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


September 27,
      2008


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 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





Registrant’s
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
registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act.  Yes [   ]  No
[X]





Indicate by check mark if the
registrant is 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
registrant:  (1) has 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
registrant is a large accelerated filer, accelerated filer, or non-accelerated
filer.  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
registrant is a shell company (as defined in Rule 12b-2 of the Securities
Exchange Act of 1934).  Yes [   ]  No
[X]





As of
December 1, 2008, all of the outstanding 100 shares of the Common Stock, $.01
par value, of Berry Plastics Corporation were held by 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
  OfficesAerocon,
      LLC
            Delaware
            3089
            35-1948748
            (a)Berry
      Iowa, LLC
            Delaware
            3089
            42-1382173
            (a)Berry
      Plastics Design, LLC
            Delaware
            3089
            62-1689708
            (a)Berry
      Plastics Technical Services, Inc.
            Delaware
            3089
            57-1029638
            (a)Berry
      Sterling Corporation
            Delaware
            3089
            54-1749681
            (a)CPI
      Holding Corporation
            Delaware
            3089
            34-1820303
            (a)Knight
      Plastics, Inc.
            Delaware
            3089
            35-2056610
            (a)Packerware
      Corporation
            Delaware
            3089
            48-0759852
            (a)Pescor,
      Inc.
            Delaware
            3089
            74-3002028
            (a)Poly-Seal,
      LLC
            Delaware
            3089
            52-0892112
            (a)Venture
      Packaging, Inc.
            Delaware
            3089
            51-0368479
            (a)Venture
      Packaging Midwest, Inc.
            Delaware
            3089
            34-1809003
            (a)Berry
      Plastics Acquisition Corporation III
            Delaware
            3089
            37-1445502
            (a)Berry
      Plastics Opco, Inc.
            Delaware
            3089
            30-0120989
            (a)Berry
      Plastics Acquisition Corporation V
            Delaware
            3089
            36-4509933
            (a)Berry
      Plastics Acquisition Corporation VIII
            Delaware
            3089
            32-0036809
            (a)Berry
      Plastics Acquisition Corporation IX
            Delaware
            3089
            35-2184302
            (a)Berry
      Plastics Acquisition Corporation X
            Delaware
            3089
            35-2184301
            (a)Berry
      Plastics Acquisition Corporation XI
            Delaware
            3089
            35-2184300
            (a)Berry
      Plastics Acquisition Corporation XII
            Delaware
            3089
            35-2184299
            (a)Berry
      Plastics Acquisition Corporation XIII
            Delaware
            3089
            35-2184298
            (a)Berry
      Plastics Acquisition Corporation XV, LLC
            Delaware
            3089
            35-2184293
            (a)Kerr
      Group, LLC
            Delaware
            3089
            95-0898810
            (a)Saffron
      Acquisition, LLC
            Delaware
            3089
            94-3293114
            (a)Setco,
      LLC
            Delaware
            3089
            56-2374074
            (a)Sun
      Coast Industries, LLC
            Delaware
            3089
            59-1952968
            (a)Tubed
      Products, LLC
            Delaware
            3089
            56-2374082
            (a)Cardinal
      Packaging, Inc.
            Ohio
            3089
            34-1396561
            (a)Landis
      Plastics, LLC
            Delaware
            3089
            36-2471333
            (a)Covalence
      Specialty Adhesives LLC
            Delaware
            2672
            20-4104683
            (a)Covalence
      Specialty Coatings LLC
            Delaware
            2672
            20-4104683
            (a)Caplas
      LLC
            Delaware
            3089
            20-3888603
            (a)Caplas
      Neptune, LLC
            Delaware
            3089
            20-5557864
            (a)Captive
      Holdings, Inc.
            Delaware
            3089
            20-1290475
            (a)Captive
      Plastics, Inc.
            New
      Jersey
            3089
            22-1890735
            (a)Grafco
      Industries Limited Partnership
            Maryland
            3089
            52-1729327
            (a)Rollpak
      Acquisition Corporation
            Indiana
            3089
            03-0512845
            (a)Rollpak
      Corporation
            Indiana
            3089
            35-1582626
            (a)


(a)  101
Oakley Street, Evansville, IN 47710





-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:





·
            changes
      in prices and availability of resin and other raw materials and our
      ability to pass on changes in raw material prices on a timely
      basis;


·
            catastrophic
      loss of one of our key manufacturing
facilities;


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


·
            risks
      associated with our substantial indebtedness and debt
    service;


·
            performance
      of our business and future operating
results;


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


·
            reliance
      on unpatented know-how and trade
secrets


·
            general
      business and economic conditions, particularly an economic
      downturn;


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


·
            the
      other factors discussed in the section of this Form 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 Form 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 CORPORATION





FORM
10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 27, 2008


PagePART
      IItem 1
              BUSINESS
              5Item 1A
              RISK
      FACTORS
              15Item 1B
              UNRESOLVED
      STAFF COMMENTS
              19Item 2
              PROPERTIES
              19Item 3
              LEGAL
      PROCEEDINGS
              19Item 4
              SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
              19PART
      IIItem 5
              MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER
      PURCHASES OF EQUITY SECURITIES
              20Item 6
              SELECTED
      FINANCIAL DATA
              21Item 7
              MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
              22Item 7A
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
              36Item 8
              FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA
              37Item 9
              CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
              38Item 9A
              CONTROLS
      AND PROCEDURES
              38Item 9B
              OTHER
      INFORMATION
              39PART
      IIIItem 10
              DIRECTORS
      AND EXECUTIVE OFFICERS OF THE REGISTRANT
              40Item 11
              EXECUTIVE
      COMPENSATION
              42Item 12
              SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
              48Item 13
              CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS AND
      DIRECTOR  INDEPENDENCE
              49Item 14
              PRINCIPAL
      ACCOUNTING FEES AND SERVICES
              49PART
      IVItem 15
              EXHIBITS
      AND FINANCIAL STATEMENT SCHEDULES
              49
  -4-





Item
1. BUSINESS





General





We
believe we are one of the world’s leading manufacturer and marketers of plastic
packaging products, plastic film products, specialty adhesives and coated
products.  We manufacture a broad range of innovative, high quality
packaging solutions using our collection of over 1,800 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 containers, trash bags, stretch films, plastic sheeting, and
tapes 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, agricultural, horticultural,
institutional, industrial, construction, aerospace, and
automotive.  We sell our packaging solutions to approximately 13,000
customers, ranging from large multinational corporations to small local
businesses comprised of a favorable balance of leading national blue-chip
customers as well as a collection of smaller local specialty
businesses.  We believe that we are one of the largest global
purchasers of polyethylene resin, our principal raw material representing
approximately 56% of our total resin pounds, buying approximately 1.2 billion
pounds annually.  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. Our top 10 customers represented
approximately 21% of our fiscal 2008 net sales with no customer accounting for
more than 6% of our fiscal 2008 net sales.  The average length of our
relationship with these customers was 22 years. Additionally, we operate 68
strategically located manufacturing facilities and have extensive distribution
capabilities.





Formation
of Berry Holding





On
February 16, 2006, Apollo Management, L. P. (“Apollo”), an investment management
firm, through its affiliate Apollo Management V., L. P., acquired substantially
all of the assets and liabilities of Tyco Plastics & Adhesives (“TP&A”)
under a Stock and Asset Purchase Agreement dated December 20, 2005 among
Covalence Specialty Materials Holding Corp. (“Old Covalence Holding”), Tyco
International S.A., and Tyco Group S.ar.l.  These assets and
liabilities were acquired by Old Covalence Holding’s wholly owned subsidiary
Covalence Specialty Materials Corp. (“Old Covalence”) and its
affiliates.   Old Covalence recorded the assets and liabilities using
the purchase method of accounting.





On
September 20, 2006, Berry Plastics Group, Inc.’s (an affiliate of Apollo and
investee of Apollo Investment Fund VI, L. P.) (“Old Berry Group”) wholly owned
subsidiary BPC Acquisition Corp. merged with and into BPC Holding Corporation
pursuant to an agreement and plan of merger (the “Apollo Berry Merger”), dated
June 28, 2006, with BPC Holding Corporation continuing as the surviving
corporation.  Following the consummation of the Apollo Berry Merger,
BPC Holding Corporation changed its name to Berry Plastics Holding Corporation
(“Old Berry Holding”).  Pursuant to the Apollo Berry Merger, Old Berry
Holding was a wholly owned subsidiary of Old Berry Group, the principal
stockholders of which were Apollo Investment Fund VI, L.P., AP Berry Holdings,
LLC, Graham Berry Holdings, L.P. and management.  Apollo Investment
Fund VI, L.P. and AP Berry Holdings, LLC are affiliates of
Apollo.  Graham Berry Holdings, L.P. is an affiliate of Graham
Partners, Inc. (“Graham”), a private equity firm.  The Apollo Berry
Merger was accounted for using the purchase method of accounting.





On April
3, 2007, Old Covalence Holding merged with Old Berry Group (the
“Merger”).  Old Covalence Holding was the surviving corporation and
changed its name to Berry Plastics Group, Inc. (“Berry Group”).  As a
result of the Merger, Old Berry Holding and Old Covalence were combined as a
direct subsidiary of Berry Group and retained the name Berry Plastics Holding
Corporation.





Prior to
the Merger, Old Covalence and Old Berry Holding were considered entities under
the common control of Apollo as defined in Emerging Issues Task Force (“EITF”)
Issue No. 02-5, Definition of Common Control in Relation to FASB Statement
of Financial Accounting Standards No. 141, Business
Combinations.  As a result of the Merger, the financial statements of
these entities are being presented retroactively on a combined basis in a manner
similar to a pooling of interests, and include the results of operations of each
business from the date of acquisition by the Apollo affiliates.


-5-
 back to Table of Contents





In
connection with the closing of the Merger, Berry Plastics Holding Corporation
adopted the fiscal year-end of the accounting acquirer, Old
Covalence.  The Company, therefore, adopted a September year-end and
commencing with periodic reports after the consummation of the Merger on April
3, 2007, began filing its periodic reports on a combined basis.





In
December 2007, Berry Plastics Holding Corporation completed an internal entity
restructuring.  Pursuant to this restructuring, effective December 28,
2007, Berry Plastics Corporation converted to Berry Plastics, LLC and then
merged with and into Berry Plastics Holding Corporation.  In addition,
Berry Plastics Holding Corporation changed its name to Berry Plastics
Corporation (“Berry” or the “Company”).  References herein to “we”,
“us”, the “Company”, “Berry”, and “Berry Plastics” refer to Berry Group and its
consolidated subsidiaries, including Berry, after giving effect to the
transactions.





History
of Old Berry Holding





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





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,
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 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 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., a manufacturer
and marketer of open-top containers.  In 2005, (1) 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., and (2) we
acquired Kerr Group, Inc., a manufacturer and marketer of closures, bottles,
vials, and tubes.





Recent
Acquisitions





Rollpak
Acquisition, Corp.





On April
11, 2007, we completed the acquisition of 100% of the outstanding common stock
of Rollpak Acquisition Corporation, which is the sole stockholder of Rollpak
Corporation (“Rollpak”).  Rollpak is a flexible film manufacturer
located in Goshen, Indiana.  The purchase price was funded utilizing
cash on hand.


-6-
 back to Table of Contents


MAC
Closures, Inc.





On
December 19, 2007, the Company acquired 100% of the outstanding common stock of
MAC Closures, Inc. (“MAC”), a plastic cap and closure manufacturer located in
Waterloo, Quebec.  MAC is a fully integrated manufacturer of injection
molded plastic caps and closures primarily serving the pharmaceutical,
nutraceutical, personal care, amenity, and household and industrial chemical
industries.  MAC manufactures stock and custom products for U.S. and
Canadian based private and national brand owners, distributors and other
packaging suppliers and is included in our rigid closed top
segment.  The purchase price was funded utilizing cash on hand from
the sale-leaseback transaction discussed elsewhere in this Form
10-K.





Captive
Holdings, LLC





On
February 5, 2008, Berry completed its purchase of the outstanding capital stock
of Captive Holdings, Inc., the parent company of Captive Plastics, Inc.
(“Captive”).  Captive manufactures blow-molded bottles and
injection-molded closures for the food, healthcare, spirits and personal care
end markets and is included in the Company’s rigid closed top
segment.  To finance the purchase, Berry used the proceeds from a
$520.0 million bridge loan facility which was subsequently retired with the
issuance of the Senior Secured First Priority Notes.





Product
Overview





We
organize our business into four operating divisions: rigid open top, rigid
closed top, flexible films, and tapes and coatings.  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.





Rigid
Open Top





Our rigid open top
division is comprised of three product categories: containers, foodservice items
(drink cups, institutional catering, and cutlery) and home and
party.  The largest end-uses for our containers are food and beverage
products, building products and chemicals.  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 products.  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 customers.  We have a diverse customer base for our
open top products, and no single open top customer exceeded 6% of the Company’s
total net sales in fiscal 2008.  Our primary competitors include
Airlite, Huhtamaki, Letica, Polytainers, WinCup, Pactiv and
Solo.  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 Dannon, Dean Foods, General Mills, Kraft, Kroger and
Unilever.





Foodservice.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


-7-
 back to Table of Contents


thermoformed
PP drink cups and offer a product line with sizes ranging from 12 to 52
ounces.  Our thermoform process uses PP instead of more expensive
polystyrene or polyethylene terephthalate (“PET”) in producing deep draw drink
cups to generate a cup of superior quality with a material competitive cost
advantage versus thermoformed polystyrene or PET 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, Starbucks, Subway,
Wendy’s and Yum! Brands.





Home and
Party.  Our
participation in the home and party market is focused on producing
semi-disposable plastic home and party 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 in two of its seasonal home
and party departments.





Rigid
Closed Top





Our rigid
closed top division is comprised of three product categories; closures and
overcaps, bottles and prescription containers, 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 container packages, Tab II® pharmaceutical packages, and
proprietary tube and closure designs.  Our innovative design center
and product development engineers regularly work with our customers to develop
differentiated packages that offer unique shelf presence, functionality, and
cost competitiveness.  Combine our design expertise with our world
class manufacturing facilities, and we are uniquely positioned to take projects
from creative concept to delivered end product.  We utilize a broad
range of manufacturing technologies, offering several different manufacturing
processes, including various forms of injection, extrusion, compression, and
blow molding, as well as decorating and lining services.  This allows
us to match the optimal manufacturing platform with each customer’s desired
package design and volume.  Our quality system, which includes an
emphasis on process control and vision technology, allows us to meet the
increasingly high performance and cosmetic standards of our
customers.  We serve a diverse customer base, with no single customer
exceeding 3% of the Company’s total net sales in fiscal 2008.  Our
primary competitors include Alcoa, Cebal, Graham Packaging, Rexam, Phoenix,
Seaquist and Silgan.  With few exceptions, these competitors do not
compete with us across many of our products and market segments.  We
believe that we are the only industry participant that offers the entire product
line of our rigid closed top products described below.  We have a
strong reputation for quality and service, and have received numerous “Supplier
Quality Achievement Awards” from customers, as well as “Distribution Industry
Awards” from market associations.





Closures and
Overcaps.  We are a leading producer of closures and overcaps
across several of our product lines, including continuous thread and child
resistant closures, as well as aerosol overcaps.  Our dispensing
closure business has been growing rapidly, as more consumer products migrate
towards functional closures.  We currently sell our closures into
numerous end markets, including pharmaceutical, vitamin/nutritional, healthcare,
food/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 expertise and
manufacturing capabilities provide us a low cost position that has allowed us to
become a leading provider of high quality closures and overcaps to a diverse set
of leading companies.  Our manufacturing advantage is driven by our
position on the forefront of various technologies, including the latest in
single and bi-injection processes, compression molding of thermoplastic and
thermoset resins, precise reproduction of colors, automation and vision
technology, and proprietary packing technology that minimizes freight cost and
warehouse space.  The majority of our overcaps and closures are
manufactured from proprietary molds, which we design, develop, and
own.  In addition to these molds, we utilize


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state of
the art lining, assembly, and decorating equipment to enhance the value and
performance of our products in the market.  Our closure and aerosol
overcap customers include McCormick, Bayer, Diageo, Pepsico, Wyeth, Kraft,
Sherwin-Williams and S.C. Johnson.





Bottles and
Prescription Containers.  Our bottle and prescription container
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 container market, supplying a complete line of amber containers
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.  We offer an extensive line
of stock polyethylene (“PE”) and PET bottles for the vitamin and nutritional
markets.  Our design capabilities, along with internal engineering
strength give us the ability to compete on customized designs to provide desired
differentiation from traditional packages.  We also 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, CVS, NBTY/Leiner,
Target Stores, 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.  We have also introduced laminate tubes
to complement our extruded tube business.  Our focus and investments
are made to ensure that we are able to meet the increasing trend towards large
diameter tubes with high-end decoration.  We have several proprietary
designs in this market that combine tube and closure, that have won prestigious
package awards, and are viewed as very innovative both in appearance,
functionality, and from a sustainability standpoint.  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, combined with a complementary line
of closures, makes us a preferred supplier for many customers in our target
markets including Kao Brands, L’Oreal, Avon, and Procter &
Gamble.





Flexible
Films





Our
flexible films division manufactures and sells primarily PE-based film products.
Our principal products include trash bags, drop cloths, agricultural film,
stretch film, shrink film and custom packaging film. We are one of the largest
producers of plastic trash bags, stretch film and plastic sheeting in the United
States. Our Ruffies trash bags are a leading value brand of retail trash bags in
the United States. Our products are used principally in the agricultural,
horticultural, institutional, foodservice and retail markets.  We have
a diverse customer base, with no single customer accounting for more than 6% of
the Company’s total net sales in fiscal 2008.  Our primary competitors
include PolyAmerica, Pliant, Heritage, AEP, Sygma and Pactiv. The flexible film
division includes the following product groups:





Do-It-Yourself—We sell
branded and private label plastic sheeting for construction, consumer, and
agricultural end users.  These products are sold under leading brands
such as Film-Gard® and Tufflite®.  Our products also include drop
cloths, painters’ plastics, greenhouse films, irrigation tubing, Ruffies®,
Ruffies Pro® and private label trash bags.  Our do-it-yourself
products are sold primarily through wholesale outlets, hardware stores and home
centers, paint stores and mass merchandisers, as well as agricultural
distributors.  Our institutional customers include Home Depot, Lowes,
True Value and ACE.





Institutional—We sell
trash-can liners and food bags for “away from home” locations such as offices,
restaurants, schools, hospitals, hotels, municipalities and manufacturing
facilities.  We also sell products under the Big City®, Hospi-Tuff®,
Plas-Tuff®, Rhino-X® and Steel-Flex® brands.  Our institutional
customers include Unisource and Gorden Food Service.





Custom Films—We manufacture a
diverse group of niche custom films, including shrink-bundling film, used to
wrap and consolidate sets of products, and barrier films for food, beverage and
industrial packaging.  These products are sold directly to converters
and end users, as well as through distributors.  Our custom films
customers include Nestle and Group O.


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Stretch Films—We produce both
hand and machine-wrap stretch films, which are used by end users to wrap
products and packages for storage and shipping.  We sell stretch film
products to distributors and retail and industrial end users under the MaxTech®
and PalleTech® brands.  Our stretch films customers include XPEDX and
Unisource.





Retail—We primarily sell
branded and private label retail trash bags.  Our Ruffies® brand of
trash bags is a leading value brand in the United States.  Private
label products are manufactured to the specifications of retailers and carry
their customers’ brands.  Retail products are sold to mass
merchandisers, grocery stores, and drug stores.  Our retail customers
include Walmart, Big Lots and HEB.





Tapes
and Coatings





Our tapes
and coatings division manufactures and sells tape, adhesive and corrosion
protective products to a diverse base of customers around the
world.  We offer a broad product portfolio of key product groups to a
wide range of global end markets that include corrosion protection, HVAC,
building and construction, industrial, retail, automotive medical and
aerospace.  Our principal products include heat shrinkable and
PE-based tape coatings, PE coated cloth tapes, splicing/laminating tapes,
flame-retardant tapes, vinyl-coated tapes, and a variety of other specialty
tapes, including carton sealing, masking, mounting and OEM medical
tapes.  We
specialize in manufacturing laminated and coated products for a diverse range of
applications, including flexible packaging, products for the housing
construction and woven polypropylene flexible intermediate bulk containers
(“FIBC”).  We use a wide range of substrates and basic weights of
paper, film, foil and woven and non-woven fabrics to service the residential
building, industrial, food packaging, healthcare and military
markets.For fiscal 2008, no single customer accounted for
more than 2% of the Company’s total net sales.  Our
primary competitors include Intertape Polymers, 3M, ShurTape, Canusa, Denso,
Caddalic, Coated Excellence and FortaFiber.




Tapes.We produce
and sell a diverse portfolio of specialty adhesive products and provide products
to end users in the industrial, oil, gas and water supply, HVAC, building and
construction, retail, automotive, and medical markets.  We sell our
products to a wide-range of customers, including retailers, distributors and end
users.  We manufacture our products primarily under eight brands,
including Nashua® and Polyken® and include the following product
groups:




Tape
Products—We are the leading
North American manufacturer of cloth and foil tape products.  Other
tape products include high-quality, high performance liners of splicing and
laminating tapes, flame-retardant tapes, vinyl-coated and carton sealing tapes,
electrical, double-faced cloth, masking, mounting, OEM medical and other
specialty tapes.  These products are sold under the NationalTM,
Nashua®, and Polyken® brands in the United States.  Tape products are
sold primarily through distributors and directly to end users and are used
predominantly in industrial, HVAC, automotive, construction and retail market
applications.  In addition to serving our core tape end markets, we
are also a leading producer of tapes in the niche aerospace, construction and
medical end markets.  We believe that our success in serving these
additional markets is principally due to a combination of technical and
manufacturing expertise leveraged in favor of customized
applications.




Corrosion
Protection Products—- We are the leading global producer of adhesive
products to infrastructure, rehabilitation and new pipeline projects throughout
the world.  Our products deliver superior performance across all
climates and terrains for the purpose of sealing, coupling, rehabilitation and
corrosion protection of pipelines.  Products include heat-shrinkable
coatings, single- and multi-layer sleeves, pipeline coating tapes, anode systems
for cathodic protection and epoxy coatings.  Our products are sold
under a number of brands, including Polyken®, Powercrete®, Raychem® and Raychem
Anodeflex®.  These products are used in oil, gas and water supply and
construction applications.  Our customers primarily include
contractors managing discrete construction projects around the world as well as
distributors and applicators.




Specialty
Adhesives—Our specialty
adhesives manufacturing and design capabilities support many applications in
virtually every industry.  We produce single and double coated
transfer tapes for bonding applications for the medical, aerospace, specialty
industrial and automotive assembly end markets.  Our products are
primarily sold under its PatcoTM and STGTM brand names and the vast majority of
them are sold directly to end-use customers with whom we work to develop
products for application-specific uses.


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Coatings.We
manufacture and sell a diversified portfolio of coated and laminated products,
including flexible packaging, multi-wall bags, fiber-drum packaging, housewrap,
and PP-based storage containers.  These products are sold for use in
packaging, construction, and material handling applications.  We sell
our coated products under a number of brands, including Barricade® and
R-Wrap®.  In addition, a number of our construction-related products
are also sold under private labels.  Our customers include converters,
distributors, contractors and manufacturers.  We provide products to a
diverse group of end users in the food, consumer, building and construction,
medical, chemical, agriculture, mining and military markets under the following
product lines:





Flexible
Packaging–We manufacture specialty coated and laminated products for a wide variety
of packaging applications.  The key end-markets and applications for
our products include food, consumer, healthcare, industrial and military
pouches, roll wrap, multi-wall bags and fiber drum packaging.  Our
products are sold under the MarvelGuardTM and MarvelSealTM brands and are
predominately sold to converters who transform them into finished goods.





Building
Products –We produce
exterior linerboard and foil laminated sheathing, housewrap and exterior window
and door flashings for the building and construction end-markets.  Our
products are sold under a number of market leading brands, including Barricade®,
ContourTM, Energy-Wrap®, Opti-Flash®, R-Wrap®, Thermo-Ply®, and WeatherTrek®.
These products are sold to wholesale distributors, lumberyards and directly to
building contractors.





FIBC –We manufacture
customized polypropylene-based, woven and sewn containers for the transportation
and storage of raw materials such as seeds, titanium dioxide, clay and resin
pellets.





Marketing
and Sales





We reach
our large and diversified base of approximately 13,000 customers through our
direct field sales force of dedicated professionals and the strategic use of
distributors.  Our field sales, production and support staff meet with
customers to understand their needs and improve our product offerings and
services.  Our scale enables us to dedicate certain sales and
marketing efforts to particular products, customers or geographic regions, when
applicable, which enables us to develop expertise that is valued by our
customers.  In addition, because we serve common customers across
segments, we have the ability to efficiently utilize our sales and marketing
resources to minimize costs.  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.





We
believe that we have differentiated ourselves from competitors by building a
reputation for high-quality products, customer service, and
innovation.  Our sales team monitors customer service in an effort to
ensure that we remain the primary supplier for our key accounts.  This
strategy requires us to develop and maintain strong relationships with our
customers, including end users as well as distributors and
converters.  We have a technical sales team with significant knowledge
of our products and processes, particularly in specialized
products.  This knowledge enables our sales and marketing team to work
closely with our research and development organization and our customers to
co-develop products and formulations to meet specific performance
requirements.  This partnership approach enables us to further expand
our relationships with our existing customer base, develop relationships with
new customers and increase sales of new products.





Manufacturing





We
manufacture our rigid open top and rigid closed top products utilizing several
primary molding methods including: injection, thermoforming, compression, tube
extrusion and blow molding.  These processes begin with raw
plastic


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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 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
manufacture our film products by combining thermoplastic resin pellets with
other resins, plasticizers or modifiers, then melting them in a controlled, high
temperature, pressurized process known as extrusion to create films with
specific performance characteristics. The films are then placed on a circular
core, packaged, and shipped directly to customers as rollstock or may undergo
further processing. Additional processing steps can include printing various
colors, slitting down to a narrower width roll or converting into finished
bags.





We
manufacture our tapes and coated products utilizing a wide variety of processing
equipment including coating lines, calenders, and extruders.  Base raw
materials include both PE and PP resins, as well as specialty resins, cloth,
natural rubber, sythenthetic rubber, tackifiers and colorants that are converted
into finished goods via the use of winding and slitting equipment.




We
continuously test raw material and finished-good shipments to ensure that both
our inputs and outputs meet our quality specifications.  Additionally,
we perform regular audits of our products and processes throughout
fabrication.  Given the highly competitive industry in which we
compete, product quality is important to maintaining our market
positions.  Our national manufacturing capabilities and broad
distribution network allow us to provide a high level of service to our
customers in nearly every major population center in North America. Our customer
base includes many national retailers, manufacturers, and distributors which
rely on us to distribute to locations throughout North America.  Our
broad distribution network enables us to work in conjunction with our customers
to minimize their lead times and inventory levels.  Each plant has
maintenance capabilities to support manufacturing 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 2008 were $162.4 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 $35.5 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 technologies, 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, thermoform, compression and blow 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 our in-house
tooling division located in Evansville.  Our engineers oversee the
mold-building process from start to finish.  We currently have a
collection of over 1,800 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


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support.  We
also utilize our in-house graphic design department to develop color and styles
for new rigid 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.





Additionally, at our major
technical centers in Lancaster, Pennsylvania, Lexington, Massachusetts, and
Homer, Louisiana, and satellite technical hubs in Lakeville, Minnesota
and Covington, Georgia, we prototype new ideas, conduct research and development
of new products and processes, and qualify production systems that go directly
to our facilities and into production.  We also have a complete
product testing and quality laboratory at our Lancaster, Pennsylvania, technical
center and in our pilot plants in our technical centers in Lexington,
Massachusetts and Homer, Louisiana, we are able to experiment with new
compositions and processes with a focus on minimizing waste and improving
productivity.  With this combination of manufacturing simulation and
quality systems support we are able to improve time to market and reduce
cost.  We spent $13.9 million and $11.2 million on research and
development in fiscal 2008 and fiscal 2007, respectively.





Quality
Assurance





Total
Quality Management philosophies, including the use of statistical process
control and extensive involvement of employee teams are used to increase
productivity and reduce cost.  We use the guidelines of ISO 9001/2000
to build a strong foundation that encourages employee involvement and team
work.  Teamwork is the approach to problem-solving, increases
continuous improvement and total employee participation.  Training is
provided in Six Sigma and developing teamwork at all levels.





Teams
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 have ISO Certification as a key goal to be
accomplished.





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”).  ISO 9001/2000 is the discipline that
encourages continuous improvement throughout the
organization.  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





We have
launched a project to migrate multiple legacy management information and
accounting systems to a single, company wide, management information and
accounting system.  The migration began in the third quarter of 2007
and is scheduled to be completed in 2009, with the exact timing being dependent
upon future events.  Once fully implemented, this change to a shared
services business model (for certain processes) along with a single, company
wide, management information and accounting system is intended to further
enhance our internal control over financial reporting and our operating
efficiencies.





Sources
and Availability of Raw Materials





The most
important raw material purchased by us is plastic resin.  We purchased
approximately $1.4 billion of resin in fiscal 2008 with approximately 56% of our
resin pounds being PE, 29% PP, and 15% other.  Our plastic resin
purchasing strategy is to deal with only high-quality, dependable suppliers,
such as Chevron, DAK
Americas, Dow, Dupont, Eastman Chemical, Exxon Mobil, Flint Hills Resources,
Georgia Gulf, Lyondell/Bassell, Nova, PolyOne Corp., Sunoco, Total, and
Westlake.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.





We also
purchase various other materials, including natural and butyl rubber, tackifying
resins, chemicals and adhesives, paper and packaging materials, polyester
staple, raw cotton, linerboard and kraft, woven and non-woven cloth and
foil.  These materials are generally available from a number of
suppliers.


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Employees





At the
end of fiscal 2008, we had approximately 13,800 employees.  We are
party to the following collective bargaining agreements with the:





·
            United
      Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied
      Industrial and Service Workers International Union (290 employees in
      Baltimore, MD), which expires in April
2009


·
            United
      Steelworkers of America (33 employees in Vancouver, WA), which expires in
      January 2011


·
            Unite
      Here Local 150 (111 employees in Bloomington, MN), which expires in March
      2009


·
            United
      Automobile, Aerospace, and Agricultural Implement Workers of America,
      Local 882 (69 employees in Columbus, GA) which expires in October 2009
      and


·
            United
      Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied
      Industrial and Service Workers International Union, AFL-CIO, Local 1008
      (102 employees in Constantine, MI) which expires in December
      2009





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 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


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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.





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 September 27, 2008, we had a
total indebtedness of $3,599.6 million with cash and cash equivalents totaling
$189.7 million.  We would have been able to borrow a further $99.4
million (reflects the reduction of Lehman’s total commitment of $18.3 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 47% of
our cost of goods sold in fiscal 2008.  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.


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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.





We source plastic
resin primarily from major industry suppliers such as Chevron, DAK Americas,
Dow, Dupont, Eastman Chemical, Exxon Mobil, Flint Hills Resources, Georgia Gulf,
Lyondell/Bassell, Nova, PolyOne Corp., Sunoco, Total, and
Westlake.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 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.




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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.  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 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


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




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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 2008, the net value of our goodwill and other intangibles was
$2,662.2 million.  In July 2001, the Financial Accounting Standards
Board (“FASB”) issued the Statement of Financial Accounting Standards (“SFAS”)
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 funds affiliated with Apollo Management and its interests as
an equity holder may conflict with yours.





A
majority of the common stock of our parent company, Berry Group, on a
fully-diluted basis, is held by funds affiliated with Apollo
Management.  Funds affiliated with Apollo Management control Berry
Group and therefore us as a wholly owned subsidiary of Berry
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 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 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.





The
recent disruptions in the overall economy and the financial markets may
adversely impact our business.





Our
industry has been affected by current economic factors, including the
deterioration of national, regional and local economic conditions, declines in
employment levels, and shifts in consumer spending patterns.  The
recent disruptions in the overall economy and volatility in the financial
markets have reduced, and may continue to reduce, consumer confidence in the
economy, negatively affecting consumer spending, which could be harmful to our
financial position and results of operations.  As a result, decreased
cash flow generated from our business may adversely affect our financial
position and our ability to fund our operations.  In addition, macro
economic disruptions, as well as the restructuring of various commercial and
investment banking organizations, could adversely affect our ability to access
the credit markets.  The disruption in the credit markets may also
adversely affect the availability of financing for our
operations.  There can be no assurance that government responses to
the disruptions in the financial markets will restore consumer confidence,
stabilize the markets, or increase liquidity and the availability of
credit.


