**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-K**





(Mark
      One)


[X]
            Annual
                report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934 for the fiscal year ended


December
      30, 2006


or


[
                ]
            Transition
                report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934 for the transition period from


___to





Commission
      File Number 333-138380


**BERRY
      PLASTICS HOLDING CORPORATION**


**(formerly
      known as BPC Holding Corporation)**


( *Exact
      name of registrant as specified in its charter* )




Delaware
            35-1814673(State
                or other jurisdiction
              of
                incorporation or organization)
            (IRS
                employer
              identification
                number)101
                Oakley Street
              Evansville,
                Indiana
            47710(Address
                of principal executive offices)
            (Zip
                code)





*SEE
      TABLE OF ADDITIONAL REGISTRANT GUARANTORS*





Registrants'
      telephone number, including area code: (812) 424-2904




Securities
      registered pursuant to Section 12(b) of the Act: None





Securities
      registered pursuant to Section 12(g) of the Act: None





Indicate
      by check mark if the registrants are well-known seasoned issuers, as defined
      in
      Rule 405 of the Securities Act. Yes [ ] No [X]





Indicate
      by check mark if the registrants are not required to file reports pursuant
      to
      Section 13 or Section 15(d) of the Securities Exchange Act of 1934. Yes [X]
      No [
      ]





Indicate
      by check mark whether the registrants: (1) have filed all reports required
      to be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or such shorter period that the registrant was required
      to
      file such reports), and (2) have been subject to such filing requirements for
      the past 90 days. Yes [X] No [ ]





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of registrant's knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K: Not applicable.





Indicate
      by check mark whether the registrants are large accelerated filers, accelerated
      filers, or non-accelerated filers. See definition of “accelerated filer and
      large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):


Large
      accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ X
      ]





Indicate
      by check mark whether the registrants are shell companies (as defined in Rule
      12b-2 of the Securities Exchange Act of 1934). Yes [   ] No
      [X]





As
      of
      March 1, 2007, all of the outstanding 100 shares of the Common Stock, $.01
      par
      value, of Berry Plastics Holding Corporation were held by Berry Plastics Group,
      Inc. The financial presentation presented in the Berry Plastics Holding
      Corporation financial statements reflects the consolidated operations and
      financial position including the results and equity structure of Berry Plastics
      Group, Inc.





**DOCUMENTS
      INCORPORATED BY REFERENCE**


None


-1-


**Table
      of Additional Registrant Guarantors**


**Exact
                  Name**
              **Jurisdiction
                  of******
                **Organization**
              **Primary
                  Standard Industrial Classification**
                **Code
                  Number**
              **I.R.S.
                  Employer Identification**
                ******No.**
              **Name,
                  Address and Telephone Number of Principal**
                **Executive
                  Offices****(1)**Berry
                  Plastics Corporation
              Delaware
              3089
              35-1813708
              (1)Aerocon,
                  Inc.
              Delaware
              3089
              35-1948748
              (1)Berry
                  Iowa Corporation
              Delaware
              3089
              42-1382173
              (1)Berry
                  Plastics Design Corporation
              Delaware
              3089
              62-1689708
              (1)Berry
                  Plastics Technical Services, Inc.
              Delaware
              3089
              57-1028638
              (1)Berry
                  Sterling Corporation
              Delaware
              3089
              54-1749681
              (1)CPI
                  Holding Corporation
              Delaware
              3089
              34-1820303
              (1)Knight
                  Plastics, Inc.
              Delaware
              3089
              35-2056610
              (1)Packerware
                  Corporation
              Delaware
              3089
              48-0759852
              (1)Pescor,
                  Inc.
              Delaware
              3089
              74-3002028
              (1)Poly-Seal
                  Corporation
              Delaware
              3089
              52-0892112
              (1)Venture
                  Packaging, Inc.
              Delaware
              3089
              51-0368479
              (1)Venture
                  Packaging Midwest, Inc.
              Delaware
              3089
              34-1809003
              (1)Berry
                  Plastics Acquisition Corporation III
              Delaware
              3089
              37-1445502
              (1)Berry
                  Plastics Acquisition Corporation V
              Delaware
              3089
              36-4509933
              (1)Berry
                  Plastics Acquisition Corporation VII
              Delaware
              3089
              30-0120989
              (1)Berry
                  Plastics Acquisition Corporation VIII
              Delaware
              3089
              32-0036809
              (1)Berry
                  Plastics Acquisition Corporation IX
              Delaware
              3089
              35-2184302
              (1)Berry
                  Plastics Acquisition Corporation X
              Delaware
              3089
              35-2184301
              (1)Berry
                  Plastics Acquisition Corporation XI
              Delaware
              3089
              35-2184300
              (1)Berry
                  Plastics Acquisition Corporation XII
              Delaware
              3089
              35-2184299
              (1)Berry
                  Plastics Acquisition Corporation XIII
              Delaware
              3089
              35-2184298
              (1)Berry
                  Plastics Acquisition Corporation XV, LLC
              Delaware
              3089
              35-2184293
              (1)Kerr
                  Group, Inc.
              Delaware
              3089
              95-0898810
              (1)Saffron
                  Acquisition Corporation
              Delaware
              3089
              94-3293114
              (1)Setco,
                  LLC
              Delaware
              3089
              56-2374074
              (1)Sun
                  Coast Industries, Inc.
              Delaware
              3089
              59-1952968
              (1)Tubed
                  Products, LLC
              Delaware
              3089
              56-2374082
              (1)Cardinal
                  Packaging, Inc.
              Ohio
              3089
              34-1396561
              (1)Landis
                  Plastics, Inc.
              Illinois
              3089
              36-2471333
              (1)




(1)
      All
      guarantors name, address, and telephone number of the principal executive office
      is 101 Oakley Street, Evansville, Indiana 47710, (812) 424-2904.





-2-


CAUTIONARY
      STATEMENT REGARDING FORWARD-LOOKING STATEMENTS





This
      Form
      10-K 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 our plans,
      strategies and prospects under the headings "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 that 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 Form 10-K. 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;




·
            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;




·
            risks
                of competition, including foreign competition, in our existing and
                future
                markets;




·
            risks
                related to our acquisition strategy and integration of acquired
                businesses;




·
            reliance
                on unpatented proprietary know-how and trade secrets;




·
            increases
                in the cost of compliance with laws and regulations, including
                environmental laws and regulations;




·
            catastrophic
                loss of one of our key manufacturing facilities;




·
            increases
                in the amounts we are required to contribute to our pension plans;




·
            our
                ownership structure following the Merger;




·
            reduction
                in net worth; and




·
            the
                other factors discussed in the section of this 10-K titled “Risk Factors.”




We
      caution you that the foregoing list of important factors may not contain all
      of
      the material factors that are important to you. In addition, in light of these
      risks and uncertainties, the matters referred to in the forward-looking
      statements contained in this 10-K may not in fact occur. We undertake no
      obligation to publicly update or revise any forward-looking statement as a
      result of new information, future events or otherwise, except as otherwise
      required by law.







-3-


**TABLE
      OF CONTENTS**





**BERRY
      PLASTICS HOLDING CORPORATION**




**FORM
      10-K FOR THE FISCAL YEAR ENDED DECEMBER 30, 2006**





**Page**PART
                IItem
                1.
            Business
            5Item
                1A.
            Risk
                Factors
            12Item
                1B.
            Unresolved
                Staff Comments
            16Item
                2.
            Properties
            16Item
                3.
            Legal
                Proceedings
            16Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            16PART
                IIItem
                5.
            Market
                for Registrants' Common Equity and Related Stockholder
                Matters
            17Item
                6.
            Selected
                Financial Data
            18Item
                7.
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            19Item
                7A.
            Quantitative
                and Qualitative Disclosures About Market Risk
            29Item
                8.
            Financial
                Statements and Supplementary Data
            30Item
                9.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            30Item
                9A.
            Controls
                and Procedures
            30Item
                9B.
            Other
                Information
            30PART
                IIIItem
                10.
            Directors
                and Executive Officers of the Registrants
            31Item
                11.
            Executive
                Compensation
            33Item
                12.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholders Matters
            37Item
                13.
            Certain
                Relationships and Related Transactions
            39Item
                14.
            Principal
                Accountant Fees and Services
            40PART
                IVItem
                15.
            Exhibits,
                Financial Statement Schedules and Reports on Form 8-K
            41





-4-


**PART
      I**





**Item
      1.** **BUSINESS**





Unless
      the context requires otherwise, references in this Form 10-K to “Holding” or
“Company” refer to Berry Plastics Holding Corporation, references to “we,” “our”
or “us” refer to Berry Plastics Holding Corporation together with its
      wholly-owned subsidiary, Berry Plastics Corporation (“Berry”), and Berry’s
      wholly-owned subsidiaries. Holding is a wholly-owned subsidiary of Berry
      Plastics Group, Inc. (“Group”).





**General**





We
      believe we are one of the world’s leading manufacturers and suppliers of
      value-added plastic packaging products. We manufacture a broad range of
      innovative, high quality packaging solutions using our collection of over 1,500
      proprietary molds and an extensive set of internally developed processes and
      technologies. Our principal products include containers, drink cups, bottles,
      closures and overcaps, tubes and prescription vials which we sell into a diverse
      selection of attractive and stable end markets, including food and beverage,
      healthcare, personal care, quick service and family dining restaurants, custom
      and retail. We sell our packaging solutions to over 8,000 active customers
      comprised of a favorable balance of leading national blue-chip customers as
      well
      as a collection of smaller local specialty businesses. We believe that our
      proprietary tools and technologies, low-cost manufacturing capabilities and
      significant operating and purchasing scale provide us with a competitive
      advantage in the marketplace. Our unique combination of leading market
      positions, proven management team, product and customer diversity and
      manufacturing and design innovation provides access to a variety of growth
      opportunities and has allowed us to achieve consistent organic volume growth
      in
      excess of market growth rates. Our top 10 customers represented approximately
      27% of our fiscal 2006 net sales with no customer accounting for more than
      6% of
      our fiscal 2006 net sales. The average length of our relationship with these
      customers was 21 years. Additionally, we operate 25 high-volume manufacturing
      facilities and have extensive distribution capabilities.




**History**





Imperial
      Plastics was established in 1967 in Evansville, Indiana. Berry Plastics, Inc.
      (“Old Berry”) was formed in 1983 to purchase substantially all of the assets of
      Imperial Plastics. In 1988, Old Berry acquired Gilbert Plastics of New
      Brunswick, New Jersey, a leading manufacturer of aerosol overcaps, and
      subsequently relocated Gilbert Plastics’ production to Old Berry’s Evansville,
      Indiana facility. In 1990, Berry and Holding were formed to purchase the assets
      of Old Berry.





We
      have
      continued to grow both organically and through acquisition by acquiring
      companies that we believed would improve our financial performance in the
      long-term, expand our product lines, or in some cases, provide us with a new
      or
      complementary product line. In 1992, we acquired the assets of the Mammoth
      Containers division of Genpak Corporation. In 1995, we acquired substantially
      all of the assets of Sterling Products, Inc., a producer of injection-molded
      plastic drink cups and lids, and Tri-Plas, Inc., a manufacturer of
      injection-molded containers. In 1997, we acquired (1) certain assets of
      Container Industries, Inc., a manufacturer and marketer of injection-molded
      industrial and pry-off containers, (2) PackerWare Corporation (“PackerWare”), a
      manufacturer and marketer of plastic containers, drink cups, housewares, and
      lawn and garden products, (3) substantially all of the assets of Virginia Design
      Packaging Corp., a manufacturer and marketer of injection-molded containers
      used
      primarily for food packaging, and (4) Venture Packaging, Inc., a manufacturer
      and marketer of injection-molded containers used in the food, dairy and various
      other markets. In 1998, we acquired all of the capital stock of Norwich
      Injection Moulders Limited (now known as Berry Plastics UK Limited) and
      substantially all of the assets of the Knight Engineering and Plastics Division
      of Courtaulds Packaging Inc., a manufacturer of aerosol overcaps. In 1999,
      we
      acquired all
      of
      the outstanding capital stock of CPI Holding Corporation, the parent company
      of
      Cardinal Packaging, Inc., a manufacturer and marketer of open-top
      containers .
      In
      2000, we acquired all of the outstanding capital stock of (1) Poly-Seal
      Corporation, a manufacturer and marketer of closures and (2) Capsol S.p.a.
      (now
      known as Capsol Berry Plastics S.p.a.), a manufacturer and marketer of aerosol
      overcaps and closures. In 2001, we acquired all of the outstanding capital
      stock
      of Pescor Plastics, Inc., a manufacturer and marketer of drink cups, and in
      2002, we acquired the Alcoa Flexible Packaging injection molding assets from
      Mount Vernon Plastics Corporation. In 2003, we acquired (1) the 400 series
      continuous threaded injection molded closure assets from CCL Plastic Packaging,
      (2) the injection molded overcap lid assets from APM Inc., and (3) all of the
      outstanding capital stock of Landis Plastics, Inc. (the “Landis Acquisition”), a
      manufacturer and marketer of open-top containers.





On
      April
      11, 2005, a subsidiary of Berry, Berry Plastics de México, S. de R.L. de C.V.,
      acquired all of the injection molding closure assets from Euromex Plastics,
      S.A.
      de C.V. (“Euromex”), an injection molding manufacturer located
      in


-5-


Toluca,
      Mexico (“the Mexico Acquisition”). On June 3, 2005, Berry acquired Kerr Group,
      Inc. (“Kerr”), a manufacturer and marketer of closures, bottles, vials, and
      tubes (the “Kerr Acquisition”).





**Merger**





On
      September 20, 2006, BPC Acquisition Corp. merged with and into BPC Holding
      Corporation pursuant to an agreement and plan of merger (the “Merger”), dated
      June 28, 2006, with BPC Holding Corporation continuing as the surviving
      corporation. Following the consummation of the Merger, BPC Holding Corporation
      changed its name to Berry Plastics Holding Corporation. Pursuant to the Merger,
      Holding is a wholly-owned subsidiary of Group, the principal stockholders of
      which are Apollo Investment Fund VI, L.P., AP Berry Holdings, LLC, an affiliate
      of Graham Partners II, L.P., and management. Apollo Investment Fund VI, L.P.
      and
      AP Berry Holdings, LLC are affiliates of Apollo Management, L.P. (the “Buyer”),
      which is a private investment firm. Graham Partners II, L.P. is an affiliate
      of
      Graham Partners, Inc. (“Graham”), a private equity firm.




The
      total
      amount of funds required to consummate the Merger and to pay fees related to
      the
      Merger was $2.4 billion. The Merger was primarily funded with (1) the issuance
      of $750.0 million aggregate principal amount of second priority senior secured
      notes, (2) new borrowings of $675.0 million in Term B loans, (3) the
      issuance of $425.0 million aggregate principal amount of senior subordinated
      notes, and (4) contributed equity. The seller used the proceeds received from
      the Merger to repay the outstanding indebtedness and accrued interest of $726.9
      million under the term loans from the old senior secured credit facility and
      $335.0 million plus accrued interest and tender fees to repurchase all of the
      outstanding 10 3⁄4% senior subordinated notes payable due 2012. The Buyer and
      its affiliates own 72% of the common stock of Group. The remaining common stock
      is primarily held by an affiliate of Graham Partners II, L.P., which owns 10%
      and members of Berry’s management which own 16%.





**Product
      Overview**





The
      product categories on which we focus utilize similar manufacturing processes,
      share common raw materials (principally resin) and sell into end markets where
      customers demand innovative packaging solutions and quick and seamless design
      and delivery. We organize our business into two operating divisions: open top
      and closed top. The
      following table displays our net sales by division for each of the past five
      fiscal years. Additional financial information about our business segments
      is
      provided in “Management's Discussion and Analysis of Financial Condition and
      Results of Operations” and the “Notes to Consolidated Financial Statements,”
which are included elsewhere in this Form 10-K.





($
                in millions)
            
            
            **2002**
            
            
            **2003**
            
            
            **2004**
            
            
            **2005**
            
            
            **2006**Open
                Top
            
            $
            360.4
            
            $
            404.6
            
            $
            659.2
            
            $
            775.7
            
            $
            836.9Closed
                Top
            
            
            133.9
            
            
            147.3
            
            
            155.0
            
            
            394.0
            
            
            594.9Total
                net sales
            
            $
            494.3
            
            $
            551.9
            
            $
            814.2
            
            $
            1,169.7
            
            $
            1,431.8





*Open
      Top*





Our
      open
      top division is comprised of three product categories: containers, drink cups,
      and housewares. The largest end-uses for our containers are food products,
      building products, chemicals and dairy products. We believe that we offer one
      of
      the broadest product lines among U.S.-based injection-molded plastic container
      and drink cup manufacturers and are a leader in thermoformed container and
      drink
      cup offerings, which provide a superior combination of value and quality
      relative to competing processes. Many of our open top products are manufactured
      from proprietary molds that we develop and own, which results in significant
      switching costs to our customers. In addition to a complete product line,
      we have sophisticated printing capabilities and in-house graphic arts and
      tooling departments, which allow us to integrate ourselves into, and add
      material value to, our customers’ packaging design process. Our product
      engineers work directly with customers to design and commercialize new drink
      cups and containers. In order to identify new markets and applications for
      existing products and opportunities to create new products, we rely extensively
      on our national sales force. Once these opportunities are identified, our sales
      force works with our product design engineers and artists to satisfy customers’
needs. Our low-cost manufacturing capability with plants strategically located
      throughout the United States and a dedication to high-quality products and
      customer service have allowed us to further develop and maintain strong
      relationships with our attractive base of franchise customers. We have a diverse
      customer base for our open top products, and no single open top customer
      exceeded 6% of our total net sales in fiscal 2006. Our primary competitors
      include Airlite, Huhtamaki, Letica, Polytainers, Wincup and Solo.




-6-


These
      competitors individually only compete on certain of our open top products,
      whereas we offer the entire selection of open top products described below.




*Containers.* We
      manufacture a collection of nationally branded container products and also
      seek
      to develop customized container products for niche applications by leveraging
      of
      our state-of-the-art design, decoration and graphic arts capabilities. This
      mix
      allows us to both achieve significant economies of scale, while also maintaining
      an attractive portfolio of specialty products. 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. We have long-standing supply relationships with many of
      the
      nation’s leading food and consumer products companies, including Dean Foods,
      General Mills, Kraft, Kroger and Unilever.





*Drink
      Cups.* We
      believe that we are the largest provider of large size thermoformed
      polypropylene (“PP”) and injection-molded plastic drink cups in the United
      States. We are the leading producer of 32 ounce or larger thermoformed PP
      drink cups and offer a product line with sizes ranging from 12 to 44
      ounces. Our thermoform process uses PP instead of more expensive polystyrene
      in
      producing deep draw drink cups to generate a cup of superior quality with a
      material competitive cost advantage versus thermoformed polystyrene drink cups.
      Additionally, we produce injection-molded plastic cups that range in size from
      12 to 64 ounces. Primary markets for our plastic drink cups are quick service
      and family dining restaurants, convenience stores, stadiums and retail stores.
      Many of our cups are decorated, often as promotional items, and we believe
      we
      have a reputation in the industry for innovative, state-of-the-art graphics.
      Selected drink cup customers and end users include Hardee’s, McDonald’s, Quik
      Trip, Subway and Yum! Brands.





*Housewares* .
      Our
      participation in the housewares market is focused on producing 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 strategy 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 the 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 entire seasonal housewares department.




*Closed
      Top*





Our
      closed top division is comprised of three product categories; closures and
      overcaps, prescription vials and bottles, and tubes. We believe that this line
      of products gives us a competitive advantage in being able to provide a complete
      plastic package to our customers. We have a number of leading positions in
      which
      we have been able to leverage this capability such as prescription vial packages
      and Tab II® pharmaceutical packages. Our design center and product development
      engineers, combined with our world class manufacturing facilities, give us
      the
      ability to take projects from concept to end product. We utilize the latest
      in
      manufacturing technology, offering several different manufacturing processes,
      including various forms of injection, extrusion, compression, and blow molding,
      as well as decoration and lining services. This allows us to match the optimal
      manufacturing platform with each customer’s desired package design and volume.
      Our state of the art mold designs, and our quality system, which includes the
      latest in vision systems and process control, allow us to meet the high
      standards of our customers. We have a diverse customer base for our closed
      top
      products, with no single customer exceeding 3% of our total net sales in fiscal
      2006. Our primary competitors include Alcoa, Cebal, Graham Packaging,
      Owens-Illinois, Phoenix, Rexam, Seaquist and Silgan. These competitors
      individually only compete on certain of our closed top products. We believe
      that
      we are the only industry participant that offers the entire product line of
      closed top products described below.





*Closures
      and Overcaps.* We are a
      leading producer of closures and overcaps in many of our product lines including
      continuous thread and child resistant closures and aerosol overcaps. We
      currently sell our closures into numerous end markets, including pharmaceutical,
      vitamin and nutritional, healthcare, food and beverage and personal care. In
      addition to traditional closures, we are a provider of a wide selection of
      custom closure solutions including fitments and plugs for medical applications,
      cups and spouts for liquid laundry detergent and dropper bulb assemblies for
      medical and personal care applications. Further, we believe that we are the
      leading domestic 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. We believe our technical capabilities, expertise and
      low
      cost position have allowed us to become the leading provider of closures
      and


-7-


overcaps
      to a diverse set of leading companies in the markets we serve. Our manufacturing
      advantage is driven by our position on the forefront of various processes
      including the latest in single and bi-injection technology, molding of
      thermoplastic and thermoset resins, compression molding of thermoplastic resins,
      accurate reproduction of colors and proprietary packing technology that
      minimizes freight cost and warehouse space. Many of our overcaps and closures
      are manufactured from proprietary molds, which we develop and own and which
      results in significant switching costs to our customers. In addition, we utilize
      state of the art lining, assembly, and decorating equipment in secondary
      operations. We have a strong reputation for quality and have received numerous
      “Supplier Quality Achievement Awards” from customers in different markets. Our
      closures and aerosol overcaps customers include Bayer, Diageo, Pepsico and
      S.C.
      Johnson.





*Prescription
      Vials and Bottles.* Our
      prescription vial and bottle businesses target similar markets as our closure
      business. We believe we are the leading supplier of spice containers in the
      United States and have a leadership position in various vitamin and nutritional
      markets, as well as selling bottles into prescription and pharmaceutical
      applications. Additionally, we are a leading supplier in the prescription vial
      market, supplying a complete line of amber plastic vials with both one-piece
      and
      two-piece child-resistant closures. We offer a variety of personal care
      packages, and see the personal care market as a strong opportunity to grow
      our
      business. While offering a set of stock bottles in the vitamin and nutritional
      markets, our design capabilities, along with internal engineering strength
      give
      us the ability to compete on customized designs to provide differentiation
      from
      traditional packages. We expect our bottle segment to experience continued
      growth in the healthcare product line, as the patented child resistant and
      senior friendly Tab II® product offering gains popularity. Our strong product
      offerings in continuous threaded, child-resistant, and tamper-evident closures,
      make “one-stop” shopping available to many key customers. We offer our customers
      decorated bottles with hot stamping, silk screening and labeling. We sell these
      products to personal care, pharmaceutical, food and consumer product customers,
      including McCormick, Nature’s Bounty, John Paul Mitchell and
      Novartis.





*Tubes* .
      We
      believe that we are one of the largest suppliers of extruded plastic squeeze
      tubes in the United States. We offer a complete line of tubes from 1⁄2” to 2 3/16”
in diameter. Our focus has been to ensure that we are able to meet the
      increasing trend towards large diameter tubes with high-end decoration. The
      majority of our tubes are sold in the personal care market, focusing on products
      like facial/cold creams, shampoos, conditioners, bath/shower gels, lotions,
      sun
      care, hair gels and anti-aging creams. We also sell our tubes into the
      pharmaceutical and household chemical markets. We believe that our ability
      to
      provide creative package designs, with state of the art decorating, combined
      with a complementary line closures, makes us a preferred supplier for many
      customers in our target markets including Kao Brands, L’Oreal and Procter &
Gamble.





**Marketing
      and Sales**





We
      reach
      our large and diversified base of over 8,000 active customers primarily through
      our direct field sales force of over 100 dedicated professionals. Our field
      sales, production and support staff meet with customers to understand their
      needs and improve our product offerings and services. While certain of these
      field sales representatives are focused on individual product lines, our team
      is
      encouraged to sell all of 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 third party
      manufacturing representatives to assist our direct sales force. Highly skilled
      customer service representatives are strategically located throughout 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 and customer service representatives to
      satisfy customers’ needs through the production of high-quality, value-added
      products and on-time deliveries.





Our
      sales
      force is also supported by technical specialists and our in-house graphics
      and
      design personnel. Our creative services 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
      manufacture our products utilizing several primary molding methods including:
      injection, thermoforming, compression, tube extrusion and blow molding. These
      processes begin with raw plastic pellets, which are then converted into finished
      products. In the injection process, the raw pellets are melted to a liquid
      state
      and injected into a multi-cavity steel mold where the resin is allowed to
      solidify to take the final shape of the part. In the thermoform


-8-


process,
      the raw resin is softened to the point where sheets of material are drawn into
      multi-cavity molds and formed over the molds to form the desired shape.
      Compression molding is a high-speed process that begins with a continuously
      extruded plastic melt stream that is cut while remaining at molding temperature
      and carried to the mold cavity. Independent mold cavities close around the
      molten plastic, compressing it to form the part, which is cooled and ejected.
      In
      the tube extrusion process, we extrude resin that is solidified in the shape
      of
      a tube and then cut to length. The tube then has the head added by using another
      extruder that extrudes molten resin into a steel die where the cut tube is
      inserted into the steel die. In blow molding we use three blow molding systems:
      injection, extrusion, and stretch blow. Injection blow molding involves
      injecting molten resin into a multiple cavity steel die and allowing it to
      solidify into a preform. The parts are then indexed to a blow station where
      high-pressure air is used to form the preform into the bottle. In extrusion
      blow
      molding, we extrude molten plastic into a long tube and then aluminum dies
      clamp
      around the tube and high-pressure air is used to form the bottle. In stretch
      blow molding, we inject molten plastic into a multi-cavity steel mold where
      the
      parts are allowed to cool in the mold until they are solidified. The parts
      are
      then brought to a stretch blow molding machine where they are reheated and
      then
      placed in aluminum dies where high pressure air is used to form the bottle.





The
      final
      cured parts are transferred from the primary molding process to corrugated
      containers for shipment to customers or for post-molding secondary operations
      (offset printing, labeling, lining, silkscreening, handle applications, etc.).
      We believe that our molding, handling, and post-molding capabilities are among
      the best in the industry. 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
      post-molding technology. We utilize state-of-the-art robotic packaging processes
      for large volume products, which enable us to reduce breakage while lowering
      warehousing and shipping costs. Each plant has maintenance capability to support
      molding and post-molding 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. Capital expenditures for 2006 were $92.1 million,
      which
      includes a significant amount of expenditures for capacity additions and other
      growth opportunities across our business as well as expenditures related to
      cost-saving opportunities and our estimated annual level of maintenance capital
      expenditures of approximately $22.0 million.





**Research,** **Product
      Development and Design**





We
      believe our technology base and research and development support are among
      the
      best in the plastics packaging industry. Using three-dimensional computer aided
      design technology, our full time product designers develop innovative product
      designs and models for the packaging market. 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 or built by one of our two
      in-house tooling divisions located in Evansville and Chicago. Our engineers
      oversee the mold-building process from start to finish. We currently have a
      collection of over 1,500 proprietary molds. 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.




Additionally,
      at our technical center in Lancaster, Pennsylvania, we prototype new ideas,
      conduct research and development of new products and processes, and qualify
      production molding systems that go directly to our facilities and into
      production. We also have a complete product testing and quality laboratory
      at
      our technical center. With this combination of manufacturing simulation and
      quality systems support we are able to improve time to market and reduce cost.
      We spent $7.8 million, $6.1 million and $3.8 million on research and development
      in the fiscal years 2006, 2005, and 2004, respectively.




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.




-9-


**Quality
      Assurance**





Each
      plant extensively utilizes Total Quality Management philosophies, including
      the
      use of statistical process control and extensive involvement of employee teams
      to increase productivity. This teamwork approach to problem-solving increases
      employee participation and provides necessary training at all levels. Our teams
      also utilize the Six Sigma methodology to improve internal processes and provide
      a systematic approach to problem solving resulting in improved customer service.
      The drive for team work and continuous improvement is an ongoing quality focus.
      All of our facilities are ISO9001/2000 certified or are working toward such
      certification. Certification requires a demonstrated compliance by a company
      with a set of shipping, trading and technology standards promulgated by the
      International Organization for Standardization (“ISO”). Extensive testing of
      parts for size, color, strength and material quality using statistical process
      control techniques and sophisticated technology is also an ongoing part of
      our
      quality assurance activities.





**Systems**





All
      of
      our facilities are on the same integrated accounting and control system that
      allows for consistency in reporting and efficient consolidation. This enterprise
      resource planning (“ERP”) system produces complete financial and operational
      reports and is expandable to add new features and/or locations as we grow.
      All
      of our facilities, excluding the Milan facility and one of the Kerr facilities,
      utilize the manufacturing applications of our standard ERP system. The remaining
      Kerr facility is scheduled to be converted to the manufacturing applications
      of
      the system by the end of the second quarter of fiscal 2007. We also utilize
      many
      other applications to support business processes.




**Sources
      and Availability of Raw Materials**





The
      most
      important raw material purchased by us is plastic resin. We purchased
      approximately $461.7 million of resin in fiscal 2006 with approximately 64%
      of
      our resin pounds being polypropylene (“PP”), 22% high density polyethylene
      (“HDPE”), 9% low density polyethylene (“LDPE”), 3% polyethylene terephthalate
      (“PET”), and 2% other. We have contractual price escalators and de-escalators
      tied to the price of resin with customers representing more than 60% of net
      sales that result in price increases/decreases to these 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. Less than 10%
      of
      our net sales are generated from arrangements that exhibit fixed-price
      characteristics, and we have at times and may continue to enter into negotiated
      purchase agreements with resin suppliers to lock-in a level of profitability
      on
      these arrangements. We also opportunistically pursue resin forward hedging
      transactions in order to manage our resin spend and further align our costs
      with
      our prices to our customers. We can further seek to 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 and reducing the
      quantity of resin in certain of our products. We feel that based upon the
      combination of the methods described above we have the ability to manage changes
      in resin prices as evidenced by our consistent profitability and earnings growth
      throughout recent periods of historically high resin volatility.




Our
      plastic resin purchasing strategy is to deal with only high-quality, dependable
      suppliers, such as Basell, Chevron, Dow, ExxonMobil, Huntsman, Lyondell, Nova,
      Sunoco and Total. We believe that we have maintained strong relationships with
      these key suppliers and expect that such relationships will continue into the
      foreseeable future. The resin market is a global market and, based on our
      experience, we believe that adequate quantities of plastic resins will be
      available at market prices, but we can give you no assurances as to such
      availability or the prices thereof.





**Employees**





At
      the
      end of 2006, we had approximately 6,600 employees. Poly-Seal Corporation, a
      wholly owned subsidiary, and the United Steelworkers of America are parties
      to a
      collective bargaining agreement which expires in April 2009. At the end of
      2006,
      approximately 290 employees of Poly-Seal Corporation, all of which are located
      in our Baltimore facility, were covered by this agreement. None of our other
      domestic 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




-10-


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.







**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 handling and disposition of wastes, and cleanup of
      contaminated soil and ground water, or otherwise relating to the protection
      of
      the environment. We believe that we are in substantial compliance with
      applicable environmental laws and regulations. However, we cannot predict with
      any certainty that we will not in the future incur liability, which could be
      significant 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 regulated
      materials, which could be material.




We
      may
      from time to time be required to conduct remediation of releases of regulated
      materials at our owned or operated facilities. None of our pending remediation
      projects are expected to result in material costs. Like any manufacturer, we
      are
      also 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 Federal Comprehensive
      Environmental Response, Compensation and Liability Act of 1980, as amended,
      (“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, and for damages
      to natural resources. Liability under CERCLA is retroactive, and, under certain
      circumstances, liability for the entire cost of a cleanup can be imposed on
      any
      responsible party. No such notices are currently pending which are expected
      to
      result in material costs.




