conditions set forth in this Section 3.1, capitalized terms used in this Section 3.1 and defined in the Original Agreement shall have the meanings specified in the Original Agreement as applicable as of the Closing Date. (a) Credit Documents. Administrative Agent shall have received sufficient copies of each Credit Document originally executed and delivered by each applicable Credit Party for each Lender. (b) Organizational Documents; Incumbency. Administrative Agent shall have received (i) sufficient copies of each Organizational Document executed and delivered by each Credit Party, as applicable, and, to the extent applicable, certified as of a recent date by the appropriate governmental official, for each Lender, each dated the Closing Date or a recent date prior thereto; (ii) signature and incumbency certificates of the officers of such Person executing the Credit Documents to which it is a party; (iii) resolutions of the Board of Directors or similar governing body of each Credit Party approving and authorizing the execution, delivery and performance of this Agreement and the other Credit Documents and the Related Agreements to which it is a party or by which it or its assets may be bound as of the Closing Date, certified as of the Closing Date by its secretary or an assistant secretary as being in full force and effect without modification or amendment; (iv) a good standing certificate from the applicable Governmental Authority of each Credit Party's jurisdiction of incorporation, organization or formation and in each jurisdiction in which it is qualified as a foreign corporation or other entity to do business, each dated a recent date prior to the Closing Date; and (v) such other documents as Administrative Agent may reasonably request in writing. (c) Organizational and Capital Structure. The organizational structure and capital structure of Holdings and its Subsidiaries, both before and after giving effect to the Merger, shall be as set forth on Schedule 4.2. -76- (d) Issuance of Senior Subordinated Notes. On or before the Closing Date: (i) Company shall have received the gross proceeds from the issuance of the Senior Subordinated Notes in an aggregate amount in cash of not less than $250,000,000; (ii) Company shall have delivered to Agents complete, correct and conformed copies of the Senior Subordinated Note Documents; and (iii) Company shall have provided evidence satisfactory to Agents that the proceeds of Senior Subordinated Notes have been irrevocably committed, prior to the application of the proceeds of the Term Loans to be made on the Closing Date, to the payment of the Merger Financing Requirements (subject to the concurrent consummation of the Merger). (e) Equity Financing. On or before the Closing Date, Company shall have provided evidence satisfactory to Agents that the proceeds of the Equity Financing have been irrevocably committed, prior to the application of the proceeds of the Term Loans to be made on the Closing Date, to the payment of the Merger Financing Requirements (subject to the concurrent consummation of the Merger). (f) Related Agreements. Syndication Agent shall have received a fully executed or conformed copy of each Related Agreement and any documents executed in connection therewith, together with copies of any opinions of counsel delivered to the parties under the Related Agreements, accompanied by a letter from each such counsel (to the extent not inconsistent with such counsel's established internal policies) authorizing Lenders to rely upon such opinion to the same extent as though it were addressed to Lenders. Each Related Agreement shall be in full force and effect and no provision thereof shall have been modified or waived in any respect determined by Syndication Agent to be material, in each case without the consent of Syndication Agent. (g) Consummation of Merger and Other Transactions. (i) All conditions to the Merger set forth in Article VIII of the Merger Agreement and related documents shall have been satisfied or the fulfillment of any such conditions shall have been waived with the consent of Administrative Agent and Syndication Agent; (ii) the Merger shall have become effective in accordance with the terms of the Merger Agreement; (iii) the other conditions set forth in Schedule 1.1 shall have been satisfied; and (iv) the Merger Financing Requirements shall not exceed $848,800,000. (h) Existing Guaranty Obligations. Except as set forth on Schedule 6.1(g), on the Closing Date, Holdings and its Subsidiaries shall have (i) extinguished all guaranty obligations of Company and its Subsidiaries, and (ii) made arrangements satisfactory to Syndication Agent and Administrative Agent with respect to the -77- cancellation of any letters of credit outstanding to support the obligations of Holdings and its Subsidiaries with respect thereto. (i) Existing Indebtedness. Except as set forth on Schedule 6.1(g), on the Closing Date, Holdings and its Subsidiaries shall have (i) repaid in full all of their Indebtedness, (ii) terminated any commitments to lend or make other extensions of credit thereunder, (iii) delivered to Syndication Agent and Administrative Agent all documents or instruments necessary to release all Liens securing any Indebtedness (other than in respect of Surviving Indebtedness) of any of them or other obligations of Holdings and its Subsidiaries thereunder being repaid on the Closing Date, and (iv) made arrangements satisfactory to Syndication Agent and Administrative Agent with respect to the cancellation of any letters of credit outstanding thereunder or the issuance of Letters of Credit to support the obligations of Holdings and its Subsidiaries with respect thereto. (j) Transaction Costs. On or prior to the Closing Date, Company shall have delivered to Administrative Agent Company's reasonable best estimate of the Transaction Costs (other than fees payable to any Agent). (k) Governmental Authorizations and Consents. Each Credit Party shall have obtained all Governmental Authorizations and all consents of other Persons, in each case that are necessary in connection with the transactions contemplated by the Credit Documents and the Related Agreements and each of the foregoing shall be in full force and effect and in form and substance reasonably satisfactory to Syndication Agent and Administrative Agent, except for such registrations, consents, approvals, notices or actions the failure of which to obtain, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. All applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose adverse conditions on the transactions contemplated by the Credit Documents or the Related Agreements or the financing thereof and no action, request for stay, petition for review or rehearing, reconsideration, or appeal with respect to any of the foregoing shall be pending, and the time for any applicable agency to take action to set aside its consent on its own motion shall have expired. (l) Real Estate Assets. In order to create in favor of Collateral Agent, for the benefit of Secured Parties, a valid and, subject to any filing and/or recording referred to herein, perfected First Priority security interest in each Material Real Estate Asset, Collateral Agent shall have received from Company and each applicable Guarantor: (i) fully executed and notarized Mortgages, in proper form for recording in all appropriate places in all applicable jurisdictions, encumbering each Real Estate Asset listed in Schedule 3.1(l) (each, a "CLOSING DATE MORTGAGED PROPERTY"); -78- (ii) an opinion of counsel (which counsel shall be reasonably satisfactory to Collateral Agent) in each state in which a Closing Date Mortgaged Property is located with respect to the enforceability of the form(s) of Mortgages to be recorded in such state and such other matters as Collateral Agent may reasonably request, in each case in form and substance reasonably satisfactory to Collateral Agent; (iii) in the case of each Leasehold Property that is a Closing Date Mortgaged Property, (1) a Landlord's Consent, Estoppel Certificate and Amendment and (2) evidence that such Leasehold Property is a Recorded Leasehold Interest; (iv) (A) ALTA mortgagee title insurance policies (or other policies available in such state and reasonably satisfactory to Collateral Agent) or unconditional commitments therefor issued by one or more title companies reasonably satisfactory to Collateral Agent with respect to each Closing Date Mortgaged Property (each, a "TITLE POLICY"), in amounts not less than the fair market value of each Closing Date Mortgaged Property, together with a title report issued by a title company with respect thereto, dated not more than thirty days prior to the Closing Date and copies of all recorded documents listed as exceptions to title or otherwise referred to therein, each in form and substance reasonably satisfactory to Collateral Agent and (B) evidence satisfactory to Collateral Agent that such Credit Party has paid to the title company or to the appropriate governmental authorities all expenses and premiums of the title company and all other sums required in connection with the issuance of each Title Policy and all recording and stamp taxes (including mortgage recording and intangible taxes) payable in connection with recording the Mortgages for each Closing Date Mortgaged Property in the appropriate real estate records; (v) evidence of flood insurance with respect to each Flood Hazard Property that is located in a community that participates in the National Flood Insurance Program, in each case in compliance with any applicable regulations of the Board of Governors of the Federal Reserve System, in form and substance reasonably satisfactory to Collateral Agent; (vi) ALTA/ACSM surveys (or any other surveys available in such state and reasonably satisfactory to Collateral Agent) of all Closing Date Mortgaged Properties, certified to Collateral Agent and dated not more than thirty days prior to the Closing Date and in form and substance reasonably satisfactory to Collateral Agent. (vii) fully executed UCC-1 fixture filings for filing in each location Collateral Agent reasonably determines to be appropriate; and -79- (viii) an appraisal of each Closing Date Mortgaged Property in form and substance reasonably acceptable to Collateral Agent. (m) Other Collateral. In order to create in favor of Collateral Agent, for the benefit of Secured Parties, a valid, perfected First Priority security interest in the Collateral (other than Real Estate Assets), Collateral Agent shall have received: (i) evidence satisfactory to the Collateral Agent of the compliance by each Credit Party of their obligations under the Pledge and Security Agreement and the other Collateral Documents (including, without limitation, their obligations to deliver UCC financing statements, originals of securities, instruments and chattel paper and any agreements governing deposit and/or securities accounts as provided therein). (ii) A completed Collateral Questionnaire dated the Closing Date and executed by an Authorized Officer of each Credit Party, together with all attachments contemplated thereby, including (A) the results of a recent search, by a Person reasonably satisfactory to Collateral Agent, of all effective UCC financing statements made with respect to any property, the creation of security interests in which is governed by the UCC, of any Credit Party in the jurisdictions specified in the Collateral Questionnaire, together with copies of all such filings disclosed by such search, and (B) UCC termination statements duly executed by all applicable Persons for filing in all applicable jurisdictions as may be necessary to terminate any effective UCC financing statements disclosed in such search (other than any such financing statements in respect of Permitted Liens); and (iii) opinions of counsel (which counsel shall reasonably be satisfactory to Collateral Agent) with respect to the creation and perfection of the security interests in favor of Collateral Agent in such Collateral and such other matters governed by the laws of each jurisdiction in which any Credit Party or any such Collateral is located as Collateral Agent may reasonably request, in each case in form and substance reasonably satisfactory to Collateral Agent. (n) Collateral Matters. Each of the Administrative Agent and the Collateral Agent shall have received evidence that each Credit Party shall have taken or caused to be taken any other action, executed and delivered or caused to be executed and delivered any other agreement, document and instrument and made or caused to be made any other filing and recording (other than as set forth herein) reasonably required by Collateral Agent. (o) Financial Statements; Projections. Lenders shall have received from Holdings (i) the Historical Financial Statements, (ii) pro forma consolidated and consolidating balance sheets of Holdings and its Subsidiaries as at the Closing Date, and reflecting the consummation of the Merger, the related financings and the other -80- transactions contemplated by the Credit Documents to occur on or prior to the Closing Date, which pro forma financial statements shall be in form and substance satisfactory to Administrative Agent and Syndicated Agent, (iii) the Projections, and (iv) if the Closing Date has not occurred on or prior to August 15, 2002, a certificate of the Chief Financial Officer of Holdings certifying that the Consolidated Adjusted EBITDA for the four Fiscal Quarters ended on June 30, 2002 is not less than $114.2 million determined on a pro forma basis after giving effect to the Merger, the related financings and the other transactions contemplated by the Related Agreements to occur on or prior to the Closing Date. (p) Evidence of Insurance. Each of Syndication Agent and Administrative Agent shall have received a certificate from Company's insurance broker or other evidence satisfactory to it that all insurance required to be maintained pursuant to Section 5.5 is in full force and effect and that Administrative Agent, for the benefit of Lenders has been named as additional insured and loss payee thereunder to the extent required under Section 5.5. (q) Opinions of Counsel to Credit Parties. Lenders and their respective counsel shall have received originally executed copies of the favorable written opinions of Fried, Frank, Harris, Shriver & Jacobson, counsel for Credit Parties, in the form of Exhibit D and as to such other matters as Administrative Agent or Syndication Agent may reasonably request, dated as of the Closing Date and otherwise in form and substance reasonably satisfactory to each of Administrative Agent and Syndication Agent (and each Credit Party hereby instructs such counsel to deliver such opinions to Agents and Lenders). (r) Opinions of Counsel to Syndication Agent. Lenders shall have received originally executed copies of one or more favorable written opinions of Sullivan & Cromwell, counsel to Syndication Agent, dated as of the Closing Date, in form and substance reasonably satisfactory to each of Syndication Agent and Administrative Agent. (s) Fees. Company shall have paid to the Agents, the fees payable on the Closing Date referred to in Section 2.11(e). (t) Solvency Certificate; Solvency Appraisal. On the Closing Date, Syndication Agent and Administrative Agent shall have received (i) a Solvency Certificate from the Chief Financial Officer of Holdings on behalf of Company and (ii) an opinion from an independent valuation consultant satisfactory to Syndication Agent and Administrative Agent, each dated the Closing Date and addressed to Syndication Agent, Administrative Agent and Lenders, and in form, scope and substance satisfactory to Syndication Agent and Administrative Agent, with appropriate attachments and demonstrating that after giving effect to the consummation of the Merger, the related financings and the other transactions contemplated by the Related -81- Documents to occur on or prior to the Closing Date, Company and its Subsidiaries are and will be Solvent. (u) Closing Date Certificate. Holdings and Company shall have delivered to Syndication Agent and Administrative Agent an originally executed Closing Date Certificate, together with all attachments thereto. (v) Closing Date. Lenders shall have made the Term Loan to Company on or before August 31, 2002. (w) No Litigation. The representations and warranties set forth in Sections 4.13 and 6.4 of the Merger Agreement (subject to the exemptions and qualifications set forth therein) shall be true and correct as of the Closing Date or compliance therewith as of the Closing Date shall have been waived with the prior approval of Syndication Agent and Administrative Agent. (x) Completion of Proceedings. All partnership, corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Administrative Agent or Syndication Agent and its counsel shall be satisfactory in form and substance to Administrative Agent and Syndication Agent and such counsel, and Administrative Agent, Syndication Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as Administrative Agent or Syndication Agent may reasonably request. Each Lender, by delivering its signature page to this Agreement and funding a Loan on the Closing Date, shall be deemed to have acknowledged receipt of, and consented to and approved, each Credit Document and each other document required to be approved by any Agent, Requisite Lenders or Lenders, as applicable on the Closing Date. 3.2. CONDITIONS TO EACH CREDIT EXTENSION. (a) Conditions Precedent. The obligation of each Lender to make any Loan, or Issuing Bank to issue any Letter of Credit, on any Credit Date, including the Effective Date and the Landis Acquisition Closing Date, are subject to the satisfaction, or waiver in accordance with Section 10.5, of the following conditions precedent: (i) Administrative Agent shall have received a fully executed and delivered Funding Notice or Issuance Notice, as the case may be; (ii) after making the Credit Extensions requested on such Credit Date, the Total Utilization of Revolving Commitments shall not exceed the Revolving Commitments then in effect; -82- (iii) as of such Credit Date, the representations and warranties contained herein and in the other Credit Documents shall be true and correct in all material respects on and as of that Credit Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date; (iv) as of such Credit Date, no event shall have occurred and be continuing or would result from the consummation of the applicable Credit Extension that would constitute an Event of Default or a Default; (v) on or before the date of issuance of any Letter of Credit, Administrative Agent shall have received all other information required by the applicable Issuance Notice, and such other documents or information as Issuing Bank may reasonably require in connection with the issuance of such Letter of Credit; and (vi) in the case of a Revolving Loan used in connection with the financing of a Permitted Acquisition (other than a Revolving Loan on the Landis Acquisition Closing Date in an aggregate principal amount not to exceed $10,000,000 used to pay Landis Acquisition Financing Requirements), if (A) the aggregate amount of Permitted Acquisition Expenses exceeds $10,000,000 or (B) the aggregate amount of Permitted Acquisition Expenses for Permitted Acquisitions for the previous four Fiscal Quarters (together with any Permitted Acquisition agreed to and not yet consummated) exceeds $20,000,000, then the Chief Financial Officer of Holdings shall have delivered a Compliance Certificate representing and warranting and otherwise demonstrating to the satisfaction of Administrative Agent that, as of such Credit Date, the Leverage Ratio as of the last day of the most recent Fiscal Quarter for which financial statements have been delivered to the Lenders pursuant to Section 5.1(b), determined on a pro forma basis in accordance with Section 6.8(d) after giving effect to the proposed Credit Extension, shall not exceed 5.00:1.00 in respect of Fiscal Quarters ending on or prior to December 25, 2004; and (iii) 4.75:1.00 in respect of subsequent Fiscal Quarters. Any Agent or Requisite Lenders shall be entitled, but not obligated to, request and receive, prior to the making of any Credit Extension, additional information reasonably satisfactory to the requesting party confirming the satisfaction of any of the foregoing if, in the good faith judgment of such Agent or Requisite Lender such request is warranted under the circumstances. (b) Notices. Any Notice shall be executed by an Authorized Officer in a writing delivered to Administrative Agent. In lieu of delivering a Notice, Company -83- may give Administrative Agent telephonic notice by the required time of any proposed borrowing, conversion/continuation or issuance of a Letter of Credit, as the case may be; provided each such notice shall be promptly confirmed in writing by delivery of the applicable Notice to Administrative Agent on or before the applicable date of borrowing, continuation/conversion or issuance. Neither Administrative Agent nor any Lender shall incur any liability to Company in acting upon any telephonic notice referred to above that Administrative Agent believes in good faith to have been given by a duly authorized officer or other person authorized on behalf of Company or for otherwise acting in good faith. 3.3. CONDITIONS TO EFFECTIVENESS. This Agreement, the obligation of each Term Loan Lender to make a Term Loan on the Effective Date and the obligation of each Delayed Draw Lender to make a Delayed Draw Loan on the Landis Acquisition Closing Date shall become effective on November 10, 2003 (the "EFFECTIVE DATE") upon (a) the execution and delivery of counterpart signature pages hereto by (i) Term Loan Lenders holding 100% of the Term Loan Commitments, Delayed Draw Lenders holding 100% of the Delayed Draw Commitments and Lenders having Revolving Exposure as of the date hereof in excess of 50% the aggregate Revolving Exposure of all Lenders and (ii) each Credit Party and (b) the satisfaction of the conditions precedent set forth in Section 3.2 in respect of the making of the Term Loans on the Effective Date. If for any reason this Agreement does not become effective by 11:59 p.m. on the Effective Date, this Agreement shall be void ab initio and the Original Agreement shall continue in full force and effect in accordance with its terms. 3.4. EFFECT OF AGREEMENT ON OTHER CREDIT DOCUMENTS. By its signature on this Agreement, each Credit Party acknowledges and agrees that this Agreement is a valid amendment of the Original Agreement made in accordance with the terms thereof and binding against such Credit Party and that each Credit Document (other than this Agreement) shall continue to be valid and binding against such Credit Party and its assets and properties as of and after the Effective Date (with any references to the Original Agreement in any such Credit Document construed as references to this Agreement). SECTION 4. REPRESENTATIONS AND WARRANTIES In order to induce Lenders and Issuing Bank to enter into this Agreement and to make each Credit Extension to be made thereby, each Credit Party represents and warrants to each Lender and Issuing Bank, on the Effective Date and on each Credit Date, that the following statements are true and correct, except to the extent any representation or warranty relates to a specific date, in which case such statement shall be true and correct as of such specific date. -84- 4.1. ORGANIZATION; REQUISITE POWER AND AUTHORITY; QUALIFICATION. Each of Holdings and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization as identified in Schedule 4.1, (b) has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into the Credit Documents to which it is a party and to carry out the transactions contemplated thereby, and (c) is qualified to do business and in good standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, except in jurisdictions where the failure to be so qualified or in good standing has not had, and could not reasonably be expected to have, a Material Adverse Effect. 4.2. CAPITAL STOCK AND OWNERSHIP. The Capital Stock of each of Holdings and its Subsidiaries has been duly authorized and validly issued and is fully paid and non-assessable. Except as set forth on Schedule 4.2, as of the date hereof, there is no existing option, warrant, call, right, commitment or other agreement to which Holdings or any of its Subsidiaries is a party requiring, and there is no Capital Stock of Holdings or any of its Subsidiaries outstanding which upon conversion or exchange would require, the issuance by Holdings or any of its Subsidiaries of any additional Capital Stock of Holdings or any of its Subsidiaries or other Securities convertible into, exchangeable for or evidencing the right to subscribe for or purchase, Capital Stock of Holdings or any of its Subsidiaries. Schedule 4.2 correctly sets forth the ownership interest of Holdings and each of its Subsidiaries in their respective Subsidiaries as of the Effective Date. 4.3. DUE AUTHORIZATION. The transactions contemplated by the Credit Documents are within the corporate powers of each Credit Party and the execution, delivery and performance of the Credit Documents have been duly authorized by all necessary action on the part of each Credit Party that is a party thereto. 4.4. GUARANTOR SUBSIDIARIES. Schedule 4.4 correctly sets forth, as of the Effective Date, all of Company's Guarantor Subsidiaries who are parties to this Agreement. 4.5. NO CONFLICT. The execution, delivery and performance by Credit Parties of the Credit Documents to which they are parties and the consummation of the transactions contemplated by the Credit Documents do not and will not (a) violate any provision of any law or any governmental rule or regulation applicable to Holdings or any of its Subsidiaries, any of the Organizational Documents of Holdings or any of its Subsidiaries, or any order, judgment or decree of any court or other agency of government binding on Holdings or any of its Subsidiaries except to the extent such violation, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect; (b) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Holdings or any of its Subsidiaries except to the extent such conflict, breach or default, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect; -85- (c) result in or require the creation or imposition of any Lien upon any of the properties or assets of Holdings or any of its Subsidiaries (other than any Liens created under any of the Credit Documents in favor of Collateral Agent, on behalf of Secured Parties) except to the extent that the creation or imposition of any such Liens, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect; or (d) require any approval of stockholders, members or partners or any approval or consent of any Person under any Contractual Obligation of Holdings or any of its Subsidiaries, except for such approvals or consents which will be obtained on or before the Effective Date and disclosed in writing to Lenders and except for any such approvals or consents the failure of which to obtain, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 4.6. GOVERNMENTAL CONSENTS. The execution, delivery and performance by Credit Parties of the Credit Documents to which they are parties and the consummation of the transactions contemplated by the Credit Documents do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority, except for such registrations, consents, approvals, notices or actions the failure of which to obtain, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 4.7. BINDING OBLIGATION. Each Credit Document has been duly executed and delivered by each Credit Party that is a party thereto and is the legally valid and binding obligation of such Credit Party, enforceable against such Credit Party in accordance with its respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. 4.8. HISTORICAL FINANCIAL STATEMENTS. The Historical Financial Statements were prepared in conformity with GAAP and fairly present, in all material respects, the financial position, on a consolidated basis, of the Persons described in such financial statements as at the respective dates thereof and the results of operations and cash flows, on a consolidated basis, of the entities described therein for each of the periods then ended, subject, in the case of any such unaudited financial statements, to changes resulting from audit and normal year-end adjustments. As of the Effective Date, neither Holdings nor any of its Subsidiaries has any contingent liability or liability for taxes, long-term lease or unusual forward or long-term commitment that is not reflected in the Historical Financial Statements or the notes thereto and which in any such case is material in relation to the business, operations, properties, assets, condition (financial or otherwise) or prospects of Holdings and any of its Subsidiaries taken as a whole. 4.9. PROJECTIONS. On and as of the Effective Date, the Projections of Holdings and its Subsidiaries for the period beginning with Fiscal Year 2003 through and including Fiscal Year 2010 (the "PROJECTIONS") are based on good faith estimates and reasonable assumptions made by the management of Holdings; provided, the Projections are not to -86- be viewed as facts and that actual results during the period or periods covered by the Projections may differ from such Projections and that the differences may be material; provided further, as of the Effective Date, management of Holdings believed that the Projections were reasonable and attainable. 4.10. NO MATERIAL ADVERSE CHANGE. Since December 28, 2002, no event, circumstance or change has occurred that has caused or evidences, either in any case or in the aggregate, a continuing Material Adverse Effect. 4.11. ADVERSE PROCEEDINGS, ETC. There are no Adverse Proceedings, individually or in the aggregate, that could reasonably be expected to have a Material Adverse Effect. Neither Holdings nor any of its Subsidiaries (a) is in violation of any applicable laws (including Environmental Laws) that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, or (b) is subject to or in default with respect to any final judgments, writs, injunctions, decrees, rules or regulations of any court or any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 4.12. PAYMENT OF TAXES. Except as otherwise permitted under Section 5.3, all material tax returns and reports of Holdings and its Subsidiaries required to be filed by any of them have been timely filed, and all taxes shown on such tax returns to be due and payable and all material assessments, fees and other governmental charges upon Holdings and its Subsidiaries and upon their respective properties, assets, income, businesses and franchises which are due and payable have been paid when due and payable. Holdings knows of no proposed tax assessment against Holdings or any of its Subsidiaries which is not being actively contested by Holdings or such Subsidiary in good faith and by appropriate proceedings; provided, such reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor. 4.13. PROPERTIES. (a) Title. Each of Holdings and its Subsidiaries has (i) good, sufficient and legal title to (in the case of fee interests in real property), (ii) valid leasehold interests in (in the case of leasehold interests in real or personal property), and (iii) good title to (in the case of all other personal property), all of their respective properties and assets reflected in their respective Historical Financial Statements referred to in Section 4.8 and in the most recent financial statements delivered pursuant to Section 5.1, in each case except for assets disposed of since the date of such financial statements in the ordinary course of business of Company and its Subsidiaries or as otherwise permitted under Section 6.9. Except as permitted by this Agreement, all such properties and assets are free and clear of Liens. -87- (b) Real Estate. As of the Effective Date, Schedule 4.13 contains a true, accurate and complete list of (i) all Real Estate Assets, and (ii) all leases, subleases or assignments of leases (together with all amendments, modifications, supplements, renewals or extensions of any thereof) affecting each Real Estate Asset of any Credit Party, regardless of whether such Credit Party is the landlord or tenant (whether directly or as an assignee or successor in interest) under such lease, sublease or assignment. Each agreement listed in clause (ii) of the immediately preceding sentence is in full force and effect and Holdings does not have knowledge of any default that has occurred and is continuing thereunder, and each such agreement constitutes the legally valid and binding obligation of each applicable Credit Party, enforceable against such Credit Party in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles. 4.14. ENVIRONMENTAL MATTERS. Except as set forth on Schedule 4.14, (i) neither Holdings nor any of its Subsidiaries nor any of their respective Facilities or operations are subject to any outstanding written order, consent decree or settlement agreement with any Person relating to any Environmental Law, any Environmental Claim, or any Hazardous Materials Activity, (ii) there are and, to each of Holdings' and its Subsidiaries' knowledge, have been, no conditions, occurrences, or Hazardous Materials Activities which could reasonably be expected to form the basis of an Environmental Claim against Holdings or any of its Subsidiaries, (iii) neither Holdings nor any of its Subsidiaries has received any letter or request for information under Section 104 of the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9604) or any comparable state law, in each of cases (i), (ii) and (iii) that, if resolved adversely, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Compliance with all current or reasonably foreseeable future requirements pursuant to or under Environmental Laws could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. No event or condition has occurred or is occurring with respect to Holdings or any of its Subsidiaries relating to any applicable Environmental Law, any Release of Hazardous Materials, or any Hazardous Materials Activity which individually or in the aggregate has had, or could reasonably be expected to have, a Material Adverse Effect, other than the events and conditions described on Schedule 4.14 as existing on or prior to the Effective Date. 4.15. NO DEFAULTS. Neither Holdings nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any of its Contractual Obligations, and no condition exists which, with the giving of notice or the lapse of time or both, could constitute such a default, except where the consequences, direct or indirect, of such default or defaults, if any, could not reasonably be expected to have a Material Adverse Effect. 