JPS PACKAGING CO, 10-K, 2000-03-15

JPS PACKAGING CO
10-K, 2000-03-15
PAPERBOARD CONTAINERS & BOXES

Previous: JPS PACKAGING CO, DEF 14A, 2000-03-15

Next: GLOBAL VACATION GROUP INC, 10-K405, 2000-03-15

<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Form 10-K

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934

For the Year Ended December 31, 1999
Commission file number 0-24415

JPS Packaging Company
(Exact name of registrant as specified in its charter)

4200 Somerset Drive, Suite 208
Prairie Village, Kansas 66208
Telephone number (913) 381-0008

Incorporated in the State of Delaware

31-1311495
(IRS Employer Identification No.)

Securities Registered Pursuant to Section 12(g) of the Act:

Title of each class
Common stock, $.01 par value

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 for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
(1) Yes [X] No [_](2) Yes [X] No [_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, [X]

As of February 25, 2000 there were 5,555,205 shares of Common Stock, $.01
par value, outstanding. On February 25, 2000, the aggregate market value of
such shares held by non-affiliates of the Registrant was approximately $10.9
million.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PART I

ITEM 1. BUSINESS

JPS Packaging Company, the Registrant, together with its subsidiary, is
referred to herein as the "Company". The Company operates in the packaging
industry as a manufacturer and converter of flexible packaging and labeling
products for use by customers in the food and beverage industry and other
niche markets. The Company sells a broad variety of flexible packaging
products, most of which are printed by the Company, to both domestic and
foreign customers. The Company's labeling products for carbonated beverages,
dairy beverages and juices are principally manufactured at its Akron, Ohio
facility. The Company also manufactures and sells liquid novelty packaging,
peelable lidding for single servings of pudding, gelatin and cultured dairy
products, and pouch packaging for dried fruit and nut products, which are
produced primarily at its San Leandro, California facility. These products
collectively accounted for approximately 75% of the Company's fiscal 1999
sales. The Company also produces and sells a variety of other products,
including packaging for single-serve condiments and film-based products for
the medical and construction industries.

History

The Company was originally incorporated in Ohio on November 1, 1990 and
known as Sealright Manufacturing-East, Inc. On March 24, 1998, Sealright
Manufacturing-East, Inc. was reincorporated in Delaware and thereafter changed
its name to "JPS Packaging Company." Prior to July 1, 1998, the Company was a
subsidiary of Sealright Co., Inc. ("Sealright"). On July 1, 1998 the Company
ceased to exist as a subsidiary of Sealright.

Sources of Raw Materials

The Company purchases raw materials from a variety of suppliers at
competitive prices and aligns its operations with suppliers who lead the
market in product innovation of packaging materials technology. The principal
raw materials used by the Company are plastic, resin, film, paper, foil and
ink. The Company has experienced little or no difficulty obtaining adequate
supplies of raw materials. The Company is dependent on the market conditions
for pricing and some of the raw materials can be subject to significant
fluctuation.

Trademarks and Patents

The Company's products are manufactured using processes covered by patents
owned or controlled by the Company. The Company has domestic registered
trademarks which are used in connection with both product names and
distinctive designs. However, the Company views its business as one which is
not primarily dependent on patent or trademark protection.

Customers

The Company has relationships with numerous customers in each of its
product categories. The Company has one customer (Constar International) which
accounted for 11% of net sales in 1999. The loss of this customer, while not
anticipated, could have a material adverse effect on the Company's financial
condition, results of operations and cash flows.

Sales and Backlog

The Company does not have an accurate methodology to track backlog, and
does not believe recorded sales backlog to be a significant factor in its
business. Customers generally place annual orders in quantities covering
demand for one to three months with shipments scheduled during that period.

2
<PAGE>

Competition

The flexible packaging industry includes several hundred competitors.
Currently available trade and industry information indicates that the 10
largest flexible packaging companies account for approximately 40% of total
industry sales in 1999. Competitors in this industry include Pechiney, Plastics
Packaging, Bemis, Bryce, Lawson Mardon, Huntsman Packaging, Printpack, Reynolds
Metals, and Sonoco Products, many of which are well capitalized and maintain a
strong market presence in the various markets in which the Company competes.
All of these competitors are substantially larger, more diversified and have
greater financial, personnel and marketing resources than the Company, and
therefore may have significant competitive advantages versus the Company.

Research and Development

The Company is engaged in designing and developing new products and adapting
existing products for new uses. Approximately $716,000, $423,000 and $547,000
were expended for research and development in 1999, 1998 and 1997,
respectively.

Environmental and Governmental Regulations

Since most of the Company's packaging products are used in the food
industry, the Company is subject to the manufacturing standards of and
inspection by the U.S. Food and Drug Administration. Historically, compliance
with the standards of the food industry has not had a material effect on the
Company's operations, capital expenditures or competitive position.

The manufacturing operations of the Company are subject to Federal, state
and local regulations governing the environment and the discharge of materials
into air, land and water, as well as the handling and disposal of solid and
hazardous wastes. The Company believes it is in substantial compliance with
applicable environmental regulations and does not believe that costs of
compliance will have a material adverse effect on its operations, capital
expenditures, or competitive position.

Employees

The Company employs approximately 420 employees, approximately 300 of whom
are covered by collective bargaining agreements with various labor unions. At
the Akron, Ohio facility 170 hourly employees are covered under a collective
bargaining agreement that expires in 2000. Negotiations are currently underway
to renew the contract, and although the initial offer was voted down by the
union the Company has no reason to believe a satisfactory agreement will not be
reached. At the San Leandro, California facility 128 hourly employees are
covered under a collective bargaining agreement that expires in 2001. Overall,
the Company believes its relations with its employees, including union
employees, are satisfactory.

Forward-Looking Statements

Certain written and oral statements in this document and elsewhere made by
management that are neither reported financial results nor other historical
information are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements are
not guarantees of future performance and are subject to known and unknown
risks, uncertainties and other factors which may cause or contribute to actual
results of the Company differing materially from those expressed in or implied
by the forward-looking statements. In addition to any such risks expressly
stated otherwise in this or other documents, other risks and uncertainties
include, but are not limited to, competitive pricing for the Company's
products, changes in raw material prices, fluctuations in customer demand,
changes in production capacities, and changes in exchange rates.

3
<PAGE>

ITEM 2. PROPERTIES

The following tables set forth the location, approximate square footage,
and principal use of each of the Company's facilities. The Company believes
that its facilities are well maintained and suitable for their respective
uses.