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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 September 27,
2008:


Location
              Square
      Footage
              Owned/Leased
              
              Location
              Square
      Footage
              Owned/LeasedAarschot,
      Belgium
              70,611
              Leased
              
              Homer,
      LA
              186,000
              OwnedAhoskie,
      NC
              150,000
              Owned
              
              Houston,
      TX
              18,000
              OwnedAlbertville,
      AL
              318,000
              Owned
              
              Iowa
      Falls, IA
              100,000
              OwnedAtlacomulco,
      Mexico
              116,250
              Owned
              
              Jackson,
      TN
              211,000
              LeasedAnaheim,
      CA
              248,000
              Leased
              
              Lakeville,
      MN
              200,000
              OwnedAtlanta,
      GA
              100,000
              Leased
              
              Lathrop,
      CA
              173,500
              LeasedAurora,
      IL
              66,900
              Leased
              
              Lawrence,
      KS
              424,000
              LeasedBaltimore,
      MD
              244,000
              Leased
              
              Louisville,
      KY
              90,000
              LeasedBaroda,
      India
              24,196
              Owned
              
              Middlesex,
      NJ
              29,020
              OwnedBattleboro,
      NC
              390,654
              Owned
              
              Milan,
      Italy
              125,000
              LeasedBeaumont,
      TX
              42,300
              Owned
              
              Minneapolis,
      MN
              200,645
              OwnedBelleville,
      Canada
              46,000
              Owned
              
              Monroe,
      LA
              452,500
              OwnedBowling
      Green, KY
              168,000
              Leased
              
              Monroeville,
      OH
              350,000
              OwnedBremen,
      GA
              140,000
              Owned
              
              Peosta,
      IA
              111,000
              LeasedBristol,
      RI
              23,000
              Owned
              
              Phillipsburg,
      NJ
              87,500
              LeasedCharlotte,
      NC
              150,000
              Owned
              
              Phoenix,
      AZ
              266,000
              LeasedCharlotte,
      NC
              53,095
              Leased
              
              Phoenix,
      AZ
              100,000
              LeasedChicago,
      IL
              472,000
              Leased
              
              Piscataway,
      NJ
              250,000
              LeasedColumbus,
      GA
              70,000
              Owned
              
              Pryor,
      OK
              198,000
              OwnedConstantine,
      MI
              144,000
              Owned
              
              Quad
      Cities, IA
              180,000
              LeasedCoon
      Rapids, MN
              64,890
              Owned
              
              Redlands,
      CA
              120,000
              LeasedCovington,
      GA
              306,889
              Owned
              
              Richmond,
      IN
              160,000
              OwnedCranbury,
      NJ
              204,000
              Leased
              
              Sarasota,
      FL
              74,000
              OwnedDoswell,
      VA
              249,456
              Owned
              
              Sioux
      Falls, SD
              230,000
              OwnedDunkirk,
      NY
              125,000
              Owned
              
              Streetsboro,
      OH
              140,000
              OwnedEasthampton,
      MA
              210,000
              Leased
              
              Suffolk,
      VA
              110,000
              OwnedEastport,
      VA
              173,400
              Leased
              
              Syracuse,
      NY
              215,000
              LeasedElizabeth,
      NJ
              46,258
              Leased
              
              Tacoma,
      WA
              77,000
              LeasedEvansville,
      IN (1)
              775,000
              Leased
              
              Tijuana,
      Mexico
              260,831
              OwnedFranklin,
      KY
              513,000
              Owned
              
              Toluca,
      Mexico
              172,000
              LeasedGreenville,
      SC
              70,000
              Owned
              
              Vancouver,
      WA
              23,000
              LeasedGoshen,
      IN
              125,000
              Owned
              
              Victoria,
      TX
              190,000
              OwnedHanover,
      MD
              117,000
              Leased
              
              Waterloo,
      Canada
              102,000
              OwnedHenderson,
      NV
              175,000
              Owned
              
              Woodstock,
      IL
              170,000
              Owned11,987,895




(1)  The
Evansville, IN facility also serves as the Company’s world
headquarters.





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.


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PART
II





Item
5.   MARKET FOR REGISTRANT’S COMMON EQUITY,
RELATED STOCKHOLDER MATTERS,
AND ISSUER PURCHASES OF EQUITY SECURITIES





There is
no established public trading market for any class of common stock of Berry
Plastics Corporation or Berry Plastics Group, Inc.  All of the issued
and outstanding common stock of the Berry Plastics Corporation is held by Berry
Plastics Group, Inc.  With respect to the capital stock of Berry
Group, as of December 15, 2008, there were approximately 400 holders of the
common stock.





On June
7, 2007, Berry Group’s Board of Directors declared a special one-time dividend
of $77 per common share to shareholders of record as of June 6,
2007.  The dividend was paid June 8, 2007.  In connection
with this dividend, Berry Holding paid a dividend of approximately $87.0 million
to Group.  This dividend reduced Berry Group’s shareholders equity for
owned shares by $530.2 million.  In connection with this dividend
payment, approximately $34.5 million related to unvested stock options was
placed in escrow and was subject to time based vesting through June 7,
2009.  In December 2008, the Executive Committee of Berry Group
modified the vesting provisions which resulted in payment of this remaining
amount of $33.0 million to the participants in December 2008.





See Item
12 of this Form 10-K entitled “Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters” and Footnote 11 to our
consolidated financial statements regarding equity compensation plan
information.





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Item
6. SELECTED FINANCIAL DATA





The
following table presents selected historical financial data for Berry and Tyco
Plastics & Adhesives (Predecessor) and should be read in conjunction with,
and is qualified by reference to, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and the respective financial
statements and notes to the financial statements included elsewhere in this Form
10-K.  The historical financial statements of Old Berry Holding and
Old Covalence prior to the Merger are included in Form S-4’s filed by the
Company on May 6, 2008 and May 4, 2007, respectively.





The
selected historical financial data of Tyco Plastics & Adhesives have been
derived from the audited financial statements that were prepared in accordance
with GAAP.  These financial statements have been prepared on a
going-concern basis, as if certain assets of Tyco Plastics & Adhesives,
which was acquired by Old Covalence on February 16, 2006, had existed as an
entity separate from Tyco during the periods presented.  Tyco charged
the predecessor operations a portion of its corporate support costs, including
engineering, legal, treasury, planning, environmental, tax, auditing,
information technology and other corporate services, based on usage, actual
costs or other allocation methods considered reasonable by Tyco
management.  Accordingly, expenses included in the financial
statements may not be indicative of the level of expenses which might have been
incurred had the predecessor been operating as a separate stand-alone
company.





Successor
            
            
            Predecessor($
      in millions)
            
            Year
      ended
                September
      27, 2008
            
            
            Year
      ended
                September
      29, 2007
            
            
            Period
      from February 17 to September 30, 2006
            
            
            Period
      from October 1, 2005 to February 16, 2006
            
            
            Year
      ended
                September
      29, 2005
            
            
            Year
      ended
                September
      29, 2004Statement
      of Operations Data:Net
      sales(1)
            
            $
            3,513.1
            
            
            $
            3,055.0
            
            
            $
            1,138.8
            
            
            $
            666.9
            
            
            $
            1,725.2
            
            
            $
            1,658.8Cost
      of sales
            
            
            3,019.3
            
            
            
            2,583.4
            
            
            
            1,022.9
            
            
            
            579.0
            
            
            
            1,477.4
            
            
            
            1,366.2Gross
      profit
            
            
            493.8
            
            
            
            471.6
            
            
            
            115.9
            
            
            
            87.9
            
            
            
            247.8
            
            
            
            292.6Charges
      and allocations from Tyco and affiliates
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            10.4
            
            
            
            56.4
            
            
            
            65.0Selling,
      general and administrative expenses
            
            
            340.0
            
            
            
            321.5
            
            
            
            107.6
            
            
            
            50.0
            
            
            
            124.6
            
            
            
            130.2Restructuring
      and impairment charges, net
            
            
            9.6
            
            
            
            39.1
            
            
            
            0.6
            
            
            
            0.6
            
            
            
            3.3
            
            
            
            57.9Other
      operating expenses
            
            
            32.8
            
            
            
            43.6
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Operating
      income
            
            
            111.4
            
            
            
            67.4
            
            
            
            7.7
            
            
            
            26.9
            
            
            
            63.5
            
            
            
            39.5Other
      expense
            
            
            —
            
            
            
            37.3
            
            
            
            12.3
            
            
            
            —
            
            
            
            —
            
            
            
            —Interest
      expense, net
            
            
            261.7
            
            
            
            237.6
            
            
            
            46.5
            
            
            
            2.1
            
            
            
            4.5
            
            
            
            6.3Interest
      expense (income), net—Tyco and affiliates
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            5.5
            
            
            
            11.2
            
            
            
            (1.7
            )Income
      (loss) before income taxes
            
            
            (150.3
            )
            
            
            (207.5
            )
            
            
            (51.1
            )
            
            
            19.3
            
            
            
            47.8
            
            
            
            34.9Income
      tax expense (benefit)
            
            
            (49.2
            )
            
            
            (88.6
            )
            
            
            (18.1
            )
            
            
            1.6
            
            
            
            3.8
            
            
            
            2.4Minority
      interest
            
            
            —
            
            
            
            (2.7
            )
            
            
            (1.8
            )
            
            
            —
            
            
            
            —
            
            
            
            0.2Net
      income (loss)
            
            $
            (101.1
            )
            
            $
            (116.2
            )
            
            $
            (31.2
            )
            
            $
            17.7
            
            
            $
            44.0
            
            
            $
            32.3Balance
      Sheet Data (at period end):Cash
      and cash equivalents
            
            $
            189.7
            
            
            $
            14.6
            
            
            $
            83.1
            
            
            $
            4.9
            
            
            $
            2.7
            
            
            $
            3.7Property,
      plant and equipment, net
            
            
            862.8
            
            
            
            785.0
            
            
            
            816.6
            
            
            
            275.6
            
            
            
            283.1
            
            
            
            291.1Total
      assets
            
            
            4,724.1
            
            
            
            3,869.4
            
            
            
            3,821.4
            
            
            
            1,279.5
            
            
            
            1,206.7
            
            
            
            1,215.0Total
      long-term obligations
            
            
            3,578.2
            
            
            
            2,693.3
            
            
            
            2,612.3
            
            
            
            —
            
            
            
            —
            
            
            
            79.5Shareholders’
      equity
            
            
            351.9
            
            
            
            450.0
            
            
            
            409.6
            
            
            
            877.7
            
            
            
            855.1
            
            
            
            822.8Cash
      Flow and other Financial Data:Net
      cash provided by (used in) operating activities
            
            $
            9.8
            
            
            $
            137.3
            
            
            $
            96.7
            
            
            $
            (119.2
            )
            
            $
            117.3
            
            
            $
            89.2Net
      cash used in investing activities
            
            
            (655.6
            )
            
            
            (164.3
            )
            
            
            (3,252.0
            )
            
            
            (9.1
            )
            
            
            (29.2
            )
            
            
            (15.5
            )Net
      cash provided by (used in) financing activities
            
            
            821.0
            
            
            
            (40.4
            )
            
            
            3,212.5
            
            
            
            130.6
            
            
            
            (89.2
            )
            
            
            (77.7
            )


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Successor
              
              
              Predecessor($
      in millions)
              
              Year
      ended
                  September
      27, 2008
              
              
              Year
      ended
                  September
      29, 2007
              
              
              Period
      from February 17 to September 30, 2006
              
              
              Period
      from October 1, 2005 to February 16, 2006
              
              
              Year
      ended
                  September
      29, 2005
              
              
              Year
      ended
                  September
      29, 2004Capital
      expenditures
              
              
              162.4
              
              
              
              99.3
              
              
              
              34.8
              
              
              
              12.2
              
              
              
              32.1
              
              
              
              16.5
      Item 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
  Formation
of Berry Holding





On
February 16, 2006, Apollo Management, L. P. (“Apollo”), an investment management
firm, through its affiliate Apollo Management V., L. P., acquired substantially
all of the assets and liabilities of Tyco Plastics & Adhesives (“TP&A”)
under a Stock and Asset Purchase Agreement dated December 20, 2005 among
Covalence Specialty Materials Holding Corp. (“Old Covalence Holding”), Tyco
International S.A., and Tyco Group S.ar.l.  These assets and
liabilities were acquired by Old Covalence Holding’s wholly owned subsidiary
Covalence Specialty Materials Corp. (“Old Covalence”) and its
affiliates.  Old Covalence recorded the assets and liabilities using
the purchase method of accounting.





On
September 20, 2006, Berry Plastics Group, Inc.’s (an affiliate of Apollo and
investee of Apollo Investment Fund VI, L. P.) (“Old Berry Group”) wholly owned
subsidiary BPC Acquisition Corp. merged with and into BPC Holding Corporation
pursuant to an agreement and plan of merger (the “Apollo Berry Merger”), dated
June 28, 2006, with BPC Holding Corporation continuing as the surviving
corporation.  Following the consummation of the Apollo Berry Merger,
BPC Holding Corporation changed its name to Berry Plastics Holding Corporation
(“Old Berry Holding”).  Pursuant to the Apollo Berry Merger, Old Berry
Holding was a wholly owned subsidiary of Old Berry Group, the principal
stockholders of which were Apollo Investment Fund VI, L.P., AP Berry Holdings,
LLC, Graham Berry Holdings, L.P. and management.  Apollo Investment
Fund VI, L.P. and AP Berry Holdings, LLC are affiliates of
Apollo.  Graham Berry Holdings, L.P. is an affiliate of Graham
Partners, Inc. (“Graham”), a private equity firm.  The Apollo Berry
Merger was accounted for using the purchase method of accounting.





On April
3, 2007, Old Covalence Holding merged with Old Berry Group (the
“Merger”).  Old Covalence Holding was the surviving corporation and
changed its name to Berry Plastics Group, Inc. (“Berry Group”).  As a
result of the Merger, Old Berry Holding and Old Covalence were combined as a
direct subsidiary of Berry Group and retained the name Berry Plastics Holding
Corporation.





Prior to
the Merger, Old Covalence and Old Berry Holding were considered entities under
the common control of Apollo as defined in Emerging Issues Task Force (“EITF”)
Issue No. 02-5, Definition of Common Control in Relation to FASB Statement
of Financial Accounting Standards No. 141, Business
Combinations.  As a result of the Merger, the financial statements of
these entities are being presented retroactively on a combined basis in a manner
similar to a pooling of interests, and include the results of operations of each
business from the date of acquisition by the Apollo affiliates.





In
connection with the closing of the Merger, Berry Plastics Holding Corporation
adopted the fiscal year-end of the accounting acquirer, Old
Covalence.  The Company, therefore,   adopted a
September year-end and commencing with periodic reports after the consummation
of the Merger on April 3, 2007, began filing its periodic reports on a combined
basis.





In
December 2007, Berry Plastics Holding Corporation completed an internal entity
restructuring.  Pursuant to this restructuring, effective December 28,
2007, Berry Plastics Corporation converted to Berry Plastics, LLC and then
merged with and into Berry Plastics Holding Corporation.  In addition,
Berry Plastics Holding Corporation changed its name to Berry Plastics
Corporation (“Berry” or the “Company”).  References herein to “we”,
“us”, the “Company”,


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“Berry”,
and “Berry Plastics” refer to Berry Group and its consolidated subsidiaries,
including Berry, after giving effect to the transactions.





Overview





You
should read the following discussion in conjunction with the consolidated
financial statements of Berry and its subsidiaries and the accompanying notes
thereto, which information is included elsewhere herein.  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.





We
believe we are one of the world’s leading manufacturer and marketers of plastic
packaging products, plastic film products, specialty adhesives and coated
products.  We manufacture a broad range of innovative, high quality
packaging solutions using our collection of over 1,800 proprietary molds and an
extensive set of internally developed processes and technologies. Our principal
products include containers, drink cups, bottles, closures and overcaps, tubes,
prescription containers, trash bags, stretch films, plastic sheeting and tapes
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, agricultural, horticultural,
institutional, industrial, construction, aerospace and automotive.  We
sell our packaging solutions to approximately 13,000 customers, ranging from
large multinational corporations to small local businesses comprised of a
favorable balance of leading national blue-chip customers as well as a
collection of smaller local specialty businesses.  We believe that we
are one of the largest global purchasers of PE resin, our principal raw material
representing approximately 56% of our total resin pounds, buying approximately
1.2 billion pounds annually.  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. Our top 10 customers represented
approximately 21% of our fiscal 2008 net sales with no customer accounting for
more than 6% of our fiscal 2008 net sales.  The average length of our
relationship with these customers was 22 years. Additionally, we operate 68
strategically located manufacturing facilities and have extensive distribution
capabilities.  At the end of fiscal 2008, we had approximately 13,800
employees.





Executive
Summary





Some of
our key accomplishments in fiscal 2008 included:





·
            Revenues
      increased to $3,513.1 million in the current year from $3,055.0 million in
      the prior year


·
            Completed
      the acquisition of Captive Plastics and MAC
  Closures


·
            In
      April 2008, we completed the successful offering of $680.6 million of
      First Priority Floating Rate Notes, resulting in proceeds of $661.4
      million which was used to repay our senior secured bridge facility
      utilized to fund the Captive acquisition with the remainder used to reduce
      the borrowings on our revolving credit
  facilities


·
            Completed
      our 2007 Flexible Films restructuring which resulted in the shut-down of
      five facilities, shutdown an additional facility in our Tapes/Coatings
      Segment and one in our Closed Top
segment


·
            Continued
      integration efforts and realization of synergies related to the
      Merger





During
fiscal 2008, rising prices in our primary raw material plastic resin resulted in
a decline in EBITDA in the current year despite several initiatives during the
year to help mitigate these rising raw material prices.  These cost
reduction initiatives included various projects which helped improve our
operating efficiency, reduce our use of plastic resin and decreased our selling,
general and administrative costs.





Also, due
to the rising raw material costs, additional borrowings were needed under our
revolving credit facilities to fund the required increases in working
capital.  The market has recently reported a decline in plastic resin
in September, October and November as global demand for plastic resin has
declined causing prices to decline. We believe that with the downward pricing
trends in our raw material costs are positive trends that may benefit our future
cash flow from operations.  We believe that our cash and availability
on our revolving credit facility provide us sufficient liquidity to operate our
business.


-24-
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Recent
Developments





In
November 2008, Berry acquired certain assets of Erie County Plastics Corporation
(“Erie Plastics”), a custom injection molder of plastics packaging and
components.  Erie Plastics previously filed for bankruptcy protection
on September 29, 2008.  Berry was the successful bidder for the
majority of the assets of Erie Plastics including equipment, inventory and other
tangible and intangible assets.  Total value for Erie Plastics’ assets
was approximately $6.5 million which included approximately $1.0 million of cash
on hand at Erie Plastics and approximately $1.8 million of accounts receivable
that were retained by the senior secured lenders.  The remaining $3.7
million was paid by Berry from available cash on hand.





In
December 2008, the Company announced the intention to shut down a manufacturing
facility within its rigid closed top division located in Redlands, California
which the Company acquired in connection with the Captive
acquisition.  The business from this facility will be moved to the
Anaheim, California facility.





In
December 2008, the Company announced that it would be eliminating approximately
71 positions at its Albertville, Alabama production facility in the tapes and
coatings segment.





Due to
recent volatility in the credit markets, our investment assets that are held by
our various pension plans have declined in value.  The fair value of
our pension plan assets have decreased from approximately $41.2 million as of
September 27, 2008 to $34.8 million as of November 30, 2008.  This
decrease in the fair value of the pension assets has increased our liability and
our potential funding obligations of these plans.





On
December 4, 2008, the Executive Committee of Berry Group modified the vesting
provisions related to the $33.0 million being held in escrow from the June 2007
special dividend which resulted in payment to the applicable
shareholders.







Berry
Plastics preliminarily estimates that its net sales will total approximately
$869 million during its fiscal 2009 first quarter, representing an increase of
$106 million over $763 million as compared to its fiscal 2008 first
quarter.  The increase is due to a combination of higher selling
prices and acquisition volumes of Captive and MAC, partially offset by expected
lower sales volumes. Also, the Company preliminarily estimates that its fiscal
2009 first quarter Adjusted EBITDA, which is a Non-GAAP measure, will be
approximately $114 million, a decrease from approximately $118 million for the
fiscal 2008 first quarter.  These amounts reflect management’s
estimate as of the date of this report; actual results may vary from these
results.  The following table reconciles net loss to the Company’s
preliminary estimate of Adjusted EBITDA for fiscal 2009 first quarter and
reported Adjusted EBITDA for fiscal 2008 first quarter:






UnauditedThirteen Weeks Ended($
      in millions)
            
            Estimated
              December
      27, 2008
            
            
            Actual
              December
      29, 2007Adjusted
      EBITDA
            
            $
            114
            
            
            $
            118Pro
      forma acquisitions
            
            
            -
            
            
            
            (10
            )Pro
      forma synergies
            
            
            (4
            )
            
            
            (17
            )Net
      interest expense
            
            
            (69
            )
            
            
            (61
            )Depreciation
      and amortization
            
            
            (65
            )
            
            
            (60
            )Income
      tax benefit
            
            
            16
            
            
            
            20Business
      optimization expense
            
            
            (5
            )
            
            
            (12
            )Restructuring
      and impairment
            
            
            -
            
            
            
            (3
            )Management
      fees
            
            
            (1
            )
            
            
            (1
            )Stock
      based compensation
            
            
            (12
            )
            
            
            (5
            )Net
      loss
            
            $
            (26
            )
            
            $
            (31
            )





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Adjusted
EBITDA is a financial metric utilized in the calculation of the first lien
leverage ratio as defined in the Company’s senior secured credit
facilities.  While the determination of appropriate adjustments in the
calculation of adjusted EBITDA is subject to interpretation under the terms of
the Credit Facility, management believes the adjustments described above are in
accordance with the covenants in the Credit Facility.  Adjusted EBITDA
should not be considered in isolation or construed as an alternative to our net
income (loss) or other measures as determined in accordance with
GAAP.  In addition, other companies in our industry or across
different industries may calculate bank covenants and related definitions
differently than we do, limiting the usefulness of our calculation of adjusted
EBITDA as a comparative measure.





Acquisitions,
Disposition and Facility Rationalizations





We
maintain a selective and disciplined acquisition strategy, which is focused on
improving our financial performance in the long-term, enhancing our market
positions and expanding our product lines or, in some cases, providing us with a
new or complementary product line.  We have historically 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.




Acquisition
of Captive Holdings, Inc.





On
February 5, 2008, the Company completed its acquisition of 100% of the
outstanding capital stock Captive Holdings, Inc., the parent company of Captive
Plastics, Inc. (“Captive”).  Captive is a manufacturer of blow-molded
bottles and injection-molded closures for the food, healthcare, spirits and
personal care end markets with annual net sales of approximately $290.3 million
in calendar 2007.  The purchase price was funded utilizing the
proceeds of a senior secured bridge loan facility which in turn was repaid with
the proceeds from the Senior Secured First Priority Notes discussed in the Notes
to the Consolidated or Combined Financial Statements section of this Form
10-K.  The Captive acquisition 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.





Acquisition
of MAC Closures, Inc.





On
December 19, 2007, the Company acquired 100% of the outstanding common stock of
MAC Closures, Inc. (“MAC”), a plastic cap and closure manufacturer located in
Waterloo, Quebec.  MAC is a fully integrated manufacturer of injection
molded plastic caps and closures primarily serving the pharmaceutical,
nutraceutical, personal care, amenity, and household and industrial chemical
industries with calendar year 2007 sales of $37.1 million.  MAC
manufactures stock and custom products for U.S. and Canadian based private and
national brand owners, distributors and other packaging
suppliers.  The MAC acquisition 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 purchase price was funded
utilizing cash on hand from the sale-leaseback transaction pursuant to which the
Company sold its manufacturing facilities located in Baltimore, Maryland;
Evansville, Indiana; and Lawrence, Kansas.  During June 2008 the
Company announced the shut down of its manufacturing facility in Oakville,
Ontario in accordance with the provisions of EITF 95-3.  The affected
business accounted for less than $7.0 million of annual net sales and the
business was transferred to other facilities within the rigid closed top
segment.





Acquisition
of Rollpak Acquisition Corporation





On April
11, 2007, the Company completed its acquisition of 100% of the outstanding
common stock of Rollpak Acquisition Corporation, which is the sole stockholder
of Rollpak Corporation (“Rollpak”).  Rollpak is a flexible film
manufacturer located in Goshen, Indiana with annual net sales of approximately
$50.0 million in calendar 2006 sales.  The purchase price was funded
utilizing cash on hand.  The Rollpak acquisition 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.





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Sale
of UK Operations




On April
10, 2007, the Company sold its wholly owned subsidiary, Berry Plastics UK Ltd.,
to Plasticum Group N.V. for approximately $10.0 million.  At the
time of the sale, the annual net sales of this business were less than
$9.0 million.





Plant
Rationalizations





During
February 2007, Old Covalence conducted a facilities utilization review and
approved a plan to close a manufacturing operation within its tapes/coatings
division in Meridian, Mississippi. This facility was closed during the fourth
quarter of fiscal 2007.  The affected business accounted for less than
$25.0 million of annual net sales with certain segments of its operations
transferred to other facilities.





In April
2007, the Company announced its intention to shut down a manufacturing facility
within its closed top division located in Oxnard, California. The business from
this facility has been moved to other existing facilities. Also in April 2007,
the Company announced that it would close the Old Covalence corporate
headquarters in Bedminster, NJ and one of the Company’s division headquarters in
Shreveport, LA.  The reorganization was part of the integration plan
to consolidate certain corporate functions at the Company’s headquarters in
Evansville, Indiana and to consolidate the adhesives and coatings segments into
one new segment called tapes/coatings.





During
July and September 2007 the Company announced a restructuring of the operations
within its flexible films division, including the closure of five manufacturing
facilities in Yonkers, New York; Columbus, Georgia; City of Industry,
California; Santa Fe Springs, California and Sparks, Nevada.  The
affected business accounted for less than $110.0 million of annual net sales
with certain segments of its operations transferred to other
facilities.





In March
2008 the Company announced the intention to shut down a manufacturing facility
within its tapes/coatings division located in San Luis Potosi,
Mexico.  The affected business accounted for less than $3.0 million of
annual net sales and the business was transferred to the Atlacomulco, Mexico
facility.





In June
2008 the Company announced the intention to shut down a manufacturing facility
within its rigid closed top division located in Oakville, Canada.  The
affected business accounted for less than $7.0 million of annual net sales and
the business was transferred to other facilities.





Discussion
of Results of Operations for the Fiscal Year Ended September 27, 2008 (the
“Current Year”) Compared to the Fiscal Year Ended September 29, 2007 (the “Prior
Year)





Net Sales.  Net
sales increased 15% to $3,513.1 million for the Current Year from $3,055.0
million for the Prior Year.  This $458.1 million increase includes
acquisition volume growth of 8%.  The following discussion in this
section provides a comparison of net sales by business segment.  Net
sales in the rigid open top business increased from $881.3 million in the Prior
Year to $1,053.2 million in the Current Year.  Base volume growth in
the rigid open top business, excluding net selling price increases, was 6%
driven primarily by growth in our various container product lines and
thermoformed drink cups.  Net sales in the rigid closed top business
increased from $598.0 million in the Prior Year to $853.4 million in the Current
Year primarily as a result of acquisition volume growth attributed to Captive
and MAC totaling $215.3 million for the Current Year.  The flexible
films business net sales increased from $1,042.8 million in the Prior Year to
$1,092.2 million in the Current Year.  Base volume declined, excluding
net selling price increases, by 3% primarily due to the Company’s decision to
discontinue historically lower margin business and slowness in the housing
sector.  Net sales in the tapes/coatings business decreased from
$536.7 million in the Prior Year to $514.3 million in the Current Year primarily
driven by softness in the new home construction and automotive markets partially
offset by strong volume growth in the corrosion protection
business.





Cost of
Sales.Cost of goods sold increased $435.9 million to $3,019.3
in the Current Year from $2,583.4 million in the Prior Year. Cost of goods
increased due to the acquisition of Captive and Mac and was adversely affected
by the increased cost of plastic resin and other materials partially offset by
various cost reduction programs.





Gross Profit.  Gross
profit increased by $22.2 million to $493.8 million (14% of net sales) for the
Current Year from $471.6 million (15% of net sales) for the Prior
Year.  This increase is attributed to theproductivity improvements
in the


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flexible
films and tapes/coatings segments as a result of realizing synergies from the
Mergerand increased selling
prices partially offset by the timing lag of passing through increased
raw material costs to customers.





Selling, General and Administrative
Expenses.Selling, general and administrative expense
increased by $20.9 million to $340.0 million for the Current Year from $321.5
million for the Prior Year primarily as a result of a $15.1 million increase in
amortization of intangible assets related to the Captive and Mac
acquisitions.





Restructuring
Charges.Restructuring and impairment charges were $9.6
million in the Current Year compared to $39.1 million in the Prior
Year.  The costs are associated with the shut down of several
facilities in the flexible films, closed top and tapes/coatings
segments.  The restructuring and impairment charges for the Current
Year consisted of $0.3 million for severance and termination benefits, $7.9
million of facility exit costs, and $1.4 million of other costs as a result of
plant rationalizations discussed above.





Other Operating
Expenses.  Other expenses decreased from $43.6 million in the
Prior Year to $32.8 million for the Current Year primarily as a result of a
decrease in transaction and integration costs associated with the
Merger.





Interest Expense,
Net.  Net interest expense increased $24.1 million to $261.7
million for the Current Year from $237.6 million in the Prior Year primarily as
a result of increased borrowings to finance the Captive acquisition, partially
offset by a decline in borrowing costs of our variable rate debt
instruments.





Income Tax
Benefit.For the Current Year, we recorded an income tax
benefit of $49.2 million or an effective tax rate of 32.7%, which is a change of
$39.4 million from the income tax benefit of $88.6 million or an effective tax
rate of 42.7% in the Prior Year.  This decrease in the income tax
benefit primarily relates to a decrease in the loss before income taxes in the
Current Year versus the Prior Year and because the effective rate differed from
the statutory rate as the Company concluded it was more likely than not that
certain foreign operating losses would not be realized.





Net Loss.  Net loss
was $101.1 million for the Current Year compared to a net loss of $116.2 million
for the Prior Year for the reasons discussed above.





Discussion
of Results of Operations for the Fiscal Year Ended September 29,
2007





Net Sales.Net sales for the
fiscal year ended September 29, 2007 was $3,055.0 million. Net sales in the
rigid open top business were $881.3 million primarily driven by solid volume
from containers and continued strong volume in the thermoformed polypropylene
drink cup product line.  Net sales in the rigid closed top business
ended at $598.0 million primarily as a result of solid volume from closures,
bottles, and prescription containers.  The flexible film business
generated net sales of $1,042.8 million.  Net sales in the tapes and
coatings business of $536.7 million were negatively impacted by softness in the
new home construction market.





Cost of
Sales.Cost of goods sold for the fiscal year ended September
29, 2007 was $2,583.4 million. Cost of goods sold was adversely impacted by the
non-cash write-up of finished goods inventory $11.2 million partially offset by
cost reduction programs.





Gross Profit.Gross profit for the
fiscal year ended September 29, 2007 was $471.6 million (15.4% of net sales).Significant productivity improvements were made in the fiscal year ended
September 29, 2007, including the installation of state-of-the-art equipment at
several of our facilities.  These productivity improvements were
partially offset by increased costs from inflation such as higher energy prices
and wage inflation.





Selling, General and Administrative
Expenses.Selling, general and administrative expenses for the fiscal
year ended September 29, 2007 was $321.5 million (10.5 % of net
sales).  Items favorably impacting selling, general and administrative
expenses included synergies generated from the Merger, partially offset by stock
compensation expense of $19.6 million.  Intangible asset amortization
represented $77.6 million of the total.





Restructuring and Impairment Charges
(credit), net.Restructuring and impairment charges (credit), net for the
fiscal year ended September 29, 2007 were $39.1 million consisting of $7.5
million for severance and termination benefits,  -28-
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Other Operating
Expenses.  Other operating expenses for the fiscal year ended
September 29, 2007 were $43.6 million which primarily consisted of expenses
incurred in connection with the closing of the Merger and subsequent integration
costs, management fees to our sponsors of $5.9 million, and other non-recurring
expenses.





Operating Income.Operating
income for the fiscal year ended September 29, 2007 was $67.4 million driven by
the items noted above.





Discussion
of Results of Operations for the period from February 17, 2006 to September 29,
2006





Net Sales.  Net
sales for the period February 17, 2006 to September 29, 2006 was $1,138.8
million. Net sales for the period was impacted by pricing actions, which had
been implemented to offset inflation in raw materials, particularly in PE resin,
in our Plastics operating segment partially offset by lower volumes driven by a
mild hurricane season and continued efforts by customers to structurally reduce
inventories. Included as a reduction of net sales is $79.4 million attributable
to customer rebates, sales incentives, trade promotions and coupons and $20.6
million attributable to discounts to customers and product returns.





Cost of
Sales.  Cost of goods sold for the period February 17, 2006 to
September 29, 2006 was $1,022.9 million. Cost of goods sold was adversely
impacted by inflation in raw materials of $65.9 million experienced in our
Plastics segment partially offset by lower volumes.  In addition, cost
of sales was impacted by step up in value of inventory of $6.8 million and
increased depreciation costs of $8.4 million as a result of purchase price
allocations in connection with Apollo Management V, L.P (“Apollo V”) acquisition
and increased freight resulting from higher fuel prices.  The effect
of these items was partially offset by the favorable impact of our cost
reduction and manufacturing efficiency programs.  Included as a
reduction of cost of goods sold was $8.7 million attributable to rebates from
vendors.