4.16. GOVERNMENTAL REGULATION. Neither Holdings nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the -88- Federal Power Act or the Investment Company Act of 1940 or under any other federal or state statute or regulation which may limit its ability to incur Indebtedness or which may otherwise render all or any portion of the Obligations unenforceable. Neither Holdings nor any of its Subsidiaries is a "registered investment company" or a company "controlled" by a "registered investment company" or a "principal underwriter" of a "registered investment company" as such terms are defined in the Investment Company Act of 1940. 4.17. MARGIN STOCK. Neither Holdings 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 any Margin Stock. No part of the proceeds of the Loans made to such Credit Party will be used to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock or for any purpose that violates, or is inconsistent with, the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System. 4.18. EMPLOYEE MATTERS. Neither Holdings nor any of its Subsidiaries is engaged in any unfair labor practice that could reasonably be expected to have a Material Adverse Effect. There is (a) no unfair labor practice complaint pending against Holdings or any of its Subsidiaries, or to the best knowledge of Holdings and Company, threatened against any of them before the National Labor Relations Board and no grievance or arbitration proceeding arising out of or under any collective bargaining agreement that is so pending against Holdings or any of its Subsidiaries or to the best knowledge of Holdings and Company, threatened against any of them, (b) no strike or work stoppage in existence or threatened involving Holdings or any of its Subsidiaries, and (c) to the best knowledge of Holdings and Company, no union representation question existing with respect to the employees of Holdings or any of its Subsidiaries and, to the best knowledge of Holdings and Company, no union organization activity that is taking place, except (with respect to any matter specified in clause (a), (b) or (c) above, either individually or in the aggregate) such as is not reasonably likely to have a Material Adverse Effect. 4.19. EMPLOYEE BENEFIT PLANS. Except as, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, (i) Holdings, each of its Subsidiaries and each of their respective ERISA Affiliates are in substantial compliance with all applicable provisions and requirements of ERISA and the Internal Revenue Code and the regulations and published interpretations thereunder with respect to each Employee Benefit Plan, and have substantially performed all their obligations under each Employee Benefit Plan, (ii) each Employee Benefit Plan which is intended to qualify under Section 401(a) of the Internal Revenue Code has received a favorable determination letter from the Internal Revenue Service indicating that such Employee Benefit Plan is so qualified and nothing has occurred subsequent to the issuance of such determination letter which would cause such Employee Benefit Plan to lose its qualified status, (iii) no liability to the PBGC (other than required premium payments) has been or is expected to be incurred by Holdings, any of its Subsidiaries or any of their ERISA -89- Affiliates, (iv) no ERISA Event has occurred or is reasonably expected to occur, and (v) Holdings, each of its Subsidiaries and each of their ERISA Affiliates have complied with the requirements of Section 515 of ERISA with respect to each Multiemployer Plan and are not in material "default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan.) 4.20. SOLVENCY. Each Credit Party is and, upon the incurrence of any Obligation by such Credit Party on any date on which this representation and warranty is made and after giving effect to the provisions of Section 7.2, will be, Solvent. 4.21. [Intentionally Omitted] 4.22. COMPLIANCE WITH STATUTES, ETC. Each of Holdings and its Subsidiaries is in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all Governmental Authorities, in respect of the conduct of its business and the ownership of its property (including compliance with all applicable Environmental Laws with respect to any Real Estate Asset or governing its business and the requirements of any permits issued under such Environmental Laws with respect to any such Real Estate Asset or the operations of Holdings or any of its Subsidiaries), except such non-compliance that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. 4.23. DISCLOSURE. No representation or warranty of any Credit Party contained in any Credit Document or in any other documents, certificates or written statements furnished to Lenders by or on behalf of Holdings or any of its Subsidiaries for use in connection with the transactions contemplated hereby at the time such representation or warranty is made contains any untrue statement of a material fact or omits to state a material fact (known to Holdings or Company, in the case of any document not furnished by either of them) necessary in order to make the statements contained herein or therein not misleading in light of the circumstances in which the same were made. Any projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptions believed by Holdings or Company to be reasonable at the time made, it being recognized by Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ materially from the projected results. There are no facts known (or which should upon the reasonable exercise of diligence be known) to Holdings or Company (other than matters of a general economic nature) that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect and that have not been disclosed herein or in such other documents, certificates and statements furnished to Lenders for use in connection with the transactions contemplated hereby. -90- SECTION 5. AFFIRMATIVE COVENANTS Each Credit Party covenants and agrees that so long as any Commitment is in effect and until payment in full of all Obligations and cancellation or expiration of all Letters of Credit, each Credit Party shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 5. 5.1. FINANCIAL STATEMENTS AND OTHER REPORTS. Holdings will deliver to Administrative Agent and Lenders: (a) Monthly Reports. Solely to the Administration Agent, (and to other Lenders upon request) as soon as available, and in any event within 30 days after the end of each month ending after the Closing Date, the consolidated balance sheet of Holdings and its Subsidiaries as at the end of such month and the related consolidated statements of income, stockholders' equity and cash flows of Holdings and its Subsidiaries for such month and for the period from the beginning of the then current Fiscal Year to the end of such month, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year and the corresponding figures from the Financial Plan for the current Fiscal Year, to the extent prepared on a monthly basis, all in reasonable detail, together with a Financial Officer Certification and a Narrative Report with respect thereto; (b) Quarterly Financial Statements. As soon as available, and in any event within 45 days after the end of each of the first three Fiscal Quarters of each Fiscal Year, the consolidated and consolidating balance sheets of Holdings and its Subsidiaries as at the end of such Fiscal Quarter and the related consolidated (and with respect to sales and EBITDA, statements of income, consolidating) statements of income, stockholders' equity and cash flows of Holdings and its Subsidiaries for such Fiscal Quarter and for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year and the corresponding figures from the Financial Plan for the current Fiscal Year, all in reasonable detail, together with a Financial Officer Certification and a Narrative Report with respect thereto; (c) Annual Financial Statements. As soon as available, and in any event within 90 days after the end of each Fiscal Year, (i) the consolidated and consolidating balance sheets of Holdings and its Subsidiaries as at the end of such Fiscal Year and the related consolidated (and with respect to sales, EBITDA and statements of income, consolidating) statements of income, stockholders' equity and cash flows of Holdings and its Subsidiaries for such Fiscal Year, setting forth in each case in comparative form the corresponding figures for the previous Fiscal Year and the corresponding figures from the Financial Plan for the Fiscal Year covered by such financial statements, in reasonable detail, together with a Financial Officer Certification and a Narrative Report with respect thereto; and (ii) with respect to such consolidated -91- financial statements a report thereon of Ernst & Young or other independent certified public accountants of recognized national standing selected by Holdings, and reasonably satisfactory to Administrative Agent (which report shall be unqualified as to going concern and scope of audit, and shall state that such consolidated financial statements fairly present, in all material respects, the consolidated financial position of Holdings and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except as otherwise disclosed in such financial statements) and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards) together (to the extent not inconsistent with the pronouncements of the Institute of Certified Public Accountants and FASB) with a written statement by such independent certified public accountants stating whether, in connection with their audit examination, any failure to comply with the terms, covenants, provisions or conditions of Article 5 or Article 6 (insofar as they relate to the accounting matters) has come to their attention and, if such a failure to comply has come to their attention, specifying the nature and period of existence thereof; (d) Compliance Certificate. Together with each delivery of financial statements of Holdings and its Subsidiaries pursuant to Sections 5.1(b) and 5.1(c), a duly executed and completed Compliance Certificate; (e) Statements of Reconciliation after Change in Accounting Principles. If, as a result of any change in accounting principles and policies from those used in the preparation of the Historical Financial Statements, the consolidated financial statements of Holdings and its Subsidiaries delivered pursuant to Section 5.1(b) or 5.1(c) will differ in any material respect from the consolidated financial statements that would have been delivered pursuant to such subdivisions had no such change in accounting principles and policies been made, then, together with the first delivery of such financial statements after such change, one or more a statements of reconciliation for all such prior financial statements in form and substance satisfactory to Administrative Agent; (f) Notice of Default. Promptly upon any Authorized Officer of Holdings or Company obtaining knowledge (i) of any condition or event that constitutes a Default or an Event of Default or that notice has been given to Holdings or Company with respect thereto; (ii) that any Person has given any notice to Holdings or any of its Subsidiaries or taken any other action with respect to any event or condition set forth in Section 8.1(b); or (iii) of the occurrence of any events or changes that have caused or evidence, individually or in the aggregate, a Material Adverse Effect, a certificate of its Authorized Officers specifying the nature and period of existence of such condition, event or change, or specifying the notice given and action taken by any such Person and the nature of such claimed Event of Default, Default, default, event or condition, and what action Company has taken, is taking and proposes to take with respect thereto; -92- (g) Notice of Litigation. Promptly upon any Authorized Officer of Holdings or Company obtaining knowledge of (i) the institution of, or non-frivolous written threat of, any Adverse Proceeding not previously disclosed in writing by Company to Lenders, or (ii) any material development in any Adverse Proceeding, in each of the cases (i) or (ii) which if adversely determined, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, or which seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated hereby, written notice thereof together with such other information as may reasonably be available to Holdings or Company to enable Lenders and their counsel to evaluate such matters; (h) ERISA. (i) Promptly upon becoming aware of the occurrence of or forthcoming occurrence of any ERISA Event, a written notice specifying the nature thereof, what action Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto; and (ii) upon request in writing, with reasonable promptness, copies of (1) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates with the Internal Revenue Service with respect to each Pension Plan; (2) all notices received by Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates from a Multiemployer Plan sponsor concerning an ERISA Event; and (3) copies of such other documents or governmental reports or filings relating to any Employee Benefit Plan as Administrative Agent shall reasonably request; (i) Financial Plan. As soon as practicable and in any event no later than thirty (30) days prior to the beginning of each Fiscal Year, a consolidated plan and financial forecast for such Fiscal Year and each Fiscal Year (or portion thereof) through the final maturity date of the Loans (a "FINANCIAL PLAN"), including (i) a forecasted consolidated balance sheet and forecasted consolidated statements of income and cash flows of Holdings and its Subsidiaries for each such Fiscal Year, together with a statement of forecasted compliance with the financial covenants in Section 6.8 (including estimates of the information required in Annex A to the form of Compliance Certificate attached hereto) for each such Fiscal Year and an explanation of the assumptions on which such forecasts are based, and (ii) forecasted consolidated statements of income and cash flows of Holdings and its Subsidiaries for each month of each such Fiscal Year, together, in each cases (i) and (ii), with an explanation of the assumptions on which such forecasts are based all in form and substance reasonably satisfactory to Agents; (j) Insurance Report. As soon as practicable and in any event by the last day of each Fiscal Year, a report in form and substance satisfactory to Administrative Agent outlining all material insurance coverage maintained as of the date of such report by Holdings and its Subsidiaries and all material insurance coverage planned to be maintained by Holdings and its Subsidiaries in the immediately succeeding Fiscal Year; -93- (k) Notice of Change in Board of Directors. With reasonable promptness, written notice of any change in the board of directors (or similar governing body) of Holdings or Company; (l) Environmental Disclosure. The materials and information required to be delivered under Section 5.9(a), as and when required; (m) Information Regarding Collateral. Information required to be delivered pursuant to Section 3.1(c) of the Pledge and Security Agreement. (n) Other Information. Promptly upon their becoming available, (i) copies of (A) all financial statements, reports, notices and proxy statements sent or made available generally by Holdings to its security holders acting in such capacity or by any Subsidiary of Holdings to its security holders other than Holdings or another Subsidiary of Holdings, (B) all regular and periodic reports and all registration statements and prospectuses, if any, filed by Holdings or any of its Subsidiaries with any securities exchange or with the Securities and Exchange Commission or any governmental or private regulatory authority, (C) all press releases and other statements made available generally by Holdings or any of its Subsidiaries to the public concerning material developments in the business of Holdings or any of its Subsidiaries, and (ii) such other information and data with respect to Holdings or any of its Subsidiaries as from time to time may reasonably be requested by Administrative Agent or any Lender. 5.2. EXISTENCE. Except as otherwise permitted under Section 6.9, each Credit Party will, and will cause each of its Subsidiaries to, at all times preserve and keep in full force and effect its existence and all rights and franchises, licenses and permits material to its business; provided, no Credit Party or any of its Subsidiaries shall be required to preserve any such existence, right or franchise, licenses and permits if such Person's board of directors (or similar governing body) shall determine that the preservation thereof is no longer desirable in the conduct of the business of such Person, and that the loss thereof could not reasonably be expected to have a Material Adverse Effect. 5.3. PAYMENT OF TAXES AND CLAIMS. Each Credit Party will, and will cause each of its Subsidiaries to, pay all Taxes imposed upon it or any of its properties or assets or in respect of any of its income, businesses or franchises before any penalty or fine accrues thereon, and all claims (including claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of its properties or assets, prior to the time when any penalty or fine shall be incurred with respect thereto; provided, no such Tax or claim need be paid if it is being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as (a) adequate reserve or other appropriate provision, as shall be required in conformity with GAAP shall have been made therefor, and (b) in the case of a charge or claim which has or may become a Lien against any of the Collateral, -94- such contest proceedings conclusively operate to stay the sale of any portion of the Collateral to satisfy such Tax or claim. 5.4. MAINTENANCE OF PROPERTIES. Each Credit Party will, and will cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear excepted, all material properties used or useful in the business of Holdings and its Subsidiaries and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof. 5.5. INSURANCE. Holdings will maintain or cause to be maintained, with financially sound and reputable insurers, such public liability insurance, third party property damage insurance, business interruption insurance and casualty insurance with respect to liabilities, losses or damage in respect of the assets, properties and businesses of Holdings and its Subsidiaries as may customarily be carried or maintained under similar circumstances by Persons of established reputation engaged in similar businesses, in each case in such amounts (giving effect to self-insurance), with such deductibles, covering such risks and otherwise on such terms and conditions as shall be customary for such Persons. Without limiting the generality of the foregoing, Holdings will maintain or cause to be maintained (a) flood insurance with respect to each Flood Hazard Property that is located in a community that participates in the National Flood Insurance Program, in each case in compliance with any applicable regulations of the Board of Governors of the Federal Reserve System, and (b) first party, property coverage insurance on the Collateral under such policies of insurance, with such insurance companies, in such amounts, with such deductibles, and covering such risks as are at all times carried or maintained under similar circumstances by Persons of established reputation engaged in similar businesses. Each such policy of insurance shall (i) name Administrative Agent, on behalf of Lenders as an additional insured thereunder as its interests may appear and (ii) in the case of each casualty insurance policy, contain a loss payable clause or endorsement, satisfactory in form and substance to Administrative Agent, that names Administrative Agent, on behalf of Lenders as the loss payee thereunder and provides for at least 30 days' prior written notice to Administrative Agent of any modification or cancellation of such policy. 5.6. INSPECTIONS. Each Credit Party will, and will cause each of its Subsidiaries to, permit any authorized representatives designated by any Agent or Lender to visit and inspect any of the properties of any Credit Party and any of its respective Subsidiaries, to inspect and copy its and their financial and accounting records, and to discuss its and their affairs, finances and accounts with its and their officers and independent public accountants, all upon reasonable notice and at such reasonable times during normal business hours and as often as may reasonably be requested. If such visit and inspection occurs at a time when no Default or Event of Default has occurred and is continuing, such visit and inspection shall be at the expense of such Lender and, if such visit and inspection occur at a time when a Default or Event of Default has occurred and is continuing, such visit and inspection shall be paid by Company pursuant to Section -95- 10.2. By this provision, each Credit Party authorizes its independent public accountants to discuss the affairs, finances and accounts of such Credit Party and its Subsidiaries, provided, such Credit Party may, if its so chooses, be present and participate in any such discussion. 5.7. LENDERS MEETINGS. Holdings and Company will, upon the request of Administrative Agent or Requisite Lenders, participate in a meeting of Administrative Agent and Lenders once during each Fiscal Year to be held at Company's corporate offices (or at such other location as may be agreed to by Company and Administrative Agent) at such time as may be agreed to by Company and Administrative Agent. 5.8. COMPLIANCE WITH LAWS. Each Credit Party will comply, and shall cause each of its Subsidiaries and all other Persons, if any, on or occupying any Facilities to comply, with the requirements of all applicable laws, rules, regulations and orders of any governmental authority (including all Environmental Laws), noncompliance with which could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 5.9. ENVIRONMENTAL. (a) Environmental Disclosure. Holdings will deliver to Administrative Agent and Lenders the following information and materials, in each case to the extent that they relate to circumstances that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect: (i) as soon as practicable following receipt thereof, copies of all environmental audits, investigations, analyses and reports whether prepared by personnel of Holdings or any of its Subsidiaries or by independent consultants, governmental authorities or any other Persons, with respect to significant environmental matters at any Facility or with respect to any Environmental Claims; (ii) promptly upon the occurrence thereof, written notice describing in reasonable detail (A) any Release required to be reported to any federal, state or local governmental or regulatory agency under any applicable Environmental Laws, (B) any remedial action taken by Holdings or any other Person in response to any Hazardous Materials Activities and (C) Holdings or Company's discovery of any occurrence or condition on any real property adjoining or in the vicinity of any Facility that could cause such Facility or any part thereof to be subject to any material restrictions on the ownership, occupancy, transferability or use thereof under any Environmental Laws; (iii) as soon as practicable following the sending or receipt thereof by Holdings or any of its Subsidiaries, a copy of any and all written communications with respect to (A) any Environmental Claims (B) any Release -96- required to be reported to any federal, state or local governmental or regulatory agency, and (C) any request for information from any governmental agency that suggests such agency is investigating whether Holdings or any of its Subsidiaries may be potentially responsible for any Hazardous Materials Activity; (iv) prompt written notice describing in reasonable detail (A) any proposed acquisition of stock, assets, or property by Holdings or any of its Subsidiaries that could reasonably be expected to expose Holdings or any of its Subsidiaries to, or result in, Environmental Claims or affect the ability of Holdings or any of its Subsidiaries to maintain in full force and effect all Governmental Authorizations required under any Environmental Laws for their respective operations and (B) any proposed action to be taken by Holdings or any of its Subsidiaries to modify current operations in a manner that could reasonably be expected to subject Holdings or any of its Subsidiaries to any additional obligations or requirements under any Environmental Laws; and (v) with reasonable promptness, such other documents and information as from time to time may reasonably be requested by Administrative Agent in relation to any matters disclosed pursuant to this Section 5.9(a). (b) Hazardous Materials Activities, Etc. Each Credit Party shall promptly take, and shall cause each of its Subsidiaries promptly to take, any and all actions necessary to (i) cure any violation of applicable Environmental Laws by such Credit Party or its Subsidiaries and (ii) make an appropriate response to any Environmental Claim against such Credit Party or any of its Subsidiaries and discharge any obligations it may have to any Person thereunder, in each of cases (i) and (ii) where failure to do so could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 5.10. SUBSIDIARIES. In the event that any Person becomes a Domestic Subsidiary of Company, whether pursuant to a Permitted Acquisition or otherwise, Company shall (a) promptly cause such Domestic Subsidiary to become a Guarantor hereunder and a party to the Intercompany Subordination Agreement and a Grantor under the Pledge and Security Agreement by executing and delivering to Administrative Agent and Collateral Agent a Counterpart Agreement, (b) promptly cause each Person holding Capital Stock of such Domestic Subsidiary (whether or not a Credit Party) to take all of the actions necessary to grant and to perfect a First Priority Lien in favor of Collateral Agent for the benefit of the Secured Parties under the Pledge and Security Agreement in respect of all such Capital Stock and (c) take all such actions and execute and deliver, or cause to be executed and delivered, all such documents, instruments, agreements, and certificates as are similar to those described in Sections 3.1(b), 3.1(l), 3.1(m), 3.1(n) and 3.1(p) in respect of any Collateral required to be secured for the benefit of Secured Parties under the Pledge and Security Agreement. In the event that any Person becomes a Foreign Subsidiary of Company, and Capital Stock of such Foreign Subsidiary is directly -97- owned by Company or by any Domestic Subsidiary of Company, Company shall, or shall cause such Domestic Subsidiary to, deliver, all such documents, instruments, agreements, and certificates as are similar to those described in Section 3.1(b), and Company shall take, or shall cause such Domestic Subsidiary to take, all of the actions necessary to grant and to perfect a First Priority Lien in favor of Collateral Agent for the benefit of Secured Parties under the Pledge and Security Agreement in such Capital Stock. With respect to each such Subsidiary, Company shall promptly send to Administrative Agent written notice setting forth with respect to such Person (i) the date on which such Person became a Subsidiary of Company, and (ii) all of the data required to be set forth in Schedules 4.1 and 4.2 with respect to all Subsidiaries of Company; provided, such written notice shall be deemed to supplement Schedule 4.1 and 4.2 for all purposes hereof. 5.11. ADDITIONAL MATERIAL REAL ESTATE ASSETS. In the event that any Credit Party acquires a Material Real Estate Asset or any Real Estate Asset becomes a Material Real Estate Asset and such interest has not otherwise been made subject to the Lien of the Collateral Documents in favor of Collateral Agent, for the benefit of Secured Parties, then such Credit Party, contemporaneously with acquiring such Material Real Estate Asset or upon any Real Estate Asset becoming a Material Real Estate Asset, shall take all such actions and execute and deliver, or cause to be executed and delivered, all such mortgages, documents, instruments, agreements, opinions and certificates similar to those described in Sections 3.1(l), 3.1(m) and 3.1(n) with respect to each such Material Real Estate Asset that Collateral Agent shall reasonably request to create in favor of Collateral Agent, for the benefit of Secured Parties, a valid and, subject to any filing and/or recording referred to herein, perfected First Priority security interest in such Material Real Estate Assets. In addition to the foregoing, Company shall, at the request of Requisite Lenders, deliver, from time to time, to Administrative Agent such appraisals as are required by law or regulation of Real Estate Assets with respect to which Collateral Agent has been granted a Lien. 5.12. INTEREST RATE PROTECTION. As soon as reasonably practicable, and in any event no later than 120 days following the Closing Date and at all times thereafter, Company shall maintain, or caused to be maintained, in effect one or more Interest Rate Agreements for a term of not less than two years and otherwise in form and substance reasonably satisfactory to Administrative Agent and Syndication Agent, which Interest Rate Agreements shall effectively limit the Unadjusted Eurodollar Rate Component of the interest costs to Company with respect to an aggregate notional principal amount of not less than 50% of the aggregate principal amount of Consolidated Total Debt (excluding any Revolving Loans) outstanding from time to time (based on the assumption that such notional principal amount was a Eurodollar Rate Loan with an Interest Period of three months) at a rate and on terms satisfactory to the Syndication Agent. 5.13. FURTHER ASSURANCES. At any time or from time to time upon the request of Administrative Agent, each Credit Party will, at its expense, promptly execute, acknowledge and deliver such further documents and do such other acts and things as -98- Administrative Agent or Collateral Agent may reasonably request in order to effect fully the purposes of the Credit Documents. In furtherance and not in limitation of the foregoing, each Credit Party shall take such actions as Administrative Agent or Collateral Agent may reasonably request from time to time to ensure that the Obligations are guarantied by the Guarantors and are secured by substantially all of the assets of Holdings, and its Subsidiaries and all of the outstanding Capital Stock of Company and its Subsidiaries (subject to limitations contained in the Credit Documents with respect to Foreign Subsidiaries). 5.14. [Intentionally omitted.] SECTION 6. NEGATIVE COVENANTS Each Credit Party covenants and agrees that, so long as any Commitment is in effect and until payment in full of all Obligations and cancellation or expiration of all Letters of Credit, such Credit Party shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 6. 