Owned Facilities

<TABLE>
<CAPTION>
Square
Location Feet Principal Use
- -------- ------- ---------------------------
<S> <C> <C>
San Leandro, California..................... 129,000 Manufacturing and Warehouse
Akron, Ohio................................. 125,000 Manufacturing and Warehouse
</TABLE>

Leased Facilities

<TABLE>
<CAPTION>
Square Lease
Location Feet Expiration Principal Use
- -------- ------ ---------- ----------------
<S> <C> <C> <C>
San Leandro, California...................... 12,000 2002 Warehouse
Prairie Village, Kansas...................... 1,600 2000 Corporate Office
</TABLE>

ITEM 3. LEGAL PROCEEDINGS

In the ordinary course of business, the Company and its subsidiary are
subject to various pending claims, lawsuits, and contingent liabilities. The
Company maintains appropriate insurance policies to protect against various
claims and lawsuits. The Company does not believe that the disposition of
these matters will have a material adverse effect on the Company's
consolidated financial statements.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

Since September 30, 1999, there have been no matters submitted to a vote of
security holders.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

<TABLE>
<CAPTION>
Dividend
Quarter High Low per Share
------- ----- ------ ---------
<S> <C> <C> <C> <C>
1999............................................. First 4 1/2 3 9/16 N/A
Second 6 4 1/4 N/A
Third 6 4 1/4 N/A
Fourth 5 2 7/8 N/A
1998............................................. First N/A N/A N/A
Second N/A N/A N/A
Third 5 1/8 2 7/16 N/A
Fourth 4 3/8 3 1/4 N/A
</TABLE>

The Common Stock, which has a par value of $.01 per share, is traded in the
over-the-counter market. It is included in the NASDAQ National Market System
("NMS") under the symbol JPSP. The trading of JPS stock commenced on July 1,
1998. The table above sets forth the high and low sale prices, as quoted by
NMS, and dividends paid for each quarter of the last two calendar years. These
quotations reflect inter-dealer prices, without markup, markdown or
commissions.

As of February 25, 2000, there were 253 shareholders of record. Since many
shareholders hold their certificates in street name, management estimates the
number of individual stockholders is approximately 800.

4
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

Statement of Operations Data
(In thousands, except per share data)

<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
Years Ended December 31, ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net Sales........................ $80,575 $78,869 $91,520 $94,895 $103,469
Cost of Goods Sold............... 73,328 72,740 85,853 84,621 91,914
------- ------- ------- ------- --------
Gross Profit..................... 7,247 6,129 5,667 10,274 11,555
SG&A Expense(2).................. 8,891 11,613 11,805 13,936 14,340
Transaction Expense and Net
Restructuring (Gain) Expense(3). -- 689 (988) 1,893 6,866
------- ------- ------- ------- --------
Operating Loss from
Continuing Operations........... (1,644) (6,173) (5,150) (5,555) (9,651)
Interest (Income) Expense, Net... 37 (54) -- -- --
------- ------- ------- ------- --------
Loss from Continuing
Operations Before Income Taxes.. (1,681) (6,119) (5,150) (5,555) (9,651)
Income Tax Benefit............... -- (1,375) (1,769) (1,879) (3,310)
------- ------- ------- ------- --------
Loss from Continuing Operations.. (1,681) (4,744) (3,381) (3,676) (6,341)
Discontinued Operation, Net of
Tax:
Income (Loss) from Operations.. -- (436) 98 462 354
Gain (Loss) on Disposal........ 415 (1,209) -- -- --
------- ------- ------- ------- --------
Income (Loss) from Discontinued
Operation....................... 415 (1,645) 98 462 354
------- ------- ------- ------- --------
Net Loss......................... $(1,266) $(6,389) $(3,283) $(3,214) $ (5,987)
======= ======= ======= ======= ========
Net Loss Per Share from
Continuing Operations Basic and
Diluted(4)...................... $ (0.30) $ (0.85) $ (0.61) $ (0.66) $ (1.15)
Net Loss Per Share Basic and
Diluted(4)...................... $ (0.23) $ (1.15) $ (0.59) $ (0.58) $ (1.08)
Cash dividends declared.......... -- -- -- -- --

Balance Sheet Data
(In thousands, except ratios)

<CAPTION>
1999 1998 1997 1996 1995
December 31, ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net Working Capital.............. $15,046 $13,762 $16,393 $15,381 $ 19,884
Net Property, Plant & Equipment.. 26,603 28,354 31,806 34,592 41,116
Total Assets..................... 52,714 53,707 61,863 63,044 75,318
Long-Term Debt................... -- -- -- -- --
Total Liabilities................ 12,412 12,149 12,129 9,896 11,776
Stockholders' Equity............. 40,302 41,558 49,734 53,148 63,542
Current Ratio.................... 2.76:1 2.66:1 2.95:1 3.00:1 3.17:1

Other Data
(In thousands)

<CAPTION>
1999 1998 1997 1996 1995
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Operating Loss from Continuing
Operations, Excluding
Restructuring and Transaction
Items........................... $(1,644) $(5,484) $(6,138) $(3,662) $ (2,785)
Depreciation and Amortization
Expense......................... 5,213 5,458 5,782 6,593 6,519
EBITDA(5)........................ 3,569 (715) 632 1,038 (3,132)
EBITDA Excluding Restructuring
and Transaction Items........... 3,569 (26) (356) 2,931 3,734
Capital Expenditures............. 3,270 2,017 5,432 1,363 6,849
</TABLE>
- --------
(1) The Company changed from the LIFO (last-in, first-out) method to the FIFO
(first-in, first-out) method of accounting for inventory in 1999. Prior
year amounts have been restated to reflect this change. The net loss
previously reported for fiscal year 1998 was increased by $200,000 or $0.04
per share, the net loss for 1997

5
<PAGE>

was increased by $60,400 or $0.01 per share, net loss for 1996 was increased
by $194,700 or $0.03 per share, and in 1995 the net loss was decreased
$186,700 or $0.04 per share.
(2) Selling, general and administrative expenses from 1995 to 1997 are based on
management's estimate of an equitable allocation of shared corporate
services. These expenses approximate what the Company would have incurred
had it operated on a stand-alone basis for periods prior to separation from
Sealright.
(3) Transaction expense includes costs associated with the formation of the
Company in 1998. These expenses included investment banking fees,
professional fees, printer fees, bank fees and other transaction related
costs. In 1997 the Company sold the Charlotte, North Carolina facility for
a gain of $1,235,000, with offsetting expenses of $247,000 related to
completing the consolidation of the Charlotte facility into the Akron
facility. The restructuring expenses in 1996 and 1995 were related to the
closing of the Charlotte facility and consolidation of the machine
manufacturing operations in Raleigh, North Carolina.
(4) The number of shares used in the computation prior to July 1, 1998 is the
number of outstanding common shares of Sealright adjusted for the exchange
ratio of one-half share of JPS Common Stock for each share of Sealright
Common Stock. The weighted average number of common shares used in the
computation were 5,555,000 in 1999, 5,553,000 in 1998, 5,536,000 in 1997
and 1996, 5,534,000 in 1995. There were no dilutive securities.
(5) EBITDA is defined as operating income (loss) from continuing operations
before interest, depreciation and amortization. EBITDA does not represent
cash flows as defined by generally accepted accounting principles (GAAP)
and does not necessarily indicate that cash flows are sufficient to fund
all of a company's cash needs. EBITDA is presented because the Company
believes it is a widely accepted financial indicator of a company's ability
to incur and service debt. However, EBITDA should not be considered in
isolation or as a substitute for net income (loss) or cash flow data
prepared in accordance with GAAP or as a measure of a company's
profitability or liquidity.

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

1999 Compared to 1998

Net sales for the year ended December 31, 1999 were $80.6 million versus
$78.9 million in 1998, an increase of approximately $1.7 million, or 2%. An
increase in new business and existing customer's business helped offset the
decline in revenue from customers in the bottle label sales. There was a
decline of approximately $4.8 million in sales to customers in the soft drink
industry. This loss is primarily attributable to the loss of the beverage
market share held by the soft drink industry. Approximately 50% of the decline
is expected to be temporary.