The
      Food
      and Drug Administration (“FDA”) regulates the material content of direct-contact
      food and drug packages, including certain packages we manufacture pursuant
      to
      the Federal Food, Drug and Cosmetics Act. Certain of our products are also
      regulated by the Consumer Product Safety Commission (“CPSC”) pursuant to various
      federal laws, including the Consumer Product Safety Act and the Poison
      Prevention Packaging 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 laws exist 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 our products that directly contact food
      and
      drug 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 particular, certain states have
      enacted legislation requiring products packaged in plastic containers to comply
      with standards intended to encourage recycling and increased use of recycled
      materials. In addition, various consumer and special interest groups have
      lobbied from time to time for the implementation of these and other similar
      measures. We believe that the legislation promulgated to date and such
      initiatives to date have not had a material adverse effect on us. There can
      be
      no assurance that any such future legislative or regulatory efforts or future
      initiatives would not have a material adverse effect on us.







**Available
      Information**





We
      make
      available, free of charge, our annual reports on Form 10-K, quarterly reports
      on
      Form 10-Q, current reports on Form 8-K and amendments, if any, to those reports
      through our Internet website as soon as practicable after they have been
      electronically filed with or furnished to the SEC. Our internet address is
      www.berryplastics.com. The information contained on our website is not being
      incorporated herein. We
      are
      currently in the process of finalizing our Code of Ethics.


-11-


**Item
      1A.**  **RISK
      FACTORS**




*Our
      substantial indebtedness could affect our ability to meet our obligations and
      may otherwise restrict our activities.*




We
      have a
      significant amount of indebtedness. On December 30, 2006, we had a total
      indebtedness of $1,872.9 million and we would have been able to borrow a further
      $185.3 million under the revolving portion of our senior secured credit
      facilities. We are permitted by the terms of our debt instruments to incur
      substantial additional indebtedness, subject to the restrictions therein. Our
      inability to generate sufficient cash flow to satisfy our debt obligations,
      or
      to refinance our obligations on commercially reasonable terms, would have a
      material adverse effect on our business, financial condition and results of
      operations.




Our
      substantial indebtedness could have important consequences. For example, it
      could:




·
            make
                it more difficult for us to satisfy our obligations under our
                indebtedness;




·
            limit
                our ability to borrow money for our working capital, capital expenditures,
                debt service requirements or other corporate purposes;




·
            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;




·
            limit
                our ability to respond to business opportunities; 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.






*Increases
      in resin prices or a shortage of available resin could harm our financial
      condition and results of operations.*




To
      produce our products, we use large quantities of plastic resins, which accounted
      for 40% of our cost of goods sold in fiscal 2006. Plastic resins are subject
      to
      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. Over the past several years, we have at times
      experienced rapidly increasing resin prices. If rapid increases in resin prices
      continue, our revenue and profitability may be materially and adversely
      affected, both in the short-term as we attempt to pass through changes in the
      price of resin to customers under current agreements and in the long-term as
      we
      negotiate new agreements or if our customers seek product substitution.




While
      customers representing more than 60% of our net sales are subject to contractual
      price escalators and de-escalators tied to resin prices, and while historically,
      we have generally been able to pass on a significant portion of the increases
      in
      resin prices to our customers over a period of time, there have nonetheless
      been
      negative short-term impacts to our financial performance. Certain of our
      customers (currently accounting for fewer than 10% of our net sales) purchase
      our products pursuant to arrangements that exhibit fixed-price characteristics
      in respect of which we have at times and may continue to enter into hedging
      or
      similar arrangements, although such hedging arrangements may not always be
      available. 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
      may have a material adverse effect on our competitive position and financial
      performance.




We
      source
      plastic resin primarily from major industry suppliers such as Basell, Chevron,
      Dow, ExxonMobil, Huntsman, Lyondell, Nova, Sunoco and Total. We have
      long-standing relationships with certain of these suppliers but have not entered
      into a firm supply contract with any of them. 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
      materially negatively impact our competitive position versus companies that
      are
      able to better or more cheaply source resin.




*We
      may not be able to compete successfully and our customers may not continue
      to
      purchase our products.*




We
      face
      intense competition in the sale of our products and compete with multiple
      companies in each of our product lines. We compete on the basis of a number
      of
      considerations, including price, service, quality, product characteristics
      and


-12-


the
      ability to supply products to customers in a timely manner. Our products also
      compete with metal, glass, paper and other packaging materials as well as
      plastic packaging materials made through different manufacturing processes.
      Some
      of these competitive products are not subject to the impact of changes in resin
      prices which may have a significant and negative impact on our competitive
      position versus substitute products. Our competitors may 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. Each of our product lines faces a different competitive landscape.
      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 do not have long-term arrangements with many of our customers these
      competitive factors could cause our customers to shift suppliers and/or
      packaging material quickly.




*We
      may pursue and execute acquisitions, which could adversely affect our business.*




As
      part
      of our growth strategy, we plan to consider the acquisition of other companies,
      assets and product lines that either complement or expand our existing business
      and create economic value. We cannot assure you that we will be able to
      consummate any such transactions or that any future acquisitions will be
      consummated at acceptable prices and terms. We continually 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, including:




·
            the
                diversion 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;




·
            possible
                adverse effects on our reported operating results, particularly during
                the
                first several reporting periods after such acquisitions are completed;
                and




·
            the
                loss of key employees and the difficulty of presenting a unified
                corporate
                image.




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 historical
      acquisitions and any future acquisitions. We have typically required selling
      stockholders to indemnify us against certain undisclosed liabilities. However,
      we cannot assure you that indemnification rights we have obtained, or will
      in
      the future obtain, will 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 .




In
      addition, we may not be able to successfully integrate future acquisitions
      without substantial costs, delays or other problems. The costs of such
      integration could have a material adverse effect on our operating results and
      financial condition. 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 understand the potential liabilities
      of
      the acquired entities and their operations.




*We
      may not be successful in protecting our intellectual property rights, including
      our unpatented proprietary know-how and trade secrets, or in avoiding claims
      that we infringed on the intellectual property rights of others.*




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 third parties. While we attempt to ensure that our
      intellectual




-13-


property
      and similar proprietary rights are protected 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. In the future, we may also rely on litigation
      to enforce our intellectual property rights and contractual rights, 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.




Our
      success depends in part on our ability to obtain, or license from third parties,
      patents, trademarks, trade secrets and similar proprietary rights without
      infringing on the proprietary rights of third parties. Although we believe
      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 such persons. Furthermore, no assurance can
      be
      given that we will not be subject to claims asserting the infringement of the
      intellectual property rights of third parties seeking damages, the payment
      of
      royalties or licensing fees and/or injunctions against the sale of our products.
      Any such litigation could be protracted and costly and could have a material
      adverse effect on our business and results of operations.




*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 treatment, storage and disposal
      of
      solid and hazardous wastes and require clean up of contaminated sites. While
      we
      have not been required historically to make significant capital expenditures
      in
      order to comply with applicable environmental laws and regulations, we cannot
      predict with any certainty our future capital expenditure requirements because
      of continually changing compliance standards and environmental technology.
      Furthermore, violations or contaminated sites that we do not know about
      (including contamination caused by prior owners and operators of such sites)
      (or
      newly discovered information) could result in additional compliance or
      remediation costs or other liabilities, which could be material. We have limited
      insurance coverage for potential environmental liabilities associated with
      historic and current operations and we do not anticipate increasing such
      coverage in the future. We may also assume significant environmental liabilities
      in acquisitions. In addition, federal, state, local and foreign 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 U.S. 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, there can be 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.




The
      Food
      and Drug Administration (“FDA”) regulates the material content of direct-contact
      food and drug 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 (“CPSC”) pursuant to various federal laws, including
      the Consumer Product Safety Act and the Poison Prevention Packaging 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
      our products that directly contact food and drug 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 not to be 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—Environmental Matters and Government
      Regulation.”




*In
      the event of a catastrophic loss of one of our key manufacturing facilities,
      our
      business would be adversely affected.*




While
      we
      manufacture our products in a large number of diversified facilities and
      maintain insurance covering our facilities, including business interruption
      insurance, a catastrophic loss of the use of all or a portion of one of our
      key


-14-


manufacturing
      facilities due to accident, labor issues, weather conditions, natural disaster
      or otherwise, whether short or long-term, could have a material adverse effect
      on us.




*Our
      future required cash contributions to our pension plans may increase.* ****




Congress
      recently passed legislation (which was signed into law by President Bush) to
      reform funding requirements for underfunded pension plans. The legislation,
      among other things, increases the percentage funding target from 90% to 100%
      and
      requires the use of a more current mortality table in the calculation of minimum
      yearly funding requirements. In fiscal 2006, we contributed $1.2 million to
      our
      U.S. defined benefit pension plans. Our future required cash contributions
      to
      our U.S. defined benefit pension plans may increase based on the funding reform
      provisions that were enacted into law. In addition, if the performance of assets
      in our pension plans does not meet our expectations, or if other actuarial
      assumptions are modified, our future required cash contributions could increase.
      Any such increases could have a material and adverse effect on our business,
      financial condition or results of operations.




The
      need
      to make these cash contributions may reduce the cash available to meet our
      other
      obligations or to meet the needs of our business. In addition, the PBGC may
      terminate our defined benefit pension plans under limited circumstances,
      including in the event the PBGC concludes that its risk may increase
      unreasonably if such plans continue. In the event a plan is terminated for
      any
      reason while it is underfunded, we could be required to make an immediate
      payment to the PBGC of all or a substantial portion of such plan’s underfunding,
      as calculated by the PBGC based on its own assumptions (which might result
      in a
      larger pension obligation than that based on the assumptions we have used to
      fund such plan), and the PBGC could assert a lien on material amounts of our
      assets.




*Our
      business operations could be significantly disrupted if members of our senior
      management team were to leave.*




Our
      success depends to a significant degree upon the continued contributions of
      our
      senior management team. Our senior management team has extensive manufacturing,
      finance and engineering experience, and we believe that the depth of our
      management team is instrumental to our continued success. While we have entered
      into employment agreements with certain executive officers, the loss of any
      of
      our key executive officers in the future could significantly impede our ability
      to successfully implement our business strategy, financial plans, expansion
      of
      services, marketing and other objectives.




*Goodwill
      and other intangibles represent a significant amount of our net worth, and
      a
      write-off could result in lower reported net income and a reduction of our
      net
      worth.*




At
      the
      end of fiscal 2006, the net value of our goodwill and other intangibles was
      $1,733.3 million. **** In
      July
      2001, the Financial Accounting Standards Board issued Statements of Financial
      Accounting Standards No. 142, Goodwill and Other Intangible Assets. Under this
      accounting 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 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
      non-cash 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.




*We
      are controlled by Apollo, and its interests as an equity holder may conflict
      with yours.*




A
      majority of the common stock of our parent company, Berry Plastics Group, on
      a
      fully-diluted basis, is held by Apollo. Apollo controls Berry Plastics Group
      and
      therefore us as a wholly-owned subsidiary of Berry Plastics Group. As a result,
      Apollo has the power to elect a majority of the members of our board of
      directors, appoint new management and approve any action requiring the approval
      of the holders of Berry Plastics Group’s stock, including approving acquisitions
      or sales of all or substantially all of our assets. The directors elected by
      Apollo have the ability to control decisions affecting our capital structure,
      including the issuance of additional capital stock, the implementation of stock
      repurchase programs and the declaration of dividends. Apollo’s interests may not
      in all cases be aligned with your interests. For example, if we encounter
      financial difficulties or are unable to pay our debts as they mature, Apollo’s
      interests, as equity holders, might conflict with your interests. Affiliates
      of
      Apollo may also have an interest in pursuing acquisitions, divestitures,
      financings and other transactions that, in their judgment, could enhance their
      equity investments, even though such transactions might


-15-


involve
      risks to you. Additionally, Apollo is in the business of investing in companies
      and may, from time to time, acquire and hold interests in businesses that
      compete directly or indirectly with us. Furthermore, Apollo has no continuing
      obligation to provide us with debt or equity financing or to provide us with
      joint purchasing or similar opportunities with its other portfolio companies.
      Apollo may also pursue acquisition opportunities that may be complementary
      to
      our business and, as a result, those acquisition opportunities may not be
      available to us.





**Item
      1B.**  **UNRESOLVED
      STAFF COMMENTS**




None





**Item
      2.** **PROPERTIES**




We
      believe that our property and equipment is well-maintained, in good operating
      condition and adequate for our present needs. The following table sets forth
      our
      principal manufacturing facilities as of December 30, 2006:





**Location**
            **Square
                Footage**
            **Use**
            **Owned/Leased**Evansville,
                IN
            552,000
            Headquarters
                and manufacturing
            OwnedEvansville,
                IN
            223,000
            Manufacturing
            LeasedHenderson,
                NV
            175,000
            Manufacturing
            OwnedIowa
                Falls, IA
            100,000
            Manufacturing
            OwnedCharlotte,
                NC
            150,000
            Manufacturing
            OwnedLawrence,
                KS
            424,000
            Manufacturing
            OwnedSuffolk,
                VA
            110,000
            Manufacturing
            OwnedMonroeville,
                OH
            350,000
            Manufacturing
            OwnedNorwich,
                England
            88,000
            Manufacturing
            OwnedWoodstock,
                IL
            170,000
            Manufacturing
            OwnedStreetsboro,
                OH
            140,000
            Manufacturing
            OwnedBaltimore,
                MD
            244,000
            Manufacturing
            OwnedMilan,
                Italy
            125,000
            Manufacturing
            LeasedChicago,
                IL
            472,000
            Manufacturing
            LeasedRichmond,
                IN
            160,000
            Manufacturing
            OwnedSyracuse,
                NY
            215,000
            Manufacturing
            LeasedPhoenix,
                AZ
            266,000
            Manufacturing
            LeasedAhoskie,
                NC
            150,000
            Manufacturing
            OwnedBowling
                Green, KY
            168,000
            Manufacturing
            LeasedSarasota,
                FL
            74,000
            Manufacturing
            OwnedJackson,
                TN
            211,000
            Manufacturing
            LeasedAnaheim,
                CA
            248,000
            Manufacturing
            LeasedCranbury,
                NJ
            204,000
            Manufacturing
            LeasedEasthampton,
                MA
            210,000
            Manufacturing
            LeasedOxnard,
                CA
            110,000
            Manufacturing
            LeasedToluca,
                Mexico
            172,000
            Manufacturing
            Leased5,511,000





**Item
      3.** **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.





**Item
      4.** **SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**





None.


-16-


**PART
      II**





**Item
      5.**  **MARKET
      FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER**


**MATTERS**





There
      is
      no established public trading market for any class of common stock of Berry
      Plastics Holding Corporation or Berry Plastics Group, Inc. All of the issued
      and
      outstanding common stock of the Berry Plastics Holding Corporation is held
      by
      Berry Plastics Group, Inc. With respect to the capital stock of Group, as of
      March 1, 2007, there were approximately 280 holders of the common stock. Holding
      or Group has not paid cash dividends on its capital stock since the Merger.
      See
      Item 12 of this Form 10-K entitled “Security Ownership of Certain Beneficial
      Owners and Management and Related Stockholder Matters” regarding equity
      compensation plan information.


-17-


**Item
      6.**  **SELECTED
      FINANCIAL DATA**





The
      following selected financial data are derived from our consolidated financial
      statements. The data should be read in connection with the consolidated
      financial statements, related notes and other financial information included
      herein. Our fiscal year is a 52/53 week period ending generally on the Saturday
      closest to December 31. All references herein to “2006,” “2005,” “2004,” “2003,”
and “2002,” relate to the fiscal years ended December 30, 2006, December 31,
      2005, January 1, 2005, December 27, 2003, and December 28, 2002, respectively.
      For analysis purposes, the results under Holding’s prior ownership
      (“Predecessor”) have been combined with results subsequent to the Merger on
      September 20, 2006. Our historical consolidated financial information may not
      be
      comparable to or indicative of our future performance. For a discussion of
      certain factors that materially affect the comparability of the consolidated
      financial data or cause the data reflected herein not to be indicative of our
      future financial condition or results of operations, see “Risk
      Factors.”




**Berry
                  Plastics Holding Corporation****Fiscal****Combined
                  Company & Predecessor**
              
              **Predecessor**
              
              **Predecessor**
              
              **Predecessor**
              
              **Predecessor****2006**
              
              **2005**
              
              **2004**
              
              **2003**
              
              **2002****(in
                  thousands of dollars)**Statement
                  of Operations Data:Net
                  sales
              
              
              1,431,764
              
              $
              1,169,704
              
              $
              814,213
              
              $
              551,876
              
              $
              494,303Cost
                  of goods sold
              
              
              1,156,368
              
              
              943,370
              
              
              639,329
              
              
              420,750
              
              
              371,273Gross
                  profit
              
              
              275,396
              
              
              226,334
              
              
              174,884
              
              
              131,126
              
              
              123,030Operating
                  expenses (a)
              
              
              209,462
              
              
              110,545
              
              
              81,008
              
              
              59,936
              
              
              77,467Operating
                  income
              
              
              65,934
              
              
              115,789
              
              
              93,876
              
              
              71,190
              
              
              45,563Other
                  expenses (income) (b)
              
              
              (299
              )
              
              1,354
              
              
              —
              
              
              (7
              )
              
              299Loss
                  on extinguished debt (c)
              
              
              39,916
              
              
              7,045
              
              
              —
              
              
              250
              
              
              25,328Interest
                  expense, net (d)
              
              
              111,280
              
              
              73,274
              
              
              53,185
              
              
              45,413
              
              
              49,254Income
                  (loss) before income taxes
              
              
              (84,963
              )
              
              34,116
              
              
              40,691
              
              
              25,534
              
              
              (29,318
              )Income
                  taxes (benefit)
              
              
              (9,795
              )
              
              14,325
              
              
              17,740
              
              
              12,486
              
              
              3,298Net
                  income (loss)
              
              
              (75,168
              )
              
              19,791
              
              
              22,951
              
              
              13,048
              
              
              (32,616
              )Preferred
                  stock dividends
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              6,468Amortization
                  of preferred stock discount
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              574Net
                  income (loss) attributable to common stockholders
              
              $
              (75,168
              )
              $
              19,791
              
              $
              22,951
              
              $
              13,048
              
              $
              (39,658
              )Balance
                  Sheet Data (at end of year):Working
                  capital
              
              $
              175,553
              
              $
              201,781
              
              $
              90,094
              
              $
              87,571
              
              $
              64,201Fixed
                  assets
              
              
              463,977
              
              
              423,444
              
              
              281,972
              
              
              282,977
              
              
              193,132Total
                  assets
              
              
              2,568,656
              
              
              1,647,830
              
              
              1,005,144
              
              
              1,015,806
              
              
              760,576Total
                  debt
              
              
              1,872,874
              
              
              1,160,620
              
              
              697,558
              
              
              751,605
              
              
              609,943Stockholders'
                  equity
              
              
              294,187
              
              
              203,388
              
              
              183,891
              
              
              152,591
              
              
              75,163Other
                  Data:Depreciation
                  and amortization (e)
              
              
              109,359
              
              
              88,720
              
              
              60,816
              
              
              44,078
              
              
              41,965Capital
                  expenditures
              
              
              92,062
              
              
              57,829
              
              
              52,624
              
              
              29,949
              
              
              28,683


(a)
      Operating expenses include $70,122 and $20,987 related to the Merger and prior
      merger during fiscal 2006 and 2002, respectively.





(b)
      Other
      expenses (income) consist of net losses (gains) on disposal of property and
      equipment and unrealized losses (gains) on investment in Southern Packaging
      for
      the respective years.





(c)
      In
      2006, the loss on extinguished debt represents tender premiums paid and
      write-off of the unamortized debt premium in connection with redeeming the
      10 3⁄4%
      senior subordinated notes payable, write-off of deferred financing fees
      associated with the senior subordinated notes payable and the old senior secured
      credit facility, the termination of interest rate swaps, and the write-off
      of
      financing fees for bridge financing that was arranged to fund the Merger but
      was
      not utilized. In 2005, the loss on extinguished debt represents unamortized
      deferred financing costs on the term loan expensed as a result of an amendment
      to the old senior credit facility. The loss on extinguished debt in 2003
      represents the legal costs associated with amending the old senior credit
      facility in connection with the acquisition of Landis. As a result of the
      r etirement
      all of Holding’s senior secured notes and Berry Plastics’ senior subordinated
      notes and the repayment of all amounts owed under our credit
      facilities ,
      $6.6
      million of existing deferred financing fees and $18.7 million of pr epayment
      fees and related charges were charged to expense in 2002 as a loss on
      extinguished debt.





(d)
      Includes non-cash interest expense of $2,951, $1,945, $1,862, $2,318, and
      $2,476, in fiscal 2006, 2005, 2004, 2003, and 2002, respectively.





(e)
      Depreciation and amortization excludes non-cash amortization of deferred
      financing fees and debt premium/discount amortization which are included in
      interest expense.


-18-


**Item
      7.**  **MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS**





Unless
      the context requires otherwise, references in this Management's Discussion
      and
      Analysis of Financial Condition and Results of Operations to “Holding” refer to
      Berry Plastics Holding Corporation, references to “we,” “our” or “us” refer to
      Berry Plastics Holding Corporation together with its wholly-owned subsidiary,
      Berry Plastics Corporation (“Berry”), and Berry’s wholly-owned subsidiaries.
      Holding is a wholly-owned subsidiary of Berry Plastics Group, Inc. (“Group”).
      You should read the following discussion in conjunction with the consolidated
      financial statements of Holding and its subsidiaries and the accompanying notes
      thereto, which information is included elsewhere herein. For analysis purposes,
      the results under Holding’s prior ownership (“Predecessor”) have been combined
      with results subsequent to the merger on September 20, 2006 described below.
      This discussion contains forward-looking statements and involves numerous risks
      and uncertainties, including, but not limited to, those described in the “Risk
      Factors” section. Our actual results may differ materially from those contained
      in any forward-looking statements.





On
      September 20, 2006, BPC Acquisition Corp. merged with and into BPC Holding
      Corporation pursuant to an agreement and plan of merger (the “Merger”), dated
      June 28, 2006, with BPC Holding Corporation continuing as the surviving
      corporation. Following the consummation of the Merger, BPC Holding Corporation
      changed its name to Berry Plastics Holding Corporation. Pursuant to the Merger,
      Holding is a wholly-owned subsidiary of Group, the principal stockholders of
      which are Apollo Investment Fund VI, L.P., AP Berry Holdings, LLC, an affiliate
      of Graham Partners II, L.P., and management. Apollo Investment Fund VI, L.P.
      and
      AP Berry Holdings, LLC are affiliates of Apollo Management, L.P. (the “Buyer”),
      which is a private investment firm. Graham Partners II, L.P. is an affiliate
      of
      Graham Partners, Inc. (“Graham”), a private equity firm. The Buyer and its
      affiliates own 72% of the common stock of Group. The remaining common stock
      is
      primarily held by an affiliate of Graham Partners II, L.P., which owns 10%
      and
      members of Berry’s management which own 16%.




**Overview**





We
      believe we are one of the world’s leading manufacturers and suppliers of
      value-added plastic packaging products. We manufacture a broad range of
      innovative, high quality packaging solutions using our collection of over 1,500
      proprietary molds and an extensive set of internally developed processes and
      technologies. Our principal products include open top containers, drink cups,
      bottles, closures and overcaps, tubes and prescription vials which we sell
      into
      a diverse selection of attractive and stable end markets, including food and
      beverage, healthcare, personal care, quick service and family dining
      restaurants, custom and retail. We sell our packaging solutions to over 8,000
      active customers comprised of a favorable balance of leading national blue-chip
      customers as well as a collection of smaller local specialty businesses. We
      believe that our proprietary tools and technologies, low-cost manufacturing
      capabilities and significant operating and purchasing scale provide us with
      a
      competitive advantage in the marketplace. Our unique combination of leading
      market positions, proven management team, product and customer diversity and
      manufacturing and design innovation provides access to a variety of growth
      opportunities and has allowed us to achieve consistent organic volume growth
      in
      excess of market growth rates. Our top 10 customers represented approximately
      27% of our fiscal 2006 net sales with no customer accounting for more than
      6% of
      our fiscal 2006 net sales. The average length of our relationship with these
      customers was 21 years. Additionally, we operate 25 high-volume manufacturing
      facilities and have extensive distribution capabilities. We organize our
      business into two operating divisions: open top and closed top. At the end
      of
      fiscal 2006, we had approximately 6,600 employees.





**Critical
      Accounting Policies and Estimates**





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.


-19-


*Allowance
      for Doubtful Accounts.* 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. Additionally,
      our allowance for doubtful accounts includes a reserve for cash discounts that
      are offered to some of our customers for prompt payment. We believe, based
      on
      past history and our credit policies, that our net accounts receivable are
      of
      good quality. A ten percent increase or decrease in our bad debt experience
      would not have a material impact on the results of operations of the Company.
      Our allowance for doubtful accounts was $5.4 million and $5.8 million as of
      December 30, 2006 and December 31, 2005, respectively.





*Inventory
      Obsolescence* .
      We
      evaluate our reserve for inventory obsolescence on a quarterly basis and review
      inventory on-hand to determine future salability. We base our determinations
      on
      the age of the inventory and the experience of our personnel. We reserve
      inventory that we deem to be not salable in the quarter in which we make the
      determination. We believe, based on past history and our policies and
      procedures, that our net inventory is salable. A ten percent increase or
      decrease in our inventory obsolescence experience would not have a material
      impact on the results of operations of the Company. Our reserve for inventory
      obsolescence was $8.0 million and $8.5 million as of December 30, 2006 and
      December 31, 2005, respectively.





*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, obtain an independent actuarial analysis on
      an
      annual basis and perform payment lag analysis. Based on our analysis, we believe
      that our recorded medical claims liability should be sufficient. A ten percent
      increase or decrease in our medical claims experience would not have a material
      impact on the results of operations of the Company. Our accrued liability for
      medical claims was $4.0 million and $5.1 million, including reserves for
      expected medical claims incurred but not reported, as of December 30, 2006
      and
      December 31, 2005, respectively.





*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 should be sufficient. A ten percent increase or decrease in our
      workers’ compensations claims experience would not have a material impact on the
      results of operations of the Company. Our accrued liability for workers’
compensation claims was $5.0 million and $4.7 million as of December 30, 2006
      and December 31, 2005, respectively.





*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.





*Impairments
      of Long-Lived Assets* .
      In
      accordance with the methodology described in Statement of Financial Accounting
      Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of
      Long-Lived Assets, we review long-lived assets for impairment whenever events
      or
      changes in circumstances indicate the carrying amount of such assets may not
      be
      recoverable. Impairment losses are recorded on long-lived assets used in
      operations when indicators of impairment are present and the undiscounted cash
      flows estimated to be generated by those assets are less than the assets’
carrying amounts. The impairment loss is measured by comparing the fair value
      of
      the asset to its carrying amount. No impairments were recorded in the financial
      statements included in this Form 10-K.





*Goodwill
      and Other Indefinite Lived Intangible Assets* .
      In
      accordance with the methodology described in SFAS No. 142, Goodwill and Other
      Intangible Assets, we review our goodwill and other indefinite lived intangible
      assets for impairment whenever events or changes in circumstances indicate
      the
      carrying amount of such assets may not be recoverable. Impairment losses are
      recorded when indicators of impairment are present and the undiscounted cash
      flows estimated to be generated by those assets are less than the assets’
carrying amounts. The impairment loss is measured by comparing the fair value
      of
      the asset to its carrying amount. In addition, we annually review our goodwill
      and other indefinite lived intangible assets for impairment. No impairments
      were
      recorded in the financial statements included in this Form
      10-K.


-20-


*Deferred
      Taxes and Effective Tax Rates.* We
      estimate the effective tax rates and associated liabilities or assets for each
      legal entity of ours in accordance with SFAS No. 109. We use tax-planning to
      minimize or defer tax liabilities to future periods. In recording effective
      tax
      rates and related liabilities and assets, we rely upon estimates, which are
      based upon our interpretation of United States and local tax laws as they apply
      to our legal entities and our overall tax structure. Audits by local tax
      jurisdictions, including the United States Government, could yield different
      interpretations from our own and cause the Company to owe more taxes than
      originally recorded. For interim periods, we accrue our tax provision at the
      effective tax rate that we expect for the full year. As the actual results
      from
      our various businesses vary from our estimates earlier in the year, we adjust
      the succeeding interim periods effective tax rates to reflect our best estimate
      for the year-to-date results and for the full year. As part of the effective
      tax
      rate, if we determine that a deferred tax asset arising from temporary
      differences is not likely to be utilized, we will establish a valuation
      allowance against that asset to record it at its expected realizable value.
      Our
      valuation allowance against deferred tax assets was $8.9 million and $6.7
      million as of December 30, 2006 and December 31, 2005, respectively.





*Pension.* Pension
      benefit costs include assumptions for the discount rate, retirement age, and
      expected return on plan assets. Retiree medical plan costs include assumptions
      for the discount rate, retirement age, and health-care-cost trend rates. These
      assumptions have a significant effect on the amounts reported. In addition
      to
      the analysis below, see the notes to the consolidated financial statements
      for
      additional information regarding our retirement benefits. Periodically, we
      evaluate the discount rate and the expected return on plan assets in our defined
      benefit pension and retiree health benefit plans. In evaluating these
      assumptions, we consider many factors, including an evaluation of the discount
      rates, expected return on plan assets and the health-care-cost trend rates
      of
      other companies; our historical assumptions compared with actual results; an
      analysis of current market conditions and asset allocations; and the views
      of
      advisers. In evaluating our expected retirement age assumption, we consider
      the
      retirement ages of our past employees eligible for pension and medical benefits
      together with our expectations of future retirement ages. We believe our pension
      and retiree medical plan assumptions are appropriate based upon the above
      factors. A one percent increase or decrease in our health-care-cost trend rates
      would not have a material impact on the results of operations of the Company.
      Also, a one quarter percentage point change in our discount rate or expected
      return on plan assets would not have a material impact on the results of
      operations of the Company.





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 Holding and its consolidated subsidiaries. This is not to suggest that other
      risk factors such as changes in economic conditions, changes in material costs,
      our ability to pass through changes in material costs, and others could not
      materially adversely impact our consolidated financial position, results of
      operations and cash flows in future periods.





**Recently
      Issued Accounting Standards**





In
      June 2006, the FASB issued Interpretation No. 48, Accounting for
“Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109”
(“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes
      recognized in a company’s financial statements and prescribes a recognition
      threshold and measurement attribute for the financial statement recognition
      and
      measurement of a tax position taken or expected to be taken in a tax return.
      FIN
      48 also provides guidance on description, classification, interest and
      penalties, accounting in interim periods, disclosure and transition. FIN
      48
      becomes effective on January 1, 2007, and the Company does not expect the
      adoption of FIN 48 to have a significant impact on the Company’s results of
      operations or financial position.





The
      Company adopted SFAS No. 154, Accounting Changes and Error Corrections—a
      replacement of APB Opinion No. 20 and FASB Statement No. 3, on
      January 1, 2006. SFAS No. 154 requires retrospective application to
      prior periods’ financial statements of changes in accounting principle, unless
      it is impracticable to determine either the period-specific effects or the
      cumulative effect of the change or unless specific transition provisions are
      proscribed in the accounting pronouncements. SFAS No. 154 does not change
      the accounting guidance for reporting a correction of an error in previously
      issued financial statements or a change in accounting estimate. The adoption
      of
      SFAS No. 154 did not have an impact on our consolidated financial
      statements.





In
      September 2006, the Securities and Exchange Commission released Staff
      Accounting Bulletin No. 108 (“SAB 108”) which provides guidance on how the
      effects of the carryover or reversal of prior year misstatements should be
      considered in quantifying a current year misstatement. SAB 108 requires entities
      to quantify the effects of unadjusted errors using both a balance sheet and
      an
      income statement approach. Entities are required to evaluate whether either
      approach results in a




-21-


quantifying
      misstatement that is material. The Company adopted SAB 108 effective 2006.
      The
      adoption of SAB 108 did not have an impact on our consolidated financial
      statements.





In
      September 2006, the FASB issued FASB No. 157, “Fair Value
      Measurements” (“FAS 157”). FAS 157 is definitional and disclosure oriented
      and addresses how companies should approach measuring fair value when required
      by GAAP; it does not create or modify any current GAAP requirements to apply
      fair value accounting. The standard provides a single definition for fair value
      that is to be applied consistently for all accounting applications, and also
      generally describes and prioritizes according to reliability the methods and
      inputs used in valuations. FAS 157 prescribes various disclosures about
      financial statement categories and amounts which are measured at fair value,
      if
      such disclosures are not already specified elsewhere in GAAP. The new
      measurement and disclosure requirements of FAS 157 are effective for the Company
      in the first quarter of 2008. We do not expect the adoption of FAS 157 to have
      a
      significant impact on the Company’s results of operations or financial
      position.