Gross Profit. Gross profit
for the period February 17, 2006 to September 29, 2006 was $115.9 million. Gross
profit was negatively impacted by raw material inflation, experienced by our
Plastics segment, and the impact of purchase method of accounting attributable
to the Acquisition. Partially offsetting these costs were the continuing
benefits of the Company’s cost reduction programs and the pricing actions
previously mentioned.





Selling, General and Administration
Expenses. Selling, general and administrative expenses for the period
February 17, 2006 to September 29, 2006 were $107.6 million. Items negatively
impacting selling, general and administrative expense included the increased
impact of depreciation and amortization of $16.5 million from the purchase
method of accounting attributable to the Acquisition executive severance expense
of $3.6 million, additional corporate support costs.





Operating
Income.Operating income for the period February 17, 2006 to
September 29, 2006 was $7.7 million. Operating income was negatively impacted by
raw material inflation experienced by our Plastics segment, increase in
inventory cost, higher depreciation and amortization costs resulting from
purchase price allocation in connection with Apollo V’s acquisition, executive
severance and additional corporate support costs, partially offset by the
favorable impact of our cost reduction and manufacturing efficiency
programs.





Discussion
of Results of Operations for the period from October 1, 2005 to February 16,
2006





Net Sales.Net sales for the
period from October 1, 2005 to February 16, 2006 was $666.9 million. Net sales
for the period reflects pricing actions, implemented to offset PE resin
inflation experienced primarily in TP&A’s Plastics division. Included as a
reduction of net sales $54.8 million attributable to customer rebates, sales
incentives, trade promotions and coupons and $15.4 million attributable to
discounts to customers and product returns.





Cost of
Sales.Cost of goods sold for the period from October 1, 2005
to February 16, 2006 was $579.0 million. Cost of goods sold was adversely
impacted by inflation in PE resin of $41.2 million and increased freight rates
of $1.8 million resulting from higher fuel prices. The effects of these items
were partially offset by the favorable impact of cost reduction and
manufacturing efficiency programs. Included as a reduction of cost of goods sold
was $5.2 million attributable to rebates from vendors.


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Gross Profit.Gross profit
for the period from October 1, 2005 through February 16, 2006 was $87.9 million.
Gross profit was negatively impacted by resin raw material inflation experienced
by the Plastics division and increased freight rates resulting from higher fuel
prices partially offset by the pricing actions previously mentioned and the
continuing benefits of cost reduction programs.





Selling, General and Administrative
Expenses.Selling, general and administrative expenses for the period
from October 1, 2005 to February 16, 2006 were $50.0 million. Items favorably
impacting selling, general and administrative expenses included lower Tyco
administrative fees of $12.2 million as a result of the elimination of the
receivables factoring and resin purchasing programs, partially offset by stock
option expense of $1.7 million following Tyco’s adoption of SFAS No.
123R.





Operating Income.Operating
income for the period from October 1, 2005 to February 16, 2006 was $26.9
million. Operating income was negatively impacted by resin raw material
inflation experienced by the Plastics division and increased freight rates
resulting from higher fuel prices, partially offset by pricing actions
previously mentioned, the continuing benefits of cost reduction programs and
lower Tyco administrative fees in selling, general and administrative
expenses.





Income
Tax Matters





As of
September 27, 2008, the Company has unused operating loss carryforwards of
$464.7 million for federal and $593.9 million for state income tax purposes
which begin to expire in 2021 and $25.0 million of foreign operating loss
carryforwards.  Alternative minimum tax credit carryforwards of
approximately $7.4 million are available to the Company indefinitely to reduce
future years’ federal income taxes.  The net operating losses are
subject to an annual limitation under Sec. 382 of the Internal Revenue Code,
however the annual limitation is in excess of the net operating loss,
effectively no limitation exists.  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 $5.0
million and $3.1 million as of September 27, 2008 and September 29, 2007,
respectively, related to the foreign operating loss carryforwards.





Liquidity
and Capital Resources





In fiscal
2008, we experienced increased working capital needs as we saw a significant
rise in the cost of raw material, particularly plastic resin which required us
to make borrowings under our senior secured credit facilities to fund these
needs.  In addition, Lehman Brothers, who participated in our
revolving credit facility filed for bankruptcy limiting the ability for us to
borrow future amounts by $18.3 million due to their insolvency.  In
September 2008, in order to protect against the significant volatility and the
illiquidity in the capital markets, we borrowed an additional $150.0 million
under our revolving credit facilities and deposited this in cash accounts to
ensure that we would have adequate liquidity to fund our
operations.  We believe cash flow from operations along with our cash
on hand and availability under our senior secured credit facilities will provide
sufficient working capital for us to fund our operations and meet our liquidity
needs over the next twelve months.  However, future unforeseen events,
increases in the cost of resin which we are unable to pass through to our
customers on a timely basis or significant acquisitions could severely impact
our liquidity.  At September 27, 2008, our cash balance was $189.7
million, and we had unused borrowing capacity under the Credit Facility’s
borrowing base of $99.4 million (reflects the reduction of
Lehman’s total commitment of $18.3 million)subject to the solvency of
our lenders to fund their obligations and our borrowing base calculations.
Subsequent to the bankruptcy filing of Lehman Brothers, as the Company began
drawing additional funds and making repayments under the revolving credit
facility, we repaid the full portion of Lehman’s commitment of $18.3
million.  Due to the bankruptcy of Lehman Brothers, they have not
participated in any future borrowings and we are unable to currently access this
$18.3 million commitment of our revolving credit facility.





Senior
Secured Credit Facility


The
Company’s senior secured credit facilities consist of $1,200.0 million term loan
and $400.0 million asset based revolving line of credit.  At September
27, 2008, the Company had $25.2 million under the revolving credit facility in
letters of credit outstanding.  The availability under the revolving
line of credit is the lesser of $400.0 million or based on a defined borrowing
base which is calculated based on available accounts receivable and
inventory.  Under the revolving


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line of
credit, the Company is required to maintain a consolidated fixed charge coverage
ratio of at least 1.00 to 1.00 during any period when availability falls below
10% and for ten consecutive days after availability exceeds 10%.  The
term loan matures on April 3, 2015 and the revolving line of credit matures on
April 3, 2013.  The LIBOR rate on the term loan and the line of credit
were 2.80% and 3.72% at September 27, 2008, respectively, determined by
reference to the costs of funds for eurodollar deposits in dollars in the LIBOR
for the interest period relevant to such borrowing plus the applicable
margin.  The applicable margin for LIBOR rate borrowings under the
revolving credit facility ranges from 1.00% to 1.75% and for the term loan is
2.00%.  The line of credit is also subject to an unused commitment fee
for unused borrowings ranging from 0.25% to 0.35% per annum and a letter of
credit fee of 0.125% per annum for each letter of credit that is
issued.  At September 27, 2008, $257.1 million was outstanding on the
revolving line of credit.  The revolving line of credit allows up to
$100.0 million of letters of credit to be issued instead of borrowings under the
revolving line of credit. At September 27, 2008, the Company had $25.2 million
under the revolving line of credit in letters of credit outstanding. At
September 27, 2008, the Company had unused borrowing capacity of $99.4 million(reflects the reduction of
Lehman’s total commitment of $18.3 million)under the revolving line of
credit subject to
the solvency of our lenders to fund their obligations and our borrowing base
calculations.  The Company was in compliance with all covenants
at September 27, 2008.





A key
financial metric utilized in the calculation of the first lien leverage ratio is
adjusted EBITDA as defined in the Company’s senior secured credit
facilities.  The following table reconciles our adjusted EBITDA of
$489.5 million for fiscal 2008 to net loss.





Year
      Ended
              September
      27,
              2008Adjusted EBITDA
            
            $
            489.5Net interest
      expense
            
            
            (261.7
            )Depreciation and
      amortization
            
            
            (256.8
            )Income tax
    benefit
            
            
            49.2Non-cash inventory
      write-up
            
            
            (4.7
            )Stock based
      compensation
            
            
            (19.6
            )Business optimization
      expense
            
            
            (26.8
            )Restructuring
      charges
            
            
            (9.6
            )Management fees
            
            
            (6.0
            )Pro forma
      acquisitions
            
            
            (14.7
            )Pro forma
    synergies
            
            
            (39.9
            )Net loss
            
            $
            (101.1
            )


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For
comparison purposes, the following table reconciles our adjusted EBITDA for the
thirteen weeks ended September 27, 2008 and September 29, 2007.





Thirteen
      Weeks EndedSeptember
      27, 2008
            
            
            September
      29, 2007Adjusted EBITDA
            
            $
            125.2
            
            
            $
            149.8Net interest
      expense
            
            
            (68.8
            )
            
            
            (58.8
            )Depreciation and
      amortization
            
            
            (68.9
            )
            
            
            (69.7
            )Income tax
    benefit
            
            
            6.4
            
            
            
            33.9Business optimization
      expense
            
            
            (8.8
            )
            
            
            (11.5
            )Restructuring and
      impairment
            
            
            (1.0
            )
            
            
            (24.7
            )Stock based
      compensation
            
            
            (4.3
            )
            
            
            (3.9
            )Non-cash inventory
      write-up
            
            
            (2.3
            )
            
            
            (2.5
            )Loss on disposal of
      assets
            
            
            —
            
            
            
            1.7Management fees
            
            
            (1.5
            )
            
            
            (2.7
            )Pro forma
      acquisitions
            
            
            —
            
            
            
            (16.1
            )Pro forma
    synergies
            
            
            (5.3
            )
            
            
            (21.3
            )Net income
    (loss)
            
            $
            (29.3
            )
            
            $
            (25.8
            )





While the
determination of appropriate adjustments in the calculation of adjusted EBITDA
is subject to interpretation under the terms of the Credit Facility, management
believes the adjustments described above are in accordance with the covenants in
the Credit Facility.  Adjusted EBITDA should not be considered in
isolation or construed as an alternative to our net income (loss) or other
measures as determined in accordance with GAAP.  In addition, other
companies in our industry or across different industries may calculate bank
covenants and related definitions differently than we do, limiting the
usefulness of our calculation of adjusted EBITDA as a comparative
measure.





Senior
Secured First Priority Notes


On April
21, 2008 the Company completed a private placement of $680.6 million, aggregate
principal amount of Senior Secured First Priority Notes which mature on February
15, 2015.  The Company received gross proceeds of $661.4 million,
before expenses, and repaid the outstanding borrowings under the senior secured
bridge loan that was used to finance and pay costs related to the Captive
acquisition and to repay amounts outstanding under the Company’s revolving
credit facility as well as to pay fees and expenses related to the
offering.  Interest on the Senior Secured First Priority Notes accrues
at a rate per annum, reset quarterly, equal to LIBOR (2.79% at September 27,
2008) plus 4.75%. Interest on the Senior Secured First Priority Notes are
payable quarterly in arrears on January 15, April 15, July 15 and October 15 of
each year, commencing July 15, 2008.  The Senior Secured First
Priority Notes are guaranteed on a senior secured basis by all of the Company’s
existing and future domestic subsidiaries, subject to certain exceptions and
will include all of the Company’s subsidiaries that guarantee the Company’s
obligations under its term loan facility.  The Senior Secured First
Priority Notes and the guarantees are secured on a first-priority basis by a
lien on the assets that secure the Company’s obligations under its senior
secured credit facilities, subject to certain exceptions.  The Company
was in compliance with all covenants at September 27, 2008.





Second
Priority Senior Secured Notes


The
Company’s $750.0 million of second priority senior secured notes (“Second
Priority Notes”) are 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 LIBOR (2.78% at September 27, 2008) 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 Company was in compliance with all covenants at
September 27, 2008.




11% Senior
Subordinated Notes


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The
Company’s $425.0 million in aggregate principal amount of 11% senior
subordinated notes (“11% Senior Subordinated Notes”) were sold in a private
placement to Goldman, Sachs and Co. and are exempt from registration under the
Securities Act.  The 11% Senior Subordinated Notes mature on 2016.
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 Company elected to satisfy 3% of
its interest obligation by issuing additional notes as discussed above in
satisfaction of its interest obligations for each quarterly period from
September 2007 through September 2008 ($3.2 million each).  The
Company was in compliance with all covenants at September 27, 2008.
  10
1⁄4% Senior Subordinated Notes
 The
Company’s $265.0 million in aggregate principal amount of 10 1⁄4% senior
subordinated notes (“10 1⁄4% Senior Subordinated Notes”) mature on March 1,
2016.  The notes are senior subordinated obligations of the Company
and rank junior to all other senior indebtedness that does not contain similar
subordination provisions.  No principal payments are required with
respect to the 10 1⁄4% Senior Subordinated Notes prior to
maturity.  Interest on the 10 1⁄4% Senior Subordinated Notes is due
semi-annually on March 1 and September 1.  The Company was in
compliance with all covenants at September 27, 2008.
 
 Berry
Group Indebtedness
 On June
5, 2007, Berry Group entered into a $500.0 million senior unsecured term loan
agreement (“Senior Unsecured Term Loan”) with a syndicate of
lenders.  The Senior Unsecured Term Loan matures on June 5, 2014 and
was sold at a 1% discount, which is being amortized over the life of the
loan.  Interest on the agreement is payable on a quarterly





Berry
Group at its election may call the notes up to the first anniversary date for
100% of the principal balance plus accrued and unpaid interest and an applicable
premium.  Berry Group’s call option for the notes between the one year
and two year and two year and three year anniversary dates changes to 102% and
101% of the outstanding principal balance plus accrued and unpaid interest,
respectively.  The notes also contain a put option which allows the
lender to require Berry Group to repay any principal and applicable PIK interest
that has accrued if Berry Group has an applicable high yield discount obligation
(“AHYDO”) within the definition outlined in the Internal Revenue Code, section
163(i)(1) at each payment period subsequent to the five year anniversary
date.





Contractual
Obligations and Off Balance Sheet Transactions





Our
contractual cash obligations as of September 27, 2008 are summarized in the
following table.





Payments
      Due by Period at September 27, 2008Total
            
            
            < 1 year
            
            
            1-3 years
            
            
            4-5 years
            
            
            > 5 yearsLong-term
      debt, excluding capital leases
            
            $
            3,579.2
            
            
            
            12.0
            
            
            $
            24.0
            
            
            $
            281.4
            
            
            $
            3,261.8Capital
      leases
            
            
            46.7
            
            
            
            11.3
            
            
            
            13.4
            
            
            
            11.7
            
            
            
            10.3Fixed
      interest rate payments
            
            
            1,703.4
            
            
            
            268.1
            
            
            
            515.7
            
            
            
            502.1
            
            
            
            417.5Operating
      leases
            
            
            397.2
            
            
            
            49.4
            
            
            
            82.5
            
            
            
            58.5
            
            
            
            206.8Total
      contractual cash obligations
            
            $
            5,726.5
            
            
            
            340.8
            
            
            
            635.6
            
            
            
            853.7
            
            
            
            3,896.4





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In
addition to the above obligations, our Parent Company, Berry Group has a $550
million unsecured term loan outstanding (described elsewhere in this 10-K),
which matures in June 2014, with potential payments in June 2012 and thereafter
depending on certain AHYDO calculations in the loan agreement.
 
 Cash
Flows from Operating Activities
 
 Net cash
provided by operating activities was $9.8 million for the fiscal year ended
September 27, 2008 compared to $137.3 million of cash flows provided by
operating activities for the fiscal year ended September 29,
2007.  The change in cash flow from operating activities is the result
of a change in working capital primarily due to increased resin costs leading to
increases in receivables, inventory and payables.
 
 Net cash
provided by operating activities was $137.3 million for the fiscal year ended
September 29, 2007.  Cash flow provided by operating activities was
negatively impacted by costs incurred as a result of Apollo’s acquisition of Old
Berry Holding, the Merger, and the restructuring activities noted
above.
 
 During
the period from February 17, 2006 to September 29, 2006, we generated $96.7
million of net cash from operating activities principally due to improved
inventory turnover and accounts payable terms.
 
 TP&A
net cash usage during the period from October 1, 2005 to February 16, 2006 was
$119.2 million, principally due to changes in raw material purchases and payment
terms as a result of the discontinuance of the resin purchasing agreement with
Tyco prior to the Apollo’s purchase of Old Covalence.  During the
period from October 1, 2005 to February 16, 2006, accounts payable and inventory
experienced a one-time change due to the discontinuance of the raw materials
resin purchasing program the Predecessor had with an affiliate of Tyco. Under
that program, amounts





Cash
Flows from Investing Activities





Net cash
used for investing activities was $655.2 million for the fiscal year ended
September 27, 2008 compared to $164.3 million for the fiscal year ended
September 29, 2007 primarily as a result of the acquisition of Captive and
MAC.  In addition, our investments in capital expenditures totaled
$162.4 million partially offset by $83.0 million from disposition of assets,
including proceeds from sale-leaseback transactions.





Net cash
used for investing activities was $164.3 million for the fiscal year ended
September 29, 2007.  Our investments in capital expenditures totaled
$99.3 million partially offset by $10.8 million of cash received from
disposition of assets which was primarily the sale of Berry Plastics UK Ltd. in
April 2007.  In addition, we used $75.8 million primarily for (1) the
acquisition of Rollpak Corporation and (2) a $30.0 million payment to Tyco as
finalization of the working capital settlement.





During
the period from February 17, 2006 to September 29, 2006, we used $3,252.0
million of net cash in investing activities, primarily due to Apollo’s
acquisition of Old Berry Holding and Old Covalence Holding and investments in
capital expenditures of $34.8 million during the period.  During the
period from October 1, 2005 to February 16, 2006, TP&A used $12.2 million of
net cash in investing activities for capital expenditures.




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Cash
Flows from Financing Activities
 Net cash
provided by financing activities was $821.0 million for the fiscal year ended
September 27, 2008 compared to $40.4 million used for financing
activities.  In February 2008, we used the proceeds from the senior
secured bridge facility to fund the $520.0 million acquisition of Captive
Plastics.  This senior secured bridge facility was subsequently
retired in April 2008, in connection with the issuance of our First Priority
Floating Rate Notes which resulted in us receiving approximately $661.4 million
of cash proceeds.  The excess proceeds from our April offering were
used to pay down our outstanding borrowings on our revolving line of
credit.  We subsequently borrowed $257.1 million under our revolving
credit facilities to fund working capital and to ensure that we had liquidity to
finance our operations given the turmoil in the financial markets.  We
had approximately $189.7 million in cash as of September 27, 2008.  We
paid approximately $26.4 million in financing fees related to the First Priority
Floating Rate Notes.
 
 Net cash
used for financing activities was $40.4 million for the fiscal year ended
September 29, 2007.  In the period, we generated cash of $1,233.0
million from long-term borrowing in connection with the Merger and paid $9.7
million of debt financing costs associated with closing these
borrowings.  We paid $1,161.2 million of long-term borrowings
primarily as a result of the Merger and had net equity distributions of $102.5
million primarily a result of the dividend to Berry Group in June 2007 described
above.
 
 During
the period from February 17, 2006 to September 29, 2006, we generated net cash
of $3,212.5 million in our financing activities due principally to the issuance
of long-term debt of $2,653.4 million and net equity contributions of $680.8
million in connection with Apollo’s acquisitions of Old Berry Holding and Old
Covalence Holding partially offset by payments on long-term debt totaling $50.7
million and debt financing costs of $71.0 million.
 
 During
the period from October 1, 2005 to February 16, 2006, cash generated from
TP&A’s financing activities was $130.6 million due to the change in the
resin purchasing arrangement with an affiliate of Tyco prior to Apollo’s
acquisition of Old Covalence Holding, partially offset by the retirement of
outstanding capital lease obligations.  In fiscal 2005, TP&A used
$89.2 million in financing activities. These activities primarily resulted from
a reduction in capital lease obligations of $61.1 million.
 
 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, based on our current level of operations, we believe
that cash flow from operations and available cash, together with available
borrowings under our senior secured credit facilities, will be adequate to meet
our short-term liquidity needs.  We base such belief on historical
experience and the funds available under the Credit
Facility.  However, we cannot predict our future results of operations
and our ability to meet $99.4 million





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.





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


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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 $19.3 million and $14.9 million as of September 27,
2008 and September 29, 2007, 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 $2.9 million and $6.7 million, including
reserves for expected medical claims incurred but not reported, as of September
27, 2008 and September 29, 2007, respectively.
 
 Workers’ Compensation
Insurance.The majority of our facilities are covered under 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
$7.6 million and $6.7 million as of September 27, 2008 and September 29, 2007,
respectively.


Revenue Recognition.  Revenue from the sales of products is recognized at
the time title and  risks and rewards of ownership pass to the
customer (either when the products reach the free-on-board shipping point or
destination depending on the contractual terms), there is persuasive evidence of
an arrangement, the sales price is fixed and determinable and collection is
reasonably assured.




Impairments of Long-Lived
Assets.  In accordance with the methodology described in 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.  An impairment of
$18.1 million was recorded in fiscal 2007.





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 discounted cash flows estimated to
be generated by those assets are less than the assets’ carrying
amounts.  The impairment loss for indefinite lived intangible assets
is measured by comparing the fair value of the asset to its carrying
amount.  Impairment losses for goodwill are recognized by performing
step two of the impairment test whereby goodwill is determined based on the
application of the purchase accounting methodology.  We annually
review our goodwill and other indefinite lived intangible assets for
impairment.  A 10% decline in the fair value of our reporting units,
could result in a potential impairment depending on earnings growth, the cost of
capital and other factors we utilized to




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Deferred Taxes and Effective Tax
Rates.We estimate the effective tax rates (“ETR”) 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 ETR’s 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 ETR 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’ ETR’s to reflect our best estimate for the year-to-date results and for
the full year.  As part of the ETR, 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 $5.0 million and $3.1 million as of September 27, 2008 and
September 29, 2007, respectively.





Accrued
Rebates.We offer various rebates to our customers in exchange
for their purchases.  These rebate programs are individually
negotiated with our customers and contain a variety of different terms and
conditions.  Certain rebates are calculated as flat percentages of
purchases, while others included tiered volume incentives.  These
rebates may be payable monthly, quarterly, or annually.  The
calculation of the accrued rebate balance involves significant management
estimates, especially where the terms of the rebate involve tiered volume levels
that require estimates of expected annual sales.  These provisions are
based on estimates derived from current program requirements and historical
experience.  We use all available information when calculating these
reserves.  Our accrual for customer rebates was $51.5 million and
$40.9 million as of September 27, 2008 and September 29, 2007,
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
July 2006, the FASB issued FASB Interpretation No. (FIN) 48, Accounting for Uncertainty in Income
Taxes—an interpretation of FASB Statement No. 109, which clarifies
the accounting for uncertainty in tax positions. This Interpretation requires
the recognition of a tax position when it is more likely than not that the tax
position will be sustained upon examination by relevant taxing authorities,
based on the technical merits of the position. The Company adopted the
provisions of FIN 48 effective September 30, 2007. The adoption of this
statement did not have a material impact on the Company’s results of operations
or financial position.







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In
September 2006, the FASB issued FASB No. 157, “Fair Value
Measurements” (“SFAS 157”).  SFAS 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. SFAS 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 SFAS 157
are effective for financial assets and liabilities for the Company’s fiscal year
beginning October 1, 2008 and for non-financial assets and liabilities for the
Company’s fiscal year beginning October 1, 2010.  The Company does not
expect the adoption of SFAS 157 to have a material impact on its results of
operations and financial position.
 
 In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities”, which includes an amendment of FASB
Statement No. 51.  This statement permits entities to choose to
measure many financial instruments and certain other items at fair
value.  This statement allows entities to report unrealized gains and
losses at fair value for those selected items.  This statement is
effective for financial statements issued for fiscal years beginning after
November 15, 2007.  The Company is currently assessing the impact of
the statement.
 
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations.”  This statement replaces FASB Statement No. 141,
“Business Combinations.” This statement retains the fundamental requirements in
SFAS 141 that the acquisition method of accounting (which SFAS 141 called
the purchase method) be used for all business combinations and for an acquirer
to be identified for each business combination. This statement defines the
acquirer as the entity that obtains control of one or more businesses in the
business combination and establishes the acquisition date as the date that the
acquirer achieves control. This statement requires an acquirer to recognize the
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date, measured at their fair values as of that date,
with limited exceptions specified in the statement.  This statement
applies prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008. The Company is currently assessing the impact of the
statement.
 
 In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”, which is an amendment of Accounting Research
Bulletin (“ARB”) No. 51.  This statement clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities”, which is an amendment of FASB Statement No.
133.  This statement requires enhanced disclosures about an entity’s
derivative and hedging activities and thereby improves the transparency of
financial reporting.  This statement is effective for the fiscal
years, and interim periods within those fiscal years, beginning on or after
November 15, 2008.





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, Senior Secured First Priority Notes and
Floating Rate Notes.  The net outstanding balance of the term loan,
revolving credit facility, Senior Secured First Priority Notes and Floating Rate
Notes at September 27, 2008 was $1,185.0 million, $257.1 million, $680.6 million
and $225.0 million respectively.





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In August
2007, Berry entered into two separate interest rate swap transactions to protect
$600.0 million of the outstanding variable rate term loan debt from future
interest rate volatility.  The swap agreements became effective in
November 2007.  The first agreement has a notional amount of $300.0
million and became effective November 5, 2007 and swaps three month variable
LIBOR contracts for a fixed two year rate of 4.875% and expires on November 5,
2009.  The second agreement has a notional amount of $300.0 million
and became effective November 5, 2007 and swaps three month variable LIBOR
contracts for a fixed three year rate of 4.920% and expires on November 5,
2010.





If the
LIBOR rate increases 0.25% and 0.5%, we estimate an annual increase in our
interest expense of $4.4 million and $8.7 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 $1,419.9 million of resin in fiscal 2008 with
approximately 56% of our resin pounds being PE, 29% PP, and 15%
other.  Our plastic resin purchasing strategy is to deal with only
high-quality, dependable suppliers, such as Chevron, DAK Americas,
Dow, Dupont, Eastman Chemical, Exxon Mobil, Flint Hills Resources, Georgia Gulf,
Lyondell/Bassell, Nova, PolyOne Corp., Sunoco, Total, and
Westlake.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.  If the
price of resin increased or decreased from fiscal 2008 by 5% and 10%, this would
result in a change to our cost of goods sold of approximately $71.0 million and
$142.0 million, respectively.


Item 8.FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA





Index
      to Financial StatementsReports
      of Independent Registered Public Accounting Firms
            F-
      1Consolidated
      Balance Sheets at September 27, 2008 and September 29,
2007
            F-
      3Consolidated
      or Combined Statements of Operations for the year ended September 27,
      2008, year ended September 29, 2007, period from February 17 to September
      30, 2006 and period from October 1, 2005 to February 16,
    2006
            F-
      5Consolidated
      or Combined Statements of Changes in Stockholders' Equity and
      Comprehensive Income (Loss) for the year ended September 27, 2008, for the
      year ended September 29, 2007, period from February 17 to September 30,
      2006 and period from October 1, 2005 to February 16, 2006
            F-
      6Consolidated
      or Combined Statements of Cash Flows for year ended September 27, 2008,
      year ended September 29, 2007, period from February 17 to September 30,
      2006 and period from October 1, 2005 to February 16, 2006
            F-
      7Notes
      to Consolidated or Combined Financial Statements
            F-
      8Index
      to Financial Statement SchedulesAll 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.


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





None.





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 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.  In connection with the preparation of this Annual Report,
the Company's management, with the participation of the Chief Executive Officer
and the Chief Financial Officer, carried out an evaluation of the effectiveness
of the design and operation of the disclosure controls and procedures as of
September 27, 2008.  Based on the identification and the evaluation of
the material weaknesses in internal control over financial reporting described
below, the Company’s Chief Executive Officer and Chief Financial Officer
concluded that, as of September 27, 2008, the Company’s disclosure controls and
procedures were not effective.





Management’s
Report on Internal Control over Financial Reporting


Management
is responsible for establishing and maintaining adequate internal control over
financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act. Internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America. Because of its
inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projection of any evaluation of effectiveness to
future periods is subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.





This
Annual Report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission (“SEC”) that permit the Company to provide only Management’s
report in this Annual Report.





A
material weakness is a control deficiency, or combination of control
deficiencies, that results in the reasonable possibility that there is more than
a remote likelihood that a misstatement of our annual or interim financial
statements that is more than inconsequential will not be prevented or detected
in a timely manner. A control deficiency exists when the design or operation of
a control does not allow management or employees, in the normal course of
performing their assigned functions, to prevent or detect misstatements on a
timely basis. A design deficiency exists when a control necessary to meet the
control objective is missing or an existing control is not properly designed so
that, even if the control operates as designed, the control objective is not
always met.  In connection with Management’s assessment of the
Company’s internal control over financial reporting, Management identified the
following material weaknesses in the Company’s internal control over financial
reporting as of September 27, 2008.





·
            In
      connection with the Merger and the integration of operations,, the Company
      did not fully complete the transition from Old Covalence’s financial
      system to Berry’s new financial system.  This resulted in
      partially implemented controls and procedures and installation of
      disclosure controls and procedures in the Old Covalence operating units
      that were not converted as of September 27,
  2008.


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·
              Ineffective
      review of account reconciliations to ensure that account balances were
      accurate and agreed to appropriate supporting detail, calculations or
      other documentation.
  ·
              Ineffective
      review of the Company’s tax provision to ensure that deferred tax balances
      were properly stated.
  
 Plans
to Remediate Material Weaknesses in Internal Control over Financial
Reporting
 
 In light
of the material weaknesses described above, the Company performed additional
analysis and other procedures to ensure that the consolidated financial
statements included in this Annual Report were prepared in accordance with
accounting principles generally accepted in the United States
("GAAP").  These procedures included additional testing of certain
balances and accounts as of September 27, 2008 to ensure the accuracy of the
annual financial statements.
 
 Management
has engaged in, and continues to engage in, substantial efforts to address the
material weaknesses in the Company’s internal control over financial
reporting.  The Company is currently transitioning and converting the
legacy Old Covalence Holding systems to the Old Berry Group systems which will
result in cohesive disclosure controls and procedures.  The Company is
also in the process of implementing new account reconciliation procedures to
ensure that the balances were accurate and agreed to appropriate supporting
detail, calculations or other documentation.  In addition , the
Company is also designing new procedures to ensure their book to tax differences
are properly identified and all deferred tax balances are properly
stated.




While the
Company believes that these remedial actions will result in correcting the
material weaknesses in its internal control over financial reporting, the exact
timing of when the conditions will be corrected is dependent upon future
events.







(b)
            Changes
      in internal controls.





The
changes that could materially affect or are reasonably likely to materially
affect the Company’s internal control over financial reporting are discussed
under “Plans to Remediation of Material Weaknesses in Internal Control over
Financial Reporting” in Item 9A(a) above.





Item
      9B. OTHER
INFORMATION





None





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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 Group, of which we are a wholly
owned subsidiary.




Name
            Age
            TitleIra
      G. Boots (1) (3)
            54
            Chairman,
      Chief Executive Officer and DirectorR.
      Brent Beeler
            55
            President
      and Chief Operating OfficerJames
      M. Kratochvil
            52
            Executive
      Vice President, Chief Financial Officer, Treasurer and
      SecretaryAnthony
      M. Civale (1) (2)
            34
            DirectorPatrick
      J. Dalton
            40
            DirectorDonald
      C. Graham (1)
            75
            DirectorSteven
      C. Graham (2)
            49
            DirectorJoshua
      J. Harris
            43
            DirectorRobert
      V. Seminara  (1) (2) (3)
            36
            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
Corporation.





Name
            Age
            TitleIra
      G. Boots (1) (3)
            54
            Chairman,
      Chief Executive Officer and DirectorR.
      Brent Beeler
            55
            President
      and Chief Operating OfficerJames
      M. Kratochvil
            52
            Executive
      Vice President, Chief Financial Officer, Treasurer and
      SecretaryAnthony
      M. Civale (1) (2)
            34
            DirectorRobert
      V. Seminara (1) (2) (3)
            36
            Director





(1)
            Member
      of the Compensation Committee.


(2)
            Member
      of the Audit Committee.


(3)
            Member
      of the Executive Committee.





Ira G. Bootshas
been Chairman of the Board 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
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


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and
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 Management, where he has
worked since 1999.  Prior to that time, Mr. Civale was employed by
Deutsche Bank Securities in the Financial Sponsors Group within its Corporate
Finance Division.  Mr. Civale also serves on the board of directors of
Harrah’s Entertainment, Inc. and Prestige Cruises.





Patrick J. Dalton has been a
member of our Board of Directors since the consummation of the Apollo Berry
Merger. Mr. Dalton joined Apollo Management in June 2004 as a partner and
as a member of Apollo Investment Management’s (“AIM”) Investment Committee.
Mr. Dalton is the President and Chief Operating Officer of Apollo
Investment Corporation (NASDAQ: AINV).  Mr. Dalton is also the Chief
Investment Officer of AIM and a member of the Investment Committees of Apollo
Investment Europe, Apollo Credit Liquidity Fund and Artus/Apollo Loan Fund.
Before joining Apollo, Mr. Dalton was a vice president with Goldman,
Sachs & Co.’s Principal Investment Area with a focus on mezzanine
investing since 2000. From 1990 to 2000, Mr. Dalton was a Vice President
with the Chase Manhattan Bank where he worked most recently in the Acquisition
Finance Department. Mr. Dalton graduated from Boston College with a BS in
Finance and received his MBA from Columbia Business School.