Consolidated gross profit was $7.2 million in 1999 compared to $6.1 million
in 1998. The primary increase in gross profit was attributable to a more
favorable product mix and material cost savings during the first six months of
the year. Unprecedented increases in the price of resin and start up expenses
during the last six months of the year for new customers negated the full
impact of the favorable product mix and material savings.

Selling, general and administrative expenses (SG&A) were 11% of sales in
1999 compared to 14.7% in 1998. In 1998 there was $1.3 million in non-recurring
SG&A associated with the spin-off from Sealright Co. Adjusted for this item
SG&A expense was 13% of sales in 1998. The 2% decrease is due mainly to reduced
corporate overhead.

Interest expense increased $91,000 from 1998 to 1999 due to increased
borrowing against the Company's line of credit. The increase in borrowing was
required primarily to fund the $3.0 million increase in inventory.

1998 Compared to 1997

Net sales for the year ended December 31, 1998 were $78.9 million versus
$91.5 million in 1997, a decline of approximately $12.6 million, or 13.8%. The
decline in revenue from the prior year is primarily due to a decline in the
end-market demand of six key customers of the San Leandro, California facility
resulting in approximately $7.0 million of reduced revenue. In addition,
approximately $2.8 million of the decline in revenue was from lost

6
<PAGE>

customers associated with the closure of the Charlotte, North Carolina facility
in 1996 and the transfer of production to the Akron, Ohio facility.

Consolidated gross profit was $6.1 million in 1998 as compared to $5.7
million in 1997. The resulting gross profit percent was 7.7% in 1998, an
increase from 6.9% in 1997. (The 1998 and 1997 numbers have been restated to
reflect the change from LIFO (last-in, first-out) to the FIFO (first-in, first-
out) method of accounting for inventory. This change was made in the third
quarter, 1999.) The increase was a result of improved margins at the Akron,
Ohio facility. In 1997, Akron was adversely affected by production
inefficiencies and capacity constraints associated with the closure of the
Charlotte, North Carolina facility, and resulting transfer of production. Gross
profit at the San Leandro, California facility decreased approximately $1.5
million as a result of reduced sales volume.

Selling, general and administrative expenses were $11.6 million in 1998 as
compared to $11.8 million in 1997. Included in selling, general and
administrative expenses in 1998 is approximately $862 thousand of non-recurring
severance and $464 thousand of non-recurring retention costs associated with
the merger. Adjusting for these non-recurring items, SG&A expense was down
approximately 13% as a result of cost savings initiatives.

Liquidity and Capital Resources

Cash used by operations was $1.1 million in 1999 compared to cash provided
of $5.7 million in 1998. Cash was used primarily in 1999 for inventory and
receivables related to the increase in sales, and for increased capital
expenditures.

The Company invested $3.2 million and $2.0 million in property, plant and
equipment during 1999 and 1998, respectively. There were no individually
significant capital investments made in 1999 or 1998. In 1997 $5.4 million in
capital expenditures were made. Major capital investments during 1997 included
building additions and improvements of approximately $4 million in Akron, Ohio
to accommodate the consolidation from the Charlotte, North Carolina facility as
well as additions of various production related equipment and other cost
savings initiatives. JPS Packaging sold one idle facility during 1997,
generating $3.2 million. The proceeds from this sale were used to fund working
capital needs.

The Company currently has a $15 million revolving credit facility, of which
none was borrowed against as of December 31, 1999. The facility is secured by
accounts receivable, inventory, and property, plant and equipment. Borrowings
are limited to a percentage of accounts receivable and inventory. As of
December 31, 1999, the Company had $11.7 million in unused borrowing capacity.
The revolving credit facility currently bears interest at a floating rate of
LIBOR plus 275 basis points or prime. In addition, JPS Packaging is required to
pay a fee of 25 basis points on the unused portion of the commitment. The
revolving credit facility, as amended, includes financial covenants regarding
minimum tangible net worth, capital expenditures, EBITDA and cash flow. The
Company was in compliance with the amended covenants at December 31, 1999.

Management believes that cash generated from operations and funds available
under the Company's revolving credit facility will be adequate to meet
foreseeable funding needs.

Effects of Inflation

During the last three years, inflation has not had a material effect on the
Company. Increases in raw material costs to the Company typically lag movements
in the markets for such materials. Thus, in a period of rising prices, the
effects of such increases are delayed several months. The Company's ability to
pass these price increases to its customers also is subject to similar lags.

ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There is no disclosure regarding market risk as the Company had no debt,
investments or foreign currency transactions.

7
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Independent Auditors' Report

To The Board of Directors of JPS Packaging Company:

We have audited the accompanying consolidated balance sheets of JPS
Packaging Company as of December 31, 1999 and December 31, 1998, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three year period ended December 31, 1999.
In connection with our audits of the consolidated financial statements, we
also audited the valuation and qualifying accounts financial statement
schedule. These consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements and
schedules. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of JPS
Packaging Company as of December 31, 1999 and 1998, and as the results of
their operations and their cash flows for each of the years in the three year
period ended December 31, 1999, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.

As discussed in Note 2, during 1999 the Company changed its method of
accounting for inventories from the last-in, first-out to the first-in, first-
out method. The accompanying financial statements have been restated to give
retroactive effect to this change in accounting principle.

KPMG LLP

Kansas City, Missouri
February 4, 2000

8
<PAGE>

CONSOLIDATED BALANCE SHEETS
(In thousands)

<TABLE>
<CAPTION>
At December 31,
----------------
ASSETS 1999 1998
------ ------- -------
<S> <C> <C>
CURRENT ASSETS
Cash............................................................ $ 34 $ 2,414
Accounts receivable, less allowance for doubtful accounts of
$165 in 1999 and $214 in 1998.................................. 10,420 9,803
Inventories (Note 1)............................................ 12,141 9,066
Other current assets............................................ 658 424
Current deferred income taxes (Note 2).......................... 355 369
------- -------
Total current assets.......................................... 23,608 22,076
Property, plant and equipment, at cost (Note 1)
Land.......................................................... 1,490 1,490
Buildings and improvements.................................... 11,240 11,069
Machinery and equipment....................................... 53,335 50,837
Furniture and fixtures........................................ 4,237 4,068
------- -------
70,302 67,464
Less accumulated depreciation................................... 43,699 39,110
------- -------
Property, plant and equipment, net............................ 26,603 28,354
OTHER ASSETS
Goodwill, net (Note 1).......................................... 2,056 2,350
Prepaid pension (Note 4)........................................ 410 471
Other (Note 8).................................................. 37 456
------- -------
Total other assets............................................ 2,503 3,277
------- -------
Total assets................................................ $52,714 $53,707
======= =======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES
Bank overdraft.................................................. $ 1,417 $ --
Accounts payable................................................ 3,775 3,986
Accrued customer rebates........................................ 1,034 1,476
Accrued vacation................................................ 766 681
Other accrued liabilities....................................... 1,570 2,171
------- -------
Total current liabilities..................................... 8,562 8,314
Deferred income taxes (Note 2).................................. 3,850 3,835
Commitments and contingencies (Note 3)
------- -------
Total liabilities............................................. 12,412 12,149
STOCKHOLDERS' EQUITY (Note 1 and 6)
Common stock, par value $0.01, 15,000,000 shares authorized;
issued and outstanding 5,555,205 shares at December 31, 1999
and 5,552,705 shares at December 31, 1998...................... 56 56
Preferred stock, par value $0.01, authorized 1,000,000 shares;
none outstanding............................................... -- --
Additional paid-in capital...................................... 47,754 47,744
Retained earnings (deficit)..................................... (7,508) (6,242)
------- -------
Total stockholders' equity...................................... 40,302 41,558
------- -------
Total Liabilities and Stockholders' Equity.................... $52,714 $53,707
======= =======
</TABLE>

The accompanying notes are an integral part of these statements.

