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SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(c)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant / /
Check the appropriate box:
[x] Preliminary Information Statement
/ / Confidential, for use of the Commission only (as permitted by Rule
14a-6 (e) (2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to (S)240.14a-11 (c) or (S)240.14a-12
LEADING EDGE PACKAGING, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
of the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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PRELIMINARY INFORMATION STATEMENT
[LOGO]
350 FIFTH AVENUE
SUITE 3922
NEW YORK, NEW YORK 10118
PRELIMINARY INFORMATION STATEMENT
This information statement is being mailed to the stockholders of Leading
Edge Packaging, Inc. (the "Company") commencing on or about April 24, 1998, to
all stockholders of record on February 27, 1998, in connection with the prior
approval on March 9, 1998, by the board of directors of the Company of the
corporate action referred to below and its subsequent adoption, also on March 9,
1998, by the majority stockholder of the Company, Chung Hwa Development Holdings
Limited (the "Majority Stockholder"). Accordingly, all necessary corporate
approvals in connection with the matter referred to herein have been obtained,
and this Information Statement is furnished solely for the purpose of informing
stockholders, in the manner required under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), of the matter before it takes effect. The total
number of shares of the Common Stock outstanding on February 27, 1998 is
3,312,500.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
The Company, as authorized by the necessary approvals of the board of
directors and the Majority Stockholder, has approved the adoption of an
amendment (the "Amendment") to the Company's Certificate of Incorporation (the
"Certificate") to increase the Company's authorized Common Stock, par value $.01
per share ("Common Stock"), from 5,000,000 shares to 8,000,000 shares.
Specifically, the first sentence of the FOURTH Article of the Certificate will
be amended to read as follows: "The total number of shares of common stock which
this corporation is authorized to issue is eight million (8,000,000) shares, par
value $.01 per share." The Amendment is scheduled to take place, on or about May
14, 1998, but no earlier than 20 days from the date this information statement
is first sent to the Company's stockholders.
PURPOSE OF THE AMENDMENT
The Amendment was adopted to facilitate the issuance of 2,250,000 shares of
Common Stock to the Majority Stockholder in exchange for the transfer to the
Company by the Majority Stockholder of all of the outstanding share capital of
Justrite Investments Limited ("Justrite"), pursuant to a certain Share Exchange
Agreement, dated January 23, 1998 (the "Agreement"), by and between the Company
and the Majority Stockholder. Prior to the Exchange, as contemplated in the
Agreement, Justrite was a wholly-owned subsidiary of the Majority Stockholder.
Justrite is the parent company of various subsidiaries described herein.
Justrite is the parent corporation of Leading Edge Packaging Limited (f/k/a
Rich City International Packaging Limited) ("LEP-Hong Kong"), the Company's
supplier of packaging products, which the Company distributes in North America.
LEP-Hong Kong distributes its packaging products directly in other parts of the
world, including Europe and Asia. Justrite also owns 100% of Breakspear Limited,
a British Virgin Islands company, which in turn holds a 60% interest in a joint
venture in the People's Republic of China. LEP-Hong Kong also has a 50% interest
in another joint venture in China. The
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Company believes that the acquisition will enable it to consolidate the
manufacture and distribution of its packaging products and to expand its sales
into additional territories.
The Company believes that the Exchange will provide it with direct control
over the management team of Justrite and its subsidiaries and production
facilities in China and access to a greater market share for its packaging
products in Europe and Asia, formerly territories of LEP-Hong Kong. There can be
no assurance, however, that the Exchange will produce the anticipated results
for the Company. In addition, under a certain Assignment and Distribution
Agreement, dated September 23, 1997, by and between the Company and LEP-Hong
Kong, the Company would have been required to pay to LEP-Hong Kong a royalty in
the amount of $2,000,000 by September 23, 1999. Consummation of the Exchange
will eliminate the royalty requirement specified in the Assignment and
Distribution Agreement.
BACKGROUND
Prior to the Company's initial public offering (the "IPO") on December 5,
1996, LEP-Hong Kong owned all of the Company's outstanding Common Stock. From
the IPO until November 3, 1997, LEP-Hong Kong owned 1,875,000 shares of the
Company's Common Stock, constituting approximately 57% of the issued and
outstanding shares of Common Stock. On November 3, 1997, as part of an internal
corporate restructuring, Rich City transferred all of its shares in the Company
to the Majority Stockholder, making it the Company's direct, rather than
indirect, parent corporation. As a result of the Exchange, the Company will
become the 100% owner of Justrite, the indirect 100% owner of Breakspear
Limited, LEP-Hong Kong, Smart Investments Limited and Circle Round Limited,
(wholly-owned subsidiaries of Justrite) the indirect majority owner of one China
joint venture and the indirect 50% owner of another. Messrs. Lip-Boon Saw and
Richard Fung-Gea Wong are both directors of Justrite, Breakspear and LEP-Hong
Kong.