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. Harrishas been
a member of our Board of Directors since the consummation of the
Merger.  Mr. Harris is a Senior Founding Partner at Apollo Management
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 the general partner of AP Alternative Assets,
Apollo Global Management LLC, CEVA Logistics, Hexion Specialty Chemicals, Inc.,
Momentive Performance Materials, Noranda Aluminum 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 Management, 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. 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


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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.











We have a
Code of Business Ethics that applies to all employees, including our Chief
Executive Officer and senior financial officers.  These standards are
designed to deter wrongdoing and to promote the highest ethical, moral and legal
conduct of all employees. Our Code of Business Ethics can be obtained, free of
charge, at our Corporate Headquarters in our Human Resources
department.





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, Salmon, Unfried, and all other vice
presidents and above, (collectively, the “Senior Management Group”) for fiscal
2008 were determined by the Compensation Committee in accordance with their
respective employment agreements.  The Committee makes all final
compensation decisions for our executive officers.   Below are
the principles outlining our executive compensation principles and
practices.





Compensation
Philosophy and Analysis





Our goal
as an employer is to ensure that our pay practices are equitable with regard to
market wages, facilitate appropriate retention, and to reward exceptional
performance.  The Human Resources Department obtains regional and
national compensation survey data.  In the past we have conducted
studies with Mercer, Clark Consulting, The Conference Board and Salary.com to
better understand compensation programs of other manufacturing companies similar
in size.  Our studies have reviewed base salary, bonus, and a time
based option value for one year. They have historically ignored the value of
401(k) match and medical.  We believe our programs are generally below
market.





The
Company believes that executive compensation should be designed to align closely
the interests 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 manufacturing
      businesses similar in size.





·
            Wage
      enhancements aligned with the performance of the
  Company.





·
            Pay for performance
      by:





·
            Setting
      performance goals determined by our CEO and the Board of Directors for our
      officers and providing a short-term incentive through a bonus plan that is
      based upon achievement of these goals.  In a year of increased
      resin and raw material prices, these goals were a challenge to the
      executive team.





·
            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.





Role
of Compensation Committee





The
Compensation Committee’s specific roles are:


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·
            to
      approve and recommend to our Board of Directors all compensation plans for
      (1) the CEO of the Company, (2) all employees of the Company and its
      subsidiaries who report directly to the CEO, and (3) other members of the
      Senior Management Group, as well as all compensation for our Board of
      Directors;·
            to
      approve the short-term compensation of the Senior Management Group and to
      recommend short-term compensation for members of our Board of
      Directors;




·
            to
      approve and authorize grants under the Company’s or its subsidiaries’
      incentive plans, including all equity plans and long-term incentive plans;
      and




·
            to
      prepare any report on executive compensation required by Securities and
      Exchange Commission rules and regulations for inclusion in our annual
      proxy statement, if any.




Role
of Executives Officers





Ira
Boots, Chairman and Chief Executive Officer, Brent Beeler, Chief Operating
Officer, Jim Kratochvil, Chief Financial Officer and Marcia Jochem, Executive
Vice President of Human Resources annually review the performance of each of our
executive officers.  Together they review annual goals and the
performance of each individual executive officer.  This information,
along with the performance of the company and market data determines the wage
adjustment recommendation presented to the Compensation
Committee.   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 and recommendations from the
Human Resource Department.





The
Compensation Committee evaluates the performance of the CEO and determines the
CEO’s compensation in light of the goals and objectives of the compensation
program. On at least an annual basis, the Compensation Committee expects to
review the performance of the CEO as compared with the achievement of the
Company’s goals and any individual goals. The CEO together with the Human
Resource Department will assess the performance and compensation of the other
named executives. The Human Resource Department, together with the CEO, annually
will review the performance of each member of the Senior Management Group as
compared with the achievement of Company or operating division goals, as the
case may be, together with each executive’s individual goals. The Compensation
Committee can exercise its discretion in modifying any recommended adjustments
or awards to the executives. Both performance and compensation are evaluated to
ensure that the Company is able to attract and retain high quality executives in
vital positions and that their compensation, taken as a whole, is competitive
and appropriate compared to that of similarly situated executives in other
corporations within the industry.





Executive
Compensation Program





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.  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.  Our equity programs are geared toward providing an incentive
and reward for the achievement of long-term business objectives, retaining key
talent and more closely aligning the interests of management with our
shareholders.





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





Base
Salary





Our
executive officers’ base salaries depend on their position within the Company
and its subsidiaries, the scope of their responsibilities and the period during
which they have been performing those responsibilities and their overall
performance. Base salaries are reviewed annually, and will be adjusted from time
to time to realign salaries with market levels after taking into account
individual responsibilities and performance and experience.


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Annual
Bonus





Berry has
a long history of sharing profits with employees. This philosophy is imbedded in
the corporate culture and is one of many practices that have enabled the Company
to continually focus on improvement and be successful. Below is the calculation,
funding and annual payment practice for the Executive program which is subject
to approval every year by the Board of Directors.  It is our goal to
exceed our commitments year after year. Our executive officers participate in
our Executive Profit Sharing Bonus Program.  Depending on our overall
business performance specifically related to EBITDA and Company growth and each
executive’s individual performance, he or she would be eligible to receive a
bonus ranging from zero to 108% his or her base salary.  These target
ranges are the same for all of the Vice Presidents and above positions and are
subject to change at the discretion of the Compensation
Committee.  The performance period is measured from January 1 through
December 31 of the respective year, and does not coincide with our externally
reported fiscal year-end.  Performance objectives are generally set on
an annualized basis.





1.
Calculation:


75% -
based on achieving 100% of annual EBITDA target


25% -
based on growing the equity value of the Company





2.Funding:


By
meeting both targets, executives qualify to earn 68.5% of their annualized
salary in a bonus payment.  This bonus payment slides up or down
depending on the performance of the Company.





3.
      Payment:


With
Board approval, bonus is paid on an annual basis, which normally happens at the
end of February, but may be paid at an earlier date at the election of the
Compensation Committee.





The
Compensation Committee is currently working with Apollo to determine the
performance metrics to apply to our 2009 bonus plan year, and we expect that our
executive officers will continue to be subject to the same financial performance
metrics as other salaried employees of the Company.





Stock
Options





In
connection with the completion of the Apollo Berry Merger, Berry adopted the
Berry Plastics Group, Inc., 2006 Equity Incentive Plan which permits us to grant
stock options, rights to purchase shares, restricted stock, restricted stock
units, and other-stock based rights to employees or directors of, or consultants
to, us, or any of our subsidiaries. The Equity Incentive Plan is administered by
our Board of Directors or, if determined by such board, by the Compensation
Committee of the board. Approximately 773 thousand shares of our
common stock have been reserved for issuance under the Equity Incentive
Plan.





As
discussed below, we have awarded stock options to members of our
management.  However, the Compensation Committee has not established
any formal program, plan or practice for the issuance of equity awards to
employees.  We do not have any program, plan or practice in place for
selecting grant dates for awards under the Equity Incentive Plan in coordination
with the release of material non-public information. Under the Equity Incentive
Plan, the exercise price for the option awards is the fair market value of the
stock of Berry on the date of grant. The fair market value is determined by the
Board of Directors by applying industry appropriate multiples to our current
EBITDA, and this valuation takes into account a level of net debt that excluded
cash required for working capital purposes.  The Compensation
Committee is not prohibited from granting awards at times when it is in
possession of material non-public information. However, no inside information
was taken into account in determining the number of options previously awarded
or the exercise price for those awards, and we did not “time” the release of any
material non-public information to affect the value of those
awards.





The
Compensation Committee believes that the granting of awards under the Equity
Incentive Plan promotes, on a short-term and long-term basis, an enhanced
personal interest and alignment of interests of those executives receiving
equity awards with the goals and strategies of the Company. The Compensation
Committee also believes that the equity grants provide not only financial
rewards to such executives for achieving Company goals but also provide
additional incentives for executives to remain with the
Company.


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From time
to time since the Apollo Berry Merger, we grant management participants stock
options that are subject to the terms of the Equity Incentive
Plan.  In connection with the grants, we enter into stock option award
agreements with the management participants.





Generally,
the options will become vested and exercisable over a five year
period.  The time based options vest 20% each year and the performance
based option grants vest over a five year period when certain EBITDA targets are
met. In each case, the vesting of options is generally subject to the
grantee’s continued provision of services to the Company or one of its
subsidiaries as of the applicable vesting date.





Berry
also clarified the anti-dilution provisions of its stock option plans to require
payment to holders of outstanding stock options of special dividends and a
pro-rata share of transaction fees that may be paid to Apollo and Graham in
connection with future transactions, re-financings, etc.   In
connection with the June 2007 dividend paid, holders of vested stock options
received $13.7 million, while an additional $34.5 million will be paid to
nonvested option holders on the second anniversary of the dividend grant date
(assuming the nonvested option holders remain employed by the
Company).  In December 2008, the Executive Committee of Berry Group
modified the vesting provisions which resulted in payment of this remaining
amount of $33.0 million to the participants on December 2008.





The
maximum term of these options is ten years. However, subject to certain
exceptions set forth in the applicable stock option award agreement, unvested
options will automatically expire 90 days after the date of a grantee’s
termination of employment, or one year in the case of termination due to death
or disability. In the case of a termination of employment due to death or
disability, an additional 20% of an individual’s options will
vest.  20% of outstanding options may become vested earlier
upon  a “change in control” of Berry, and 40% of outstanding options
become vested earlier if such change in control results in the achievement of a
targeted internal rate of return.





Shares of
Company common stock acquired under the Equity Incentive Plan are subject to
restrictions on transfer, repurchase rights, and other limitations set forth in
a stockholder’s agreement.





Post-Employment
Compensation.





We
provide post-employment compensation to our employees, including our named
executive officers, as a continuance of the post-retirement programs sponsored
by prior owners and applicable to our employees prior to the Apollo Berry
Merger. The Compensation Committee believes that offering such compensation
allows us to attract and retain qualified employees and executives in a highly
competitive marketplace and rewards our employees and executives for their
contribution to the Company during their employment. A principal component of
our post-employment executive officer compensation program is a qualified
defined contribution 401(k) plan and a retirement health plan.  Our
executive officers are eligible to participate in our company-wide 401(k)
qualified plan for employees.  The Company awards a $200 lump sum
contribution annually for participating in the plan and matches dollar for
dollar the first $300 dollars, and a 10% match
thereafter.  Participants who contribute at least $1,000 will also
receive an addition $150 lump sum deposit at the end of the
year.  Company matching contributions are 100% vested
immediately.  We also offer our employees a retirement health
plan.




Perquisites and Other Personal
Benefits.





While we
believe that perquisites should be a minor part of executive compensation, we
recognize the need to provide our executive officers with perquisites and other
personal benefits that are reasonable, competitive and consistent with the
overall compensation program in order to enable us to attract and retain
qualified employees for key positions.  Accordingly, we provide our
executive officers with leased company vehicles including maintenance and
operational cost.  The Compensation Committee periodically reviews the
perquisites provided to our executive officers.





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
transactions between us and various affiliates of Apollo and
Graham.


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The
following table sets forth a summary of the compensation paid by us to our Chief
Executive Officer, Chief Financial Officer and three other most highly
compensated executive officers (collectively, the “Named Executive Officers”)
for services rendered in all capacities to us during fiscal 2008, 2007 and
2006.





Summary
Compensation Table





Name and Principal Position
            
            Fiscal
              Year
            
            
            Salary
            
            
            Option
              Awards ($)
            
            
            Bonus (1)
            
            
            All
      Other
              Compensation
            
            
            Total ($)Ira
      G. Boots
              Chairman and Chief Executive
      Officer
            
            
            2008
              2007
              2006
            
            
            
            $893,930
              760,434
              589,031
            
            
            
            $—
              —
              704,178
            
            
            
            $599,732
              649,431
              9,840,217
            
            
            
            $—
              —
              —
            
            
            
            $1,493,662
              1,409,865
              11,133,426James
      M. Kratochvil
              Executive Vice President, Chief
      Financial Officer, Treasurer and Secretary
            
            
            2008
              2007
              2006
            
            
            
            $475,020
              406,602
              333,817
            
            
            
            $—
              —
              403,332
            
            
            
            $318,631
              349,694
              4,300,854
            
            
            
            $—
              —
              —
            
            
            
            $793,651
              756,296
              5,038,003R.
      Brent Beeler
              President and Chief Operating
      Officer
            
            
            2008
              2007
              2006
            
            
            
            $669,887
              605,119
              501,432
            
            
            
            $—
              —
              403,332
            
            
            
            $468,756
              549,519
              3,977,444
            
            
            
            $—
              —
              —
            
            
            
            $1,138,643
              1,154,638
              4,882,208Thomas
      E. Salmon
              President – Tapes &Coatings
      Division
            
            
            2008
              2007
              2006
            
            
            
            $385,889
              353,277
              82,115
            
            
            
            $—
              —
              —
            
            
            
            $262,799
              139,487
              191,000
            
            
            
            $—
              —
              —
            
            
            
            $648,688
              492,764
                273,115G.
      Adam Unfried
              President – Rigid Open Top
      Division
            
            
            2008
              2007
              2006
            
            
            
            $283,057
              259,953
              237,087
            
            
            
            $—
              —
              264,480
            
            
            
            $201,634
              249,781
              856,060
            
            
            
            $—
              —
              —
            
            
            
            $484,691
              509,734
              1,357,627


(1)  
      Amounts shown include amounts paid to Messrs. Boots, Kratochvil, Beeler
      and Unfried at the time of the Apollo Berry Merger of $9,450,000,
      $4,050,000, $3,650,000 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.  Mr.
Unfried entered into an amendment to his existing employment agreement with
Berry that extended the term of such agreement through December 31,
2011.  Mr. Salmon entered into an employment agreement with Berry that
expires April 3, 2012 (each of the agreements with Messrs. Boots, Beeler,
Kratochvil, Salmon and Unfried, as amended, an “Employment Agreement” and,
collectively, the “Employment Agreements”). The Employment Agreements provided
for fiscal 2008 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.  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, Salmon,
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. Salmon 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.





Grants
of Plan-Based Awards for Fiscal 2008





The table
below sets forth the grants to our Named Executive Officers in 2008 from the
Equity 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 AwardsThomas
      E. Salmon (1)
            1/1/08
            3,762
            $112.83
            $141,827Thomas
      E. Salmon (2)
            1/1/08
            3,762
            $112.83
            $141,827





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(1)
            Represents
      options which (i) have an exercise price fixed at $112.83 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 2008 based on continued service with the
      Company.


(2)
            Represents
      options which (i) have an exercise price fixed at $112.83 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.





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
              DateIra
      G. Boots
            19,305
            17,118
            $100
            9/20/16James
      M. Kratochvil
            11,058
            9,804
            $100
            9/20/16R.
      Brent Beeler
            11,058
            9,804
            $100
            9/20/16G.
      Adam Unfried
            7,251
            6,429
            $100
            9/20/16Thomas
      E. Salmon
            958
            1,778
            $100
            6/04/17Thomas
      E. Salmon
            752
            6,772
            $112.83
            1/01/18





Option
Exercises and Stock Vested for 2008





No
options were exercised by our named executive officers in fiscal
2008.





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.  For the fiscal year ended September 27, 2008, we
paid non-employee directors’ fees on a combined basis as shown in the following
table.





Director
Compensation Table for Fiscal 2008




Name
            Fees
      Earned
              or
      Paid in
              Cash ($)
            Option
              Awards ($)
            Total ($)Anthony
      M. Civale
            $66,000
            $—
            $66,000Patrick
      J. Dalton
            66,000
            —
            66,000Donald
      C. Graham
            62,000
            —
            62,000Steven
      C. Graham
            64,000
            —
            64,000Joshua
      J. Harris
            64,000
            —
            64,000Robert
      V. Seminara
            66,000
            —
            66,000





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





Stock
Ownership





We are a
wholly-owned subsidiary of Berry Group.  The following table sets
forth certain information regarding the beneficial ownership of the common
stock, of Berry 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
September 27, 2008.





Name and Address of
      Owner(1)
            
            Number
      of Shares of
              Common Stock(1)
            Percent
      of ClassApollo
      Investment Fund VI, L.P. (2)
            
            3,559,930
            
            49.3
            %Apollo
      Investment Fund V, L.P. (3)
            
            1,902,558
            
            26.3
            %AP
      Berry Holdings, L. P (4)
            
            1,641,269
            
            22.7
            %Graham
      Berry Holdings, LP (5)
            
            500,000
            
            6.9
            %Ira
      G. Boots (6)
            
            138,700
            
            1.9
            %R.
      Brent Beeler (6)
            
            79,068
            
            1.1
            %James
      M. Kratochvil (6)
            
            78,845
            
            1.1
            %G.
      Adam Unfried (6)
            
            19,369
            
            *Thomas
      E. Salmon (6)
            
            4,361
            
            *Anthony
      M. Civale (7),(8)
            
            3,531
            
            *Patrick
      J. Dalton (7),(8)
            
            2,000
            
            *Donald
      C. Graham (7),(9)
            
            2,000
            
            *Steven
      C. Graham (7),(9)
            
            2,000
            
            *Joshua
      J. Harris (7),(8)
            
            3,531
            
            *Robert
      V. Seminara (7),(8)
            
            3,531
            
            *All
      directors and executive officers as a group (11 persons)
            
            336,936
            
            4.7
            %


*
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.  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 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 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.


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(3)   Represents
all equity interests of Berry Group held of record by controlled affiliates of
Apollo Investment Fund V, L.P., including Apollo V Covalence Holdings, LLC and
Covalence Co-Investment Holdings, L.P.  Apollo Management V, 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 Group that may be deemed beneficially owned by Apollo Management V, L.P.,
except to the extent of any pecuniary interest therein.  Each of
Apollo Management V, L.P., Apollo V Covalence 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
V, L.P., Apollo Investment Fund V, L.P., and Apollo V Covalence Holdings, LLC is
c/o Apollo Management, L.P., 9 West 57th Street, New York, New York
10019.





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





(5)   Graham
Partners II, L.P., as the sole member of the general partner of Graham Berry
Holdings, L.P., has the voting and investment power over the shares held by
Graham Berry Holdings, L.P.  Each of Messrs. Steven Graham and Donald
Graham, who have relationships with Graham Partners II, L.P. and/or Graham Berry
Holdings L.P., disclaim beneficial ownership of any shares of Berry Group that
may be deemed beneficially owned by Graham Partners II, L.P. or Graham Berry
Holdings L.P. 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, L.P. is 3811 West Chester Pike, Building 2, Suite 200
Newton Square, Pennsylvania 19073.





(6)   The
address of Messrs. Boots, Beeler, Kratochvil, Unfried, and Salmon is c/o Berry
Plastics Corporation, 101 Oakley Street,  Evansville, Indiana
47710.  Total includes underlying options that are vested or scheduled
to vest within 60 days of December 15, 2008





(7)   Total
represents underlying options that are vested or scheduled to vest within 60
days of December 15, 2008 for each of Messrs. Civale, Dalton, Donald Graham,
Steven Graham, Harris and Seminara.





(8)   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.





(9)   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.


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Equity
Compensation Plan Information





The
following table provides information as of September 27, 2008 regarding shares
of common stock of Berry 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)
            772,957(2)
            102.38
            34,295Total
            772,957
            102.38
            34,295





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


(2)
            Does
      not include shares of Berry 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 Apollo Berry 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.




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
Group.




As of
September 27, 2008, there were outstanding options to purchase 767,609 shares of
Berry Group’s common stock and stock appreciation rights with respect to 5,348
shares of Berry Group’s common stock.







Item
13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND
DIRECTOR INDEPENDENCE





Stockholders
Agreement with Management





We make
cash payments to Berry 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 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 Group and us.





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


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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.





The
Company is charged a management fee by Apollo Management VI, L.P., an affiliate
of its principal stockholder and Graham Partners, for the provision of
management consulting and advisory services provided throughout the
year.  The management fee is the greater of $3.0 million or 1.25% of
adjusted EBITDA.  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 $2.6 million to entities affiliated with Apollo Management, L.P.
and $0.4 million to entities affiliated with Graham Partners, Inc. collectively
for fiscal 2008.





Certain
of our management, stockholders and related parties and its affiliates have
independently acquired and hold financial debt instruments of the
Company.  During fiscal 2008, interest expense includes $1.2 million
related to this debt.





Item
14. PRINCIPAL ACCOUNTING FEES AND SERVICES





Prior to
the formation of Berry through the merger of Old Berry Group and Old Covalence
Holding, Old Berry Group’s principal accounting firm was Ernst & Young, LLP
(“E&Y”) and Old Covalence Holding’s principal accounting firm was Deloitte
& Touche LLP  (“Deloitte”).  After the date of the Berry
Holding formation, the combined company filed on Form 8-K which stated that
E&Y would become the principal accounting firm of the combined
company.  The following table sets forth fees incurred by E&Y and
Deloitte to Berry, Berry Holding, Old Berry Group and Old Covalence Holding for
fiscal 2008 and 2007.





E&Y
            
            
            Deloitte
            
            
            Total2008
            
            
            2007
            
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007Audit
      fees
            
            
            (1
            )
            
            $
            2.3
            
            
            $
            2.3
            
            
            $
            0.1
            
            
            $
            0.3
            
            
            $
            2.4
            
            
            $
            2.6Audit-related
      fees
            
            
            (2
            )
            
            
            —
            
            
            
            0.7
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            0.7Tax
      fees
            
            
            (3
            )
            
            
            0.6
            
            
            
            0.5
            
            
            
            —
            
            
            
            —
            
            
            
            0.6
            
            
            
            0.5All
      other fees
            
            
            
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —$
            2.9
            
            
            $
            3.5
            
            
            $
            0.1
            
            
            $
            0.3
            
            
            $
            3.0
            
            
            $
            3.8





(1)
            Audit
      Fees.  This category includes fees and expenses billed by
      E&Y and Deloitte for the audits of the Company’s financial statements
      and for the reviews of the financial statements included in the Company’s
      Quarterly Reports on Form 10-Q. This category also includes services
      associated with SEC registration statements, periodic reports, and other
      documents issued in connection with securities
  offerings.


(2)
            Audit Related
      Fees. This category includes fees and expenses billed by E&Y
      and Deloitte for assurance and related services that are reasonably
      related to the performance of the audit or review of the Company’s
      financial statements. This category includes fees for due diligence, other
      audit-related accounting and SEC reporting services and certain agreed
      upon services.


(3)
            Tax
      Fees.  This category includes fees and expenses billed by
      E&Y and Deloitte for domestic and international tax compliance and
      planning services and tax advice.


(4)
            All Other
      Fees.  There were no other fees billed by E&Y or
      Deloitte.





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 our principal accounting firms in fiscal 2008 and
2007.  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


-53-
 back to Table of Contents


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 the principalaccounting firms in
fiscal 2008 and 2007.














PART
IV





Item
15.  EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES




Financial Statements









Financial Statement Schedules









Exhibits







-54-
 back to Table of Contents


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM





The Board
of Directors and Stockholders


Berry
Plastics Corporation




We have
audited the accompanying consolidated balance sheets of Berry Plastics
Corporation (a wholly owned subsidiary of Berry Plastics Group, Inc.) as of
September 27, 2008 and September 29, 2007, and the related consolidated
statements of operations, changes in stockholders' equity and comprehensive
income (loss), and cash flows for each of the two years in the period ended
September 27, 2008.  We also audited the combined statement of
operations, stockholders’ equity, and cash flows of Berry Plastics Corporation
for the period from February 17, 2006 to September 30, 2006. 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 did not audit the 2006 financial statements of Covalence
Specialty Materials Corp., a combined entity, which statements for the period
from February 17, 2006 to September 29, 2006, reflect net loss constituting 80%
of the related combined totals. Those statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates to
the amounts included for Covalence Specialty Materials Corp., is based solely on
the report of the other auditors.




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 audit 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 and the report of other auditors provide a reasonable
basis for our opinion.




In our
opinion, based on our audits and, for 2006, the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Berry Plastics Corporation at September
27, 2008 and September 29, 2007 and the consolidated results of its operations
and its cash flows for the two years in the period ended September 27, 2008 and
the combined results of Berry Plastics Corporation for the period from February
17, 2006 to September 30, 2006, in conformity with U.S. generally accepted
accounting principles.





As
discussed in Note 2 to the consolidated financial statements, effective
September 29, 2007 the Company adopted Statement of Financial Accounting
Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other
Post-Retirement Plans, an amendment of FASB Statements No. 87, 88, 106 and
132(R).








/s/ Ernst and Young
LLP




Indianapolis,
Indiana


December
11, 2008





F-1


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the
Directors of


Covalence
Specialty Materials Corp.


Bedminster,
New Jersey




We have
audited the consolidated statements of operations, equity and comprehensive
income (loss) and cash flows for the period February 17, 2006 through September
29, 2006 (not presented separately herein) of Covalence Specialty Materials
Corp. and subsidiaries.  We have also audited the accompanying
combined statements of operations, parent company equity and comprehensive
income (loss) and cash flows of Tyco Plastics and Adhesives (the “Predecessor
Company”) for the period October 1, 2005 through February 16,
2006.  These financial statements are the responsibility of Berry
Plastics Corporation’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.  The
Predecessor Company is not required to have, nor were we engaged to perform, an
audit of its 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
Predecessor 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, as well as evaluating the
overall financial statement presentation.  We believe that our audits
provide a reasonable basis for our opinion.




In our
opinion, such consolidated financial statements present fairly, in all material
respects, the consolidated results of operations of Covalence Specialty
Materials Corp. and subsidiaries and their cash flows for the period February
17, 2006 through September 29, 2006 in conformity with accounting principles
generally accepted in the United States of America. Also, such combined
financial statements present fairly, in all material respects, the combined
results of operations of Tyco Plastics and Adhesives and their cash flows for
the period October 1, 2005 through February 16, 2006, in conformity with
accounting principles generally accepted in the United States of
America.




Certain
expenses of the Predecessor Company represent allocations made from Tyco
International Ltd. The accompanying combined financial statements of the
Predecessor Company were prepared from the separate records maintained by the
Predecessor Company and may not necessarily be indicative of the conditions that
would have existed or the results of operations if the Predecessor Company had
been operated as an unaffiliated company.




As
discussed in Note 13 to the financial statements, the accompanying guarantor and
non-guarantor financial information has been restated.




/s/
DELOITTE & TOUCHE LLP


Parsippany,
New Jersey


December
22, 2006


(February
7, 2007 as to the effects of the restatement discussed in Note 13)


F-2





Berry Plastics Corporation


Consolidated Balance
Sheets


(In Millions of Dollars)





September
      27,
              2008
            
            
            September
      29,
              2007AssetsCurrent
      assets:Cash and cash
      equivalents
            
            $
            189.7
            
            
            $
            14.6Accounts receivable
      (less allowance for doubtful accounts of $12.1 at September 27, 2008 and
      $11.3 at September 29, 2007)
            
            
            422.5
            
            
            
            372.5Inventories:Finished
goods
            
            
            306.1
            
            
            
            227.3Raw materials and
      supplies
            
            
            194.2
            
            
            
            158.0500.3
            
            
            
            385.3Deferred income
      taxes
            
            
            35.3
            
            
            
            31.7Prepaid expenses and
      other current assets
            
            
            49.3
            
            
            
            35.7Total
      current assets
            
            
            1,197.1
            
            
            
            839.8Property,
      plant and equipment:Land
            
            
            39.1
            
            
            
            42.2Buildings and
      improvements
            
            
            165.3
            
            
            
            178.7Equipment and
      construction in progress
            
            
            978.5
            
            
            
            735.11,182.9
            
            
            
            956.0Less accumulated
      depreciation
            
            
            320.1
            
            
            
            171.0862.8
            
            
            
            785.0Intangible
      assets and other long-term assets:Deferred financing fees,
      net
            
            
            53.8
            
            
            
            38.0Goodwill
            
            
            1,449.3
            
            
            
            1,132.0Other intangibles,
      net
            
            
            1,159.1
            
            
            
            1,072.1Other long-term
      assets
            
            
            2.0
            
            
            
            2.52,664.2
            
            
            
            2,244.6Total
      assets
            
            $
            4,724.1
            
            
            $
            3,869.4


F-3


Berry Plastics
Corporation


Consolidated
Balance Sheets (continued)










September
      27,
              2008
            
            
            September
      29,
              2007Liabilities
      and stockholders' equityCurrent
      liabilities:Accounts payable
            
            $
            253.8
            
            
            $
            263.2Accrued expenses and other
      current liabilities
            
            
            206.6
            
            
            
            189.4Current portion of long-term
      debt
            
            
            21.4
            
            
            
            17.4Total
      current liabilities
            
            
            481.8
            
            
            
            470.0Long-term
      debt, less current portion
            
            
            3,578.2
            
            
            
            2,693.3Deferred
      income taxes
            
            
            212.3
            
            
            
            217.7Other
      long-term liabilities
            
            
            99.9
            
            
            
            38.4Total
      liabilities
            
            
            4,372.2
            
            
            
            3,419.4Commitments
      and contingenciesStockholders'
      equity:Parent company
      investment, net
            
            
            617.2
            
            
            
            598.1Accumulated
      deficit
            
            
            (253.0
            )
            
            
            (151.9
            )Accumulated other
      comprehensive income (loss)
            
            
            (12.3
            )
            
            
            3.8Total
      stockholders’ equity
            
            
            351.9
            
            
            
            450.0Total
      liabilities and stockholders' equity
            
            $
            4,724.1
            
            
            $
            3,869.4





See
notes to consolidated or combined financial statements.


F-4


Berry
Plastics Corporation


Consolidated
or Combined Statements of Operations


(In
Millions of Dollars)





Successor
            
            
            PredecessorYear
      ended September 27, 2008
            
            
            Year
      ended September 29, 2007
            
            
            Period
      from February 17 to September 30, 2006
            
            
            Period
      from
              October
      1, 2005 to February 16, 2006Net
      sales
            
            $
            3,513.1
            
            
            $
            3,055.0
            
            
            $
            1,138.8
            
            
            $
            666.9Cost
      of goods sold
            
            
            3,019.3
            
            
            
            2,583.4
            
            
            
            1,022.9
            
            
            
            579.0Gross
      profit
            
            
            493.8
            
            
            
            471.6
            
            
            
            115.9
            
            
            
            87.9Operating
      expenses:Selling, general and
      administrative
            
            
            340.0
            
            
            
            321.5
            
            
            
            107.6
            
            
            
            50.0Restructuring and impairment
      charges, net
            
            
            9.6
            
            
            
            39.1
            
            
            
            —
            
            
            
            0.6Other
      operating expenses
            
            
            32.8
            
            
            
            43.6
            
            
            
            0.6
            
            
            
            —Charges
      and allocations from Tyco International, Ltd. and
    affiliates
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            10.4Operating
      income
            
            
            111.4
            
            
            
            67.4
            
            
            
            7.7
            
            
            
            26.9Other
      income
            
            
            —
            
            
            
            —
            
            
            
            (1.3
            )
            
            
            —Loss
      on extinguished debt
            
            
            —
            
            
            
            37.3
            
            
            
            13.6
            
            
            
            —Interest
      expense, net
            
            
            261.7
            
            
            
            237.6
            
            
            
            46.5
            
            
            
            2.1Interest
      expense, net – Tyco International, Ltd. and affiliates
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            5.5Income
      (loss) before income taxes and minority interest
            
            
            (150.3
            )
            
            
            (207.5
            )
            
            
            (51.1
            )
            
            
            19.3Income
      tax expense (benefit)
            
            
            (49.2
            )
            
            
            (88.6
            )
            
            
            (18.1
            )
            
            
            1.6Minority
      interest
            
            
            —
            
            
            
            (2.7
            )
            
            
            (1.8
            )
            
            
            —Net
      income (loss)
            
            $
            (101.1
            )
            
            $
            (116.2
            )
            
            $
            (31.2
            )
            
            $
            17.7





See
notes to consolidated or combined financial statements.