In
      September 2006, the Financial Accounting Standards Board issued FAS 158,
“Employers’ Accounting for Defined Benefit Pension and Other Postretirement
      Plans-an amendment of FASB Statements No. 87, 88, 106, and 132(R)”. FAS 158
      requires employers to recognize the over- or under-funded status of defined
      benefit plans and other postretirement plans in the statement of financial
      position and to recognize changes in the funded status in the year in which
      the
      changes occur through comprehensive income. In addition, FAS 158 requires
      employers to measure the funded status of plans as of the date of the year-end
      statement of financial position. The recognition and disclosure provisions
      of
      FAS 158 are effective for fiscal years ending after December 15, 2006, while
      the
      requirement to measure plan assets and benefit obligations as of a company’s
      year-end date is effective for fiscal years ending after December 15, 2008
      (the
      Company currently uses the fiscal year ending date). The adoption of the
      recognition and disclosure provisions of FAS 158 did not have a significant
      impact on the Company’s results of operations or financial position, and the Company
      does not expect the adoption of the remaining provisions to have a material
      affect on the
      Company’s results of operations or financial position .




**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. Most businesses we have acquired had 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.





On
      April
      11, 2005, a subsidiary of Berry, Berry Plastics de México, S. de R.L. de C.V.,
      acquired all of the injection molding aerosol overcap and closure assets from
      Euromex Plastics, S.A. de C.V. (“Euromex”), an injection molding manufacturer
      located in Toluca, Mexico (the “Mexico Acquisition”), for aggregate
      consideration of approximately $8.2 million. The purchase was financed through
      borrowings under the Company’s prior revolving line of credit and cash on hand.
      The operations from the Mexico Acquisition are included in Berry’s operations
      since the acquisition date.





On
      June
      3, 2005, Berry acquired Kerr Group, Inc. (“Kerr”), a manufacturer and marketer
      of closures, bottles, vials, and tubes, for aggregate consideration of
      approximately $455.8 million (the “Kerr Acquisition”), including direct costs
      associated with the acquisition. The purchase price was financed through
      additional term loan borrowings under an amendment to Berry’s prior senior
      secured credit facility and cash on hand. The operations from the Kerr
      Acquisition are included in Berry’s operations since the acquisition date.





**Merger**




On
      September 20, 2006, BPC Acquisition Corp. merged with and into BPC Holding
      Corporation pursuant to an agreement and plan of merger (the “Merger”), dated
      June 28, 2006, with BPC Holding Corporation continuing as the surviving
      corporation. Following the consummation of the Merger, BPC Holding Corporation
      changed its name to Berry Plastics Holding Corporation. Pursuant to the Merger,
      Holding is a wholly-owned subsidiary of Group, the principal stockholders of
      which are Apollo Investment Fund VI, L.P., AP Berry Holdings, LLC, an affiliate
      of Graham Partners II, L.P., and management. Apollo Investment Fund VI, L.P.
      and
      AP Berry Holdings, LLC are affiliates of Apollo




-22-


Management,
      L.P. (the “Buyer”), which is a private investment firm. Graham Partners II, L.P.
      is an affiliate of Graham Partners, Inc. (“Graham”), a private equity firm.




The
      total
      amount of funds required to consummate the Merger and to pay fees related to
      the
      Merger was $2.4 billion. The Merger was primarily funded with (1) the issuance
      of $750.0 million aggregate principal amount of second priority senior secured
      notes, (2) new borrowings of $675.0 million in Term B loans, (3) the
      issuance of $425.0 million aggregate principal amount of senior subordinated
      notes, and (4) contributed equity. The seller used the proceeds received from
      the Merger to repay the outstanding indebtedness and accrued interest of $726.9
      million under the term loans from the old senior secured credit facility and
      $335.0 million plus accrued interest and tender fees to repurchase all of the
      outstanding 10 3⁄4% senior subordinated notes payable due 2012. The Buyer and its
      affiliates own 72% of the common stock of Group. The remaining common stock
      is
      primarily held by an affiliate of Graham Partners II, L.P., which owns 10%
      and
      members of Berry’s management which own 16%. Group loaned $9.8 million to
      non-executive management in order to purchase a portion of the common
      equity.





**Subsequent
      Event**





On
      March
      9, 2007, Group entered into a definitive agreement whereby it agreed to merge
      with Covalence Specialty Materials Holding Corp. in a stock-for-stock merger.
      The resulting company will retain the name Berry Plastics Group, Inc. (“New
      Berry”). Group shareholders will own a majority of New Berry’s common stock
      following the merger. The merger has been approved by written consent of a
      majority of each company’s stockholders, and remains subject to customary
      closing conditions, including receipt of required regulatory approvals.
      Immediately following the merger, the Company and Covalence Specialty Materials
      Corp. (“Covalence”) will be combined as a direct subsidiary of New Berry. The
      Company will remain the primary obligor in respect of the Company’s Second
      Priority Senior Secured Fixed Rate Notes due 2014, Second Priority Senior
      Secured Floating Rate Notes due 2014, and Senior Subordinated Notes due 2016.
      The outstanding credit facilities of Covalence and the Company are expected
      to
      be refinanced at the time of the closing with a new asset based revolver and
      new
      senior secured term loan. The Company currently expects the closing to occur
      in
      April 2007.





**Year
      Ended December 30, 2006**


**Compared
      to Year Ended December 31, 2005**





*Net
      Sales* .
      Net
      sales increased 22% to $1,431.8 million in 2006 from $1,169.7 million in 2005.
      This $262.1 million increase included approximately $60.0 million or 5% due to the pass through of higher resin costs
      to our customers, increased base business volume of approximately $18.4 million
      or 2%, and acquisition volume of $183.7 million or 16%. Our resin pounds sold,
      excluding acquired businesses, increased by 2% in 2006 over 2005. The following
      discussion in this section provides a comparison by business segment. Open
      top
      net sales increased $61.2 million in 2006 primarily due to the higher selling
      prices noted above and base business volume growth partially offset by soft
      volume with certain major customers. The open top division recorded base
      business volume growth in several product categories with the thermoformed
      polypropylene drink cup product line volume increasing over 33% in 2006. Closed
      top net sales increased $200.9 million with the Kerr Acquisition and Euromex
      Acquisition providing closed top net sales of approximately
      $181.9 million and $1.8 million, respectively, in 2006. The increase in closed
      top net sales was primarily a result of the Kerr Acquisition and Euromex
      Acquisition, increased selling prices, and base business price adjusted volume
      growth in the closure, bottle, and prescription vial product categories
      partially offset by declines in the extruded tube and aerosol overcap
      businesses. The Kerr business experienced strong growth in the first five months
      of 2006 with $181.9 million of sales noted above as compared to $168.3 million
      for the same period a year ago under prior ownership.




*Gross
      Profit* .
      Gross
      profit increased $49.1 million from $226.3 million (19% of net sales) in 2005
      to
      $275.4 million (19% of net sales) in 2006. This increase of 22% includes the combined
      impact of the additional sales volume driven by organic growth and the Kerr
      Acquisition, productivity improvement initiatives, our financial and mechanical
      resin hedging programs, and the timing effect of the 5% increase in net selling
      prices due to higher resin costs passed through to our customers. This was
      partially offset by increased raw material costs and increased manufacturing
      costs primarily due to cost inflation, as well as an $10.1 million charge to
      cost of goods sold for the year as a result of the write-up of inventory to
      net
      realizable value in accordance with purchase accounting from the Merger.
      Significant productivity improvements were made in the current year, including
      the installation of state-of-the-art equipment at several of our facilities.


-23-





*Operating
      Expenses* .
      Selling
      expenses increased by $4.4 million to $38.5 million for 2006 from $34.1 million
      principally as
      a
      result of increased selling expenses associated with higher sales partially
      offset by cost reduction efforts .
      General
      and administrative expenses increased from $49.5 million to $61.3 million in
      2006. This increase of $11.8 million can be primarily attributed to the full
      year’s impact of general and administrative expenses related to the Kerr
      Acquisition, increased accrued bonus expenses, and an increase in non-cash
      stock
      compensation expense. Research and development costs increased $1.7 million
      to
      $7.8 million in 2006 primarily as a result of the Kerr Acquisition and increased
      development efforts. Intangible asset amortization increased from $15.6 million
      in 2005 to $22.7 million for 2006, primarily as a result of i ntangible
      assets resulting from the Merger and the Kerr Acquisition. In connection with
      the Merger, the Predecessor incurred Merger related expenses of approximately
      $70.1 million, consisting
      primarily of investment banking fees, bonuses to management, non-cash
      acceleration and modification of stock option awards, and legal costs. Other
      expenses were $9.1 million for 2006 compared to $5.2 million for 2005. Other
      expenses in 2006 and 2005 primarily relate to transition expenses as a result
      of
      the Kerr Acquisition and Euromex Acquisition.




*Interest
      Expense, Net* .
      Net
      interest expense, including amortization of deferred financing costs and debt
      premium, for 2006 was $111.3 million (8% of net sales) compared to $80.3 million
      (7% of net sales) in 2005, an increase of $31.0 million. This increase is
      primarily attributed to the new
      indebtedness occurred to finance the Merger and the Kerr Acquisition and
      increased rates of interest on borrowings .





*Loss
      on Extinguished Debt.* A s
      a
      result of extinguishing the debt in connection with the Merger, the Predecessor
      recognized a loss on debt extinguishment of $34.0 million primarily consisting
      of tender premiums paid and the write off of the unamortized bond premium in
      connection with redeeming the 10 3⁄4% senior subordinated notes payable, write-off
      of deferred financing fees associated with the senior subordinated notes payable
      and the old senior secured credit facility, and the termination of interest
      rate
      swaps. In addition, the Company recorded an expense of $5.9 million related
      to
      the write-off of financing fees for bridge financing that was arranged to fund
      the Merger but was not utilized.





*Income
      Taxes* .
      In
      2006, we recorded an income tax benefit of $9.8 million, or an effective tax
      rate of 12%, compared to income tax expense of $14.3 million, or an effective
      tax rate of 42%, in 2005. The
      decrease of $24.1 million can be attributed to a decrease in net income (loss)
      before income taxes primarily as a result of losses associated with the Merger. In
      2006
      for the predecessor period, the Company recorded a valuation allowance against
      all net operating loss carryforwards . In 2005,
      t he
      effective tax rate is greater than the statutory rate due to the impact of
      state
      taxes and foreign location losses.





*Net
      Income (Loss)* .
      We
      recorded a net loss of $75.2 million in 2006 compared to net income of $19.8
      million in 2005 for the reasons stated above.





**Year
      Ended December 31, 2005**


**Compared
      to Year Ended January 1, 2005**





*Net
      Sales* .
      Net
      sales increased 44% to $1,169.7 million in 2005 from $814.2 million in 2004.
      This $355.5 million increase included approximately $89.5 million or 11% due to the pass through of higher resin
      costs
      to our customers, increased base business volume of approximately $32.7 million
      or 4%, and acquisition volume of $233.3 million or 29%.  In
      2005,
      we reorganized our operations into two reportable segments: rigid open top
      and
      rigid closed top. The realignment occurred in an effort to integrate the
      operations of acquired businesses, better service the Company’s customers, and
      provide a more efficient organization. Prior periods have been restated to
      be
      aligned with the new reporting structure in order to provide comparable results. Rigid
      open top net sales increased $116.4 million in 2005 primarily due to the higher
      selling prices noted above and strong base business volume growth. The rigid
      open top division recorded base business volume growth in several product
      categories with the thermoformed drink cup product line volume increasing over
      40% in 2005. Rigid closed top net sales increased $239.0 million with the Kerr
      Acquisition and Euromex Acquisition providing rigid closed top net sales of
      approximately $229.1 million and $4.2 million, respectively in 2005. The
      increase in rigid closed top net sales was primarily a result of the Kerr
      Acquisition and Euromex Acquisition and increased selling prices on base
      business.




*Gross
      Profit* .
      Gross
      profit increased $51.4 million from $174.9 million (21% of net sales) in 2004
      to
      $226.3 million (19% of net sales) in 2005. This increase of 29% includes the combined
      impact of the additional sales volume, productivity improvement initiatives,
      our
      financial and mechanical resin hedging programs, and the timing effect of the
      11% increase in net selling prices due to higher resin costs passed through
      to
      our customers. This was partially offset by increased raw material costs and
      increased manufacturing costs primarily due to cost inflation. The decline
      in
      gross


-24-


profit
      percentage from 21% in 2004 to 19% in 2005 can be attributed in part to the
      mathematical effect of the 11% increase in net selling prices due to higher
      resin costs passed through to our customers. Also, the historical margin
      percentage of the business acquired in the Kerr Acquisition was significantly
      less than the Company’s historical gross margin percentage, which reduced our
      consolidated margin percentage. In addition, an expense of $0.7 million was
      charged to cost of goods sold in 2005 related to the write-up and subsequent
      sale of Kerr’s finished good inventory to fair market value in accordance with
      purchase accounting. We have continued to consolidate products and business
      of
      recent acquisitions to the most efficient tooling and plant location, providing
      customers with improved products and customer service.





*Operating
      Expenses* .
      Selling
      expenses increased by $7.7 million to $34.1 million for 2005 from $26.4 million
      principally as
      a
      result of increased selling expenses associated with higher sales partially
      offset by cost reduction efforts .
      General
      and administrative expenses increased from $38.5 million to $49.5 million in
      2005. This increase of $11.0 million can be primarily attributed to general
      and
      administrative expenses from the Kerr Acquisition and increased accrued bonus
      expenses. Research and development costs increased $2.3 million to $6.1 million
      in 2005 primarily as a result of the Kerr Acquisition and increased development
      efforts. Intangible asset amortization increased from $6.5 million in 2004
      to
      $15.6 million for 2005, primarily as a result of additional
      intangible assets resulting from the Kerr Acquisition .
      Other
      expenses were $5.2 million for 2005 compared to $5.8 million for 2004. Other
      expenses in 2005 primarily relate to transition expenses as a result of the
      Kerr
      Acquisition and Euromex Acquisition. Other expenses in 2004 include transition
      expenses of $4.0 million related to the Landis Acquisition and $1.8 million
      related to the shutdown and reorganization of facilities.





*Interest
      Expense, Net* .
      Net
      interest expense, including amortization of deferred financing costs and debt
      premium, for 2005 was $80.3 million (7% of net sales) compared to $53.2 million
      (7% of net sales) in 2004, an increase of $27.1 million. This increase is
      primarily attributed to a write
      off of unamortized deferred financing fees of $7.0 million as a result of an
      amendment to our senior credit facility, additional indebtedness utilized to
      finance the Kerr Acquisition, and increased rates of interest on
      borrowings .





*Income
      Taxes* .
      In
      2005, we recorded income tax expense of $14.3 million, or an effective tax
      rate
      of 42%, compared to $17.7 million, or an effective tax rate of 44%, in 2004. The
      decrease of $3.4 million can be attributed to a decrease in net income before
      income taxes for the reasons stated above. The
      effective tax rate is greater than the statutory rate due to the impact of
      state
      taxes and foreign location losses.





*Net
      Income* .
      We
      recorded net income of $19.8 million in 2005 compared to $23.0 million in 2004
      for the reasons stated above.





**Income
      Tax Matters**





As
      of
      December 30, 2006, Group has unused operating loss carryforwards of $231.6
      million for federal and state income tax purposes which begin to expire in
      2021
      and $28.2 million of foreign operating loss carryforwards. Alternative minimum
      tax credit carryforwards of approximately $7.4 million are available to Group
      indefinitely to reduce future years’ federal income taxes. As a result of the
      Merger, the unused operating loss carryforward is subject to an annual
      limitation. We are in the process of finalizing the computation to determine the
      limitation, but have preliminarily estimated the aggregate limit as a result
      of
      the Merger to be approximately $208.0 million per year. As part of the effective
      tax rate calculation, if we determine that a deferred tax asset arising from
      temporary differences is not likely to be utilized, we will establish a
      valuation allowance against that asset to record it at its expected realizable
      value. Our valuation allowance against deferred tax assets was $8.9 million
      and
      $6.7 million as of December 30, 2006 and December 31, 2005, respectively,
      related to the foreign operating loss carryforwards.





**Liquidity
      and Capital Resources**





*Senior
      Secured Credit Facility*





On
      September 20, 2006, the Company entered into a credit agreement and a related
      guarantee and collateral agreement with a syndicate of lenders. This senior
      secured credit facility (the “Credit Facility”) provides financing of up to
      $875.0 million, consisting of (1) $675.0 million in term loans and (2) a $200.0
      million revolving credit facility. The interest rates per annum applicable
      to
      loans under the Credit Facility are, at the Company’s option, equal to either an
      alternate base rate or an adjusted LIBOR rate for a one-, two-, three- or
      six-month interest period, or a nine- or twelve-month period, if available
      from
      all relevant lenders, in each case, plus an applicable margin. The alternate
      base rate means the greater of (1) Credit Suisse’s prime rate and
      (2) one-half of 1.0% over the weighted average of rates on overnight
      Federal Funds. The Company


-25-


also
      pays
      a customary commitment fee to the lenders under the revolving credit facility
      in
      respect of the unutilized commitments thereunder at a rate equal to
      0.5% per annum (subject to reduction upon attainment of certain leverage
      ratios) and letter of credit and agency fees.





The
      Credit Facility requires a prepayment on outstanding term loans, subject to
      certain exceptions, with (1) beginning with the first full fiscal year after
      the
      closing, 50% (which percentage can be as low as 0% upon the achievement of
      certain leverage ratios) of excess cash flow less the amount of certain
      voluntary prepayments, (2) so long as our total net first lien leverage ratio
      is
      above a certain threshold, 100% of the net cash proceeds of any incurrence
      of
      debt other than excluded debt issuances, and (3) so long as the total net first
      lien leverage ratio is above a certain threshold, 100% of the net cash proceeds
      of all non-ordinary course asset sales and casualty and condemnation events,
      if
      the Company does not reinvest or commit to reinvest those proceeds in assets
      to
      be used in our business or to make certain other permitted investments within
      15
      months. The Company may voluntarily repay outstanding loans under the Credit
      Facility at any time without premium or penalty.





The
      term
      loans amortize each year in an amount equal to 1% per annum in equal
      quarterly installments for the first six years and nine months, with the
      remaining amount payable on September 20, 2013. Principal amounts outstanding
      under the revolving credit facility will be due and payable in full on September
      20, 2012. All obligations under the Credit Facility are unconditionally
      guaranteed by Group and, subject to certain exceptions, each existing and future
      direct and indirect domestic subsidiary. All obligations under the Credit
      Facility and the guarantees of those obligations are secured by substantially
      all assets of the Company and each subsidiary guarantor subject to certain
      exceptions: (1) a first priority pledge of all equity interests of the Company,
      a pledge of 100% of the equity interests of all guarantors and a first priority
      pledge of 65% of the voting equity interests of certain foreign subsidiaries;
      and (2) a first priority security interest in substantially all tangible and
      intangible assets of the Company and each subsidiary guarantor.





The
      Credit Facility contains customary covenants that, among other things, restrict,
      subject to certain exceptions, the ability, and the ability of subsidiaries,
      to
      incur indebtedness, sell assets, make investments, engage in acquisitions,
      mergers or consolidations and make dividend and other restricted payments.
      In
      addition, the Credit Facility requires the Company to maintain the
      total
      net first lien leverage ratio below a certain ratio and also
      contains certain customary affirmative covenants and events of default. The
      Company was in compliance with all the financial and operating covenants at
      December 30, 2006. At December 30, 2006, there were no borrowings outstanding
      on
      the revolving credit facility. The revolving credit facility allows up to $50.0
      million of letters of credit to be issued instead of borrowings. At December
      30,
      2006 and December 31, 2005, the Company had $14.7 million under the
      Credit Facility and the prior credit facility, respectively, in letters of
      credit outstanding. At December 30, 2006, the Company had unused borrowing
      capacity of $185.3 million under the revolving line of credit.





*Second
      Priority Senior Secured Notes*





On
      September 20, 2006, Holding issued $750.0 million of second priority senior
      secured notes (“Second Priority Notes”) comprised of (1) $525.0 million
      aggregate principal amount of 8 7/8% second priority fixed rate notes (“Fixed
      Rate Notes”) and (2) $225.0 million aggregate principal amount of second
      priority senior secured floating rate notes (“Floating Rate Notes”). The Second
      Priority Notes mature on September 15, 2014. Interest on the Fixed Rate Notes
      is
      due semi-annually on March 15 and September 15. The Floating Rate Notes bear
      interest at a rate of LIBOR plus 3.875% per annum, which resets quarterly.
      Interest on the Floating Rate Notes is payable quarterly on March 15,
      June 15, September 15 and December 15 of each year.




The
      Second Priority Notes are secured by a second priority security interest in
      the
      collateral granted to the collateral agent under the Credit Facility for the
      benefit of the holders and other future parity lien debt that may be issued
      pursuant to the terms of the indenture. These liens will be junior in priority
      to the liens on the same collateral securing the Credit Facility and to all
      other permitted prior liens. The Second Priority Notes are guaranteed, jointly
      and severally, on a second priority senior secured basis, by each domestic
      subsidiary that guarantees the Credit Facility. The Second Priority Notes
      contain customary covenants that, among other things, restrict, subject to
      certain exceptions, our ability, and the ability of subsidiaries, to incur
      indebtedness, sell assets, make investments, engage in acquisitions, mergers
      or
      consolidations and make dividend and other restricted payments.




On
      or
      after September 15, 2010 and 2008, the Company may redeem some or all of the
      Fixed Rate Notes and Floating Rate Notes, respectively, at specified redemption
      prices. Additionally, on or prior to September 15, 2009 and 2008, we may redeem
      up to 35% of the aggregate principal amount of the Fixed Rate Notes and Floating
      Rate Notes, respectively, with the net proceeds of specified equity offerings
      at
      specified redemption prices. If a change of control occurs, the Company
      must


-26-


give
      holders of the Second Priority Notes an opportunity to sell their notes at
      a
      purchase price of 101% of the principal amount plus accrued and unpaid interest.




*Senior
      Subordinated Notes*





On
      September 20, 2006, the Company issued $425.0 million in aggregate
      principal amount of senior subordinated notes (“Senior Subordinated Notes”) to
      affiliates of Goldman, Sachs and Co. in a private placement that is exempt
      from
      registration under the Securities Act. The Senior Subordinated Notes are
      unsecured, senior subordinated obligations and are guaranteed on an unsecured,
      senior subordinated basis by each of our subsidiaries that guarantee the Credit
      Facility and the Second Priority Notes. The Senior Subordinated Notes mature
      in
      2016 and bear interest at a rate of 11% per annum. Such interest is payable
      quarterly in cash; provided, however, that on any quarterly interest payment
      date on or prior to the third anniversary of the issuance, the Company can
      satisfy up to 3% of the interest payable on such date by capitalizing such
      interest and adding it to the outstanding principal amount of the Senior
      Subordinated Notes.




The
      Senior Subordinated Notes may be redeemed at the Company’s option under
      circumstances and at redemption prices set forth in the indenture. Upon the
      occurrence of a change of control, the Company is required to offer to
      repurchase all of the Senior Subordinated Notes. The indenture sets forth
      covenants and events of default that are substantially similar to those set
      forth in the indenture governing the Second Priority Notes. The Senior
      Subordinated Notes contain additional affirmative covenants and certain
      customary representations, warranties and conditions.




The
      Company was in compliance with all the financial and operating covenants at
      December 30, 2006. A key financial metric utilized in the calculation in certain
      of the financial covenants noted above is bank compliance EBITDA. The following
      table reconciles our bank compliance EBITDA of $289.7 million for fiscal 2006
      to
      net income.





**Year
                Ended**
              **December
                30,**
              **2006**Bank
                compliance EBITDA
            
            
            289,731Net
                interest expense
            
            
            (111,280
            )Depreciation
            
            
            (86,678
            )Amortization
            
            
            (22,681
            )Income
                tax benefit
            
            
            9,795Gain
                on investment in Southern Packaging
            
            
            299Loss
                on extinguished debt
            
            
            (39,916
            )Merger
                expense
            
            
            (81,309
            )Business
                optimization expense
            
            
            (14,287
            )Pro
                forma synergies
            
            
            (14,557
            )Non-cash
                stock compensation
            
            
            (3,385
            )Management
                fees
            
            
            (900
            )Net
                loss
            
            $
            (75,168
            )





EBITDA
      represents net income (loss) before interest expense, net, income taxes and
      depreciation and amortization. Bank compliance EBITDA represents EBITDA as
      further adjusted. Bank compliance EBITDA is a financial measure used in the
      indentures governing the Second Priority Notes and the Senior Subordinated
      Notes
      and in our Credit Facility as a component of a coverage ratio that is used
      to
      test whether certain transactions are permitted. Adjustments to arrive at bank
      compliance EBITDA are permitted in calculating covenant compliance. We believe
      that the inclusion of these adjustments to net income (loss) applied in
      presenting bank compliance EBITDA are appropriate to provide additional
      information about certain non-cash items and about unusual items that we do
      not
      expect to continue at the same level in the future. Bank compliance EBITDA
      differs from the term “EBITDA” as it is commonly used. EBITDA and bank
      compliance EBITDA are not measures of financial performance under GAAP and
      may
      not be comparable to similarly titled measures of other companies. You should
      not consider our EBITDA or bank compliance EBITDA as alternatives to operation
      or net income (loss), determined in accordance with GAAP, as indicators of
      our
      operating performance, or as an alternative to cash flows from operating
      activities, determined in accordance with GAAP.


-27-


*Contractual
      Obligations and Off Balance Sheet Transactions*




Our
      contractual cash obligations as of December 30, 2006 are summarized in the
      following table.


**Payments
                  Due by Period at December 30, 2006****Total**
              
              **<
                  1 year**
              
              **1-3
                  years**
              
              **4-5
                  years**
              
              **>
                  5 years**Long-term
                  debt, excluding capital leases
              
              
              1,849,187
              
              
              6,750
              
              
              13,500
              
              
              13,500
              
              
              1,815,437Capital
                  leases
              
              
              27,049
              
              
              6,799
              
              
              11,372
              
              
              8,878
              
              
              -Fixed
                  interest rate payments
              
              
              1,287,336
              
              
              162,155
              
              
              324,310
              
              
              324,310
              
              
              476,561Operating
                  leases
              
              
              209,533
              
              
              26,291
              
              
              46,921
              
              
              39,558
              
              
              96,763Purchase
                  obligations (1)
              
              
              80,757
              
              
              80,757
              
              
              -
              
              
              -
              
              
              -Total
                  contractual cash obligations
              
              
              3,453.862
              
              
              282,752
              
              
              396,103
              
              
              386,246
              
              
              2,388,761


(1)  Represents
      open purchase commitments for purchases of resin and capital expenditures in
      the
      normal course of operations.





*Cash
      Flow*





Net
      cash
      provided by operating activities was $170.7 million in 2006 as compared to
      $101.5 million in 2005. This increase of $69.2 million can be primarily
      attributed to improved operating performance and improvements in working
      capital. Net cash provided by operating activities was $101.5 million in 2005
      as
      compared to $75.2 million in 2004. This increase of $26.3 million can be
      primarily attributed to improved operating performance partially offset by
      increased working capital needs due to revenue growth, increased resin costs,
      and increased quantities of resin as a result of mechanical
      hedging.





Net
      cash
      used for investing activities increased from $520.0 million in 2005 to $2,382.3
      million in 2006 primarily as a result of the Merger in 2006 as compared to
      the
      Kerr Acquisition and Euromex Acquisition in 2005. Our capital expenditures
      increased in 2006 to $92.1 million in 2006 from $57.8 million in 2005 primarily
      as a result of additional lines to support our volume growth in thermoformed
      drink cups and having the full year of Kerr in 2006. Capital expenditures in
      2006 included investments of $7.8 million for facility additions and
      renovations, production systems and offices necessary to support production
      operating levels throughout the company, $18.2 million for molds, $52.8 million
      for molding and decorating equipment, and $13.3 million for accessory equipment
      and systems. Net cash used for investing activities increased from $45.5 million
      in 2004 to $520.0 million in 2005 primarily as a result of the Kerr Acquisition
      and Euromex Acquisition in 2005. Capital expenditures in 2005 were $57.8
      million, an increase of $5.2 million from $52.6 million in 2004. Our capital
      expenditure budget for 2007 is expected to be approximately $80.0
      million.





Net
      cash
      provided by financing activities was $2,205.5 million in 2006 as compared to
      $443.2 million in 2005. The change can be primarily attributed to the financing
      of the Merger in 2006 and the Kerr Acquisition and Euromex Acquisition in 2005
      and the new debt structure following the Merger in 2006. Net cash provided
      by
      financing activities was $443.2 million in 2005 as compared to cash used by
      financing activities of $55.7 million in 2004. The change can be primarily
      attributed to the Kerr Acquisition and Euromex Acquisition financing in 2005
      and
      the voluntary prepayment of $45.0 million of the senior term loans in 2004.





Increased
      working capital needs occur whenever we experience strong incremental demand
      or
      a significant rise in the cost of raw material, particularly plastic resin.
      However, we anticipate that our cash interest, working capital and capital
      expenditure requirements for 2007 will be satisfied through a combination of
      funds generated from operating activities and cash on hand, together with funds
      available under the Credit Facility. We base such belief on historical
      experience and the substantial funds available under the Credit Facility.
      However, we cannot predict our future results of operations and our ability
      to
      meet our obligations involves
      numerous risks and uncertainties, including, but not limited to, those described
      in the “Risk Factors” section. In
      particular, increases in the cost of resin which we are unable to pass through
      to our customers or significant acquisitions could severely impact our
      liquidity. At December 30, 2006, our cash balance was $19.5 million, and we
      had
      unused borrowing capacity under the Credit Facility’s borrowing base of $185.3
      million.


-28-





**Item
      7A.**  **QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**





*Interest
      Rate Sensitivity*





We
      are
      exposed to market risk from changes in interest rates primarily through our
      senior secured credit facilities and second priority senior secured notes.
      Our
      senior secured credit facilities are comprised of (i) a $675.0 million term
      loan and (ii) a $200.0 million revolving credit facility. At December 30,
      2006, there were no borrowings outstanding on the revolving credit facility.
      The
      net outstanding balance of the term loan at December 30, 2006 was $673.3
      million. Borrowings under our senior secured credit facilities bear interest,
      at our option, at either an alternate base rate or an adjusted LIBOR rate
      for a one-, two-, three- or six month interest period, or a nine- or
      twelve-month period, if available to all relevant lenders, in each case, plus
      an
      applicable margin. The alternate base rate is the mean the greater of
      (i) Credit Suisse’s prime rate and (ii) one-half of 1.0% over the
      weighted average of rates on overnight Federal Funds as published by the Federal
      Reserve Bank of New York. The adjusted LIBOR rate is determined by reference
      to
      settlement rates established for deposits in dollars in the London interbank
      market for a period equal to the interest period of the applicable loan and
      the
      maximum reserve percentages established by the Board of Governors of the U.S.
      Federal Reserve to which our lenders are subject. Our second priority senior
      secured notes are comprised of (i) $525.0 million fixed rate notes and (ii)
      $225.0 million floating rate notes. The floating rate notes bear interest at
      a
      rate of LIBOR plus 3.875% per annum, which resets quarterly. At December 30,
      2006, the LIBOR rate applicable to the term loan and floating rate notes was
      5.37% and 5.39%, respectively. If the LIBOR rate increases 0.25% and 0.5%,
      we
      estimate an annual increase in our interest expense of $2.2 million and $4.5
      million, respectively.





*Resin
      Cost Sensitivity*




We
      are
      exposed to market risk from changes in plastic resin prices that could impact
      our results of operations and financial condition. We
      purchased approximately $461.7 million of resin in fiscal 2006 with
      approximately 64% of our resin pounds being PP, 22% HDPE, 9% LDPE, 3% PET and
      2%
      other. We
      have
      contractual price escalators and de-escalators tied to the price of resin with
      customers representing more than 60% of net sales that result in price
      increases/decreases to these 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. Less than 10% of our net sales are generated from
      arrangements that exhibit fixed-price characteristics, and we have at times
      and
      may continue to enter into negotiated purchase agreements with resin suppliers
      to lock-in a level of profitability on these arrangements. We also
      opportunistically pursue resin forward hedging transactions in order to manage
      our resin spend and further align our costs with our prices to our customers.
      We
      can further seek to 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 and reducing the quantity of resin in certain of
      our
      products. We believe that using the methods described above we have a proven
      strategy for managing changes in resin prices as evidenced by our consistent
      profitability and earnings growth throughout recent periods of historically
      high
      resin volatility.