6.1. INDEBTEDNESS. No Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or guaranty, or otherwise become or remain directly or indirectly liable with respect to any Indebtedness, except: (a) the Obligations; (b) (i) Indebtedness of any Guarantor Subsidiary to Company or to any other Guarantor Subsidiary, or of Company to any Guarantor Subsidiary; provided, (A) all such Indebtedness shall be evidenced by promissory notes and all such notes shall be subject to a First Priority Lien pursuant to the Pledge and Security Agreement, (B) all such Indebtedness shall be unsecured and subordinated in right of payment to the payment in full of the Obligations pursuant to the terms and conditions of the applicable promissory notes or the Intercompany Subordination Agreement, and (C) any payment by any Guarantor Subsidiary under any guaranty of the Obligations shall result in a pro tanto reduction of the amount of any such Indebtedness owed by such Guarantor Subsidiary to Company or to any of its Guarantor Subsidiaries for whose benefit such payment is made; (ii) Indebtedness of any Foreign Subsidiary to Company or any Guarantor Subsidiary, provided, (A) all such Indebtedness shall be evidenced by promissory notes and all such notes shall be subject to a First Priority Lien pursuant to the Pledge and Security Agreement and (B) all such Indebtedness shall be unsecured and subordinated in right of payment to the payment in full of the Obligations pursuant to the terms and conditions of the applicable promissory notes or an Intercompany Subordination Agreement; (iii) Indebtedness of any Foreign Subsidiary to any other Foreign Subsidiary and (iv) Indebtedness between Company and Holdings arising as a result of Restricted Junior Payments permitted under Section 6.5(d); -99- (c) Company and its Guarantor Subsidiaries may become and remain liable with respect to (i) Senior Subordinated Notes in an aggregate principal amount not to exceed $440,000,000 at any time outstanding under the Senior Subordinated Note Indenture; (ii) additional Subordinated Indebtedness the proceeds of which (net of reasonable costs and expenses associated therewith) are used to repay the Loans pursuant to Section 2.15(d), provided, the terms and conditions of such Subordinated Indebtedness (including the terms and conditions of any guarantees of or other credit support for such Indebtedness) are not less favorable in any material respect to Company and its Subsidiaries, the Agents or the Lenders than the terms and conditions of the Senior Subordinated Notes; and (iii) extensions, renewals, refinancings or replacements of the Subordinated Indebtedness permitted under clauses (i) and (ii), provided, such extensions, renewals, refinancings or replacements (A) are on terms and conditions (including the terms and conditions of any guarantees of or other credit support for such Indebtedness) not less favorable in any material respect to Company and its Subsidiaries, the Agents or the Lenders than the terms and conditions of the Indebtedness being extended, renewed, refinanced or replaced, (B) do not add as an obligor any Person that would not have been an obligor under the Indebtedness being extended, renewed, replaced or refinanced, (C) do not result in a greater principal amount or shorter remaining average life to maturity than the Indebtedness being extended, renewed, replaced or refinanced and (D) are not effected at any time when a Default or Event of Default has occurred and is continuing or would result therefrom; (d) Indebtedness in respect of (i) netting services, overdraft protections and otherwise in connection with endorsements of checks and other negotiable instruments and deposit accounts incurred in the ordinary course of business; (ii) workers' compensation claims, self-insurance obligations, performance, surety, release, appeal and similar bonds and completion guarantees incurred in the ordinary course of business of Company and its Subsidiaries and any reimbursement obligations in respect of the foregoing; and (iii) indemnification obligations or obligations in respect of purchase price adjustments or similar obligations incurred or assumed by Company and its Subsidiaries in connection with an Asset Sale or sale of Capital Stock of Holdings otherwise permitted under this Agreement; (e) guaranties in the ordinary course of business of Company and its Subsidiaries of the obligations of suppliers, customers, franchisees and licensees of Holdings and its Subsidiaries; (f) guaranties by Holdings or Company of Indebtedness of a Guarantor Subsidiary or guaranties by a Subsidiary of Company of Indebtedness of Company or a Guarantor Subsidiary with respect, in each case, to Indebtedness otherwise permitted to be incurred pursuant to this Section 6.1; (g) Indebtedness described in Schedule 6.1(g), and not exceeding the aggregate principal amount indicated therein (the "SURVIVING INDEBTEDNESS") and, solely -100- in the case of the Surviving Capital Leases and Surviving IRBs, any extensions, renewals, refinancings or replacements thereof, provided, such extensions, renewals, refinancings or replacements (i) are on terms and conditions (including the terms and conditions of any guarantee or other credit support for such Indebtedness) not less favorable in any material respect to Company and its Subsidiaries, the Agents or the Lenders than the terms and conditions of the Indebtedness being extended, renewed, refinanced or replaced, (ii) do not add as obligor any Person that would not have been an obligor under the Indebtedness being extended, renewed, replaced or refinanced, (iii) do not result in a greater principal amount or shorter remaining average life to maturity than the Indebtedness being extended, renewed, replaced or refinanced and (iv) are not effected at any time when a Default or Event of Default has occurred and is continuing or would result therefrom; (h) Indebtedness with respect to Capital Leases (in addition to any Surviving Capital Leases), including Capital Leases acquired in connection with Permitted Acquisitions, in an aggregate amount at any time outstanding not to exceed the sum of (i) $25,000,000 plus (ii) the excess, if any, of (A) the aggregate amount of Surviving Capital Leases outstanding as of the Closing Date over (B) the aggregate amount of Surviving Capital Leases and any extensions, renewals, refinancings or replacements thereof made in accordance with the proviso of Section 6.1(g) outstanding as of the date of determination; (i) Indebtedness of Foreign Subsidiaries (to Persons other than Company or its Subsidiaries) in an aggregate amount not to exceed $15,000,000 at any time outstanding; (j) purchase money Indebtedness in an aggregate amount not to exceed $10,000,000 at any time outstanding (excluding any such Indebtedness of a Person acquired in connection with a Permitted Acquisition); provided, any such Indebtedness (i) shall be secured only by assets acquired in connection with the incurrence of such Indebtedness, and (ii) shall constitute not less than 90% of the aggregate consideration paid with respect to such asset; (k) (i) Indebtedness (other than Capital Leases) of any Person (other than Landis or any Subsidiary of Landis) that becomes a Guarantor Subsidiary after the date hereof pursuant to a Permitted Acquisition (including purchase money Indebtedness of such Person), which Indebtedness exists at the time such Person becomes a Subsidiary and is not created in contemplation of, or in connection with, such Person becoming a Subsidiary; and (ii) any extensions, renewals, refinancings or replacements of such Indebtedness which extensions, renewals, refinancings or replacements (A) are on terms and conditions (including the terms and conditions of any guarantee or other credit support for such Indebtedness) not less favorable in any material respect to Company and its Subsidiaries or the Lenders than the terms and conditions of the Indebtedness being extended, renewed, refinanced or replaced and, (B) do not add as obligor any Person that -101- would not have been an obligor under the Indebtedness being extended, renewed, replaced or refinanced, (C) do not result in a greater principal amount or shorter remaining average life to maturity than the Indebtedness being extended, renewed, replaced or refinanced and (D) are not effected at any time when a Default or Event of Default has occurred and is continuing or would result therefrom; provided, the aggregate amount of Indebtedness described in clauses (i) and (ii) does not exceed $10,000,000 at any time outstanding; (l) Indebtedness with respect to Financial Hedge Agreements; (m) senior unsecured Indebtedness of Holdings to rank pari passu with Holdings' Obligations under its Guaranty, in an aggregate principal amount not to exceed $50,000,000 at any time outstanding; provided, the Administrative Agent is satisfied that the terms and conditions of such Indebtedness (A) provide that there shall be no payment (whether in Cash or other assets or property, other than payments-in-kind) of principal, interest, fees, expenses or other amounts by Holdings out of the assets or estate of Holdings or any of its Subsidiaries (other than as a consequence of any acceleration or event of default) at any time prior to the payment in full of the Obligations, (B) do not create rights or remedies enforceable against Company or any of its Subsidiaries, (C) do not provide for covenants, restrictions or limitations on Holdings in respect of Company and its Subsidiaries, or Events of Default relating to Company and its Subsidiaries, in each case, that are more restrictive in any material respect than the analogous provisions of the Senior Subordinated Notes and (D) provide for a final maturity after the final maturity of any Loan then outstanding or committed to be lent hereunder; provided, further, 100% of the proceeds of such Indebtedness (net of reasonable costs and expenses associated therewith, including reasonable fees and expenses of professional advisors) are contributed as equity capital to Company; (n) other Indebtedness of Holdings and its Guarantor Subsidiaries, which is unsecured and subordinated to the Obligations in a manner satisfactory to Administrative Agent in an aggregate amount not to exceed $10,000,000 at any time outstanding. 6.2. LIENS. No Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset (including any document or instrument in respect of goods or accounts receivable) of Holdings or any of its Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, or file or permit the filing of, or permit to remain in effect, any financing statement or other similar notice of any Lien with respect to any such property, asset, income or profits under the UCC of any State or under any similar recording or notice statute, except: (a) Liens in favor of Collateral Agent for the benefit of Secured Parties granted pursuant to any Credit Document; -102- (b) Liens for Taxes or Liens imposed pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code, in each case, if the underlying obligations are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted; (c) statutory Liens of landlords, banks (including rights of set-off), carriers, warehousemen, mechanics, repairmen, workmen and materialmen, and other Liens imposed by law (other than any such Lien imposed pursuant to Section 401 (a)(29) or 412(n) of the Internal Revenue Code or by ERISA), in each case incurred in the ordinary course of business of Company and its Subsidiaries (i) for amounts not yet overdue or (ii) for amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of five days) are being contested in good faith by appropriate proceedings, so long as such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts; (d) Liens incurred in the ordinary course of business of Company and its Subsidiaries in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money or other Indebtedness), so long as no foreclosure, sale or similar proceedings have been commenced with respect to any portion of the Collateral on account thereof; (e) easements, rights-of-way, restrictions, encroachments, and other minor defects or irregularities affecting any Real Estate Asset in title, in each case which do not and will not materially and adversely affect marketability of title or the value of such Real Estate Asset or interfere in any material respect with the ordinary conduct of the business of Holdings or any of its Subsidiaries; (f) any interest or title in real estate or improvements of a lessor or sublessor, but only as a lessor, under any lease of real estate permitted hereunder; (g) Liens solely on any cash earnest money deposits made by Holdings or any of its Subsidiaries in connection with any letter of intent or purchase agreement permitted hereunder; (h) purported Liens evidenced by the filing of precautionary UCC financing statements relating solely to personal property leased pursuant to operating leases entered into in the ordinary course of business of Company and its Subsidiaries; (i) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; -103- (j) any zoning or similar law or right reserved to or vested in any governmental office or agency to control or regulate the use of any real property; (k) licenses of patents, trademarks and other intellectual property rights granted by Holdings or any of its Subsidiaries in the ordinary course of business and not interfering in any respect with the ordinary conduct of the business of Company or such Subsidiary; (l) Liens described in Schedule 6.2(l) or on a title report delivered pursuant to Section 3.1(l)(iv)(A); (m) Liens securing Indebtedness permitted pursuant to Sections 6.1(j) and 6.1(k), provided, any such Lien (i) exists on the date of the applicable acquisition or, solely in the case of Indebtedness permitted in Section 6.1(j), is created in connection with the financing of the acquisition within 180 days thereafter, (ii) solely in the case of Indebtedness permitted by Section 6.1(k), is not created in contemplation of, or in connection with, such acquisition, and (iii) applies only to the property or assets acquired; (n) Liens in respect of Surviving Capital Leases and Surviving IRBs and existing as of the Closing Date and any replacement Liens, provided any such replacement Lien applies only to assets and property subject to the Lien so replaced; and (o) other Liens on assets other than the Collateral securing Indebtedness in an aggregate amount not to exceed $5,000,000 at any time outstanding. 6.3. EQUITABLE LIEN. If any Credit Party or any of its Subsidiaries shall create or assume any Lien upon any of its properties or assets, whether now owned or hereafter acquired, other than Permitted Liens, it shall make or cause to be made effective provisions whereby the Obligations will be secured by such Lien equally and ratably with any and all other Indebtedness secured thereby as long as any such Indebtedness shall be so secured; provided, notwithstanding the foregoing, this covenant shall not be construed as a consent by Requisite Lenders to the creation or assumption of any such Lien not otherwise permitted by Section 6.2. 6.4. NO FURTHER NEGATIVE PLEDGES. No Credit Party nor any of its Subsidiaries shall enter into any agreement prohibiting the creation or assumption of any Lien upon any of its properties or assets, whether now owned or hereafter acquired, except (a) restrictions pursuant to the Credit Documents, any Subordinated Indebtedness permitted under Section 6.1(c) and any Surviving Indebtedness permitted under Section 6.1(g), provided, in the case of Subordinated Indebtedness and Surviving Indebtedness, that such restrictions are no more restrictive in any material respect than the applicable restrictions in the Senior Subordinated Note Documents; (b) customary restrictions pending a sale of property or assets permitted hereunder arising under an executed agreement in respect of such sale, provided, such restrictions relate only to the property or assets being sold; (c) customary restrictions on assignment, subletting or other -104- transfers contained in leases, licenses and similar agreements entered into in the ordinary course of business of Company and its Subsidiaries, provided, in each case, such restrictions relate only to the property subject to such leases, licenses or similar agreements; and (d) restrictions on property or assets subject to a Lien permitted under Section 6.2(m), provided, such restrictions relate only to the property or assets subject to such Lien. 6.5. RESTRICTED JUNIOR PAYMENTS. No Credit Party shall, nor shall it permit any of its Subsidiaries through any manner or means or through any other Person to, directly or indirectly, declare, order, pay, make or set apart, or agree to declare, order, pay, make or set apart, any sum for any Restricted Junior Payment in respect of such Credit Party or Subsidiary, as applicable, except that (a) Company may make regularly scheduled payments of interest in respect of the Senior Subordinated Notes in accordance with the terms of, and only to the extent required by, and subject to the subordination provisions contained in, the Senior Subordinated Note Indenture; (b) Company may extend, renew, refinance or replace Subordinated Indebtedness to the extent permitted under Section 6.1(c); (c) any Subsidiary may pay dividends or make other distributions with respect to any class of its issued and outstanding Capital Stock or intercompany Indebtedness permitted by clauses (i) through (iii) of Section 6.1(b); provided, any dividends and other distributions by a Subsidiary that is not Wholly-Owned (i) are paid in Cash on a pro rata basis among the holders of each applicable class of Capital Stock and (ii) are not made to any Person other than Company or its Subsidiaries at any time when a Default or Event of Default shall have occurred and be continuing or shall be caused thereby; (d) so long as no Default or Event of Default shall have occurred and be continuing or shall be caused thereby, Company may make Restricted Junior Payments to Holdings (i) in an aggregate amount not to exceed $1,000,000 in any Fiscal Year, to the extent necessary to permit Holdings to pay general administrative costs and expenses and to pay franchise taxes and other fees to maintain its corporate existence, (ii) to the extent necessary to permit Holdings to discharge the consolidated tax liabilities of Holdings and its Subsidiaries and (iii) to the extent necessary to fund Restricted Junior Payments by Holdings in accordance with clause (e) below, provided, in each of cases (i), (ii) and (iii) Holdings promptly applies the amount of any such Restricted Junior Payment for such purpose; (e) so long as no Default or Event of Default shall have occurred and be continuing or shall be caused thereby, the following additional payments may be made to holders or purchasers of Capital Stock of Holdings and its Subsidiaries: (i) Holdings may purchase its Capital Stock for Cash from present or former officers and employees of Holdings or any of its Subsidiaries in accordance with the terms of the Employee Leverage Program, Stockholder Agreements and stock option plans upon the death, disability or termination of employment of such officer or employee, provided, the aggregate amount of such Restricted Junior Payment does not exceed $3,000,000 per Fiscal Year and (ii) any Subsidiary acquired in a Permitted Acquisition may make Cash payments to redeem, retire or repurchase Capital Stock in such Subsidiary held by a minority investor permitted under clause (iii) of the definition of "Permitted Acquisition," provided, in the case of this clause (ii), the aggregate amount of all such payments by -105- Holdings and its Subsidiaries (exclusive of amounts permitted by Section 6.5(d)) does not exceed $4,000,000 during any Fiscal Year and $12,000,000 from the Closing Date; and (f) payments of Landis Acquisition Financing Requirements on or prior to the Delayed Draw Commitment Termination Date as contemplated by the Landis Merger Agreement. 6.6. RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS. Except as provided herein, no Credit Party shall, nor shall it permit any of its Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Subsidiary of Company to (a) pay dividends or make any other distributions on any of such Subsidiary's Capital Stock owned by Company or any other Subsidiary of Company, (b) repay or prepay any Indebtedness owed by such Subsidiary to Company or any other Subsidiary of Company, or (c) make loans or advances to Company or any other Subsidiary of Company, provided, none of clauses (a) through (c) shall apply to (i) customary restrictions pending a sale of a Subsidiary (or any of its property, assets or Capital Stock) permitted hereunder which restrictions arise under an executed agreement in respect of such sale and relate only to the Subsidiary being sold, (ii) restrictions imposed by applicable law, (iii) restrictions pursuant to the Credit Documents, any Subordinated Indebtedness permitted under Section 6.1(c), any Surviving Indebtedness permitted under Section 6.1(g) and Indebtedness of Foreign Subsidiaries under Section 6.1(i) and (iv) any restrictions existing on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business of Company and its Subsidiaries. 6.7. INVESTMENTS. No Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, make or own any Investment in any Person, including without limitation any Joint Venture, except: (a) Cash and Cash Equivalents; (b) Investments owned as of the Closing Date in the Capital Stock of any Subsidiary; (c) Investments made after the Closing Date in Capital Stock or, to the extent incurred in accordance with Section 6.1(b), Indebtedness of Company or any Subsidiary, provided, no Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, make any Investment in any Foreign Subsidiary unless on a pro forma basis after giving effect to such Investment as of the last day of the Fiscal Quarter recently ended, Domestic Subsidiaries account for (A) at least 80% of the consolidated assets of Holdings and its Subsidiaries as of the last day of the Fiscal Quarter recently ended and (B) at least 80% of the consolidated revenues of Holdings and its Subsidiaries for the last four full Fiscal Quarters recently ended; (d) Investments made after the Closing Date in Joint Ventures in a business or line of business permitted for Company under Section 6.13, provided, -106- (A) immediately prior to the making of any Investment, and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing, (B) all transactions in connection therewith shall be consummated, in all material respects, in accordance with all applicable laws and in conformity with all applicable Governmental Authorizations, (C) such Investment can be legally maintained, and is maintained, as Collateral (but only to the extent of Company's interest in such Joint Venture) subject to First Priority security interests on such terms and conditions as are reasonably satisfactory to Administrative Agent, and (D) the aggregate amount of all Investments in Joint Ventures pursuant to this clause (d) does not exceed $10,000,000 at any time outstanding; (e) Investments (i) in any Securities received from financially troubled account debtors in satisfaction or partial satisfaction of accounts receivable incurred in the ordinary course of business of Company and its Subsidiaries, (ii) deposits, prepayments and other credits to suppliers made in the ordinary course of business of Company and its Subsidiaries and (iii) prepaid expenses, negotiable instruments held for collection and lease, utility, worker's compensation, performance and other similar deposits made in the ordinary course of business of Company and its Subsidiaries; (f) Investments that constitute Restricted Junior Payments permitted under Section 6.5(e), Consolidated Capital Expenditures permitted under Section 6.8(c) and Permitted Acquisition Expenses; (g) Investments existing on the Closing Date and described in Schedule 6.7; (h) Investments that constitute Financial Hedge Agreements or agreements permitted under Section 6.18(b); and (i) other Investments (including loans and advances to officers and employees for relocation and other expenses) in an aggregate amount not to exceed $3,000,000 at any time outstanding. 6.8. FINANCIAL COVENANTS. (a) Interest Coverage Ratio. Holdings shall not permit the Interest Coverage Ratio as of the last day of any Fiscal Quarter, beginning with the Fiscal Quarter ending on or near December 31, 2002 to be less than the correlative ratio indicated:
FISCAL QUARTER INTEREST ENDING COVERAGE RATIO - ------------------------------------------- December 2002 2.00:1.00 March 2003 2.00:1.00 June 2003 2.00:1.00
-107-
FISCAL QUARTER INTEREST ENDING COVERAGE RATIO - ------------------------------------------- September 2003 2.00:1.00 December 2003 2.00:1.00 March 2004 2.00:1.00 June 2004 2.10:1.00 September 2004 2.10:1.00 December 2004 2.15:1.00 March 2005 2.15:1.00 June 2005 2.25:1.00 September 2005 2.25:1.00 December 2005 2.25:1.00 March 2006 2.25:1.00 June 2006 2.35:1.00 September 2006 2.35:1.00 December 2006 2.35:1.00 March 2007 2.50:1.00 June 2007 2.50:1.00 September 2007 2.50:1.00 December 2007 2.50:1.00 March 2008 2.50:1.00 June 2008 2.50:1.00 September 2008 2.50:1.00 December 2008 2.50:1.00 March 2009 2.50:1.00 June 2009 2.50:1.00 September 2009 2.50:1.00 December 2009 2.50:1.00 March 2010 2.50:1.00
-108-
FISCAL QUARTER INTEREST ENDING COVERAGE RATIO - ------------------------------------------- June 2010 2.50:1.00
(b) Leverage Ratio. Holdings shall not permit the Leverage Ratio as of the last day of any Fiscal Quarter, beginning with the Fiscal Quarter ending on or near December 31, 2002, to exceed the correlative ratio indicated:
FISCAL QUARTER ENDING LEVERAGE RATIO - ----------------------------------------------- December 2002 5.90:1.00 March 2003 5.90:1.00 June 2003 5.90:1.00 September 2003 5.75:1.00 December 2003 5.90:1.00 March 2004 5.90:1:00 June 2004 5.75:1.00 September 2004 5.75:1.00 December 2004 5.50:1.00 March 2005 5.50:1.00 June 2005 5.50:1.00 September 2005 5.25:1.00 December 2005 5.25:1.00 March 2006 5.00:1.00 June 2006 5.00:1.00 September 2006 4.75:1.00 December 2006 4.75:1.00 March 2007 4.75:1.00 June 2007 4.50:1.00 September 2007 4.50:1.00
-109-
FISCAL QUARTER ENDING LEVERAGE RATIO - ----------------------------------------------- December 2007 4.50:1.00 March 2008 4.25:1.00 June 2008 4.25:1.00 September 2008 4.25:1.00 December 2008 4.25:1.00 March 2009 4.00:1:00 June 2009 4:00:1:00 September 2009 4.00:1.00 December 2009 4.00:1.00 March 2010 4.00:1.00 June 2010 4.00:1.00
(c) Maximum Consolidated Capital Expenditures. Except to the extent funded from the Cash proceeds of Additional Sponsor Equity, Holdings shall not, and shall not permit its Subsidiaries to, make or incur Consolidated Capital Expenditures in any Fiscal Year indicated below in an aggregate amount in excess of (i) the corresponding amount set forth opposite such Fiscal Year plus (ii) an amount equal to the Additional Net Sales for such Fiscal Year (the sum of (i) and (ii), together, the "BUDGETED AMOUNT" for such Fiscal Year) plus (iii) if the Budgeted Amount for the immediately preceding Fiscal Year was greater than the actual amount of Consolidated Capital Expenditures made or incurred by Holdings or its Subsidiaries for such preceding Fiscal Year, an amount equal to the lesser of (A) the difference between the Budgeted Amount for such preceding Fiscal Year and the actual amount of Consolidated Capital Expenditures for such preceding Fiscal Year and (B) 50% of the Budgeted Amount for such preceding Fiscal Year:
FISCAL QUARTER CONSOLIDATED CAPITAL ENDING EXPENDITURES - -------------------------------------------------------- 2002 $45,000,000 2003 $50,000,000 2004 $50,000,000 2005 $60,000,000
-110-
FISCAL QUARTER CONSOLIDATED CAPITAL ENDING EXPENDITURES - -------------------------------------------------------- 2006 $60,000,000 2007 $60,000,000 2008 $65,000,000 2009 $65,000,000 2010 $65,000,000
(d) Certain Calculations. For purposes of determining compliance with the financial covenants set forth in this Section 6.8 (but not for purposes of determining the Applicable Margin or Applicable Revolving Commitment Fee Percentage), (i) with respect to any period during which a Permitted Acquisition or an Asset Sale has occurred (each, a "SUBJECT TRANSACTION"), each of Consolidated Adjusted EBITDA, the components of Consolidated Cash Interest Expense and Additional Net Sales shall be calculated with respect to such period on a pro forma basis (including only Permitted Adjustments) using the historical audited financial statements of any business so acquired or to be acquired or sold or to be sold and the consolidated financial statements of Holdings and its Subsidiaries which shall be reformulated as if such Subject Transaction, and any Indebtedness incurred or repaid in connection therewith, had been consummated or incurred or repaid at the beginning of such period (and assuming that such Indebtedness bears interest during any portion of the applicable measurement period prior to the relevant acquisition at the weighted average of the interest rates applicable to outstanding Loans incurred during such period); (ii) with respect to any period during which Company has incurred plant shutdown costs, acquisition integration costs or Uncompleted Acquisition Costs, Consolidated Adjusted EBITDA for such period shall be increased by an amount, without duplication, equal to any such costs payable in Cash and incurred by Company during such period to the extent that such costs have reduced Consolidated Net Income for such period, provided that the aggregate amount of adjustments to Consolidated Adjusted EBITDA made pursuant to this Section 6.8(d)(ii) for any period, together with any Permitted Adjustments in respect of any Subject Transactions made pursuant to clause (ii) of the definition of Permitted Adjustments for the same period, shall not exceed 7.5% of pro forma Consolidated Adjusted EBITDA (as reformulated) for such period; -111- (iii) with respect to any period during which the proceeds of any capital contribution to, or issuance of Capital Stock of, Holdings ("EQUITY PROCEEDS") have been applied to make mandatory or voluntary prepayments of Loans, the components of Consolidated Adjusted EBITDA and Consolidated Cash Interest Expense shall be calculated with respect to such period on a pro forma basis (including only pro forma adjustments which are factually supportable and are expected to have a continuing impact, in each case determined on a basis consistent with Article 11 of Regulation S-X promulgated under the Securities Act and as interpreted by the staff of the Securities and Exchange Commission, which pro forma adjustments shall be certified by the Chief Financial Officer of Holdings) using historical financial statements which shall be reformulated (after giving effect to any reformulation required under clause (i) above) as if such Equity Proceeds had been received, and applicable portion of the Loans prepaid, at the beginning of such period; (iv) with respect to any period including the Fiscal Quarter ended September 30, 2002 or any prior Fiscal Quarter (each an "HISTORICAL QUARTER"), Consolidated Adjusted EBITDA and Consolidated Cash Interest Expense shall be calculated in accordance with Schedule 6.8(d)(iv); and (v) proceeds of the Landis Acquisition Senior Subordinated Notes shall not be included in the determination of Consolidated Total Debt for purposes of determining compliance with this Section 6.8 for periods up to and including the Landis Acquisition Closing Date if all such proceeds (A) are deposited in an escrow account on the terms and conditions described in the offering circular relating to the Landis Acquisition Senior Subordinated Notes and (B)(1) are used to pay Landis Acquisition Financing Requirements on the Landis Acquisition Closing Date or (2) used to prepay the Landis Acquisition Senior Subordinated Notes if the Landis Acquisition Closing Date does not occur on or prior to May 22, 2004. 6.9. FUNDAMENTAL CHANGES; DISPOSITION OF ASSETS; ACQUISITIONS. No Credit Party shall, nor shall it permit any of its Subsidiaries to, enter into any transaction of merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or sublessor), transfer or otherwise dispose of, in one transaction or a series of transactions, all or any part of its business, assets or property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, whether now owned or hereafter acquired, or acquire by purchase or otherwise (other than purchases or other acquisitions of inventory, materials and equipment in the ordinary course of business of Company and its Subsidiaries) the business, property or fixed assets of, or Capital Stock or other evidence of beneficial ownership of, any Person or any business line or unit or division of any Person, except: -112- (a) any Subsidiary of Holdings may be merged with or into Company or any Guarantor Subsidiary, or be liquidated, wound up or dissolved, or all or any part of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to Company or any Guarantor Subsidiary; provided, in the case of such a merger, Company or such Guarantor Subsidiary, as applicable, shall be the continuing or surviving Person; (b) sales or other dispositions of assets that do not constitute Asset Sales; (c) Asset Sales in respect of (i) obsolete, worn out or surplus property (including obsolete, worn out or surplus property acquired in a Permitted Acquisition), (ii) property acquired in a Permitted Acquisition which the Company or any of its Subsidiaries is legally required to divest or (iii) other property (other than current assets) the proceeds of which (valued at the principal amount thereof in the case of notes or other debt Securities and valued at fair market value in the case of other non-Cash proceeds) are less than $6,000,000 with respect to any single Asset Sale or series of related Asset Sales pursuant to this clause (iii) and when aggregated with the proceeds of all such other Asset Sales made by Credit Parties pursuant to this clause (iii) within the same Fiscal Year, are less than $10,000,000; provided, in each of cases (i), (ii) and (iii) the consideration received for such property shall be in an amount at least equal to the fair market value thereof (determined in good faith by the board of directors of Holdings), no less than 75% of such consideration shall be paid in Cash and all related Net Asset Sale Proceeds shall be applied in accordance with Section 2.16(b); (d) any Permitted Acquisition by Company or any Guarantor Subsidiary; (e) any Foreign Subsidiary may be merged with or into any other Foreign Subsidiary, or be liquidated, wound up or dissolved, or all or any part of the its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to any Foreign Subsidiary; (f) Company may liquidate any of its Subsidiaries that has total net assets (as shown on the most recent balance sheet of such Subsidiary delivered to the Agents and at the time of liquidation) of $100,000 or less, provided, any Restricted Junior Payments in connection with such liquidation are made in accordance with Section 6.5; (g) Sales of Capital Stock in any Subsidiary to qualify directors or allow for investments by foreign nationals, in either case, to the extent required by applicable law; and (h) any Investment permitted under Section 6.7 and any grant of a Permitted Lien. -113- 6.10. DISPOSAL OF SUBSIDIARY INTERESTS. Except for (i) Liens created under any of the Credit Documents and (ii) any sale of all (but not less than all) of the Company's direct and indirect interests in the Capital Stock of any Subsidiary in compliance with the provisions of Section 6.9, no Credit Party shall, nor shall it permit any of its Subsidiaries to, (a) directly or indirectly sell, assign, pledge or otherwise encumber or dispose of any Capital Stock of any of its Subsidiaries, except to qualify directors or allow for investments by foreign nationals, in either case, if required by applicable law; or (b) permit any of its Subsidiaries directly or indirectly to sell, assign, pledge or otherwise encumber or dispose of any Capital Stock of any of its Subsidiaries, except to another Credit Party (subject to the restrictions on such disposition otherwise imposed hereunder), or to qualify directors if required by applicable law. 6.11. SALES AND LEASE-BACKS. No Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, become or remain liable as lessee or as a guarantor or other surety with respect to any lease of any property (whether real, personal or mixed), whether now owned or hereafter acquired, which such Credit Party (a) has sold or transferred or is to sell or to transfer to any other Person (other than Company or any of its Guarantor Subsidiaries), or (b) intends to use for substantially the same purpose as any other property which has been or is to be sold or transferred by such Credit Party to any Person (other than Company or any of its Guarantor Subsidiaries) in connection with such lease, provided, the foregoing restriction shall not apply to (i) sales and lease-backs of equipment and other personal property in the ordinary course of business of Company and its Subsidiaries which a Credit Party first acquired not more than 30 days prior to the commencement of the applicable lease and (ii) sales and lease-backs of real property with an aggregate fair market value (as sold) not to exceed $1,000,000 at any time outstanding, in each of cases (i) and (ii) to the extent such transactions are otherwise in compliance with this Agreement. 