F-5


Berry
Plastics Corporation


Consolidated
or Combined Statements of Changes in Stockholders'


Equity
and Comprehensive Income (Loss)


(In
Millions of Dollars)





Parent
              Company
      Investment, net
            
            
            Accumulated
              Other
      Comprehensive Income (loss)
            
            
            Accumulated
      Deficit
            
            
            Total
            
            
            Comprehensive
      Income (Loss)Predecessor:Balance
      at September 30, 2005
            
            $
            895.0
            
            
            $
            (39.9
            )
            
            $
            —
            
            
            $
            855.1Net
      transfers to parent
            
            
            224.2
            
            
            
            —
            
            
            
            —
            
            
            
            224.2Net
      income
            
            
            17.7
            
            
            
            —
            
            
            
            —
            
            
            
            17.7
            
            
            $
            17.7Currency
      translation
            
            
            —
            
            
            
            1.7
            
            
            
            —
            
            
            
            1.7
            
            
            
            1.7Balance
      at February 16, 2006
            
            $
            1,136.9
            
            
            $
            (38.2
            )
            
            $
            —
            
            
            $
            1,098.7
            
            
            $
            19.4Successor:Contributions
      of equity- Old Covalence
            
            $
            190.5
            
            
            $
            —
            
            
            $
            —
            
            
            $
            190.5Contributions
      of equity-Old Berry
            
            
            356.0
            
            
            
            —
            
            
            
            —
            
            
            
            356.0Stock
      compensation expense
            
            
            0.3
            
            
            
            —
            
            
            
            —
            
            
            
            0.3Adjustment
      for negative minority interest
            
            
            (106.2
            )
            
            
            —
            
            
            
            —
            
            
            
            (106.2
            )Net
      loss
            
            
            —
            
            
            
            —
            
            
            
            (31.2
            )
            
            
            (31.2
            )
            
            $
            (31.2
            )Currency
      translation
            
            
            —
            
            
            
            0.2
            
            
            
            —
            
            
            
            0.2
            
            
            
            0.2Balance
      at September 30, 2006
            
            
            440.6
            
            
            
            0.2
            
            
            
            (31.2
            )
            
            
            409.6
            
            
            $
            (31.0
            )Stock
      compensation expense
            
            
            19.6
            
            
            
            —
            
            
            
            —
            
            
            
            19.6Net
      transfers to parent
            
            
            (102.5
            )
            
            
            —
            
            
            
            —
            
            
            
            (102.5
            )Minority
      interest acquisition
            
            
            240.4
            
            
            
            0.2
            
            
            
            (4.5
            )
            
            
            236.1Net
      loss
            
            
            —
            
            
            
            —
            
            
            
            (116.2
            )
            
            
            (116.2
            )
            
            $
            (116.2
            )Currency
      translation
            
            
            —
            
            
            
            3.7
            
            
            
            —
            
            
            
            3.7
            
            
            
            3.7Interest
      rate hedges, net of tax
            
            
            —
            
            
            
            (3.0
            )
            
            
            —
            
            
            
            (3.0
            )
            
            
            (3.0
            )Adoption
      of SFAS No. 158, net of tax
            
            
            —
            
            
            
            2.7
            
            
            
            —
            
            
            
            2.7
            
            
            
            —Balance
      at September 29, 2007
            
            
            598.1
            
            
            
            3.8
            
            
            
            (151.9
            )
            
            
            450.0
            
            
            $
            (115.5
            )Stock
      compensation expense
            
            
            19.6
            
            
            
            —
            
            
            
            —
            
            
            
            19.6Net
      transfers to parent
            
            
            (0.5
            )
            
            
            —
            
            
            
            —
            
            
            
            (0.5
            )Net
      loss
            
            
            —
            
            
            
            —
            
            
            
            (101.1
            )
            
            
            (101.1
            )
            
            $
            (101.1
            )Currency
      translation
            
            
            —
            
            
            
            (4.7
            )
            
            
            —
            
            
            
            (4.7
            )
            
            
            (4.7
            )Interest
      rate hedges, net of tax
            
            
            —
            
            
            
            (5.0
            )
            
            
            —
            
            
            
            (5.0
            )
            
            
            (5.0
            )Minimum
      pension liability, net of tax
            
            
            —
            
            
            
            (6.4
            )
            
            
            —
            
            
            
            (6.4
            )
            
            
            (6.4
            )Balance
      at September 27, 2008
            
            $
            617.2
            
            
            $
            (12.3
            )
            
            $
            (253.0
            )
            
            $
            351.9
            
            
            $
            (117.2
            )





See
notes to consolidated or combined financial statements.


F-6


Berry
Plastics Corporation


Consolidated
or Combined Statements of Cash Flows


(In
Millions of Dollars)





Successor
            
            
            PredecessorYear
      ended September 27, 2008
            
            
            Year
      ended September 29, 2007
            
            
            Period
      from February 17 to September 30, 2006
            
            
            Period
      from October 1, 2005 to February 16, 2006Cash
      Flows from Operating Activities:Net
      income (loss)
            
            $
            (101.1
            )
            
            $
            (116.2
            )
            
            $
            (31.2
            )
            
            $
            17.7Adjustments
      to reconcile net cash from operating activities:Depreciation and
      amortization
            
            
            256.8
            
            
            
            220.2
            
            
            
            54.6
            
            
            
            15.6Non-cash interest
      expense
            
            
            24.6
            
            
            
            7.3
            
            
            
            2.2
            
            
            
            —Write-off of deferred financing
      fees
            
            
            —
            
            
            
            35.5
            
            
            
            13.6
            
            
            
            —Non-cash
      restructuring
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            0.3Stock compensation
      expense
            
            
            19.6
            
            
            
            19.6
            
            
            
            0.3
            
            
            
            —Deferred income taxes
      (benefit)
            
            
            (49.2
            )
            
            
            (90.4
            )
            
            
            (20.7
            )
            
            
            1.2Loss (gain) on disposal and
      impairment of fixed assets
            
            
            —
            
            
            
            18.1
            
            
            
            —
            
            
            
            (3.0
            )Minority interest
            
            
            —
            
            
            
            (2.7
            )
            
            
            (1.8
            )
            
            
            —Changes in operating assets and
      liabilities:Accounts
      receivable, net
            
            
            (15.4
            )
            
            
            2.9
            
            
            
            (26.1
            )
            
            
            20.5Inventories
            
            
            (75.2
            )
            
            
            17.6
            
            
            
            27.5
            
            
            
            (94.3
            )Prepaid
      expenses and other assets
            
            
            (11.2
            )
            
            
            3.8
            
            
            
            8.0
            
            
            
            (11.0
            )Due
      to Tyco International, Ltd and affiliates
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (106.7
            )Accounts
      payable and other current liabilities
            
            
            (39.1
            )
            
            
            21.6
            
            
            
            70.3
            
            
            
            40.5Net cash provided by (used for) operating activities
            
            
            (9.8
            )
            
            
            137.3
            
            
            
            96.7
            
            
            
            (119.2
            )Cash
      Flows from Investing Activities:Purchase
      of property, plant and equipment
            
            
            (162.4
            )
            
            
            (99.3
            )
            
            
            (34.8
            )
            
            
            (12.2
            )Proceeds
      from disposal of assets
            
            
            83.0
            
            
            
            10.8
            
            
            
            0.8
            
            
            
            3.1Acquisitions
      of business, net of cash acquired
            
            
            (576.2
            )
            
            
            (75.8
            )
            
            
            (3,218.0
            )
            
            
            —Net
      cash used for investing activities
            
            
            (655.6
            )
            
            
            (164.3
            )
            
            
            (3,252.0
            )
            
            
            (9.1
            )Cash
      Flows from Financing Activities:Proceeds
      from long-term borrowings
            
            
            1,388.5
            
            
            
            1,233.0
            
            
            
            2,653.4
            
            
            
            —Equity
      contributions (distributions), net
            
            
            (0.5
            )
            
            
            (102.5
            )
            
            
            680.8
            
            
            
            —Repayment
      of long-term debt
            
            
            (543.0
            )
            
            
            (1,161.2
            )
            
            
            (50.7
            )
            
            
            (79.4
            )Debt
      financing costs
            
            
            (26.4
            )
            
            
            (9.7
            )
            
            
            (71.0
            )
            
            
            —Change
      in book overdraft
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (14.2
            )Change
      in Predecessor parent company investment
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            224.2Sales
      of interest rate hedges
            
            
            2.4
            
            
            
            —
            
            
            
            —
            
            
            
            —Net
      cash provided by (used for) financing activities
            
            
            821.0
            
            
            
            (40.4
            )
            
            
            3,212.5
            
            
            
            130.6Effect
      of currency translation on cash
            
            
            (0.1
            )
            
            
            (1.1
            )
            
            
            (1.1
            )
            
            
            (0.2
            )Net
      increase (decrease) in cash and cash equivalents
            
            
            175.1
            
            
            
            (68.5
            )
            
            
            56.1
            
            
            
            2.1Cash
      and cash equivalents at beginning of period
            
            
            14.6
            
            
            
            83.1
            
            
            
            27.0
            
            
            
            2.7Cash
      and cash equivalents at end of period
            
            $
            189.7
            
            
            $
            14.6
            
            
            $
            83.1
            
            
            $
            4.8





See
notes to consolidated or combined financial statements.


F-7


Berry
Plastics Corporation


Notes
to Consolidated or Combined Financial Statements


(In
millions of dollars, except as otherwise noted)





1.  Basis
of Presentation and Summary of Significant Accounting Policies





Background





Berry
Plastics Corporation is a one of the world’s leading manufacturer and marketers
of plastic packaging products, plastic film products, specialty adhesives and
coated products.  The Company’s key principal products include
containers, drink cups, bottles, closures and overcaps, tubes, prescription
containers, trash bags, stretch films, plastic sheeting and tapes 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, agricultural, horticultural, institutional,
industrial, construction, aerospace and automotive.  At September 27,
2008, the Company had 68 production and manufacturing facilities, with 60
located in the United States.





On
February 16, 2006, Apollo Management, L. P. (“Apollo”), an investment management
firm, through its affiliate Apollo Management V., L. P., acquired substantially
all of the assets and liabilities of Tyco Plastics & Adhesives (“TP&A”)
under a Stock and Asset Purchase Agreement dated December 20, 2005 among
Covalence Specialty Materials Holding Corp. (“Old Covalence Holding”), Tyco
International S.A., and Tyco Group S.ar.l.  These assets and
liabilities were acquired by Old Covalence Holding’s wholly owned subsidiary
Covalence Specialty Materials Corp. (“Old Covalence”) and its
affiliates.   Old Covalence recorded the assets and liabilities using
the purchase method of accounting.





On
September 20, 2006, Berry Plastics Group, Inc.’s (an affiliate of Apollo and
investee of Apollo Investment Fund VI, L. P.) (“Old Berry Group”) wholly owned
subsidiary BPC Acquisition Corp. merged with and into BPC Holding Corporation
pursuant to an agreement and plan of merger (the “Apollo Berry Merger”), dated
June 28, 2006, with BPC Holding Corporation continuing as the surviving
corporation.  Following the consummation of the Apollo Berry Merger,
BPC Holding Corporation changed its name to Berry Plastics Holding Corporation
(“Old Berry Holding”).  Pursuant to the Apollo Berry Merger, Old Berry
Holding was a wholly owned subsidiary of Old Berry Group, the principal
stockholders of which were Apollo Investment Fund VI, L.P., AP Berry Holdings,
LLC, Graham Berry Holdings, L.P. and management.  Apollo Investment
Fund VI, L.P. and AP Berry Holdings, LLC are affiliates of
Apollo.  Graham Berry Holdings, L.P. is an affiliate of Graham
Partners, Inc. (“Graham”), a private equity firm.  The Apollo Berry
Merger was accounted for using the purchase method of accounting.





On April
3, 2007, Old Covalence Holding merged with Old Berry Group (the
“Merger”).  Old Covalence Holding was the surviving corporation and
changed its name to Berry Plastics Group, Inc. (“Berry Group”).  As a
result of the Merger, Old Berry Holding and Old Covalence were combined as a
direct subsidiary of Berry Group and retained the name Berry Plastics Holding
Corporation.





In
connection with the closing of the Merger, Berry Plastics Holding Corporation
adopted the fiscal year-end of the accounting acquirer, Old
Covalence.  The Company, therefore,   adopted a
September year-end and commencing with periodic reports after the consummation
of the Merger on April 3, 2007, began filing its periodic reports on a combined
basis.





In
December 2007, Berry Plastics Holding Corporation completed an internal entity
restructuring.  Pursuant to this restructuring, effective December 28,
2007, Berry Plastics Corporation converted to Berry Plastics, LLC and then
merged with and into Berry Plastics Holding Corporation.  In addition,
Berry Plastics Holding Corporation changed its name to Berry Plastics
Corporation (“Berry” or the “Company”).





Basis
of Presentation




Prior to
the Merger, Old Berry Holding and Old Covalence were considered entities under
the common control of Apollo affiliates as defined in Emerging Issues Task Force
(“EITF”) Issue No. 02-5, Definition of Common Control in Relation to FASB
SFAS No. 141, Business Combinations.  As a result of the Merger,
the financial statements of these entities are being presented retroactively on
a combined basis through the date of the Merger in a manner similar to a pooling
of


F-8




interests,
and include the results of operations of each business from the date of
acquisition by the Apollo affiliates.  The accompanying financial
statements for Tyco Plastics & Adhesives (“Predecessor”) are presented on a
combined basis and consist of the combined operations of the formerly
wholly-owned operating units of Tyco:  Tyco Plastics, Tyco Adhesives
and Ludlow Coated Products.  The Predecessor financial statements
presented may not be indicative of the results that would have been achieved had
the Predecessor operated as a separate, stand-alone entity.





The
acquisitions by affiliates of Apollo of Old Covalence Holding and Old Berry
Group have both been accounted for by the purchase method of
accounting.  All intercompany transactions have been
eliminated.





Parent
Company Investment, net in the combined company includes the capital stock
(common stock and perpetual preferred stock) that was invested in Old Berry
Group and Old Covalence Holding by Apollo.  All other capital stock
contributed by the minority shareholders is reflected in minority interest, to
the extent that it was a positive equity balance up until the date of the Merger
at which time the shareholders exchanged shares of Old Berry Group and Old
Covalence Holding for shares in Berry Group.  The Company has recorded
a minority interest liability for the equity interests in the combined company
that are not owned by funds affiliated and controlled by Apollo up until the
date of the Merger on April 3, 2007.  At September 30, 2006, the
minority interest liability reflects the equity interests in Berry Group held by
management and other third parties.  In connection with the
acquisition of Old Berry Group by Apollo on September 20, 2006, management
elected to rollover shares that were owned prior to the acquisition by Apollo
into the new Company and accordingly, there was no step up applied under
purchase accounting for management’s ownership in accordance with EITF 88-16,
Basis in Leveraged Buyout Transactions.  The application of EITF 88-16
produced a negative equity balance relevant to management’s
investment.  Since that negative balance is not recoverable from the
management shareholders, this amount has been reflected as a reduction of
Apollo’s equity in Old Berry Holding at September 30, 2006.  All
losses that are allocable to management are being absorbed by Apollo due to the
negative equity of Old Berry Holding’s management.  In connection with
the closing of the Merger on April 3, 2007, the minority ownership interests
were acquired.





On April
3, 2007, in connection with the merger of Berry and Covalence, shares of Berry
Plastics Group, Inc., the former parent of Berry Plastics Holding Corporation,
and Covalence Specialty Materials Holding Corporation held by minority
shareholders and management were exchanged for shares in the new merged
company.  The minority shareholders and management held ownership
interests of 28% and 5% for Berry and Covalence, respectively.  The
acquisition of these ownership interests occurred on April 3, 2007 in connection
with the closing of the transaction and was accounted for under the purchase
method of accounting and pushed-down to the Company.





Berry,
through its wholly-owned subsidiaries operates in four primary
segments:  rigid open top, rigid closed top, flexible films, and tapes
and coatings.  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.





The
Company has recorded expense in our financial statements of $19.6 million, $19.6
million and $0.3 million for the year ended September 27, 2008, year ended
September 29, 2007 and for the period from February 16, 2006 to September 30,
2006, respectively, related to stock compensation of Berry Group, management
fees of $6.0 million, $5.9 million and $3.3 million for the year ended September
27, 2008, year ended September 29, 2007 and for the period from February 16,
2006 to September 30, 2006, respectively, charged by Apollo and other investors
to Berry Group and recorded income taxes to push down the respective amounts
that relate to the consolidated or combined operations of the
Company.





Consolidation





The
consolidated and combined financial statements include the accounts of Berry
Plastics Corporation and its subsidiaries, all of which are wholly owned.
Intercompany accounts and transactions have been eliminated in
consolidation.





Revenue
Recognition





Revenue
from the sales of products is recognized at the time title and risks and rewards
of ownership pass to the customer (either when the products reach the
free-on-board shipping point or destination depending on the contractual terms),
there is persuasive evidence of an arrangement, the sales price is fixed and
determinable and collection is


F-9


reasonably
assured.  Provisions for certain rebates, sales incentives, trade
promotions, coupons, product returns and discounts to customers are accounted
for as reductions in gross sales to arrive at net sales in the same period that
the related sales are recorded.  In accordance with EITF 01-9,
“Accounting for Consideration Given By a Vendor to a Customer”, the Company
provides for these items as reductions of revenue at the later of the date of
the sale or the date the incentive is offered.  These provisions are
based on estimates derived from current program requirements and historical
experience.





Shipping,
handling, purchasing, receiving, inspecting, warehousing, and other costs of
distribution are presented in cost of sales in the statements of
operations.  The Company classifies amounts charged to its customers
for shipping and handling in net sales in its statement of
operations.





Vendor
Rebates, Purchases of Raw Materials and Concentration of Risk





The
Company receives consideration in the form of rebates from certain vendors and
in accordance with EITF 02-16, “Accounting by a Customer (Including a Reseller)
for Certain Consideration Received from a Vendor”, the Company accrues these as
a reduction of inventory cost as earned under existing programs, and reflects as
a reduction of cost of goods sold at the time that the related underlying
inventory is sold to customers.





Purchases
of various densities of plastic resin used in the manufacture of the Company’s
products aggregated approximately $1,419.9 million, $977.7 million, $400.7
million and $271.6 million for the fiscal year ended September 27, 2008, year
ended September 29, 2007, for the period from February 17, 2006 to September 30,
2006 and the period from October 1, 2005 to February 16, 2006.  The
largest supplier of the Company’s total resin material requirements represented
approximately 33% of purchases in fiscal 2008.  The Company uses
suppliers such as Chevron, DAK Americas,
Dow, Dupont, Eastman Chemical, Exxon Mobil, Flint Hills Resources, Georgia Gulf,
Lyondell/Bassell, Nova, PolyOne Corp., Sunoco, Total, and Westlaketo
meet its resin requirements.





Research
and Development





Research
and development costs are expensed when incurred.  The Company
incurred research and development expenditures of $13.9 million for fiscal 2008,
$11.2 million for fiscal 2007, $5.0 million for the period February 17 to
September 30, 2006, and $3.1 million for the period October 1, 2005 to February
16, 2006.





Advertising





Advertising
costs are expensed when incurred and are included in operating
expenses.  The Company incurred advertising costs of $0.7 million in
fiscal 2008, $1.1 million in fiscal 2007, $2.5 million for the period February
17 to September 30, 2006, and $1.1 million for the period October 1, 2005 to
February 16, 2006.





Stock-Based
Compensation





SFAS No.
123 (Revised 2004), Share-Based Payment (“SFAS 123R”), 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.  As of September 27, 2008, the
Company has one share-based compensation plan (“2006 Equity Incentive Plan”)
which is more fully described in Note 10.  Under the plan, members of
management were granted stock options upon the initial acquisitions of Old Berry
and Old Covalence.  In connection with the Merger, prior to the
granting of the special one-time dividend discussed in Note 11, the Company
amended the terms of the plan to allow both vested and nonvested option holders
to receive the dividend either immediately (in the case of vested holders) or
after a two-year vesting period (in the case of nonvested
holders).  In connection with this amendment and the special one-time
dividend granted to option holders, the Company recognized stock compensation
expense of $17.9 million during the year ended September 27, 2008.  An
additional $1.2 million was recognized as stock compensation expense related to
earnings on the escrowed funds held in a rabbi trust for the benefit of
nonvested option holders who were granted the special one-time dividend. 
The Company has continued to make stock option grants under the 2006 Equity
Incentive Plan subsequent to the special one-time dividend.  In addition,
the Company recognized $0.5 million in stock compensation expense primarily
related to stock option awards granted after the amendment and special one-time
dividend resulting in total stock compensation expense of $19.6 million for the
year ended September 27, 2008.  The Company recorded $19.6


F-10


million
in stock compensation expense for the year ended September 29,
2007.  In December 2008, the Executive Committee modified the vesting
provisions related to the dividend on the non-vested options by eliminating any
future service requirements and approving the payment of the remaining unpaid
dividend.





The
Predecessor had granted options to purchase Tyco common shares to certain of the
TP&A’s employees. Following the formation of Old Covalence, the expense and
liability related to these stock options have remained with Tyco. Effective
October 1, 2005, the TP&A adopted SFAS No. 123R using the modified
prospective application transition method. Under this method, compensation cost
is recognized for the unvested portion of share-based payments granted prior to
October 1, 2005 and all share-based payments granted subsequent to September 30,
2005 over the related vesting period. Prior to the first fiscal quarter of 2006,
the TP&A applied the intrinsic value based method prescribed in Accounting
Principles Board Opinion No. 25 in accounting for employee stock based
compensation. Prior period results have not been restated. Due to the adoption
of SFAS No. 123R, the results from October 1, 2005 to February 16, 2006 include
incremental share-based compensation expense totaling $1.7 million.





The
Company and Predecessor utilized a combination of the Black-Scholes and
lattice-based option valuation models 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 and
Black-Scholes models 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.  The 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 lives of the grants are derived from historical experience and expected
behavior.  The fair value for options granted have been estimated at
the date of grant using a Black-Scholes, generally with the following weighted
average assumptions:





Company
            
            
            PredecessorYear
      ended
              September
      27,2008
            
            
            Year
      ended
              September
      29,2007
            
            
            Period
      from February 17 to September 30, 2006
            
            
            Period
      from October 1, 2005 to February 16, 2006Risk-free
      interest rate
            
            2.7-4.2%
            
            
            
            4.5
      – 4.9%
            
            
            
            4.5
      – 4.9%
            
            
            
            4.5
      – 4.9%Dividend
      yield
            
            0.0%
            
            
            
            0.0%
            
            
            
            0.0%
            
            
            
            0.0%Volatility
      factor
            
            .31
      - .34
            
            
            
            .20
      - .45
            
            
            
            .45
            
            
            
            .45Expected
      option life
            
            5
      years
            
            
            3.73
      – 6.86 years
            
            
            3.73
      – 6.86 years
            
            
            3.73
      – 6.86 years





Foreign
Currency





For the
non-U.S. subsidiaries that account in a functional currency other than U.S.
Dollars, assets and liabilities are translated into U.S. Dollars using
period-end exchange rates.  Sales and expenses are translated at the
average exchange rates in effect during the period.  Foreign currency
translation gains and losses are included as a component of accumulated other
comprehensive income (loss) within stockholders’ equity.  Gains and
losses resulting from foreign currency transactions, the amounts of which are
not material in any period presented are included in net income.





Cash
and Cash Equivalents





All
highly liquid investments purchased with a maturity of three months or less from
the time of purchase are considered to be cash equivalents.


F-11


Allowance
for Doubtful Accounts





The
Company’s accounts receivable and related allowance for doubtful accounts are
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 for the years ended September 27, 2008 and September 29,
2007 for the allowance for doubtful accounts, excluding the activity related to
cash discounts due to its volume.




September
      27, 2008
              
              
              September
      29, 2007
              
              
              Period
      from February 17 to September 30, 2006Balance
      at beginning of period
              
              $
              11.3
              
              
              $
              9.6
              (1)
              
              $
              10.1Acquired
      allowance (Captive and Mac)
              
              
              1.0
              
              
              
              —
              
              
              
              —Charged
      to costs and expenses
              
              
              0.3
              
              
              
              0.1
              
              
              
              (0.2
              )Deductions
      and currency translation
              
              
              (0.5
              )
              
              
              1.6
              
              
              
              (0.3
              )Balance
      at end of period
              
              $
              12.1
              
              
              $
              11.3
              
              
              $
              9.6




(1) Fair
value of allowance for doubtful accounts from acquisition date





Inventories





Inventories
are stated at the lower of cost or market and are valued using the first-in,
first-out method.  Management periodically reviews inventory balances,
using recent and future expected sales to identify slow-moving and/or obsolete
items. The cost of spare parts inventory is charged to manufacturing overhead
expense when incurred.





Property,
Plant 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
term.  Repairs and maintenance costs are charged to expense as
incurred.  Depreciation expense totaled $164.1 million, $142.6
million, $31.9 million and $14.6 million for year ended September 27, 2008, year
ended September 29, 2007, period from February 17, 2006 to September 30, 2006
and period from October 1, 2005 to February 16, 2006,
respectively.  The Company capitalized interest of $2.3 million and
$1.5 million in the fiscal year ended September 27, 2008 and September 29, 2007,
respectively.  Interest capitalization in the other periods presented
was not material.





Long-lived
Assets





Long-lived
assets, including property, plant and equipment and definite lived intangible
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.  The
Company did not record any impairment charges for the year ended September 27,
2008.  In connection with our facility rationalization program in our
flex films and tapes and coatings segments, we recorded impairment charges
totaling $18.1 million to write-down fixed assets to their net realizable
valuables for the year ended September 29, 2007.


F-12


Goodwill





The
Company follows the principles of SFAS 142, Goodwill and Other Intangible
Assets. Goodwill is not amortized but rather tested annually for
impairment. The Company performs their annual impairment test on the first day
of the fourth quarter in each respective fiscal year.  The Company’s
annual impairment test did not result in any impairment charges being
recognized. The Company’s five reporting units are contained within our four
operating segments, rigid open top, rigid closed top, flexible films and tapes
and coatings under SFAS 131, Disclosures about Segments of an
Enterprise and Related Information. Based on the fact that each reporting
unit constitutes a business, has discrete financial information with similar
economic characteristics, and the operating results of the component are
regularly reviewed by management, the Company applies the provisions of SFAS 142
and performs the necessary goodwill impairment tests at the reporting unit
level.





The
changes in the carrying amount of goodwill by reportable segment for the year
ended September 27, 2008, are as follows (in millions):





Rigid
            
            
            Rigid
            
            
            Flexible
            
            
            Tapes
      andOpen
      Top
            
            
            Closed
      Top
            
            
            Films
            
            
            Coatings
            
            
            TotalBalance
      at September 29, 2007
            
            $
            646.3
            
            
            $
            456.2
            
            
            $
            23.7
            
            
            $
            5.8
            
            
            $
            1,132.0Goodwill
      from acquisitions
            
            
            —
            
            
            
            317.7
            
            
            
            (0.4
            )
            
            
            —
            
            
            
            317.3Balance
      at September 27, 2008
            
            $
            646.3
            
            
            $
            773.9
            
            
            $
            23.3
            
            
            $
            5.8
            
            
            $
            1,449.3





Deferred
Financing Fees





Deferred
financing fees are being amortized to interest expense using the effective
interest method over the lives of the respective debt agreements.





Intangible
Assets





Customer
relationships are being amortized using an accelerated amortization method which
corresponds with the customer attrition rates used in the initial valuation of
the intangibles over the estimated life of the relationships which range from 11
to 20 years.  Technology intangibles are being amortized using the
straight-line method over the estimated life of the technology which is 11
years.  License intangibles are being amortized using the
straight-line method over the life of the license which is 10
years.  Patent intangibles are being amortized using the straight-line
method over the shorter of the estimated life of the technology or the patent
expiration date ranging from ten to twenty years, with a weighted-average life
of 15 years.  The Company evaluates the remaining useful life of
intangible assets on a periodic basis to determine whether events and
circumstances warrant a revision to the remaining useful
life.  Trademarks that are expected to remain in use, which are
indefinite lived intangible assets, are reviewed for impairment annually
pursuant to SFAS No. 142.





Financial
Instruments and Derivative Financial Instruments





The
Company’s financial instruments consist primarily of cash and cash equivalents,
accounts receivable, accounts payable, long-term debt, interest rate swap
agreements and capital lease obligations.  The fair value of such
instruments approximated book value at September 27, 2008 except for our
carrying amounts for the Company’s term loan, Senior Secured First Priority
Notes, Fixed Rate Notes, Floating Rate Notes, 11% Senior Subordinated Notes and
10 1⁄4% Senior Subordinated Notes for which the carrying value exceeded the fair
value by $201.6 million, $68.1 million, $115.5 million, $69.8 million, $119.1
million and $84.8 million, respectively.  The fair value of such
instruments approximated book value at September 29, 2007 except our carrying
amounts for our 8 7/8% Fixed Rate Notes for which the fair value exceeded the
carrying value by $16.9 million and the Company’s 11% Senior Subordinated Notes
and 10 1/4% Senior Subordinated Notes for which the carrying value exceeded the
fair value by $4.3 million and $5.3 million, respectively.





Under the
provisions of SFAS No. 133, as amended and interpreted (“SFAS
No. 133”), the Company recognizes at fair value all derivatives, whether
designated as hedging relationships or not, in the balance sheet as either an
asset or liability.


F-13





SFAS
No. 133 defines requirements for designation and documentation of hedging
relationships, as well as on-going effectiveness assessments, in order to use
hedge accounting under this standard. The Company formally documents all
relationships between hedging instruments and hedged items, as well as its
risk-management objective and strategy for undertaking various hedge
transactions. This process includes relating all derivatives that are designated
as fair value or cash flow hedges to specific assets and liabilities on the
balance sheet or to specific firm commitments or forecasted transactions. The
Company’s derivative activities, all of which are for purposes other than
trading, are initiated within the guidelines of corporate risk-management
policies. The Company formally assesses both at inception and at least quarterly
thereafter, whether the derivatives that are used in hedging transactions are
highly effective in offsetting changes in either the fair value or cash flows of
the hedged item. If a derivative ceases to be a highly effective hedge, the
Company discontinues hedge accounting.





Insurable
Liabilities





The
Company records liabilities for the self-insured portion of workers’
compensation, health, product, general and auto liabilities.  The
determination of these liabilities and related expenses is dependent on claims
experience.  For most of these liabilities, claims incurred but not
yet reported are estimated by utilizing actuarial valuations based upon
historical claims experience.





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 period in which the underlying transactions are
recorded.  Deferred taxes, with the exception of non-deductible
goodwill, 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.  The Company recognizes uncertain tax
positions when it is more likely than not that the tax position will be
sustained upon examination by relevant taxing authorities, based on the
technical merits of the position. The amount recognized is measured as the
largest amount of benefit that is greater than 50 percent likely of being
realized upon ultimate settlement.  The Company’s effective tax rate
is dependent on many factors including:  the impact of enacted tax
laws in jurisdictions in which the Company operates; the amount of earnings by
jurisdiction, due to varying tax rates in each country; and the Company’s
ability to utilize foreign tax credits related to foreign taxes paid on foreign
earnings that will be remitted to the U.S.





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 resulting from currency translations of foreign investments,
changes in the value of our derivative instruments and adjustments to record the
minimum pension liability.





Accrued
Rebates





The
Company offers various rebates to customers in exchange for
purchases.  These rebate programs are individually negotiated with
customers and contain a variety of different terms and
conditions.  Certain rebates are calculated as flat percentages of
purchases, while others included tiered volume incentives.  These
rebates may be payable monthly, quarterly, or annually.  The
calculation of the accrued rebate balance involves significant management
estimates, especially where the terms of the rebate involve tiered volume levels
that require estimates of expected annual sales.  These provisions are
based on estimates derived from current program requirements and historical
experience.  The Company uses all available information when
calculating these reserves.  The accrual for customer rebates was
$51.5 million and $40.9 million as of September 27, 2008 and September 29, 2007,
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.  F-14





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
8, the Company adopted SFAS No. 158 effective September 29, 2007.





Use
of Estimates





The
preparation of the financial statements in conformity with U.S. generally
accepted accounting principles requires management to make extensive use of
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities and the reported
amounts of sales and expenses.  Significant estimates in these
financial statements include restructuring charges and credits, allowances for
doubtful accounts receivable, estimates of future cash flows associated with
long-lived assets, useful lives for depreciation and amortization, loss
contingencies and net realizable value of inventories, revenue credits, vendor
rebates, income taxes and tax valuation reserves and the determination of
discount and other rate assumptions for pension and postretirement employee
benefit expenses.  Actual results could differ materially from these
estimates.  Changes in estimates are recorded in results of operations
in the period that the event or circumstances giving rise to such changes
occur.





Recently
Issued Accounting Pronouncements




In
July 2006, the FASB issued FASB Interpretation No. (FIN) 48, Accounting for Uncertainty in Income
Taxes—an interpretation of FASB Statement No. 109, which clarifies
the accounting for uncertainty in tax positions. This Interpretation requires
the recognition of a tax position when it is more likely than not that the tax
position will be sustained upon examination by relevant taxing authorities,
based on the technical merits of the position. The Company adopted the
provisions of FIN 48 effective September 30, 2007. The adoption of this
statement did not have a material impact on the Company’s results of operations
or financial position.


In
September 2006, the FASB issued FASB No. 157, “Fair Value
Measurements” (“SFAS 157”).  SFAS 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. SFAS 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 SFAS 157
are effective for the Company’s fiscal year beginning October 1,
2008.  The Company does not expect the adoption of SFAS 157 to have a
material impact on its results of operations and financial
position.





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities”, which includes an amendment of FASB
Statement No. 51.  This statement permits entities to choose to
measure many financial instruments and certain other items at fair
value.  This statement allows entities to report unrealized gains and
losses at fair value for those selected items.  This statement is
effective for financial statements issued for fiscal years beginning after
November 15, 2007.  The Company is currently assessing the impact of
the statement.





In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations.”  This statement replaces FASB Statement No. 141,
“Business Combinations.” This statement retains the fundamental requirements in
SFAS 141 that the acquisition method of accounting (which SFAS 141 called
the purchase method) be used for all business combinations and for an acquirer
to be identified for each business combination. This statement defines the
acquirer as the entity that obtains control of one or more businesses in the
business combination and establishes the acquisition date as the date that the
acquirer achieves control. This statement requires an acquirer to recognize the
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date, measured at their fair values as of that date,
with limited exceptions specified in the statement.  This statement
applies prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008. The Company is currently assessing the impact of the
statement.