9
<PAGE>

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

<TABLE>
<CAPTION>
For the Years Ended
December 31,
-------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Net Sales........................................... $80,575 $78,869 $91,520
Cost of Goods Sold.................................. 73,328 72,740 85,853
------- ------- -------
Gross Profit.................................... 7,247 6,129 5,667
Selling, General and Administrative Expenses........ 8,891 11,613 11,805
Transaction Expense and Restructuring (Gain) (Note
5)................................................. -- 689 (988)
------- ------- -------
Operating Loss from Continuing Operations........... (1,644) (6,173) (5,150)
Interest (Income) Expense, Net...................... 37 (54) --
------- ------- -------
Loss from Continuing Operations Before Income Taxes. (1,681) (6,119) (5,150)
Income Taxes (Note 2)............................... -- (1,375) (1,769)
------- ------- -------
Loss from Continuing Operations................... (1,681) (4,744) (3,381)
Discontinued Operation, Net of Tax (Note 8):
Income (Loss) from Operation...................... -- (436) 98
Gain (Loss) on Disposal........................... 415 (1,209) --
------- ------- -------
Income (Loss) from Discontinued Operation........... 415 (1,645) 98
------- ------- -------
Net Loss........................................ $(1,266) $(6,389) $(3,283)
======= ======= =======
Net Loss Per Share From Continuing Operations
Basic and Diluted................................. $ (0.30) $ (0.85) $ (0.61)
Net Loss Per Share (Note 1)
Basic and Diluted................................. $ (0.23) $ (1.15) $ (0.59)
======= ======= =======
</TABLE>

The accompanying notes are an integral part of these statements.

10
<PAGE>

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except per share data)

<TABLE>
<CAPTION>
Total
Common Paid In Retained Stockholder's
Stock Capital Earnings Equity
------ ------- -------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996............ * $49,718 $ 3,430 $53,148
Net Loss................................ -- -- (3,283) (3,283)
Distributions to Parent................. -- (131) -- (131)
--- ------- ------- -------
Balance at December 31, 1997............ * 49,587 147 49,734
Net Loss................................ -- -- (6,389) (6,389)
Issuance of Stock....................... 56 (56) -- --
Distributions to Parent................. -- (1,787) -- (1,787)
--- ------- ------- -------
Balance at December 31, 1998............ 56 47,744 (6,242) 41,558
Exercise of Options..................... -- 10 -- 10
Net Loss................................ -- -- (1,266) (1,266)
--- ------- ------- -------
Balance at December 31, 1999............ $56 $47,754 $(7,508) $40,302
=== ======= ======= =======
* Less than $1,000.
</TABLE>

The accompanying notes are an integral part of these statements.

11
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

<TABLE>
<CAPTION>
For the Years Ended
December 31,
-------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss.......................................... $(1,266) $(6,389) $(3,283)
Adjustments To Reconcile Net Loss to Net Cash
Provided by Operating Activities
Loss (Income) from Discontinued Operations........ -- 436 (98)
(Gain) Loss on Disposal of Discontinued
Operations....................................... (415) 1,209 --
Depreciation and Amortization..................... 5,213 5,458 5,782
Deferred Income Taxes............................. 29 262 1,000
(Gain) Loss on Disposal of Assets................. (100) 135 (53)
Restructuring Gain................................ -- -- (988)
Changes in Assets and Liabilities:
Accounts Receivable, Net........................ (617) 3,071 (2,235)
Inventories..................................... (3,075) 1,483 1,017
Accounts Payable................................ (211) 305 (518)
Net Restructuring............................... -- -- (729)
Other........................................... (415) (492) 1,825
------- ------- -------
Net Cash Provided (Used) by Continuing Operations. (857) 5,478 1,720
Net Cash Provided (Used) by Discontinued
Operations....................................... (285) 236 (15)
------- ------- -------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES.... (1,142) 5,714 1,705
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures.............................. (3,270) (2,017) (5,432)
Proceeds from Disposal of Assets.................. 203 171 3,566
Proceeds from Disposal of Discontinued Operation.. 402 -- --
------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES............... (2,665) (1,846) (1,866)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in Bank Overdraft........................ 1,417 -- --
Proceeds from Exercise of Stock Options........... 10 -- --
Contributions from (Distributions To) Parent, Net. -- (1,787) 321
------- ------- -------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES.... 1,427 (1,787) 321
------- ------- -------
Net Increase (Decrease) In Cash................... (2,380) 2,081 160
CASH, Beginning of Year............................. 2,414 333 173
------- ------- -------
CASH, End of Year................................... $ 34 $ 2,414 $ 333
======= ======= =======
Cash Paid During the Year for
Interest........................................ $ 79 $ 22 --
Income Taxes.................................... -- -- --
</TABLE>

The accompanying notes are an integral part of these statements.

12
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

a. Principles of Consolidation--The accompanying financial statements
include the accounts of two former wholly-owned subsidiaries of Sealright Co.,
Inc. (Sealright) and the accounts of a portion of Sealright and another
subsidiary. The resulting entity operates the San Leandro, California, and
Akron, Ohio, facilities and is collectively referred to as JPS Packaging
Company (the Company).

On March 24, 1998, the Company was reorganized and incorporated as a
Delaware corporation (the reorganization). Prior to July 1, 1998 the Company
was a subsidiary of Sealright. In connection with the merger of Sealright with
Huhtamaki Oy, JPS Packaging Company was split off in a taxable distribution to
Sealright shareholders. The transaction closed on June 30, 1998 and Sealright
shareholders received $11 per share of cash and 1/2 share of stock (Exchange
Ratio) of JPS Packaging Company stock for each share of Sealright stock. The
Company was authorized to issue 15,000,000 shares of common stock, $0.01 par
value, and 1,000,000 shares of preferred stock, $0.01 par value. The Company
has one wholly owned inactive subsidiary incorporated in North Carolina.

A portion of selling, general and administrative expenses prior to July 1,
1998 have been included in the consolidated statements of operations based on
management's estimate of an equitable allocation of shared corporate services.
These expenses approximate what the Company would have incurred had it
operated on a stand-alone basis for periods prior to the Company's separation
from Sealright. The estimated expense was approximately $2,500,000 in 1998,
$5,700,000 in 1997.

b. Description of Business--The Company manufactures flexible packaging
material primarily for the food and beverage industries. The Company has one
customer which accounted for 11% of 1999 sales. In 1998 there were two
customers which each had more than 10% of 1998 sales and in 1997 there were no
customers with more than 10% of sales.

c. Inventories--Inventories are stated at the lower of cost or market. In
the third quarter of 1999 the Company elected to change from the last-in,
first-out (LIFO) method to the first-in, first-out (FIFO) method of inventory
valuation. The Company believes the change to the FIFO method of valuation
will result in better matching of raw material cost to the selling price of
finished goods and will also better reflect the current inventory value at
period-end dates. All previously reported results have been restated to
reflect the application of this accounting change. Net loss previously
reported for fiscal year 1998 was increased by $200,000 or $0.04 per share and
in 1997 the net loss was increased by $60,400 per share or $0.01 per share.
There was no effect to 1999 income. The resulting effect on equity at December
31, 1996 was an increase of $917,000.