6.12. TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES. No Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any holder of 10% or more of any class of Capital Stock of Holdings or any of its Subsidiaries or with any Affiliate of Holdings, on terms that are less favorable to it or such Subsidiary, as the case may be, than those that might be obtained at the time from a Person who is not such a holder or Affiliate; provided, the foregoing restriction shall not apply to (a) any transaction between Company and any Wholly-Owned Guarantor Subsidiary; (b) reasonable and customary fees paid to members of the board of directors (or similar governing body) of Holdings and its Subsidiaries; (c) compensation arrangements for officers and other employees of Holdings and its Subsidiaries entered into in the ordinary course of business of Company and its Subsidiaries; (d) transactions in connection with the Merger; (e) any Restricted Junior Payment permitted to be paid pursuant to Section 6.5(c), 6.5(d), or 6.5(e)(i); (f) any issuance of Securities, or other payments, awards or grants in cash, Securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and -114- stock ownership plans (including the Employee Leverage Program) approved by the board of directors of Holdings, in each case which are otherwise consistent with this Agreement; (g) sales or issuances of Capital Stock of Holdings to Affiliates of Company approved by the board of directors of Holdings; and (h) sales of inventory or other product and arrangements in respect of administrative, corporate overhead and insurance, legal and similar expenses among Company and its Subsidiaries in the ordinary course of business. 6.13. CONDUCT OF BUSINESS. From and after the Closing Date, no Credit Party shall, nor shall it permit any of its Subsidiaries to, engage in any business other than (a) the businesses engaged in by such Credit Party on the Closing Date and similar or related businesses and (b) such other lines of business as may be consented to by Requisite Lenders. 6.14. PERMITTED ACTIVITIES OF HOLDINGS. Holdings shall not (a) incur, directly or indirectly, any Indebtedness other than its Obligations under the Credit Documents or guarantees in respect of Indebtedness of Company or any of its Subsidiaries otherwise permitted under this Agreement and Indebtedness permitted under Section 6.1(m); (b) create or suffer to exist any Lien upon any property or assets now owned or hereafter acquired by it other than the Liens created under the Collateral Documents to which it is a party or permitted pursuant to Section 6.2; (c) engage in any business or activity or own any assets other than (i) holding 100% of the Capital Stock of Company and, through Company, not less than 80% of the Capital Stock of each of the Subsidiaries of Company; (ii) performing its obligations and activities incidental thereto under the Credit Documents, and to the extent not inconsistent therewith, the Related Agreements and the Landis Merger Agreement, as applicable; and (iii) making Restricted Junior Payments and Investments to the extent permitted by this Agreement; (d) consolidate with or merge with or into, or convey, transfer or lease all or substantially all its assets to, any Person; (e) sell or otherwise dispose of any Capital Stock of Company; (f) create or acquire any Subsidiary or make or own any Investment in any Person other than Company and, through Company, the Subsidiaries of Company; or (g) fail to hold itself out to the public as a legal entity separate and distinct from all other Persons. 6.15. AMENDMENTS OR WAIVERS OF CERTAIN RELATED AGREEMENTS. Except as set forth in Section 6.16, no Credit Party shall nor shall it permit any of its Subsidiaries to, agree to any material amendment, restatement, supplement or other modification to, or waiver of, any of its material rights under any Related Agreement or the Landis Merger Agreement after the Effective Date without in each case obtaining the prior written consent of Requisite Lenders to such amendment, restatement, supplement or other modification or waiver. 6.16. AMENDMENTS OR WAIVERS OF OR WITH RESPECT TO SUBORDINATED INDEBTEDNESS. No Credit Party shall, nor shall it permit any of its Subsidiaries to, amend or otherwise change the terms of any Subordinated Indebtedness, or make any payment -115- consistent with an amendment thereof or change thereto, (a) if the effect of such amendment or change is to increase the interest rate on such Subordinated Indebtedness, change (to earlier dates) any dates upon which payments of principal or interest are due thereon, change any event of default or condition to an event of default with respect thereto (other than to eliminate any such event of default or increase any grace period related thereto), change the redemption, prepayment or defeasance provisions thereof, change the subordination provisions of such Senior Subordinated Notes (or of any guaranty thereof), or (b) amend or otherwise change the covenants or other provisions contained in any Subordinated Indebtedness not described in clause (a) of this Section 6.16 if the effect of such amendment or change, together with all other amendments or changes made, is to increase the obligations of the obligor thereunder or to confer any additional material rights on the holders of such Subordinated Indebtedness (or a trustee or other representative on their behalf) which would be adverse to any Credit Party or Lenders. 6.17. FISCAL YEAR. No Credit Party shall, nor shall it permit any of its Subsidiaries to, change its Fiscal Year. 6.18. DERIVATIVE TRANSACTIONS. No Credit Party shall enter into any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value, other than (a) Financial Hedge Agreements and (b) for the purposes of hedging the actual exposure of Company and its Subsidiaries to fluctuations in the price of resin or other raw materials used in the operations of Company and its Subsidiaries and not for speculative purposes. SECTION 7. GUARANTY 7.1. GUARANTY OF THE OBLIGATIONS. Subject to the provisions of Section 7.2, Guarantors jointly and severally hereby irrevocably and unconditionally guarantee to Administrative Agent for the ratable benefit of the Beneficiaries the due and punctual payment in full of all Obligations when the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)) (collectively, the "GUARANTEED OBLIGATIONS"). Without limiting the obligations of Holdings under this Section 7, Holdings shall become a co-obligor under the Notes, on a joint and several basis with Company, and execute the Notes in such capacity. 7.2. CONTRIBUTION BY GUARANTORS. All Guarantors desire to allocate among themselves (collectively, the "CONTRIBUTING GUARANTORS"), in a fair and equitable manner, their obligations arising under this Guaranty. Accordingly, in the event any payment or distribution is made on any date by a Guarantor (a "FUNDING GUARANTOR") -116- under this Guaranty that exceeds its Fair Share as of such date, such Funding Guarantor shall be entitled to a contribution from each of the other Contributing Guarantors in the amount of such other Contributing Guarantor's Fair Share Shortfall as of such date, with the result that all such contributions will cause each Contributing Guarantor's Aggregate Payments to equal its Fair Share as of such date. "FAIR SHARE" means, with respect to a Contributing Guarantor as of any date of determination, an amount equal to (a) the ratio of (i) the Fair Share Contribution Amount with respect to such Contributing Guarantor to (ii) the aggregate of the Fair Share Contribution Amounts with respect to all Contributing Guarantors multiplied by (b) the aggregate amount paid or distributed on or before such date by all Funding Guarantors under this Guaranty in respect of the obligations Guaranteed. "FAIR SHARE SHORTFALL" means, with respect to a Contributing Guarantor as of any date of determination, the excess, if any, of the Fair Share of such Contributing Guarantor over the Aggregate Payments of such Contributing Guarantor. "FAIR SHARE CONTRIBUTION AMOUNT" means, with respect to a Contributing Guarantor as of any date of determination, the maximum aggregate amount of the obligations of such Contributing Guarantor under this Guaranty that would not render its obligations hereunder or thereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11 of the United States Code or any comparable applicable provisions of state law; provided, solely for purposes of calculating the "FAIR SHARE CONTRIBUTION AMOUNT" with respect to any Contributing Guarantor for purposes of this Section 7.2, any assets or liabilities of such Contributing Guarantor arising by virtue of any rights to subrogation, reimbursement or indemnification or any rights to or obligations of contribution hereunder shall not be considered as assets or liabilities of such Contributing Guarantor. "AGGREGATE PAYMENTS" means, with respect to a Contributing Guarantor as of any date of determination, an amount equal to (1) the aggregate amount of all payments and distributions made on or before such date by such Contributing Guarantor in respect of this Guaranty (including, without limitation, in respect of this Section 7.2), minus (2) the aggregate amount of all payments received on or before such date by such Contributing Guarantor from the other Contributing Guarantors as contributions under this Section 7.2. The amounts payable as contributions hereunder shall be determined as of the date on which the related payment or distribution is made by the applicable Funding Guarantor. The allocation among Contributing Guarantors of their obligations as set forth in this Section 7.2 shall not be construed in any way to limit the liability of any Contributing Guarantor hereunder. Each Guarantor is a third party beneficiary to the contribution agreement set forth in this Section 7.2. 7.3. PAYMENT BY GUARANTORS. Subject to Section 7.2, Guarantors hereby jointly and severally agree, in furtherance of the foregoing and not in limitation of any other right which any Beneficiary may have at law or in equity against any Guarantor by virtue hereof, that upon the failure of Company to pay any of the Guaranteed Obligations when and as the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)), Guarantors will upon demand pay, or cause to be -117- paid, in Cash, in same day funds, to Administrative Agent for the ratable benefit of Beneficiaries, an amount equal to the sum of the unpaid principal amount of all Guaranteed Obligations then due as aforesaid, accrued and unpaid interest on such Guaranteed Obligations (including interest which, but for Company's becoming the subject of a case under the Bankruptcy Code, would have accrued on such Guaranteed Obligations, whether or not a claim is allowed against Company for such interest in the related bankruptcy case) and all other Guaranteed Obligations then owed to Beneficiaries as aforesaid. 7.4. LIABILITY OF GUARANTORS ABSOLUTE. Each Guarantor agrees that its obligations hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of the Guaranteed Obligations or the release of such Guarantor permitted by the Credit Documents. In furtherance of the foregoing and without limiting the generality thereof, each Guarantor agrees as follows: (a) this Guaranty is a guaranty of payment when due and not of collectability. This Guaranty is a primary obligation of each Guarantor and not merely a contract of surety; (b) Administrative Agent may enforce this Guaranty upon the occurrence of an Event of Default notwithstanding the existence of any dispute between Company and any Beneficiary with respect to the existence of such Event of Default; (c) the obligations of each Guarantor hereunder are independent of the obligations of Company and the obligations of any other guarantor (including any other Guarantor) of the obligations of Company, and a separate action or actions may be brought and prosecuted against such Guarantor whether or not any action is brought against Company or any of such other guarantors and whether or not Company is joined in any such action or actions; (d) payment by any Guarantor of a portion, but not all, of the Guaranteed Obligations shall in no way limit, affect, modify or abridge any Guarantor's liability for any portion of the Guaranteed Obligations which has not been paid. Without limiting the generality of the foregoing, if Administrative Agent is awarded a judgment in any suit brought to enforce any Guarantor's covenant to pay a portion of the Guaranteed Obligations, such judgment shall not be deemed to release such Guarantor from its covenant to pay the portion of the Guaranteed Obligations that is not the subject of such suit, and such judgment shall not, except to the extent satisfied by such Guarantor, limit, affect, modify or abridge any other Guarantor's liability hereunder in respect of the Guaranteed Obligations; (e) any Beneficiary, upon such terms as it deems appropriate, without notice or demand and without affecting the validity or enforceability hereof or giving rise -118- to any reduction, limitation, impairment, discharge or termination of any Guarantor's liability hereunder, from time to time may (i) renew, extend, accelerate, increase the rate of interest on, or otherwise change the time, place, manner or terms of payment of the Guaranteed Obligations; (ii) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guaranteed Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations; (iii) request and accept other guaranties of the Guaranteed Obligations and take and hold security for the payment hereof or the Guaranteed Obligations; (iv) release, surrender, exchange, substitute, compromise, settle, rescind, waive, alter, subordinate or modify, with or without consideration, any security for payment of the Guaranteed Obligations, any other guaranties of the Guaranteed Obligations, or any other obligation of any Person (including any other Guarantor) with respect to the Guaranteed Obligations; (v) enforce and apply any security now or hereafter held by or for the benefit of such Beneficiary in respect hereof or the Guaranteed Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that such Beneficiary may have against any such security, in each case as such Beneficiary in its discretion may determine consistent herewith or the applicable Financial Hedge Agreement and any applicable security agreement, including foreclosure on any such security pursuant to one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable, and even though such action operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of any Guarantor against Company or any security for the Guaranteed Obligations; and (vi) exercise any other rights available to it under the Credit Documents or the Financial Hedge Agreements; and (f) this Guaranty and the obligations of Guarantors hereunder shall be valid and enforceable and shall not be subject to any reduction, limitation, impairment, discharge or termination for any reason (other than payment in full of the Guaranteed Obligations), including the occurrence of any of the following, whether or not any Guarantor shall have had notice or knowledge of any of them: (i) any failure or omission to assert or enforce or agreement or election not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy (whether arising under the Credit Documents or the Financial Hedge Agreements, at law, in equity or otherwise) with respect to the Guaranteed Obligations or any agreement relating thereto, or with respect to any other guaranty of or security for the payment of the Guaranteed Obligations; (ii) any rescission, waiver, amendment or modification of, or any consent to departure from, any of the terms or provisions (including provisions relating to events of default) hereof, any of the other Credit Documents, any of the Financial Hedge Agreements or any agreement or instrument executed pursuant thereto, or of any other guaranty or security for the Guaranteed Obligations, in each case whether or not in accordance with the terms hereof or such Credit Document, such Financial Hedge Agreement or any agreement relating to such other guaranty or security; (iii) the Guaranteed Obligations, or any agreement relating thereto, at any time being found to be -119- illegal, invalid or unenforceable in any respect; (iv) the application of payments received from any source (other than payments received pursuant to the other Credit Documents or any of the Financial Hedge Agreements or from the proceeds of any security for the Guaranteed Obligations, except to the extent such security also serves as collateral for indebtedness other than the Guaranteed Obligations) to the payment of indebtedness other than the Guaranteed Obligations, even though any Beneficiary might have elected to apply such payment to any part or all of the Guaranteed Obligations; (v) any Beneficiary's consent to the change, reorganization or termination of the corporate structure or existence of Holdings or any of its Subsidiaries and to any corresponding restructuring of the Guaranteed Obligations; (vi) any failure to perfect or continue perfection of a security interest in any collateral which secures any of the Guaranteed Obligations; (vii) any defenses, set-offs or counterclaims which Company may allege or assert against any Beneficiary in respect of the Guaranteed Obligations, including failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury; and (viii) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of any Guarantor as an obligor in respect of the Guaranteed Obligations. 7.5. WAIVERS BY GUARANTORS. Each Guarantor hereby waives, for the benefit of Beneficiaries: (a) any right to require any Beneficiary, as a condition of payment or performance by such Guarantor, to (i) proceed against Company, any other guarantor (including any other Guarantor) of the Guaranteed Obligations or any other Person, (ii) proceed against or exhaust any security held from Company, any such other guarantor or any other Person, (iii) proceed against or have resort to any balance of any Deposit Account or credit on the books of any Beneficiary in favor of Company or any other Person, or (iv) pursue any other remedy in the power of any Beneficiary whatsoever; (b) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of Company or any other Guarantor including any defense based on or arising out of the lack of validity or the unenforceability of the Guaranteed Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of Company or any other Guarantor from any cause other than payment in full of the Guaranteed Obligations; (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (d) any defense based upon any Beneficiary's errors or omissions in the administration of the Guaranteed Obligations, except behavior which amounts to bad faith; (e) (i) any principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms hereof and any legal or equitable discharge of such Guarantor's obligations hereunder, (ii) the benefit of any statute of limitations affecting such Guarantor's liability hereunder or the enforcement hereof, (iii) any rights to set-offs, recoupments and counterclaims, and (iv) promptness, diligence and any requirement that any Beneficiary protect, secure, perfect or insure any security interest or lien or any property subject thereto; (f) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance hereof, notices of default hereunder, the -120- Financial Hedge Agreements or any agreement or instrument related thereto, notices of any renewal, extension or modification of the Guaranteed Obligations or any agreement related thereto, notices of any extension of credit to Company and notices of any of the matters referred to in Section 7.4 and any right to consent to any thereof; and (g) any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms hereof. 7.6. GUARANTORS' RIGHTS OF SUBROGATION, CONTRIBUTION, ETC. Until the Guaranteed Obligations shall have been indefeasibly paid in full and the Revolving Commitments shall have terminated and all Letters of Credit shall have expired or been cancelled, each Guarantor hereby waives any claim, right or remedy, direct or indirect, that such Guarantor now has or may hereafter have against Company or any other Guarantor or any of its assets in connection with this Guaranty or the performance by such Guarantor of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including without limitation (a) any right of subrogation, reimbursement or indemnification that such Guarantor now has or may hereafter have against Company with respect to the Guaranteed Obligations, (b) any right to enforce, or to participate in, any claim, right or remedy that any Beneficiary now has or may hereafter have against Company, and (c) any benefit of, and any right to participate in, any collateral or security now or hereafter held by any Beneficiary. In addition, until the Guaranteed Obligations shall have been indefeasibly paid in full and the Revolving Commitments shall have terminated and all Letters of Credit shall have expired or been cancelled, each Guarantor shall withhold exercise of any right of contribution such Guarantor may have against any other guarantor (including any other Guarantor) of the Guaranteed Obligations, including, without limitation, any such right of contribution as contemplated by Section 7.2. Each Guarantor further agrees that, to the extent the waiver or agreement to withhold the exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification such Guarantor may have against Company or against any collateral or security, and any rights of contribution such Guarantor may have against any such other guarantor, shall be junior and subordinate to any rights any Beneficiary may have against Company, to all right, title and interest any Beneficiary may have in any such collateral or security, and to any right any Beneficiary may have against such other guarantor. If any amount shall be paid to any Guarantor on account of any such subrogation, reimbursement, indemnification or contribution rights at any time when all Guaranteed Obligations shall not have been finally and indefeasibly paid in full, such amount shall be held in trust for Administrative Agent on behalf of Beneficiaries and shall forthwith be paid over to Administrative Agent for the benefit of Beneficiaries to be credited and applied against the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms hereof. 7.7. SUBORDINATION OF OTHER OBLIGATIONS. Any Indebtedness of Company or any Guarantor now or hereafter held by any Guarantor (the "OBLIGEE GUARANTOR") is -121- hereby subordinated in right of payment to the Guaranteed Obligations, and any such indebtedness collected or received by the Obligee Guarantor after an Event of Default has occurred and is continuing shall be held in trust for Administrative Agent on behalf of Beneficiaries and shall forthwith be paid over to Administrative Agent for the benefit of Beneficiaries to be credited and applied against the Guaranteed Obligations but without affecting, impairing or limiting in any manner the liability of the Obligee Guarantor under any other provision hereof. 7.8. CONTINUING GUARANTY. This Guaranty is a continuing guaranty and shall remain in effect until all of the Guaranteed Obligations shall have been paid in full and the Revolving Commitments shall have terminated and all Letters of Credit shall have expired or been cancelled. Each Guarantor hereby irrevocably waives any right to revoke this Guaranty as to future transactions giving rise to any Guaranteed Obligations. 7.9. AUTHORITY OF GUARANTORS OR COMPANY. It is not necessary for any Beneficiary to inquire into the capacity or powers of any Guarantor or Company or the officers, directors or any agents acting or purporting to act on behalf of any of them. 7.10. FINANCIAL CONDITION OF COMPANY. Any Credit Extension may be made to Company or continued from time to time, and any Financial Hedge Agreements may be entered into from time to time, in each case without notice to or authorization from any Guarantor regardless of the financial or other condition of Company at the time of any such grant or continuation or at the time such Financial Hedge Agreement is entered into, as the case may be. No Beneficiary shall have any obligation to disclose or discuss with any Guarantor its assessment, or any Guarantor's assessment, of the financial condition of Company. Each Guarantor has adequate means to obtain information from Company on a continuing basis concerning the financial condition of Company and its ability to perform its obligations under the Credit Documents and the Financial Hedge Agreements, and each Guarantor assumes the responsibility for being and keeping informed of the financial condition of Company and of all circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations. Each Guarantor hereby waives and relinquishes any duty on the part of any Beneficiary to disclose any matter, fact or thing relating to the business, operations or conditions of Company now known or hereafter known by any Beneficiary. 7.11. BANKRUPTCY, ETC. (a) Without limiting any Guarantor's ability to file a voluntary bankruptcy petition in respect of itself, so long as any Guaranteed Obligations remain outstanding, no Guarantor shall, without the prior written consent of Administrative Agent acting pursuant to the instructions of Requisite Lenders, commence or join with any other Person in commencing any bankruptcy, reorganization or insolvency case or proceeding of or against Company or any other Guarantor. The obligations of Guarantors hereunder shall not be reduced, limited, impaired, discharged, deferred, suspended or terminated by any case or proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or -122- arrangement of Company or any other Guarantor or by any defense which Company or any other Guarantor may have by reason of the order, decree or decision of any court or administrative body resulting from any such proceeding. (b) Each Guarantor acknowledges and agrees that any interest on any portion of the Guaranteed Obligations which accrues after the commencement of any case or proceeding referred to in clause (a) above (or, if interest on any portion of the Guaranteed Obligations ceases to accrue by operation of law by reason of the commencement of such case or proceeding, such interest as would have accrued on such portion of the Guaranteed Obligations if such case or proceeding had not been commenced) shall be included in the Guaranteed Obligations because it is the intention of Guarantors and Beneficiaries that the Guaranteed Obligations which are guaranteed by Guarantors pursuant hereto should be determined without regard to any rule of law or order which may relieve Company of any portion of such Guaranteed Obligations. Guarantors will permit any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar person to pay Administrative Agent, or allow the claim of Administrative Agent in respect of, any such interest accruing after the date on which such case or proceeding is commenced. (c) In the event that all or any portion of the Guaranteed Obligations are paid by Company, the obligations of Guarantors hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) are rescinded or recovered directly or indirectly from any Beneficiary as a preference, fraudulent transfer or otherwise, and any such payments which are so rescinded or recovered shall constitute Guaranteed Obligations for all purposes hereunder. 7.12. DISCHARGE OF GUARANTY UPON SALE OF GUARANTOR. If all of the Capital Stock of any Guarantor or any of its successors in interest hereunder shall be sold or otherwise disposed of (including by merger or consolidation) in a transaction consummated in accordance with the terms and conditions hereof, the Guaranty of such Guarantor or such successor in interest, as the case may be, hereunder shall automatically be discharged and released without any further action by any Beneficiary or any other Person effective as of the time of such disposition. SECTION 8. EVENTS OF DEFAULT 8.1. EVENTS OF DEFAULT. If any one or more of the following conditions or events shall occur: (a) Failure to Make Payments When Due. Failure by Company to pay (i) when due any installment of principal of any Loan, whether at stated maturity, by acceleration, by notice of voluntary prepayment, by mandatory prepayment or otherwise; (ii) when due any amount payable to Issuing Bank in reimbursement of any Letter of -123- Credit Disbursement; or (iii) any interest on any Loan or any fee or any other amount due hereunder within three days after the date due; or (b) Default in Other Agreements. (i) Failure of any Credit Party or any of their respective Subsidiaries to pay when due any principal of or interest on or any other amount payable in respect of one or more items of Indebtedness (other than Indebtedness referred to in Section 8.1(a)) in an individual principal amount of $5,000,000 or more or with an aggregate principal amount of $15,000,000 or more, in each case beyond the grace period, if any, provided therefor; or (ii) breach or default by any Credit Party with respect to any other material term of (1) one or more items of Indebtedness in the individual or aggregate principal amounts referred to in clause (i) above or (2) any loan agreement, mortgage, indenture or other agreement relating to such item(s) of Indebtedness, in each case beyond the grace period, if any, provided therefor, if the effect of such breach or default is to cause, or to permit the holder or holders of that Indebtedness (or a trustee on behalf of such holder or holders), to cause, that Indebtedness to become or be declared due and payable (or redeemable) prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be; or (c) Breach of Certain Covenants. Failure of any Credit Party to perform or comply with any term or condition contained in Section 2.7, Section 5.2 (solely in respect of the Company), Section 5.14 or Section 6 or in Section 3 of the Pledge and Security Agreement; or (d) Breach of Representations, Etc. Any representation, warranty, certification or other statement made or deemed made by any Credit Party in any Credit Document or in any statement or certificate at any time given by any Credit Party or any of its Subsidiaries in writing pursuant hereto or thereto shall be false in any material respect as of the date made or deemed made; or (e) Other Defaults Under Credit Documents. Any Credit Party shall default in the performance of or compliance with any term contained herein or any of the other Credit Documents, other than any such term referred to in any other Section of this Section 8.1, and such default shall not have been remedied or waived within 30 days after the earlier of (i) an Authorized Officer of Company or Holdings becoming aware of such default or (ii) receipt by Company of notice from Administrative Agent or any Lender of such default; or (f) Involuntary Bankruptcy; Appointment of Receiver, Etc. (i) A court of competent jurisdiction shall enter a decree or order for relief in respect of Holdings or any of its Subsidiaries (other than Excluded Foreign Subsidiaries) in an involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable federal, state or foreign law; or (ii) an involuntary case shall be commenced against Holdings or any of its -124- Subsidiaries (other than an Excluded Foreign Subsidiary) under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over Holdings or any of its Subsidiaries (other than an Excluded Foreign Subsidiary), or over all or a substantial part of its property, shall have been entered; or there shall have occurred the involuntary appointment of an interim receiver, trustee or other custodian of Holdings or any of its Subsidiaries (other than an Excluded Foreign Subsidiary) for all or a substantial part of its property; or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of Holdings or any of its Subsidiaries (other than an Excluded Foreign Subsidiary), and any such event described in this clause (ii) shall continue for 60 days without having been dismissed, bonded or discharged; or (g) Voluntary Bankruptcy; Appointment of Receiver, Etc. (i) Holdings or any of its Subsidiaries (other than an Excluded Foreign Subsidiary) shall have an order for relief entered with respect to it or shall commence a voluntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or Holdings or any of its Subsidiaries (other than Excluded Foreign Subsidiaries) shall make any assignment for the benefit of creditors; or (ii) Holdings or any of its Subsidiaries (other than an Excluded Foreign Subsidiary) shall be unable, or shall fail generally, or shall admit in writing its inability, to pay its debts as such debts become due; or the board of directors (or similar governing body or any committee thereof) of Holdings or any of its Subsidiaries (other than an Excluded Foreign Subsidiary) shall adopt any resolution or otherwise authorize any action to approve any of the actions referred to herein or in Section 8.1(f); or (h) Judgments and Attachments. Any money judgment, writ or warrant of attachment or similar process involving (i) in any individual case an amount in excess of $5,000,000 or (ii) in the aggregate at any time an amount in excess of $15,000,000 (in either case to the extent not adequately covered by insurance as to which a solvent and unaffiliated insurance company has acknowledged coverage) shall be entered or filed against Holdings or any of its Subsidiaries or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of 60 days (or in any event later than five days prior to the date of any proposed sale thereunder); or (i) Dissolution. Any order, judgment or decree shall be entered against any Credit Party decreeing the dissolution or split up of such Credit Party and such order shall remain undischarged or unstayed for a period in excess of 30 days; or -125- (j) Employee Benefit Plans. (i) There shall occur one or more ERISA Events which individually or in the aggregate (A) have or could reasonably be expected to have a