The Amendment was approved by the Board of Directors by its unanimous
written consent, dated March 9, 1998. The Amendment was also approved by the
Written Consent of the Majority Stockholder, also dated March 9, 1998, pursuant
to Section 228 of the Delaware General Corporation Law. Delaware law requires
approval of the Amendment by a simple majority of the shares of the Common Stock
issued and outstanding. The 57% of the Common Stock held by the Majority
Stockholder constitutes the simple majority required to pass the Amendment. The
Exchange transaction itself was approved by the Company's Board of Directors and
did not require submission to the stockholders under Delaware law. The Company
received a waiver from the Nasdaq National Market of its stockholder approval
requirement.
THE SHARE EXCHANGE AGREEMENT
The Agreement provides that the Company is to acquire all of the outstanding
capital stock of Justrite in exchange for the issuance to the Majority
Stockholder of 2,250,000 shares of the Common Stock, par value $.01 per share.
Aside from the amendment and the issuance of the shares to Chung Hwa, all other
conditions to closing under the Agreement have been satisfied or waived. The
Amendment and the issuance of the Common Stock to the Majority Stockholder will
take place on or about May 14, 1998, or 20 days from the date of mailing of this
Information Statement to the Company's stockholders. Prior to the issuance of
the shares to the Majority Stockholder, it holds 57% of the Common Stock. Upon
issuance of the shares, it will hold 74% of the Common Stock.
The Agreement contains certain warranties by the Majority Stockholder with
respect to Justrite and the subsidiaries. The Agreement limits the liability of
the Majority Stockholder arising under the Agreement to no more than
US$13,500,000. The Agreement also provides for the assumption by the Company of
any guarantees and letters of undertaking by the Majority Stockholder for the
benefit of Justrite or the subsidiaries.
The 2,250,000 shares of Common Stock issuable to the Majority Stockholder
under the Agreement have been valued by the Company and the Majority Stockholder
at $6.00 per share, as specified in the
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Agreement, or US$13,500,000 in the aggregate. The Majority Stockholder
undertakes, pursuant to the Agreement, that in the event the audited net asset
value of Justrite for the year ended March 31, 1998 as reflected in its audited
report and financial statements is less than US$4,500,000, the Majority
Stockholder will pay to the Company, on a US-dollar for US-dollar basis, the
amount of any shortfall. The US$13,500,000 valuation was reached by negotiations
between the parties and takes account of the $4.5 million net asset value
undertaking referred to below, profits generated by Justrite and the
Subsidiaries in prior years and an adjustment for estimated downtime during the
setup of new facilities.
The foregoing discussion contains forward-looking statements which are
inherently subject to risks and uncertainties.
JUSTRITE AND THE SUBSIDIARIES
The following is a summary description of each of Justrite and its
subsidiaries. A table of corporate information for each of them appears as
Appendix I which is attached to this Information Statement.
JUSTRITE
Justrite is an investment holding company for its operating subsidiaries
which are engaged in the manufacture and distribution of packaging products.
Justrite is incorporated in the British Virgin Islands and has its headquarters
in Hong Kong. Prior to the Exchange, 100% of the outstanding share capital of
Justrite was held by the majority stockholder and is being transferred to the
Company in the Exchange.
LEP-HONG KONG
LEP-Hong Kong is the primary operating subsidiary of Justrite. LEP-Hong Kong
is incorporated in Hong Kong. Of the 2,000,000 shares of LEP-Hong Kong
outstanding, 1,999,999 are held by Justrite, and one share is held by a third
party. LEP-Hong Kong coordinates the distribution of packaging products produced
by the other Subsidiaries to its customers throughout Europe, Asia and, through
the Company, to North America. LEP-Hong Kong has a sales force in Hong Kong to
deal directly with its Asian and European customers. The packaging products
distributed by LEP-Hong Kong are essentially the same types of products
distributed by the Company in North America. LEP-Hong Kong owns a 50% interest
in Circle Round Limited and Dongguan Shilong Wah Rich Packaging.