Work in process and finished goods inventories include the cost of
material, labor and factory overhead required in the production of the
Company's products. Inventories at December 31, 1999 and 1998 consisted of the
following:

<TABLE>
<CAPTION>
As of December
31,
--------------
1999 1998
------- ------
(In thousands)
<S> <C> <C>
Raw materials.............................................. $ 3,996 $3,666
Work in process............................................ 3,163 2,211
Finished goods............................................. 4,982 3,189
------- ------
Total Inventory.......................................... $12,141 $9,066
======= ======
</TABLE>

d. Property, Plant and Equipment--Property, plant and equipment has been
recorded at cost and such assets are being depreciated over their estimated
useful lives using the straight-line method. The estimated useful lives are as
follows:

<TABLE>
<S> <C>
Buildings and improvements.................................. 5 to 45 years
Machinery and equipment..................................... 3 to 15 years
Furniture and fixtures...................................... 3 to 8 years
</TABLE>

13
<PAGE>

Maintenance and repairs are charged to expense as incurred. The cost and
accumulated depreciation of assets retired are removed from the accounts, and
any resulting gains or losses are reflected in current income.

e. Goodwill--The excess of purchase price over fair value of net assets
acquired is being amortized on a straight-line basis over 20 years.
Accumulated amortization was $3,819,000 and $3,525,000 as of December 31, 1999
and 1998, respectively. The related amortization expense charged to operations
was $294,000 during each of the years ended December 31, 1999, 1998, and 1997,
respectively.

The Company assesses the recoverability of long-lived assets by determining
whether the amortization of the balance over its remaining life can be
recovered through un-discounted future operating cash flows. The amount of
impairment, if any, is measured based on expected discounted future operating
cash flows. The assessment of the recoverability of long-lived assets will be
impacted if estimated future operating cash flows are not achieved.

f. Income Taxes--Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.

g. Research and Development--Research and development costs are charged to
expense as incurred, and were approximately $716,000, $423,000, and $547,000
in 1999, 1998, and 1997 respectively. Research and development costs are
classified as part of Selling, General and Administrative expense.

h. Earnings Per Share--The number of shares used in the computation of
earnings per share prior to the reorganization is the number of outstanding
common shares of Sealright adjusted for the Exchange Ratio of one-half share
of the Company for each share of Sealright. The weighted average number of
common shares used in the computation were 5,555,000 in 1999, 5,553,000 in
1998, and 5,536,000 in 1997. There were no dilutive securities.

i. Revenue Recognition--Revenue from the sale of packaging and packaging
equipment is recognized at the time of shipment to the customer.

j. Fair Value of Financial Instruments--The Company has various financial
instruments comprised of cash, trade and notes receivable and trade and other
payables. The carrying amounts of short-term assets and liabilities
approximate fair value due to the short duration of these instruments.

k. Use of Estimates--Management of the Company has made a number of
estimates and assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities to prepare these
consolidated financial statements in conformity with generally accepted
accounting principles. Actual results may differ from those estimates.

2. Income Taxes

Total income taxes are allocated as follows:
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------
1999 1998 1997
---- ------- -------
(In thousands)
<S> <C> <C> <C>
Continuing operations.............................. $-- $(1,375) $(1,769)
Discontinued operation............................. -- (149) 51
---- ------- -------
Total tax benefit.............................. $-- $(1,524) $(1,718)
==== ======= =======
</TABLE>

14
<PAGE>

Taxes from continuing operations were as follows:
<TABLE>
<CAPTION>
For the Years Ended
December 31,
----------------------
1999 1998 1997
---- ------- -------
(In thousands)
<S> <C> <C> <C>
Current
Federal.............................................. $(29) $(1,220) $(2,463)
State and Local...................................... -- ( 417) (306)
---- ------- -------
Total Current Tax Benefit.......................... (29) (1,637) (2,769)
Deferred
Federal.............................................. 29 195 866
State and Local...................................... -- 67 134
---- ------- -------
Total Deferred Tax Provision....................... 29 262 1,000
---- ------- -------
Total Tax Benefit.................................. $-- $(1,375) $(1,769)
==== ======= =======
</TABLE>

A reconciliation of the income tax provision (benefit) from continuing
operations to the statutory Federal rate of 34% is as follows:

<TABLE>
<CAPTION>
For the Years Ended
December 31,
-----------------------
1999 1998 1997
----- ------- -------
(In thousands)
<S> <C> <C> <C>
Statutory Federal Tax Rate...................... $(430) $(2,080) $(1,751)
Increase in Valuation Allowance................. 616 2,748 --
Amortization of Intangibles..................... (163) -- 96
State Income and Franchise Taxes................ (64) (231) (114)
Other........................................... 41 8 --
Tax Benefit Allocation from Sealright........... -- (1,820) --
----- ------- -------
Total....................................... $ -- $(1,375) $(1,769)
===== ======= =======
</TABLE>

The operations of the Company were historically included in the consolidated
Federal income tax returns of Sealright. The policy of Sealright was to
allocate consolidated Federal income tax expense to members of the affiliated
group, including the Company, on a stand-alone basis.

15
<PAGE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities as of
December 31, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
As of
December 31,
-----------------
1999 1998
------ ------
(In thousands)
<S> <C> <C> <C>
Deferred Tax Assets:
Federal AMT Credit Carry Forward...................... $ 637 $ 637
Federal Net Operating Loss............................ 2,701 2,036
State Net Operating Loss.............................. 226 275
Accrued Vacation and Other Compensation............... 331 405
Accrued Workers' Compensation Reserve................. -- 47
Other Reserves........................................ 92 636
------ ------
Total Gross Deferred Tax Assets..................... 3,987 4,036
Valuation Allowance................................. 3,564 2,948
------ ------
Deferred Tax Assets................................. 423 1,088
------ ------
Deferred Tax Liabilities:
Property, Plant and Equipment......................... $3,533 $4,181
Inventories........................................... -- 34
Prepaid Pension, Net.................................. 152 174
Other................................................. 233 165
------ ------
Deferred Tax Liabilities............................ 3,918 4,554
------ ------
Net Deferred Tax Liability.......................... $3,495 $3,466
====== ======
</TABLE>

The Company has recorded a valuation allowance for deferred tax assets as
of December 31, 1999 of $3,564,000 and $2,948,000 as of December 31, 1998. In
assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which the temporary differences become deductible.

At December 31, 1999, the Company had net operating loss carryforwards for
Federal income tax purposes of approximately $2,701,000 which were available
to offset future federal taxable income, if any, through 2018. In addition,
the Company had alternative minimum tax credit carryforwards of approximately
$637,000, which were available to reduce federal regular income taxes, if any,
over an indefinite period.