Material Adverse Effect, (B) have resulted in liabilities of Holdings, its Subsidiaries or any of their ERISA Affiliates, taken together, in excess of $10,000,000 which liabilities (1) have continued for a period of 60 days without being paid, waived or otherwise discharged and (2) are not being contested in good faith by appropriate proceedings or (ii) there shall be imposed a Lien or security interest under Section 401(a)(29) or Section 412(n) of the Internal Revenue Code or under ERISA on Collateral which Lien or security interest (1) has continued in effect for a period of 60 days without being discharged and (2) is not being contested in good faith by appropriate proceedings; or (k) Change of Control. A Change of Control shall occur; or (l) Guaranties, Collateral Documents and other Credit Documents. At any time after the execution and delivery thereof, (i) the Guaranty for any reason, other than the satisfaction in full of all Obligations, shall cease to be in full force and effect (other than in accordance with its terms) or shall be declared to be null and void or any Guarantor shall repudiate its obligations thereunder, (ii) this Agreement or any Collateral Document ceases to be in full force and effect (other than by reason of a release of Collateral in accordance with the terms hereof or thereof or the satisfaction in full of the Obligations in accordance with the terms hereof) or shall be declared null and void, or Collateral Agent shall not have or shall cease to have a valid and perfected Lien in any Collateral purported to be covered by the Collateral Documents with the priority required by the relevant Collateral Document (unless released pursuant to the terms of the Credit Documents), in each case for any reason other than the failure of Collateral Agent or any Secured Party to take any action within its control, or (iii) any Credit Party shall contest the validity or enforceability of any Credit Document in writing or deny in writing that it has any further liability, including with respect to future advances by Lenders, under any Credit Document to which it is a party; THEN, (1) upon the occurrence of any Event of Default described in Section 8.1(f) or 8.1(g) with respect to Company or Holdings, automatically, and (2) so long as any other Event of Default shall be continuing, at the request of (or with the consent of) Requisite Lenders, upon notice to Company by Administrative Agent, (A) the Revolving Commitments, if any, of each Lender having such Revolving Commitments and the obligation of Issuing Bank to issue any Letter of Credit shall immediately terminate; (B) each of the following shall immediately become due and payable, in each case without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by each Credit Party: (I) the unpaid principal amount of and accrued interest on the Loans, (II) an amount equal to the maximum amount that may at any time be drawn under all Letters of Credit then outstanding (regardless of whether any beneficiary under any such Letter of Credit shall have presented, or shall be entitled at such time to present, the drafts or other documents or certificates required to draw under -126- such Letters of Credit), and (III) all other Obligations; provided, the foregoing shall not affect in any way the obligations of Lenders under Section 2.3(b)(iv) or Section 2.4(e); (C) Administrative Agent may cause the Collateral Agent to enforce any and all Liens and security interests created pursuant to Collateral Documents; and (D) Administrative Agent shall direct Company to pay (and Company hereby agrees upon receipt of such notice, or upon the occurrence of any Event of Default specified in Section 8.1(f) and (g) to pay) to Administrative Agent such additional amounts of cash, to be held as security for Company's reimbursement Obligations in respect of Letters of Credit then outstanding, equal to the Letter of Credit Usage at such time. SECTION 9. AGENTS 9.1. APPOINTMENT OF AGENTS. JPMCB is hereby appointed Syndication Agent hereunder, and each Lender hereby authorizes Syndication Agent to act as its agent in accordance with the terms hereof and the other Credit Documents. GSCP is hereby appointed Administrative Agent hereunder and under the other Credit Documents and each Lender hereby authorizes Administrative Agent to act as its agent in accordance with the terms hereof and the other Credit Documents. Fleet National Bank is hereby appointed Collateral Agent hereunder and under the other Credit Documents and each Lender hereby authorizes Collateral Agent to act as its agent in accordance with the terms hereof and the other Credit Documents. Each Agent hereby agrees to act upon the express conditions contained herein and the other Credit Documents, as applicable. The provisions of this Section 9 are solely for the benefit of Agents and Lenders and no Credit Party shall have any rights as a third party beneficiary of any of the provisions thereof. In performing its functions and duties hereunder, each Agent shall act solely as an agent of Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for Holdings or any of its Subsidiaries. Syndication Agent, without consent of or notice to any party hereto, may assign any and all of its rights or obligations hereunder to any of its Affiliates. As of the Closing Date, each of JPMCB, in its capacity as Syndication Agent, and General Electric Capital Corporation and The Royal Bank of Scotland, in their capacities as Co-Documentation Agents, shall not have any obligations but shall be entitled to all benefits of this Section 9. 9.2. POWERS AND DUTIES. Each Lender irrevocably authorizes each Agent to take such action on such Lender's behalf and to exercise such powers, rights and remedies hereunder and under the other Credit Documents as are specifically delegated or granted to such Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto. Each Agent shall have only those duties and responsibilities that are expressly specified herein and the other Credit Documents. Each Agent may exercise such powers, rights and remedies and perform such duties by or through its agents or employees. No Agent shall have, by reason hereof or any of the other Credit Documents, a fiduciary relationship in respect of any Lender; and nothing herein or any of the other Credit Documents, expressed or implied, is -127- intended to or shall be so construed as to impose upon any Agent any obligations in respect hereof or any of the other Credit Documents except as expressly set forth herein or therein. 9.3. GENERAL IMMUNITY. (a) No Responsibility for Certain Matters. No Agent shall have any duties or obligations except those expressly set forth herein, nor shall any Agent be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing. Without limiting the generality of the foregoing, no Agent shall be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectability or sufficiency hereof or any other Credit Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by any Agent to Lenders or by or on behalf of any Credit Party to any Agent or any Lender in connection with the Credit Documents and the transactions contemplated thereby or for the financial condition or business affairs of any Credit Party or any other Person liable for the payment of any Obligations, nor shall any Agent be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Credit Documents or as to the use of the proceeds of the Loans or as to the existence or possible existence of any Event of Default or Default. Except as expressly set forth herein, no Agent shall have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to any Credit Party that is communicated to or obtained by such Agent or any of its Affiliates in any capacity. Anything contained herein to the contrary notwithstanding, Administrative Agent shall not have any liability arising from confirmations of the amount of outstanding Loans or the Letter of Credit Usage or the component amounts thereof. (b) Exculpatory Provisions. No Agent nor any of its officers, partners, directors, employees or agents shall be liable to Lenders for any action taken or omitted by any Agent under or in connection with any of the Credit Documents except to the extent caused by such Agent's gross negligence or willful misconduct. Each Agent shall be entitled to refrain from any act or the taking of any action (including the failure to take an action) in connection herewith or any of the other Credit Documents or from the exercise of any power, discretion or authority vested in it hereunder or thereunder unless and until such Agent shall have received instructions in respect thereof from Requisite Lenders (or such other Lenders as may be required to give such instructions under Section 10.5) and, upon receipt of such instructions from Requisite Lenders (or such other Lenders, as the case may be), such Agent shall be entitled to act or (where so instructed) refrain from acting, or to exercise such power, discretion or authority, in accordance with such instructions. Any Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been -128- signed or sent by the proper Person. Any Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. Any Agent may consult with legal counsel (who may be counsel for Company), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. 9.4. AGENTS ENTITLED TO ACT AS LENDER. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, any Agent in its individual capacity as a Lender hereunder. With respect to its participation in the Loans and the Letters of Credit, each Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as if it were not performing the duties and functions delegated to it hereunder, and the term "Lender" shall, unless the context clearly otherwise indicates, include each Agent in its individual capacity. Any Agent and its Affiliates may accept deposits from, lend money to, own securities of, and generally engage in any kind of banking, trust, financial advisory or other business with Holdings or any of its Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from Company for services in connection herewith and otherwise without having to account for the same to Lenders. 9.5. LENDERS' REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGMENT. (a) Each Lender represents and warrants that it has made its own independent investigation of the financial condition and affairs of Holdings and its Subsidiaries in connection with Credit Extensions hereunder and that it has made and shall continue to make its own appraisal of the creditworthiness of Holdings and its Subsidiaries. No Agent shall have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of Lenders or to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter, and no Agent shall have any responsibility with respect to the accuracy of or the completeness of any information provided to Lenders. (b) [Intentionally omitted.] 9.6. RIGHT TO INDEMNITY. Each Lender, in proportion to its Pro Rata Share, severally agrees to indemnify each Agent, to the extent that such Agent shall not have been reimbursed by any Credit Party, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against such Agent in exercising its powers, rights and remedies or performing its duties hereunder or under the other Credit Documents or otherwise in its capacity as such Agent in any way relating to or arising out hereof or the -129- other Credit Documents; provided, no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent's gross negligence or willful misconduct. If any indemnity furnished to any Agent for any purpose shall, in the opinion of such Agent, be insufficient or become impaired, such Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished; provided, in no event shall this sentence require any Lender to indemnify any Agent against any liability, obligation, loss, damage, penalty, action, judgment, suit, cost, expense or disbursement in excess of such Lender's Pro Rata Share thereof; and provided, further, this sentence shall not be deemed to require any Lender to indemnify any Agent against any liability, obligation, loss, damage, penalty, action, judgment, suit, cost, expense or disbursement described in the proviso in the immediately preceding sentence. 9.7. SUB-AGENTS. Each Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by such Agent. Each Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Affiliates. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Affiliates of each Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as such Agent. 9.8. SUCCESSOR ADMINISTRATIVE AGENT, COLLATERAL AGENT AND SWING LINE LENDER. (a) Administrative Agent and Collateral Agent. Each of Administrative Agent and Collateral Agent may resign at any time by giving 30 days' prior written notice thereof to Lenders and Company, and each of Administrative Agent and Collateral Agent may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to Company and Administrative Agent or Collateral Agent, as applicable, and signed by Requisite Lenders. Upon any such notice of resignation or any such removal, Requisite Lenders shall have the right, upon five Business Days' notice to Company, to appoint a successor Administrative Agent or Collateral Agent with Company's consent (not to be unreasonably withheld) unless an Event of Default has occurred and is continuing or such successor is a Lender, in each of which cases Company's consent need not be obtained. Upon the acceptance of any appointment as Administrative Agent or Collateral Agent hereunder by a successor Administrative Agent or Collateral Agent, that successor Administrative Agent or Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Administrative Agent or Collateral Agent and the retiring or removed Administrative Agent or Collateral Agent shall promptly (i) transfer to such successor Administrative Agent all sums, Securities and other items of Collateral held under the Collateral Documents, together with all -130- records and other documents necessary or appropriate in connection with the performance of the duties of the successor Administrative Agent or Collateral Agent under the Credit Documents, and (ii) execute and deliver to such successor Administrative Agent or Collateral Agent such amendments to financing statements, and take such other actions, as may be necessary or appropriate in connection with the assignment to such successor Administrative Agent or Collateral Agent of the security interests created under the Collateral Documents, whereupon such retiring or removed Administrative Agent or Collateral Agent shall be discharged from its duties and obligations hereunder. After any retiring or removed Administrative Agent's or Collateral Agent's resignation or removal hereunder as Administrative Agent or Collateral Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent hereunder. (b) Swing Line Lender. Swing Line Lender may be replaced at any time by written agreement among Company, Administrative Agent, the replaced Swing Line Lender and the successor Swing Line Lender. Administrative Agent shall notify the Lenders of any such replacement of Swing Line Lender. At the time any such replacement shall become effective, (i) Company shall prepay any outstanding Swing Line Loans made by the retiring or removed Swing Line Lender, (ii) upon such prepayment, the retiring or removed Swing Line Lender shall surrender any Swing Line Note held by it to Company for cancellation, and (iii) Company shall issue, if so requested by successor Swing Line Loan Lender, a new Swing Line Note to the successor Swing Line Lender, in the principal amount of the Swing Line Loan Sublimit then in effect and with other appropriate insertions. 9.9. COLLATERAL DOCUMENTS AND GUARANTY. (a) Agents under Collateral Documents and Guaranty. Each Lender hereby further authorizes Administrative Agent or Collateral Agent, as applicable, on behalf of and for the benefit of Lenders, to be the agent for and representative of Lenders with respect to the Guaranty, the Collateral and the Collateral Documents. Subject to Section 10.5, without further written consent or authorization from Lenders, Administrative Agent or Collateral Agent, as applicable may execute any documents or instruments necessary to (i) release any Lien encumbering any item of Collateral that is the subject of a sale or other disposition of assets permitted hereby or to which Requisite Lenders (or such other Lenders as may be required to give such consent under Section 10.5) have otherwise consented or (ii) release any Guarantor from the Guaranty pursuant to Section 7.12 or with respect to which Requisite Lenders (or such other Lenders as may be required to give such consent under Section 10.5) have otherwise consented. (b) Right to Realize on Collateral and Enforce Guaranty. Anything contained in any of the Credit Documents to the contrary notwithstanding, Company, Administrative Agent and each Lender hereby agree that (i) no Lender shall have any right individually to realize upon any of the Collateral or to enforce the Guaranty, it being -131- understood and agreed that all powers, rights and remedies hereunder may be exercised solely by Administrative Agent, on behalf of Lenders in accordance with the terms hereof and all powers, rights and remedies under the Collateral Documents may be exercised solely by Collateral Agent, and (ii) in the event of a foreclosure by Collateral Agent on any of the Collateral pursuant to a public or private sale, Collateral Agent or any Lender may be the purchaser of any or all of such Collateral at any such sale and Collateral Agent, as agent for and representative of Secured Parties (but not any Lender or Lenders in its or their respective individual capacities unless Requisite Lenders shall otherwise agree in writing) shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any collateral payable by Collateral Agent at such sale. SECTION 10. MISCELLANEOUS 10.1. NOTICES. Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given to a Credit Party, Syndication Agent, Collateral Agent, Administrative Agent, Swing Line Lender or Issuing Bank shall be sent to such Person's address as set forth on Appendix B or in the other relevant Credit Document, and in the case of any Lender, the address as indicated on Appendix B or otherwise indicated to Administrative Agent in writing. Each notice hereunder shall be in writing and may be personally served, telexed or sent by telefacsimile or United States mail or courier service and shall be deemed to have been received when delivered in person or by courier service and signed for against receipt thereof, upon receipt of telefacsimile or telex, or three Business Days after depositing it in the United States mail with postage prepaid and properly addressed; provided, no notice to any Agent, Swing Line Lender or Issuing Bank shall be effective until received by such Person. 10.2. EXPENSES. Whether or not the transactions contemplated hereby shall be consummated, Company agrees to pay promptly (a) all the actual and reasonable costs and expenses of preparation of the Credit Documents and any consents, amendments, waivers or other modifications thereto; (b) all the costs of furnishing all opinions by counsel for Company and the other Credit Parties; (c) the reasonable out-of-pocket fees, expenses and disbursements of outside counsel to Agents in connection with the negotiation, preparation, execution and administration of the Credit Documents and any consents, amendments, waivers or other modifications thereto and any other documents or matters requested by Company; (d) all the out-of-pocket actual costs and reasonable expenses of creating and perfecting Liens in favor of Collateral Agent, for the benefit of Lenders pursuant hereto, including filing and recording fees, expenses and taxes, stamp or documentary taxes, search fees, title insurance premiums and reasonable fees, expenses and disbursements of counsel to each Agent and of counsel providing any opinions that any Agent or Requisite Lenders may request in respect of the Collateral or the Liens created pursuant to the Collateral Documents; (e) all the out-of-pocket actual -132- costs and reasonable fees, expenses and disbursements of any auditors, accountants, consultants or appraisers; (f) all the out-of-pocket actual costs and reasonable expenses (including the reasonable fees, expenses and disbursements of any appraisers, consultants, advisors and agents employed or retained by Collateral Agent and its counsel) in connection with the custody or preservation of any of the Collateral; (g) all other out-of-pocket actual and reasonable costs and expenses incurred by each Agent in connection with the syndication of the Loans and Commitments and the negotiation, preparation and execution of the Credit Documents and any consents, amendments, waivers or other modifications thereto and the transactions contemplated thereby; and (h) after the occurrence of a Default or an Event of Default, (i) all costs and expenses of inspections and visits by any Agent or Lender pursuant to Section 5.6 and (ii) all out-of-pocket costs and expenses, including reasonable attorneys' fees and costs of settlement, incurred by any Agent and Lenders in enforcing any Obligations of or in collecting any payments due from any Credit Party hereunder or under the other Credit Documents by reason of such Default or Event of Default (including in connection with the sale of, collection from, or other realization upon any of the Collateral or the enforcement of the Guaranty) or in connection with any refinancing or restructuring of the credit arrangements provided hereunder in the nature of a "work-out" or pursuant to any insolvency or bankruptcy cases or proceedings. 10.3. INDEMNITY. (a) In addition to the payment of expenses pursuant to Section 10.2, whether or not the transactions contemplated hereby shall be consummated, each Credit Party agrees to defend (subject to Indemnitees' selection of counsel), indemnify, pay and hold harmless, each Agent and Lender and the officers, partners, directors, trustees, employees, agents and Affiliates of each Agent and each Lender (each, an "INDEMNITEE"), from and against any and all Indemnified Liabilities; provided, no Credit Party shall have any obligation to any Indemnitee hereunder with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities arise from the gross negligence or willful misconduct of that Indemnitee, and provided, further, no Credit Party shall have any obligation to Issuing Bank in the event of the wrongful dishonor by Issuing Bank of a proper demand for payment made under any Letter of Credit issued by it (it being understood that no dishonor as a result of a Governmental Act shall constitute a wrongful dishonor). To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in this Section 10.3 may be unenforceable in whole or in part because they are violative of any law or public policy, the applicable Credit Party shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of them. To the extent permitted by applicable law, no Credit Party shall assert, and each hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, any Credit Document or any agreement or instrument or transaction contemplated hereby. -133- (b) To the extent permitted by applicable law, neither Holdings nor any of its Subsidiaries or Affiliates shall assert, and hereby waives, any claim against any Lender or any of their Affiliates, directors, employees, attorneys or agents, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) (whether or not the claim therefor is based on contract, tort or duty imposed by any applicable legal requirement) arising out of, in connection with, arising out of, as a result of, or in any way related to, this Agreement or any Credit Document or any agreement or instrument contemplated hereby or thereby, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof or any act or omission or event occurring in connection therewith, and Holdings and Company hereby waives, releases and agrees not to sue upon any such claim or any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. 10.4. SET-OFF. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence of any Event of Default each Lender is hereby authorized by each Credit Party at any time or from time to time subject to the consent of Administrative Agent (such consent not to be unreasonably withheld or delayed), without notice to any Credit Party or to any other Person (other than Administrative Agent), any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including Indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other Indebtedness at any time held or owing by such Lender to or for the credit or the account of any Credit Party against and on account of the obligations and liabilities of any Credit Party to such Lender hereunder, under the Letters of Credit and participations therein and under the other Credit Documents, including all claims of any nature or description arising out of or connected herewith or therewith, irrespective of whether or not (a) such Lender shall have made any demand hereunder or (b) the principal of or the interest on the Loans or any amounts in respect of the Letters of Credit or any other amounts due hereunder shall have become due and payable pursuant to Section 2 and although such obligations and liabilities, or any of them, may be contingent or unmatured. Each Credit Party hereby further grants to Administrative Agent and each Lender a security interest in all Deposit Accounts maintained with Administrative Agent or such Lender as security for the Obligations. 10.5. AMENDMENTS AND WAIVERS. (a) Requisite Lenders' Consent. Subject to Section 10.5(b) and 10.5(c), no amendment, modification, termination or waiver of any provision of the Credit Documents, or consent to any departure by any Credit Party therefrom, shall in any event be effective without the written concurrence of the Requisite Lenders. -134- (b) Affected Lenders' Consent. Without the written consent of each Lender (other than a Defaulting Lender) that would be affected thereby, no amendment, modification, termination, or consent shall be effective if the effect thereof would: (i) extend the scheduled final maturity of any Loan or Note; (ii) waive, reduce or postpone any scheduled repayment (but not prepayment); (iii) extend the stated expiration date of any Letter of Credit beyond the Revolving Commitment Termination Date; (iv) reduce the rate of interest on any Loan (other than any waiver of any increase in the interest rate applicable to any Loan pursuant to Section 2.10) or any fee payable hereunder; (v) extend the time for payment of any such interest or fees; (vi) reduce the principal amount of any Loan or any reimbursement obligation in respect of any Letter of Credit; (vii) amend, modify, terminate or waive any provision of this Section 10.5(b) or Section 10.5(c); (viii) amend the definition of "REQUISITE LENDERS" or "PRO RATA SHARE"; provided, with the consent of Requisite Lenders, additional extensions of credit pursuant hereto may be included in the determination of "REQUISITE LENDERS" or "PRO RATA SHARE" on substantially the same basis as the Term Loan Commitments, the Term Loans, the Revolving Commitments and the Revolving Loans are included on the Closing Date; (ix) release all or substantially all of the Collateral or all or substantially all of the Guarantors from the Guaranty except as expressly provided in the Credit Documents; or (x) consent to the assignment or transfer by any Credit Party of any of its rights and obligations under any Credit Document. (c) Other Consents. No amendment, modification, termination or waiver of any provision of the Credit Documents, or consent to any departure by any Credit Party therefrom, shall: (i) increase any Revolving or Delayed Draw Commitment of any Lender over the amount thereof then in effect without the consent of such Lender; provided, no amendment, modification or waiver of any condition -135- precedent, covenant, Default or Event of Default shall constitute an increase in any Revolving or Delayed Draw Commitment of any Lender; (ii) amend, modify, terminate or waive any provision hereof relating to the Swing Line Sublimit or the Swing Line Loans without the consent of Swing Line Lender; (iii) amend the definition of "REQUISITE CLASS LENDERS" without the consent of Requisite Class Lenders of each Class; provided, with the consent of the Requisite Lenders, additional extensions of credit pursuant hereto may be included in the determination of such "REQUISITE CLASS LENDERS" on substantially the same basis as the Term Loan Commitments, the Term Loans, the Revolving Commitments and the Revolving Loans are included on the Closing Date; (iv) alter the required application of any repayments or prepayments as between Classes pursuant to Section 2.15 without the consent of Requisite Class Lenders of each Class which is being allocated a lesser repayment or prepayment as a result thereof; provided, Requisite Lenders may waive, in whole or in part, any prepayment so long as the application, as between Classes, of any portion of such prepayment which is still required to be made is not altered; (v) amend, modify, terminate or waive any obligation of Lenders relating to the issuance of or purchase of participations in Letters of Credit without the written consent of Administrative Agent and of Issuing Bank; or (vi) amend, modify, terminate or waive any provision of Section 9 as the same applies to any Agent, or any other provision hereof as the same applies to the rights or obligations of any Agent, in each case without the consent of such Agent. (d) Execution of Amendments, etc. Administrative Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of such Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on any Credit Party in any case shall entitle any Credit Party to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this Section 10.5 shall be binding upon each Lender at the time outstanding, each future Lender and, if signed by a Credit Party, on such Credit Party. -136- 10.6. SUCCESSORS AND ASSIGNS; PARTICIPATIONS. (a) Generally. This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of Lenders. No Credit Party's rights or obligations hereunder nor any interest therein may be assigned or delegated by any Credit Party without the prior written consent of all Lenders. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, Affiliates of each of the Agents and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Register. Company, Administrative Agent and Lenders shall deem and treat the Persons listed as Lenders in the Register as the holders and owners of the corresponding Commitments and Loans listed therein for all purposes hereof, and no assignment or transfer of any such Commitment or Loan shall be effective, in each case, unless and until an Assignment Agreement effecting the assignment or transfer thereof shall have been delivered to and accepted by Administrative Agent and recorded in the Register as provided in Section 10.6(d). Prior to such recordation, all amounts owed with respect to the applicable Commitment or Loan shall be owed to the Lender listed in the Register as the owner thereof, and any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is listed in the Register as a Lender shall be conclusive and binding on any subsequent holder, assignee or transferee of the corresponding Commitments or Loans. (c) Right to Assign. Each Lender shall have the right at any time to sell, assign or transfer all or a portion of its rights and obligations under this Agreement, including, without limitation, all or a portion of its Commitment or Loans owing to it or other Obligation to any Eligible Assignee upon the giving of notice to Company and Administrative Agent, provided (i) each such assignment shall be of a uniform, and not varying, percentage of all rights and obligations under and in respect of any Loan and any related Commitments and shall not, without Company's consent, result in payment to such assignee under Sections 2.19(c), 2.20 and 2.21 that would not have been made to the assigning Lender; and (ii) any assignment to a Person that does not meet the requirements of clause (i) of the definition of the term "Eligible Assignee" shall require the prior written consent of Administrative Agent and, so long as no Event of Default has occurred and is continuing, Company, in each case not to be unreasonably withheld or delayed. -137- (d) Mechanics. The assigning Lender and the assignee thereof shall execute and deliver to Administrative Agent an Assignment Agreement, together with such forms, certificates or other evidence, if any, with respect to United States federal income tax withholding matters as the assignee under such Assignment Agreement may be required to deliver to Administrative Agent pursuant to Section 2.20(c). Any assignment to a Person that does not meet the requirements of clause (i) of the definition of the term "Eligible Assignee," shall be in an aggregate amount of not less than $100,000 (or such lesser amount as may be agreed by Company and Administrative Agent or as shall constitute the aggregate amount of a Class of Loans or Commitments of the assigning Lender). (e) Notice of Assignment. Upon its receipt of a duly executed and completed Assignment Agreement, (and any forms, certificates or other evidence required by this Agreement in connection therewith), Administrative Agent shall record the information contained in such Assignment Agreement in the Register, shall give prompt notice thereof to Company and shall maintain a copy of such Assignment Agreement. (f) Representations and Warranties of Assignee. Each Lender, upon execution and delivery hereof or upon executing and delivering an Assignment Agreement, as the case may be, represents and warrants as of its Lender Effective Date that (i) it is an Eligible Assignee; (ii) it has experience and expertise in the making of or investing in commitments or loans such as the applicable Commitments or Loans, as the case may be; and (iii) it will make or invest in, as the case may be, its Commitments or Loans for its own account in the ordinary course of its business and without a view to distribution of such Commitments or Loans within the meaning of the Securities Act or the Exchange Act or other federal securities laws (it being understood that, subject to the provisions of this Section 10.6, the disposition of such Commitments or Loans or any interests therein shall at all times remain within its exclusive control). (g) Effect of Assignment. Subject to the terms and conditions of this Section 10.6, as of the "Effective Date" specified in the applicable Assignment Agreement: (i) the assignee thereunder shall have the rights and obligations of a "Lender" hereunder to the extent such rights and obligations hereunder have been assigned to it pursuant to such Assignment Agreement and shall thereafter be a party hereto and a "Lender" for all purposes hereof; (ii) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned thereby pursuant to such Assignment Agreement, relinquish its rights (other than any rights which survive the termination hereof under Section 10.8) and be released from its obligations hereunder (and, in the case of an Assignment Agreement covering all or the remaining portion of an assigning Lender's rights and obligations hereunder, such Lender shall cease to be a party hereto); provided, anything contained in any of the Credit Documents to the contrary notwithstanding, (A) Issuing Bank shall continue to have all rights and obligations thereof with respect to such Letters of Credit until the cancellation or expiration of such -138- Letters of Credit and the reimbursement of any amounts drawn thereunder and (B) such assigning Lender shall continue to be entitled to the benefit of all indemnities hereunder as specified herein with respect to matters arising out of the prior involvement of such assigning Lender as a Lender hereunder; (iii) the Commitments shall be modified to reflect the Commitment of such assignee and any Revolving Commitment of such assigning Lender, if any; and (iv) if any such assignment occurs after the issuance of any Note hereunder, the assigning Lender shall, upon the effectiveness of such assignment or as promptly thereafter as practicable, surrender its applicable Notes to Administrative Agent for cancellation, and thereupon Company shall issue and deliver new Notes, if so requested by the assignee and/or assigning Lender, to such assignee and/or to such assigning Lender, with appropriate insertions, to reflect the new Revolving Commitments and/or outstanding Loans of the assignee and/or the assigning Lender. (h) Participations. Each Lender shall have the right at any time to sell, without notice to, or consent of the Company and Administrative Agent one or more participations to any Person (other than Holdings, any of its Subsidiaries or any of its Affiliates) in all or any part of its Commitments, Loans or in any other Obligation. The holder of any such participation, other than an Affiliate of the Lender granting such participation, shall not be entitled to require such Lender to take or omit to take any action hereunder except with respect to any amendment, modification or waiver that would (i) extend the final scheduled maturity of any Loan, Note or Letter of Credit (unless such Letter of Credit is not extended beyond the Revolving Commitment Termination Date) in which such participant is participating, or reduce the rate or extend the time of payment of interest or fees thereon (except in connection with a waiver of applicability of any post-default increase in interest rates) or reduce the principal amount thereof, or increase the amount of the participant's participation over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Commitment shall not constitute a change in the terms of such participation, and that an increase in any Commitment or Loan shall be permitted without the consent of any participant if the participant's participation is not increased as a result thereof), (ii) consent to the assignment or transfer by any Credit Party of any of its rights and obligations under this Agreement or (iii) release all or substantially all of the Collateral under the Collateral Documents (except as expressly provided in the Credit Documents) supporting the Loans hereunder in which such participant is participating. The Company agrees that each participant shall be entitled to the benefits of Sections 2.19(c), 2.20 and 2.21 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (c) of this Section; provided, (i) a participant shall not be entitled to receive any greater payment under Section 2.20 or 2.21 than the applicable Lender would have been entitled to receive with respect to the participation sold to such participant, unless the sale of the participation to such participant is made with Company's prior written consent and (ii) a participant that would be a Non-US Lender if it were a Lender or would be a US Lender that is not willing or able to execute a valid Form W-9 shall not be entitled to the benefits of Section 2.21 unless Company is notified of the participation sold to such participant and such -139- participant agrees, for the benefit of Company, to comply with Section 2.21 as though it were a Lender. To the extent permitted by law, each participant also shall be entitled to the benefits of Section 10.4 as though it were a Lender, provided such Participant agrees to be subject to Section 2.17 as though it were a Lender. (i) Certain Other Assignments. In addition to any other assignment permitted pursuant to this Section 10.6, (i) any Lender may assign and/or pledge all or any portion of its Loans, the other Obligations owed by or to such Lender, and its Notes, if any, to secure obligations of such Lender including, without limitation, any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any operating circular issued by such Federal Reserve Bank; provided, no Lender, as between Company and such Lender, shall be relieved of any of its obligations hereunder as a result of any such assignment and pledge, and provided, further, in no event shall the applicable Federal Reserve Bank or trustee be considered to be a "Lender" or be entitled to require the assigning Lender to take or omit to take any action hereunder. 10.7. INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists. 10.8. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All representations, warranties and agreements made herein shall survive the execution and delivery hereof and the making of any Credit Extension. Notwithstanding anything herein or implied by law to the contrary, the agreements of each Credit Party set forth in Sections 2.19(c), 2.20, 2.21, 10.2, 10.3 and 10.4 and the agreements of Lenders set forth in Sections 2.18 and 9.6 shall survive the payment of the Loans, the cancellation or expiration of the Letters of Credit and the reimbursement of any amounts drawn thereunder, and the termination hereof. 10.9. NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of any Agent or any Lender in the exercise of any power, right or privilege hereunder or under any other Credit Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. The rights, powers and remedies given to each Agent and each Lender hereby are cumulative and shall be in addition to and independent of all rights, powers and remedies existing by virtue of any statute or rule of law or in any of the other Credit Documents or any of the Financial Hedge Agreements. Any forbearance or failure to exercise, and any delay in exercising, any right, power or remedy hereunder shall not impair any such right, power or remedy or be construed to be -140- a waiver thereof, nor shall it preclude the further exercise of any such right, power or remedy. 10.10. MARSHALLING; PAYMENTS SET ASIDE. Neither any Agent nor any Lender shall be under any obligation to marshal any assets in favor of any Credit Party or any other Person or against or in payment of any or all of the Obligations. To the extent that any Credit Party makes a payment or payments to Administrative Agent or Lenders (or to Administrative Agent, on behalf of Lenders), or Administrative Agent or Lenders enforce any security interests or exercise their rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or setoff had not occurred. 10.11. SEVERABILITY. In case any provision in or obligation hereunder or any Note shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. 10.12. OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS. The obligations of Lenders hereunder are several and no Lender shall be responsible for the obligations or Commitment of any other Lender hereunder. Nothing contained herein or in any other Credit Document, and no action taken by Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out hereof and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. 10.13. HEADINGS. Section headings herein are included herein for convenience of reference only and shall not constitute a part hereof for any other purpose or be given any substantive effect. 10.14. APPLICABLE LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF. -141- 10.15. CONSENT TO JURISDICTION. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PARTY HERETO ARISING OUT OF OR RELATING HERETO OR ANY OTHER CREDIT DOCUMENT, OR ANY OF THE OBLIGATIONS, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH PARTY HERETO, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (a) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (b) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (c) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE CREDIT PARTY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 10.1; (d) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (c) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE CREDIT PARTY IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND (e) AGREES AGENTS AND LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY CREDIT PARTY IN THE COURTS OF ANY OTHER JURISDICTION. 10.16. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING HEREUNDER OR UNDER ANY OF THE OTHER CREDIT DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/COMPANY RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CON- -142- SULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 10.16 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO OR ANY OF THE OTHER CREDIT DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. 10.17. CONFIDENTIALITY. Each Lender shall hold all non-public information regarding Holdings and Company and their business identified as such by Company and obtained by such Lender pursuant to the requirements hereof in accordance with such Lender's customary procedures for handling confidential information of such nature, it being understood and agreed by Holdings and Company that, in any event, a Lender may make (i) disclosures of such information to Affiliates of such Lender and to their agents and advisors (and to other persons authorized by a Lender or Agent to organize, present or disseminate such information in connection with disclosures otherwise made in accordance with this Section 10.17), (ii) disclosures of such information reasonably required by any bona fide or potential assignee, transferee or participant in connection with the contemplated assignment, transfer or participation by such Lender of any Loans or any participations therein or by any direct or indirect contractual counterparties (or the professional advisors thereto) in Financial Hedge Agreements (provided, such assignees, transferees, participants, counterparties and advisors are advised of and agree to be bound by the provisions of this Section 10.17), (iii) disclosure to any rating agency when required by it, provided, prior to any disclosure, such rating agency shall undertake in writing to preserve the confidentiality of any confidential information relating to the Credit Parties received by it from any of the Agents or any Lender, and (iv) required or requested by any governmental agency or representative thereof or by the NAIC or pursuant to legal or judicial process; provided, unless specifically prohibited by applicable law or court order, each Lender shall make reasonable efforts to notify Company of any request by any governmental agency or representative thereof (other than any such request in connection with any examination of the financial condition or other routine examination of such Lender by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information. Notwithstanding anything to the contrary set forth herein, each party (and each of their respective employees, representatives or other agents) may disclose to any and all persons, without limitations of any kind, the tax treatment and tax structure of the transactions contemplated by this Agreement and all materials of any kind (including without limitation, opinions and other tax analyses) that are provided to any such party relating to such tax treatment and tax structure. However, any information relating to the tax treatment or tax structure shall remain subject to the confidentiality provisions hereof -143- (and the foregoing sentence shall not apply) to the extent reasonably necessary to enable the parties hereto, their respective Affiliates, and their and their respective Affiliates' directors and employees to comply with applicable securities laws. For this purpose, "tax structure" means any facts relevant to the federal income tax treatment of the transactions contemplated by this Agreement but does not include information relating to the identity of any of the parties hereto or any of their respective Affiliates. 10.18. USURY SAVINGS CLAUSE. Notwithstanding any other provision herein, the aggregate interest rate charged with respect to any of the Obligations, including all charges or fees in connection therewith deemed in the nature of interest under applicable law shall not exceed the Highest Lawful Rate. If the rate of interest (determined without regard to the preceding sentence) under this Agreement at any time exceeds the Highest Lawful Rate, the outstanding amount of the Loans made hereunder shall bear interest at the Highest Lawful Rate until the total amount of interest due hereunder equals the amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect. In addition, if when the Loans made hereunder are repaid in full the total interest due hereunder (taking into account the increase provided for above) is less than the total amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect, then to the extent permitted by law, Company shall pay to Administrative Agent an amount equal to the difference between the amount of interest paid and the amount of interest which would have been paid if the Highest Lawful Rate had at all times been in effect. Notwithstanding the foregoing, it is the intention of Lenders and Company to conform strictly to any applicable usury laws. Accordingly, if any Lender contracts for, charges, or receives any consideration which constitutes interest in excess of the Highest Lawful Rate, then any such excess shall be cancelled automatically and, if previously paid, shall at such Lender's option be applied to the outstanding amount of the Loans made hereunder or be refunded to Company. 10.19. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. 10.20. WAIVER OF CERTAIN PROVISIONS RELATING TO THE LANDIS ACQUISITION SUBORDINATED NOTES. The Company may deposit the proceeds of the Landis Acquisition Senior Subordinated Notes in a segregated account which may be secured for the benefit of the holders thereof or their agents and representatives and apply such proceeds either (a) to pay Landis Acquisition Financing Requirements on the Landis Acquisition Closing Date if the Landis Acquisition Closing Date occurs on or prior to May 22, 2004 or (b) to prepay the Landis Acquisition Senior Subordinated Notes if the Landis Acquisition does not for any reason occur on or prior to May 22, 2004, in each case in accordance with the escrow arrangement described in the offering circular relating to the Landis Acquisition Senior Subordinated Notes and notwithstanding Sections 6.2, 6.3, 6.5 and 6.9 of this -144- Agreement, which Sections shall not be applicable to the transactions contemplated by the escrow arrangements described therein. Remainder of page intentionally left blank -145- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. BPC HOLDING CORPORATION By:/s/ James M. Kratochvil -------------------------------- Name: James M. Kratochvil Title: EVP & CFO BERRY PLASTICS CORPORATION By:/s/ James M. Kratochvil -------------------------------- Name: James M. Kratochvil Title: EVP & CFO BERRY IOWA CORPORATION By:/s/ James M. Kratochvil -------------------------------- Name: James M. Kratochvil Title: EVP & CFO PACKERWARE CORPORATION By:/s/ James M. Kratochvil -------------------------------- Name: James M. Kratochvil Title: EVP & CFO KNIGHT PLASTICS, INC. By:/s/ James M. Kratochvil -------------------------------- Name: James M. Kratochvil Title: EVP & CFO BERRY STERLING CORPORATION By:/s/ James M. Kratochvil -------------------------------- Name: James M. Kratochvil Title: EVP & CFO BERRY PLASTICS DESIGN CORPORATION By:/s/ James M. Kratochvil -------------------------------- Name: James M. Kratochvil Title: EVP & CFO POLY-SEAL CORPORATION By:/s/ James M. Kratochvil -------------------------------- Name: James M. Kratochvil Title: EVP & CFO BERRY PLASTICS ACQUISITIONS CORPORATION III By:/s/ James M. Kratochvil -------------------------------- Name: James M. Kratochvil Title: EVP & CFO VENTURE PACKAGING, INC. By:/s/ James M. Kratochvil -------------------------------- Name: James M. Kratochvil Title: EVP & CFO VENTURE PACKAGING MIDWEST, INC. By:/s/ James M. Kratochvil -------------------------------- Name: James M. Kratochvil Title: EVP & CFO BERRY PLASTICS TECHNICAL SERVICES, INC. By:/s/ James M. Kratochvil -------------------------------- Name: James M. Kratochvil Title: EVP & CFO CPI HOLDING CORPORATION By:/s/ James M. Kratochvil -------------------------------- Name: James M. Kratochvil Title: EVP & CFO AEROCON, INC. By:/s/ James M. Kratochvil -------------------------------- Name: James M. Kratochvil Title: EVP & CFO PESCOR, INC. By:/s/ James M. Kratochvil -------------------------------- Name: James M. Kratochvil Title: EVP & CFO BERRY TRI-PLAS CORPORATION By:/s/ James M. Kratochvil -------------------------------- Name: James M. Kratochvil Title: EVP & CFO CARDINAL PACKAGING, INC. By:/s/ James M. Kratochvil -------------------------------- Name: James M. Kratochvil Title: EVP & CFO GOLDMAN SACHS CREDIT PARTNERS L.P., as Administrative Agent and a Lender By:/s/ W. W. Archer -------------------------------- Authorized Signatory JPMORGAN CHASE BANK, as Syndication Agent and a Lender By: /s/ Stacey Haimes -------------------------------- Authorized Signatory FLEET NATIONAL BANK, as Collateral Agent, Issuing Bank and Swing Line Lender and a Lender By: /s/ Michael DiSandro -------------------------------- Authorized Signatory THE ROYAL BANK OF SCOTLAND, as a Co-Documentation Agent and a Lender By: /s/ Curt Lueker -------------------------------- Authorized Signatory GENERAL ELECTRIC CAPITAL CORPORATION, as a Co-Documentation Agent and a Lender By: /s/ Joanna Young ------------------------------------ Authorized Signatory WEBSTER BANK, as a Lender By: /s/ Juliana B. Dalton ------------------------------------ Authorized Signatory MERRILL LYNCH CAPITAL, a division of Merrill Lynch Business Financial Services Inc., as a Lender By:/s/ Julia Mashanka ------------------------------------ Authorized Signatory ORIX FINANCIAL SERVICES., as a Lender By:/s/ Thomas Buda ------------------------------------ Authorized Signatory KZH HIGHLAND-2 LLC, as a Lender By: /s/ Rowena Smith ------------------------------------ Authorized Signatory APPENDIX A-1 TO CREDIT AND GUARANTY AGREEMENT TERM LOAN COMMITMENTS Goldman Sachs Credit Partners L.P. $330,000,000 Appendix A-1 APPENDIX A-2 TO CREDIT AND GUARANTY AGREEMENT DELAYED DRAW COMMITMENTS Goldman Sachs Credit Partners L.P. $50,000,000 Appendix A-2 APPENDIX A-3 TO CREDIT AND GUARANTY AGREEMENT REVOLVING COMMITMENTS Goldman Sachs Credit Partners L.P. $ 4,000,000 JPMorgan Chase Bank $14,000,000 Fleet National Bank $12,000,000 General Electric Capital Corporation $20,000,000 The Royal Bank of Scotland $22,000,000 Webster Bank $ 5,000,000 KZH Highland-2 LLC $ 5,000,000 Merrill Lynch Capital $ 8,000,000 Orix Financial Services $10,000,000 Appendix A-3 APPENDIX B TO CREDIT AND GUARANTY AGREEMENT NOTICE ADDRESSES BERRY PLASTICS CORPORATION 101 Oakley St. Evansville, IN 47710 Attention: James A. Kratochvil Telecopier: (812) 424-0128 BPC HOLDING CORPORATION 101 Oakley St. Evansville, IN 47710 Attention: James A. Kratochvil Telecopier: (812) 424-0128 APPENDIX B-1 GOLDMAN SACHS CREDIT PARTNERS L.P., as a Lead Arranger, Administrative Agent and a Lender Goldman Sachs Credit Partners L.P. 85 Broad Street New York, New York 10004 Attention: Stephen King Telecopier: (212) 357-0932 with a copy to: Goldman Sachs Credit Partners L.P. 85 Broad Street New York, New York 10004 Attention: John Makrinos Telecopier: (212) 357-4597 APPENDIX B-2 JPMORGAN CHASE BANK, as Syndication Agent and a Lender JP Morgan Chase Bank 270 Park Avenue, 38th Fl. New York, NY 10017 Attention: Stacey Haimes Telecopier: (212) 270-7939 FLEET NATIONAL BANK as Collateral Agent, Issuing Bank, and Swing Line Lender Fleet Bank 100 Federal St. MA DE 100-11A Boston, MA 02110 Attention: Shai Patel Telecopier: (617) 434-4929 APPENDIX B-3 EX-10.4 8 y92946exv10w4.txt COUNTERPART AGREEMENT Exhibit 10.4 COUNTERPART AGREEMENT November 20, 2003 This Counterpart Agreement ("COUNTERPART AGREEMENT") of Landis Plastics, Inc. (the "CORPORATION") is delivered pursuant to that certain Amended and Restated Credit and Guaranty Agreement, dated as of November 10, 2003 (as it may be amended, supplemented or otherwise modified, the "AMENDED CREDIT AGREEMENT"; the terms defined therein and not otherwise defined herein being used herein as therein defined), by and among Berry Plastics Corporation ("BERRY"), BPC Holding Corporation, certain Subsidiaries of Berry, as Guarantors, the Lenders party thereto from time to time, Goldman Sachs Credit Partners L.P., as Administrative Agent, JPMorgan Chase Bank, as Syndication Agent, Fleet National Bank, as Collateral Agent, Issuing Bank and Swing Line Lender and The Royal Bank of Scotland and GE Capital Corporation, as Co-Documentation Agents. 1. Certifications. Pursuant to Section 5.10 of the Amended Credit Agreement, the Corporation hereby: (a) Consent. Agrees that this Counterpart Agreement may be attached to the Amended Credit Agreement and that by the execution and delivery hereof, the Corporation becomes a Guarantor under the Amended Credit Agreement and agrees to be bound by all of the terms thereof; (b) Representations and Warranties. Represents and warrants that each of the representations and warranties set forth in the Amended Credit Agreement and each other Credit Document and applicable to the Corporation is true and correct both before and after giving effect to this Counterpart Agreement, except to the extent that any such representation and warranty relates solely to any earlier date, in which case such representation and warranty is true and correct as of such earlier date; (c) Event of Default. Certifies that no event has occurred or is continuing as of the date hereof, or will result from the transactions contemplated hereby on the date hereof, that would constitute an Event of Default or a Default; (d) Unconditional Guarantee. Agrees to irrevocably and unconditionally guaranty the due and punctual payment in full of all Obligations when the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)) and in accordance with Section 7 of the Credit Agreement; (e) Pledge and Security Agreement. (i) agrees that this counterpart may be attached to the Pledge and Security Agreement, (ii) agrees that the Corporation will comply with all the terms and conditions of the Pledge and Security Agreement as if it were an original signatory thereto, (iii) grants to Secured Parties (as such term is defined in the Pledge and Security Agreement) a security interest in all of the Corporation's right, title and interest in and to all "Collateral" (as such term is defined in the Pledge and Security Agreement) of the Corporation, in each case whether now or hereafter existing or in which the Corporation now has or hereafter acquires an interest and wherever the same may be located and (iv) delivers to Collateral Agent supplements to all schedules attached to the Pledge and Security Agreement. All such Collateral shall be deemed to be part of the "Collateral" and hereafter subject to each of the terms and conditions of the Pledge and Security Agreement; and (f) Intercompany Subordination Agreement. (i) agrees that this counterpart may be attached to the Intercompany Subordination Agreement and (ii) agrees that the Corporation will comply with all the terms and conditions of the Intercompany Subordination Agreement as if it were an original signatory thereto. 2. Administrative Agent. The Corporation agrees from time to time, upon request of Administrative Agent, to take such additional actions and to execute and deliver such additional documents and instruments as Administrative Agent and as Collateral Agent may request to effect the transactions contemplated by, and to carry out the intent of, this Agreement. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated, except by an instrument in writing signed by the party (including, if applicable, any party required to evidence its consent to or acceptance of this Agreement) against whom enforcement of such change, waiver, discharge or termination is sought. Any notice or other communication herein required or permitted to be given shall be given in accordance with the requirements of Section 10.1 of the Amended Credit Agreement, and all for purposes thereof, the notice address of the Corporation shall be the address as set forth on the signature page hereof. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF. [The remainder of this page intentionally left blank.] -2- IN WITNESS WHEREOF, the undersigned has caused this Counterpart Agreement to be duly executed and delivered by its duly authorized officer as of the date above first written. LANDIS PLASTICS, INC. By:/s/ James M. Kratochvil -------------------------- Name: James M. Kratochvil Title: Secretary Address for Notices: Berry Plastics Corporation 101 Oakley Street Evansville, IN 47710 Attention: Chief Financial Officer Telecopier: (812) 424-0128 with a copy to: Fried, Frank, Harris, Shriver & Jacobson One New York Plaza, 26th Floor New York, NY 10004 Attention: Arthur Kaufman Telecopier: (212) 859-4000 ACKNOWLEDGED AND ACCEPTED, as of the date above first written: GOLDMAN SACHS CREDIT PARTNERS L.P., as Administrative Agent By:/s/ W. W. Archer - ------------------- Name: William W. Archer Title: Managing Director FLEET NATIONAL BANK, as Collateral Agent By:/s/ Michael DiSandro - ----------------------- Name: Michael DiSandro Title: Director SCHEDULE 3.1(l) TO AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT CLOSING DATE MORTGAGED PROPERTIES: Owned Property:
ADDRESS CITY, STATE & ZIP CODE COUNTY ------- ---------------------- ------ 1. 1207 North 6th Street Monticello, IN 47960 White County 2. 630 Commerce Road Richmond, IN 47374 Wayne County
Leased Property:
ADDRESS CITY, STATE & ZIP CODE COUNTY ------- ---------------------- ------ 1. 8400 West Washington St Tolleson, AZ 85353 Maricopa County 2. 5750-5751 118 Street Alsip, Illinois 60482 Cook County 3. 11600/11700 South Alsip, IL 60658 Cook County Central Ave. 4. 1500 Milton Ave. Solvay, NY 13209 Onadoga County
SCHEDULE 4.1 TO AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT JURISDICTIONS OF ORGANIZATION AND QUALIFICATION:
JURISDICTION OF TYPE OF ORGANIZATION/ NAME ORGANIZATION FORMATION FOREIGN QUALIFICATIONS ---- ------------ --------- ---------------------- 1. Landis Plastics, Inc. Corporation Illinois Arizona, Indiana, New York
SCHEDULE 4.2 TO AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT CAPITAL STOCK AND OWNERSHIP:
TOTAL NUMBER OF SHARES % OF HOLDER STOCK ISSUER OUTSTANDING OWNERSHIP -------------------------- -------------------- --------------- --------- 1. Berry Plastics Corporation Landis Plastics, Inc. 100 100%
SCHEDULE 4.4 TO AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT GUARANTOR SUBSIDIARIES: 1. Landis Plastics, Inc. SCHEDULE 4.13 TO AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT REAL ESTATE ASSETS: OWNED REAL PROPERTY:
ENTITY MAILING ADDRESS COUNTY CITY, STATE AND ZIP CODE - --------------------- --------------------- ------ ------------------------ Landis Plastics, Inc. 1207 North 6th Street White Monticello, IN 47960 Landis Plastics, Inc. 630 Commerce Road Wayne Richmond, IN 47374
LEASED REAL PROPERTY:
CITY, STATE MONTHLY RENTAL ENTITY MAILING ADDRESS COUNTY AND ZIP CODE TERM PAYMENT - --------------------- -------------------- -------- -------------- ----------------------- -------------- Landis Plastics, Inc. 8400 West Washington Maricopa Tolleson, AZ Term expires 11/[ ]/23 [ ] Street 85353 Landis Plastics, Inc. 5750-5751 118th Cook Alsip, IL Term expires 11/[ ]/23 [ ] Street/ 60482 Landis Plastics, Inc. 11600/11700 South Cook Alsip, IL Term expires 11/[ ]/23 [ ] Central Avenue 60658 Landis Plastics, Inc. 10800 South Central Cook Chicago Ridge, [ ] [ ] Avenue IL 60415 Landis Plastics, Inc. 1500 Milton Avenue, Onodaga Solvay, NY Term expires 11/[ ]/23 [ ] Solvay, NY 13209 Landis Plastics, Inc. 5632 Pleasant Cook Chicago Ridge, [ ] [ ] Boulevard IL 60415
EX-10.5 9 y92946exv10w5.txt PLEDGE SUPPLEMENT Exhibit 10.5 PLEDGE SUPPLEMENT November 20, 2003 This PLEDGE SUPPLEMENT is delivered pursuant to the Pledge and Security Agreement, dated as of July 22, 2002 (as it may be from time to time amended, restated, modified or supplemented, the "SECURITY AGREEMENT"), among BERRY PLASTICS CORPORATION, the other Grantors named therein, and FLEET NATIONAL BANK, as the Collateral Agent. Capitalized terms used herein not otherwise defined herein shall have the meanings ascribed thereto in the Security Agreement. Each of the Grantors hereby confirms the grant to the Collateral Agent set forth in the Security Agreement of, and does hereby grant to the Collateral Agent, a security interest in all of each of the Grantors' right, title and interest in and to all of each of its Collateral to secure the Secured Obligations, in each case whether now or hereafter existing or in which each of the Grantors now has or hereafter acquires an interest and wherever the same may be located. Each of the Grantors represents and warrants that the attached Supplements to Schedules accurately and completely set forth all additional information required pursuant to the Security Agreement and hereby agrees that such Supplements to Schedules shall constitute part of the Schedules to the Security Agreement. [The remainder of this page intentionally left blank.] IN WITNESS WHEREOF, each of the undersigned Grantors has caused this Pledge Supplement to be duly executed and delivered by its duly authorized officer as of the date above first written. GRANTOR: BERRY PLASTICS CORPORATION By:/s/ James M. Kratochvil --------------------------- Name: James M. Kratochvil Title: Secretary LANDIS PLASTICS, INC. By:/s/ James M. Kratochvil ---------------------------- Name: James M. Kratochvil Title: Secretary SUPPLEMENT TO SCHEDULE 3.1 TO PLEDGE AND SECURITY AGREEMENT ADDITIONAL INFORMATION: GENERAL INFORMATION (A) Full Legal Name, Type of Organization, Jurisdiction of Organization, Chief Executive Office/Sole Place of Business (or Residence if Grantor is a Natural Person) and Federal Taxpayer Identification Number of Grantor:
CHIEF EXECUTIVE OFFICE/SOLE PLACE FEDERAL TAXPAYER TYPE OF JURISDICTION OF BUSINESS (OR RESIDENCE IF IDENTIFICATION FULL LEGAL NAME ORGANIZATION OF ORGANIZATION GRANTOR IS A NATURAL PERSON) NUMBER --------------- ------------ --------------- ---------------------------- ------ Landis Plastics, Inc. Corporation Illinois Ira G. Boots 36-2471333
(B) Other Names (including any Trade-Name or Fictitious Business Name) under which each Grantor has conducted business for the past five years: None. (C) Changes in Name, Jurisdiction of Organization, Chief Executive Office or Sole Place of Business (or Principal Residence if Grantor is a Natural Person), Federal Taxpayer Identification Number and Corporate Structure within past five years: None. (D) Agreements entered into by another Person pursuant to which Grantor has become bound as a debtor within past five (5) years: None. (E) Financing Statements:
NAME OF GRANTOR JURISDICTION --------------- ------------ Landis Plastics, Inc. Illinois
-1- SUPPLEMENT TO SCHEDULE 3.2 TO PLEDGE AND SECURITY AGREEMENT ADDITIONAL INFORMATION: LOCATION OF EQUIPMENT AND INVENTORY
NAME OF GRANTOR LOCATION OF EQUIPMENT AND INVENTORY - --------------- ----------------------------------- Landis Plastics, Inc. 8400 West Washington Street Tolleson AZ, 85353 Maricopa County 5750-5751 118th Street Alsip IL, 60482 Cook County 11600/11700 South Central Avenue Alsip IL, 60658 Cook County 1500 Milton Ave Solvay NY, 13209 Onodaga County 1207 North 6th Street Monticello IN, 47960 White County 630 Commerce Road Richmond IN, 47374 Wayne County
-2- SUPPLEMENT TO SCHEDULE 3.4(A) TO PLEDGE AND SECURITY AGREEMENT ADDITIONAL INFORMATION: INVESTMENT RELATED PROPERTY DEPOSIT ACCOUNTS:
- -------------------------------------------------------------------------------------------------------------- FEDERAL TAX ID NUMBER OF ACCOUNT NUMBER ACCOUNT HOLDER NAME AND ADDRESS OF BANK BANK - -------------------------------------------------------------------------------------------------------------- 1. 4108051 Landis Plastics, Inc. Bank One 31-6243961 7610 W. Washington Street Indianapolis, IN 46231 2. 500207802 Landis Plastics, Inc. Bank One 31-6243761 7610 W. Washington Street Indianapolis, IN 46231 3. 100063701 Landis Plastics, Inc. Founders Bank 36-2446555 8825 West 11th Street Worth, IL 60482 4. 411-1078087 Landis Plastics, Inc. Chase Manhattan Bank ###-##-#### P.O. Box 5206 New Hyde Park, NY 11042 5. 750-0018570 Landis Plastics, Inc. Wells Fargo Bank Indiana 35-0783575 P.O. Box 960 Fort Wayne, IN 46801 6. 1013247 Landis Plastics, Inc. Wayne Bank & Trust Co. 35-0744110 P.O. Box 210145 W. Main Street Cambridge City, IN 47327-0210 - --------------------------------------------------------------------------------------------------------------
-3- SUPPLEMENT TO SCHEDULE 3.4(B) TO PLEDGE AND SECURITY AGREEMENT ADDITIONAL INFORMATION: EQUITY INTERESTS IN ANOTHER ENTITY ACQUIRED WITHIN THE LAST FIVE YEARS.