Our
      plastic resin purchasing strategy is to deal with only high-quality, dependable
      suppliers, such as Basell, Chevron, Dow, ExxonMobil, Huntsman, Lyondell, Nova,
      Sunoco and Total. We believe that we have maintained strong relationships with
      these key suppliers and expect that such relationships will continue into the
      foreseeable future. The resin market is a global market and, based on our
      experience, we believe that adequate quantities of plastic resins will be
      available at market prices, but we can give you no assurances as to such
      availability or the prices thereof.


-29-


**Item
      8.**    **FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA**





**Index
                to Financial Statements**Report
                of Independent Registered Public Accounting Firm
            F-
                1Consolidated
                Balance Sheets at December 30, 2006 and December 31, 2005
            F-
                2Consolidated
                Statements of Operationsfor
                the periods ended December 30, 2006, December 31, 2005 and
              January
                1, 2005
            F-
                4Consolidated
                Statements of Changes in Stockholders' Equity for the periods ended
                December 30, 2006, December 31, 2005,
              and
                January 1, 2005
            F-
                5Consolidated
                Statements of Cash Flows for the periods ended December 30, 2006,
                December
                31, 2005 and
              January
                1, 2005
            F-
                6Notes
                to Consolidated Financial Statements
            F-
                7**Index
                to Financial Statement Schedules**All
                schedules have been omitted because they are not applicable or not
                required or because the required information is included in
              the
                consolidated financial statements or notes thereto.





**Item
      9.**  **CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE**





Not
      applicable.





**Item
      9A.**  **CONTROLS
      AND PROCEDURES**





(a)
            Evaluation
                of disclosure controls and
                procedures.





Our
      management team is responsible for the preparation and integrity of the
      consolidated financial statements appearing in this Form 10-K. We have
      established disclosure controls and procedures to ensure that material
      information relating to Holding and the Company, including consolidated
      subsidiaries, is made known to members of senior management and the Board of
      Directors.





As
      required by Rule 13a-15 under the Securities Exchange Act of 1934, within the
      90
      days prior to the date of this report, we carried out an evaluation under the
      supervision and with the participation of our management team, including our
      Chief Executive Officer and Chief Financial Officer, of the effectiveness of
      the
      design and operation of our disclosure controls and procedures. Based upon
      that
      evaluation, the Chief Executive Officer and Chief Financial Officer concluded
      that our disclosure controls and procedures are effective to ensure that
      information required to be disclosed by us in the reports we file or submit
      under the Exchange Act is recorded, processed, summarized and reported, within
      the time periods specified in the Securities and Exchange Commission’s rules and
      forms. In connection with the new rules, we currently are in the process of
      further reviewing and documenting our disclosure controls and procedures,
      including our internal controls and procedures for financial reporting, and
      may
      from time to time make changes aimed at enhancing their effectiveness and to
      ensure that our systems evolve with our business.





(b)  Changes
      in internal controls.





None





**Item
      9B.**  **OTHER
      INFORMATION**





None


-30-





**PART
      III**





**Item
      10.** ****  **DIRECTORS
      AND EXECUTIVE OFFICERS OF THE REGISTRANT**




The
      following table provides information regarding the executive officers, officers
      and members of the board of directors of Berry Plastics Group, of which we
      are a
      wholly owned subsidiary, following the consummation of the Merger.


**Name**
              **Age**
              **Title**Ira
                  G. Boots (1) (3)................................
              52
              President,
                  Chief Executive Officer and DirectorR.
                  Brent Beeler......................................
              53
              Executive
                  Vice President and Chief Operating OfficerJames
                  M. Kratochvil............................
              50
              Executive
                  Vice President, Chief Financial Officer, Treasurer and
                  SecretaryAnthony
                  M. Civale (1) (2).............
              32
              DirectorPatrick
                  J. Dalton..............................
              38
              DirectorDonald
                  C. Graham (1).....................
              73
              DirectorSteven
                  C. Graham (2)......................
              47
              DirectorJoshua
                  J. Harris...............................
              41
              DirectorRobert
                  V. Seminara (1) (2) (3)........
              34
              Director




(1)
            Member
                of the Compensation Committee.


(2)
            Member
                of the Audit Committee.


(3)
            Member
                of the Executive Committee.




The
      following table provides information regarding the executive officers, officers
      and members of the board of directors of Berry Plastics Holding Corporation
      following the consummation of the Merger.


**Name**
              **Age**
              **Title**Ira
                  G. Boots (1) (3)............................
              52
              President,
                  Chief Executive Officer and DirectorR.
                  Brent Beeler..................................
              53
              Executive
                  Vice President and Chief Operating OfficerJames
                  M. Kratochvil........................
              50
              Executive
                  Vice President, Chief Financial Officer, Treasurer and
                  SecretaryAnthony
                  M. Civale (1) (2)...............
              32
              DirectorRobert
                  V. Seminara (1) (2) (3)..........
              34
              Director




(1)
            Member
                of the Compensation Committee.


(2)
            Member
                of the Audit Committee.


(3)
            Member
                of the Executive Committee.





**Ira
      G. Boots**  has
      been
      President and Chief Executive Officer since June 2001 of Holding and Berry
      Plastics Corporation, and a Director of Holding and Berry Plastics Corporation
      since April 1992. Prior to that, Mr. Boots served as Chief Operating Officer
      of
      Berry Plastics Corporation since August 2000 and Vice President of Operations,
      Engineering and Product Development of Berry Plastics Corporation since April
      1992. Mr. Boots was employed by our predecessor company from 1984 to December
      1990 as Vice President, Operations.





**R.
      Brent Beeler** was
      named Executive Vice President and Chief Operating Officer of Holding and Berry
      Plastics Corporation in May 2005. He formerly served as President—Containers and
      Consumer Products of Berry Plastics Corporation since October 2003 and has
      been
      an Executive Vice President of Holding since July 2002. He had been Executive
      Vice President and General Manager—Containers and Consumer Products of Berry
      Plastics Corporation since October 2002 and was Executive Vice President and
      General Manager—Containers since August 2000. Prior to that, Mr. Beeler was
      Executive Vice President, Sales and Marketing of Berry Plastics Corporation
      since February 1996 and Vice President, Sales and Marketing of Berry Plastics
      Corporation since December 1990. Mr. Beeler was employed by our predecessor
      company from October 1988 to December 1990 as Vice President, Sales and
      Marketing and from 1985 to 1988 as National Sales Manager.





**James
      M. Kratochvil** has been
      Executive Vice President, Chief Financial Officer, Treasurer and Secretary
      of
      Holding and Berry Plastics Corporation since December 1997. He formerly served
      as Vice President, Chief Financial Officer and


-31-


Secretary
      of Berry Plastics Corporation since 1991, and as Treasurer of Berry Plastics
      Corporation since May 1996. He formerly served as Vice President, Chief
      Financial Officer and Secretary of Holding since 1991. Mr. Kratochvil was
      employed by our predecessor company from 1985 to 1991 as Controller.





**Anthony M.
      Civale** has been
      a member of our Board of Directors since the consummation of the Merger. Mr.
      Civale is a Partner at Apollo, where he has worked since 1999. Prior to that
      time, Mr. Civale was employed by Deutsche Bank Securities in the Corporate
      Finance Department. Mr. Civale also serves on the boards of directors of Goodman
      Global Holdings, Inc. and Covalence Specialty Materials Corp.





**Patrick
      J. Dalton** has
      been
      a member of our Board of Directors since the consummation of the Merger. Mr.
      Dalton is a Partner and member of the Investment Committee of Apollo Investment
      Management, L.P., Apollo’s business development corporation, where he has worked
      since 2004. Prior to that time, Mr. Dalton was employed by Goldman,
      Sachs & Co. in the Principal Investment Area. Mr. Dalton has served, or
      was an observer, on the boards of directors of Playpower Inc., Pro Mach Inc.,
      and Hanley Wood, LLC as well as a number of other private companies.





**Donald
      C. Graham** founded
      the Graham Group, an industrial and investment concern, and has been a member
      of
      our Board of Directors since the consummation of the Merger. The Graham Group
      is
      engaged in a broad array of businesses, including industrial process technology
      development, capital equipment production, and consumer and industrial products
      manufacturing. Mr. Graham founded Graham Packaging Company, in which he sold
      a
      controlling interest in 1998. The Graham Group’s three legacy industrial
      businesses operate in more than 80 locations worldwide, with combined sales
      of
      more than $2.75 billion. Mr. Graham currently serves on the board of directors
      of Western Industries, Inc., Supreme Corq LLC, National Diversified Sales,
      Inc.,
      Infiltrator Systems, Inc., Touchstone Wireless Repair and Logistics LP, Nurture,
      Inc., Graham Engineering Corporation and Graham Architectural Products
      Corporation.





**Steven
      C. Graham** founded
      Graham Partners and has been a member of our Board of Directors since the
      consummation of the Merger. Prior to founding Graham Partners in 1998, Mr.
      Graham oversaw the Graham Group’s corporate finance division starting in 1988.
      Prior to 1988, Mr. Graham was a member of the investment banking division of
      Goldman, Sachs & Co., and was an Acquisition Officer for the RAF Group,
      a private equity investment group. Mr. Graham currently serves on the board
      of
      directors of Graham Architectural Products Corporation, Western Industries,
      Inc., National Diversified Sales, Inc., HB&G Building Products, Inc.,
      Nailite International, Inc., Dynojet, Inc., Supreme Corq LLC, Line-X, LLC,
      Abrisa Industrial Glass, Inc., Infiltrator Systems, Inc., The Masonry Group
      LLC,
      Aerostructures Acquisition, LLC, Transaxle, LLC, and ICG Commerce Holdings,
      Inc.





**Joshua J.
      Harris** has
      been
      a member of our Board of Directors since the consummation of the Merger. Mr.
      Harris is a founding Senior Partner at Apollo and has served as an officer
      of
      certain affiliates of Apollo since 1990. Prior to that time, Mr. Harris was
      a
      member of the Mergers and Acquisitions Department of Drexel Burnham Lambert
      Incorporated. Mr. Harris is also a director of Hexion Specialty Chemicals,
      Inc.,
      Allied Waste Industries, Inc., Metals USA, Inc., Nalco Corporation, Covalence
      Specialty Materials Corp., Quality Distribution Inc., United Agri Products
      and
      Verso Paper Inc.





**Robert V.
      Seminara** has been
      a member of our Board of Directors since the consummation of the Merger. Mr.
      Seminara is a Partner at Apollo, where he has worked since 2003. Prior to that
      time, Mr. Seminara was a managing director of Evercore Partners LLC. Mr.
      Seminara also serves on the boards of directors of Hexion Specialty Chemicals,
      Inc., Covalence Specialty Materials Corp. and World Kitchen Inc.





**Board
      Committees**





Our
      Board
      of Directors has a Compensation Committee, an Audit Committee and Executive
      Committee. The Compensation Committee makes recommendations concerning salaries
      and incentive compensation for our employees and consultants. The Audit
      Committee, which consists of at least one financial expert, 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.


-32-


**Item
      11.** **EXECUTIVE COMPENSATION**





**Compensation
      Discussion and Analysis**





The
      Company has a Compensation Committee comprised of Messrs. Boots, Seminara,
      Civale, and Donald Graham. The annual salary and bonus paid to Messrs. Boots,
      Kratochvil, Beeler, Hobson, and Unfried for fiscal 2006 were determined by
      the
      Compensation Committee in accordance with their respective employment
      agreements. All other compensation decisions with respect to officers of the
      Company are made by Mr. Boots pursuant to policies established in consultation
      with the Compensation Committee. The Company believes that executive
      compensation should be designed to align closely the interest of the Company,
      the executive officers, and its stockholders and attract, motivate reward and
      retain superior management talent. Berry utilizes the following guidelines
      pertaining to executive compensation:





·
            Pay
                compensation that is competitive with the practices of other competing
                businesses





·
            Pay
                for performance by:





·
            Setting
                performance goals for our officers and providing a short-term incentive
                through a bonus plan that is based upon achievement of these goals;
                and





·
            Providing
                long-term incentives in the form of stock options, in order to retain
                those individuals with the leadership abilities necessary for increasing
                long-term shareholder value while aligning with the interests of
                our
                investors





The
      compensation for our executive officers is primarily in the following three
      categories: (1) salary, (2) bonus, and (3) stock options. Berry has selected
      these elements because each is considered useful and/or necessary to meet one
      or
      more of the principal objectives of the business. For instance, base salary
      and
      bonus targets are set with the goal of motivating employees and adequately
      compensating and rewarding them on a day-to-day basis for the time spent and
      the
      services they perform, while our equity programs are geared toward providing
      an
      incentive and reward for the achievement of long-term business objectives and
      retaining key talent. Berry believes that these elements of compensation, when
      combined, are effective, and will continue to be effective.





The
      compensation program is reviewed on an annual basis. In setting individual
      compensation levels for a particular executive, the total compensation package
      is considered as well as each element individually, and the executive’s past and
      expected future contributions to our business.





Messrs.
      Seminara and Civale are partners in Apollo Management. Donald Graham is the
      founder of the Graham Group.  See
      the
      section of this Form 10-K titled “Certain Relationships and Related
      Transactions” for a description of these transactions between us and various
      affiliates of Apollo and Graham.


-33-


The
      following table sets forth a summary of the compensation paid by us to our
      Chief
      Executive Officer and our four other most highly compensated executive officers
      (collectively, the “Named Executive Officers”) for services rendered in all
      capacities to us during fiscal 2006, 2005 and 2004.





**Summary
      Compensation Table**


**Name
                  and Principal Position**
              **Fiscal**
                **Year**
              **Salary**
              **Option**
                **Awards
                  ($)**
              **Bonus
                  (1)**
              **All
                  Other**
                **Compensation**
              **Total
                  ($)**Ira
                  G. Boots
                President
                  and Chief Executive Officer
              2006
                2005
                2004
              $655,088
                455,749
                442,226
              $704,178
                —
                —
              $10,291,398
                299,323
                214,200
              $
                  —
                —
                —
              $11,650,664
                755,072
                656,426James
                  M. Kratochvil
                Executive
                  Vice President, Chief Financial Officer, Treasurer and
                  Secretary
              2006
                2005
                2004
              $359,089
                293,373
                284,909
              $403,332
                —
                —
              $4,543,798
                192,422
                137,700
              $
                  —
                —
                —
              $5,306,219
                485,795
                422,609R.
                  Brent Beeler
                Executive
                  Vice President and Chief Operating Officer
              2006
                2005
                2004
              $552,788
                382,828
                345,995
              $403,332
                135,000
                —
              $4,359,213
                236,325
                156,503
              $
                  —
                —
                —
              $5,315,333
                754,153
                502,498Randall
                  J. Hobson
                President
                  - Rigid Closed Top Division
              2006
                2005
                2004
              $253,075
                177,805
                140,374
              $264,480
                56,520
                —
              $1,023,955
                95,900
                66,634
              $
                  —
                —
                —
              $1,541,510
                330,225
                207,008G.
                  Adam Unfried
                President
                  - Rigid Open Top Division
              2006
                2005
                2004
              $248,148
                183,447
                132,556
              $264,480
                56,520
                —
              $1,029,591
                90,420
                53,550
              $
                  —
                —
                —
              $1,542,219
                330,387
                186,106




(1)  Amounts
      shown include amounts paid to Messrs. Boots, Kratochvil, Beeler, Hobson, and
      Unfried at the time of Merger of $9,450,000, $4,050,000, $3,650,000, $700,000,
      and $700,000, respectively.





**Employment
      Agreements**





In
      connection with the Merger, Berry entered into employment agreements with each
      of Messrs. Boots, Beeler and Kratochvil that supersede their previous employment
      agreements with Berry and that expire on December 31, 2011. In addition, Messrs.
      Hobson and Unfried entered into amendments to their existing employment
      agreements with Berry that extend the terms of such agreements through December
      31, 2011 (each of the agreements with Messrs. Boots, Beeler, Kratochvil, Hobson
      and Unfried, as amended, an “Employment Agreement” and, collectively, the
“Employment Agreements”). The Employment Agreements provided for fiscal 2006
      base compensation as disclosed in the “Summary Compensation Table” above.
      Salaries are subject in each case to annual adjustment at the discretion of
      the
      Compensation Committee of the Board of Directors of Berry Plastics Corporation.
      The Employment Agreements entitle each executive to participate in all other
      incentive compensation plans established for executive officers of Berry. Berry
      may terminate each Employment Agreement for “cause” or a “disability” (as such
      terms are defined in the Employment Agreements). Specifically, if any of Messrs.
      Boots, Beeler, Kratochvil, Hobson, and Unfried is terminated by Berry 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 one year after termination or (b) 1/12 of 1
      year’s base salary for each year of employment up to 30 years with Berry
      Plastics Corporation or a predecessor in interest (excluding Messrs. Hobson
      and
      Unfried which would be entitled to (a) only) and (2) the pro rata portion of
      his
      annual bonus. Each Employment Agreement also includes customary noncompetition,
      nondisclosure and nonsolicitation provisions.





In
      addition, the Named Executive Officers purchased Berry Plastics Group common
      stock and were granted options to purchase Berry Plastics Group Common Stock,
      as
      described elsewhere in this Form 10-K


-34-


**Grants
      of Plan-Based Awards for 2006**





In
      connection with the Merger, we have adopted an equity incentive plan for the
      benefit of certain of our employees, which we refer to as the 2006 Equity
      Incentive Plan. The purpose of the 2006 Equity Incentive Plan is to further
      our
      growth and success, to enable our directors, executive officers and employees
      to
      acquire shares of our common stock, thereby increasing their personal interest
      in our growth and success, and to provide a means of rewarding outstanding
      performance by such persons. See the table below for the grants to our named
      executive officers in 2006 from this incentive plan.




**Name**
              **Grant**
                **Date**
              **All
                  Other Option Awards: Number of**
                **Securities
                  Underlying****Options
                  (#)**
              **Exercise
                  or Base**
                **Price
                  of Option**
                **Awards
                  ($/sh)**
              **Grant
                  Date Fair**
                **Value
                  of Stock and**
                **Option
                  Awards**Ira
                  G. Boots (1)
              9/20/06
              12,141
              $100
              $376,371Ira
                  G. Boots (2)
              9/20/06
              12,141
              $100
              $315,666Ira
                  G. Boots (3)
              9/20/06
              12,141
              $100
              $12,141James
                  M. Kratochvil (1)
              9/20/06
              6,954
              $100
              $215,574James
                  M. Kratochvil (2)
              9/20/06
              6,954
              $100
              $180,804James
                  M. Kratochvil (3)
              9/20/06
              6,954
              $100
              $6,954R.
                  Brent Beeler (1)
              9/20/06
              6,954
              $100
              $215,574R.
                  Brent Beeler (2)
              9/20/06
              6,954
              $100
              $180,804R.
                  Brent Beeler (3)
              9/20/06
              6,954
              $100
              $6,954Randall
                  J. Hobson (1)
              9/20/06
              4,560
              $100
              $141,360Randall
                  J. Hobson (2)
              9/20/06
              4,560
              $100
              $118,560Randall
                  J. Hobson (3)
              9/20/06
              4,560
              $100
              $4,560G.
                  Adam Unfried (1)
              9/20/06
              4,560
              $100
              $141,360G.
                  Adam Unfried (2)
              9/20/06
              4,560
              $100
              $118,560G.
                  Adam Unfried (3)
              9/20/06
              4,560
              $100
              $4,560


(1)  Represents
      options which (i) have an exercise price fixed at $100 per share, which was
      the
      fair market value of a share of Group Common Stock on the date of grant, and
      (ii) vest and become exercisable over a five year period, beginning in fiscal
      2007 based on continued service with the Company.


(2)  Represents
      options which (i) have an exercise price fixed at $100 per share, which was
      the
      fair market value of a share of Group Common Stock on the date of grant, and
      (ii) vest and become exercisable based on the achievement by Group of certain
      financial targets.


(3)  Represents
      options which (i) have an exercise price that commenced at $100 per share,
      which
      was the fair market value of a share of Group Common Stock on the date of grant,
      and will increase at the rate of 15% per year during the term of the option
      starting in fiscal 2007 and (ii) vest and become exercisable over a five year
      period, beginning in fiscal 2007 based on continued service with the
      Company.





**Outstanding
      Equity Awards at Fiscal Year-End Table**




**Name**
              **Number
                  of**
                **Securities**
                **Underlying**
                **Unexercised**
                **Options
                  (#)**
                **Exercisable**
              **Number
                  of**
                **Securities**
                **Underlying**
                **Unexercised**
                **Options
                  (#)**
                **Unexercisable**
              **Option
                  Exercise**
                **Price**
              **Option
                  Expiration**
                **Date**Ira
                  G. Boots
              —
              36,423
              $100
              9/20/16James
                  M. Kratochvil
              —
              20,862
              $100
              9/20/16R.
                  Brent Beeler
              —
              20,862
              $100
              9/20/16Randall
                  J. Hobson
              —
              13,680
              $100
              9/20/16G.
                  Adam Unfried
              —
              13,680
              $100
              9/20/16


-35-


**Option
      Exercises and Stock Vested for 2006**


**Option
                  Awards****Name**
              **Shares
                  Acquired**
                **on****Exercise
                  (1)**
              **Value
                  Realized**
                **on****Exercise (1)**Ira
                  G. Boots
              80,475
              $14,862,455James
                  M. Kratochvil
              46,570
              $8,683,395R.
                  Brent Beeler
              48,259
              $8,943,221Randall
                  J. Hobson
              12,567
              $2,362,964G.
                  Adam Unfried
              8,803
              $1,668,161




(1)
      All
      vested options were settled in cash for the difference between the fair value
      and the exercise cost in connection with the Merger.





**Compensation
      for Directors**





Non-employee
      directors receive $12,500 per quarter plus $2,000 for each meeting they attend
      and are reimbursed for out-of-pocket expenses incurred in connection with their
      duties as directors. Non-employee directors each received 2,000 stock options
      in
      connection with the consummation of the Merger. These options were vested and
      exercisable immediately. For each individual, 1,334 of the options and have
      a
      fixed exercise price of $100 per share, which was the fair market value at
      the
      date of grant, and the remaining 666 options have an exercise price that
      commenced at the fair market value of $100 per share and increases at a rate
      of
      15% per year. For the fiscal year ended December 30, 2006, we paid $150,000
      for
      non-employee directors’ fees as shown in the following table.





**Director
      Compensation Table for 2006**




Name
            
            Fees
                Earned
              or
                Paid in
              Cash
                ($)
            
            Option
              Awards
                ($)
            
            Total
                ($)Anthony
                M. Civale
            
            $
            25,000
            
            $
            41,354
            
            $
            66,354Patrick
                J. Dalton
            
            
            25,000
            
            
            41,354
            
            
            66,354Donald
                C. Graham
            
            
            25,000
            
            
            41,354
            
            
            66,354Steven
                C. Graham
            
            
            25,000
            
            
            41,354
            
            
            66,354Joshua
                J. Harris
            
            
            25,000
            
            
            41,354
            
            
            66,354Robert
                V. Seminara
            
            
            25,000
            
            
            41,354
            
            
            66,354





-36-


**Item
                12.**
            **SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS**





**Stock
      Ownership**





We
      are a
      wholly-owned subsidiary of Group. The following table sets forth certain
      information regarding the beneficial ownership of the common stock, of Group
      with respect to each person that is a beneficial owner of more than 5% of its
      outstanding common stock and beneficial ownership of its common stock by each
      director and each executive officer named in the Summary Compensation Table
      and
      all directors and executive officers as a group as of December 30,
      2006.





**Name
                and Address of Owner**(1)
            
            **Number
                of Shares**
              **of**
              **Common
                Stock**(1)
            **Percent
                of Class**Apollo
                Investment Fund VI, L.P. (2)
            
            3,559,930
            
            72.1
            %AP
                Berry Holdings, LLC (3)
            
            1,641,269
            
            33.3
            %Graham
                Berry Holdings, LP (4)
            
            500,000
            
            10.1
            %Ira
                G. Boots (5)
            
            119,395
            
            2.4
            %James
                M. Kratochvil (5)
            
            67,787
            
            1.4
            %R.
                Brent Beeler (5)
            
            68,010
            
            1.4
            %G.
                Adam Unfried (5)
            
            12,118
            
            *Randall
                J. Hobson (5)
            
            15,246
            
            *Anthony
                M. Civale (6),(7)
            
            2,000
            
            *Patrick
                J. Dalton (6),(7)
            
            2,000
            
            *Donald
                C. Graham (6),(8)
            
            2,000
            
            *Steven
                C. Graham (6),(8)
            
            2,000
            
            *Joshua
                J. Harris (6),(7)
            
            2,000
            
            *Robert
                V. Seminara (6),(7)
            
            2,000
            
            *




All
                directors and executive officers as a group (11 persons)
                (6)
            
            294,556
            
            6.0
            %


*
      Less
      than 1% of common stock outstanding.





(1)
      The
      amounts and percentages of common stock beneficially owned are reported on
      the
      basis of regulations of the SEC governing the determination of beneficial
      ownership of securities. Under the rules of the SEC, a person is deemed to
      be a
“beneficial owner” of a security if that person has or shares voting power,
      which includes the power to vote or direct the voting of such security, or
      investment power, which includes the power to dispose of or to direct the
      disposition of such security. A person is also deemed to be a beneficial owner
      of any securities of which that person has a right to acquire beneficial
      ownership within 60 days. Securities that can be so acquired are deemed to
      be
      outstanding for purposes of computing such person’s ownership percentage, but
      not for purposes of computing any other person’s percentage. Under these rules,
      more than one person may be deemed beneficial owner of the same securities
      and a
      person may be deemed to be a beneficial owner of securities as to which such
      person has no economic interest. Except as otherwise indicated in these
      footnotes, each of the beneficial owners has, to our knowledge, sole voting
      and
      investment power with respect to the indicated shares of common
      stock.





(2)
      Represents all equity interests of Berry Plastics Group held of record by
      controlled affiliates of Apollo Investment Fund VI, L.P., including AP Berry
      Holdings, LLC and BPC Co-Investment Holdings, LLC. Apollo Management VI, L.P.
      has the voting and investment power over the shares held on behalf of Apollo.
      Each of Messrs. Civale, Dalton, Harris, and Seminara, who have relationships
      with Apollo, disclaim beneficial ownership of any shares of Berry Plastics
      Group
      that may be deemed beneficially owned by Apollo Management VI, L.P., except
      to
      the extent of any pecuniary interest therein. Each of Apollo Management VI,
      L.P., AP Berry Holdings, LLC and its affiliated investment funds disclaims
      beneficial ownership of any such shares in which it does not have a pecuniary
      interest. The address of Apollo Management VI, L.P., Apollo Investment Fund
      VI,
      L.P., and AP Berry Holdings LLC is c/o Apollo Management, L.P., 9 West 57th
      Street, New York, New York 10019.





(3)
      The
      address of AP Berry Holdings LLC is c/o Apollo Management, L.P., 9 West 57th
      Street, New York, New York 10019.


-37-





(4) Graham
      Partners II, L.P., as the sole member of the general partner of Graham Berry
      Holdings, LP,  has the voting and investment power over the shares held by
      Graham Berry Holdings, LP. Each of Messrs. Steven Graham and Donald Graham,
      who
      have relationships with Graham Partners II, L.P. and/or Graham Berry Holdings,
      LP, disclaim beneficial ownership of any shares of Berry Plastics Group that
      may
      be deemed beneficially owned by Graham Partners II, L.P. or Graham Berry
      Holdings, LP except to the extent of any pecuniary interest therein. Each
      of Graham Partners II, L.P. and its affiliates disclaims beneficial ownership
      of
      any such shares in which it does not have a pecuniary interest. The address
      of
      Graham Partners II, L.P. and Graham Berry Holdings, LP is 3811 West Chester
      Pike, Building 2, Suite 200 Newton Square, Pennsylvania 19073.





(5)
      The
      address of Messrs. Boots, Beeler, Kratochvil, Unfried, and Hobson is c/o Berry
      Plastics Holding Corporation, 101 Oakley Street, Evansville, Indiana
      47710.





(6)
      Includes 2,000 shares underlying options that are vested or scheduled to vest
      within 60 days of September 20, 2006 for each of Messrs. Civale, Dalton, Donald
      Graham, Steven Graham, Harris and Seminara.





(7)
      The
      address of Messrs. Civale, Harris, Seminara and Dalton is c/o Apollo Management,
      L.P., 9 West 57th Street, New York, New York 10019.





(8)
      The
      address of Messrs. Steven Graham and Donald Graham is c/o Graham Partners II,
      L.P. is 3811 West Chester Pike, Building 2, Suite 200 Newtown Square,
      Pennsylvania 19073.





**Equity
      Compensation Plan Information**





The
      following table provides information as of December 30, 2006 regarding shares
      of
      common stock of Group that may be issued under our existing equity compensation
      plan.





Plan
                category
            Number
                of securities to be
              issued
                upon exercise of
              outstanding
                options,
              warrants
                and rights
            Weighted
                Average
              exercise
                price of
              outstanding
                options,
              warrants
                and rights
            Number
                of securities
              remaining
                available for
              future
                issuance under
              equity
                compensation plan
              (excluding
                securities
              referenced
                in column (a))(a)
            (b)
            (c)Equity
                compensation plans
              approved
                by security holders
            —
            —
            —Equity
                compensation plans not
              approved
                by security holders (1)
            500,184
                (2)
            100
            77,068Total
            500,184
            100
            77,068





(1)  Consists
      of the 2006 Equity Incentive Plan which our Board adopted in September 2006.


(2)  Does
      not
      include shares of Group Common Stock already purchased as such shares are
      already reflected in the Company’s outstanding shares.





**2006
      Equity Incentive Plan**





In
      connection with the Merger, we have adopted an equity incentive plan for the
      benefit of certain of our employees, which we refer to as the 2006 Equity
      Incentive Plan. The purpose of the 2006 Equity Incentive Plan is to further
      our
      growth and success, to enable our directors, executive officers and employees
      to
      acquire shares of our common stock, thereby increasing their personal interest
      in our growth and success, and to provide a means of rewarding outstanding
      performance by such persons. Options granted under the 2006 Equity Incentive
      Plan may not be assigned or transferred, except to us or by will or the laws
      of
      descent or distribution. The 2006 Equity Incentive Plan terminates ten years
      after adoption and no options may be granted under the plan thereafter. The
      2006
      Equity Incentive Plan allows for the issuance of non-qualified options, options
      intended to qualify as “incentive stock options” within the meaning of the
      Internal Revenue Code of 1986, as amended, and stock appreciation rights.


-38-


The
      employees participating in the 2006 Equity Incentive Plan receive options and
      stock appreciation rights under the 2006 Equity Incentive Plan pursuant to
      individual option and stock appreciation rights agreements, the terms and
      conditions of which are substantially identical. Each option agreement provides
      for the issuance of options to purchase common stock of Berry Plastics Group.




As
      of
      December 30, 2006, there were outstanding options to purchase 494,720 shares
      of
      Group’s common stock and stock appreciation rights with respect to 5,464 shares
      of Group’s common stock.





**Management
      Equity Buy-In**





In
      connection with the Merger, members of our management team have made equity
      investments in Berry Plastics Group through the purchase of common stock in
      Berry Plastics Group. Such members of senior management and other employees
      have
      made their equity investments in Berry Plastics Group by using a portion of
      the
      compensation they received, or would have otherwise received, in connection
      with
      the Merger. The purchase price paid for their equity was based on the purchase
      price paid by the Sponsors. The equity securities that they have purchase are
      subject to restrictions on transfer, repurchase rights and other limitations
      set
      forth in a stockholders agreement. See “Certain Relationships and Related Party
      Transactions.” In total, our employees, including members of our senior
      management team, own approximately 23% of the equity of Berry Plastics Group
      on
      a fully diluted basis. We have made, and from time to time in the future we
      may
      make, secured loans to certain of our employees who are not executive officers
      to finance the purchase of Berry Plastics Group common stock by such employees.
      In connection with the Merger, Group loaned $9.8 million to non-executive
      management in order to purchase a portion of the common equity.