3. Commitments and Contingencies

Future minimum rental payments required under the terms of operating leases
that have initial or remaining non-cancelable lease terms at December 31,
1999, are as follows:

<TABLE>
<CAPTION>
For Years Ended December 31, (In thousands)
<S> <C>
2000....................................................... $382
2001....................................................... 286
2002....................................................... 188
2003....................................................... 115
2004....................................................... 97
</TABLE>

Principal operating leases are for equipment, warehouse facilities and
office space. Rent expense related to continuing operations for all operating
leases was $432,000, $301,000, and $182,000 in 1999, 1998, and 1997,
respectively. It is anticipated that leases will be renewed or replaced as
they expire.

16
<PAGE>

The Company is a party to various legal matters incidental to its business.
In the opinion of management, these matters will not have a material impact on
the Company's financial statements. Liabilities for loss contingencies are
recorded when it is probable that a liability has been incurred and the amount
of the loss can be reasonably estimated.

Credit Facility

In 1998 the Company entered into a $15 million secured revolving line of
credit with a bank. Borrowings under the revolving credit facility bear
interest at floating rates, as determined at the Company's option to be either
LIBOR plus 275 basis points or prime. In addition, the Company is required to
pay a fee of 25 basis points per annum on the unused portion of the commitment.
The amount of borrowing allowed under the facility is limited to an amount
based on certain percentages of accounts receivable and inventory. As of
December 31, 1999, there were no borrowings under the facility and the amount
available was $11.7 million. In addition, the facility includes covenants
regarding minimum tangible net worth, capital expenditures and earnings before
taxes and depreciation (EBITDA). As of December 31, 1999, the Company was in
compliance with these covenants.

At December 31, 1999, the Company had letters of credit outstanding totaling
$640,000. Of this amount $240,000 secured leased machinery and $400,000 was
related to an environmental performance obligation associated with the sale of
the Company's former Charlotte facility. The letter of credit related to the
Charlotte facility is secured by a letter of credit from the seller of the
facility to the Company.

4. Employee Benefit Plans

The Company sponsors a defined benefit pension plan covering the hourly
employees at its Akron, Ohio location. Benefits are based on a flat rate per
year of service.

17
<PAGE>

The funded status of the plan was as follows:

<TABLE>
<CAPTION>
Year Ending December 31,
----------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year.... $1,230,565 $ 958,532 $ 749,783
Service cost............................... 110,038 74,439 62,394
Interest cost.............................. 95,291 73,575 61,378
Actuarial (gain) loss...................... (210,197) 164,019 121,100
Benefits and expenses paid................. (98,379) (40,000) (36,123)
---------- ---------- ----------
Benefit obligation at end of year.......... $1,127,318 $1,230,565 $ 958,532
========== ========== ==========
Change in plan assets
Fair value of plan assets a beginning of
year...................................... $1,631,868 $1,565,157 $1,274,986
Actual return on plan assets............... 53,629 106,711 326,294
Employer contribution...................... -0- -0- -0-
Benefits paid.............................. (72,235) (20,000) (18,858)
Expenses paid.............................. (26,144) (20,000) (17,265)
---------- ---------- ----------
Fair value of plan assets as end of year... $1,587,118 $1,631,868 $1,565,157
========== ========== ==========
Funded status.............................. $ 459,800 $ 401,303 $ 606,625
Unrecognized net actuarial gain (loss)..... (143,386) 10,847 (191,428)
Unrecognized prior service cost............ 93,475 59,269 62,484
---------- ---------- ----------
Prepaid benefit cost....................... $ 409,889 $ 471,419 $ 477,681
========== ========== ==========
Weighted-average assumptions as of December
31
Discount rate.............................. 8.00% 7.00% 7.25%
Expected return on plan assets............. 9.25% 9.25% 9.25%
Components of net periodic benefit cost
Service cost............................... $ 110,038 $ 74,439 $ 62,394
Interest cost.............................. 95,291 73,575 61,378
Expected return on plan assets............. (149,199) (143,099) (116,073)
Amortization of prior service cost......... 5,400 3,215 3,215
Recognized net actuarial loss.............. -0- (1,868) -0-
---------- ---------- ----------
Net periodic benefit cost.................. $ 61,530 $ 6,262 $ 10,914
========== ========== ==========
</TABLE>

The Company makes contributions to a defined benefit multi-employer pension
plan for certain union employees at its San Leandro, California, manufacturing
facility. Amounts contributed to the plan totaled $269,000, $246,000 and
$239,000 in 1999, 1998, and 1997, respectively.

At July 1, 1998, the Company established a long-term savings plan available
to substantially all non-union employees. The total expense to the Company for
the plan was approximately $111,000 and $42,000 for the years ended December
31, 1999 and 1998, respectively.

5. Transaction and Restructuring Expense

Transaction expense relating to the formation of the Company was $689,000 in
1998. These costs included investment banking fees, professional fees, printer
fees, bank fees and other transaction related costs. During the second quarter
of 1997, the Company sold the Charlotte, North Carolina facility for a gain of
$1,235,000, offsetting expenses of $247,000 related to completing the
consolidation of the Charlotte facility.

6. Stock Options

Stock options are primarily granted under the 1998 Stock Option Plan. The
purpose of the Stock Option Plan is to align executive compensation and
stockholder return. The selection of the participants, allotment of

18
<PAGE>

shares, exercise price, determination of the vesting schedule and other
conditions are established by the Compensation Committee. There is no explicit
formula for determining specific stock option grants. In awarding options the
Committee evaluates the recipient's ability to influence the Company's long-
term growth and profitability. The Committee also considers the number of
options previously granted to the recipient and, in certain cases, the number
of shares of common stock held by the recipient.

The Stock Option Plan has 550,000 shares of the Company's common stock
reserved for key employees, officers, and directors. Options issued under the
1998 plan are qualified and non-qualified. Stock options are granted at a
price equal to the fair market value of JPS Packaging Company Common Stock at
the date of grant for terms of up to ten years. The options vest up to 5 years
and 10% of the vested options must be exercised annually.

During 1998 options for 25,000 shares were issued to directors of the
Company under a non-qualified plan. These options were granted at a price
equal to the fair market value of JPS Packaging Company Common Stock at the
date of grant for a term of ten years. The options were fully vested at the
date of grant and 10% of the vested options must be exercised annually.