BREAKSPEAR LIMITED
Breakspear Limited is a wholly-owned subsidiary of Justrite. It is
incorporated in the British Virgin Islands. Breakspear serves as a holding
company for a 60% interest in Dongguan Walford Ornaments Packaging Limited, a
manufacturing joint venture in China. Breakspear also performs administrative
services in connection with the distribution of the packaging products. It
serves at the contractual management company for the factories in China. It
purchases all of the products from the China joint ventures and sells them to
LEP-Hong Kong. For tax planning purposes, it retains most of the profits from
these sales.
CIRCLE ROUND LIMITED
Circle Round Limited is a 50% owned subsidiary of Rich City. It is a
property holding company and holds title to the office/showroom/warehouse
premises in Hong Kong, which are used by LEP-Hong Kong.
CHINA JOINT VENTURES
Dongguan Shilong Wah Rich Packaging Limited is a manufacturing joint venture
in China which is 50% owned by LEP-Hong Kong and 50% owned by a China party,
Dongguan City Shek Long Wah Nam Enterprises Company. This is one of two joint
ventures involved in the manufacture of packaging products
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for distribution by the other Subsidiaries. Dongguan Shilong operates pursuant
to a management agreement between Breakspear Limited and the China party. Under
the management agreement, Breakspear Limited is responsible for all of the
assets and liabilities of the joint venture and is entitled to all of the net
profits from its operations after the payment of a fixed amount as a management
fee to the China party each year. Rich City leases property from the China party
for use by the joint venture. Although the actual production of the packaging
products has been transferred from Dongguan Shilong to Dongguan Walford, this
entity is maintained in existence for tax planning purposes.
Dongguan Walford Ornaments Packaging Company Limited is the primary
manufacturing joint venture in China, which is 60% owned by Breakspear and 40%
owned by Dongguan City Shek Long Wah Nam Enterprises Company. Breakspear has a
management agreement and profit sharing arrangement with the China party similar
to that of Dongguan Shilong. Dongguan Walford has assumed the actual production
of the packaging products from Dongguan Shilong.
Both of the joint ventures are managed by Breakspear Limited. They produce
packaging products exclusively for Breakspear Limited and are prohibited from
selling to third parties. The two factories in which the products are
manufactured are approximately 450,000 square feet in the aggregate and employ
between 2,850 and 3,100 workers, depending upon worker turnover, production
demands and the local employment market. The two factories are under one
management team. All workers in both factories are employed by Dongguan Walford.
MATERIAL INCORPORATED BY REFERENCE
The audited balance sheets of the Company as of March 31, 1997 and 1996 and
the related statements of income, shareholders' equity and cash flows for the
three years ended March 31, 1997, are incorporated herein by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1997
(the "Annual Report"). The Company's unaudited balance sheets as of June 30,
September 30 and December 31, 1997 and the related statements of income,
stockholders' equity and cash flows for each of the three month periods ended
June 30, September 30 and December 31, 1997, are incorporated herein by
reference to the Company's Quarterly Reports on Form 10-Q for those respective
periods.
Information required pursuant to Item 13(a) of Schedule 14A and specified in
Items 302 and 303 of Regulation S-K is hereby incorporated by reference to the
Annual Report and each of the Quarterly Reports listed above.
April 24, 1998
By Order of the Board of Directors
CASEY K. TJANG, Secretary
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APPENDIX I
Details of Justrite and the Subsidiaries as at March 31, 1998 are as
follows:
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<CAPTION>
PLACE OF
INCORPORATION/ ISSUED AND FULLY ATTRIBUTABLE EQUITY
REGISTRATION PAID ORDINARY INTEREST HELD
AND SHARE CAPITAL/ BY THE COMPANY
NAME OPERATION ----------- REGISTERED CAPITAL DIRECTLY INDIRECTLY PRINCIPAL ACTIVITIES
- --------------------------- --------------------- ----------- ------------- ---------------------------
<S> <C> <C> <C> <C> <C>
Justrite Investments British Virgin US$100 100% -- Investment holding
Limited Islands
Rich City Internatinal Hong Kong HK$2,000,000 -- 100% Sale and distribution of
Packaging Limited packaging products
Breakspear Limited British Virgin US$1 -- 100% Investment holding and
Islands provision of group
services
Smart Investments Limited Hong Kong HK$2 -- 100% Property holding
Circle Round Limited Hong Kong HK$2 -- 100% Property holding
Dongguan Shilong Wah Rich People's Republic of RMB1,410,000 -- 50% Manufacture and sale of
Packaging Limited China registered capital packaging products
Dongguan Walford Ornaments People's Republic of HK$26,250,000 -- 60% Manufacture and sale of
Packaging Company Limited China registered capital packaging products
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