**Item
      13.** **CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
      INDEPENDENCE**





**Stockholders
      Agreement with Management**





We
      make
      cash payments to Berry Plastics Group to enable it to pay any (i) federal,
      state or local income taxes to the extent that such income taxes are directly
      attributable to our and our subsidiaries’ income, (ii) franchise taxes and
      other fees required to maintain Berry Plastics Group’s legal existence and
      (iii) corporate overhead expenses incurred in the ordinary course of
      business and salaries or other compensation of employees who perform services
      for both Berry Plastics Group and us.





Prior
      to
      the Merger, Goldman Sachs Credit Partners, L.P., an affiliate of Goldman Sachs,
      acted as the administrative agent, joint lead arranger and joint bookrunner
      for
      the Second Amended and Restated Retired Credit Facility without separate
      compensation. JP Morgan Chase Bank, an affiliate of J.P. Morgan, acted as the
      joint lead arranger and joint bookrunner for the Second Amended and Restated
      Credit Facility for consideration of approximately $0.4 million. In addition,
      the Company entered into four resin forward contracts in the fourth quarter
      of
      2004 ranging from 6.0 million to 33.6 million annual pounds of resin with J.
      Aron & Company, a division of Goldman, Sachs & Co., and entered into
      foreign currency transactions through its normal course of business with
      Goldman, Sachs & Co. In
      June
      2005, Berry entered into two separate interest rate swap transactions, which
      were cancelled in the third quarter before the Merger, for $100.0 million each
      with an
      affiliate of Goldman Sachs and an affiliate of J.P. Morgan to
      protect a portion of the outstanding variable rate term loan debt from future
      interest rate volatility.





Also
      prior to the Merger, in connection with the Kerr Acquisition, the Company paid
      $2.7 million to entities affiliated with Goldman, Sachs & Co. and $1.3
      million to entities affiliated with J.P. Morgan Chase & Co., for advisory
      and other services. Goldman Sachs and J.P. Morgan Chase Bank, an affiliate
      of
      J.P. Morgan, acted as co-syndication agents, joint lead arrangers, and joint
      bookrunners for the Second Amendment to the Second Amended and Restated Retired
      Credit Facility for consideration of $2.7 million and $2.4 million,
      respectively. Goldman Sachs Credit Partners, L.P., an affiliate of Goldman
      Sachs, acted as the co-syndication agent, joint lead arranger and joint
      bookrunner for the Third Amendment to the Second Amended and Restated Retired
      Credit Facility without separate compensation. JP Morgan Chase Bank, an
      affiliate of J.P. Morgan, acted as the co-syndication agent, joint lead
      arranger, and joint bookrunner for the Third Amendment to the Second Amended
      and
      Restated Retired Credit Facility for consideration of $0.5 million. Also,
      affiliates of Goldman Sachs & Co. and J.P. Morgan invest in a portion of the
      Company’s credit facilities in its normal course of business. In
      connection with the Merger, the Company paid $19.7 million to affiliates
      of Goldman Sachs & Co. and J.P. Morgan for
      advisory and other services.





In
      connection with the Merger, Apollo and Graham and certain of our employees
      who
      invested in Berry Plastics Group entered into a stockholders agreement. The
      stockholders agreement provides for, among other things, a restriction on
      the


-39-


transferability
      of each such person’s equity ownership in us, tag-along rights, drag-along
      rights, piggyback registration rights and repurchase rights by us in certain
      circumstances.





Apollo
      and Graham have entered into a management agreement with us and Berry Plastics
      Group relating to the provision of certain financial and strategic advisory
      services and consulting services. We pay Apollo and Graham an annual management
      fee equal to the greater of $3.0 million and 1.25% of our Adjusted EBITDA,
      as
      defined in the bond indenture, and reimburse Apollo and Graham for out-of-pocket
      expenses incurred in the performance of their obligations under the agreement.
      We have agreed to indemnify Apollo and Graham and each of their affiliates
      and
      their directors, officers and representatives for losses relating to the
      services contemplated by the management agreement. The management agreement
      expires on December 31, 2012, subject to automatic yearly extensions unless
      terminated by any party upon prior notice. In addition, Apollo and Graham have
      the right to terminate the agreement at any time, in which case Apollo and
      Graham will receive additional consideration equal to the present value of
      $21
      million less the aggregate amount of annual management fees previously paid
      to
      Apollo and Graham and the employee stockholders will receive a pro rata payment
      based on such amount. We paid $1,500,000 in management fees for the year ended
      December 30, 2006, including amounts paid for a portion of fiscal 2007 services.
      In addition, we paid Apollo and Graham a fee of $20.0 million for services
      rendered in connection with the Merger and reimbursed Apollo and Graham for
      certain expenses incurred in rendering those services.





**Item
      14.** **PRINCIPAL ACCOUNTING FEES AND SERVICES**





*Audit
      Fees* .
      The
      aggregate fees for professional services rendered by Ernst & Young LLP for
      the audit of the Predecessor’s and Company’s annual financial statements for
      2006, 2005, and 2004, the review of the financial statements included in the
      Predecessor’s and Company’s Forms 10-Q for 2006, 2005, and 2004 and statutory
      audits of foreign subsidiaries totaled $1,372,000, $799,000, and $422,000,
      respectively.





*Audit-Related
      Fees* .
      The
      aggregate fees for assurance and related services by Ernst & Young LLP that
      are related to the performance of the audit or review of the Predecessor’s and
      Company’s financial statements, for 2006, 2005, and 2004, and are not disclosed
      in the paragraph caption “Audit Fees” above, were $85,000, $202,000, and
      $207,000, respectively. The services performed by Ernst & Young LLP in
      connection with these fees consisted of internal controls consultation and
      due
      diligence on businesses being considered for purchase.





*Tax
      Fees.* The
      aggregate fees for professional services rendered by Ernst & Young LLP for
      tax compliance, for the years ended 2006, 2005, and 2004 were $34,000, $120,000,
      and $65,000, respectively. The aggregate fees billed by Ernst & Young LLP
      for professional services rendered for tax advice and tax planning, for 2006,
      2005, and 2004, were $240,000, $146,000, and $93,000, respectively. The services
      performed by Ernst & Young LLP in connection with these advisory and
      planning fees consisted of consultation regarding various tax
      issues.





*All
      Other Fees* .
      There
      were no fees for products and services by Ernst & Young LLP, other than the
      services described in the paragraphs captioned “Audit Fees”, “Audit-Related
      Fees”, and “Tax Fees” above for 2006, 2005 and 2004.





The
      Audit
      Committee has established its pre-approval policies and procedures, pursuant
      to
      which the Audit Committee approved the foregoing audit and permissible non-audit
      services provided by Ernst & Young LLP in 2006, 2005, and 2004. Consistent
      with the Audit Committee’s responsibility for engaging our independent auditors,
      all audit and permitted non-audit services require pre-approval by the Audit
      Committee. All requests or applications for services to be provided by the
      independent auditor that do not require specific approval by the Audit Committee
      will be submitted to the Chief Financial Officer and must include a detailed
      description of the services to be rendered. The Chief Financial Officer will
      determine whether such services are included within the services that have
      received pre-approval of the Audit Committee. The Audit Committee will be
      informed on a timely basis of any such services rendered by the independent
      auditor. Request or applications to provide services
      that require specific approval by the Audit Committee will be submitted to
      the
      Audit Committee by both the independent auditor and the Chief Financial Officer.
      The Chief Financial Officer and management will immediately report to the Audit
      Committee any breach of this policy that comes to the attention of the Chief
      Financial Officer or any member of management. Pursuant to these procedures
      the
      Audit Committee approved the audit and permissible non-audit services provided
      by Ernst & Young LLP in 2006, 2005, and 2004.


-40-


**PART
      IV**





**Item
      15.**  **EXHIBITS,
      FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K**





(a)
            Documents
                Filed as Part of the Report





1.  Financial
      Statements





The
      financial statements listed under Item 8 are filed as part of this
      report.





2.  Financial
      Statement Schedules





Schedules
      have been omitted because they are either not applicable or the required
      information has been disclosed in the


financial
      statements or notes thereto.





3.  Exhibits





The
      exhibits listed on the accompanying Exhibit Index are filed as part of this
      report.





(b)
            Reports
                on Form 8-K





None




-41-


**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**








The
      Board
      of Directors and Stockholders


Berry
      Plastics Holding Corporation





We
      have
      audited the accompanying consolidated balance sheets of Berry Plastics Holding
      Corporation (a wholly owned subsidiary of Berry Plastics Group, Inc.) as of
      December 30, 2006 (Company) and December 31, 2005 (Predecessor), and the related
      consolidated statements of operations, stockholders' equity, and cash flows
      for
      the periods from September 20, 2006 to December 30, 2006 (Company), January
      1,
      2006 to September 19, 2006 (Predecessor), and each of the two years in the
      period ended December 31, 2005. 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 the standards of the Public Company
      Accounting Oversight Board (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. We were not engaged to perform
      an
      audit of the Company's internal control over financial reporting. Our audits
      included consideration of internal control over financial reporting as a basis
      for designing audit procedures that are appropriate in the circumstances, but
      not for the purpose of expressing an opinion on the effectiveness of the
      Company's internal control over financial reporting. Accordingly, we express
      no
      such opinion. An audit also includes examining, on a test basis, evidence
      supporting the amounts and disclosures in the financial statements, assessing
      the accounting principles used and significant estimates made by management,
      and
      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 consolidated financial position of Berry Plastics Holding
      Corporation at December 30, 2006 (Company), and December 31, 2005 (Predecessor),
      and the consolidated results of its operations and its cash flows for the
      periods from September 20, 2006 to December 30, 2006 (Company), January 1,
      2006
      to September 19, 2006 (Predecessor) and each of the two years in the period
      ended December 31, 2005 (Predecessor), in conformity with U.S. generally
      accepted accounting principles.





As
      discussed in Note 2 to the consolidated financial statements, effective January
      1, 2006 the Company adopted Statement of Financial Accounting Standards No.
      123(R), Share-Based Payment.





**/s/**  **ERNST
      & YOUNG LLP**











Indianapolis,
      Indiana


March
      9,
      2007





F-1


**Berry
      Plastics Holding Corporation**


**Consolidated
      Balance Sheets**


**(In
      Thousands of Dollars, except per share information)**


**Company**
              
              **Predecessor****December
                  30,**
                **2006**
              
              **December
                  31,**
                **2005****Assets**Current
                  assets*:*Cash
                  and cash equivalents
              
              **$**
              **19,549**
              
              $
              24,756Accounts
                  receivable (less allowance for doubtful accounts of $5,369
                at
                  December 30, 2006 and $5,766 at December 31, 2005)
              
              
              **145,387**
              
              
              140,443Inventories:Finished
                  goods
              
              
              **111,635**
              
              
              101,632Raw
                  materials and supplies
              
              
              **48,885**
              
              
              50,716**160,520**
              
              
              152,348Deferred
                  income taxes
              
              
              **21,531**
              
              
              22,905Prepaid
                  expenses and other current assets
              
              
              **24,416**
              
              
              39,037Total
                  current assets
              
              
              **371,403**
              
              
              379,489Property
                  and equipment:Land
              
              
              **15,504**
              
              
              12,292Buildings
                  and improvements
              
              
              **83,329**
              
              
              92,810Equipment
                  and construction in progress
              
              
              **390,018**
              
              
              497,364**488,851**
              
              
              602,466Less
                  accumulated depreciation
              
              
              **24,874**
              
              
              179,022**463,977**
              
              
              423,444Intangible
                  assets:Deferred
                  financing fees, net
              
              
              **41,763**
              
              
              18,333Customer
                  relationships, net
              
              
              **504,663**
              
              
              255,981Goodwill
              
              
              **989,181**
              
              
              495,258Trademarks,
                  net
              
              
              **182,200**
              
              
              47,065Other
                  intangibles, net
              
              
              **15,469**
              
              
              28,260**1,733,276**
              
              
              844,897Total
                  assets
              
              **$**
              **2,568,656**
              
              $
              1,647,830




F-2




**Consolidated
        Balance Sheets (continued)**
  **Company**
              
              **Predecessor****December
                  30,**
                **2006**
              
              **December
                  31,**
                **2005****Liabilities
                  and stockholders' equity**Current
                  liabilities:Accounts
                  payable
              
              **$**
              **89,030**
              
              $
              64,970Accrued
                  interest
              
              
              **26,010**
              
              
              20,165Employee
                  compensation, payroll and other taxes
              
              
              **37,113**
              
              
              43,915Accrued
                  expenses and other current liabilities
              
              
              **31,297**
              
              
              34,730Current
                  portion of long-term debt
              
              
              **12,400**
              
              
              13,928Total
                  current liabilities
              
              
              **195,850**
              
              
              177,708Long-term
                  debt, less current portion
              
              
              **1,860,474**
              
              
              1,146,692Deferred
                  income taxes
              
              
              **197,801**
              
              
              94,934Other
                  long-term liabilities
              
              
              **20,344**
              
              
              25,108Total
                  liabilities
              
              
              **2,274,469**
              
              
              1,444,442Stockholders'
                  equity:Common
                  stock; $.01 par value: 200,000,000 shares authorized;
                4,931,011 shares issued and outstanding at December 30,
                  2006
              
              
              **49**
              
              
              —Additional
                  paid-in capital
              
              
              **493,581**
              
              
              346,943Adjustment
                  of the carryover basis of continuing stockholders
              
              
              **(173,422**
              **)**
              
              (196,603
              )Notes
                  receivable - common stock
              
              
              **(9,935**
              **)**
              
              (14,273
              )Treasury
                  stock: 629 shares
              
              
              **(63**
              **)**
              
              —Common
                  Stock (Predecessor)
              
              
              **—**
              
              
              34Treasury
                  Stock (Predecessor)
              
              
              **—**
              
              
              (3,547
              )Retained
                  earnings
              
              
              **(18,065**
              **)**
              
              58,969Accumulated
                  other comprehensive income
              
              
              **2,042**
              
              
              11,865Total
                  stockholders’ equity
              
              
              **294,187**
              
              
              203,388Total
                  liabilities and stockholders' equity
              
              **$**
              **2,568,656**
              
              $
              1,647,830


*See
      notes to consolidated financial statements.*




F-3


**Berry
        Plastics Holding Corporation**


**Consolidated
      Statements of Operations**


**(In
      Thousands of Dollars)**


**Company**
            
            **Predecessor****Period
                from 9/20/06-**
              **12/30/06**
            
            **Period
                from 01/01/06-09/19/06**
            
            **Year
                ended**
              **December
                31,**
              **2005**
            
            **Year
                ended**
              **January
                1,**
              **2005**Net
                sales
            
            **$**
            **383,288**
            
            **$**
            **1,048,476**
            
            $
            1,169,704
            
            $
            814,213Cost
                of goods sold
            
            
            **316,939**
            
            
            **839,429**
            
            
            943,370
            
            
            639,329Gross
                profit
            
            
            **66,349**
            
            
            **209,047**
            
            
            226,334
            
            
            174,884Operating
                expenses:Selling
            
            
            **10,253**
            
            
            **28,255**
            
            
            34,145
            
            
            26,361General
                and administrative
            
            
            **17,369**
            
            
            **43,885**
            
            
            49,477
            
            
            38,518Research
                and development
            
            
            **2,373**
            
            
            **5,455**
            
            
            6,131
            
            
            3,825Amortization
                of intangibles
            
            
            **7,554**
            
            
            **15,127**
            
            
            15,574
            
            
            6,513Merger
                expenses
            
            
            —
            
            
            **70,122**
            
            
            —
            
            
            **—**Other
                expenses
            
            
            **4,325**
            
            
            **4,744**
            
            
            5,218
            
            
            5,791Operating
                income
            
            
            **24,475**
            
            
            **41,459**
            
            
            115,789
            
            
            93,876Other
                expense (income):Unrealized
                loss (gain) on investment in
              Southern Packaging
            
            
            —
            
            
            **(299**
            **)**
            
            1,354
            
            
            —Income
                before interest and taxes
            
            
            **24,475**
            
            
            **41,758**
            
            
            114,435
            
            
            93,876Interest:Expense
            
            
            **47,773**
            
            
            **64,710**
            
            
            74,445
            
            
            54,076Loss
                on extinguished debt
            
            
            **5,875**
            
            
            **34,041**
            
            
            7,045
            
            
            —Income
            
            
            **(302**
            **)**
            
            **(901**
            **)**
            
            (1,171
            )
            
            (891
            )Income
                (loss) before income taxes
            
            
            **(28,871**
            **)**
            
            **(56,092**
            **)**
            
            34,116
            
            
            40,691Income
                tax expense (benefit)
            
            
            **(10,806**
            **)**
            
            **1,011**
            
            
            14,325
            
            
            17,740Net
                income (loss)
            
            **$**
            **(18,065**
            **)**
            **$**
            **(57,103**
            **)**
            $
            19,791
            
            $
            22,951




*See
      notes to consolidated financial statements.*





F-4




**Berry
      Plastics Holding Corporation**


**Consolidated
      Statements of Changes in Stockholders' Equity**


**(In
      Thousands of Dollars)**


**Common
                  Stock**
              **Additional**
                **Paid-In**
                **Capital**
              **Adjustment
                  of the carryover basis of continuing stockholders**
              **Notes
                  receivable - common stock**
              **Treasury**
                **Stock**
              **Retained**
                **Earnings**
                **(Deficit)**
              **Accumulated
                  Other Comprehensive Income**
              **Total**
              **Comprehensive
                  Income**Predecessor:Balance
                  at December 27, 2003
              $
                  34
              $344,363
              $(196,603)
              $(14,157)
              $
                  (1,972)
              $
                  16,227
              $
                  4,699
              $152,591Issuance
                  of common stock
              —
              53
              —
              —
              —
              —
              —
              53
              —Collection
                  on notes receivable
              —
              —
              —
              73
              —
              —
              —
              73
              —Purchase
                  of treasury stock
              —
              —
              —
              —
              (192)
              —
              —
              (192)
              —Sale
                  of treasury stock
              —
              —
              —
              —
              115
              —
              —
              115
              —Interest
                  on notes receivable
              —
              —
              —
              (772)
              —
              —
              —
              (772)
              —Stock-based
                  compensation
              —
              585
              —
              —
              —
              —
              —
              585
              —Translation
                  gain
              —
              —
              —
              —
              —
              —
              2,743
              2,743
              2,743Other
                  comprehensive gains
              —
              —
              —
              —
              —
              —
              5,744
              5,744
              5,744Net
                  income
              —
              —
              —
              —
              —
              22,951
              —
              22,951
              22,951Balance
                  atJanuary
                  1, 2005
              34
              345,001
              (196,603)
              (14,856)
              (2,049)
              39,178
              13,186
              183,891
              31,438Collection
                  on notes receivable
              **—**
              **—**
              **—**
              1,361
              **—**
              **—**
              **—**
              1,361
              **—**Purchase
                  of treasury stock
              —
              (15)
              —
              —
              (5,498)
              —
              —
              (5,513)
              —Sale
                  of treasury stock
              —
              (195)
              —
              —
              4,000
              —
              —
              3,805
              —Interest
                  on notes receivable
              —
              —
              —
              (778)
              —
              —
              —
              (778)
              —Stock-based
                  compensation
              —
              2,152
              —
              —
              —
              —
              —
              2,152
              —Translation
                  losses
              —
              —
              —
              —
              —
              —
              (3,225)
              (3,225)
              (3,225)Other
                  comprehensive gains
              —
              —
              —
              —
              —
              —
              1,904
              1,904
              1,904Net
                  income
              —
              —
              —
              —
              —
              19,791
              —
              19,791
              19,791Balance
                  at December 31, 2005
              34
              346,943
              (196,603)
              (14,273)
              (3,547)
              58,969
              11,865
              203,388
              18,470Collection
                  on notes receivable
              **—**
              **—**
              **—**
              3,234
              **—**
              **—**
              **—**
              3,234
              **—**Purchase
                  of treasury stock
              —
              (204)
              —
              —
              (827)
              —
              —
              (1,031)
              —Sale
                  of treasury stock
              —
              —
              —
              —
              873
              —
              —
              873
              —Interest
                  on notes receivable
              —
              —
              —
              (488)
              —
              —
              —
              (488)
              —Stock-based
                  compensation
              —
              12,638
              —
              —
              —
              —
              —
              12,638
              —Translation
                  gains
              —
              —
              —
              —
              —
              —
              2,145
              2,145
              2,145Other
                  comprehensive losses
              —
              —
              —
              —
              —
              —
              (6,328)
              (6,328)
              (6,328)Net
                  loss
              —
              —
              —
              —
              —
              (57,103)
              —
              (57,103)
              (57,103)Redemption
                  of predecessor stock
              (34)
              (359,377)
              196,603
              11,527
              3,501
              (1,866)
              (7,682)
              (157,328)
              61,286Balance
                  at September 19, 2006
              —
              —
              —
              —
              —
              —
              —
              —
              —Company:Fair
                  value adjustment on rolled stock
              **—**
              **—**
              **(173,422)**
              **—**
              **—**
              **—**
              **—**
              **(173,422)**
              **—**Issuance
                  of common stock
              **49**
              **493,052**
              **—**
              **(9,805)**
              **—**
              **—**
              **—**
              **483,296**
              **—**Purchase
                  of treasury stock
              **—**
              **—**
              **—**
              **—**
              **(148)**
              **—**
              **—**
              **(148)**
              **—**Sale
                  of treasury stock
              **—**
              **—**
              **—**
              **—**
              **85**
              **—**
              **—**
              **85**
              **—**Interest
                  on notes receivable
              **—**
              **—**
              **—**
              **(130)**
              **—**
              **—**
              **—**
              **(130)**
              **—**Stock-based
                  compensation
              **—**
              **529**
              **—**
              **—**
              **—**
              **—**
              **—**
              **529**
              **—**Translation
                  gains
              **—**
              **—**
              **—**
              **—**
              **—**
              **—**
              **1,358**
              **1,358**
              **1,358**Other
                  comprehensive gains
              **—**
              **—**
              **—**
              **—**
              **—**
              **—**
              **684**
              **684**
              **—**Net
                  loss
              **—**
              **—**
              **—**
              **—**
              **—**
              **(18,065)**
              **—**
              **(18,065)**
              **(18,065)**Balance
                  at December 30, 2006
              **$
                  49**
              **$493,581**
              **$
                  (173,422)**
              **$
                  (9,935)**
              **$
                  (63)**
              **$
                  (18,065)**
              **$
                  2,042**
              **$
                  294,187**
              **$
                  (16,707)**





*See
      notes to consolidated financial statements.*





F-5


**Berry
      Plastics Holding Corporation**


**Consolidated
      Statements of Cash Flows**


**(In
      Thousands of Dollars)**




**Company**
              
              **Predecessor****Period
                  from 09/20/06-12/30/06**
              
              
              
              **Period
                  from 01/01/06-09/19/06**
              
              **Year
                  ended**
                **December
                  31,**
                **2005**
              
              **Year
                  ended**
                **January
                  1,**
                **2005****Operating
                  activities**Net
                  income (loss)
              
              **$**
              **(18,065**
              **)**
              
              
              **$**
              **(57,103**
              **)**
              $
              19,791
              
              $
              22,951Adjustments
                  to reconcile net income (loss) to net cash provided by operating
                  activities:Depreciation
              
              
              **24,634**
              
              
              
              
              **62,044**
              
              
              73,146
              
              
              54,303Non-cash
                  interest expense
              
              
              **1,582**
              
              
              
              
              **1,369**
              
              
              1,945
              
              
              1,862Loss
                  on extinguished debt
              
              
              **5,875**
              
              
              
              
              **34,041**
              
              
              7,045
              
              
              —Amortization
                  of intangibles
              
              
              **7,554**
              
              
              
              
              **15,127**
              
              
              15,574
              
              
              6,513Non-cash
                  compensation
              
              
              **529**
              
              
              
              
              **2,856**
              
              
              2,152
              
              
              585Unrealized
                  loss (gain) on investment
              
              
              **—**
              
              
              
              
              **(299**
              **)**
              
              1,354
              
              
              —Deferred
                  income taxes (benefit)
              
              
              **(10,746**
              **)**
              
              
              
              **—**
              
              
              12,769
              
              
              16,772Merger
                  expenses
              
              
              **—**
              
              
              
              
              **70,122**
              
              
              —
              
              
              —Changes
                  in operating assets and liabilities:Accounts
                  receivable, net
              
              
              **10,562**
              
              
              
              
              **(14,582**
              **)**
              
              (13,004
              )
              
              (7,216
              )Inventories
              
              
              **16,523**
              
              
              
              
              **(14,214**
              **)**
              
              (8,720
              )
              
              (27,200
              )Prepaid
                  expenses and other assets
              
              
              **2,794**
              
              
              
              
              **3,697**
              
              
              309
              
              
              (7,022
              )Accrued
                  interest
              
              
              **26,010**
              
              
              
              
              **(10,300**
              **)**
              
              1,349
              
              
              683Payables
                  and accrued expenses
              
              
              **(29,988**
              **)**
              
              
              
              **40,694**
              
              
              (12,164
              )
              
              13,002Net
                  cash provided by operating activities
              
              
              **37,264**
              
              
              
              
              **133,452**
              
              
              101,546
              
              
              75,233**Investing
                  activities**Additions
                  to property and equipment
              
              
              **(15,002**
              **)**
              
              
              
              **(77,060**
              **)**
              
              (57,829
              )
              
              (52,624
              )Proceeds
                  from disposal of property and equipment
              
              
              **16**
              
              
              
              
              **71**
              
              
              2,223
              
              
              2,986Proceeds
                  from working capital settlement on business acquisition
              
              
              **—**
              
              
              
              
              **—**
              
              
              —
              
              
              7,397Investment
                  in Southern Packaging
              
              
              **—**
              
              
              
              
              **—**
              
              
              —
              
              
              (3,236
              )Acquisitions
                  of businesses
              
              
              **(2,290,341**
              **)**
              
              
              
              **—**
              
              
              (464,392
              )
              
              —Net
                  cash used for investing activities
              
              
              **(2,305,327**
              **)**
              
              
              
              **(76,989**
              **)**
              
              (519,998
              )
              
              (45,477
              )**Financing
                  activities**Proceeds
                  from long-term borrowings
              
              
              **1,850,832**
              
              
              
              
              **—**
              
              
              465,052
              
              
              880Payments
                  on long-term borrowings
              
              
              **(3,485**
              **)**
              
              
              
              **(84,845**
              **)**
              
              (12,882
              )
              
              (55,996
              )Proceeds
                  from notes receivable
              
              
              **—**
              
              
              
              
              **3,234**
              
              
              1,361
              
              
              73Issuance
                  of common stock
              
              
              **483,296**
              
              
              
              
              **—**
              
              
              —
              
              
              53Purchase
                  of treasury stock
              
              
              **(148**
              **)**
              
              
              
              **(1,031**
              **)**
              
              (5,513
              )
              
              (192
              )Sale
                  of treasury stock
              
              
              **85**
              
              
              
              
              **873**
              
              
              3,805
              
              
              115Debt
                  financing costs
              
              
              **(43,348**
              **)**
              
              
              
              **—**
              
              
              (8,637
              )
              
              (641
              )Net
                  cash provided by (used for) financing activities
              
              
              **2,287,232**
              
              
              
              
              **(81,769**
              **)**
              
              443,186
              
              
              (55,708
              )Effect
                  of exchange rate changes on cash
              
              
              **380**
              
              
              
              
              **550**
              
              
              (242
              )
              
              24Net
                  increase (decrease) in cash and cash equivalents
              
              
              **19,549**
              
              
              
              
              **(24,756**
              **)**
              
              24,492
              
              
              (25,928
              )Cash
                  and cash equivalents at beginning of period
              
              
              **—**
              
              
              
              
              **24,756**
              
              
              264
              
              
              26,192Cash
                  and cash equivalents at end of period
              
              **$**
              **19,549**
              
              
              
              **$**
              **—**
              
              $
              24,756
              
              $
              264


*See
      notes to consolidated financial statements.*





F-6


**Berry
      Plastics Holding Corporation**


**Notes
      to Consolidated Financial Statements**


**(In
      thousands of dollars, except as otherwise noted)**





**Note
      1. Organization**





Berry
      Plastics Holding Corporation (“Holding”, formerly BPC Holding Corporation),
      through its wholly-owned subsidiary Berry Plastics Corporation (“Berry” or the
“Company”) and its wholly-owned subsidiaries, manufactures and markets plastic
      packaging products. Holding is a wholly-owned subsidiary of Berry Plastics
      Group, Inc. (“Group”). Holding’s fiscal year is a 52/53 week period ending
      generally on the Saturday closest to December 31. All references herein to
      “2006”, “2005,” and “2004,” relate to the fiscal years ended December 30, 2006,
      December 31, 2005, and January 1, 2005, respectively. Due to the merger (see
      Note 3), fiscal 2006 consists of two separate periods of January 1, 2006 to
      September 19, 2006 (Predecessor) and September 20, 2006 to December 30, 2006
      (Company).





**Note
      2. Summary of Significant Accounting Policies**





*Consolidation
      and Business*





The
      consolidated financial statements include the accounts of Holding and its
      wholly-owned subsidiary Berry Plastics Corporation, and Berry’s subsidiaries,
      all of which are wholly-owned. The financial presentation presented in the
      Holding financial statements as of December 30, 2006 and for the period from
      September 20, 2006 to December 30, 2006 reflects all expenses incurred by Group.
      Holding has recorded expense in their financial statements to reflect expense
      related to stock compensation, management fees and income taxes, as Group files
      a consolidated income tax return. In addition, the equity structure of Group
      has
      been pushed down to Holding to mirror the capital structure of Group.
      Intercompany accounts and transactions have been eliminated in consolidation.
      Holding, through its wholly-owned subsidiary Berry Plastics Corporation and
      its
      wholly owned subsidiaries, operates in two primary segments: open top and closed
      top. 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 $461.7 million and $385.0 million in 2006
      and
      2005, respectively. Dow Chemical Corporation was the largest supplier of the
      Company’s total resin material requirements, representing approximately 25% and
      29% of such resin requirements in 2006 and 2005, respectively. The Company
      also
      uses other suppliers such as  Basell,
      Nova, Total, Lyondell, Chevron,
      ExxonMobil, Sunoco, and Huntsman to meet
      its resin requirements.





*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. Additionally, the allowance for doubtful
      accounts includes a reserve for cash discounts that are offered to some
      customers for prompt payment. The following table summarizes the activity by
      period for the allowance for doubtful accounts, excluding the activity related
      to cash discounts due to its volume.


F-7


**Company**
              
              **Predecessor****Period
                  from**
                **9/20/06-**
                **12/30/06**
              
              **Period
                  from**
                **1/1/06-**
                **9/19/06**
              
              **Year
                  Ended**
                **December
                  31,**
                **2005**
              
              **Year
                  Ended**
                **January
                  1,**
                **2005**Balance
                  at beginning of period
              
              **$**
              **6,277**
              
              **$**
              **5,766**
              
              $
              3,207
              
              $
              2,717Charged
                  to costs and expenses
              
              
              **(1,031**
              **)**
              
              **21**
              
              
              592
              
              
              323Allocated
                  to other accounts (1)
              
              
              —
              
              
              —
              
              
              1,851
              
              
              —Deductions
                  and currency translation (2)
              
              
              **123**
              
              
              **490**
              
              
              116
              
              
              167Balance
                  at end of period
              
              **$**
              **5,369**
              
              **$**
              **6,277**
              
              $
              5,766
              
              $
              3,207




(1)
            Primarily
                relates to purchase of accounts receivable and related allowance
                through
                acquisitions.


(2)
            Uncollectible
                accounts written off, net of recoveries, and currency translation
                on
                foreign operations.





*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. Leasehold improvements are depreciated over the shorter
      of the useful life of the improvement or the lease life. 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 which is 20 years .





The
      goodwill acquired 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 Statement of Financial Accounting Standards
      (“SFAS”) No. 142, Goodwill and Other Intangible Assets .
      Assets
      are allocated to reporting units (open top or closed top) based on the assets
      for each facility within each segment. For facilities that manufacture and
      sell
      products for both segments, the assets are allocated based on the net sales
      of
      each segment.





Trademarks
      that are expected to remain in use, which are indefinite lived intangible
      assets, are reviewed
      for impairment annually pursuant to SFAS No. 142.