A summary of all stock option activity and weighted average exercise price
follows:

<TABLE>
<CAPTION>
Shares Exercise Price
------- --------------
<S> <C> <C>
Outstanding at July 1, 1998............................. -- --
Granted............................................... 390,000 $4.04
Exercised............................................. -- --
Canceled.............................................. -- --
------- -----
Outstanding at December 31, 1998........................ 390,000 $4.04
Granted............................................... 75,000 $3.33
Exercised............................................. (2,500) $4.06
Canceled.............................................. (4,000) $4.00
------- -----
Outstanding at December 31, 1999........................ 458,500 $3.92
======= =====
Options Exercisable at:
December 31, 1998..................................... -- --
December 31, 1999..................................... 123,500 $4.03
======= =====
</TABLE>

A summary of stock options outstanding and exercisable as of December 31,
1999 follows:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ------------------------------------------------------ ---------------------------
Weighted-
Avg. Weighted Weighted-
Range of Contracted Average Average
Exercise Number Life in Exercise Number Exercise
Price Outstanding Years Price Exercisable Price
- ----------- ----------- ---------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$4.00-$4.25 403,500 8.75 $4.05 123,500 $4.03
$3.00-$3.99 55,000 9.92 $3.00 -- --
</TABLE>

19
<PAGE>

The Company applies APB Opinion No. 25 (intrinsic value method) in
accounting for stock option grants and, accordingly, no compensation cost has
been recognized. Had the Company recognized compensation expense in accordance
with SFAS No. 123, (fair value method) the Company's net income (loss) would
have been as follows:

<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Net Loss (in thousands)
As reported............................................... $(1,266) $(6,389)
Pro forma................................................. $(1,353) $(6,484)
Net Loss from Continuing Operations (in thousands)
As reported............................................... $(1,681) $(4,744)
Pro forma................................................. $(1,768) $(4,839)
Basic and Diluted Earnings (Loss) Per Share
As reported............................................... $ (0.23) $ (1.15)
Pro forma................................................. $ (0.24) $ (1.17)
Basic and Diluted Earnings (Loss) Per Share from Continuing
Operations
As reported............................................... $ (0.30) $ (0.85)
Pro forma................................................. $ (0.32) $ (0.87)
</TABLE>

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model. The following assumptions were used.

<TABLE>
<CAPTION>
Year of Grant 1999 1998
------------- ----- -----
<S> <C> <C>
Expected Dividend Yield..................................... 0% 0%
Expected Volatility......................................... 31.67% 25.20%
Risk Free Interest Rate..................................... 6.6% 4.75%
Expected Remaining Life..................................... 8 8
Option Value................................................ $1.65 $1.48
</TABLE>

Summarized Quarterly Data (unaudited)

The following table presents selected quarterly data for the two most
recent fiscal years (in thousands, except per share data). The 1998 data has
been restated to reflect the change in inventory valuation from LIFO to FIFO,
there was no restatement in 1999. Per share data may not add to year end
totals due to rounding.

<TABLE>
<CAPTION>
Basic and
Diluted Net Basic and
Income Diluted
Income (Loss) From Net
(Loss) From Net Continuing Income
Net Gross Continuing Income Operations (Loss)
Sales Profit Operations (Loss) Per Share Per Share
------- ------ ----------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
1999
First quarter........ $20,713 $2,416 $ 36 $ 36 $ 0.01 $ 0.01
Second quarter....... 20,502 2,148 (134) 281 (0.02) 0.05
Third quarter........ 20,103 1,280 (805) (805) (0.14) (0.14)
Fourth quarter....... 19,257 1,403 (778) (778) (0.14) (0.14)
1998
First quarter........ $20,012 $1,590 (984) $(1,152) (0.18) (0.21)
Second quarter....... 22,246 2,086 (1,665) (1,787) (0.30) (0.32)
Third quarter........ 18,034 1,163 (932) (1,065) (0.16) (0.19)
Fourth quarter....... 18,577 1,290 $(1,163) (2,385) $(0.21) $(0.43)
</TABLE>

20
<PAGE>

The following table presents the quarterly data, as originally reported,
for the year 1998.

<TABLE>
<CAPTION>
Basic and
Diluted Net Basic and
Income Diluted
Income (Loss) From Net
(Loss) From Net Continuing Income
Net Gross Continuing Income Operations (Loss)
Sales Profit Operations (Loss) Per Share Per Share
------- ------ ----------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
1998
First quarter........ $20,012 $1,590 $ (984) $(1,152) $(0.18) $(0.21)
Second quarter....... 22,246 2,199 (1,590) (1,712) (0.29) (0.31)
Third quarter........ 18,034 1,163 (932) (1,065) (0.16) (0.19)
Fourth quarter....... 18,577 1,415 (1,038) (2,260) (0.19) (0.41)
</TABLE>

8. Discontinued Operation

In June 1999, the Company completed the sale of its sleeve label machine
manufacturing business, Styrotech. The Company received cash proceeds of
$402,000 with a portion of the proceeds deferred. As a result of this
transaction a gain of $415,000 was reported in the second quarter of 1999.

During the fourth quarter of 1998, the Company decided to exit its
Styrotech machine manufacturing business which builds equipment that is used
to apply polyester sleeve labels. The operations of the Styrotech business
were presented as a discontinued operation and, accordingly, the consolidated
financial statements were reclassified for all periods presented. The
estimated loss on disposal of $1,209,000 included $150,000 for operating
losses during the 1999 phase-out period. The operating results of the
discontinued operation are summarized below:

<TABLE>
<CAPTION>
1999 1998 1997
---- ------ ------
<S> <C> <C> <C>
Revenues............................................. $-- $1,909 $3,971
Income (loss) from operations........................ -- (585) 149
Income taxes (benefit)............................... -- (149) 51
---- ------ ------
Net income (loss).................................... $-- $ (436) $ 98
</TABLE>

Net assets of the discontinued operation, which were included in other
assets, are summarized below:

<TABLE>
<CAPTION>
1999 1998
---- ------
<S> <C> <C>
Accounts Receivable.......................................... $-- $ 273
Inventories.................................................. -- 1,134
Other Assets................................................. -- 11
Property, Plant & Equipment.................................. -- 48
Other Liabilities............................................ -- (149)
Estimated loss on disposal................................... -- (1,209)
---- ------
Net assets................................................... $-- $ 108
==== ======
</TABLE>

ITEM 9. CHANGES IN AND DISAGRREMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None

21
<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

<TABLE>
<CAPTION>
Principal Occupation for Last Five
Director Years
Name of Director Since Age and Directorships
---------------- -------- --- ----------------------------------
<C> <C> <C> <S>
G. Kenneth Baum (1)....... 1998 69 Chairman of the Board of George K.
Baum Group, Inc., an investment
company in Kansas City, Missouri,
since May 1994. Chairman of the Board
of George K. Baum & Company, an
investment banking firm, from April
1982 until May 1994. Mr. Baum is also
a Director of H&R Block, Inc. and
Interstate Bakeries Corporation.
Leo Benatar (1)........... 1998 70 Chairman of the Board of the Company
since August 1998. Associated
consultant for A. T. Kearney, Inc. and
Principal of Benatar & Associates from
June 1996 to present. Chairman of the
Board of Engraph, Inc. (a subsidiary
of Sonoco Products Company)
and Senior Vice President of Sonoco
Products Company from October 1993
until May 1996. Chairman and Chief
Executive Officer of Engraph, Inc.
from 1981 until October 1993. Mr.
Benatar is a Director of Interstate
Bakeries Corporation, Johns Manville
Corporation, Mohawk Industries, Inc.,
PAXAR Corporation, and Aaron Rents,
Inc. and was the Chairman and a
Director of the Federal Reserve Bank
of Atlanta until January 1996.
John T. Carper............ 1998 48 President of the Company since March
1998 and Chief Financial Officer since
November 1998. Senior Vice President
of Finance and Chief Financial Officer
of Sealright Co., Inc. from May 1996
to June 1998. From May 1994 to June
1996, Mr. Carper was Vice President--
Finance and Chief Financial Officer of
Sealright Co., Inc. From July 1989 to
May 1994, he was a partner with KPMG
LLP, independent public accountants.
D. Patrick Curran (2)..... 1998 55 Chairman of the Board and President of
Curran Companies, a manufacturer and
supplier of specialty chemicals, since
August 1979. Mr. Curran is also a
Director of Applebee's International,
Inc.
N. Brian Stevenson........ 1998 55 Chief Executive Officer of the Company
since September 1998. Executive Vice
President and Chief Operating Officer
of Huntsman Packaging Corporation from
January 1992 to September 1998.
Charles A. Sullivan....... 1998 64 Chairman of the Board of Interstate
Bakeries Corporation since May 1991.
President and Chief Executive Officer
of Interstate Business Corporation
since March 1989. Mr. Sullivan is a
Director of UMB Bank, n.a. and The
Andersons, Inc.
William D. Thomas (1) (2). 1998 56 Senior Managing Director of George K.
Baum Merchant Banc, LLC. since May
1996. President of George K. Baum
Group, Inc. since May 1994. Vice
Chairman of George K. Baum & Company
from June 1991 until May 1994.
</TABLE>
- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.