- ---------------------------------------------------------------------------------------------------------------- GRANTOR ACQUIRED ENTITY PERCENTAGE OF OWNERSHIP DATE OF ACQUISITION - ---------------------------------------------------------------------------------------------------------------- Berry Plastics Corporation Landis Plastics, Inc. 100% November [ ], 2003 - ----------------------------------------------------------------------------------------------------------------
-4- SUPPLEMENT TO SCHEDULE 3.5 TO PLEDGE AND SECURITY AGREEMENT ADDITIONAL INFORMATION: DESCRIPTION OF MATERIAL CONTRACTS 1. Strategic Supplier Alliance Agreement by and between the Company and Kraft Foods North America, Inc. dated January 1, 2001. 2. Sales Contract by and between The Dow Chemical Company and the Company dated August 1, 2001. 3. Letter Agreement between the Company and Basell USA Inc. dated January 14, 2003. 4. Contract for Sale of Polymers between the Company and Equistar Chemicals, LP, Polymers Division, dated July 1, 2001. 5. Sun Chemical Corporation Ink Supply Agreement between the Company and Sun Chemical Corporation dated June 14, 2002. -5- SUPPLEMENT TO SCHEDULE 3.7 TO PLEDGE AND SECURITY AGREEMENT ADDITIONAL INFORMATION: INTELLECTUAL PROPERTY (A) Copyrights: None (B) Copyright Licenses: None (C) Patents and Patent Applications:
- ------------------------------------------------------------------------------------------------------------ PATENT OR APPLICATION FILING NUMBER DATE ISSUE DATE TITLE - ------------------------------------------------------------------------------------------------------------ CA 1,245,819 6/5/85 12/6/88 Annular injection molding nozzles with central heater probes CA 1,311,217 1/15/88 12/8/92 Tear strip closure for container with security ring with strip provided with pull tab, pulling acting to expose lift tab US 4,759,465 9/3/87 7/26/88 Tear strip closure for container with security ring with lift tab connected to upper part of skirt to allow removal of closure US 4,819,825 2/5/88 4/11/89 Tear strip closure with tamper indication US 4,826,039 2/5/88 5/2/89 Container closure with anti-nesting ribs US 4,872,586 9/25/87 10/10/89 Container closure and assembly US 5,238,135; 3/18/92; 8/24/93; Easy-open tear strip lid CA 2,091,947 3/18/93 9/19/93 CA 2,126,390(1) 6/21/94 12/22/95 Closure for dairy container. CA 1,239,514 7/12/85 7/26/88 Injection Molding Apparatus US D369,107 12/13/94 4/23/96 Design of lid with partially removable gripping flange US D389058 1/6/95 1/13/98 Design of plastic container lid US 09/571,634 5/15/00 Applications Thin wall closure container CA 2326031 11/16/00 pending US 60/463,361 4/16/03 Application Tamper evident lid and container pending - ------------------------------------------------------------------------------------------------------------
- ------------------------ (1) The next maintenance fee is due in June, 2004. The Company may decide not to pay the fee. -6- (D) Patent Licenses:
- ------------------------------------------------------------------------------------------------------ PATENT NUMBER FILING DATE ISSUE DATE USE - ------------------------------------------------------------------------------------------------------ 4,735,337 5/26/87 4/5/88 Right to use molds incorporating the zig-zag tear strip embodiment of the '337 patent sold by Plas-Tool Co. to produce products, so long as the lid is also covered by the Landis '135 patent - ------------------------------------------------------------------------------------------------------
(E) Trademarks 1. Trademark Registrations:
- -------------------------------------------------------------------------------------------------- STATE OR REGISTRATION NUMBER MARK COUNTRY REGISTRATION DATE - -------------------------------------------------------------------------------------------------- 1,153,982 LPI US 5/12/81; renewed 5/12/01 1,813,752 LPI [design mark] US 12/28/93 - --------------------------------------------------------------------------------------------------
2. Domain Names:
DOMAIN NAME OWNER OF RECORD EXPIRATION DATE - ------------------------------------------------------------------------------------------------ E-LPI.COM Landis Plastics, Inc. 1/6/09 LPIDIRECT.COM Landis Plastics, Inc. 8/23/08 LANDISPLASTICS.COM Landis Plastics, Inc. 12/11/07 - ------------------------------------------------------------------------------------------------
(F) Trademark Licenses: None (G) Trade Secret Licenses: None (H) Intellectual Property Matters Other License Agreements: 1. Strategic Supplier Alliance Agreement by and between the Company and Kraft Foods North America, Inc. dated January 1, 2001, appears to relate to rights in certain joint technology; expires December 31, 2003. -7- EX-12.1 10 y92946exv12w1.txt RATIO OF EARNINGS TO FIXED CHARGES Exhibit 12.1 BERRY PLASTICS CORPORATION STATEMENT RE: COMPUTATION OF EARNINGS TO FIXED CHARGES (in Thousands)
Fiscal Thirty-nine weeks ended -------------------------------------------------------------- -------------------------- September September (Dollars in thousands) 1998 1999 2000 2001 2002 28, 2002 27, 2003 - ----------------------------------------------------------------------------------------------------------------------------------- Earnings: Income (loss) before income taxes $ (7,819) $ (8,584) $ (22,227) $ (1,361) $ (3,990) $ (31,659) $ 21,364 Interest expense 35,555 40,819 51,457 54,355 49,254 37,495 33,794 Interest portion of rental expense 1,805 2,427 3,061 2,764 3,254 2,511 2,629 ------------------------------------------------------------------------------------------- Earnings $ 29,541 $ 34,662 $ 32,291 $ 55,758 $ 48,518 $ 8,347 $ 57,787 =========================================================================================== Fixed Charges: Interest expense $ 34,778 $ 39,372 $ 49,750 $ 53,766 $ 48,410 $ 36,763 $ 33,063 Interest portion of rental expense 1,805 2,427 3,061 2,764 3,254 2,511 2,629 ------------------------------------------------------------------------------------------- Fixed charges $ 36,583 $ 41,799 $ 52,811 $ 56,530 $ 51,664 $ 39,274 $ 35,692 =========================================================================================== Ratio (Deficiency) of earnings to cover fixed charges 0.8x 0.8x 0.6x 1.0x 0.9x 0.2x 1.6x ===========================================================================================
EX-21.1 11 y92946exv21w1.txt LIST OF SUBSIDIARIES Exhibit 21.1 List of Subsidiaries of Berry Plastics Corporation Berry Iowa Corporation (DE) Packerware Corporation (DE) Knight Plastics, Inc. (DE) Berry Sterling Corporation (DE) Berry Plastics Design Corporation (DE) Poly-Seal Corporation (DE) Venture Packaging, Inc. (DE) Venture Packaging Midwest, Inc. (DE) Berry Plastics Technical Services, Inc. (DE) CPI Holding Corporation (DE) Cardinal Packaging, Inc. (OH) AeroCon, Inc. (DE) Pescor, Inc. (DE) Berry Tri-Plas Corporation (DE) Landis Plastics, Inc. (IL) Berry Plastics Acquisition Corporation II (DE) Berry Plastics Acquisition Corporation III (DE) Berry Plastics Acquisition Corporation V (DE) Berry Plastics Acquisition Corporation VI (DE) Berry Plastics Acquisition Corporation VII (DE) Berry Plastics Acquisition Corporation VIII (DE) Berry Plastics Acquisition Corporation IX (DE) Berry Plastics Acquisition Corporation X (DE) Berry Plastics Acquisition Corporation XI (DE) Berry Plastics Acquisition Corporation XII (DE) Berry Plastics Acquisition Corporation XIII (DE) Berry Plastics Acquisition Corporation XIV, LLC (DE) Berry Plastics Acquisition Corporation XV, LLC (DE) NIM Holdings Limited (E&W) Berry Plastics U.K. Limited (E&W) Norwich Acquisition Limited (E&W) Capsol Berry Plastics S.p.A. (Italy) Ociesse S.r.l. (Italy) EX-23.2 12 y92946exv23w2.txt CONSENT OF ERNST & YOUNG LLP Exhibit 23.2 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the captions "Selected Consolidated Financial Data" and "Independent auditors" and to the use of our report dated February 14, 2003, with respect to BPC Holding Corporation in Post-Effective Amendment No. 4 to the Registration Statement (Form S-4) and related Prospectus of Berry Plastics Corporation for the registration of $85,000,000 of 10 3/4% Senior Subordinated Notes due 2012. /s/ Ernst & Young LLP Indianapolis, Indiana January 7, 2004 EX-23.3 13 y92946exv23w3.txt CONSENT OF ROCHE, SCHOLZ ROCHE & WALSH, LTD. Exhibit 23.3 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the captions "Selected Consolidated Financial Data" and "Independent Auditors" and to the use of our reports dated February 21, 2001 and February 14, 2003, with respect to Landis Plastics, Inc. in the Registration Statement (Form S-4) and related Prospectus of Berry Plastics Corporation for the registration of $85,000,000 of 10 3/4% Senior Subordinated Notes due 2012. /s/ Roche, Scholz, Roche & Walsh, Ltd. - -------------------------------------- Roche, Scholz, Roche & Walsh, Ltd. January 7, 2004 EX-25.1 14 y92946exv25w1.txt FORM T-1 Exhibit 25.1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE Check if an Application to Determine Eligibility of a Trustee Pursuant to Section 305(b)(2)___ ------------------------------------------------------- U.S. BANK TRUST NATIONAL ASSOCIATION (Exact name of Trustee as specified in its charter) 41-1973763 I.R.S. Employer Identification No. 300 EAST DELAWARE AVENUE, 8TH FLOOR WILMINGTON, DELAWARE 19809 (Address of principal executive offices) (Zip Code) Patrick J. Crowley U.S. Bank Trust National Association 100 Wall Street, Suite 1600 New York, NY 10005 Telephone (212) 361-2505 (Name, address and telephone number of agent for service) BERRY PLASTICS CORPORATION (Exact name of Registrant as specified in its charter) DELAWARE 11-1111111 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 388 GREENWICH STREET NEW YORK, NEW YORK 10013 (Address of Principal Executive Offices) (Zip Code) 10 3/4% SENIOR SUBORDINATED NOTES DUE 2012 ================================================================================ FORM T-1 ITEM 1. GENERAL INFORMATION. Furnish the following information as to the Trustee. a) Name and address of each examining or supervising authority to which it is subject. Comptroller of the Currency Washington, D.C. b) Whether it is authorized to exercise corporate trust powers. Yes ITEM 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the Trustee, describe each such affiliation. None ITEMS 3-15 Not applicable because, to the best of Trustee's knowledge, the Trustee is not a trustee under any other indenture under which any other securities or certificates of interest or participation in any other securities of the obligor are outstanding and there is not, nor has there been, a default with respect to securities issued under the indenture to be qualified. Item 16. LIST OF EXHIBITS: List below all exhibits filed as a part of this statement of eligibility and qualification. 1. A copy of the Articles of Association of the Trustee now in effect, incorporated herein by reference to Exhibit 1 of Form T-1, Document 6 of Registration No. 333-84320. 2. A copy of the certificate of authority of the Trustee to commence business, incorporated herein by reference to Exhibit 2 of Form T-1, Document 6 of Registration No. 333-84320. 3. A copy of the certificate of authority of the Trustee to exercise corporate trust powers, incorporated herein by reference to Exhibit 3 of Form T-1, Document 6 of Registration No. 333-84320. 4. A copy of the existing bylaws of the Trustee, as now in effect, incorporated herein by reference to Exhibit 4 of Form T-1, Document 6 of Registration No. 333-84320. 5. Not applicable. 6. The consent of the Trustee required by Section 321(b) of the Trust Indenture Act of 1939, incorporated herein by reference to Exhibit 6 of Form T-1, Document 6 of Registration No. 333-84320. 7. Report of Condition of the Trustee as of March 31, 2003, published pursuant to law or the requirements of its supervising or examining authority, attached as Exhibit 7. 8. Not applicable. 9. Not applicable. 2 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the Trustee, U.S. BANK TRUST NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York, State of New York on the 23rd day of December, 2003. U.S. BANK TRUST NATIONAL ASSOCIATION By: /s/ Patrick J. Crowley -------------------------- Name: Patrick J. Crowley Title : Vice President 3 Exhibit 7 U.S. BANK TRUST NATIONAL ASSOCIATION STATEMENT OF FINANCIAL CONDITION AS OF 6/30/2003 ($000's)
6/30/2003 --------- ASSETS Cash and Due From Depository Institutions $ 368,354 Fixed Assets 1,209 Intangible Assets 121,311 Other Assets 29,546 --------- TOTAL ASSETS $ 520,420 LIABILITIES Other Liabilities $ 14,194 --------- TOTAL LIABILITIES $ 14,194 EQUITY Common and Preferred Stock $ 1,000 Surplus 505,932 Undivided Profits (706) --------- TOTAL EQUITY CAPITAL $ 506,226 TOTAL LIABILITIES AND EQUITY CAPITAL $ 520,420
- ----------------- To the best of the undersigned's determination, as of this date the above financial information is true and correct. U.S. Bank Trust National Association By: /s/ Beverly A. Freeney - -------------------------- Name: Beverly A. Freeney Title : Vice President Date: December 23, 2003 4 EX-99.1 15 y92946exv99w1.txt FORM OF LETTER OF TRANSMITTAL EXHIBIT 99.1 LETTER OF TRANSMITTAL FOR TENDER OF ALL OUTSTANDING 10 3/4% SENIOR SUBORDINATED NOTES DUE 2012 IN EXCHANGE FOR 10 3/4% SENIOR SUBORDINATED NOTES DUE 2012 OF BERRY PLASTICS CORPORATION THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2004 (THE "EXPIRATION DATE"), UNLESS THE OFFER IS EXTENDED BY BERRY PLASTICS CORPORATION IN ITS SOLE DISCRETION. TENDERS OF OUTSTANDING NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. EXCHANGE AGENT: U.S. BANK TRUST NATIONAL ASSOCIATION BY MAIL: BY HAND OR OVERNIGHT DELIVERY: U.S. BANK TRUST NATIONAL ASSOCIATION U.S. BANK TRUST NATIONAL ASSOCIATION 60 LIVINGSTON AVENUE 60 LIVINGSTON AVENUE 1ST FLOOR BOND DROP WINDOW 1ST FLOOR BOND DROP WINDOW ST. PAUL, MN 55107 ST. PAUL, MN 55107 ATTENTION: STRUCTURED FINANCE UNIT ATTENTION: STRUCTURED FINANCE UNIT FACSIMILE: 651-495-8158 FACSIMILE: 651-495-8158 CONFIRM BY TELEPHONE: 1-800-934-6802 CONFIRM BY TELEPHONE: 1-800-934-6802
BY HAND: U.S. BANK TRUST NATIONAL ASSOCIATION 100 WALL STREET 16TH FLOOR--BOND DROP WINDOW NEW YORK, NY 10005 ATTENTION: BEVERLY FREENEY DELIVERY TO AN ADDRESS OTHER THAN THE DEPOSITORY TRUST COMPANY (ATOP) OR AS SET FORTH IN THIS LETTER OF TRANSMITTAL OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. By execution hereof, the undersigned acknowledges receipt of the Prospectus dated , 2004 (the "Prospectus") of Berry Plastics Corporation ("Berry") which, together with this Letter of Transmittal (the "Letter of Transmittal"), constitute Berry's offer (the "Exchange Offer") to exchange $1,000 in stated amount at maturity of a new series of 10 3/4% Senior Subordinated Notes Due 2012 (the "Exchange Notes") of Berry for each $1,000 in stated amount at maturity of outstanding 10 3/4% Senior Subordinated Notes Due 2012 originally issued on November 20, 2003 (the "Outstanding Notes") of Berry. The terms of the Exchange Notes are identical in all material respects (including stated amount at maturity, interest rate and maturity) to the terms of the Outstanding Notes for which they may be exchanged pursuant to the Exchange Offer, except that the Exchange Notes will have been registered under the Securities Act of 1933 (the "Securities Act"), as amended, and, therefore, will not bear legends restricting the transfer thereof. This Letter of Transmittal is to be used by Holders (as defined below) if: (i) certificates representing Outstanding Notes are to be physically delivered to the Exchange Agent herewith by Holders; (ii) tender of Outstanding Notes is to be made by book-entry transfer to the Exchange Agent's account at The Depository Trust Company ("DTC") by any financial institution that is a participant in DTC and whose name appears on a security position listing as the owner of Outstanding Notes (such participants, acting on behalf of Holders, are referred to herein, together with such Holders, as "Acting Holder"); or (iii) tender of Outstanding Notes is to be made according to the guaranteed delivery procedures. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. If delivery of the Outstanding Notes is to be made by book-entry transfer to the account maintained by the Exchange Agent at DTC as set forth in (ii) in the immediately preceding paragraph, this Letter of Transmittal need not be manually executed; provided, however, that tenders of Outstanding Notes must be effected in accordance with the procedures mandated by DTC's Automated Tender Offer Program ("ATOP"). To tender Outstanding Notes through ATOP, the electronic instructions sent to DTC and transmitted by DTC to the Exchange Agent must contain the character by which the participant acknowledges its receipt of and agrees to be bound by this Letter of Transmittal. Unless the context requires otherwise, the term "Holder" for purposes of this Letter of Transmittal means: (i) any person in whose name Outstanding Notes are registered on the books of Berry or any other person who has obtained a properly completed bond power from the registered Holder or (ii) any participant in DTC whose Outstanding Notes are held of record by DTC who desires to deliver such Outstanding Notes by book-entry transfer at DTC. The undersigned has completed, executed and delivered this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. The instructions included with this Letter of Transmittal must be followed. Questions and requests for assistance or for additional copies of the Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Exchange Agent. HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR OUTSTANDING NOTES MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY. 2 List below the Outstanding Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the Certificate Numbers and Stated Amounts at Maturity should be listed on a separate signed schedule affixed hereto. Tenders of Outstanding Notes will be accepted only in authorized denominations of $1,000.
- ------------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF OUTSTANDING NOTES - ------------------------------------------------------------------------------------------------------------------------ CERTIFICATE AGGREGATE STATED NUMBER(S)* AMOUNT AT MATURITY NAME(S) AND ADDRESS(ES) OF HOLDER(S) (ATTACHED SIGNED TENDERED (PLEASE FILL IN, IF BLANK) LIST IF NECESSARY) (IF LESS THAN ALL)** - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ TOTAL STATED AMOUNT AT MATURITY OF OUTSTANDING NOTES TENDERED - ------------------------------------------------------------------------------------------------------------------------ * Need not be completed by Holders tending by book-entry transfer. ** Need not be completed by Holders who wish to tender with respect to all Outstanding Notes listed. See Instruction 2. - ------------------------------------------------------------------------------------------------------------------------
3 [ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY DTC TO THE EXCHANGE AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution: - -------------------------------------------------------------------------------- DTC Book-Entry Account: - -------------------------------------------------------------------------------- Transaction Code No.: - -------------------------------------------------------------------------------- Holders who wish to tender their Outstanding Notes and (i) whose Outstanding Notes are not immediately available, or (ii) who cannot deliver their Outstanding Notes, the Letter of Transmittal or any other required documents to the Exchange Agent prior to the Expiration Date, or cannot complete the procedure for book-entry transfer on a timely basis, may effect a tender according to the guaranteed delivery procedures and must also complete the Notice of Guaranteed Delivery. [ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Holder(s) of Outstanding Notes: - -------------------------------------------------------------------------------- Window Ticket No. (If Any): - -------------------------------------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: - -------------------------------------------------------------------------------- Name of Eligible Institution that Guaranteed Delivery: - -------------------------------------------------------------------------------- DTC Book-Entry Account No.: If Delivered by Book-Entry Transfer: Name of Tendering Institution: - -------------------------------------------------------------------------------- Transaction Code: - -------------------------------------------------------------------------------- [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO: Name: - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- 4 PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to Berry the above-described stated amount at maturity of Outstanding Notes. Subject to, and effective upon, the acceptance for exchange of the Outstanding Notes tendered herewith, the undersigned hereby exchanges, assigns and transfers to, or upon the order of, Berry all right, title and interest in and to such Outstanding Notes. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that said Exchange Agent also acts as the agent of Berry and as Trustee under the Indenture for the Outstanding Notes and the Exchange Notes) to cause the Outstanding Notes to be assigned, transferred and exchanged. The undersigned represents and warrants that it has full power and authority to tender, exchange, assign and transfer the Outstanding Notes and to acquire Exchange Notes issuable upon the exchange of such tendered Outstanding Notes, and that, when the same are accepted for exchange, Berry will acquire good and unencumbered title to the tendered Outstanding Notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The undersigned also warrants that it will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or Berry to be necessary or desirable to complete the exchange, assignment and transfer of tendered Outstanding Notes. The Exchange Offer is subject to certain conditions as set forth in the Prospectus under the caption "The exchange offer--Conditions to the exchange offer". The undersigned recognizes that as a result of these conditions (which may be waived, in whole or in part, by Berry) as more particularly set forth in the Prospectus, Berry may not be required to exchange any of the Outstanding Notes tendered hereby and, in such event, the Outstanding Notes not exchanged will be returned to the undersigned at the address shown below the signature of the undersigned. By tendering, each Holder of Outstanding Notes represents to Berry that (i) the Exchange Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is such Holder, (ii) neither the Holder of Outstanding Notes nor any such other person has an arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Notes in violation of the provisions of the Securities Act, (iii) if the Holder is not a broker-dealer or is a broker-dealer but will not receive Exchange Notes for its own account in exchange for Outstanding Notes, neither the Holder nor any such other person is engaged in or intends to participate in a distribution of the Exchange Notes and (iv) neither the Holder nor any such other person is an "affiliate" of Berry or any Guarantor within the meaning of Rule 405 under the Securities Act or, if such Holder is such an "affiliate", that such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. If the tendering Holder is a broker-dealer (whether or not it is also an "affiliate" of Berry within the meaning of Rule 405 under the Securities Act) that will receive Exchange Notes for its own account in exchange for Outstanding Notes, it represents that the Outstanding Notes to be exchanged for the Exchange Notes were acquired by it as a result of market-making activities or other trading activities, and acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes. By acknowledging that it will deliver and by delivering a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes, the undersigned is not deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For purposes of the Exchange Offer, Berry shall be deemed to have accepted validly tendered Outstanding Notes when, as and if Berry has given oral or written notice thereof to the Exchange Agent 5 and complied with the applicable provisions of the Registration Rights Agreement. If any tendered Outstanding Notes are not accepted for exchange pursuant to the Exchange Offer for any reason or if Outstanding Notes are submitted for a greater stated amount at maturity than the Holder desires to exchange, such unaccepted or non-exchanged Outstanding Notes will be returned without expense to the tendering Holder thereof (or, in the case of Outstanding Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to customary book-entry transfer procedures, such non-exchanged Notes will be credited to an account maintained with such Book-Entry Transfer Facility) as promptly as practicable after the expiration or termination of the Exchange Offer. All authority conferred or agreed to be conferred by this Letter of Transmittal shall survive the death, incapacity or dissolution of the undersigned and every obligation under this Letter of Transmittal shall be binding upon the undersigned's heirs, personal representatives, successors and assigns. The undersigned understands that tenders of Outstanding Notes pursuant to the instructions hereto will constitute a binding agreement between the undersigned and Berry upon the terms and subject to the conditions of the Exchange Offer. Unless otherwise indicated under "Special Issuance Instruction", please issue the certificates representing the Exchange Notes issued in exchange for the Outstanding Notes accepted for exchange and return any Outstanding Notes not tendered or not exchanged, in the name(s) of the undersigned (or in either such event in the case of Outstanding Notes tendered by DTC, by credit to the account at DTC). Similarly, unless otherwise indicated under "Special Delivery Instructions", please send the certificates representing the Exchange Notes issued in exchange for the Outstanding Notes accepted for exchange and any certificates for Outstanding Notes not tendered or not exchanged (and accompanying documents as appropriate) to the undersigned at the address shown below the undersigned's signatures, unless, in either event, tender is being made through DTC. In the event that both "Special Issuance Instructions" and "Special Delivery Instructions" are completed, please issue the certificates representing the Exchange Notes issued in exchange for the Outstanding Notes accepted for exchange and return any Outstanding Notes not tendered or not exchanged in the name(s) of, and send said certificates to, the person(s) so indicated. The undersigned recognizes that Berry has no obligation pursuant to the "Special Issuance Instructions" and "Special Delivery Instructions" to transfer any Outstanding Notes from the name of the registered holder(s) thereof if Berry does not accept for exchange any of the Outstanding Notes so tendered. 6 PLEASE SIGN HERE (TO BE COMPLETED BY ALL TENDERING HOLDERS OF OUTSTANDING NOTES REGARDLESS OF WHETHER OUTSTANDING NOTES ARE BEING PHYSICALLY DELIVERED HEREWITH) This Letter of Transmittal must be signed by the Holder(s) of Outstanding Notes exactly as their name(s) appear(s) on certificate(s) for Outstanding Notes or, if tendered by a participant in DTC, exactly as such participant's name appears on a security position listing as the owner of Outstanding Notes, or by person(s) authorized to become registered Holder(s) by endorsements and documents transmitted with this Letter of Transmittal. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below under "Capacity" and submit evidence satisfactory to Berry of such persons authority to so act. See Instruction 3 herein. If the signature appearing below is not of the registered Holder(s) of the Outstanding Notes, then the registered Holder(s) must sign a valid proxy. X --------------------------------------------------------- Date: ----------------------------------------------------- X --------------------------------------------------------- Date: ----------------------------------------------------- SIGNATURE(S) OF HOLDER(S) OR AUTHORIZED SIGNATORY Names: -------------------------------------------------- Address: ------------------------------------------------- - ----------------------------------------------------------- ----------------------------------------------------------- - ----------------------------------------------------------- ----------------------------------------------------------- (PLEASE PRINT) (INCLUDING ZIP CODE) Capacity(ies): -------------------------------------------- Area Code and Telephone No: ----------------------- Social Security No(s).: - ------------------------------------------------------------------------------------------------------------------------
PLEASE COMPLETE FORM W-9 HEREIN SIGNATURE GUARANTEE (SEE INSTRUCTION 3 HEREIN) CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION - -------------------------------------------------------------------------------- (NAME OF ELIGIBLE INSTITUTION GUARANTEEING SIGNATURES) - -------------------------------------------------------------------------------- (ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE NUMBER (INCLUDING AREA CODE) OF FIRM) - -------------------------------------------------------------------------------- (AUTHORIZED SIGNATURE) - -------------------------------------------------------------------------------- (PRINTED NAME) - -------------------------------------------------------------------------------- (TITLE) Date: ------------------------------ 7 SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTION 4 HEREIN) To be completed ONLY if certificates for the Exchange Notes issued pursuant to the Exchange Offer are to be issued to the order of, someone other than the person or persons whose signature(s) appear(s) within this Letter of Transmittal or issued to an address different from that shown in the box entitled "Description of Outstanding Notes" within this Letter of Transmittal, or if Outstanding Notes tendered by book-entry transfer that are not accepted are maintained at DTC other than the account at DTC indicated above. Name: - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (PLEASE PRINT) Zip Code: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Taxpayer Identification or Social Security Number: - -------------------------------------------------------------------------------- (SEE FORM W-9 HEREIN) SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTION 4 HEREIN) To be completed ONLY if certificates for the Exchange Notes issued pursuant to the Exchange Offer are sent to, someone other than the person or persons whose signature(s) appear(s) within this Letter of Transmittal or to be credited to an account maintained at DTC other than the account at DTC indicated above. Name: - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (PLEASE PRINT) Zip Code: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Taxpayer Identification or Social Security Number: - -------------------------------------------------------------------------------- (SEE FORM W-9 HEREIN) 8 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES. The certificates for the tendered Outstanding Notes (or a confirmation of a book-entry into the Exchange Agent's account at DTC of all Outstanding Notes delivered electronically), as well as a properly completed and duly executed copy of this Letter of Transmittal of facsimile hereof and any other documents required by this Letter of Transmittal must be received by the Exchange Agent at its address set forth herein prior to 5:00 P.M., New York City time, on the Expiration Date. Berry Plastics Corporation may extend the Expiration Date in its sole discretion by a public announcement given no later than 9:00am, New York City time, on the next business day following the previously scheduled Expiration Date. The method of delivery of the tendered Outstanding Notes, this Letter of Transmittal and all other required documents to the Exchange Agent are at the election and risk of the Holder and, except as otherwise provided below, the delivery will be deemed made only when actually received by the Exchange Agent. Instead of delivery by mail, it is recommended that the Holder use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. No Letter of Transmittal or Outstanding Notes should be sent to Berry. Holders who wish to tender their Outstanding Notes and (i) whose Outstanding Notes are not immediately available or (ii) who cannot deliver their Outstanding Notes, this Letter of Transmittal or any other documents required hereby to the Exchange Agent prior to the Exchange Date, or who cannot complete the procedure for book-entry transfer on a timely basis must tender their Outstanding Notes and follow the guaranteed delivery procedures set forth in the Prospectus. Pursuant to such procedures: (i) such tender must be made by or through an Eligible Institution (as defined below); (ii) prior to the Expiration Date, the Exchange Agent must have received from the Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the Holder of the Outstanding Notes, the certificate number or numbers of such Outstanding Notes and the stated amount at maturity of Outstanding Notes tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange trading days after the Expiration Date, this Letter of Transmittal (or copy thereof) (or electronic instructions containing the character by which the participant acknowledges its receipt of and agrees to be bound by this Letter of Transmittal) together with the certificate(s) representing the Outstanding Notes (or a confirmation of electronic mail delivery of book-entry into the Exchange Agent's account at DTC) and any of the required documents will be deposited by the Eligible Institution with the Exchange Agent; and (iii) such properly completed and executed Letter of Transmittal (or copy thereof) (or electronic instructions containing the character by which the participant acknowledges its receipt of and agrees to be bound by this Letter of Transmittal), as well as all other documents required by this Letter of Transmittal, and the certificate(s) representing all tendered Outstanding Notes in proper form for transfer (or a confirmation of electronic mail delivery book-entry delivery into the Exchange Agent's account at DTC), must be received by the Exchange Agent within three New York Stock Exchange trading days after the Expiration Date. Any Holder of Outstanding Notes who wishes to tender these Outstanding Notes pursuant to the guaranteed delivery procedures described above must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery prior to 5:00 P.M., New York City time, on the Expiration Date. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered Outstanding Notes will be determined by Berry in its sole discretion, which determination will be final and binding. Berry reserves the absolute right to reject any and all Outstanding Notes not 9 properly tendered or any Outstanding Notes Berry's acceptance of which would, in the opinion of counsel for Berry, be unlawful. Berry also reserves the absolute right to waive any defects, irregularities or conditions of tender as to particular Outstanding Notes. Berry's interpretation of the terms and conditions of the Exchange Offer (including the instructions in this Letter of Transmittal) will be in its sole discretion and will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Outstanding Notes must be cured within such time as Berry shall determine. Although Berry intends to notify Holders of defects or irregularities with respect to tenders of Outstanding Notes, neither Berry, the Exchange Agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Outstanding Notes, nor shall any of them incur any liability for failure to give such notification. Tenders of Outstanding Notes will not be deemed to have been made until such defects or irregularities have been cured or waived and will be returned without cost by the Exchange Agent to the tendering Holders of Outstanding Notes, unless otherwise provided in this Letter of Transmittal, as soon as practicable following the Expiration Date. 2. PARTIAL TENDERS; WITHDRAWALS. If less than all Outstanding Notes are tendered, the tendering Holder should fill in the number of Outstanding Notes tendered in the third column of the chart entitled "Description of Outstanding Notes." All Outstanding Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. If not all Outstanding Notes are tendered, Outstanding Notes for the aggregate stated amount at maturity of Outstanding Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. If not all Outstanding Notes are tendered, a certificate or certificates representing Exchange Notes issued in exchange of any Outstanding Notes tendered and accepted will be sent to the Holder at his or her registered address, unless a different address is provided in the appropriate box in this Letter of Transmittal or unless tender is made through DTC, promptly after the Outstanding Notes are accepted for exchange. 