Other
      intangibles, which include patents, are being amortized using the straight-line
      method over the estimated life of the technology ranging from ten to twenty
      years, with a weighted-average life of 15 years.





*Long-lived
      Assets*





Long-lived
      assets are reviewed for impairment in accordance with SFAS No. 144 whenever
      facts and circumstances indicate that the carrying amount may not be
      recoverable. Specifically, this process involves comparing an asset's carrying
      value to the estimated undiscounted future cash flows the asset is expected
      to
      generate over its remaining life. If this process were to result in the
      conclusion that the carrying value of a long-lived asset would not be
      recoverable, a write-down of the asset to fair value would be recorded through
      a
      charge to operations. Fair value is determined based upon discounted cash flows
      or appraisals as appropriate. Long-lived assets that are held for sale are
      reported at the lower of the assets’ carrying amount or fair value less costs
      related to the assets’ disposition. No impairments were recorded in these
      financial statements.


F-8


*Derivative
      Financial Instruments*





The
      Company has in the past used interest rate hedge instruments to manage a portion
      of its interest rate exposures. In 2004, the Company also entered into resin
      forward contracts, which became effective in 2005, to manage certain resin
      price
      exposures. These instruments are entered into to manage market risk
      exposures and are not used for trading purposes. The Company recognizes all
      derivative transactions as either assets or liabilities at fair value in the
      balance sheet.





Derivatives
      used for hedging purposes must be designated as, and effective as, a hedge
      of
      the identified risk exposure at the designation of the contract. Accordingly,
      changes in the market value of the derivative contract must be highly correlated
      with changes in the market value of the underlying hedged item at inception
      of
      the hedge and over the life of the hedge contract. The change in fair value
      of
      the effective portion of a hedge contract is deferred in other accumulated
      comprehensive income (loss). Any derivative instrument terminated, designated
      but no longer effective as a hedge, or initially not effective as a hedge would
      be recorded at market value and the related gains and losses would be recognized
      in earnings. Derivatives not designated as hedges are adjusted to fair value
      through the consolidated statement of operations. Management routinely reviews
      the effectiveness of the use of derivative instruments. Gains and losses from
      hedges of anticipated transactions are classified in the statement of operations
      upon recording the related hedge transaction in the statement of operations
      consistent with the accounting treatment of the items being hedged.





*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 in stockholders’ equity. Foreign currency transaction gains and losses
      are included in net income (loss).





*Revenue
      Recognition*





The
      Company recognizes revenue in accordance with SEC Staff Accounting Bulletin
      No.
      101, “Revenue Recognition in Financial Statements” (“SAB 101”) and SEC Staff
      Accounting Bulletin No. 104, “Revenue Recognition” (“SAB 104”). Revenue is
      recognized when the title and risk of loss have passed to the customer, there
      is
      persuasive evidence of an arrangement, delivery has occurred or services have
      been rendered, the sales price is fixed or determinable, and collectibility
      is
      reasonably assured. Shipping and handling costs are included in cost of sales.





*Stock-Based
      Compensation*





In
      December 2004, the FASB issued SFAS No. 123 (Revised 2004,) Share-Based Payment
      (“SFAS 123R”), which requires that the compensation cost relating to share-based
      payment transactions be recognized in financial statements based on alternative
      fair value models. The share-based compensation cost is
      measured based on the fair value of the equity or liability instruments issued.
      The Company adopted SFAS 123R on January 1, 2006 using the modified prospective
      method and recorded $2.9 million for the period from January 1, 2006 to
      September, 20, 2006 and $0.5 million for the period from September 20, 2006
      to
      December 30, 2006 of non-cash charges for stock compensation related to
      amortization of the fair value of unvested stock options. Under this method,
      the
      Company recognized compensation cost, on a prospective basis, for the portion
      of
      outstanding awards for which the requisite service had not yet been rendered
      as
      of January 1, 2006. In addition, the Company recognized compensation cost on
      new
      grants based upon the grant date fair value of those awards calculated under
      SFAS 123R. Accordingly,
      we have not restated prior period amounts.





In
      connection with the adoption of SFAS 123R, we reassessed the valuation
      methodology for stock options and the related input assumptions. As a result,
      beginning with stock options granted in 2006, the Company utilized a Black
      Scholes and lattice-based option valuation model for estimating the fair value
      of the stock options. The models allow for the use of a range of assumptions.
      Expected volatilities utilized in the lattice model are based on implied
      volatilities from traded stocks of peer companies. Similarly, the dividend
      yield
      is based on historical experience and the estimate of future dividend yields.
      T
      he risk-free interest rate is derived from the U.S. Treasury yield curve in
      effect at the time of grant. The lattice model incorporates exercise and
      post-vesting forfeiture assumptions based on an analysis of historical data.
      The
      expected life of the grants are derived from historical experience and expected
      behavior. The fair value for options granted by Group have been estimated at
      the
      date of grant using a Black Scholes or lattice option pricing model, generally
      with the following weighted average assumptions:


F-9


**Company**
              
              **Predecessor****Period
                  from**
                **9/20/06-**
                **1****2/30/06**
              
              
              
              **Period
                  from**
                **1/1/06-**
                **9/19/06**
              
              **Year
                  ended**
                **December
                  31,**
                **2005**
              
              **Year
                  ended**
                **January
                  1,**
                **2005**Risk-free
                  interest rate
              
              
              **4.5**
              **%**
              
              
              
              **4.5**
              **%**
              
              4.5
              %
              
              3.1
              %Dividend
                  yield
              
              
              **0.0**
              **%**
              
              
              
              **0.0**
              **%**
              
              0.0
              %
              
              0.0
              %Volatility
                  factor
              
              
              **.20**
              
              
              
              
              **.25**
              
              
              .25
              
              
              .25Expected
                  option life
              
              
              **6.0
                  years**
              
              
              
              
              **5.0
                  years**
              
              
              5.0
                  years
              
              
              5.0
                  years




Prior
      to
      the adoption of SFAS No. 123R, we used the intrinsic value method prescribed
      in
      APB 25 and also followed the disclosure requirements of SFAS No. 123, as amended
      by SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and
      Disclosure”, (“SFAS No. 148”); which required certain disclosures on a pro forma
      basis as if the fair value method had been followed for accounting for such
      compensation. The following table presents the pro forma effect on net income
      as
      if we had applied the fair value method to measure compensation cost prior
      to
      our adoption of SFAS No. 123R:





**Predecessor**
            
            **Predecessor****Year
                Ended**
              **December
                31,**
              **2005**
            
            **Year
                Ended**
              **January
                1,**
              **2005**Reported
                net income
            
            $
            19,791
            
            $
            22,951Stock-based
                employee compensation expense
              included in reported income, net of tax
            
            
            1,291
            
            
            351Total
                stock-based employee compensation expense
              determined under fair value based method,
              for all awards, net of tax
            
            
            (2,508
            )
            
            (2,294
            )Pro
                forma net income
            
            $
            18,574
            
            $
            21,008





*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. If the
      Company determines that a deferred tax asset arising from temporary differences
      is not likely to be utilized, the Company will establish a valuation allowance
      against that asset to record it at its expected realizable value.





*Comprehensive
      Income (Loss)*





Comprehensive
      income (loss) is comprised of net income (loss) and other comprehensive income
      (losses). Other comprehensive income (losses) includes unrealized gains or
      losses on derivative financial instruments, unrealized gains or losses resulting
      from currency translations of foreign investments, and adjustments to record
      the
      minimum pension liability prior to the adoption of SFAS No. 158.





*Pension*





Pension
      benefit costs include assumptions for the discount rate, retirement age, and
      expected return on plan assets. Retiree medical plan costs include assumptions
      for the discount rate, retirement age, and health-care-cost trend rates.
      Periodically, the Company evaluates the discount rate and the expected return
      on
      plan assets in its defined benefit pension and retiree health benefit plans.
      In
      evaluating these assumptions, the Company considers many factors, including
      an
      evaluation of the discount rates, expected return on plan assets and the
      health-care-cost trend rates of other companies; historical assumptions compared
      with actual results; an analysis of current market conditions and asset
      allocations; and the views of advisers. As
      further discussed in Note 9, the Company has adopted SFAS No. 158 effective
      December 30, 2006.


F-10


*Use
      of Estimates*





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States requires management to make estimates
      and assumptions that affect the reported amounts of assets and liabilities,
      disclosure of any contingent assets and liabilities at the financial statement
      date and reported amounts of revenue and expenses during the reporting period.
      On an on-going basis, the Company reviews its estimates and assumptions. The
      Company’s estimates were based on its historical experience and various other
      assumptions that the Company believes to be reasonable under the circumstances.
      Actual results are likely to differ from those estimates under different
      assumptions or conditions, but management does not believe such differences
      will
      materially affect the Company's financial position or results of
      operations.





*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*





The
      Company adopted SFAS No. 154, Accounting Changes and Error Corrections—a
      replacement of APB Opinion No. 20 and FASB Statement No. 3, on
      January 1, 2006. SFAS No. 154 requires retrospective application to
      prior periods’ financial statements of changes in accounting principle, unless
      it is impracticable to determine either the period-specific effects or the
      cumulative effect of the change or unless specific transition provisions are
      proscribed in the accounting pronouncements. SFAS No. 154 does not change
      the accounting guidance for reporting a correction of an error in previously
      issued financial statements or a change in accounting estimate. The adoption
      of
      SFAS No. 154 did not have an impact on the Company’s results of operations or
      financial position.





In
      September 2006, the FASB issued FASB No. 157, “Fair Value
      Measurements” (“FAS 157”). FAS 157 is definitional and disclosure oriented
      and addresses how companies should approach measuring fair value when required
      by U.S. generally accepted accounting principles (“GAAP”); it does not create or
      modify any current GAAP requirements to apply fair value accounting. The
      standard provides a single definition for fair value that is to be applied
      consistently for all accounting applications, and also generally describes
      and
      prioritizes according to reliability the methods and inputs used in valuations.
      FAS 157 prescribes various disclosures about financial statement categories
      and
      amounts which are measured at fair value, if such disclosures are not already
      specified elsewhere in GAAP. The new measurement and disclosure requirements
      of
      FAS 157 are effective for the Company in the first quarter of 2008. The Company
      does not expect the adoption of FAS 157 to have a significant impact on the
      Company’s results of operations or financial position.





In
      September 2006, the Financial Accounting Standards Board issued FAS 158,
“Employers’ Accounting for Defined Benefit Pension and Other Postretirement
      Plans-an amendment of FASB Statements No. 87, 88, 106, and 132(R)”. FAS 158
      requires employers to recognize the over- or under-funded status of defined
      benefit plans and other postretirement plans in the statement of financial
      position and to recognize changes in the funded status in the year in which
      the
      changes occur through comprehensive income. In addition, FAS 158 requires
      employers to measure the funded status of plans as of the date of the year-end
      statement of financial position. The recognition and disclosure provisions
      of
      FAS 158 are effective for fiscal years ending after December 15, 2006, while
      the
      requirement to measure plan assets and benefit obligations as of a company’s
      year-end date is effective for fiscal years ending after December 15, 2008
      (the
      Company currently uses the fiscal year ending date as the measurement date).
      As
      further discussed in Note 9, the Company has adopted SFAS No. 158 effective
      December 30, 2006, the effect by which was not material.





In
      June 2006, the FASB issued Interpretation No. 48, Accounting for
“Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109”
(“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes
      recognized in a company’s financial statements and prescribes a recognition
      threshold and measurement attribute for the financial statement recognition
      and
      measurement of a tax position taken or expected to be taken in a tax return.
      FIN
      48 also provides guidance on description, classification, interest and
      penalties, accounting in interim periods, disclosure and transition. FIN 48
      becomes effective on January 1, 2007, and the Company does not expect the
      adoption of FIN 48 to have a significant impact on the Company’s results of
      operations or financial position.





In
      September 2006, the Securities and Exchange Commission released Staff
      Accounting Bulletin No. 108 (“SAB 108”) which provides guidance on how the
      effects of the carryover or reversal of prior year misstatements should be
      considered in quantifying a current year misstatement. SAB 108 requires entities
      to quantify the effects of unadjusted errors using both a balance sheet and
      an
      income statement approach. Entities are required to evaluate whether either
      approach results in a




F-11


quantifying
      misstatement that is material. The Company adopted SAB 108 effective 2006.
      The
      adoption of SAB 108 did not have an impact on the Company’s results of
      operations or financial position..







**Note
      3. The Merger**





On
      September 20, 2006, BPC Acquisition Corp. merged with and into BPC Holding
      Corporation pursuant to an agreement and plan of merger (the “Merger”), dated
      June 28, 2006, with BPC Holding Corporation continuing as the surviving
      corporation. Following the consummation of the Merger, BPC Holding Corporation
      changed its name to Berry Plastics Holding Corporation. Pursuant to the Merger,
      Holding is a wholly-owned subsidiary of Group, the principal stockholders of
      which are Apollo Investment Fund VI, L.P., AP Berry Holdings, LLC, an affiliate
      of Graham Partners II, L.P., and management. Apollo Investment Fund VI, L.P.
      and
      AP Berry Holdings, LLC are affiliates of Apollo Management, L.P. (the “Buyer”),
      which is a private investment firm. Graham Partners II, L.P. is an affiliate
      of
      Graham Partners, Inc. (“Graham”), a private equity firm.





The
      total
      amount of funds required to consummate the Merger and to pay fees related to
      the
      Merger was $2.4 billion. The Merger was primarily funded with (1) the issuance
      of $750.0 million aggregate principal amount of second priority senior secured
      notes, (2) new borrowings of $675.0 million in Term B loans, (3) the
      issuance of $425.0 million aggregate principal amount of senior subordinated
      notes, and (4) contributed equity. The seller used the proceeds received from
      the Merger to repay the outstanding indebtedness and accrued interest of $726.9
      million under the term loans from the old senior secured credit facility and
      $335.0 million plus accrued interest and tender fees to repurchase all of the
      outstanding 10 3⁄4% senior subordinated notes payable due 2012. The Buyer and its
      affiliates own 72% of the common stock of Group. The remaining common stock
      is
      primarily held by an affiliate of Graham Partners II, L.P., which owns 10%
      and
      members of Berry’s management which own 16%.





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. The Company is amortizing
      its definite lived intangible assets over a weighted-average life of 20 years.
      The impact of writing up inventory to net realizable value resulted in a charge
      to cost of goods sold for the period from September 20 to December 30, 2006
      of
      $10.1 million. The Company has applied the provisions of Emerging Issues Task
      Force 88-16, whereby, the carryover equity interests of certain management
      shareholders from the Predecessor to the Successor were recorded at their
      Predecessor basis. The application of these provisions has preliminarily reduced
      stockholders’ equity and intangibles by $173.4 million. In connection with the
      Merger, the Predecessor incurred Merger related expenses of $70.1 million,
      consisting primarily of investment banking fees, bonuses to management, non-cash
      acceleration and modification of stock option awards, and legal costs. In
      addition, as a result of extinguishing the debt in connection with the Merger,
      the Predecessor recognized a loss on debt extinguishment of $34.0 million
      primarily consisting of tender premiums paid in connection with redeeming the
      10
3⁄4% senior subordinated notes payable, write-off of deferred financing fees
      associated with the senior subordinated notes payable and the old senior secured
      credit facility, and the termination of interest rate swaps. The following
      table
      summarizes the allocation of purchase price and the estimated fair values of
      the
      assets acquired and liabilities assumed at the date of the
      acquisition.


F-12


**September
                  20,**
                **2006**Current
                  assets
              
              $
              389,318Property
                  and equipment
              
              
              473,160Goodwill
              
              
              989,181Customer
                  relationships
              
              
              511,900Trademarks
              
              
              182,200Other
                  intangibles
              
              
              59,045Total
                  assets
              
              
              2,604,804Current
                  liabilities
              
              
              197,449Long-term
                  liabilities
              
              
              2,103,357Total
                  liabilities
              
              
              2,300,806Net
                  assets acquired
              
              $
              303,998







The
      $304.0 million of net assets acquired consists of Apollo, Graham and
      management’s $428.8 million cash contribution and $31.8 million of carryover
      basis in rollover stock, net of the $5.9 million charge to loss on extinguished
      debt for bridge financing fees arranged to fund the Merger but not utilized
      and
      a $150.7 million deemed cash dividend to the selling shareholders that was
      required to be recognized by Emerging Issues Task Force Issue No. 88-16, Basis
      in Leveraged Buyout Transactions.





**Note
      4. Recent Acquisitions**





On
      April
      11, 2005, a subsidiary of Berry, Berry Plastics de México, S. de R.L. de C.V.,
      acquired all of the injection molding closure assets from Euromex Plastics,
      S.A.
      de C.V. (“Euromex”), an injection molding manufacturer located in Toluca, Mexico
      (the “Mexico Acquisition”), for aggregate consideration of approximately $8.2
      million. The purchase price was allocated to fixed assets ($4.1 million),
      inventory ($1.6 million), goodwill ($0.7 million), and other intangibles ($1.8
      million). The purchase was financed through borrowings under the Company’s prior
      revolving line of credit and cash on hand. The operations from the Mexico
      Acquisition are included in Berry’s operations since the acquisition
      date.





On
      June
      3, 2005, Berry acquired Kerr Group, Inc. (“Kerr”) for aggregate consideration of
      approximately $454.8 million (the “Kerr Acquisition”), including direct costs
      associated with the acquisition. The operations from the Kerr Acquisition are
      included in Berry’s operations since the acquisition date. The purchase price
      was financed through additional term loan borrowings under an amendment to
      Berry’s prior senior secured credit facility and cash on hand. In accordance
      with EITF 95-3, the Company established opening balance sheet reserves of $2.7
      million related to plant shutdown and severance costs, of which payments
      totaling $1.0 million and $0.5 million were made in 2006 and 2005, respectively.





The
      pro
      forma financial results presented below are unaudited and assume that the Kerr
      Acquisition and the Merger occurred at the beginning of the respective period.
      Pro forma results have not been adjusted to reflect the Mexico Acquisition
      as
      they do not differ materially from the pro forma results presented below. The
      information presented is for informational purposes only and is not necessarily
      indicative of the operating results that would have occurred had the Kerr
      Acquisition or Merger been consummated at the beginning of the respective
      period, nor are they necessarily indicative of future operating results.
      Further, the information reflects only pro forma adjustments for additional
      interest and amortization expense, elimination of Berry’s write off of deferred
      financing fees and Merger related expenses, and the elimination of Kerr’s
      closing expenses, net of the applicable income tax effects.


**Unaudited****Year
                  ended**
                **December
                  30,**
                **2006**
              
              **Year
                  ended**
                **December
                  31,**
                **2005**
              
              **Year
                  ended January 1,**
                **2005**Pro
                  forma net sales
              
              **$**
              **1,431,764**
              
              $
              1,338,019
              
              $
              1,189,059Pro
                  forma net loss
              
              **$**
              **(19,488**
              **)**
              $
              (40,322
              )
              $
              (39,623
              )




F-13


**Note
      5. Intangible Assets and Deferred Costs**





Intangible
      assets and deferred costs consist of the following:


**Company**
              
              **Predecessor****December
                  30,**
                **2006**
              
              **December
                  31,**
                **2005**Deferred
                  financing fees
              
              **$**
              **43,348**
              
              $
              24,402Customer
                  relationships
              
              
              **511,900**
              
              
              275,614Goodwill
              
              
              **989,181**
              
              
              495,258Trademarks
              
              
              **182,200**
              
              
              49,588Technology-based
              
              
              **15,785**
              
              
              27,206Covenants
                  not to compete and other
              
              
              **—**
              
              
              4,613Accumulated
                  amortization
              
              
              **(9,138**
              **)**
              
              (31,784
              )**$**
              **1,733,276**
              
              $
              844,897




The
      increase in the intangible assets is primarily the result of intangible assets
      acquired or revalued in connection with the Merger consistent with purchase
      accounting. Also,
      a s
      a
      result of the Merger, the Predecessor expensed $16.1 million of unamortized
      deferred financing costs for the period from January 1, 2006 to September 19,
      2006.





Future
      amortization expense for definite lived intangibles at December 30, 2006 for
      the
      next five fiscal years is approximately $32.3 million each year for fiscal
      2007,
      2008, 2009, 2010, and 2011, respectively.





**Note
      6. Long-Term Debt**





Long-term
      debt consists of the following:


**Company**
              
              **Predecessor****December
                  30,**
                **2006**
              
              **December
                  31,**
                **2005**Term
                  loans
              
              **$**
              **673,313**
              
              $
              791,025Revolving
                  line of credit
              
              
              **—**
              
              
              —Italian
                  revolving line of credit
              
              
              **874**
              
              
              —Second
                  Priority Senior Secured Fixed Rate Notes
              
              
              **525,000**
              
              
              —Second
                  Priority Senior Secured Floating Rate Notes
              
              
              **225,000**
              
              
              —Senior
                  Subordinated Notes
              
              
              **425,000**
              
              
              —Capital
                  leases
              
              
              **23,687**
              
              
              26,896Berry
                  10 3⁄4% Senior Subordinated Notes
              
              
              **—**
              
              
              335,000Debt
                  premium on 10 3⁄4% Notes, net
              
              
              **—**
              
              
              7,699**1,872,874**
              
              
              1,160,620Less
                  current portion of long-term debt
              
              
              **12,400**
              
              
              13,928**$**
              **1,860,474**
              
              $
              1,146,692





*Senior
      Secured Credit Facility (Company)*





On
      September 20, 2006, the Company entered into a credit agreement and a related
      guarantee and collateral agreement with a syndicate of lenders. This senior
      secured credit facility (the “Credit Facility”) provides financing of up to
      $875.0 million, consisting of (1) $675.0 million in term loans and (2) a $200.0
      million revolving credit facility. The interest rates per annum applicable
      to
      loans under the Credit Facility are, at the Company’s option, equal to either an
      alternate base rate or an adjusted LIBOR rate for a one-, two-, three- or
      six-month interest period, or a nine- or twelve-month period, if available
      from
      all relevant lenders, in each case, plus an applicable margin. The alternate
      base rate means the greater of (1) Credit Suisse’s prime rate and
      (2) one-half of 1.0% over the weighted average of rates on overnight
      Federal Funds. The Company also pays a customary commitment fee to the lenders
      under the revolving credit facility in respect of the unutilized
      commitments


F-14


thereunder
      at a rate equal to 0.5% per annum (subject to reduction upon attainment of
      certain leverage ratios) and letter of credit and agency fees.





The
      Credit Facility requires a prepayment on outstanding term loans, subject to
      certain exceptions, with (1) beginning with the first full fiscal year after
      the
      closing, 50% (which percentage can be as low as 0% upon the achievement of
      certain leverage ratios) of excess cash flow less the amount of certain
      voluntary prepayments, (2) so long as our total net first lien leverage ratio
      is
      above a certain threshold, 100% of the net cash proceeds of any incurrence
      of
      debt other than excluded debt issuances, and (3) so long as the total net first
      lien leverage ratio is above a certain threshold, 100% of the net cash proceeds
      of all non-ordinary course asset sales and casualty and condemnation events,
      if
      the Company does not reinvest or commit to reinvest those proceeds in assets
      to
      be used in our business or to make certain other permitted investments within
      15
      months. The Company may voluntarily repay outstanding loans under the Credit
      Facility at any time without premium or penalty.





The
      term
      loans amortize each year in an amount equal to 1% per annum in equal
      quarterly installments for the first six years and nine months, with the
      remaining amount payable on September 20, 2013. Principal amounts outstanding
      under the revolving credit facility will be due and payable in full on September
      20, 2012. All obligations under the Credit Facility are unconditionally
      guaranteed by Group and, subject to certain exceptions, each existing and future
      direct and indirect domestic subsidiary. All obligations under the Credit
      Facility and the guarantees of those obligations are secured by substantially
      all assets of the Company and each subsidiary guarantor subject to certain
      exceptions: (1) a first priority pledge of all equity interests of the Company,
      a pledge of 100% of the equity interests of all guarantors and a first priority
      pledge of 65% of the voting equity interests of certain foreign subsidiaries;
      and (2) a first priority security interest in substantially all tangible and
      intangible assets of the Company and each subsidiary guarantor.





The
      Credit Facility contains customary covenants that, among other things, restrict,
      subject to certain exceptions, the ability, and the ability of subsidiaries,
      to
      incur indebtedness, sell assets, make investments, engage in acquisitions,
      mergers or consolidations and make dividend and other restricted payments.
      In
      addition, the Credit Facility requires the Company to maintain the total net
      first lien leverage ratio below a certain ratio and also contains certain
      customary affirmative covenants and events of default. The Company was in
      compliance with all the financial and operating covenants at December 30,
      2006.


At
      December 30, 2006, there were no borrowings outstanding on the revolving credit
      facility. The revolving credit facility allows up to $50.0 million of letters
      of
      credit to be issued instead of borrowings under the revolving credit facility.
      At December 30, 2006 and December 31, 2005, the Company had $14.7
      million under the Credit Facility and $14.7 million under the prior credit
      facility, respectively, in letters of credit outstanding. At December 30, 2006,
      the Company had unused borrowing capacity of $185.3 million under the revolving
      line of credit.





*Second
      Priority Senior Secured Notes (Company)*





On
      September 20, 2006, Holding issued $750.0 million of second priority senior
      secured notes (“Second Priority Notes”) comprised of (1) $525.0 million
      aggregate principal amount of 8 7/8% second priority fixed rate notes (“Fixed
      Rate Notes”) and (2) $225.0 million aggregate principal amount of second
      priority senior secured floating rate notes (“Floating Rate Notes”). The Second
      Priority Notes mature on September 15, 2014. Interest on the Fixed Rate Notes
      is
      due semi-annually on March 15 and September 15. The Floating Rate Notes bear
      interest at a rate of LIBOR plus 3.875% per annum, which resets quarterly.
      Interest on the Floating Rate Notes is payable quarterly on March 15,
      June 15, September 15 and December 15 of each year.




The
      Second Priority Notes are secured by a second priority security interest in
      the
      collateral granted to the collateral agent under the Credit Facility for the
      benefit of the holders and other future parity lien debt that may be issued
      pursuant to the terms of the indenture. These liens will be junior in priority
      to the liens on the same collateral securing the Credit Facility and to all
      other permitted prior liens. The Second Priority Notes are guaranteed, jointly
      and severally, on a second priority senior secured basis, by each domestic
      subsidiary that guarantees the Credit Facility. The Second Priority Notes
      contain customary covenants that, among other things, restrict, subject to
      certain exceptions, our ability, and the ability of subsidiaries, to incur
      indebtedness, sell assets, make investments, engage in acquisitions, mergers
      or
      consolidations and make dividend and other restricted payments.




On
      or
      after September 15, 2010 and 2008, the Company may redeem some or all of the
      Fixed Rate Notes and Floating Rate Notes, respectively, at specified redemption
      prices. Additionally, on or prior to September 15, 2009 and 2008, the Company
      may redeem up to 35% of the aggregate principal amount of the Fixed Rate Notes
      and Floating Rate Notes, respectively, with the net proceeds of specified equity
      offerings at specified redemption prices. If a change of control occurs, the
      Company must give holders of the Second Priority Notes an opportunity to sell
      their notes at a purchase price of 101% of the principal amount plus accrued
      and
      unpaid interest.




F-15


*Senior
      Subordinated Notes (Company)*





On
      September 20, 2006, the Company issued $425.0 million in aggregate
      principal amount of senior subordinated notes (“Senior Subordinated Notes”) to
      affiliates of Goldman, Sachs and Co. in a private placement that is exempt
      from
      registration under the Securities Act. The Senior Subordinated Notes are
      unsecured, senior subordinated obligations and are guaranteed on an unsecured,
      senior subordinated basis by each of our subsidiaries that guarantee the Credit
      Facility and the Second Priority Notes. The Senior Subordinated Notes mature
      in
      2016 and bear interest at a rate of 11% per annum. Such interest is payable
      quarterly in cash; provided, however, that on any quarterly interest payment
      date on or prior to the third anniversary of the issuance, the Company can
      satisfy up to 3% of the interest payable on such date by capitalizing such
      interest and adding it to the outstanding principal amount of the Senior
      Subordinated Notes.




The
      Senior Subordinated Notes may be redeemed at the Company’s option under
      circumstances and at redemption prices set forth in the indenture. Upon the
      occurrence of a change of control, the Company is required to offer to
      repurchase all of the Senior Subordinated Notes. The indenture sets forth
      covenants and events of default that are substantially similar to those set
      forth in the indenture governing the Second Priority Notes. The Senior
      Subordinated Notes contain additional affirmative covenants and certain
      customary representations, warranties and conditions.




*Retired* *Berry
      10 3⁄4% Senior Subordinated Notes (Predecessor)*





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
      2002
      merger. On November 20, 2003, Berry completed an offering of $85.0 million
      aggregate principal amount of 10 3⁄4% Senior Subordinated Notes due 2012 (the
      "Add-on Notes"). The net proceeds to Berry from the sale of the Add-on Notes,
      after expenses, were $91.8 million. The proceeds from the Add-on Notes were
      used
      in the financing of the acquisition of Landis. The 2002 Notes and Add-on Notes
      mature on July 15, 2012. Interest was payable semi-annually on January 15 and
      July 15 of each year. The 2002 Notes and Add-on Notes were retired in connection
      with the Merger and the associated premium paid and net deferred financing
      fees
      were expensed as a loss on extinguished debt.





*Retired
      Senior Secured Credit Facility (Predecessor)*





On
      June
      3, 2005, the Company entered into a Second Amendment to the Second Amended
      and
      Restated Credit Agreement. As a result of the second amendment to the credit
      facility, the Company expensed $7.0 million of unamortized deferred financing
      costs in 2005. On October 26, 2005, the Company entered into a Third Amendment
      to the Second Amended and Restated Credit Agreement (the “Retired Credit
      Facility”) that reduced the applicable margin on the term loan. The Retired
      Credit Facility provided (1) a $795.0 million term loan and (2) a $150.0 million
      revolving credit facility. The Retired Credit Facility was extinguished in
      connection with the Merger and the associated net deferred financing fees were
      expensed as a loss on extinguished debt.





Future
      maturities of long-term debt at December 30, 2006 are as follows:


2007
              
              **$**
              **12,400**2008
              
              
              **11,269**2009
              
              
              **12,048**2010
              
              
              **6,931**2011
              
              
              **14,789**Thereafter
              
              
              **1,815,437****$**
              **1,872,874**





Interest
      paid was $20,181 for the period from September 20, 2006 to December 30, 2006,
      $83,506 for the period from January 1, 2006 to September 20, 2006, and $71,151
      and $53,393 for 2005 and 2004, respectively. Interest capitalized was $887
      for
      the period from September 20, 2006 to December 30, 2006, $1,582 for the period
      from January 1, 2006 to September 20, 2006, and $1,230 and $1,120 for 2005
      and
      2004, respectively.


F-16


**Note
      7. Lease and Other Commitments**





Certain
      property and equipment are leased using capital and operating leases. In 2006
      and 2005, Berry Plastics entered into various capital lease obligations with
      no
      immediate cash flow effect resulting in capitalized property and equipment
      of
      $3,341 and $11,482, respectively. Total capitalized lease property consists
      of a
      building and manufacturing equipment with a cost of $21,929 and $39,113 and
      related accumulated amortization of $889 and $11,132 at December
      30, 2006 and December
      31, 2005 ,
      respectively. Capital lease amortization is included in depreciation expense.
      Total rental expense from operating leases was $9,142 for the period from
      September 20, 2006 to December 30, 2006, $22,097 for the period from January
      1,
      2006 to September 20, 2006, and $23,210 and $14,879 for 2005 and 2004,
      respectively.





Future
      minimum lease payments for capital leases and noncancellable operating leases
      with initial terms in excess of one year are as follows:


**At
                  December 30, 2006****Capital
                  Leases**
              
              **Operating
                  Leases**2007
              
              **$**
              **6,799**
              
              **$**
              **26,291**2008
              
              
              **5,345**
              
              
              **24,086**2009
              
              
              **6,027**
              
              
              **22,835**2010
              
              
              **793**
              
              
              **21,172**2011
              
              
              **8,085**
              
              
              **18,386**Thereafter
              
              
              **—**
              
              
              **96,763****27,049**
              
              **$**
              **209,533**Less:
                  amount representing interest
              
              
              **(3,362**
              **)**Present
                  value of net minimum lease payments
              
              **$**
              **23,687**


The
      Company is party to various legal proceedings involving routine claims which
      are
      incidental to its business. Although the Company’s legal and financial liability
      with respect to such proceedings cannot be estimated with certainty, the Company
      believes that any ultimate liability would not be material to its financial
      position or results of operations.