F-15


In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”, which is an amendment of Accounting Research
Bulletin (“ARB”) No. 51.  This statement clarifies that a
noncontrolling





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities”, which is an amendment of FASB Statement No.
133.  This statement requires enhanced disclosures about an entity’s
derivative and hedging activities and thereby improves the transparency of
financial reporting.  This statement is effective for the fiscal
years, and interim periods within those fiscal years, beginning on or after
November 15, 2008.  Based on current conditions, we do not expect the
adoption of SFAS 161 to have a significant impact on the Company’s results of
operations or financial position.





2.
Acquisitions and Disposition





Old Covalence Holding
(Successor to Tyco Plastics & Adhesives)





On
February 16, 2006, substantially all of the assets and liabilities of TP&A
were acquired by Old Covalence, under a Stock and Asset Purchase Agreement dated
December 20, 2005 and entered into among Old Covalence Holding, an affiliate of
Apollo Management V,
L.P (“Apollo V”)and the
direct parent of Old Covalence, Tyco International S.A. and Tyco Group
S.a.r.l.  Under the agreement, Old Covalence acquired Tyco’s
businesses through the acquisition of certain equity interests of, and certain
assets and liabilities held by direct and indirect operating subsidiaries of,
Tyco International Ltd. (“Tyco”).  The initial purchase price was
$975.2 million, subject to working capital adjustments and was funded with a new
$350.0 million term loan, $175.0 million of Second Priority Floating Rate Notes,
$265.0 million of 10 1⁄4% Senior Subordinated Notes and an equity contribution of
$197.5 million.  The Company performed an evaluation of the fair
values of the real and personal property, inventory and certain identifiable
intangible assets in connection with the purchase price allocation.  A
valuation study was undertaken, which supports the purchase price
allocation.  The valuation study resulted in a fair value step-up to
real and personal property, inventory and certain identifiable intangible
assets.  The Company recognized $6.8 million as a charge to cost of
sales relating to the sale of inventory that was stepped-up to fair value for
this acquisition.  The Company recorded a purchase price of $916.1
million, which includes $975.2 million of original purchase price partially
offset by favorable working capital adjustments from Tyco of $63.6 million and
$25.5 million and an unfavorable post-closing working capital adjustment of
$30.0 million that was paid to Tyco.  The excess of the fair value of
the net assets acquired over the purchase price paid has been allocated to non
current assets on a prorated basis.  Old Covalence incurred a $3.7
million charge in the period from February 17, 2006 to September 30, 2006
related to a loss on extinguished debt for bridge financing fees arranged to
fund the acquisition that was not utilized.  The following table
summarizes the allocation of fair values of the Company’s assets acquired and
liabilities assumed at the date of acquisition.


F-16






Allocation
      of
              Purchase
      Price at
              February
      16, 2006Current
      assets
            
            $
            429.0Property,
      plant and equipment
            
            
            359.8Goodwill
            
            
            14.0Intangible
      assets
            
            
            346.6Deferred
      financing fees and other non-current assets
            
            
            24.1Assets
      acquired
            
            
            1,173.5Current
      liabilities
            
            
            183.7Non
      current liabilities
            
            
            73.7Liabilities
      assumed
            
            
            257.4Net
      assets acquired
            
            $
            916.1





Acquisition
of Old Berry Holding





On
September 20, 2006, BPC Acquisition Corp. merged with and into BPC Holding
Corporation pursuant to the Apollo Berry 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, Berry is a wholly-owned
subsidiary of Group, the principal stockholders of which were Apollo VI, 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, which is a private investment
firm.  Graham Partners II, L.P. is an affiliate of Graham, a private
equity firm.





The total
amount of funds required to acquire Old Berry Holding and to pay fees related to
the acquisition was $2.4 billion.  The acquisition 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.  Apollo and
its affiliates acquired 72% of the common stock of Group.  The
remaining common stock was primarily held by an affiliate of Graham Partners II,
L.P., which owned 10% and members of Berry’s management which owned
16%.





The
acquisition 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 impact of writing up inventory to net realizable value was
$10.1 million and resulted in a charge to cost of goods sold for the period from
September 20 to September 30, 2006 of $2.9 million and $7.2 million in the
fiscal year ended September 29, 2007.


F-17


Allocation
      of
              Purchase
      Price at September 20, 2006Current
      assets
            
            $
            389.3Property
      and equipment
            
            
            470.1Goodwill
            
            
            996.1Customer
      relationships
            
            
            511.9Trademarks
            
            
            182.2Other
      intangibles and deferred financing fees
            
            
            59.0Total
      assets
            
            
            2,608.6Current
      liabilities
            
            
            202.3Long-term
      liabilities
            
            
            2,102.4Liabilities
      assumed
            
            
            2,304.7Net
      assets acquired
            
            $
            303.9





Acquisition of Minority
Interest of Old Berry and Covalence





On April
3, 2007, shares of Old Group and CSM Holding were exchanged for shares in
Group.  The minority shareholders and management held ownership
interests of 28% and 4% for Old Group and CSM Holding, respectively. The
acquisition of these ownership interests was accounted for under the purchase
method of accounting and pushed-down to the Company.  The following
table summarizes the step-up to fair value of the assets acquired and
liabilities assumed at the date of acquisition based upon the percentage
ownership acquired from the minority shareholders.





April
      3, 2007Current
      assets
            
            $
            2.6Fixed
      assets
            
            
            7.9Intangible
      assets
            
            
            101.0Goodwill
            
            
            106.2Total
      assets
            
            
            217.7Deferred
      income taxes
            
            
            (44.8
            )Other
      liabilities
            
            
            0.5Total
      liabilities
            
            
            (44.3
            )Net
      assets stepped-up
            
            $
            173.4





F-18


As a
result of the exchange of minority interest shares, stockholders’ equity was
adjusted by $236.1 million, consisting of the $173.4 million step-up to fair
value of net assets and a $62.7 million reclassification from minority interest
to stockholders’ equity.  Additionally, $0.2 million and $4.5 million
of accumulated other comprehensive income and accumulated deficit, respectively,
were reclassified to recognize an accumulated negative basis by minority
interest holders whose shares were exchanged.





Of the
$101.0 million of acquired intangible assets, $67.4 million was assigned to
customer relationships, $34.8 million to tradenames and a $1.2 million reduction
was assigned to patents.  The acquired definite-lived intangible
assets will be amortized over a weighted average useful life of 20
years.  The Company allocated the goodwill between its rigid open top
and rigid closed top segments.  None of this goodwill is expected to
be deductible for tax purposes.





Rollpak
Acquisition Corp.





On April
11, 2007, the Company completed its acquisition of 100% of the outstanding
common stock of Rollpak Acquisition Corporation, which is the sole stockholder
of Rollpak.  Rollpak is a flexible film manufacturer located in
Goshen, Indiana with annual net sales of approximately $50.0 million in calendar
2006 sales.  The purchase price was funded utilizing cash on
hand.  The Rollpak acquisition has been accounted for under the
purchase method of accounting,





Sale
of UK Operations





On April
10, 2007, the Company sold its wholly owned subsidiary, Berry Plastics UK Ltd.,
to Plasticum Group N.V. for approximately $10.0 million.  At the
time of the sale, the annual net sales of this business were less than
$9.0 million.





MAC
Closures, Inc.





On
December 19, 2007, the Company acquired 100% of the outstanding common stock of
MAC, a plastic cap and closure manufacturer located in Waterloo, Quebec for
approximately CN$72.0 million.  MAC is a fully integrated manufacturer
of injection molded plastic caps and closures primarily serving the
pharmaceutical, nutraceutical, personal care, amenity, and household and
industrial chemical industries with 2007 calendar year sales of $37.1
million.  MAC manufactures stock and custom products for U.S. and
Canadian based private and national brand owners, distributors and other
packaging suppliers and will be included in our closed top
segment.  The purchase price was funded utilizing cash on hand from
the sale-leaseback transaction discussed elsewhere in this Form
10-K.  The MAC acquisition has been accounted for using the purchase
method of accounting, and accordingly, the purchase price has been allocated to
working capital and fixed assets with any excess allocated to
goodwill.  The purchase price allocation is preliminary and subject to
change.  In accordance with EITF 95-3, Recognition of Liabilities in
Connection with a Purchase Business Combination, the Company established
opening balance sheet reserves of $1.2 million related to the shutdown of the
Oakville, Ontario facility and related severance costs.  Pro forma
results have not been presented, as they do not differ materially from reported
historical results.


F-19





Captive
Holdings, LLC





On
February 5, 2008, the Company completed its purchase of the outstanding capital
stock of Captive Holdings, Inc., the parent company of
Captive.  Pursuant to a Stock Purchase Agreement dated December 21,
2007 and amended on January 25, 2008 (the “Purchase Agreement”), the aggregate
purchase price was approximately $500.0 million, subject to certain post-closing
upward or downward adjustments.  Captive manufactures blow-molded
bottles and injection-molded closures for the food, healthcare, spirits and
personal care end markets and is included in the Company’s Rigid Closed Top
segment.  To finance the purchase, Berry used the proceeds from a
$520.0 million bridge loan facility which was subsequently retired with the
issuance of the Senior Secured First Priority Notes.  The purchase
price allocation is preliminary and subject to change.  A portion of
the goodwill is deductible for tax purposes.  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 acquisition:





Working
      capital
            
            $
            39.5Property
      plant and equipment
            
            
            73.1Intangible
      assets
            
            
            159.0Goodwill
            
            
            281.4Long-term
      liabilities
            
            
            (48.5
            )Net
      assets acquired
            
            $
            504.5





The
impact of recording inventory at fair value resulted in the Company recording a
charge of $4.5 million in cost of goods sold in the year ended September 27,
2008.  In accordance with EITF 95-3, Recognition of Liabilities in
Connection with a Purchase Business Combination, the Company established
opening balance sheet reserves of $2.4 million related to plant shutdown and
severance costs.  Pro forma results have not been presented, as they
do not differ materially from reported historical results.





3.  Long-Term
Debt





Long-term
debt consists of the following:





September
      27, 2008
            
            
            September
      29, 2007Term
      loan
            
            $
            1,185.0
            
            
            $
            1,194.0Revolving
      line of credit
            
            
            257.1
            
            
            
            50.0First
      Priority Senior Secured Floating Rate Notes
            
            
            680.6
            
            
            
            —Debt
      discount on First Priority Notes, net
            
            
            (18.0
            )
            
            
            —Second
      Priority Senior Secured Fixed Rate Notes
            
            
            525.0
            
            
            
            525.0Second
      Priority Senior Secured Floating Rate Notes
            
            
            225.0
            
            
            
            225.011%
      Senior Subordinated Notes
            
            
            441.2
            
            
            
            428.210
      1⁄4% Senior Subordinated Notes
            
            
            265.0
            
            
            
            265.0Capital
      leases and other
            
            
            38.7
            
            
            
            23.53,599.6
            
            
            
            2,710.7Less
      current portion of long-term debt
            
            
            (21.4
            )
            
            
            (17.4
            )$
            3,578.2
            
            
            $
            2,693.3





Senior
Secured Credit Facility




In
connection with the Merger, the Company entered into senior secured credit
facilities that include a term loan in the principal amount of $1,200.0 million
and a revolving credit facility (“Credit Facility”) which provides borrowing
availability equal to the lesser of (a) $400.0 million or (b) the borrowing
base, which is a function, among other things, of the Company’s accounts
receivable and inventory.  The term loan matures on April 3, 2015 and
the revolving credit facility matures on April 3, 2013.


F-20





The
borrowings under the senior secured credit facilities bear interest at a rate
equal to an applicable margin plus, as determined at our option, either (a) a
base rate determined by reference to the higher of (1) the prime rate of Credit
Suisse, Cayman Islands Branch, as administrative agent, in the case of the term
loan facility or Bank of America, N.A., as administrative agent, in the case of
the revolving credit facility and (2) the U.S. federal funds rate plus 1/2 of 1%
or (b) LIBOR (2.80% and 3.72% for the term loan and the revolving line of
credit, respectively, at September 27, 2008) determined by reference to the
costs of funds for eurodollar deposits in dollars in the London interbank market
for the interest period relevant to such borrowing Bank Compliance for certain
additional costs.  The applicable margin for LIBOR rate borrowings
under the revolving credit facility ranges from 1.00% to 1.75% and for the term
loan is 2.00%.  The initial applicable margin for base rate borrowings
under the revolving credit facility is 0% and under the term loan is
1.00%.





The term
loan facility requires minimum quarterly principal payments of $3.0 million for
the first eight years, which commenced in June 2007, with the remaining amount
payable on April 3, 2015. In addition, the Company must prepay the outstanding
term loan, subject to certain exceptions, with (1) beginning with the Company’s
first fiscal year after the closing, 50% (which percentage is subject to a
minimum of 0% upon the achievement of certain leverage ratios) of excess cash
flow (as defined in the credit agreement); and (2) 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 its business or to make certain other permitted investments within 15
months, subject to certain limitations.





In
addition to paying interest on outstanding principal under the senior secured
credit facilities, the Company is required to pay a commitment fee to the
lenders under the revolving credit facilities in respect of the unutilized
commitments thereunder at a rate equal to 0.25% to 0.35% per annum depending on
the average daily available unused borrowing capacity. The Company also pays a
customary letter of credit fee, including a fronting fee of 0.125% per annum of
the stated amount of each outstanding letter of credit, and customary agency
fees.





The
Company may voluntarily repay outstanding loans under the senior secured credit
facilities at any time without premium or penalty, other than customary
“breakage” costs with respect to eurodollar loans.  The senior secured
credit facilities contain various restrictive covenants that, among other things
and subject to specified exceptions, prohibit the Company from prepaying other
indebtedness, and restrict its ability to incur indebtedness or liens, make
investments or declare or pay any dividends.  All obligations under
the senior secured credit facilities are unconditionally guaranteed by Berry
Group and, subject to certain exceptions, each of the Company’s existing and
future direct and indirect domestic subsidiaries. The guarantees of those
obligations are secured by substantially all of the Company’s assets as well as
those of each domestic subsidiary guarantor.  The Company was in
compliance with all covenants at September 27, 2008.





At
September 27, 2008, there was $257.1 million outstanding on the revolving credit
facility.  The revolving credit facility allows up to $100.0 million
of letters of credit to be issued instead of borrowings under the revolving
credit facility. At September 27, 2008, the Company had $25.2 million under the
Credit Facility in letters of credit outstanding.  One of the
participants in the Company’s revolving credit facility was Lehman Brothers and
its affiliates, who had committed to fund approximately $18.3 million out of our
total $400.0 million credit facility.  Due to the recent bankruptcy of
Lehman Brothers, we may not be able to access the full commitment of our credit
facility.  At September 27, 2008, the Company had unused borrowing
capacity of $99.4
million(reflects the reduction of Lehman’s total commitment of $18.3
million) under the revolving line of credit subject to the solvency of our
lenders to fund their obligations and our borrowing base
calculations.





Senior
Secured First Priority Notes





On April
21, 2008 the Company completed a private placement of $680.6 million, aggregate
principal amount of senior secured first priority notes which mature on February
15, 2015.  The Company received gross proceeds of $661.4 million,
before expenses, and repaid the outstanding borrowings under the senior secured
bridge loan that was used to finance and pay costs related to the Company’s
acquisition of Captive and to repay amounts outstanding under the Company’s
revolving credit facility as well as to pay fees and expenses related to the
offering.   Interest on the Senior Secured First Priority Notes
accrues at a rate per annum, reset quarterly, equal to LIBOR (2.79% at September
27, 2008) plus 4.75%. Interest on these notes are payable quarterly in arrears
on January 15, April 15, July 15 and October 15 of each year, which commenced
July 15, 2008.  The Senior Secured First Priority Notes are guaranteed
on a senior secured basis by all of the Company’s existing and future domestic
subsidiaries, subject to certain exceptions and will include
all


F-21


of
the Company’s subsidiaries that guarantee the Company’s obligations under its
term loan facility.  The Senior Secured First Priority Notes and the
guarantees are secured on a first-priority basis by a lien on the assets that
secure the Company’s obligations under its senior secured credit facilities,
subject to certain exceptions.  The Company was in compliance with all
covenants at September 27, 2008.





Second
Priority Senior Secured Notes





On
September 20, 2006, Old Berry 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
(2.78% at September 27, 2008) 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.  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.  The Company was in compliance with all covenants at
September 27, 2008.




11%
Senior Subordinated Notes





On
September 20, 2006, Old Berry Holding issued $425.0 million in aggregate
principal amount of 11% Senior Subordinated Notes to Goldman, Sachs and Co. in a
private placement that is exempt from registration under the Securities
Act.  The 11% 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 11% 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 11% Senior
Subordinated Notes.  The Company issued an additional $13.0 million
and $3.2 million aggregate principal amount of outstanding notes in the year
ended September 27, 2008 and September 29, 2007, respectively, in satisfaction
of its interest obligations.





The 11%
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 11% 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 11% Senior Subordinated Notes contain
additional affirmative covenants and certain customary representations,
warranties and conditions.  The Company was in compliance with all
covenants at September 27, 2008.


10
1⁄4% Senior Subordinated Notes
  In
connection with Apollo’s acquisition of Old Covalence Holding, Old Covalence
issued $265.0 million of 10 1⁄4% Senior Subordinated Notes due March 1,
2016.  The notes are senior subordinated obligations of the Company
and rank junior to all other senior indebtedness that does not contain similar
subordination provisions.  No principal payments are required with
respect to the 10 1⁄4% Senior Subordinated Notes prior to
maturity.


F-22




The
indenture relating to the notes contain a number of covenants that, among other
things and subject to certain exceptions, restrict the Company’s ability and the
ability of its restricted subsidiaries to incur indebtedness or issue
disqualified stock or preferred stock, pay dividends or redeem or repurchase
stock, make certain types of investments, sell assets, incur certain liens,
restrict dividends or other payments from subsidiaries, enter into transactions
with affiliates and consolidate, merge or sell all or substantially all of the
Company’s assets.  The Company was in compliance with all covenants at
September 27, 2008.





Senior
Secured Credit Facility (retired)





In
connection with Apollo’s acquisitionof Old
Covalence Holding, Old Covalence entered into a senior secured credit
facility, which included a term loan in the amount of $350.0 million with a
maturity date of February 16, 2013.  On May 18, 2006, Old Covalence
refinanced its senior secured credit facilities, which then consisted of a new
term loan in the principal amount of $300.0 million and a new revolving credit
facility which provided borrowing availability equal to the lesser of (a) $200.0
million or (b) the borrowing base, which is a function, among other things, of
Old Covalence’s accounts receivable and inventory.  The borrowings
under the senior secured credit facilities accrued interest at a rate equal to
an applicable margin plus, as determined at our option, either (a) a base rate
determined by reference to the higher of (1) the prime rate of Bank of America,
N.A., as administrative agent, and (2) the U.S. federal funds rate plus 1/2 of
1% or (b) LIBOR.  The initial applicable margin for LIBOR rate
borrowings under the revolving credit facility was 1.50% and under the term loan
was 2.00%.  The initial applicable margin for base rate borrowings
under the revolving credit facility was 0% and under the term loan was
1.00%.





The
senior secured credit facilities required minimum quarterly principal payments
of $0.750 million on the term loan for the first six years and nine months,
which commenced in September 2006.  The credit facility was repaid and
retired in connection with the Merger.





Second
Priority Floating Rate Notes (retired)





Also in
connection with Apollo’s acquisitionof Old
Covalence Holding, Old Covalence entered into a $175.0 million second
priority floating rate loan.  The second priority floating rate note
matured on August 16, 2013, and accrued interest at a rate per annum, reset at
the end of each interest period, equal to LIBOR plus 3.25% or Base Rate plus
2.25%.  The note was repaid and retired in connection with the Merger,
and the Company also incurred a prepayment penalty of $1.8 million, which is
included in loss on extinguished debt on the statement of operations for fiscal
2007.





Derivative
Instruments





In August
2007, Berry entered into two separate interest rate swap transactions to protect
$600.0 million of the outstanding variable rate term loan debt from future
interest rate volatility.  The swap agreements became effective in
November 2007.  The first agreement had a notional amount of $300.0
million and became effective November 5, 2007 and swaps three month variable
LIBOR contracts for a fixed two year rate of 4.875% and expires on November 5,
2009.  The second agreement had a notional amount of $300.0 million
and became effective November 5, 2007 and swaps three month variable LIBOR
contracts for a fixed three year rate of 4.920% and expires on November 5,
2010.  The counterparty to this agreement is a global financial
institution. The Company is exposed to credit loss in the event of
nonperformance by the counterparty to the agreement. However, the Company
considers this risk to be low.




On
January 22, 2008, the Company entered into an interest rate swap transaction to
protect $300.0 million of the outstanding variable rate term loan debt from
future interest rate volatility.  The swap agreement became effective
February 5, 2008.  The swap agreement had a notional amount of $300.0
million and swap three month variable LIBOR contracts for a fixed three year
rate of 2.962%.  On April 23, 2008, the Company elected to settle this
derivative instrument in accordance with the agreement.  The Company
received $2.4 million on April 25, 2008 as a result of this
settlement.  The offset is included in accumulated other comprehensive
income (loss) and is being amortized over the initial contract period to
interest expense.





The
Company concluded that it met the hedge accounting criteria for accounting for
these swaps.  The Company estimates the fair value of the Swaps
identified above to be a liability of $15.0 million and $4.9  million as of
September 27, 2008 and September 29, 2007, respectively, which is reflected as a
part of other long-term liabilities on the accompanying consolidated balance
sheet with an offset, net of tax, to accumulated other comprehensive income.
The





F-23





fair
value of the swaps is estimated by obtaining quotations from the counterparty to
the Company’s swap agreement. The fair value is an estimate of the net amount
that the Company would be required to pay on September 27, 2008, if the
agreements were transferred to other parties or cancelled by the
Company.





Future
maturities of long-term debt at September 27, 2008 are as follows:





2009
            $             21.42010
            17.72011
            16.82012
            16.82013
            274.5Thereafter
            3,270.4$        3,617.7





Interest
paid was $244.7 million in fiscal 2008, $227.0 million in fiscal 2007, $43.9
million for the period from February 17, 2006 to September 30, 2006 and $0.6
million for the period from October 1, 2005 to February 16, 2006.





4.  Goodwill,
Intangible Assets and Deferred Costs





The
following table sets forth the gross carrying amount and accumulated
amortization of the Company’s goodwill, intangible assets and deferred
costs:








September
      27, 2008
            
            
            September
      29, 2007
            
            Amortization
      PeriodDeferred
      financing fees
            
            $
            69.3
            
            
            $
            43.0
            
            Respective
      debtAccumulated
      amortization
            
            
            (15.5
            )
            
            
            (5.0
            )Deferred
      financing fees, net
            
            
            53.8
            
            
            
            38.0Goodwill
            
            
            1,449.3
            
            
            
            1,132.0
            
            Indefinite
      livedCustomer
      relationships
            
            
            1,031.0
            
            
            
            862.2
            
            11
      – 20 yearsTrademarks
            
            
            265.2
            
            
            
            256.7
            
            Indefinite
      livedOther
      intangibles
            
            
            53.3
            
            
            
            53.3
            
            10-20
      yearsAccumulated
      amortization
            
            
            (192.4
            )
            
            
            (100.1
            )Intangible
      assets, net
            
            
            1,159.1
            
            
            
            1,072.1Total
      Goodwill, Intangible Assets and Deferred Costs
            
            $
            2,662.2
            
            
            $
            2,242.1





Future
amortization expense for definite lived intangibles at September 27, 2008 for
the next five fiscal years is $95.3 million, $90.4 million, $84.7 million, 79.8
million and $75.0 million each year for fiscal 2009, 2010, 2011, 2012, and 2013,
respectively.  Recognized amortization expense totaled $92.7 million
in fiscal 2008, $77.6 million in fiscal 2007, $22.7 million for the period
February 17 to September 30, 2006, and $1.0 million for the period October 1,
2005 to February 16, 2006.




5.  Lease
and Other Commitments and Contingencies





The
Company leases certain property, plant and equipment under long-term lease
agreements.  Property, plant and equipment under capital leases are
reflected on the Company’s balance sheet as owned.  The Company
entered into new capital lease obligations totaling $28.9 million and $3.7
million during the fiscal year-ended September 27, 2008 and September 29, 2007,
respectively with various lease expiration dates through 2015.  Assets
under operating leases are not recorded on the Company’s balance
sheet.  Operating leases expire at various dates in the future with
certain leases containing renewal options.  The Company had
approximately $14.2 million of asset retirement obligations related to the
operating leases at September 27, 2008 and September 29, 2007,
respectively.   Total rental expense from operating leases was
$58.3 million for fiscal 2008, $44.2 million for fiscal 2007, $6.7 million for
the period from February 17, 2006 to September 30, 2006 and $2.6 million for the
period from October 1, 2005 to February 16, 2006.


F-24
  Future
minimum lease payments for capital leases and
noncancellable operating leases with initial terms in excess of one year are as
follows:





At
      September 27, 2008Capital
      Leases
            
            
            Operating
      Leases2009
            
            $
            11.3
            
            
            $
            49.42010
            
            
            7.3
            
            
            
            43.02011
            
            
            6.1
            
            
            
            39.52012
            
            
            5.8
            
            
            
            31.32013
            
            
            5.9
            
            
            
            27.2Thereafter
            
            
            10.3
            
            
            
            206.846.7
            
            
            $
            397.2Less:  amount
      representing interest
            
            
            (8.3
            )Present
      value of net minimum lease payments
            
            $
            38.4





On
December 19, 2007, the Company entered into a sale-leaseback transaction
pursuant to which it sold its manufacturing facilities located in Baltimore,
Maryland; Evansville, Indiana; and Lawrence, Kansas. The Company received
proceeds of $83.0 million and used these proceeds to repay non-recourse debt on
its Evansville, Indiana facility of $7.9 million and transaction costs of $0.9
million. This resulted in the Company receiving net proceeds of $74.2 million
which were utilized to fund the acquisition of MAC Closures, Inc. The
sale-leaseback transaction resulted in the Company realizing a deferred gain of
$41.8 million which will be offset against the future lease payments over the
life of the respective leases.





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, results of operations or cash
flows.  The Company has various purchase commitments for raw
materials, supplies and property and equipment incidental to the ordinary
conduct of business.




6.  Accrued
Expenses and Other Current Liabilities





The
following table sets forth the totals included in accrued expenses and other
current liabilities.





September
      27, 2008
            
            
            September
      29, 2007Employee
      compensation, payroll and other taxes
            
            $
            62.3
            
            
            $
            70.1Interest
            
            
            27.8
            
            
            
            21.7Restructuring
            
            
            4.1
            
            
            
            13.4Rebates
            
            
            51.5
            
            
            
            40.9Other
            
            
            60.9
            
            
            
            43.3$
            206.6
            
            
            $
            189.4





7.  Income
Taxes





Successor





The
Company is being taxed at the U.S. corporate level as a C-Corporation and has
provided U.S. federal and state income taxes.  The Company has been
indemnified by Tyco for tax liabilities that may arise in the future that relate
to the period prior to the Covalence Acquisition of the various entities from
Tyco.  The Company’s effective tax rate is dependent on many
factors including:  the impact of enacted tax laws in jurisdictions in
which the Company operates; the amount of earnings by jurisdiction, due to
varying tax rates in each country; and the Company’s ability to utilize foreign
tax credits related to foreign taxes paid on foreign earnings that have been
included in U.S. taxable income (loss) under the Subpart F rules.




F-25








Year
      ended
                September
      27, 2008
              
              
              Year
      ended
                September
      29, 2007
              
              
              From
      the period
                February
      17, 2006 to
                September
      30, 2006CurrentUnited
      StatesFederal
              
              $
              —
              
              
              $
              —
              
              
              $
              —State
              
              
              0.9
              
              
              
              0.7
              
              
              
              —Non-U.S.
              
              
              2.6
              
              
              
              1.0
              
              
              
              2.6Current
      Income tax provision
              
              
              3.5
              
              
              
              1.7
              
              
              
              2.6Deferred:United
      StatesFederal
              
              
              (44.3
              )
              
              
              (70.9
              )
              
              
              (17.5
              )State
              
              
              (2.9
              )
              
              
              (19.8
              )
              
              
              (1.0
              )Non-U.S.
              
              
              (5.5
              )
              
              
              0.3
              
              
              
              (2.2
              )Deferred
      income tax benefit
              
              
              (52.7
              )
              
              
              (90.4
              )
              
              
              (20.7
              )Benefit
      for income taxes
              
              $
              (49.2
              )
              
              $
              (88.6
              )
              
              $
              (18.1
              )







The
reconciliation between U.S. federal income taxes at the statutory rate and the
Company’s benefit for income taxes on continuing operations for the year ended
September 27, 2008, the year ended September 29, 2007, and the period from
February 17, 2006 to September 30, 2006 are as follows:




Year
      ended September 27, 2008
                
                
                Year
      ended September 29, 2007
                
                
                From
      the period
                  February
      17, 2006 to
                  September
      30, 2006U.S.
      Federal income tax benefit at the statutory rate
                
                $
                (52.6
                )
                
                $
                (72.6
                )
                
                $
                (17.9
                )Adjustments
      to reconcile to the income tax provision:U.S.
      state income tax benefit
                
                
                (3.3
                )
                
                
                (10.4
                )
                
                
                (2.3
                )Permanent
      differences
                
                
                0.6
                
                
                
                0.5
                
                
                
                0.3Changes
      in State effective tax rate
                
                
                —
                
                
                
                (10.9
                )
                
                
                —Changes
      in Valuation Allowance – Foreign
                
                
                2.8
                
                
                
                2.3
                
                
                
                1.8Rate
      differences between U.S. and Foreign
                
                
                0.9
                
                
                
                (0.4
                )
                
                
                (0.2
                )Sub
      F income
                
                
                2.8
                
                
                
                —
                
                
                
                —Other
                
                
                (0.4
                )
                
                
                2.9
                
                
                
                0.2Benefit
      for income taxes
                
                $
                (49.2
                )
                
                $
                (88.6
                )
                
                $
                (18.1
                )
 F-26


Deferred
income taxes result from temporary differences between the amount of assets and
liabilities recognized for financial reporting and tax purposes.  The
components of the net deferred income tax liability at September 27, 2008 and
September 29, 2007 are as follows:


September
      27, 2008
              
              
              September
      29, 2007Deferred
      tax assets:Allowance
      for doubtful accounts
              
              $
              2.0
              
              
              $
              1.8Deferred
      gain on sales-leaseback
              
              
              13.9
              
              
              
              —Accrued
      liabilities and reserves
              
              
              31.7
              
              
              
              24.3Inventories
              
              
              6.8
              
              
              
              4.0Net
      operating loss carryforward
              
              
              183.3
              
              
              
              156.9Alternative
      minimum tax (AMT) credit carryforward
              
              
              7.4
              
              
              
              7.4Others
              
              
              13.8
              
              
              
              11.4Total
      deferred tax assets
              
              
              258.9
              
              
              
              205.8Valuation
      allowance
              
              
              (5.0
              )
              
              
              (3.1
              )Total
      deferred taxes, net of valuation allowance
              
              
              253.9
              
              
              
              202.7Deferred
      tax liabilities:Property
      and equipment
              
              
              76.3
              
              
              
              68.2Intangible
      assets
              
              
              351.4
              
              
              
              316.0Prepaid
      expenses
              
              
              —
              
              
              
              1.2Foreign
      earnings
              
              
              —
              
              
              
              1.4Others
              
              
              3.1
              
              
              
              1.9Total
      deferred tax liabilities
              
              
              430.9
              
              
              
              388.7Net
      deferred tax liability
              
              $
              (177.0
              )
              
              $
              (186.0
              )


As of
September 27, 2008, the Company had foreign net operating loss carryforwards of
$25.0 million.  In the U.S. the company had approximately $464.7
million of federal net operating loss carryforwards at September 27,
2008.  The federal net operating loss carryforwards will expire in
future years beginning 2021.  AMT credit carryforwards of $7.4 million
are available to the Company indefinitely to reduce future years’ federal income
taxes.





The
Company believes that it will not generate sufficient future taxable income to
realize the tax benefits in foreign jurisdictions related to the deferred tax
assets of Capsol Spa and Berry Plastics de Mexico.  Therefore, the
company has provided
a full valuation allowance against its foreign net operating losses included
within the deferred tax assets for Capsol Spa and Berry Plastics de
Mexico. 
 Due to
prior year Sec. 382 limit carryforwards, all Federal operating loss
carryforwards are available for immediate use.  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 $5.0 million and $3.1 million as of September 27, 2008 and September 29,
2007, respectively, related to the foreign operating loss
carryforwards.
  Uncertain
Tax Positions
  Effective
September 30, 2007, we adopted the provisions of FIN 48, Accounting for Uncertainty in Income
Taxes—an interpretation of FASB Statement No. 109. This
Interpretation clarifies the accounting for uncertainty in income taxes
recognized in an enterprise's financial statements in accordance with SFAS No.
109 and prescribes a recognition threshold of more-likely-than-not to be
sustained upon examination. Upon adoption of FIN 48, our policy to
include


F-27


interest
and penalties related to gross unrecognized tax benefits within our provision
for income taxes did not change. There was no adjustment to retained earnings
upon adoption to FIN 48 on September 30, 2007.