3. SIGNATURE ON THE LETTER OF TRANSMITTAL; BOND POWER AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or copy hereof) is signed by the registered Holder(s) of the Outstanding Notes tendered hereby, the signature must correspond with the name(s) as written on the face of the Outstanding Notes without alteration, enlargement or any change whatsoever. If this Letter of Transmittal (or copy hereof) is signed by the registered Holder(s) of Outstanding Notes tendered and the certificate(s) for Exchange Notes issued in exchange therefor is to be issued (or any untendered number of Outstanding Notes is to be reissued) to the registered Holder, such Holder need not and should not endorse any tendered Outstanding Note, nor provide a separate bond power. In any other case, such Holder must either properly endorse the Outstanding Notes tendered or transmit a properly completed separate bond power with this Letter of Transmittal, with the signature on the endorsement or bond power guaranteed by an Eligible Institution. If this Letter of Transmittal (or copy hereof) if signed by a person other than the registered Holder(s) of Outstanding Notes listed therein, such Outstanding Notes must be endorsed or accompanied by properly completed bond powers which authorized such person to tender the Outstanding Notes on behalf of the registered Holder, in either case signed as the name of the registered Holder or Holders appears on the Outstanding Notes. If this Letter of Transmittal (or copy hereof) or any Outstanding Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, or officers of corporations or others acting in a fiduciary or representative capacity, such person should so indicate when signing and unless waived by Berry, evidence satisfactory to Berry of their authority to so act must be submitted with this Letter of Transmittal. Endorsements on Outstanding Notes or signatures on bond powers required by this Instruction 3 must be guaranteed by an Eligible Institution. 10 Signatures on this Letter of Transmittal (or copy hereof) or a notice of withdrawal, as the case may be, must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution") unless the Outstanding Notes tendered pursuant thereto are tendered (i) by a registered Holder (including any participant in DTC whose name appears on a security position listing as the owner of Outstanding Notes) who has not completed the box set forth herein entitled "Special Issuance Instructions" or "Special Delivery Instructions" of this Letter of Transmittal or (ii) for the account of an Eligible Institution. 4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering Holders should include, in the applicable spaces, the name and address to which Exchange Notes for stated amount at maturity not tendered or not accepted for exchange are to be sent, if different from the name and address of the person signing this Letter of Transmittal (or in the case of tender of the Outstanding Notes through DTC, if different from the account maintained at DTC indicated above). In the case of issuance in a different name, the taxpayer identification or social security number of the person named must also be indicated. 5. TRANSFER TAXES. Berry shall pay all transfer taxes, if any, applicable to the exchange of Outstanding Notes pursuant to the Exchange Offer. If, however, certificates representing Exchange Notes, or Outstanding Notes for stated amounts at maturity not tendered or accepted for exchange, are to be delivered to, or are to be issued in the name of, any person other than the registered Holder of the Outstanding Notes tendered hereby, or if a transfer tax is imposed for any reason other than the exchange of Outstanding Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered Holder or any other person) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering Holder. Except as provided in this Instruction 5, it will not be necessary for transfer tax stamps to be affixed to the Outstanding Notes listed in this Letter of Transmittal. 6. WAIVER OF CONDITIONS. Berry reserves the absolute right to amend, waive or modify, in whole or in part, any of the conditions to the Exchange Offer set forth in the Prospectus. 7. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any Holder whose Outstanding Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions. 8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address and telephone number set forth above. In addition, all questions relating to the Exchange Offer, as well as requests for assistance or additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address specified in the Prospectus. 9. IRREGULARITIES. All questions as to the validity, form, eligibility (including time of receipt), and acceptance of Letters of Transmittal or Outstanding Notes will be resolved by Berry, whose determination will be final and binding. Berry reserves the absolute right in its sole discretion to reject any or all Letters of Transmittal or tenders that are not in proper form or the acceptance of which would, in the opinion of Berry or Berry's counsel, be unlawful. Berry also reserves the right to waive any irregularities or conditions of tender as to the particular Outstanding Notes covered by any Letter of Transmittal or tendered pursuant to such Letter of Transmittal. None of Berry, the Exchange Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability 11 for failure to give any such notification. Berry's interpretation of the terms and conditions of the Exchange Offer shall be final and binding. 10. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or contingent tenders will be accepted unless consented to by Berry. All tendering holders of Outstanding Notes, by execution of this Letter of Transmittal, shall waive any right to receive notice of the acceptance of their Outstanding Notes for exchange. 11. DEFINITIONS. Capitalized terms used in this Letter of Transmittal and not otherwise defined have the meanings given in the Prospectus. IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH CERTIFICATES FOR OUTSTANDING NOTES AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE. 12 Form W-9 REQUEST FOR TAXPAYER (Rev. January 2002) IDENTIFICATION NUMBER AND CERTIFICATION GIVE FORM TO THE Department of the Treasury REQUESTER. DO Internal Revenue Service NOT SEND TO THE IRS. - --------------------------------------------------------------------------------------
PRINT OR TYPE SEE SPECIFIC INSTRUC- TIONS ON PAGE 2. Name ----------------------------------------------------------------------------------------------------- Business name, if different from above ----------------------------------------------------------------------------------------------------- Check appropriate box: [ ] Individual/Sole Proprietor [ ] Corporation [ ] Partnership [ ] Other .................................................... [ ] Exempt from backup withholding ----------------------------------------------------------------------------------------------------- Address (number, street, and apt. or suite no.) Requester's name and address (optional) ------------------------------------------------------- City, state and ZIP code ----------------------------------------------------------------------------------------------------- List account number(s) here (optional)
- -------------------------------------------------------------------------------- PART I TAXPAYER IDENTIFICATION NUMBER (TIN) - -------------------------------------------------------------------------------- Enter your TIN in the appropriate box. For individuals, this SOCIAL SECURITY NUMBER is your social security number (SSN). HOWEVER, FOR A RESIDENT ALIEN, SOLE PROPRIETOR, OR DISREGARDED ENTITY, SEE THE PART I INSTRUCTIONS ON PAGE 2. For other entities, it is your employer identification number (EIN), if you do not --------------------------- have a number, see HOW TO GET A TIN on page 2. OR NOTE: If the account is in more than one name, see the chart EMPLOYER IDENTIFICATION NUMBER on page 2 for guidelines on whose number to enter. ---------------------------
- -------------------------------------------------------------------------------- PART II CERTIFICATION - -------------------------------------------------------------------------------- Under penalties of perjury, I certify that: 1. The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me), AND 2. I am not subject to backup withholding because: (A) I am exempt from backup withholding, or (B) I have not been notified by the Internal Revenue Service that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (C) the IRS has notified me that I am no longer subject to backup withholding, AND 3. I am a U.S. person (including a U.S. resident alien). CERTIFICATION INSTRUCTIONS. You must cross out item 2 above if you have been notified by the IRS that you are currently subject to backup withholding because you have failed to report all interest and dividends on your tax return. For real estate transactions, item 2 does not apply. For mortgage interest paid, acquisition or abandonment of secured property, cancellation of debt, contributions to an individual retirement arrangement (IRA), and generally, payments other than interest and dividends, you are not required to sign the Certification, but you must provide your correct TIN. (See the instructions on page 2.) - -------------------------------------------------------------------------------- SIGN SIGNATURE OF HERE U.S. PERSON DATE
- -------------------------------------------------------------------------------- PURPOSE OF FORM A person who is required to file an information return with the IRS must get your correct taxpayer identification number (TIN) to report, for example, income paid to you, real estate transactions, mortgage interest you paid, acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA. USE FORM W-9 ONLY IF YOU ARE A U.S. PERSON (including a resident alien), to give your correct TIN to the person requesting it (the requester) and, when applicable, to: 1. Certify the TIN you are giving is correct (or you are waiting for a number to be issued). 2. Certify you are not subject to backup withholding, or 3. Claim exemption from backup withholding if you are a U.S. exempt payee. IF YOU ARE A FOREIGN PERSON, USE THE APPROPRIATE FORM W-8. See PUB. 515, Withholding of Tax on Nonresident Aliens and Foreign Entities. NOTE: If a requester gives you a form other than a Form W-9 to request your TIN, you must use the requester's form if it is substantially similar to this Form W-9. WHAT IS BACKUP WITHHOLDING? Persons making certain payments to you must under certain conditions withhold and pay to the IRS 30% of such payments AFTER December 31, 2001 (29% after December 31, 2003). This is called "backup withholding." Payments that may be subject to backup withholding include interest, dividends, broker and barter exchange transactions, rents, royalties, nonemployee pay, and certain payments from fishing boat operators. Real estate transactions are not subject to backup withholding. You will NOT be subject to backup withholding on payments you receive if you give the requestor your correct TIN, make the proper certifications, and report all your taxable interest and dividends on your tax return. PAYMENTS YOU RECEIVE WILL BE SUBJECT TO BACKUP WITHHOLDING IF: 1. You do not furnish your TIN to the requester, or 2. You do not certify your TIN when required (see the Part II instructions on page 2 for details), or 3. The IRS tells the requester that you furnished an incorrect TIN, or 4. The IRS tells you that you are subject to backup withholding because you did not report all your interest and dividends on your tax return (for reportable interest and dividends only), or 5. You do not certify to the requester that you are not subject to backup withholding under 4 above (for reportable interest and dividend accounts opened after 1983 only). Certain payees and payments are exempt from backup withholding. See the instructions on page 2 and the separate INSTRUCTIONS FOR THE REQUESTER OF FORM W-9. PENALTIES FAILURE TO FURNISH TIN. If you fail to furnish your correct TIN to a requester, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty. CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. MISUSE OF TINS. If the requester discloses or uses TINs in violation of Federal law, the requester may be subject to civil and criminal penalties. - -------------------------------------------------------------------------------- Cat. No. 10231X Form W-9 (Rev. 1-2002) Form W-9 (Rev. 1-2002) Page 2 - -------------------------------------------------------------------------------- SPECIFIC INSTRUCTIONS NAME. If you are an individual, you must generally enter the name shown on your social security card. However, if you have changed your last name, for instance, due to marriage without informing the Social Security Administration of the name change, enter your first name, the last name shown on your social security card, and your new last name. If the account is in joint names, list first and then circle the name of the person or entity whose number you enter in Part I of the form. SOLE PROPRIETOR. Enter your INDIVIDUAL name as shown on your social security card on the "Name" line. You may enter your business, trade, or "doing business as (DBA)" name on the "Business name" line. LIMITED LIABILITY COMPANY (LLC). If you are a single-member LLC (including a foreign LLC with a domestic owner) that is disregarded as an entity separate from its owner under Treasury regulations section 301.7701-3, ENTER THE OWNER'S NAME ON THE "NAME" LINE. Enter the LLC's name on the "Business name" line. OTHER ENTITIES. Enter your business name as shown on required Federal tax documents on the "Name" line. This name should match the name shown on the charter or other legal document creating the entity. You may enter any business, trade, or DBA name on the "Business name" line. EXEMPT FROM BACKUP WITHHOLDING. If you are exempt, enter your name as described above, then check the "Exempt from backup withholding" box in the line following the business name, sign and date the form. Individuals (including sole proprietors) are not exempt from backup withholding. Corporations are exempt from backup withholding for certain payments, such as interest and dividends. For more information on exempt payees, see the Instructions for the Requester of Form W-9. If you are a nonresident alien or a foreign entity not subject to backup withholding, give the requester the appropriate completed Form W-8. NOTE: If you are exempt from backup withholding, you should still complete this form to avoid possible erroneous backup withholding. PART I--TAXPAYER IDENTIFICATION NUMBER (TIN) ENTER YOUR TIN IN THE APPROPRIATE BOX. If you are a RESIDENT ALIEN and you do not have and are not eligible to get an SSN, your TIN is your IRS individual taxpayer identification number (ITIN). Enter it in the social security number box. If you do not have an ITIN, see HOW TO GET A TIN below. If you are a SOLE PROPRIETOR and you have an EIN, you may enter either your SSN or EIN. However, the IRS prefers that you use your SSN. If you are an LLC that is DISREGARDED AS AN ENTITY separate from its owner (see LIMITED LIABILITY COMPANY (LLC) above), and are owned by an individual, enter your SSN (or "pre-LLC" EIN, if desired). If the owner of a disregarded LLC is a corporation, partnership, etc., enter the owner's EIN. NOTE: See the chart on this page for further clarification of name and TIN combinations. HOW TO GET A TIN. If you do not have a TIN, apply for one immediately. To apply for an SSN, get FORM SS-5, Application for a Social Security Card, from your local Social Security Administration office. Get FORM W-7, Application for IRS Individual Taxpayer Identification Number, to apply for an ITIN, or FORM SS-4, Application for Employer Identification Number, to apply for an EIN. You can get Forms W-7 and SS-4 from the IRS by calling 1-800-TAX-FORM (1-800-829-3676) or from the IRS Web Site at www.irs.gov. If you are asked to complete Form W-9 but do not have a TIN, write "Applied For" in the space for the TIN, sign and date the form, and give it to the requester. For interest and dividend payments, and certain payments made with respect to readily tradable instruments, generally you will have 60 days to get a TIN and give it to the requester before you are subject to backup withholding on payments. The 60-day rule does not apply to other types of payments. You will be subject to backup withholding on all such payments until you provide your TIN to the requester. NOTE: Writing "Applied For" means that you have already applied for a TIN OR that you intend to apply for one soon. CAUTION: A disregarded domestic entity that has a foreign owner must use the appropriate Form W-8. PART II--CERTIFICATION To establish to the withholding agent that you are a U.S. person, or resident alien, sign Form W-9. You may be requested to sign by the withholding agent even if items 1, 3, and 5 below indicate otherwise. For a joint account, only the person whose TIN is shown in Part I should sign (when required). Exempt recipients, see EXEMPT FROM BACKUP WITHHOLDING above. SIGNATURE REQUIREMENTS. Complete the certification as indicated in 1 through 5 below. 1. INTEREST, DIVIDEND, AND BARTER EXCHANGE ACCOUNTS OPENED BEFORE 1984 AND BROKER ACCOUNTS CONSIDERED ACTIVE DURING 1983. You must give your correct TIN, but you do not have to sign the certification. 2. INTEREST, DIVIDEND, BROKER, AND BARTER EXCHANGE ACCOUNTS OPENED AFTER 1983 AND BROKER ACCOUNTS CONSIDERED INACTIVE DURING 1983. You must sign the certification or backup withholding will apply. If you are subject to backup withholding and you are merely providing your correct TIN to the requester, you must cross out item 2 in the certification before signing the form. 3. REAL ESTATE TRANSACTIONS. You must sign the certification. You may cross out item 2 of the certification. 4. OTHER PAYMENTS. You must give your correct TIN, but you do not have to sign the certification unless you have been notified that you have previously given an incorrect TIN. "Other payments" include payments made in the course of the requester's trade or business for rents, royalties, goods (other than bills for merchandise), medical and health care services (including payments to corporations), payments to a nonemployee for services, payments to certain fishing boat crew members and fishermen, and gross proceeds paid to attorneys (including payments to corporations). 5. MORTGAGE INTEREST PAID BY YOU, ACQUISITION OR ABANDONMENT OF SECURED PROPERTY, CANCELLATION OF DEBT, QUALIFIED TUITION PROGRAM PAYMENTS (UNDER SECTION 529), IRA OR ARCHER MSA CONTRIBUTIONS OR DISTRIBUTIONS, AND PENSION DISTRIBUTIONS. You must give your correct TIN, but you do not have to sign the certification. PRIVACY ACT NOTICE Section 6109 of the Internal Revenue Code requires you to give your correct TIN to persons who must file information returns with the IRS to report interest, dividends, and certain other income paid to you, mortgage interest you paid, the acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA or Archer MSA. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. The IRS may also provide this information to the Department of Justice for civil and criminal litigation, and to cities, states, and the District of Columbia to carry out their tax laws. You must provide your TIN whether or not you are required to file a tax return. Payers must generally withhold 30% of taxable interest, dividend, and certain other payments to a payee who does not give a TIN to a payer. Certain penalties may also apply. WHAT NAME AND NUMBER TO GIVE THE REQUESTER - ---------------------------------------------------- FOR THIS TYPE OF ACCOUNT: GIVE NAME AND SSN OF: - ---------------------------------------------------- 1. Individual The individual 2. Two or more The actual owner of the individuals (joint account or, if combined account) funds, the first individual on the account (1) 3. Custodian account of The minor (2) a minor (Uniform Gift to Minors Act) 4. a. The usual The grantor-trustee (1) revocable savings trust (grantor is also trustee) b. So-called trust The actual owner (1) account that is not a legal or valid trust under state law 5. Sole proprietorship The owner (3) - ---------------------------------------------------- FOR THIS TYPE OF ACCOUNT: GIVE NAME AND SSN OF: - ---------------------------------------------------- 6. Sole proprietorship The owner (3) 7. A valid trust, Legal entity (4) estate, or pension trust. 8. Corporate The corporation 9. Association, club, The organization religious, charitable, educational, or other tax-exempt organization 10. Partnership The partnership 11. A broker or The broker or nominee registered nominee 12. Account with the The public entity Department of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments - ----------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. If only one person on a joint account has an SSN, that person's number must be furnished. (2) Circle the minor's name and furnish the minor's SSN. (3) YOU MUST SHOW YOUR INDIVIDUAL NAME, but you may also enter your business or "DBA" name. You may use either your SSN or EIN (if you have one). (4) List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the TIN of the personal representative or trustee unless the legal entity itself is not designated in the account title.) NOTE: If no name is circled when more than one name is listed, the number will be considered to be that of the first name listed. [RECYCLED PAPER LOGO] IMPORTANT: THIS LETTER OF TRANSMITTAL (TOGETHER WITH CERTIFICATES FOR OUTSTANDING NOTES AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO 5:00 P.M., NEW YORK CITY TIME ON THE EXPIRATION DATE. (DO NOT WRITE IN SPACE BELOW)
- ---------------------------------------------------------------------------------------------------- OUTSTANDING OUTSTANDING CERTIFICATE SURRENDERED NOTES TENDERED NOTES ACCEPTED - ---------------------------------------------------------------------------------------------------- - -------------------------------- -------------------------------- -------------------------------- - -------------------------------- -------------------------------- -------------------------------- - -------------------------------- -------------------------------- -------------------------------- - -------------------------------- -------------------------------- -------------------------------- Delivery Prepared by: Checked by: Date - ----------------------------------------------------------------------------------------------------
EX-99.2 16 y92946exv99w2.txt FORM OF NOTICE OF GUARANTEED DELIVERY EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF ALL OUTSTANDING 10 3/4% SENIOR SUBORDINATED NOTES DUE 2012 IN EXCHANGE FOR 10 3/4% SENIOR SUBORDINATED NOTES DUE 2012 OF BERRY PLASTICS CORPORATION Registered holders of outstanding 10 3/4% Senior Subordinated Notes Due 2012 originally issued on November 20, 2003 (the "Outstanding Notes") of Berry Plastics Corporation ("Berry") who wish to tender their Outstanding Notes in exchange for a like stated amount at maturity of 10 3/4% Senior Subordinated Notes Due 2012 (the "Exchange Notes") of Berry and, in each case, whose Outstanding Notes are not immediately available or who cannot deliver their Outstanding Notes and Letter of Transmittal (and any other documents required by the Letter of Transmittal) to U.S. Bank Trust National Association (the "Exchange Agent"), prior to the Expiration Date, may use this Notice of Guaranteed Delivery or one substantially equivalent hereto. This Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight delivery) or mail to the Exchange Agent. See "The exchange offer--Guaranteed delivery procedures" in the Prospectus. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2004 (THE "EXPIRATION DATE") UNLESS THE OFFER IS EXTENDED BY BERRY IN ITS SOLE DISCRETION. TENDERS OF OUTSTANDING NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: U.S. BANK TRUST NATIONAL ASSOCIATION BY MAIL: U.S. BANK TRUST NATIONAL ASSOCIATION 60 LIVINGSTON AVENUE 1ST FLOOR BOND DROP WINDOW ST. PAUL, MN 55107 ATTENTION: STRUCTURED FINANCE UNIT FACSIMILE: 651-495-8158 CONFIRM BY TELEPHONE: 1-800-934-6802 BY HAND OR OVERNIGHT DELIVERY: U.S. BANK TRUST NATIONAL ASSOCIATION 60 LIVINGSTON AVENUE 1ST FLOOR BOND DROP WINDOW ST. PAUL, MN 55107 ATTENTION: STRUCTURED FINANCE UNIT FACSIMILE: 651-495-8158 CONFIRM BY TELEPHONE: 1-800-934-6802 BY HAND: U.S. BANK TRUST NATIONAL ASSOCIATION 100 WALL STREET 16TH FLOOR--BOND DROP WINDOW NEW YORK, NY 10005 ATTENTION: BEVERLY FREENEY FOR ANY QUESTIONS REGARDING THIS NOTICE OF GUARANTEED DELIVERY OR FOR ANY ADDITIONAL INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT BY TELEPHONE AT 212-361-2893, OR BY FACSIMILE AT 212-509-3384. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an Eligible Institution, such signature guarantee must appear in the applicable space provided on the Letter of Transmittal for Guarantee of Signatures. 2 Ladies & Gentlemen: The undersigned hereby tender(s) to Berry, upon the terms and subject to the conditions set forth in the Prospectus and the accompanying Letter of Transmittal, receipt of which is hereby acknowledged, the aggregate stated amount at maturity of Outstanding Notes set forth below pursuant to the guaranteed delivery procedures set forth in the Prospectus. The undersigned understands that tenders of Outstanding Notes will be accepted only in stated amounts at maturity equal to $1,000 or integral multiples thereof. The undersigned understands that tenders of Outstanding Notes pursuant to the Exchange Offer may not be withdrawn after 5:00 p.m., New York City time on the business day prior to the Expiration Date. Tenders of Outstanding Notes may also be withdrawn if the Exchange Offer is terminated without any such Outstanding Notes being purchased thereunder or as otherwise provided in the Prospectus. All authority herein conferred or agreed to be conferred by this Notice of Guaranteed Delivery shall survive the death or incapacity of the undersigned and every obligation of the undersigned under this Notice of Guaranteed Delivery shall be binding upon the heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other legal representatives of the undersigned. PLEASE SIGN AND COMPLETE Signature(s) of Registered Owner(s) or Authorized Signatory: - --------------------------------------------------------- - --------------------------------------------------------- - --------------------------------------------------------- Stated Amount at Maturity of Outstanding Notes Tendered: - --------------------------------------------------------- Certificate No(s). of Outstanding Notes (if available): - --------------------------------------------------------- - --------------------------------------------------------- Date: - -------------------------------------------------- Name(s) of Registered Holder(s): - --------------------------------------------------------- - --------------------------------------------------------- - --------------------------------------------------------- Address: - ---------------------------------------------- Area Code and Telephone No.: - ------------------- If Outstanding Notes will be delivered by book-entry transfer at The Depository Trust Company, insert Depository Account No.: - --------------------------------------------------------- 3 This Notice of Guaranteed Delivery must be signed by the registered holder(s) of Outstanding Notes exactly as its (their) name(s) appear on certificates for Outstanding Notes or on a security position listing as the owner of Outstanding Notes, or by person(s) authorized to become registered Holder(s) by endorsements and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must provide the following information. PLEASE PRINT NAME(S) AND ADDRESS(ES) Name(s): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Capacity: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Address(es): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DO NOT SEND OUTSTANDING NOTES WITH THIS FORM. OUTSTANDING NOTES SHOULD BE SENT TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL. GUARANTEE OF DELIVERY (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or a correspondent in the United States or an "eligible guarantor institution" as defined by Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, (the "Exchange Act") hereby (a) represents that each holder of Outstanding Notes on whose behalf this tender is being made "own(s)" the Outstanding Notes covered hereby within the meaning of Rule 14e-4 under the Exchange Act (b) represents that such tender of Outstanding Notes complies with such Rule 14e-4, and (c) guarantees that, within three New York Stock Exchange trading days from the date of this Notice of Guaranteed Delivery, a properly completed and duly executed Letter of Transmittal, together with certificates representing the Outstanding Notes covered hereby in proper form for transfer and required documents will be deposited by the undersigned with the Exchange Agent. THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF TRANSMITTAL AND OUTSTANDING NOTES TENDERED HEREBY TO THE EXCHANGE AGENT WITHIN THE TIME SET FORTH ABOVE AND THAT FAILURE TO DO SO COULD RESULT IN FINANCIAL LOSS TO THE UNDERSIGNED. Name of Firm: Authorized Signature Address: Name: ------------------------------------------------ - ------------------------------------------------------ Title: -------------------------------------------------- Area Code and Telephone No. Date: -------------------------------------------------- - ------------------------------------------------------
4 EX-99.3 17 y92946exv99w3.txt FORM OF INSTRUCTIONS EXHIBIT 99.3 INSTRUCTION TO REGISTERED HOLDER FROM BENEFICIAL OWNER OF 10 3/4% SENIOR SUBORDINATED NOTES DUE 2012 OF BERRY PLASTICS CORPORATION To Registered Holder: The undersigned hereby acknowledges receipt of the Prospectus dated , 2004 (the "Prospectus") of Berry Plastics Corporation ("Berry"), and accompanying Letter of Transmittal (the "Letter of Transmittal"), that together constitute Berry's offer (the "Exchange Offer") to exchange $1,000 in stated amount at maturity of a new series of 10 3/4% Senior Subordinated Notes Due 2012 (the "Exchange Notes") of Berry for each $1,000 in stated amount at maturity of outstanding 10 3/4% Senior Subordinated Notes Due 2012 originally issued on November 20, 2003 (the "Outstanding Notes") of Berry. Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus. This will instruct you, the registered holder, as to the action to be taken by you relating to the Exchange Offer with respect to the Outstanding Notes held by you for the account of the undersigned. The aggregate face amount of the Outstanding Notes held by you for the account of the undersigned is (fill in amount): $ of 10 3/4% Senior Subordinated Notes Due 2012. With respect to the Exchange Offer, the undersigned hereby instructs you (check appropriate box): [ ] To TENDER the following Outstanding Notes held by you for the account of the undersigned (insert stated amount at maturity of Outstanding Notes to be tendered (if any)): $ of 10 3/4% Senior Subordinated Notes Due 2012. [ ] NOT to TENDER any Outstanding Notes held by you for the account of the undersigned. If the undersigned instructs you to tender Outstanding Notes held by you for the account of the undersigned, it is understood that you are authorized to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representations and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner, including but not limited to the representations, that (i) the Exchange Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the undersigned, (ii) neither the undersigned nor any such other person has an arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act of 1933, as amended (the "Securities Act")) of such Exchange Notes in violation of the provisions of the Securities Act, (iii) if the undersigned is not a broker-dealer, or is a broker-dealer but will not receive Exchange Notes for its own account in exchange for Outstanding Notes, neither the undersigned nor any such other person is engaged in or intends to participate in the distribution of such Exchange Notes and (iv) neither the undersigned nor any such other person is an "affiliate" of Berry or any Guarantor within the meaning of Rule 405 under the Securities Act or, if the undersigned is an "affiliate", that the undersigned will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. If the undersigned is a broker-dealer (whether or not it is also an "affiliate") that will receive Exchange Notes for its own account in exchange for Outstanding Notes, it represents that such Outstanding Notes were acquired as a result of market-making activities or other trading activities, and it acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes. By acknowledging that it will deliver and by delivering a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes, the undersigned is not deemed to admit that it is an "underwriter" within the meaning of the Securities Act. SIGN HERE Name of beneficial owner(s) (please print): --------------------------------------------------------- Signature(s): --------------------------------------------------------- Address: --------------------------------------------------------- Telephone Number: --------------------------------------------------------- Taxpayer identification or Social Security Number: --------------------------------------------------------- Date: 2 EX-99.4 18 y92946exv99w4.txt LETTER TO CLIENTS EXHIBIT 99.4 TENDER FOR ALL OUTSTANDING 10 3/4% SENIOR SUBORDINATED NOTES DUE 2012 IN EXCHANGE FOR 10 3/4% SENIOR SUBORDINATED NOTES DUE 2012 OF BERRY PLASTICS CORPORATION To Our Clients: We are enclosing herewith a Prospectus, dated , 2004, of Berry Plastics Corporation ("Berry"), and a related Letter of Transmittal (which together constitute the "Exchange Offer") relating to the offer by Berry, to exchange its 10 3/4% Senior Subordinated Notes Due 2012 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like stated amount at maturity of its issued and outstanding 10 3/4% Senior Subordinated Notes Due 2012 originally issued on November 20, 2003 (the "Outstanding Notes") upon the terms and subject to the conditions set forth in the Exchange Offer. PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2004 UNLESS EXTENDED BY BERRY IN ITS SOLE DISCRETION. THE EXCHANGE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF OUTSTANDING NOTES BEING TENDERED. We are the holder of record of Outstanding Notes held by us for your account. A tender of such Outstanding Notes can be made only by us as the record holder and pursuant to your instructions. The Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender Outstanding Notes held by us for your account. We request instructions as to whether you wish to tender any or all of the Outstanding Notes held by us for your account pursuant to the terms and conditions of the Exchange Offer. Please so instruct us by completing, executing and returning to us the enclosed Instruction to Registered Holder from Beneficial Holder enclosed herewith. We urge you to read carefully the Prospectus and the Letter of Transmittal before instructing us to tender your Outstanding Notes. We also request that you confirm with such instruction form that we may on your behalf make the representations contained in the Letter of Transmittal. Pursuant to the Letter of Transmittal, each holder of Outstanding Notes will represent to Berry that (i) the Exchange Notes acquired in the Exchange Offer are being obtained in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is such holder, (ii) neither the holder of the Outstanding Notes nor any such other person has an arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of such Exchange Notes in violation of the provisions of the Securities Act, (iii) if the holder is not a broker-dealer or is a broker-dealer but will not receive Exchange Notes for its own account in exchange for Outstanding Notes, neither the holder nor any such other person is engaged in or intends to participate in a distribution of the Exchange Notes and (iv) neither the holder nor any such other person is an "affiliate" of Berry or any Guarantor within the meaning of Rule 405 under the Securities Act or, if such holder is an "affiliate", that such holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. If the tendering holder is a broker-dealer (whether or not it is also an "affiliate") that will receive Exchange Notes for its own account in exchange for Outstanding Notes, we will represent on behalf of such broker-dealer that the Outstanding Notes to be exchanged for the Exchange Notes were acquired by it as a result of market-making activities or other trading activities, and acknowledge on behalf of such broker-dealer that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes. By acknowledging that it will deliver and by delivering a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Very truly yours, 2 -----END PRIVACY-ENHANCED MESSAGE-----