The
      Company has various purchase commitments for raw materials, supplies and
      property and equipment incidental to the ordinary conduct of business. At
      December 30, 2006, the Company had committed approximately $63.8 million for
      resin on order that had not yet been received and $17.0 million to complete
      capital projects.





**Note
      8. Income Taxes**





For
      financial reporting purposes, income (loss) before income taxes, by tax
      jurisdiction, is comprised of the following:





**Company**
            
            **Predecessor****Period
                from 9/20/06-**
              **12/30/06**
            
            **Period
                from 1/1/06-**
              **9/19/06**
            
            **Year
                Ended December 31, 2005**
            
            **Year
                Ended January 1,**
              **2005**Domestic
            
            **$**
            **(26,692**
            **)**
            **$**
            **(50,507**
            **)**
            $
            43,519
            
            $
            44,841Foreign
            
            
            **(2,179**
            **)**
            
            **(5,585**
            **)**
            
            (9,403
            )
            
            (4,150
            )**$**
            **(28,871**
            **)**
            **$**
            **(56,092**
            **)**
            $
            34,116
            
            $
            40,691





F-17


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:


**Company**
              
              **Predecessor****December
                  30, 2006**
              
              **December
                  31, 2005**Deferred
                  tax assets:Allowance
                  for doubtful accounts
              
              **$**
              **1,928**
              
              $
              1,877Inventory
              
              
              **4,825**
              
              
              1,918Compensation
                  and benefit accruals
              
              
              **13,235**
              
              
              17,114Insurance
                  reserves
              
              
              **1,543**
              
              
              1,557Net
                  operating loss carryforwards
              
              
              **101,658**
              
              
              32,843Alternative
                  minimum tax (AMT) credit carryforwards
              
              
              **7,389**
              
              
              6,398Other
              
              
              **1,926**
              
              
              96Total
                  deferred tax assets
              
              
              **132,504**
              
              
              61,803Valuation
                  allowance
              
              
              **(8,932**
              **)**
              
              (6,741
              )Deferred
                  tax assets, net of valuation allowance
              
              
              **123,572**
              
              
              55,062Deferred
                  tax liabilities:Intangibles
              
              
              **256,736**
              
              
              88,837Property
                  and equipment
              
              
              **41,506**
              
              
              35,888Other
              
              
              **1,600**
              
              
              2,366Total
                  deferred tax liabilities
              
              
              **299,842**
              
              
              127,091Net
                  deferred tax liability
              
              **$**
              **(176,270**
              **)**
              $
              (72,029
              )





Income
      tax expense (benefit) consists of the following:





**Company**
            
            **Predecessor****Period
                from 9/20/06-**
              **12/30/06**
            
            **Period
                from 1/1/06-**
              **9/19/06**
            
            **Year
                Ended December 31, 2005**
            
            **Year
                Ended January 1,**
              **2005**Current:Federal
            
            **$**
            **(341**
            **)**
            **$**
            **287**
            
            $
            735
            
            $
            363Foreign
            
            
            **47**
            
            
            **186**
            
            
            189
            
            
            133State
            
            
            **234**
            
            
            **538**
            
            
            632
            
            
            472Total current
            
            
            **(60**
            **)**
            
            **1,011**
            
            
            1,556
            
            
            968Deferred:Federal
            
            
            **(9,394**
            **)**
            
            **—**
            
            
            11,779
            
            
            13,543Foreign
            
            
            **—**
            
            
            **—**
            
            
            **—**
            
            
            (173
            )State
            
            
            **(1,352**
            **)**
            
            **—**
            
            
            990
            
            
            3,402Total deferred
            
            
            **(10,746**
            **)**
            
            **—**
            
            
            12,769
            
            
            16,772Income
                tax expense (benefit)
            
            **$**
            **(10,806**
            **)**
            **$**
            **1,011**
            
            $
            14,325
            
            $
            17,740





Group
      has
      unused operating loss carryforwards of approximately $231.6
      million for
      federal and state income tax purposes which begin to expire in 2021 and $28.2
      million of foreign operating loss carryforwards. AMT credit carryforwards are
      available to Group infinitely to reduce future years' federal income taxes.
      As a
      result of the Merger, the unused operating loss carryforward is subject to
      an
      annual limitation. The Company is in the process of finalizing the computation
      to determine the limitation, but have preliminarily estimated the aggregate
      limit as a result of the Merger to be approximately $208.0 million per
      year.  The valuation allowance against deferred tax assets was $8.9 million
      and $6.7 million as of December 30, 2006 and December 31, 2005,
      respectively, related to the foreign operating loss
      carryforwards.





Income
      taxes paid during 2006, 2005, and 2004 approximated $1,010, $1,152, and $764
      respectively.


F-18


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 9/20/06-12/30/06**
              
              
              
              **Period
                  from 1/1/06-**
                **9/19/06**
              
              **Year
                  Ended December 31, 2005**
              
              **Year
                  Ended January 1,**
                **2005**Income
                  tax expense computed at statutory rate
              
              **$**
              **(10,105**
              **)**
              
              
              **$**
              **(19,632**
              **)**
              $
              11,941
              
              $
              14,244State
                  income tax expense, net of federal taxes
              
              
              **(1,554**
              **)**
              
              
              
              **(3,029**
              **)**
              
              1,622
              
              
              2,518Expenses
                  not deductible for income tax purposes
              
              
              **91**
              
              
              
              
              **321**
              
              
              375
              
              
              394Change
                  in valuation allowance
              
              
              **626**
              
              
              
              
              **22,317**
              
              
              557
              
              
              1,288Other
              
              
              **136**
              
              
              
              
              **1,034**
              
              
              (170
              )
              
              (704
              )Income
                  tax expense (benefit)
              
              **$**
              **(10,806**
              **)**
              
              
              **$**
              **1,011**
              
              $
              14,325
              
              $
              17,740





**Note
      9. Pension and Other Post-retirement Benefits**





In
      connection with the Kerr Acquisition, the Company acquired two defined benefit
      pension plans which cover substantially all former employees and former union
      employees at Kerr’s former Lancaster facility. The Company also acquired a
      retiree health plan from Kerr, which covers certain healthcare and life
      insurance benefits for certain retired employees and their spouses. The two
      defined benefit plans of Kerr and the retiree health plan are all inactive
      plans
      and are included in the beginning of year totals in the table below for the
      year
      ended December 31, 2005 as a result of the Kerr Acquisition on June 3, 2005.
      The
      Company also maintains a defined benefit pension plan covering the Poly-Seal
      employees under a collective bargaining agreement. The Company uses December
      31
      as a measurement date for the retirement plans. In connection with the Merger,
      the Company recorded an adjustment to reduce the pension benefit obligation
      by
      $1.5 million on September 20, 2006.





As
      disclosed in Note 1, SFAS No. 158, adopted by the Company effective December
      30,
      2006, requires the recognition of the overfunded or underfunded status of a
      defined benefit postretirement plan as an asset or liability in the balance
      sheet, with changes in the funded status recorded through other comprehensive
      income. Accordingly, the amounts presented in the table below utilize different
      accounting methodologies for the respective periods. The effect of adopting
      SFAS
      No. 158 was to reduce the accrued benefit liability by $1.1 million at December
      30, 2006. The projected benefit obligations of the Company’s plans presented
      herein are materially consistent with the accumulated benefit obligations of
      such plans.






F-19


**Defined
                  Benefit Pension Plans**
              
              **Retiree
                  Health Plan****Company**
              
              **Predecessor**
              
              **Company**
              
              **Predecessor****Period
                  from 9/20/06-12/30/06**
              
              **Period
                  from 1/1/06-9/19/06**
              
              **Year
                  ended**
                **December
                  31, 2005**
              
              **Year
                  ended**
                **January
                  1, 2005**
              
              **Period
                  from 9/20/06-12/30/06**
              
              **Period
                  from 1/1/06-9/19/06**
              
              **Year
                  ended**
                **December
                  31, 2005****Change
                  in Projected Benefit Obligations (PBO)**PBO
                  at beginning of period
              
              **$**
              **41,575**
              
              **$**
              **42,285**
              
              $
              44,026
              
              $
              5,639
              
              **$**
              **6,896**
              
              **$**
              **7,664**
              
              $
              9,338Service
                  cost
              
              
              **68**
              
              
              **204**
              
              
              257
              
              
              269
              
              
              **5**
              
              
              **11**
              
              
              11Interest
                  cost
              
              
              **619**
              
              
              **1,614**
              
              
              1,457
              
              
              352
              
              
              **103**
              
              
              **283**
              
              
              268Participant
                  contributions
              
              
              **—**
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              **50**
              
              
              —Increase
                  due to discount rate change
              
              
              **176**
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Actuarial
                  loss (gain)
              
              
              **—**
              
              
              **6**
              
              
              (1,186
              )
              
              42
              
              
              —
              
              
              **(466**
              **)**
              
              (1,589
              )Benefits
                  paid
              
              
              **(842**
              **)**
              
              **(2,534**
              **)**
              
              (2,269
              )
              
              (198
              )
              
              **(214**
              **)**
              
              **(646**
              **)**
              
              (364
              )PBO
                  at end of period
              
              **$**
              **41,596**
              
              **$**
              **41,575**
              
              $
              42,285
              
              $
              6,104
              
              **$**
              **6,790**
              
              **$**
              **6,896**
              
              $
              7,664**Change
                  in Fair Value of Plan Assets**Plan
                  assets at beginning of period
              
              **$**
              **33,687**
              
              **$**
              **33,681**
              
              $
              33,558
              
              $
              4,775
              
              **$**
              —
              
              **$**
              —
              
              $
              —Actual
                  return on plan assets
              
              
              **1,044**
              
              
              **2,421**
              
              
              1,898
              
              
              190
              
              
              —
              
              
              —
              
              
              —Company
                  contributions
              
              
              **195**
              
              
              **119**
              
              
              494
              
              
              415
              
              
              **215**
              
              
              **646**
              
              
              364Benefits
                  paid
              
              
              **(842**
              **)**
              
              **(2,534**
              **)**
              
              (2,269
              )
              
              (198
              )
              
              **(215**
              **)**
              
              **(646**
              **)**
              
              (364
              )Plan
                  assets at end of period
              
              
              **34,084**
              
              
              **33,687**
              
              
              33,681
              
              
              5,182
              
              
              —
              
              
              —
              
              
              —**Funded
                  status**
              
              **$**
              **(7,512**
              **)**
              **$**
              **(7,888**
              **)**
              $
              (8,604
              )
              $
              (922
              )
              **$**
              **(6,790**
              **)**
              **$**
              **(6,896**
              **)**
              $
              (7,664
              )Unrecognized
                  net actuarial loss/gain
              
              
              —
              
              
              **(1,854**
              **)**
              
              (645
              )
              
              765
              
              
              —
              
              
              **(1,947**
              **)**
              
              (1,589
              )Unrecognized
                  prior service cost
              
              
              **—**
              
              
              —
              
              
              597
              
              
              686
              
              
              —
              
              
              —
              
              
              —**Net
                  amount recognized**
              
              **$**
              **(7,512**
              **)**
              **$**
              **(9,742**
              **)**
              $
              (8,652
              )
              $
              529
              
              **$**
              **(6,790**
              **)**
              **$**
              **(8,843**
              **)**
              $
              (9,253
              )**Amounts
                  recognized in the Consolidated Balance Sheet consist
                  of:**Prepaid
                  pension
              
              **$**
              —
              
              **$**
              **204**
              
              $
              413
              
              $
              529
              
              
              **—**
              
              
              **—**
              
              
              —Accrued
                  benefit liability
              
              
              **(7,512**
              **)**
              
              **(10,523**
              **)**
              
              (10,624
              )
              
              (1,456
              )
              
              **(6,790**
              **)**
              
              **(8,843**
              **)**
              
              (9,253
              )Intangible
                  assets
              
              
              **—**
              
              
              —
              
              
              597
              
              
              685
              
              
              **—**
              
              
              **—**
              
              
              —Accumulated
                  other comprehensive (gains) losses before income taxes
              
              
              —
              
              
              **577**
              
              
              962
              
              
              771
              
              
              **—**
              
              
              **—**
              
              
              —**Net
                  amount recognized**
              
              **$**
              **(7,512**
              **)**
              **$**
              **(9,742**
              **)**
              $
              (8,652
              )
              $
              529
              
              **$**
              **(6,790**
              **)**
              **$**
              **(8,843**
              **)**
              $
              (9,253
              )







The
      following table presents significant weighted-average assumptions used to
      determine benefit obligation and benefit cost for the periods indicated.


**Defined
                  Benefit Pension Plans**
              
              **Retiree
                  Health Plan****Company**
              
              **Predecessor**
              
              **Company**
              
              **Predecessor**(Percents)
              
              **Period
                  from 9/20/06-12/30/06**
              
              **Period
                  from 1/1/06-**
                **9/19/06**
              
              **Year
                  Ended December 31, 2005**
              
              **Year
                  Ended January 1,**
                **2005**
              
              **Period
                  from 9/20/06-12/30/06**
              
              **Period
                  from 1/1/06-**
                **9/19/06**
              
              **Year
                  Ended December 31, 2005**Weighted-average
                  assumptions:Discount
                  rate for benefit obligation
              
              
              **5.5**
              
              
              **5.5**
              
              
              5.5
              
              
              6.3
              
              
              **5.5**
              
              
              **5.5**
              
              
              5.5Discount
                  rate for net benefit cost
              
              
              **5.6**
              
              
              **5.6**
              
              
              5.3
              
              
              6.3
              
              
              **5.0**
              
              
              **5.0**
              
              
              5.0Expected
                  return on plan assets for net benefit costs
              
              
              **8.0**
              
              
              **8.0**
              
              
              8.0
              
              
              8.0
              
              
              **—**
              
              
              **—**
              
              
              —




In
      evaluating the expected return on plan assets, the Company considered its
      historical assumptions compared with actual results, an analysis of current
      market conditions, asset allocations, and the views of advisers.
      Health-care-cost trend rates were assumed to increase at an annual rate of
      7.5
      percent in 2007 trending down to 4.5 percent in 2012 and thereafter. The trend
      rate is a significant factor in determining the amounts reported. A
      one-percentage-point change in these assumed health care cost trend rates would
      have the following effects, in millions of dollars:


F-20





One-Percentage
                Point
            
            Increase
            
            DecreaseAccumulated
                Postretirement benefit obligation
            
            $
            146
            
            $
            (143
            )Sum
                of service cost and interest cost
            
            $
            10
            
            $
            (10
            )





The
      following benefit payments, which reflect expected future service, as
      appropriate, are expected to be paid as follows:





**Defined
                Benefit Pension Plans**
            
            **Retiree**
              **Health
                Plan**2007
            
            **$**
            **3,436**
            
            **$**
            **1,314**2008
            
            
            **3,373**
            
            
            **1,153**2009
            
            
            **3,320**
            
            
            **972**2010
            
            
            **3,250**
            
            
            **840**2011
            
            
            **3,218**
            
            
            **773**2012-2015
            
            
            **16,275**
            
            
            **2,958**





In
      2007,
      the Company expects to contribute approximately $3.0 million to its retirement
      plans to satisfy minimum funding requirements for the year.





Net
      pension and retiree health benefit expense included the following
      components:





**Company**
            
            **Predecessor****Period
                from 9/20/06-**
              **12/30/06**
            
            **Period
                from 1/1/06-**
              **9/19/06**
            
            **Year
                Ended**
              **December
                31,**
              **2005**
            
            **Year
                Ended**
              **January
                1,**
              **2005**Components
                of net period benefit cost:Defined
                Benefit Pension PlansService
                cost
            
            **$**
            **68**
            
            **$**
            **204**
            
            $
            257
            
            $
            269Interest
                cost
            
            
            **619**
            
            
            **1,614**
            
            
            1,457
            
            
            352Expected
                return on plan assets
            
            
            **(704**
            **)**
            
            **(1,830**
            **)**
            
            (1,692
            )
            
            (399
            )Amortization
                of prior service cost
            
            
            —
            
            
            **73**
            
            
            91
            
            
            94Recognized
                actuarial loss
            
            
            —
            
            
            **17**
            
            
            60
            
            
            36Net
                periodic benefit cost
            
            **$**
            **(17**
            **)**
            **$**
            **78**
            
            $
            173
            
            $
            352Retiree
                Health Benefit PlanService
                cost
            
            **$**
            **5**
            
            **$**
            **11**
            
            $
            11
            
            $
            —Interest
                cost
            
            
            **103**
            
            
            **283**
            
            
            268
            
            
            —Amortization
                of net actuarial gain
            
            
            —
            
            
            **(91**
            **)**
            
            —
            
            
            —Net
                periodic benefit cost
            
            **$**
            **108**
            
            **$**
            **203**
            
            $
            279
            
            $
            —





Our
      defined benefit pension plan asset allocations are as follows:


**Company**
              
              **Predecessor****December
                  30, 2006**
              
              **December
                  31, 2005**
              
              **January
                  1,**
                **2005**Asset
                  CategoryEquity
                  securities and equity-like instruments
              
              
              **51**
              **%**
              
              51
              %
              
              60
              %Debt
                  securities
              
              
              **47**
              
              
              47
              
              
              34Other
              
              
              **2**
              
              
              2
              
              
              6Total
              
              
              **100**
              **%**
              
              100
              %
              
              100
              %





The
      Company’s retirement plan assets are invested with the objective of providing
      the plans the ability to fund current and future benefit payment requirements
      while minimizing annual Company contributions. The plans’ asset allocation
      strategy reflects a long-term growth strategy with approximately 51% allocated
      to growth investments and 47% allocated to fixed income investments. The Company
      re-addresses the allocation of its investments on an annual
      basis.


F-21


Berry
      Plastics also sponsors two defined contribution 401(k) retirement plans 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 expenses for these plans were $772 for the
      period from September 20, 2006 to December 30, 2006, $2,911 for the period
      from
      January 1, 2006 to September 20, 2006, and $2,801 and $2,020 for 2005 and 2004,
      respectively.





**Note
      10. Stockholders’ Equity**





*Common
      and Preferred Stock*





On
      September 20, 2006, BPC Acquisition Corp. merged with and into BPC Holding
      Corporation pursuant to an agreement and plan of merger (the “Merger”), dated
      June 28, 2006, with BPC Holding Corporation continuing as the surviving
      corporation. Following the consummation of the Merger, BPC Holding Corporation
      changed its name to Berry Plastics Holding Corporation. Pursuant to the Merger,
      Holding is a wholly-owned su bsidiary
      of Group. At the effective time of the Merger, 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.





*Notes
      Receivable from Management*





Group
      has
      adopted an employee stock purchase program pursuant to which a number of
      non-executive employees had the opportunity to invest in Group on a leveraged
      basis. In the event that an employee defaults on a promissory note used to
      purchase such shares, Group’s only recourse is to the shares of Group securing
      the note. In this manner, non-executive management acquired 98,052 shares in
      the
      aggregate at the time of the Merger.





*2006
      Equity Incentive Plan*





In
      connection with the Merger, Group adopted an equity incentive plan pursuant
      to
      which options to acquire up to 577,252 shares
      of
      Group’s common stock may be granted (the “2006 Equity Incentive Plan”). Options
      granted under the 2006 Equity Incentive Plan may not be assigned or transferred,
      except to Group or by will or the laws of descent or distribution. The 2006
      Equity Incentive Plan terminates ten years after adoption and no options may
      be
      granted under the plan thereafter. The 2006 Equity Incentive Plan allows for
      the
      issuance of non-qualified options, options intended to qualify as “incentive
      stock options” within the meaning of the Internal Revenue Code of 1986, as
      amended, and stock appreciation rights. The employees participating in the
      2006
      Equity Incentive Plan receive options and stock appreciation rights under the
      2006 Equity Incentive Plan pursuant to individual option and stock appreciation
      rights agreements, the terms and conditions of which are substantially
      identical. Each option agreement provides for the issuance of options to
      purchase common stock of Group. Options granted under the 2006 Equity Incentive
      Plan 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. Some options granted
      under the plan become vested and exercisable over a five-year period based
      on
      continued service. Other options become vested and exercisable based on the
      achievement by the Company of certain financial targets Upon a change in
      control, the vesting schedule with respect to certain options accelerate for
      a
      portion of the shares subject to such options. Since Group’s common stock is not
      highly liquid, except in certain limited circumstances, the stock options may
      not be redeemable.





*Predecessor
      Option Plans*





Prior
      to
      the Merger, Holding maintained the BPC Holding Corporation 1996 Stock Option
      Plan (‘‘1996 Option Plan’’), as amended. Option agreements issued pursuant to
      the 1996 Option Plan generally provided that options become vested and
      exercisable at a rate of 10% per year based on continued service. Additional
      options also vested in years during which certain financial targets were
      attained. Notwithstanding the vesting provisions in the option agreements,
      all
      options that were scheduled to vest prior to December 30, 2006 accelerated
      and
      became vested immediately prior to the Merger.


F-22


Prior
      to
      the Merger, Holding also maintained an employee stock option plan (‘‘2002 Option
      Plan’’), as amended, pursuant to which options may be granted to its employees,
      directors and consultants. Options granted under the 2002 Option Plan had an
      exercise price per share that either (1) was fixed at the fair market value
      of a
      share of common stock on the date of grant or (2) commenced at the fair market
      value of a share of common stock on the date of grant and increased at the
      rate
      of 15% per year during the term. Generally, options had a ten-year term, subject
      to earlier expiration upon the termination of the option holder’s employment and
      other events. Some options granted under the plan became vested and exercisable
      over a five-year period based on continued service with Holding. Other options
      became vested and exercisable based on the achievement by Holding of certain
      financial targets, or if such targets are not achieved, based on continued
      service with Holding. Notwithstanding the vesting provisions in the option
      agreements, all options that were scheduled to vest prior to December 30, 2006
      accelerated and became vested immediately prior to the Merger.





Information
      related to the 2006 Equity Incentive Plan and Predecessor stock option plans
      of
      Holding is as follows:


**Company**
              
              **Predecessor**
              
              **Predecessor**
              
              **Predecessor****December
                  30, 2006**
              
              **September
                  19, 2006**
              
              **December
                  31, 2005**
              
              **January
                  1, 2005**Number
                Of
                Shares
              
              Weighted
                Average
                Exercise
                Price
              
              Number
                Of
                Shares
              
              Weighted
                Average
                Exercise
                Price
              
              Number
                Of
                Shares
              
              Weighted
                Average
                Exercise
                Price
              
              Number
                Of
                Shares
              
              Weighted
                Average
                Exercise
                PriceOptions
                  outstanding, beginning of period
              
              
              **—**
              
              **$**
              **—**
              
              
              **625,209**
              
              **$**
              **113**
              
              
              590,156
              
              $
              102
              
              
              530,662
              
              $
              94Options
                  granted
              
              
              **500,184**
              
              
              **100**
              
              
              **21,558**
              
              
              **172**
              
              
              96,051
              
              
              145
              
              
              65,465
              
              
              120Options
                  exercised or cash settled
              
              
              **—**
              
              
              **—**
              
              
              **(570,717**
              **)**
              
              **112**
              
              
              (31,652
              )
              
              105
              
              
              (1,640
              )
              
              53Options
                  forfeited or cancelled
              
              
              **—**
              
              
              **—**
              
              
              **(76,050**
              **)**
              
              **137**
              
              
              (29,346
              )
              
              117
              
              
              (4,331
              )
              
              93Options
                  outstanding, end of period
              
              
              **500,184**
              
              **$**
              **100**
              
              
              **—**
              
              
              **—**
              
              
              625,209
              
              
              113
              
              
              590,156
              
              
              102Option
                  price range at end of period
              
              **$100**
              **—**
              $32
                  - $163
              $32-$142Options
                  exercisable at end of period
              
              **12,000**
              **—**
              365,265
              291,879Options
                  available for grant at period end
              
              **77,068**
              **—**
              4,216
              43,489Weighted
                  average fair value of options granted during period
              
              **$19**
              **$51**
              $45
              $34




The
      following table summarizes information about the options outstanding at December
      30, 2006:


Range
                  of
                Exercise
                Prices
              Number
                  Outstanding
                At
                  December 30, 2006
              Weighted
                  Average
                Remaining
                  Contractual
                Life
              Weighted
                Average
                Exercise
                Price
              Number
                Exercisable
                  at
                December
                  30, 2006**$100**
              **500,184**
              **10
                  years**
              **$100**
              **12,000**





Shares
      issued under the stock-based compensation plans are usually issued from shares
      of common stock held in treasury. Stock compensation is included in the General
      and administrative line on the Consolidated Statements of Operations. As of
      December 30, 2006, the total remaining unrecognized compensation cost
      related to nonvested stock options amounted to $9.0 million, which will be
      amortized over the weighted-average remaining requisite service period of 5
      years.





*Stockholders
      Agreements (Company)*





In
      connection with the Merger, Apollo and Graham and certain employees who invested
      in Berry Plastics Group entered into a stockholders
      agreement. The stockholders agreement provides for, among other things, a
      restriction on the transferability of each such person’s equity ownership in us,
      tag-along rights, drag-along rights, piggyback registration rights and
      repurchase rights by Group in certain circumstances.





*Common
      and Treasury Stock (Predecessor)*





In
      connection with the Merger, all of the Predecessor’s Common and Preferred Stock
      was retired. The Notes receivable from management (Predecessor) and all accrued
      interest were repaid in connection with the Merger. Effective
      with the Merger, the Predecessor accelerated the vesting of a portion of
      unvested stock option awards. Certain of the awards were accelerated pursuant
      to
      provisions in the option agreements, while other awards were modified to
      accelerate the vesting. The Predecessor recognized $9.8 million in compensation
      expense related to this acceleration, which is


F-23


included
      in Merger expenses in the accompanying consolidated statement of operations.
      The
      vested awards were then settled in cash at the transaction date, based upon
      the
      per share consideration received in the transaction. All remaining outstanding
      options of the Predecessor were cancelled upon consummation of the Merger.





**Note
      11. Related Party Transactions**





*Company*





In
      connection with the Merger, the Company paid $18.1 million to entities
      affiliated with Apollo Management, L.P. and $2.3 million to entities affiliated
      with Graham Partners, Inc. for advisory and other services. Apollo and Graham
      have also entered into a management agreement with Holding and Berry Plastics
      Group relating to the provision of certain financial and strategic advisory
      services and consulting services. The Company pays Apollo and Graham an annual
      management fee equal to the greater of $3.0 million and 1.25% of our adjusted
      EBITDA, as defined in the bond indenture, and reimburse Apollo and Graham for
      out-of-pocket expenses incurred in the performance of their obligations under
      the agreement. The management agreement expires on December 31, 2012, subject
      to
      automatic yearly extensions unless terminated by any party upon prior notice.
      In
      addition, Apollo and Graham have the right to terminate the agreement at any
      time, in which case Apollo and Graham will receive additional consideration
      equal to the present value of $21 million less the aggregate amount of annual
      management fees previously paid to Apollo and Graham, and the employee
      stockholders will receive a pro rata payment based on such amount. The Company
      paid $1,500,000 in management fees for the year ended December 30, 2006,
      including amounts paid for a portion of fiscal 2007 services.





*Predecessor*





Prior
      to
      the Merger, Goldman Sachs Credit Partners, L.P., an affiliate of Goldman Sachs,
      acted as the administrative agent, joint lead arranger and joint bookrunner
      for
      the Second Amended and Restated Retired Credit Facility without separate
      compensation. JP Morgan Chase Bank, an affiliate of J.P. Morgan, acted as the
      joint lead arranger and joint bookrunner for the Second Amended and Restated
      Credit Facility for consideration of approximately $0.4 million. In addition,
      the Company entered into four resin forward contracts in the fourth quarter
      of
      2004 ranging from 6.0 million to 33.6 million annual pounds of resin with J.
      Aron & Company, a division of Goldman, Sachs & Co., and entered into
      foreign currency transactions through its normal course of business with
      Goldman, Sachs & Co. In
      June
      2005, Berry entered into two separate interest rate swap transactions, which
      were cancelled in the third quarter before the Merger, for $100.0 million each
      with an
      affiliate of Goldman Sachs and an affiliate of J.P. Morgan to
      protect a portion of the outstanding variable rate term loan debt from future
      interest rate volatility.





Also
      prior to the Merger, in connection with the Kerr Acquisition, the Company paid
      $2.7 million to entities affiliated with Goldman, Sachs & Co. and $1.3
      million to entities affiliated with J.P. Morgan Chase & Co., for advisory
      and other services. Goldman Sachs and J.P. Morgan Chase Bank, an affiliate
      of
      J.P. Morgan, acted as co-syndication agents, joint lead arrangers, and joint
      bookrunners for the Second Amendment to the Second Amended and Restated Retired
      Credit Facility for consideration of $2.7 million and $2.4 million,
      respectively. Goldman Sachs Credit Partners, L.P., an affiliate of Goldman
      Sachs, acted as the co-syndication agent, joint lead arranger and joint
      bookrunner for the Third Amendment to the Second Amended and Restated Retired
      Credit Facility without separate compensation. JP Morgan Chase Bank, an
      affiliate of J.P. Morgan, acted as the co-syndication agent, joint lead
      arranger, and joint bookrunner for the Third Amendment to the Second Amended
      and
      Restated Retired Credit Facility for consideration of $0.5 million. Also,
      affiliates of Goldman Sachs & Co. and J.P. Morgan invest in a portion of the
      Company’s credit facilities in its normal course of business. In
      connection with the Merger, the Company paid $19.7 million to affiliates
      of Goldman Sachs & Co. and J.P. Morgan for
      advisory and other services.





**Note
      12. Financial Instruments**





Holding’s
      and the Company's financial instruments generally consist of cash and cash
      equivalents, the investment in Southern Packaging, interest rate hedge
      contracts, resin hedge contracts, and long-term debt. In September 2006, the
      Company entered into an interest rate agreement, which expires on June 3, 2008
      that caps the three month LIBOR rate at 8.0% for $230.0 million of the Company’s
      indebtedness. The carrying amounts of Holding’s and the Company's financial
      instruments approximate fair value at December 30, 2006 except for the Second
      Priority Notes for which the fair value exceeded the carrying value by $11.3
      million.


F-24


**Note
      13. Accumulated Other Comprehensive Income**





The
      accumulated balances related to each component of the other comprehensive income
      consist of the following:


**Company**
              
              **Predecessor****December
                  30, 2006**
              
              **December
                  31, 2005**Currency
                  translation
              
              **$**
              **1,358**
              
              $
              5,214Impact
                  of SFAS No. 158
              
              
              **684**
              
              
              **—**Minimum
                  pension liability adjustment
              
              
              **—**
              
              
              (577
              )Unrealized
                  gain on interest rate hedges
              
              
              **—**
              
              
              3,548Unrealized
                  gain on resin hedge contracts
              
              
              **—**
              
              
              3,680**$**
              **2,042**
              
              $
              11,865





F-25


**Note
      14. Operating Segments**





Berry
      organizes its operations into two reportable segments: open top and closed
      top.
      The Company evaluates performance and allocates resources to segments based
      on
      operating income before depreciation and amortization of intangibles adjusted
      to
      exclude (1) Merger expenses (2) business optimization expenses, and (3) non-cash
      compensation plus pro forma synergies (collectively, “Bank Compliance EBITDA”).
      The accounting policies of the reportable segments are the same as those
      described in the summary of significant accounting policies.