The
following table summarizes the activity related to our gross unrecognized tax
benefits from September 30, 2007 to September 30, 2008:




Balance
      as of September 30, 2007
            
            
            $3.9Increases
      related to prior year tax positions (acquired exposure)
            
            
            1.4Balance
      as of September 27, 2008
            
            
            $5.3




There are
no unrecognized tax benefits that, if recognized, would affect our effective tax
rate as of September 30, 2007 and September 27, 2008, respectively.




As of
September 27, 2008, due to availability of NOL we have no accrued amounts for
payment of interest. Interest included in our provision for income taxes was not
material in all the periods presented. We have not accrued any penalties related
to our uncertain tax positions as we believe that it is more likely than not
that there will not be any assessment of penalties.




We and
our subsidiaries are routinely examined by various taxing authorities. Although
we file U.S. federal, U.S. state, and foreign tax returns, our major tax
jurisdiction is the U.S. The IRS has completed an examination of our 2003 tax
year.  Our 2002 and 2004 - 2007 tax years remain subject to
examination by the IRS for U.S. federal tax purposes.  There are
various other on-going audits in various other jurisdictions that are not
material to our financial statements.





Predecessor




Under the
Predecessor, business activities in the U.S. were conducted through partnership
entities.  The reconciliation between U.S. federal income taxes at the
statutory rate and the Company’s provision for income taxes are as
follows:




October
      1, 2005 to February 16, 2006Notional
      U.S. federal income tax expense at the statutory rate
            
            
            6.8Adjustments
      to reconcile to the Company’s income tax provision:U.S.
      partnership income taxed at the partner level
            
            
            (6.8
            )Non-U.S.
      earnings
            
            
            1.6Provision
      for income taxes
            
            
            1.6Deferred
      provision (benefit)
            
            
            —Current
      provision
            
            
            1.6


The
provisions for income taxes for the period from October 1, 2005 to February 16,
2006 includes $1.6 million for non-U.S. income taxes.  The
non-U.S. component of income before income taxes was $3.9 million for the period
from October 1, 2005 to February 16, 2006.
 
 8.  Retirement
Plans
 
 The
Company maintains five defined benefit pension plans, three of which were
acquired through former business combinations of Old Berry.  The
fourth and fifth plans cover approximately 70 active and inactive employees of
Old Covalence and 300 active and 300 inactive employees of Captive
Plastics.  The Company assumed the obligations of Captive Plastics
defined benefit plans in connection with the acquisition in February of
2008.  The Captive Plastics plan had a projected benefit obligation of
approximately $16.0 and plan assets of approximately $14.2 million at the date
of the acquisition.  The Company also maintains a retiree health plan,
which covers certain healthcare and life insurance benefits
  F-28


for
certain retired employees and their spouses.  Three of the five
defined benefit plans and the retiree health plan are frozen
plans.  The Company uses our year-end as a measurement date for the
retirement plans.





The
Company sponsors two defined contribution 401(k) retirement plans covering
substantially all employees of Old Berry.  Contributions are based
upon a fixed dollar amount for employees who participate and percentages of
employee contributions at specified thresholds.  Contribution expense
for these plans was $7.8 million for the year ended September 27, 2008 and $6.8
million for the year ended September 29, 2007.  Contribution expense
was immaterial for the other periods presented.




The
Company participates in one multiemployer plan. Contributions to the plan are
based on specific percentages of employee compensation and are
immaterial.





The
Company adopted SFAS No. 158 effective September 29, 2007, which 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. The effect of
adopting SFAS No. 158 was to reduce the accrued benefit liability by $4.4
million at September 29, 2007, with an offsetting adjustment to ending
accumulated other comprehensive income, net of tax.




The
projected benefit obligations of the Company’s plans presented herein are
materially consistent with the accumulated benefit obligations of such
plans.  The net amount of liability recognized is included in other
long-term liabilities on the balance sheet.




F-29







Defined
      Benefit Pension
              
              
              Retiree Health PlanYear
      ended
                September 27,
                2008
              
              
              Year ended
                September 27,
                2008
              
              
              Year
      ended
                September 27,
                2008
              
              
              Year ended
                September
      29,
                2007Change
      in Projected Benefit Obligations (PBO)PBO
      at beginning of period
              
              $
              40.2
              
              
              $
              41.6
              
              
              $
              6.6
              
              
              $
              6.9Service
      cost
              
              
              0.3
              
              
              
              0.2
              
              
              
              —
              
              
              
              —Purchase
      (Captive)
              
              
              16.0
              
              
              
              —
              
              
              
              —
              
              
              
              —Interest
      cost
              
              
              2.9
              
              
              
              2.2
              
              
              
              0.4
              
              
              
              0.3Participant
      contributions
              
              
              —
              
              
              
              0.3
              
              
              
              —
              
              
              
              —Actuarial
      loss (gain)
              
              
              (0.4
              )
              
              
              (0.9
              )
              
              
              0.2
              
              
              
              0.4Benefits
      paid
              
              
              (4.1
              )
              
              
              (3.2
              )
              
              
              (1.0
              )
              
              
              (1.1
              )PBO
      at end of period
              
              $
              54.9
              
              
              $
              40.2
              
              
              $
              6.2
              
              
              $
              6.5


Change
      in Fair Value of Plan AssetsPlan
      assets at beginning of period
              
              $
              36.2
              
              
              $
              33.7
              
              
              $
              —
              
              
              $
              —Actual
      return on plan assets
              
              
              (6.6
              )
              
              
              4.2
              
              
              
              —
              
              
              
              —Purchase
      (Captive)
              
              
              14.2
              
              
              
              —
              
              
              
              —
              
              
              
              —Company
      contributions
              
              
              1.5
              
              
              
              1.5
              
              
              
              1.0
              
              
              
              1.1Benefits
      paid
              
              
              (4.1
              )
              
              
              (3.2
              )
              
              
              (1.0
              )
              
              
              (1.1
              )Plan
      assets at end of period
              
              
              41.2
              
              
              
              36.2
              
              
              
              0.0
              
              
              
              0.0Funded
      status
              
              $
              (13.7
              )
              
              $
              (4.0
              )
              
              $
              (6.2
              )
              
              $
              (6.5
              )Unrecognized
      net actuarial loss/gain
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —Net
      amount recognized
              
              $
              (13.7
              )
              
              $
              (4.0
              )
              
              $
              (6.2
              )
              
              $
              (6.5
              )Amounts
      recognized in the Consolidated Balance Sheet consist of:Prepaid
      pension
              
              $
              —
              
              
              $
              —
              
              
              
              
              
              Accrued
      benefit liability
              
              
              (13.7
              )
              
              
              (4.0
              )
              
              
              (6.2
              )
              
              
              (6.5
              )Net
      amount recognized
              
              $
              (13.7
              )
              
              $
              (4.0
              )
              
              $
              (6.2
              )
              
              $
              (6.5
              )


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(Percents)
            Year
      ended
              September
      27, 2008
            Year
      ended
              September
      29, 2007
            
            Year
      ended
              September
      27, 2008
            Year
      ended
              September
      29, 2007Weighted-average assumptions:Discount
      rate for benefit obligation
            6.0
            5.6
            
            6.0
            5.75Discount
      rate for net benefit cost
            6.0
            5.7
            
            6.0
            5.5Expected
      return on plan assets for net benefit costs
            8.0
            8.0
            
            8.0
            8.0








In
evaluating the expected return on plan assets, Berry 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 7.0% in 2009 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-30






One-Percentage Point
            Increase
            DecreaseAccumulated
      Postretirement benefit obligation
            $
      0.1
            $
      (0.1)Sum
      of service cost and interest cost
            $
      0.0
            $
      (0.0)





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





Defined
      Benefit Pension Plans
            
            
            Retiree
      Health PlanYear
      ended September 27, 2008
            
            
            Year
      ended September 27, 20082009
            
            $
            4.4
            
            
            $
            1.72010
            
            
            4.3
            
            
            
            1.12011
            
            
            4.2
            
            
            
            0.82012
            
            
            4.3
            
            
            
            0.72013
            
            
            4.3
            
            
            
            0.52014-2018
            
            
            20.7
            
            
            
            1.2





In fiscal
2009, Berry expects to contribute approximately $2.5 million to its retirement
plans to satisfy minimum funding requirements for the year.





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





Year
      ended September 27, 2008
            
            
            Year
      ended September 29, 2007Components
      of net period benefit cost:Defined
      Benefit Pension PlansService cost
            
            $
            0.3
            
            
            $
            0.2Interest cost
            
            
            2.9
            
            
            
            2.2Expected return on plan
      assets
            
            
            (3.4
            )
            
            
            (2.6
            )Net periodic benefit
      cost
            
            $
            (0.2
            )
            
            $
            (0.2
            )Retiree
      Health Benefit PlanInterest cost
            
            
            0.4
            
            
            
            0.3Net periodic benefit
      cost
            
            $
            0.4
            
            
            $
            0.3





Our
defined benefit pension plan asset allocations are as
follows:





September
      27,
              2008
            
            
            September
      29, 2007Asset
      CategoryEquity
      securities and equity-like instruments
            
            
            45
            %
            
            
            51
            %Debt
      securities
            
            
            46
            
            
            
            46Other
            
            
            9
            
            
            
            3Total
            
            
            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


F-31


reflects
a long-term growth strategy with approximately 45% allocated to growth
investments and 46% allocated to fixed income investments and 9% in other,
including cash. The Company re-addresses the allocation of its investments on an
annual basis.





9.  Restructuring
and impairment charges





During
February 2007, Old Covalence conducted a facilities utilization review and
approved a plan to close a manufacturing operation within its tapes/coatings
division in Meridian, Mississippi. This facility was closed during the fourth
quarter of fiscal 2007.  The affected business accounted for less than
$25.0 million of annual net sales with certain segments of its operations
transferred to other facilities.





In April
2007, the Company announced its intention to shut down a manufacturing facility
within its closed top division located in Oxnard, California. The business from
this facility has been moved to other existing facilities. Also in April 2007,
the Company announced that it would close the Old Covalence corporate
headquarters in Bedminster, NJ and one of the Company’s division headquarters in
Shreveport, LA.  The reorganization was part of the integration plan
to consolidate certain corporate functions at the Company’s headquarters in
Evansville, Indiana and to consolidate the adhesives and coatings segments into
one new segment called tapes/coatings.





During
July and September 2007 the Company announced a restructuring of the operations
within its flexible films division, including the closure of five manufacturing
facilities in Yonkers, New York; Columbus, Georgia; City of Industry,
California; Santa Fe Springs, California and Sparks, Nevada.  The
affected business accounted for less than $110.0 million of annual net sales
with certain segments of its operations transferred to other
facilities.





In March
2008 the Company announced the intention to shut down a manufacturing facility
within its tapes/coatings division located in San Luis Potosi,
Mexico.




The table
below sets forth the Company’s estimate of the total cost of the restructuring
programs, the portion recognized through September 27, 2008 and the portion
expected to be recognized in a future period:





Expected
              Total
      Costs
            
            
            Cumulative
              charges
      through Fiscal 2008
            
            
            To
      be
              Recognized
      in FutureSeverance
      and termination benefits
            
            $
            8.7
            
            
            $
            7.8
            
            
            $
            0.9Facility
      exit costs
            
            
            20.7
            
            
            
            19.2
            
            
            
            1.5Asset
      impairment
            
            
            18.1
            
            
            
            18.1
            
            
            
            —Other
            
            
            7.0
            
            
            
            3.6
            
            
            
            3.4Total
            
            $
            54.5
            
            
            $
            48.7
            
            
            $
            5.8





F-32


The
tables below sets forth the significant components of the restructuring charges
recognized for the years ended September 29, 2007 and September 27, 2008, by
segment:





Year
      ended September 27, 2008
            
            TapesandCoatings
            
            
            Flexible
      Films
            
            
            Corporate
            
            
            Rigid
      Closed Top
            
            
            TotalSeverance
      and termination benefits
            
            $
            0.8
            
            
            $
            (0.5
            )
            
            $
            —
            
            
            $
            —
            
            
            $
            0.3Facility
      exit costs
            
            
            0.6
            
            
            
            7.3
            
            
            
            —
            
            
            
            —
            
            
            
            7.9Asset
      impairment
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Other
            
            
            1.2
            
            
            
            0.2
            
            
            
            —
            
            
            
            —
            
            
            
            1.4Restructuring
      and impairment charges
            
            $
            2.6
            
            
            $
            7.0
            
            
            $
            —
            
            
            $
            —
            
            
            $
            9.6





Year
      ended September 29, 2007
            
            Tapes
      and Coatings
            
            
            Flexible
      Films
            
            
            Corporate
            
            
            Rigid
      Closed Top
            
            
            TotalSeverance
      and termination benefits
            
            $
            0.8
            
            
            $
            3.0
            
            
            $
            3.5
            
            
            $
            0.2
            
            
            $
            7.5Facility
      exit costs
            
            
            0.3
            
            
            
            4.2
            
            
            
            1.9
            
            
            
            4.9
            
            
            
            11.3Asset
      impairment
            
            
            3.4
            
            
            
            14.7
            
            
            
            —
            
            
            
            —
            
            
            
            18.1Other
            
            
            1.6
            
            
            
            0.2
            
            
            
            —
            
            
            
            0.4
            
            
            
            2.2Restructuring
      and impairment charges
            
            $
            6.1
            
            
            $
            22.1
            
            
            $
            5.4
            
            
            $
            5.5
            
            
            $
            39.1





The table
below sets forth the activity with respect to the restructuring accrual at
September 29, 2007 and September 27, 2008:




Employee
                Severance
                and
      Benefits
              
              
              Facilities
                Exit
                Costs
              
              
              Other
              
              
              Non-cash
      charges
              
              
              TotalBalance
      at September 30, 2006
              
              $
              ―
              
              
              $
              1.2
              
              
              $
              ―
              
              
              $
              ―
              
              
              $
              1.2Charges
              
              
              7.5
              
              
              
              11.3
              
              
              
              2.2
              
              
              
              18.1
              
              
              
              39.1Non-cash
      charges
              
              
              ―
              
              
              
              ―
              
              
              
              ―
              
              
              
              (18.1
              )
              
              
              (18.1
              )Cash
      payments
              
              
              (4.5
              )
              
              
              (2.1
              )
              
              
              (2.2
              )
              
              
              ―
              
              
              
              (8.8
              )Balance
      at September 29, 2007
              
              
              3.0
              
              
              
              10.4
              
              
              
              ―
              
              
              
              ―
              
              
              
              13.4Charges
              
              
              0.3
              
              
              
              7.9
              
              
              
              1.4
              
              
              
              ―
              
              
              
              9.6Cash
      payments
              
              
              (3.3
              )
              
              
              (14.2
              )
              
              
              (1.4
              )
              
              
              ―
              
              
              
              (18.9
              )Balance
      at September 27, 2008
              
              $
              ―
              
              
              $
              4.1
              
              
              $
              —
              
              
              $
              ―
              
              
              $
              4.1
  The
restructuring costs accrued as of September 27, 2008 will result in future cash
outflows. The charges recognized in the period ending September 27, 2008 have
been reported as restructuring expense in these Consolidated Statements of
Operations. The remaining liability as of September 27, 2008 has been included
within Accrued Expenses on the Consolidated Balance Sheet.





10.  Related
Party Transactions





Apollo
Management Fee





The
Company is charged a management fee by Apollo Management, L.P., an affiliate of
its principal stockholder and Graham Partners, for the provision of management
consulting and advisory services provided throughout the year.  The
management fee is the greater of $3.0 million or 1.25% of adjusted
EBITDA.  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.





Old
Covalence was charged a management fee by Apollo Management V, L.P., an
affiliate of its principal stockholder, for the provision of management
consulting and advisory services provided throughout the year.  The
annual management fee was the greater of $2.5 million or 1.5% of adjusted
EBITDA.  This agreement was terminated effective with the
Merger.


F-33


Total
management fees charged by Apollo and Graham were $6.0 million, $5.9 million and
$3.3 million for the year ended September 27, 2008, year ended September 29,
2007 and the period from February 17, 2006 to September 30, 2006,
respectively.


The Company paid $2.6
million to entities affiliated with Apollo Management and $0.4 million to
entities affiliated with Grahamfor the fiscal year ended September 27,
2008.Old Berry Holding paid $2.5 million toentities affiliated with
Apollo Management, L.P. and $0.5 million to entities affiliated with Graham
Partners, Inc. for the
fiscal year ended September 29, 2007.





Apollo
Transaction Fees





During
fiscal 2007, in connection with the acquisition of Old Covalence Holding, Old
Covalence paid a $10 million fee to entities affiliated with Apollo Management
for various services performed by it and its affiliates in connection with the
transaction.  In connection with the acquisition of Old Berry Group,
the Company paid $18.1 million to entities affiliated with Apollo Management and
$2.3 million to entities affiliated with Graham for advisory and other
services.





Other
Related Party Transactions





Certain
of our management, stockholders and related parties and its affiliates have
independently acquired and hold financial debt instruments of the
Company.  During fiscal 2008, interest expense includes $1.2 million
related to this debt.





11.  Stockholders’
Equity





In
connection with the Apollo Berry Merger, Apollo and Graham and certain employees
who invested in Old Berry 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 Berry Group in certain
circumstances.





On June
7, 2007, Group’s Board of Directors declared a special one-time dividend of $77
per common share to shareholders of record as of June 6, 2007.  The
dividend was paid June 8, 2007, which reduced Group’s shareholders’ equity for
owned shares by approximately $530.2 million.  In connection with
this dividend, the Company paid a dividend of approximately $87.0 million to
Berry Group and used the proceeds from a Senior Unsecured Term Loan (described
below) to fund this dividend payment.  This dividend is reflected as a
reduction of Contributed equity from parent.





Berry
Group Indebtedness ($500 million Senior Unsecured Term Loan)





On June
5, 2007, Berry Group entered into a $500.0 million senior unsecured term loan
agreement (“Senior Unsecured Term Loan”) with a syndicate of
lenders.  The Senior Unsecured Term Loan matures on June 5, 2014 and
was sold at a 1% discount, which is being amortized over the life of the
loan.  Interest on the agreement is payable on a quarterly basis and
bears interest at the Company’s option based on (1) a fluctuating rate per annum
equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the
rate of interest in effect for such day as publicly announced from time to time
by Credit Suisse as its “prime rate” plus 525 basis points or (2) LIBOR (2.79%
at September 27, 2008) plus 625 basis points.  The Senior Unsecured
Term Loan contains a payment in kind (“PIK”) option which allows the Company to
forgo paying cash interest and to add the PIK interest to the outstanding
balance of the loan.  This option expires on the five year anniversary
of the loan.  Berry Group at its election may make the quarterly
interest payments in cash, may make the payments by paying 50% of the interest
in cash and 50% in PIK interest or 100% in PIK interest for the first five
years.  The notes are unsecured and there are no guarantees by Berry
Plastics or any of its subsidiaries and therefore this
financial obligation is not recorded in the consolidated financial statements of
Berry Plastics Corporation.  Berry Group elected to exercise
the PIK interest option during fiscal 2008, which resulted in the balance on the
loan increasing to $550.0 million as of September 27, 2008.





Berry
Group at its election may call the notes up to the first anniversary date for
100% of the principal balance plus accrued and unpaid interest and an applicable
premium.  Berry Group’s call option for the notes between the one year
and two year and two year and three year anniversary dates changes to 102% and
101% of the outstanding principal balance plus accrued and unpaid interest,
respectively.  The notes also contain a put option which allows the
lender to require Berry


F-34


Group
to repay any principal and applicable PIK interest that has accrued if Berry
Group has an applicable high yield discount obligation (“AHYDO”) within the
definition outlined in the Internal Revenue Code, section 163(i)(1) at each
payment period subsequent to the five year anniversary date.


Notes
Receivable from Management





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





2006
Equity Incentive Plan





In
connection with Apollo’s acquisition of Old Berry Holding, Berry 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”).  In fiscal 2008, the plan was amended to allow for an
additional 185,000 options to be granted.  In fiscal 2007, the plan
was amended to allow for an additional 45,000 options to be
granted.  Options granted under the 2006 Equity Incentive Plan may not
be assigned or transferred, except to Berry 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 Berry Group.  Options granted under the
2006 Equity Incentive Plan prior to the Merger 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 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 Berry Group’s common stock is not
highly liquid, except in certain limited circumstances, the stock options may
not be redeemable.





In
connection with the Merger, Group modified its outstanding stock options to
provide for (i) the vesting of an additional twenty percent (20%) of the total
number of shares underlying such outstanding options; (ii) the conversion of
options with escalating exercise prices to a fixed priced option, with no
increase in the exercise price as of the date of grant of such escalating priced
option; and (iii) with respect to each outstanding option, the vesting of which
was contingent upon the achievement of performance goals, the deemed achievement
of all such performance goals.





During
fiscal 2007, the Group also clarified the anti-dilution provisions of its stock
option plans to require payment of special dividends to holders of outstanding
stock options.   In connection with the June 2007 dividend paid
in fiscal 2007, holders of vested stock options received $13.7 million, while an
additional $34.5 million will be paid to nonvested option holders on the second
anniversary of the dividend grant date (assuming the nonvested option holders
remain employed by the Company).





This
resulted in the immediate expensing of $13.7 million related to the payment of
dividends on vested awards, less $0.8 million that was expensed in prior
periods, and will result in $34.5 million of additional expense that will be
recognized over the two-year service period beginning June 8,
2007.  Of this $34.5 million, $19.1 million and $5.3 million has been
recognized in the fiscal years ended September 27, 2008 and September 29, 2007,
respectively.  Berry Group recognizes the offset to this expense as a
liability which is held pursuant to a rabbi trust
arrangement.  Earnings on the rabbi trust are recognized by Berry
Group and pushed down to the Company.  For the year-ended September
27, 2008, the Company has recognized $1.2 million of compensation expense
related to earnings on the rabbi trust holdings.  In December 2008, the
Executive Committee modified the vesting provisions related to the dividend on
the non-vested options.





F-35


The
Company recognized total stock based compensation of $19.6 million for the
fiscal years ended September 27, 2008 and September 29, 2007.  The
stock based compensation recognized in the year ended September 27, 2008 was
comprised of stock based compensation of $19.1 million related to the unvested
stock options associated with special one-time dividend and earnings under the
rabbi trust and $0.5 million of stock based compensation for the 2007 and 2008
grants of time based and performance based options that were granted after the
special one-time dividend.  The Company has not





Information
related to the 2006 Equity Incentive Plan is as follows:




September
      27, 2008
              
              
              September
      29, 2007Number
                Of
                Shares
              
              
              Weighted
                Average
                Exercise
                Price
              
              
              Number
                Of
                Shares
              
              
              Weighted
                Average
                Exercise
                PriceOptions
      outstanding, beginning of period
              
              
              618,620
              
              
              $
              100.00
              
              
              
              500,184
              
              
              $
              100Options
      granted
              
              
              204,416
              
              
              
              109.90
              
              
              
              135,358
              
              
              
              100Options
      exercised or cash settled
              
              
              (5,068
              )
              
              
              98.10
              
              
              
              —
              
              
              
              —Options
      forfeited or cancelled
              
              
              (45,011
              )
              
              
              104.20
              
              
              
              (16,922
              )
              
              
              100Options
      outstanding, end of period
              
              
              772,957
              
              
              $
              102.38
              
              
              
              618,620
              
              
              $
              100Option
      price range at end of period
              
              $
              53.50
      - $112.80
              
              
              $
              100Options
      exercisable at end of period
              
              
              322,951
              
              
              
              177,605Options
      available for grant at period end
              
              
              34,295
              
              
              
              3,632Weighted
      average fair value of options granted during period
              
              $
              36
              
              
              $
              19




The fair
value for options granted have been estimated at the date of grant using a
Black-Scholes, generally with the following weighted average
assumptions:





Company
            
            PredecessorYear
      ended
              September
      27,2008
            Year
      ended
              September
      29,2007
            Period
      from
              February
      17 to
              September
      30, 2006
            
            Period
      from
              October
      1, 2005 to
              February
      16, 2006Risk-free
      interest rate
            2.7-4.2%
            4.5
      – 4.9%
            4.5
      – 4.9%
            
            4.5
      – 4.9%Dividend
      yield
            0.0%
            0.0%
            0.0%
            
            0.0%Volatility
      factor
            .31
      - .34
            .20
      - .45
            .45
            
            .45Expected
      option life
            5
      years
            3.73
      – 6.86 years
            3.73
      – 6.86 years
            
            3.73
      – 6.86  years





The
following table summarizes information about the options outstanding at
September 27, 2008:





Range
      of
              Exercise
              Prices
            Number
      Outstanding
              at
      September 27, 2008
            Weighted
      Average
              Remaining
      Contractual
              Life
            Weighted
              Average
              Exercise
              Price
            Number
              Exercisable
      at
              September
      27, 2008$53.50
      - $112.80
            772,957
            8
      years
            $102.38
            322,951





F-36


12.  Segment
and Geographic Data





In
connection with the closing of the Merger, Berry organized its operations into
four reportable segments: rigid open top, rigid closed top, flexible films, and
tapes and coatings.  The Company has manufacturing and distribution
centers in the United States, Canada, Mexico, Belgium, Italy and
India.  The Company evaluates the performance of and allocates
resources to these segments based on revenue, EBITDA and other segment profit
measures.  Approximately 93% of the Company’s net sales and 96% of the
total assets are located in North America.  Selected information by
reportable segment is presented in the following table:






Company
              
              
              PredecessorYear
      ended September 27, 2008
              
              
              Year
      ended September 29, 2007
              
              
              Period
      from February 17 to September 30, 2006
              
              
              Period
      from October 1, 2005 to February 16, 2006Net
      SalesFlexible
      Films
              
              $
              1,092.2
              
              
              $
              1,042.8
              
              
              $
              705.5
              
              
              $
              449.5Tapes
      and Coatings
              
              
              514.3
              
              
              
              536.7
              
              
              
              392.7
              
              
              
              221.4Rigid
      Open Top
              
              
              1,053.2
              
              
              
              881.3
              
              
              
              27.0
              
              
              
              —Rigid
      Closed Top
              
              
              853.4
              
              
              
              598.0
              
              
              
              19.4
              
              
              
              —Less
      intercompany revenue
              
              
              —
              
              
              
              (3.8
              )
              
              
              (5.8
              )
              
              
              (4.0
              )$
              3,513.1
              
              
              $
              3,055.0
              
              
              $
              1,138.8
              
              
              $
              666.9Operating
      incomeFlexible
      Films
              
              $
              (10.3
              )
              
              $
              (23.6
              )
              
              $
              4.2
              
              
              $
              22.8Tapes
      and Coatings
              
              
              6.0
              
              
              
              (10.6
              )
              
              
              21.2
              
              
              
              9.7Rigid
      Open Top
              
              
              73.7
              
              
              
              69.9
              
              
              
              (0.5
              )
              
              
              —Rigid
      Closed Top
              
              
              42.0
              
              
              
              31.7
              
              
              
              (0.4
              )
              
              
              —Corporate-Covalence
              
              
              —
              
              
              
              —
              
              
              
              (16.8
              )
              
              
              (5.6
              )$
              111.4
              
              
              $
              67.4
              
              
              $
              7.7
              
              
              $
              26.9Depreciation
      and amortizationFlexible
      Films
              
              $
              42.3
              
              
              $
              51.2
              
              
              $
              27.6
              
              
              $
              9.6Tapes
      and Coatings
              
              
              35.7
              
              
              
              38.4
              
              
              
              22.6
              
              
              
              5.9Rigid
      Open Top
              
              
              88.0
              
              
              
              77.3
              
              
              
              2.1
              
              
              
              —Rigid
      Closed Top
              
              
              90.8
              
              
              
              53.3
              
              
              
              1.4
              
              
              
              —Corporate-Covalence
              
              
              —
              
              
              
              —
              
              
              
              0.9
              
              
              
              0.1$
              256.8
              
              
              $
              220.2
              
              
              $
              54.6
              
              
              $
              15.6




F-37


September
      27,
              2008
            
            
            September
      29,
              2007Total
      AssetsFlexible
      Films
            
            $
            637.8
            
            
            $
            683.5Tapes
      and Coatings
            
            
            417.9
            
            
            
            414.8Rigid
      Open Top
            
            
            2,019.6
            
            
            
            1,746.6Rigid
      Closed Top
            
            
            1,648.8
            
            
            
            1,024.5$
            4,724.1
            
            
            $
            3,869.4GoodwillFlexible
      Films
            
            $
            23.3
            
            
            $
            23.7Tapes
      and Coatings
            
            
            5.8
            
            
            
            5.8Rigid
      Open Top
            
            
            646.3
            
            
            
            646.3Rigid
      Closed Top
            
            
            773.9
            
            
            
            456.2$
            1,449.3
            
            
            $
            1,132.0





13.  Guarantor
and Non-Guarantor Financial Information





Berry, a
wholly owned subsidiary of Berry Plastics Group, Inc., has notes outstanding
which are fully and unconditionally guaranteed by Berry’s domestic
subsidiaries.  Separate financial statements and other disclosures
concerning the Parent Company and Guarantor Subsidiaries are not presented
because they are 100% wholly-owned by the Parent Company and Guarantor
Subsidiaries have fully and unconditionally guaranteed such debt on a joint and
several basis.  The following tables present consolidating financial
information for the Parent Company, Guarantor Subsidiaries and Non-Guarantor
Subsidiaries of Berry.  The equity method of accounting is used to
reflect investments of the Parent Company in its Guarantor and Non-Guarantor
Subsidiaries.  Total equity includes our investment in parent, net,
capital stock and intercompany balances.  All intercompany sales
transactions have been eliminated within the respective columns after the merger
of Old Berry Holding and Old Covalence on April 3, 2007.  The
principal elimination entries eliminate investments in subsidiaries and
intercompany balances and transactions. More than 95% of the Company’s revenue
is in North America.  In addition, more than 95% of the Company’s
property and equipment is located in North America.  The Company has
restated its previously reported financial information for the period from
October 1, 2005 through February 16, 2006, to correctly present the financial
information of the Parent Company and Guarantor Subsidiaries separately in
accordance with Rule 3-10(f) of Regulation S-X.





F-38


Condensed
Supplemental Consolidated or Combined Statement of Operations








(Company)
            
            Year
      ended September 27, 2008Parent
              Company
            
            
            Guarantor
              Subsidiaries
            
            
            Non-
              Guarantor
              Subsidiaries
            
            
            Eliminations
            
            
            TotalNet
      sales, including related party revenue
            
            $
            974.3
            
            
            $
            2,287.1
            
            
            $
            251.7
            
            
            $
            —
            
            
            $
            3,513.1Cost
      of sales
            
            
            900.2
            
            
            
            1,894.2
            
            
            
            224.9
            
            
            
            —
            
            
            
            3,019.3Gross
      profit
            
            
            74.1
            
            
            
            392.9
            
            
            
            26.8
            
            
            
            —
            
            
            
            493.8Selling,
      general and administrative expenses
            
            
            91.0
            
            
            
            224.9
            
            
            
            24.1
            
            
            
            —
            
            
            
            340.0Restructuring
      and impairment charges, net
            
            
            6.2
            
            
            
            3.4
            
            
            
            —
            
            
            
            —
            
            
            
            9.6Other
      operating expenses
            
            
            18.4
            
            
            
            10.2
            
            
            
            4.2
            
            
            
            —
            
            
            
            32.8Operating
      income
            
            
            (41.5
            )
            
            
            154.4
            
            
            
            (1.5
            )
            
            
            —
            
            
            
            111.4Other
      (income) expense
            
            
            —
            
            
            
            (0.1
            )
            
            
            0.1
            
            
            
            —
            
            
            
            —Interest
      expense, net
            
            
            309.9
            
            
            
            (57.2
            )
            
            
            9.0
            
            
            
            —
            
            
            
            261.7Income
      (loss) before income taxes
            
            
            (351.4
            )
            
            
            211.7
            
            
            
            (10.6
            )
            
            
            —
            
            
            
            (150.3
            )Income
      tax expense (benefit)
            
            
            0.3
            
            
            
            (54.0
            )
            
            
            4.5
            
            
            
            —
            
            
            
            (49.2
            )Net
      income (loss)
            
            $
            (351.7
            )
            
            $
            265.7
            
            
            $
            (15.1
            )
            
            $
            —
            
            
            $
            (101.1
            )








(Company)
            
            Year
      ended September 29, 2007Parent
              Company
            
            
            Guarantor
              Subsidiaries
            
            
            Non-
              Guarantor
              Subsidiaries
            
            
            Eliminations
            
            
            TotalNet
      sales, including related party revenue
            
            $
            973.4
            
            
            $
            1,910.4
            
            
            $
            187.0
            
            
            $
            (15.8
            )
            
            $
            3,055.0Cost
      of sales
            
            
            888.1
            
            
            
            1,542.2
            
            
            
            168.9
            
            
            
            (15.8
            )
            
            
            2,583.4Gross
      profit
            
            
            85.3
            
            
            
            368.2
            
            
            
            18.1
            
            
            
            —
            
            
            
            471.6Selling,
      general and administrative expenses
            
            
            (78.6
            )
            
            
            388.0
            
            
            
            12.6
            
            
            
            (0.5
            )
            
            
            321.5Restructuring
      and impairment charges, net
            
            
            39.1
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            39.1Other
      operating expenses
            
            
            18.1
            
            
            
            23.6
            
            
            
            1.9
            
            
            
            —
            
            
            
            43.6Operating
      income
            
            
            106.7
            
            
            
            (43.4
            )
            
            
            3.6
            
            
            
            0.5
            
            
            
            67.4Loss
      on extinguished debt
            
            
            15.4
            
            
            
            21.9
            
            
            
            —
            
            
            
            —
            
            
            
            37.3Interest
      expense, net
            
            
            266.5
            
            
            
            (10.9
            )
            
            
            2.2
            
            
            
            (20.2
            )
            
            
            237.6Equity
      in net income  of subsidiaries
            
            
            (9.4
            )
            
            
            (2.0
            )
            
            
            —
            
            
            
            11.4
            
            
            
            —Income
      (loss) before income taxes
            
            
            (165.8
            )
            
            
            (52.4
            )
            
            
            1.4
            
            
            
            9.3
            
            
            
            (207.5
            )Minority
      interest
            
            
            (2.7
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (2.7
            )Income
      tax expense (benefit)
            
            
            (18.0
            )
            
            
            (72.7
            )
            
            
            2.1
            
            
            
            —
            
            
            
            (88.6
            )Net
      income (loss)
            
            $
            (145.1
            )
            
            $
            20.3
            
            
            $
            (0.7
            )
            
            $
            9.3
            
            
            $
            (116.2
            )





F-39





(Company)
            
            Period
      from February 17, 2006 to September 30, 2006Parent
              Company
            
            
            Guarantor
              Subsidiaries
            
            
            Non-
              Guarantor
              Subsidiaries
            
            
            Eliminations
            
            
            TotalNet
      sales, including related party revenue
            
            $
            666.8
            
            
            $
            385.8
            
            
            $
            109.4
            
            
            $
            (23.2
            )
            
            $
            1,138.8Cost
      of sales
            
            
            619.6
            
            
            
            329.0
            
            
            
            93.1
            
            
            
            (18.8
            )
            
            
            1,022.9Gross
      profit
            
            
            47.2
            
            
            
            56.8
            
            
            
            16.3
            
            
            
            (4.4
            )
            
            
            115.9Selling,
      general and administrative expenses
            
            
            59.9
            
            
            
            41.0
            
            
            
            6.8
            
            
            
            —
            
            
            
            107.7Restructuring
      and impairment charges, net
            
            
            —
            
            
            
            0.5
            
            
            
            —
            
            
            
            —
            
            
            
            0.5Operating
      income
            
            
            (12.7
            )
            
            
            15.3
            
            
            
            9.5
            
            
            
            (4.4
            )
            
            
            7.7Other
      (income) expense
            
            
            (1.4
            )
            
            
            (5.0
            )
            
            
            5.1
            
            
            
            —
            
            
            
            (1.3
            )Loss
      on extinguished debt
            
            
            54.6
            
            
            
            —
            
            
            
            1.0
            
            
            
            —
            
            
            
            55.6Interest
      expense, net.
            
            
            1.0
            
            
            
            3.4
            
            
            
            0.1
            
            
            
            —
            
            
            
            4.5Equity
      in net income of subsidiaries
            
            
            17.8
            
            
            
            (0.3
            )
            
            
            —
            
            
            
            (17.5
            )
            
            
            —Income
      (loss) before income taxes
            
            
            (49.1
            )
            
            
            16.6
            
            
            
            3.3
            
            
            
            (21.9
            )
            
            
            (51.1
            )Minority
      interest.
            
            
            (1.8
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (1.8
            )Income
      tax expense (benefit)
            
            
            (16.1
            )
            
            
            (3.7
            )
            
            
            1.7
            
            
            
            —
            
            
            
            (18.1
            )Net
      income (loss)
            
            $
            (31.2
            )
            
            $
            20.3
            
            
            $
            1.6
            
            
            $
            (21.9
            )
            
            $
            (31.2
            )








(Predecessor)
            
            Period
      from October 1, 2005 to February 16, 2006Parent
              Company
            
            
            Guarantor
              Subsidiaries
            
            
            Non-
              Guarantor
              Subsidiaries
            
            
            Eliminations
            
            
            TotalNet
      sales, including related party revenue
            
            $
            420.4
            
            
            $
            196.3
            
            
            $
            52.8
            
            
            $
            (2.6
            )
            
            $
            666.9Cost
      of sales
            
            
            369.6
            
            
            
            168.5
            
            
            
            43.1
            
            
            
            (2.2
            )
            
            
            579.0Gross
      profit
            
            
            50.8
            
            
            
            27.8
            
            
            
            9.7
            
            
            
            (0.4
            )
            
            
            87.9Charges
      and allocations from Tyco International,
              Ltd.
      and affiliates
            
            
            1.3
            
            
            
            9.1
            
            
            
            —
            
            
            
            —
            
            
            
            10.4Selling,
      general and administrative expenses
            
            
            28.7
            
            
            
            17.6
            
            
            
            3.7
            
            
            
            —
            
            
            
            50.0Restructuring
      and impairment charges, net
            
            
            0.6
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            0.6Operating
      income
            
            
            20.2
            
            
            
            1.1
            
            
            
            6.0
            
            
            
            (0.4
            )
            
            
            26.9Other
      (income) expense
            
            
            7.9
            
            
            
            (9.6
            )
            
            
            1.7
            
            
            
            —
            
            
            
            —Interest
      expense, net
            
            
            1.6
            
            
            
            0.1
            
            
            
            0.4
            
            
            
            —
            
            
            
            2.1Interest
      expense (income), net – Tyco
              International
      Ltd. and affiliates
            
            
            7.8
            
            
            
            (2.3
            )
            
            
            —
            
            
            
            —
            
            
            
            5.5Equity
      in net income of subsidiaries
            
            
            14.8
            
            
            
            —
            
            
            
            —
            
            
            
            (14.8
            )
            
            
            —Income
      (loss) before income taxes
            
            
            17.7
            
            
            
            12.9
            
            
            
            3.9
            
            
            
            (15.2
            )
            
            
            19.3Income
      tax expense (benefit)
            
            
            —
            
            
            
            —
            
            
            
            1.6
            
            
            
            —
            
            
            
            1.6Net
      income (loss)
            
            $
            17.7
            
            
            $
            12.9
            
            
            $
            2.3
            
            
            $
            (15.2
            )
            
            $
            17.7








F-40


Condensed
Supplemental Consolidated Balance Sheet


As
of September 27, 2008


($
in millions)


Parent
              Company
            
            
            Guarantor
              Subsidiaries
            
            
            Non-
              Guarantor
              Subsidiaries
            
            
            Eliminations
            
            
            TotalAssetsCurrent
      assets:Cash
      and cash equivalents
            
            $
            172.6
            
            
            $
            8.7
            
            
            $
            8.4
            
            
            $
            —
            
            
            $
            189.7Accounts
      receivable, net of allowance
            
            
            116.1
            
            
            
            266.1
            
            
            
            40.3
            
            
            
            —
            
            
            
            422.5Inventories
            
            
            140.7
            
            
            
            327.3
            
            
            
            32.3
            
            
            
            —
            
            
            
            500.3Prepaid
      expenses and other current
            
            
            3.8
            
            
            
            70.1
            
            
            
            10.7
            
            
            
            —
            
            
            
            84.6Total
      current assets
            
            
            433.2
            
            
            
            672.2
            
            
            
            91.7
            
            
            
            —
            
            
            
            1,197.1Property,
      plant and equipment, net
            
            
            201.2
            
            
            
            610.9
            
            
            
            50.7
            
            
            
            —
            
            
            
            862.8Intangible
      assets, net
            
            
            216.2
            
            
            
            2,378.3
            
            
            
            67.7
            
            
            
            —
            
            
            
            2,662.2Investment
      in Subsidiaries
            
            
            1,872.6
            
            
            
            —
            
            
            
            —
            
            
            
            (1,872.6
            )
            
            
            —Other
      assets
            
            
            2.0
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            2.0Total
      Assets
            
            $
            2,725.2
            
            
            $
            3,661.4
            
            
            $
            210.1
            
            
            $
            (1,872.6
            )
            
            $
            4,724.1Liabilities
      and EquityCurrent
      liabilities:Accounts
      payable
            
            $
            61.0
            
            
            $
            177.0
            
            
            $
            15.8
            
            
            $
            —
            
            
            $
            253.8Accrued
      and other current liabilities
            
            
            72.3
            
            
            
            122.5
            
            
            
            11.8
            
            
            
            —
            
            
            
            206.6Long-term
      debt—current portion
            
            
            12.0
            
            
            
            9.1
            
            
            
            0.3
            
            
            
            —
            
            
            
            21.4Total
      current liabilities
            
            
            145.3
            
            
            
            308.6
            
            
            
            27.9
            
            
            
            —
            
            
            
            481.8Long-term
      debt
            
            
            3,548.9
            
            
            
            28.6
            
            
            
            0.7
            
            
            
            —
            
            
            
            3,578.2Deferred
      tax liabilities
            
            
            (2.0
            )
            
            
            203.4
            
            
            
            10.9
            
            
            
            —
            
            
            
            212.3Other
      non current liabilities
            
            
            33.1
            
            
            
            64.7
            
            
            
            2.1
            
            
            
            —
            
            
            
            99.9Total
      long-term liabilities
            
            
            3,580.0
            
            
            
            298.2
            
            
            
            13.7
            
            
            
            —
            
            
            
            3,891.9Total
      Liabilities
            
            
            3,725.3
            
            
            
            605.3
            
            
            
            41.6
            
            
            
            —
            
            
            
            4,372.2Commitments
      and contingenciesTotal
      Equity
            
            
            (1,000.1
            )
            
            
            3,056.1
            
            
            
            168.5
            
            
            
            (1,872.6
            )
            
            
            351.9Total
      Liabilities and Equity
            
            $
            2,725.2
            
            
            $
            3,661.4
            
            
            $
            210.1
            
            
            $
            (1,872.6
            )
            
            $
            4,724.1


F-41


Condensed
Supplemental Consolidated Balance Sheet


As
of September 29, 2007


($
in millions)


Parent
              Company
            
            
            Guarantor
              Subsidiaries
            
            
            Non-
              Guarantor
              Subsidiaries
            
            
            Eliminations
            
            
            TotalAssetsCurrent
      assets:Cash
      and cash equivalents
            
            $
            0.9
            
            
            $
            7.7
            
            
            $
            6.0
            
            
            $
            —
            
            
            $
            14.6Accounts
      receivable, net of allowance
            
            
            135.9
            
            
            
            207.9
            
            
            
            28.7
            
            
            
            —
            
            
            
            372.5Inventories
            
            
            138.4
            
            
            
            221.6
            
            
            
            25.3
            
            
            
            —
            
            
            
            385.3Prepaid
      expenses and other current
            
            
            3.0
            
            
            
            52.4
            
            
            
            12.0
            
            
            
            —
            
            
            
            67.4Total
      current assets
            
            
            278.2
            
            
            
            489.6
            
            
            
            72.0
            
            
            
            —
            
            
            
            839.8Property,
      plant and equipment, net
            
            
            211.7
            
            
            
            538.9
            
            
            
            34.4
            
            
            
            —
            
            
            
            785.0Intangible
      assets, net
            
            
            218.8
            
            
            
            2,007.1
            
            
            
            16.2
            
            
            
            —
            
            
            
            2,242.1Investment
      in Subsidiaries
            
            
            1,588.6
            
            
            
            —
            
            
            
            —
            
            
            
            (1,588.6
            )
            
            
            —Other
      assets
            
            
            2.3
            
            
            
            0.2
            
            
            
            —
            
            
            
            —
            
            
            
            2.5Total
      Assets
            
            $
            2,299.6
            
            
            $
            3,035.8
            
            
            $
            122.6
            
            
            $
            (1,588.6
            )
            
            $
            3,869.4Liabilities
      and EquityCurrent
      liabilities:Accounts
      payable
            
            $
            109.7
            
            
            $
            140.2
            
            
            $
            13.3
            
            
            $
            —
            
            
            $
            263.2Accrued
      and other current liabilities
            
            
            78.4
            
            
            
            100.9
            
            
            
            10.1
            
            
            
            —
            
            
            
            189.4Long-term
      debt—current portion
            
            
            12.0
            
            
            
            5.1
            
            
            
            0.3
            
            
            
            —
            
            
            
            17.4Total
      current liabilities
            
            
            200.1
            
            
            
            246.2
            
            
            
            23.7
            
            
            
            —
            
            
            
            470.0Long-term
      debt
            
            
            2,675.2
            
            
            
            16.9
            
            
            
            1.2
            
            
            
            —
            
            
            
            2,693.3Deferred
      tax liabilities
            
            
            31.1
            
            
            
            183.9
            
            
            
            2.7
            
            
            
            —
            
            
            
            217.7Other
      non current liabilities
            
            
            20.3
            
            
            
            15.2
            
            
            
            2.9
            
            
            
            —
            
            
            
            38.4Total
      long-term liabilities
            
            
            2,726.6
            
            
            
            216.0
            
            
            
            6.8
            
            
            
            —
            
            
            
            2,949.4Total
      Liabilities
            
            
            2,926.7
            
            
            
            462.2
            
            
            
            30.5
            
            
            
            —
            
            
            
            3,419.4Commitments
      and contingenciesTotal
      Equity
            
            
            (627.1
            )
            
            
            2,573.6
            
            
            
            92.1
            
            
            
            (1,588.6
            )
            
            
            450.0Total
      Liabilities and Equity
            
            $
            2,299.6
            
            
            $
            3,035.8
            
            
            $
            122.6
            
            
            $
            (1,588.6
            )
            
            $
            3,869.4


F-42


Condensed
Supplemental Consolidated or Combined Statement of Cash Flows





(Company)
            
            Year
      ended September 27, 2008Parent
              Company
            
            
            Guarantor
              Subsidiaries
            
            
            Non-
              Guarantor
              Subsidiaries
            
            
            Eliminations
            
            
            TotalCash
      Flow from Operating Activities
            
            $
            (32.5
            )
            
            $
            37.5
            
            
            $
            4.8
            
            
            $
            —
            
            
            $
            (9.8
            )Cash
      Flow from Investing ActivitiesPurchase
      of property, plant, and equipment
            
            
            (40.8
            )
            
            
            (119.5
            )
            
            
            (2.1
            )
            
            
            —
            
            
            
            (162.4
            )Proceeds
      from disposal of assets
            
            
            —
            
            
            
            83.0
            
            
            
            —
            
            
            
            —
            
            
            
            83.0Acquisition
      of business net of cash acquired
            
            
            (576.2
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (576.2
            )Net
      cash used in investing activities
            
            
            (617.0
            )
            
            
            (36.5
            )
            
            
            (2.1
            )
            
            
            —
            
            
            
            (655.6
            )Cash
      Flow from Financing ActivitiesBorrowings
      of long-term debt
            
            
            1,388.5
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            1,388.8Equity
      contributions
            
            
            (0.5
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (0.5
            )Repayment
      of long-term debt
            
            
            (542.8
            )
            
            
            —
            
            
            
            (0.2
            )
            
            
            —
            
            
            
            (543.0
            )Debt
      financing costs
            
            
            (26.4
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (26.4
            )Sales
      of interest rate hedges
            
            
            2.4
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            2.4Net
      cash provided by financing activities
            
            
            821.2
            
            
            
            —
            
            
            
            (0.2
            )
            
            
            —
            
            
            
            821.0Effect
      of currency translation on cash
            
            
            —
            
            
            
            —
            
            
            
            (0.1
            )
            
            
            —
            
            
            
            (0.1
            )Net
      increase in cash and cash equivalents
            
            
            171.7
            
            
            
            1.0
            
            
            
            2.4
            
            
            
            —
            
            
            
            175.1Cash
      and cash equivalents at beginning of period
            
            
            0.9
            
            
            
            7.7
            
            
            
            6.0
            
            
            
            —
            
            
            
            14.6Cash
      and cash equivalents at end of period
            
            $
            172.6
            
            
            $
            8.7
            
            
            $
            8.4
            
            
            $
            —
            
            
            $
            189.7





(Company)
            
            Year
      ended September 29, 2007Parent
              Company
            
            
            Guarantor
              Subsidiaries
            
            
            Non-
              Guarantor
              Subsidiaries
            
            
            Eliminations
            
            
            TotalCash
      Flow from Operating Activities
            
            $
            23.6
            
            
            $
            115.6
            
            
            $
            (1.9
            )
            
            $
            —
            
            
            $
            137.3Cash
      Flow from Investing ActivitiesPurchase
      of property, plant, and equipment
            
            
            (16.4
            )
            
            
            (75.7
            )
            
            
            (7.2
            )
            
            
            —
            
            
            
            (99.3
            )Proceeds
      from disposal of assets
            
            
            —
            
            
            
            0.8
            
            
            
            10.0
            
            
            
            —
            
            
            
            10.8Acquisition
      of business net of cash acquired
            
            
            (30.0
            )
            
            
            (45.8
            )
            
            
            —
            
            
            
            —
            
            
            
            (75.8
            )Net
      cash used in investing activities
            
            
            (46.4
            )
            
            
            (120.7
            )
            
            
            2.8
            
            
            
            —
            
            
            
            (164.3
            )Cash
      Flow from Financing ActivitiesBorrowings
      of long-term debt
            
            
            1,232.6
            
            
            
            —
            
            
            
            0.4
            
            
            
            —
            
            
            
            1,233.0Equity
      contributions
            
            
            (102.5
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (102.5
            )Repayment
      of long-term debt
            
            
            (1,159.0
            )
            
            
            (2.2
            )
            
            
            —
            
            
            
            —
            
            
            
            (1,161.2
            )Debt
      financing costs
            
            
            (9.7
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (9.7
            )Net
      cash provided by financing activities
            
            
            (38.6
            )
            
            
            (2.2
            )
            
            
            0.4
            
            
            
            —
            
            
            
            (40.4
            )Effect
      of currency translation on cash
            
            
            —
            
            
            
            —
            
            
            
            (1.1
            )
            
            
            —
            
            
            
            (1.1
            )Net
      increase in cash and cash equivalents
            
            
            (61.4
            )
            
            
            (7.3
            )
            
            
            0.2
            
            
            
            —
            
            
            
            (68.5
            )Cash
      and cash equivalents at beginning of period
            
            
            62.3
            
            
            
            15.0
            
            
            
            5.8
            
            
            
            —
            
            
            
            83.1Cash
      and cash equivalents at end of period
            
            $
            0.9
            
            
            $
            7.7
            
            
            $
            6.0
            
            
            $
            —
            
            
            $
            14.6




F-43





(Company)
            
            Period
      from February 17 to September 30, 2006Parent
              Company
            
            
            Guarantor
              Subsidiaries
            
            
            Non-
              Guarantor
              Subsidiaries
            
            
            Eliminations
            
            
            TotalCash
      Flow from Operating Activities
            
            $
            50.8
            
            
            $
            45.1
            
            
            $
            0.8
            
            
            $
            —
            
            
            $
            96.7Cash
      Flow from Investing ActivitiesPurchase
      of property, plant, and equipment
            
            
            (18.7
            )
            
            
            (15.4
            )
            
            
            (0.7
            )
            
            
            —
            
            
            
            (34.8
            )Proceeds
      from disposal of assets
            
            
            0.6
            
            
            
            —
            
            
            
            0.2
            
            
            
            —
            
            
            
            0.8Acquisition
      of business net of cash acquired
            
            
            (3,205.7
            )
            
            
            (14.7
            )
            
            
            2.4
            
            
            
            —
            
            
            
            (3,218.0
            )Net
      cash used in investing activities
            
            
            (3,223.80
            )
            
            
            (30.1
            )
            
            
            1.9
            
            
            
            —
            
            
            
            (3,252.0
            )Cash
      Flow from Financing ActivitiesIssuance
      of long-term debt
            
            
            2,653.4
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            2,653.4Equity
      contributions
            
            
            680.8
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            680.8Repayment
      of long-term debt
            
            
            (50.7
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (50.7
            )Long-term
      debt financing costs
            
            
            (25.2
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (25.2
            )Long-term
      debt refinancing costs
            
            
            (45.8
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (45.8
            )Net
      cash provided by financing activities
            
            
            3,212.5
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            3,212.5Effect
      of currency translation on cash
            
            
            —
            
            
            
            —
            
            
            
            (1.1
            )
            
            
            —
            
            
            
            (1.1
            )Net
      increase in cash and cash equivalents
            
            
            39.5
            
            
            
            15.0
            
            
            
            1.6
            
            
            
            —
            
            
            
            56.1Cash
      and cash equivalents at beginning of period
            
            
            22.8
            
            
            
            —
            
            
            
            4.2
            
            
            
            —
            
            
            
            27.0Cash
      and cash equivalents at end of period
            
            $
            62.3
            
            
            $
            15.0
            
            
            $
            5.8
            
            
            $
            —
            
            
            $
            83.1





(Predecessor)
            
            Period
      from October 1, 2005 to February 16, 2006Parent
              Company
            
            
            Guarantor
              Subsidiaries
            
            
            Non-
              Guarantor
              Subsidiaries
            
            
            Eliminations
            
            
            TotalCash
      Flow from Operating Activities
            
            $
            (126.2
            )
            
            $
            3.8
            
            
            $
            3.2
            
            
            $
            —
            
            
            $
            (119.2
            )Cash
      Flow from Investing ActivitiesPurchase
      of property, plant, and equipment
            
            
            (9.2
            )
            
            
            (2.8
            )
            
            
            (0.2
            )
            
            
            —
            
            
            
            (12.2
            )Proceeds
      from disposal of assets
            
            
            3.0
            
            
            
            —
            
            
            
            0.1
            
            
            
            —
            
            
            
            3.1Acquisition
      of business net of cash acquired
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Net
      cash used in investing activities
            
            
            (6.2
            )
            
            
            (2.8
            )
            
            
            (0.1
            )
            
            
            —
            
            
            
            (9.1
            )Cash
      Flow from Financing ActivitiesChange
      in book overdraft
            
            
            (9.8
            )
            
            
            (4.4
            )
            
            
            —
            
            
            
            —
            
            
            
            (14.2
            )Payments
      of capital lease obligations
            
            
            (59.4
            )
            
            
            (20.0
            )
            
            
            —
            
            
            
            —
            
            
            
            (79.4
            )Distributions
      to minority interests
            
            
            (2.2
            )
            
            
            (0.6
            )
            
            
            2.8
            
            
            
            —
            
            
            
            —Change
      in Predecessor parent company investment
            
            
            203.8
            
            
            
            24.4
            
            
            
            (4.0
            )
            
            
            —
            
            
            
            224.2Net
      cash provided by financing activities
            
            
            132.4
            
            
            
            (0.6
            )
            
            
            (1.2
            )
            
            
            —
            
            
            
            130.6Effect
      of currency translation on cash
            
            
            —
            
            
            
            —
            
            
            
            (0.2
            )
            
            
            —
            
            
            
            (0.2
            )Net
      increase in cash and cash equivalents
            
            
            —
            
            
            
            0.4
            
            
            
            1.7
            
            
            
            —
            
            
            
            2.1Cash
      and cash equivalents at beginning of period
            
            
            —
            
            
            
            0.1
            
            
            
            2.6
            
            
            
            —
            
            
            
            2.7Cash
      and cash equivalents at end of period
            
            $
            —
            
            
            $
            0.5
            
            
            $
            4.3
            
            
            $
            —
            
            
            $
            4.8





F-44


14.  Quarterly
Financial Data (Unaudited)





The
following table contains selected unaudited quarterly financial data for fiscal
years 2008 and 2007.





2008
            
            
            2007First
            
            
            Second
            
            
            Third
            
            
            Fourth
            
            
            First
            
            
            Second
            
            
            Third
            
            
            FourthNet
      sales
            
            $
            762.7
            
            
            $
            844.3
            
            
            $
            939.9
            
            
            $
            966.2
            
            
            $
            703.6
            
            
            $
            741.6
            
            
            $
            807.3
            
            
            $
            802.5Cost
      of sales
            
            
            653.9
            
            
            
            731.9
            
            
            
            800.8
            
            
            
            832.7
            
            
            
            617.2
            
            
            
            619.9
            
            
            
            667.9
            
            
            
            678.4Gross
      profit
            
            $
            108.8
            
            
            $
            112.4
            
            
            $
            139.1
            
            
            $
            133.5
            
            
            $
            86.4
            
            
            $
            121.7
            
            
            $
            139.4
            
            
            $
            124.1Net
      income (loss)
            
            $
            (31.3
            )
            
            $
            (29.3
            )
            
            $
            (11.2
            )
            
            $
            (29.3
            )
            
            $
            (30.3
            )
            
            $
            (14.1
            )
            
            $
            (46.0
            )
            
            $
            (25.8
            )





15.  Subsequent
Events





In
November 2008, Berry acquired certain assets of Erie County Plastics Corporation
("Erie Plastics"),  a custom injection molder of plastics packaging and
components.  Erie Plastics previously filed for bankruptcy protection
on September 29, 2008.  Berry was the successful bidder for the majority of
the assets of Erie Plastics including equipment, inventory and other tangible
and intangible assets.  Total
value for Erie Plastics’ assets was approximately $6.5 million which included
approximately $1.0 million of cash on hand at Erie Plastics and approximately
$1.8 million of accounts receivable that were retained by the senior secured
lenders.  The remaining $3.7 million was paid by Berry from available
cash on hand.




In
December 2008, the Company announced the intention to shut down a manufacturing
facility within its rigid closed top division located in Redlands, California
which the Company acquired in connection with the Captive
acquisition.  The business from this facility will be moved to the
Anaheim, California facility.





In
December 2008, the Company announced that it would be eliminating approximately
71 positions at its Albertville, AL production facility in its Tapes and
Coatings segment.





Due to
recent volatility in the credit markets, our investment assets that are held by
our various pension plans have declined in value.  The fair value of
our pension plan assets have decreased from approximately $41.2 million as of
September 29, 2007 to $34.8 million as of November 30, 2008.  This
decrease in the fair value of the pension assets has increased our liability and
our potential funding obligations of these plans.





In
December 2008, the Executive Committee of Berry Group modified the vesting
provisions related to the $33.0 million being held in escrow from the June 2007
special dividend.








F-45


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 15th day of December, 2008.





BERRY PLASTICS
CORPORATION











By/s/
Ira G. Boots


Ira G.
Boots


Chairman 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, Chief Executive Officer and Director (Principal
      Executive Officer)
            December
      15, 2008Ira
      G. Boots/s/
      James M. Kratochvil
            Executive
      Vice President, Chief Financial Officer, Treasurer and Secretary
      (Principal Financial and Accounting Officer)
            December
      15, 2008James
      M. Kratochvil/s/
      Robert V. Seminara
            Director
            December
      15, 2008Robert
      V. Seminara/s/
      Anthony M. Civale
            Director
            December
      15, 2008Anthony
      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
Registrant has not sent any annual report or proxy material to security
holders.






S-2




Exhibit
                  No.
              Description
      of Exhibit2.1
              Agreement
      and Plan of Merger and Corporate Reorganization, dated as of March 9,
      2007, between Covalence Specialty Materials Holding Corp. and Berry
      Plastics Group, Inc. (incorporated herein by reference to our Registration
      Statement Form S-4, filed on May 14, 2007)4.1
              Indenture,
      by and between Berry Plastics Corporation, as Issuer, certain Guarantors
      and Wells Fargo Bank, National Association, as Trustee, relating to first
      priority floating rate senior secured notes due 2015, dated as of April
      21, 2008 (incorporated herein by reference to Exhibit 4.1 to our Current
      Report on Form 8-K, filed on April 22, 2008)4.2
              Collateral
      Agreement, by and between Berry Plastics Corporation, each Subsidiary of
      the Company identified therein and Wells Fargo Bank, National Association,
      as Collateral Agent, dated as of April 21, 2008 (incorporated herein by
      reference to Exhibit 4.2 to our Current Report on Form 8-K, filed on April
      22, 2008)4.3
              Registration
      Rights Agreement, by and between Berry Plastics Corporation, each
      Subsidiary of the Company identified therein, Banc of America Securities
      LLC, Goldman, Sachs & Co. and Lehman Brothers Inc., dated as of April
      21, 2008 (incorporated herein by reference to Exhibit 4.3 to our Current
      Report on Form 8-K, filed on April 22, 2008)10.1
              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)10.2
              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)10.3
              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)10.4
              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)10.5(a)
              U.S.
      $400,000,000 Amended and Restated Credit Agreement, dated as of April 3,
      2007, by and among Covalence Specialty Materials Corp., Berry Plastics
      Group, Inc., certain domestic subsidiaries party thereto from time to
      time, Bank of America, N.A., as collateral agent and administrative agent,
      the lenders party thereto from time to time, and the financial
      institutions party thereto (incorporated herein by reference to Exhibit
      10.1(a) to our Current Report on Form 8-K, filed on April 10,
      2007)10.5(b)
              U.S.
      $1,200,000,000 Second Amended and Restated Credit Agreement, dated as of
      April 3, 2007, by and among Covalence Specialty Materials Corp., Berry
      Plastics Group, Inc., Credit Suisse, Cayman Islands Branch, as collateral
      and administrative agent, the lenders party thereto from time to time, and
      the other financial institutions party thereto (incorporated herein by
      reference to Exhibit 10.1(b) to our Current Report on Form 8-K, filed on
      April 10, 2007).
  
  10.5(c)
              Amended
      and Restated Intercreditor Agreement by and among Berry Plastics Group,
      Inc., Covalence Specialty Materials Corp., certain subsidiaries identified
      as parties thereto, Bank of America, N.A. and Credit Suisse, Cayman
      Islands Branch  as first lien agents, and Wells Fargo Bank,
      N.A., as trustee (incorporated herein by reference to Exhibit 10.1(d) to
      our Current Report on Form 8-K, filed on April 10,
2007)10.5(d)
              Indenture
      dated as of  February 16, 2006, among Covalence Specialty
      Materials Corp., the Guarantors named therein and Wells Fargo Bank,
      National Association, as trustee (incorporated herein by reference to
      Exhibit 10.1(e) to our Current Report on Form 8-K, filed on April 10,
      2007).10.5(e)
              First
      Supplemental Indenture dated as of  April 3, 2007, among
      Covalence Specialty Materials Corp. (or its successor), the Guarantors
      identified on the signature pages thereto and Wells Fargo Bank, National
      Association, as trustee (incorporated herein by reference to Exhibit
      10.1(f) to our Current Report on Form 8-K, filed on April 10,
      2007)10.5(f)
              Second
      Supplemental Indenture dated as of  April 3, 2007, among
      Covalence Specialty Materials Corp. (or its successor), Berry Plastics
      Holding Corporation, the Guarantors identified on the signature pages
      thereto and Wells Fargo Bank, National Association, as trustee
      (incorporated herein by reference to Exhibit 10.1(g) to our Current Report
      on Form 8-K, filed on April 10, 2007)10.5(g)
              Second
      Supplemental Indenture dated as of April 3, 2007, among Berry Plastics
      Holding Corporation (or its successor), the existing Guarantors identified
      on the signature pages thereto, the new Guarantors identified on the
      signature pages thereto and Wells Fargo Bank, National Association, as
      trustee (incorporated herein by reference to Exhibit 10.1(h) to our
      Current Report on Form 8-K, filed on April 10, 2007)10.5(h)
              Second
      Supplemental Indenture dated as of April 3, 2007, among Berry Plastics
      Holding Corporation (or its successor), the existing Guarantors identified
      on the signature pages thereto, the new Guarantors identified on the
      signature pages thereto and Wells Fargo Bank, National Association, as
      trustee (incorporated herein by reference to Exhibit 10.1(i) to our
      Current Report on Form 8-K, filed on April 10, 2007)10.5(i)
              Supplement
      No. 1 dated as of April 3, 2007 to the Collateral Agreement dated as of
      September 20, 2006 among Berry Plastics Holding Corporation, each
      subsidiary identified therein as a party and Wells Fargo Bank, National
      Association, as collateral agent (incorporated herein by reference to
      Exhibit 10.1(j) to our Current Report on Form 8-K, filed on April 10,
      2007)10.5(j)
              Employment
      Agreement dated May 26, 2006 between Covalence Specialty Materials Corp.
      and Layle K. Smith (incorporated herein by reference to Exhibit 10.1(k) to
      our Current Report on Form 8-K, filed on April 10,
      2007).10.5(k)
              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)10.5(l)
              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)
  
  10.5(m)
              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)10.5(n)
              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)10.6
              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 our Registration
      Statement Form S-4, filed on May 14, 2007)10.7
              Termination
      Agreement, by and among Covalence Specialty Materials Holding Corp.,
      Covalence Specialty Materials Corp., and Apollo Management V, L.P., dated
      as of April 3, 2007. (incorporated herein by reference to our Registration
      Statement Form S-4, filed on May 14,2007)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.
      (incorporated herein by reference to our Registration Statement Form S-4,
      filed on May 14,2007)10.20*
                Employment
      Agreement, dated April 3, 2007 between Berry Plastics Corporation and
      Thomas E. Salmon10.21*
                Purchase
      and Sale Agreement, dated as of December 15, 2008, by and between BP
      Parallel Corporation, a Delaware corporation, and Apollo Management VI,
      L.P., a Delaware limited partnership12.1*
                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.