**Year
                Ended****Company/**
              **Predecessor**
            
            **Predecessor**
            
            **Predecessor****December
                30,**
              **2006**
            
            **December
                31,**
              **2005**
            
            **January
                1,**
              **2005**Net
                sales:Open
                Top
            
            **$**
            **836,847**
            
            $
            775,677
            
            $
            659,257Closed
                Top
            
            
            **594,917**
            
            
            394,027
            
            
            154,956Total
                net sales
            
            
            **1,431,764**
            
            
            1,169,704
            
            
            814,213Adjusted
                EBITDA:Open
                Top
            
            
            **169,677**
            
            
            141,432
            
            
            131,188Closed
                Top
            
            
            **120,054**
            
            
            71,154
            
            
            29,880Total
                adjusted EBITDA
            
            
            **289,731**
            
            
            212,586
            
            
            161,068Total
                assets:Open
                Top
            
            
            **1,550,034**
            
            
            858,555
            
            
            789,592Closed
                Top
            
            
            **1,018,622**
            
            
            789,275
            
            
            215,552Total
                assets
            
            
            **2,568,656**
            
            
            1,647,830
            
            
            1,005,144Goodwill,
                net:Open
                Top
            
            
            **558,384**
            
            
            284,644
            
            
            280,508Closed
                Top
            
            
            **430,797**
            
            
            210,614
            
            
            78,375Total
                goodwill, net
            
            
            **989,181**
            
            
            495,258
            
            
            358,883Reconciliation
                of Bank Compliance EBITDA to net income (loss):Bank
                Compliance EBITDA for reportable segments
            
            **$**
            **289,731**
            
            $
            212,586
            
            $
            161,068Net
                interest expense
            
            
            **(111,280**
            **)**
            
            (73,274
            )
            
            (53,185
            )Depreciation
            
            
            **(86,678**
            **)**
            
            (73,146
            )
            
            (54,303
            )Amortization
            
            
            **(22,681**
            **)**
            
            (15,574
            )
            
            (6,513
            )Income
                taxes (benefit)
            
            
            **9,795**
            
            
            (14,325
            )
            
            (17,740
            )Unrealized
                gain (loss) on investment in Southern Packaging
            
            
            **299**
            
            
            (1,354
            )
            
            —Merger
                expenses
            
            
            **(81,309**
            **)**
            
            —
            
            
            —Business
                optimization expense
            
            
            **(14,287**
            **)**
            
            (5,925
            )
            
            (5,791
            )Loss
                on extinguished debt
            
            
            **(39,916**
            **)**
            
            (7,045
            )
            
            —Non-cash
                compensation
            
            
            **(3,385**
            **)**
            
            (2,152
            )
            
            (585
            )Management
                fees
            
            
            **(900**
            **)**
            
            —
            
            
            —Pro
                forma synergies
            
            
            **(14,557**
            **)**
            
            —
            
            
            —Net
                income (loss)
            
            **$**
            **(75,168**
            **)**
            $
            19,791
            
            $
            22,951


F-26


**15.**  **Condensed
      Consolidating Financial Information**





Holding
      conducts its business through its wholly owned subsidiary, Berry. Certain of
      Berry’s domestic subsidiaries fully, jointly, severally, and unconditionally
      guarantee on a second priority basis the $750.0
      million aggregate principal amount of Holding’s Second Priority Notes due
      2014 .
      Each of
      Holding’s subsidiaries is 100% owned, directly or indirectly, 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
      Group, Holding, and its subsidiaries at December 30, 2006 (Company) and December
      31, 2005 (Predecessor) and for the periods from September 20 ,2006 to December
      30, 2006 (Company), January 1, 2006, to September 19, 2006 (Predecessor), and
      the years ended December 31, 2005 and January 1, 2005 (both Predecessor). The
      equity method has been used with respect to investments in
      subsidiaries.


**December
                  30, 2006 (Company)**Combined
                  GuarantorSubsidiaries
              
              Combined
                Non-guarantorSubsidiaries
              
              ConsolidatingAdjustments
              
              Consolidated**Consolidating
                  Balance Sheet**Current
                  assets
              
              $
              347,762
              
              $
              23,641
              
              $
              —
              
              $
              371,403Net
                  property and equipment
              
              
              437,859
              
              
              26,118
              
              
              —
              
              
              463,977Other
                  noncurrent assets
              
              
              1,757,348
              
              
              24
              
              
              (24,096
              )
              
              1,733,276Total
                  assets
              
              $
              2,542,969
              
              $
              49,783
              
              $
              (
                  24,096
              )
              $
              2,568,656Current
                  liabilities
              
              $
              187,691
              
              $
              8,159
              
              $
              —
              
              $
              195,850Noncurrent
                  liabilities
              
              
              2,060,219
              
              
              18,400
              
              
              —
              
              
              2,078,619Equity
                  (deficit)
              
              
              295,059
              
              
              23,224
              
              
              (24,096
              )
              
              294,187Total
                  liabilities and equity (deficit)
              
              $
              2,542,969
              
              $
              49,783
              
              $
              (24,096
              )
              $
              2,568,656




**December
                  31, 2005 (Predecessor)**Combined
                  GuarantorSubsidiaries
              
              Combined
                Non-guarantorSubsidiaries
              
              ConsolidatingAdjustments
              
              Consolidated**Consolidating
                  Balance Sheet**Current
                  assets
              
              $
              356,663
              
              $
              22,826
              
              $
              —
              
              $
              379,489Net
                  property and equipment
              
              
              403,480
              
              
              19,964
              
              
              —
              
              
              423,444Other
                  noncurrent assets
              
              
              854,021
              
              
              13,214
              
              
              (22,338
              )
              
              844,897Total
                  assets
              
              $
              1,614,164
              
              $
              56,004
              
              $
              (22,338
              )
              $
              1,647,830Current
                  liabilities
              
              $
              168,618
              
              $
              9,090
              
              $
              —
              
              $
              177,708Noncurrent
                  liabilities
              
              
              1,225,951
              
              
              40,783
              
              
              —
              
              
              1,266,734Equity
                  (deficit)
              
              
              219,595
              
              
              6,131
              
              
              (22,338
              )
              
              203,388Total
                  liabilities and equity (deficit)
              
              $
              1,614,164
              
              $
              56,004
              
              $
              (22,338
              )
              $
              1,647,830





F-27


**Period
                    from September 20, 2006 to December 30, 2006
                    (Company)**Combined
                    GuarantorSubsidiaries
                
                Combined
                  Non-guarantorSubsidiaries
                
                ConsolidatingAdjustments
                
                Consolidated**Consolidating
                    Statement of Operations**Net
                    sales
                
                $
                372,775
                
                $
                10,513
                
                $
                —
                
                $
                383,288Cost
                    of goods sold
                
                
                305,560
                
                
                11,379
                
                
                —
                
                
                316,939Gross
                    profit
                
                
                67,215
                
                
                (866
                )
                
                —
                
                
                66,349Operating
                    expenses
                
                
                40,955
                
                
                919
                
                
                —
                
                
                41,874Operating
                    income (loss)
                
                
                26,250
                
                
                (1,785
                )
                
                —
                
                
                24,475Loss
                    on extinguished debt
                
                
                5,875
                
                
                —
                
                
                —
                
                
                5,875Interest
                    expense, net
                
                
                47,077
                
                
                394
                
                
                —
                
                
                47,471Income
                    tax expense (benefit)
                
                
                (10,853
                )
                
                47
                
                
                —
                
                
                (10,806
                )Equity
                    in net (income) loss from subsidiary
                
                
                2,226
                
                
                —
                
                
                (2,226
                )
                
                —Net
                    income (loss)
                
                $
                (18,065
                )
                $
                (2,226
                )
                $
                2,226
                
                $
                (18,065
                )
 **Consolidating
                      Statement of Cash Flows**Net
                      income (loss)
                  
                  $
                  (18,065
                  )
                  $
                  (2,226
                  )
                  $
                  2,226
                  
                  $
                  (18,065
                  )Non-cash
                      expenses
                  
                  
                  27,714
                  
                  
                  1,714
                  
                  
                  —
                  
                  
                  29,428Equity
                      in net (income) loss from subsidiary
                  
                  
                  2,226
                  
                  
                  —
                  
                  
                  (2,226
                  )
                  
                  —Changes
                      in working capital
                  
                  
                  27,877
                  
                  
                  (1,976
                  )
                  
                  —
                  
                  
                  25,901Net
                      cash provided by (used for) operating activities
                  
                  
                  39,752
                  
                  
                  (2,488
                  )
                  
                  —
                  
                  
                  37,264Net
                      cash provided by (used for) investing activities
                  
                  
                  (2,327,975
                  )
                  
                  22,648
                  
                  
                  —
                  
                  
                  (2,305,327
                  )Net
                      cash provided by (used for) financing activities
                  
                  
                  2,306,827
                  
                  
                  (19,595
                  )
                  
                  —
                  
                  
                  2,287,232Effect
                      of exchange rate changes on cash
                  
                  
                  —
                  
                  
                  380
                  
                  
                  —
                  
                  
                  380Net
                      (decrease) in cash and cash equivalents
                  
                  
                  18,604
                  
                  
                  945
                  
                  
                  —
                  
                  
                  19,549Cash
                      and cash equivalents at beginning of period
                  
                  
                  2
                  
                  
                  (2
                  )
                  
                  —
                  
                  
                  —Cash
                      and cash equivalents at end of period
                  
                  $
                  18,606
                  
                  $
                  943
                  
                  $
                  3⁄4
                  
                  $
                  19,549




**Period
                  from January 1, 2006 to September 19, 2006
                  (Predecessor)**Combined
                  GuarantorSubsidiaries
              
              Combined
                Non-guarantorSubsidiaries
              
              ConsolidatingAdjustments
              
              Consolidated**Consolidating
                  Statement of Operations**Net
                  sales
              
              $
              1,025,159
              
              $
              23,317
              
              $
              —
              
              $
              1,048,476Cost
                  of goods sold
              
              
              815,271
              
              
              24,158
              
              
              —
              
              
              839,429Gross
                  profit
              
              
              209,888
              
              
              (841
              )
              
              —
              
              
              209,047Operating
                  expenses
              
              
              164,721
              
              
              2,867
              
              
              —
              
              
              167,588Operating
                  income (loss)
              
              
              45,167
              
              
              (3,708
              )
              
              —
              
              
              41,459Other
                  income
              
              
              —
              
              
              (299
              )
              
              —
              
              
              (299
              )Loss
                  on extinguished debt
              
              
              34,041
              
              
              —
              
              
              —
              
              
              34,041Interest
                  expense, net
              
              
              61,633
              
              
              2,176
              
              
              —
              
              
              63,809Income
                  tax expense (benefit)
              
              
              824
              
              
              187
              
              
              —
              
              
              1,011Equity
                  in net (income) loss from subsidiary
              
              
              5,772
              
              
              —
              
              
              (5,772
              )
              
              —Net
                  income (loss)
              
              $
              (57,103
              )
              $
              (5,772
              )
              $
              5,772
              
              $
              (57,103
              )
 Net
                    income (loss)
                
                $
                (57,103
                )
                $
                (5,772
                )
                
                5,772
                
                $
                (57,103
                )Non-cash
                    expenses
                
                
                182,410
                
                
                2,850
                
                
                —
                
                
                185,260Equity
                    in net (income) loss from subsidiary
                
                
                5,772
                
                
                —
                
                
                (5,772
                )
                
                —Changes
                    in working capital
                
                
                4,852
                
                
                443
                
                
                —
                
                
                5,295Net
                    cash provided by (used for) operating activities
                
                
                135,931
                
                
                (2,479
                )
                
                —
                
                
                133,452Net
                    cash provided by (used for) investing activities
                
                
                (73,404
                )
                
                (3,585
                )
                
                —
                
                
                (76,989
                )Net
                    cash provided by (used for) financing activities
                
                
                (85,652
                )
                
                3,883
                
                
                —
                
                
                (81,769
                )Effect
                    of exchange rate changes on cash
                
                
                —
                
                
                550
                
                
                —
                
                
                550Net
                    (decrease) in cash and cash equivalents
                
                
                (23,125
                )
                
                (1,631
                )
                
                —
                
                
                (24,756
                )Cash
                    and cash equivalents at beginning of period
                
                
                23,125
                
                
                1,631
                
                
                —
                
                
                24,756Cash
                    and cash equivalents at end of period
                
                $
                3⁄4
                
                $
                3⁄4
                
                $
                3⁄4
                
                $
                3⁄4




F-28


**Year
                  Ended December 31, 2005 ( Predecessor)**Combined
                  GuarantorSubsidiaries
              
              Combined
                Non-guarantorSubsidiaries
              
              ConsolidatingAdjustments
              
              Consolidated**Consolidating
                  Statement of Operations**Net
                  sales
              
              $
              1,142,453
              
              $
              27,251
              
              $
              —
              
              $
              1,169,704Cost
                  of goods sold
              
              
              914,956
              
              
              28,414
              
              
              —
              
              
              943,370Gross
                  profit
              
              
              227,497
              
              
              (1,163
              )
              
              —
              
              
              226,334Operating
                  expenses
              
              
              105,803
              
              
              4,742
              
              
              —
              
              
              110,545Operating
                  income (loss)
              
              
              121,694
              
              
              (5,905
              )
              
              —
              
              
              115,789Other
                  income
              
              
              —
              
              
              1,354
              
              
              —
              
              
              1,354Loss
                  on extinguished debt
              
              
              7,045
              
              
              —
              
              
              —
              
              
              7,045Interest
                  expense (income), net
              
              
              71,130
              
              
              2,144
              
              
              —
              
              
              73,274Income
                  taxes
              
              
              14,136
              
              
              189
              
              
              —
              
              
              14,325Equity
                  in net (income) loss from subsidiary
              
              
              9,592
              
              
              —
              
              
              (9,592
              )
              
              —Net
                  income (loss)
              
              $
              19,791
              
              $
              (9,592
              )
              $
              9,592
              
              $
              19,791
 **Consolidating
                  Statement of Cash Flows**Net
                  income (loss)
              
              $
              19,791
              
              $
              (9,592
              )
              
              9,592
              
              $
              19,791Non-cash
                  expenses
              
              
              108,315
              
              
              5,670
              
              
              —
              
              
              113,985Equity
                  in net (income) loss from subsidiary
              
              
              9,592
              
              
              —
              
              
              (9,592
              )
              
              —Changes
                  in working capital
              
              
              (28,819
              )
              
              (3,411
              )
              
              —
              
              
              (32,230
              )Net
                  cash provided by (used for) operating activities
              
              
              108,879
              
              
              (7,333
              )
              
              —
              
              
              101,546Net
                  cash used for investing activities
              
              
              (503,181
              )
              
              (16,817
              )
              
              —
              
              
              (519,998
              )Net
                  cash provided by (used for) financing activities
              
              
              417,302
              
              
              25,884
              
              
              —
              
              
              443,186Effect
                  of exchange rate changes on cash
              
              
              —
              
              
              (242
              )
              
              —
              
              
              (242
              )Net
                  increase (decrease) in cash and cash equivalents
              
              
              23,000
              
              
              1,492
              
              
              —
              
              
              24,492Cash
                  and cash equivalents at beginning of period
              
              
              127
              
              
              137
              
              
              —
              
              
              264Cash
                  and cash equivalents at end of period
              
              $
              23,127
              
              $
              1,629
              
              $
              3⁄4
              
              $
              24,756




F-29





**Year
                  Ended January 1, 2005 (Predecessor)**Combined
                  GuarantorSubsidiaries
              
              Combined
                Non-guarantorSubsidiaries
              
              ConsolidatingAdjustments
              
              Consolidated**Consolidating
                  Statement of Operations**Net
                  sales
              
              $
              790,555
              
              $
              23,658
              
              $
              —
              
              $
              814,213Cost
                  of goods sold
              
              
              616,008
              
              
              23,321
              
              
              —
              
              
              639,329Gross
                  profit
              
              
              174,547
              
              
              337
              
              
              —
              
              
              174,884Operating
                  expenses
              
              
              77,259
              
              
              3,749
              
              
              —
              
              
              81,008Operating
                  income (loss)
              
              
              97,288
              
              
              (3,412
              )
              
              —
              
              
              93,876Interest
                  expense (income), net
              
              
              52,447
              
              
              738
              
              
              —
              
              
              53,185Income
                  taxes
              
              
              17,781
              
              
              (41
              )
              
              —
              
              
              17,740Equity
                  in net (income) loss from subsidiary
              
              
              4,109
              
              
              —
              
              
              (4,109
              )
              
              —Net
                  income (loss)
              
              $
              22,951
              
              $
              (4,109
              )
              $
              4,109
              
              $
              22,951
 **Consolidating
                  Statement of Cash Flows**Net
                  income (loss)
              
              $
              22,951
              
              $
              (4,109
              )
              $
              4,109
              
              $
              22,951Non-cash
                  expenses
              
              
              76,746
              
              
              3,485
              
              
              —
              
              
              80,231Equity
                  in net (income) loss from subsidiary
              
              
              4,109
              
              
              —
              
              
              (4,109
              )
              
              —Changes
                  in working capital
              
              
              (26,944
              )
              
              (1,005
              )
              
              —
              
              
              (27,949
              )Net
                  cash provided by (used for) operating activities
              
              
              76,862
              
              
              (1,629
              )
              
              —
              
              
              75,233Net
                  cash used for investing activities
              
              
              (47,551
              )
              
              2,074
              
              
              —
              
              
              (45,477
              )Net
                  cash provided by (used for) financing activities
              
              
              (55,140
              )
              
              (568
              )
              
              —
              
              
              (55,708
              )Effect
                  of exchange rate changes on cash
              
              
              —
              
              
              24
              
              
              —
              
              
              24Net
                  increase (decrease) in cash and cash equivalents
              
              
              (25,829
              )
              
              (99
              )
              
              —
              
              
              (25,928
              )Cash
                  and cash equivalents at beginning of period
              
              
              25,956
              
              
              236
              
              
              —
              
              
              26,192Cash
                  and cash equivalents at end of period
              
              $
              127
              
              $
              137
              
              $
              3⁄4
              
              $
              264
  **Note
      16. Quarterly Financial Data (Unaudited)**





The
      following table contains selected unaudited quarterly financial data for fiscal
      years 2006 and 2005.





**2006**
            
            **2005****First**
            
            **Second**
            
            **Third**
            
            **Fourth**
            
            **First**
            
            **Second**
            
            **Third**
            
            **Fourth**Net
                sales
            
            **$**
            **355,964**
            
            **$**
            **375,114**
            
            **$**
            **363,805**
            
            **$**
            **336,881**
            
            $
            225,310
            
            $
            282,871
            
            $
            342,305
            
            $
            319,218Cost
                of sales
            
            
            **284,621**
            
            
            **299,320**
            
            
            **297,736**
            
            
            **274,691**
            
            
            184,016
            
            
            233,477
            
            
            273,129
            
            
            252,748Gross
                profit
            
            **$**
            **71,343**
            
            **$**
            **75,794**
            
            **$**
            **66,069**
            
            **$**
            **62,190**
            
            $
            41,294
            
            $
            49,394
            
            $
            69,176
            
            $
            66,470Net
                income (loss)
            
            **$**
            **8,180**
            
            **$**
            **9,732**
            
            **$**
            **(86,286**
            **)**
            **$**
            **(6,794**
            **)**
            $
            3,799
            
            $
            1,751
            
            $
            9,085
            
            $
            5,156





**Note
      17. Subsequent Event**





On
      March
      12, 2007, Group entered into a definitive agreement whereby it agreed to merge
      with Covalence Specialty Materials Holding Corp. in a stock-for-stock merger.
      The resulting company will retain the name Berry Plastics Group, Inc. (“New
      Berry”). Group shareholders will own a majority of New Berry’s common stock
      following the merger. The merger has been approved by written consent of a
      majority of each company’s stockholders, and remains subject to customary
      closing conditions, including receipt of required regulatory approvals.
      Immediately following the merger, the Company and Covalence Specialty Materials
      Corp. (“Covalence”) will be combined as a direct subsidiary of New Berry. The
      Company will remain the primary obligor in respect of the Company’s Second
      Priority Senior Secured Fixed Rate Notes due 2014, Second Priority Senior
      Secured Floating Rate Notes due 2014 and Senior Subordinated Notes due
      2016. The
      outstanding credit facilities of Covalence and the Company are expected to
      be
      refinanced at the time of the closing with a new asset based revolver and new
      senior secured term loan. The
      Company currently expects the closing to occur in April 2007.





F-30





**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized, on the 12th day of March,
      2007.





**BERRY
      PLASTICS HOLDING CORPORATION**











By /s/
      Ira G. Boots


Ira
      G.
      Boots


President
      and Chief Executive Officer








Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed by the following persons on behalf of the registrant and in the
      capacities and on the dates indicated:


**Signature**
              **Title**
              **Date**/s/
                  Ira G. Boots
              Chairman
                  of the Board of Directors, President,
                Chief
                  Executive Officer and Director (Principal
                Executive
                  Officer)
              March
                  12, 2007Ira
                  G. Boots/s/
                  James M. Kratochvil
              Executive
                  Vice President, Chief Financial
                Officer,
                  Treasurer and Secretary (Principal
                Financial
                  and Accounting Officer)
              March
                  12, 2007James
                  M. Kratochvil/s/
                  Robert V. Seminara
              Director
              March
                  12, 2007Robert
                  V. Seminara/s/
                  Anthony M. Civale
              Director
              March
                  12, 2007Anthony
                  M. Civale




S-1


**** **Supplemental
      Information To Be Furnished With Reports Filed Pursuant To Section 15(d) Of
      The
      Act By Registrant Which Has Not Registered Securities Pursuant To Section 12
      Of
      The Act**








The
      Registrants have not sent any annual report or proxy material to security
      holders.











S-2


**EXHIBIT
      INDEX**


Exhibit
              No.
            Description
                of Exhibit2.1
            Agreement
                and Plan of Merger by and among Berry Plastics Holding Corporation,
                BPC
                Holding Acquisition Corp. (now known as Berry Plastics Group, Inc.),
                and
                BPC Acquisition Corp., dated June 28, 2006 (incorporated herein by
                reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed
                with the SEC on July 3, 2006).3.1
            Amended
                and Restated Certificate of Incorporation of Berry Plastics Holding
                Corporation (incorporated herein by reference to Exhibit 3.1 to our
                Registration Statement Form S-4, filed on November 2,
                2006)3.2
            Certificate
                of Amendment to the Amended and Restated Certificate of Incorporation
                of
                Berry Plastics Holding Corporation (incorporated herein by reference
                to
                Exhibit 3.2 to our Registration Statement Form S-4, filed on
                November 2, 2006)3.3
            Amended
                and Restated By-laws of Berry Plastics Holding Corporation (incorporated
                herein by reference to Exhibit 3.3 to our Registration Statement
                Form S-4,
                filed on November 2, 2006)3.4
            Board
                Consent amending the Amended and Restated By-laws of BPC Holding
                Corporation, dated October 24, 2006 (incorporated herein by reference
                to
                Exhibit 3.4 to our Registration Statement Form S-4, filed on
                November 2, 2006)4.1
            Indenture,
                by and between BPC Acquisition Corp. (and following the merger of
                BPC
                Acquisition Corp. with and into BPC Holding Corporation, BPC Holding
                Corporation, as Issuer, and certain Guarantors) and Wells Fargo Bank,
                National Association, as Trustee, relating to $525,000,000 87/8%
                Second
                Priority Senior Secured Fixed Rate Notes due 2014 and $225,000,000
                Second
                Priority Senior Secured Floating Rate Notes due 2014, dated as of
                September 20, 2006 (incorporated herein by reference to Exhibit 4.1
                to our
                Registration Statement Form S-4, filed on November 2,
                2006)4.2
            First
                Supplemental Indenture, by and among BPC Holding Corporation, certain
                guarantors, BPC Acquisition Corp., and Wells Fargo Bank, National
                Association, as Trustee, dated as of September 20, 2006 (incorporated
                herein by reference to Exhibit 4.2 to our Registration Statement
                Form S-4,
                filed on November 2, 2006)4.3
            Registration
                Rights Agreement, by and among BPC Acquisition Corp., BPC Holding
                Corporation, the subsidiaries of BPC Holding Corporation, Deutsche
                Bank
                Securities Inc., Credit Suisse Securities (USA) LLC, Citigroup Global
                Markets Inc., J.P. Morgan Securities Inc., Banc of America Securities
                LLC,
                Lehman Brothers Inc., Bear, Stearns & Co., and GE Capital Markets,
                Inc., dated as of September 20, 2006 (incorporated herein by reference
                to
                Exhibit 4.3 to our Registration Statement Form S-4, filed on
                November 2, 2006)4.4
            Collateral
                Agreement, by and among BPC Acquisition Corp., as Borrower, each
                Subsidiary of the Borrower identified therein, and Wells Fargo Bank,
                N.A.,
                as Collateral Agent, dated as of September 20, 2006 (incorporated
                herein
                by reference to Exhibit 4.4 to our Registration Statement Form S-4,
                filed
                on November 2, 2006)4.5
            Intercreditor
                Agreement by and among Credit Suisse, Cayman Islands Branch (“Credit
                Suisse”), as First Lien Agent, Wells Fargo Bank, N.A., as Trustee, Berry
                Plastics Group, Inc., BPC Acquisition Corp., (which on the Closing
                Date
                was merged with and into BPC Holding Corporation, with BPC Holding
                Corporation surviving the merger as the Borrower), and each Subsidiary
                of
                the Borrower identified therein, dated as of September 20,
                2006.10.1
            Credit
                Agreement, by and among Berry Plastics Group, Inc., BPC Acquisition
                Corp.,
                as Borrower, the Lenders Party thereto, Credit Suisse, Cayman Islands
                Branch, as Administrative Agent, Citicorp North America, Inc., as
                Syndication Agent, Deutsche Bank Securities Inc. and J.P. Morgan
                Securities Inc., as Co-Documentation Agents, Credit Suisse Securities
                (USA) LLC, Deutsche Bank Securities, Inc., J.P. Morgan Securities
                Inc. and
                Citigroup Global Markets Inc., as Joint Bookrunners, Credit Suisse
                Securities (USA) LLC and Citigroup Global Markets Inc., as Joint
                Lead
                Arrangers, dated as of September 20, 2006 (incorporated herein by
                reference to Exhibit 10.1 to our Registration Statement Form S-4,
                filed on
                November 2, 2006)













10.2
            Guarantee
                & Collateral Agreement, by and among Berry Plastics Group, Inc., BPC
                Acquisition Corp. as Borrower (which on the Closing Date was merged
                with
                and into BPC Holding Corporation, with BPC Holding Corporation surviving
                the merger as the Borrower), each Subsidiary of the Borrower acting
                as a
                guarantor, and Credit Suisse, Cayman Islands Branch, as Administrative
                Agent, dated as of September 20, 2006 (incorporated herein by reference
                to
                Exhibit 10.2 to our Registration Statement Form S-4, filed on
                November 2, 2006)10.3
            Note
                Purchase Agreement, among BPC Acquisition Corp. and Goldman, Sachs
&
                Co., as Initial Purchaser, and GSMP 2006 Onshore US, Ltd., GSMP 2006
                Offshore US, Ltd., GSMP 2006 Institutional US, Ltd., GS Mezzanine
                Partners
                2006 Institutional, L.P., as Subsequent Purchasers, relating to
                $425,000,000 Senior Subordinated Notes due 2016, dated as of September
                20,
                2006 (incorporated herein by reference to Exhibit 10.3 to our Registration
                Statement Form S-4, filed on November 2, 2006)10.4
            Indenture,
                by and between BPC Acquisition Corp. (and following the merger of
                BPC
                Acquisition Corp. with and into BPC Holding Corporation, BPC Holding
                Corporation, as Issuer, and certain Guarantors) and Wells Fargo Bank,
                National Association, as Trustee, relating to 11% Senior Subordinated
                Notes due 2016, dated as of September 20, 2006 (incorporated herein
                by
                reference to Exhibit 10.4 to our Registration Statement Form S-4,
                filed on
                November 2, 2006)10.5
            First
                Supplemental Indenture, by and among BPC Holding Corporation, certain
                guarantors, BPC Acquisition Corp., and Wells Fargo Bank, National
                Association, as Trustee, dated as of September 20, 2006 (incorporated
                herein by reference to Exhibit 10.5 to our Registration Statement
                Form
                S-4, filed on November 2, 2006)10.6
            Exchange
                and Registration Rights Agreement, by and among BPC Acquisition Corp.
                and
                Goldman, Sachs & Co., GSMP 2006 Onshore US, Ltd.,
                GSMP 2006 Offshore US, Ltd., and GSMP 2006 Institutional US, Ltd.,
                dated
                as of September 20, 2006 (incorporated herein by reference to Exhibit
                10.6
                to our Registration Statement Form S-4, filed on November 2,
                2006)10.7
            Management
                Agreement, among Berry Plastics Corporation, Berry Plastics Group,
                Inc.,
                Apollo Management VI, L.P., and Graham Partners, INC., dated as of
                September 20, 2006 (incorporated herein by reference to Exhibit 10.7
                to
                our Registration Statement Form S-4, filed on November 2,
                2006)10.8
            2006
                Equity Incentive Plan (incorporated herein by reference to Exhibit
                10.8 to
                our Registration Statement Form S-4, filed on November 2,
                2006)10.9
            Form
                of Performance-Based Stock Option Agreement of Berry Plastics Group,
                Inc.
                (incorporated herein by reference to Exhibit 10.9 to our Registration
                Statement Form S-4, filed on November 2, 2006)10.10
            Form
                of Accreting Stock Option Agreement of Berry Plastics Group, Inc.
                (incorporated herein by reference to Exhibit 10.10 to our Registration
                Statement Form S-4, filed on November 2, 2006)10.11
            Form
                of Time-Based Stock Option Agreement of Berry Plastics Group, Inc.
                (incorporated herein by reference to Exhibit 10.11 to our Registration
                Statement Form S-4, filed on November 2, 2006)10.12
            Form
                of Performance-Based Stock Appreciation Rights Agreement of Berry
                Plastics
                Group, Inc. (incorporated herein by reference to Exhibit 10.12 to
                our
                Registration Statement Form S-4, filed on November 2,
                2006)10.13
            Employment
                Agreement, dated September 20, 2006, between Berry Plastics Corporation
                and Ira G. Boots (incorporated herein by reference to Exhibit 10.13
                to our
                Registration Statement Form S-4, filed on November 2,
                2006)











10.14
            Employment
                Agreement, dated September 20, 2006, between Berry Plastics Corporation
                and James M. Kratochvil (incorporated herein by reference to Exhibit
                10.14
                to our Registration Statement Form S-4, filed on November 2,
                2006)10.15
            Employment
                Agreement, dated September 20, 2006, between Berry Plastics Corporation
                and R. Brent Beeler (incorporated herein by reference to Exhibit
                10.15 to
                our Registration Statement Form S-4, filed on November 2,
                2006)10.16
            Employment
                Agreement, dated November 22, 1999 between Berry Plastics Corporation
                and
                G. Adam Unfried (incorporated herein by reference to Exhibit 10.23
                of the
                Company’s Current Annual Report on Form 10-K filed with the SEC on March
                22, 2006).10.17
            Amendment
                No. 1 to Employment Agreement, dated November 22, 1999 between Berry
                Plastics Corporation and G. Adam Unfried dated November 23, 2004
                (incorporated herein by reference to Exhibit 10.24 of the Company’s
                Current Annual Report on Form 10-K filed with the SEC on March 22,
                2006).10.18
            Amendment
                No. 2 to Employment Agreement, dated November 22, 1999 between Berry
                Plastics Corporation and G. Adam Unfried dated March 10, 2006
                (incorporated herein by reference to Exhibit 10.25 of the Company’s
                Current Annual Report on Form 10-K filed with the SEC on March 22,
                2006).10.19
            Amendment
                No. 3 to Employment Agreement, dated November 22, 1999 between Berry
                Plastics Corporation and G. Adam Unfried dated September 20, 2006.10.20
            Employment
                Agreement, dated October 4, 1996 between Berry Plastics Corporation
                and
                Randall J. Hobson (incorporated herein by reference to Exhibit 10.21
                of
                the Company’s Current Annual Report on Form 10-K filed with the SEC on
                March 22, 2006).10.21
            Amendment
                No. 1 to Employment Agreement, dated October 4, 1996, between Berry
                Plastics Corporation and Randall J. Hobson, dated June 30, 2001
                (incorporated herein by reference to Exhibit 10.22 of the Company’s
                Current Annual Report on Form 10-K filed with the SEC on March 22,
                2006).10.22
            Amendment
                No. 2 to Employment Agreement, dated October 4, 1996, between Berry
                Plastics Corporation and Randall J. Hobson, dated September 20, 2006
                (incorporated herein by reference to Exhibit 10.22 to our Registration
                Statement Form S-4, filed on November 2, 2006)12.1*
            Computation
                of Ratio of Earnings to Fixed Charges21.1*
            Subsidiaries
                of the Registrant31.1*
            Rule
                13a-14(a)/15d-14(a) Certification of the Chief Executive
                Officer31.2*
            Rule
                13a-14(a)/15d-14(a) Certification of the Chief Financial
                Officer32.1*
            Section
                1350 Certification of the Chief Executive Officer32.2*
            Section
                1350 Certification of the Chief Financial Officer







*  Filed
      herewith.