22
<PAGE>

Board Committees and Director Meetings

The Board of Directors of the Company held five meetings during 1999. No
Director standing for election at the Annual Meeting attended fewer than 75%
of the total number of meetings of the Board of Directors and the committees
of the Board on which he served during 1999.

The Compensation Committee held one meeting during 1999. The primary
function of the Committee is the administration of the Company's overall
compensation program, including the JPS Packaging Long-Term Compensation Plan
(the "Long-Term Plan").

The Audit Committee held one meeting during 1999. The functions performed
by the Audit Committee are the review of significant financial information of
the Company, ascertainment of the existence of an effective accounting and
internal control system, oversight of the audit function and recommendation of
the appointment of the independent public accountants of the Company.

The Company does not have a standing Nominating Committee.

Compensation of Directors

Each non-officer Director is paid $5,000 annually, plus $500 for each
meeting of the Board of Directors and $500 for each meeting of its committees
which he attends. During the fiscal year 1999, the Company paid a total of
$31,000 in Directors' fees. Mr. Benatar, Mr. Stevenson, and Mr. Carper do not
receive any fees for attendance at the meetings.

Compensation Committee Interlocks

The Compensation Committee consists of G. Kenneth Baum, Leo Benatar and
William D. Thomas. There are no Compensation Committee interlocks with other
companies.

EXECUTIVE OFFICERS

In addition to those executive officers listed in the foregoing table of
director nominees, the Company's other executive officers as of March 15, 2000
are as follows:

<TABLE>
<CAPTION>
Name of Non-
Director Executive
Officers Age Principal Occupation for Last Five Years
------------------ --- ----------------------------------------
<C> <C> <S>
Edwin W. Stranberg. 49 Senior Vice President of Operations of the Company
since November 1998. From January 1992 to November
1998, Mr. Stranberg was Vice President of Huntsman
Packaging Corporation.

A. Lawrence Walton. 55 Senior Vice President of Business Development and
Marketing of the Company since September 1998. From
July 1998 to September 1998, Mr. Walton was Vice
President of Sales of the Company. From September 1996
to June 1998, he was Vice President of Food and
Beverage Sales, Sealright Co., Inc. From February 1996
to August 1996, he was Vice President of Research and
Development of Sealright Co., Inc. Mr. Walton was Vice
President, Marketing and Technical Services of the San
Leandro facility of the Company from June 1994 to
February 1996. From July 1991 to June 1994, he was
Vice President of Marketing and Sales of Glenroy,
Inc., a flexible packaging company.

Rick Merical....... 45 Vice President and Western Regional Manager of the
Company since August 1999. From August 1993 to August
1999, Mr. Merical was Vice President of Huntsman
Packaging Corporation.
</TABLE>

23
<PAGE>

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and executive officers to file with the Securities Exchange
Commission ("SEC") and The NASDAQ Stock Market initial reports of ownership
and reports of changes in ownership of the Company's common stock and other
equity securities. Directors and executive officers are required by SEC
regulations to furnish the Company with copies of all Section 16(a) reports
they file.

To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during 1999 all Section 16(a) filing requirements
applicable to its Directors and executive officers were complied with.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The following table provides certain summary information concerning
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive Officer and of each of the Company's three other most highly
compensated executive officers whose remuneration for the year ended December
31, 1999, exceeded $100,000 (collectively, the "Named Executive Officers") for
services to the Company.

<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
--------------------- -------------------------------------
Awards Payouts
--------------------- ---------------
Other All
Annual Restricted Securities Other
Name and Compen- Stock Underlying LTIP Compen-
Principal Salary Bonus sation Award(s) Options Payouts sation
Position Year ($) ($) ($) ($) (#) ($) ($)
--------- ---- ------ ----- ------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
N. Brian
Stevenson, 1999 $250,000 -0- $5,000 none 25,000 none none
Chief
Executive
Officer 1998 $ 75,592 $75,000 $1,588 none 200,000 none none
1997 n/a n/a n/a n/a n/a n/a n/a

John T.
Carper, 1999 $168,000 -0- $4,200 none 10,000 none none
President
and Chief
Financial 1998 $ 80,669 -0- $ 807 none 55,000 none none
Officer 1997 n/a n/a n/a n/a n/a n/a n/a

Edwin W.
Stranberg, 1999 $175,000 -0- $3,660 none 10,000 none none
Senior Vice
President, 1998 $ 25,240 $40,000 -0- none 40,000 none none
Operations 1997 n/a n/a n/a n/a n/a n/a n/a

A. Lawrence
Walton, 1999 $150,000 -0- $3,800 none 10,000 none none
Senior Vice
President,
Business 1998 $ 74,484 -0- $ 906 none 30,000 none none
Development
and
Marketing 1997 n/a n/a n/a n/a n/a n/a n/a
</TABLE>

24
<PAGE>

Option Grants in Last Fiscal Year

The following table summarizes options granted during 1999 pursuant to the
Long-Term Plan:

<TABLE>
<CAPTION>
Potential
realizable
value at
assumed annual
rates of stock
price
appreciation
for option
Individual Grants (1) term (2)
------------------------------------- --------------
Number of
securities Percent of
underlying total options
options granted to Exercise or Grant date
granted (#) employees in base price Expiration present value
Name (3) fiscal year ($/Sh) date (4) 5% ($) 10% ($) ($)
---- ----------- ------------- ----------- ---------- ------ ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
N. Brian
Stevenson,
Chief
Executive
Officer 25,000 46% 3.00 12-06-09 38,600 77,200 none

John T.
Carper,
President
and Chief
Financial
Officer 10,000 18% 3.00 12-06-09 15,400 30,800 none

Edwin W.
Stranberg,
Senior
Vice
President,
Operations 10,000 18% 3.00 12-06-09 15,400 30,800 none

A. Lawrence
Walton,
Senior
Vice
President,
New
Business
Development
and
Marketing 10,000 18% 3.00 12-06-09 15,400 30,800 none
</TABLE>
- --------
(1) All options were granted with an exercise price equal to the greater of
the closing price for the Company's common stock on the date of grant, as
reported on the NASDAQ National Market System or $3.00. Except in the
event of death, disability or retirement, if any of the named executive
officers ceases to be employed by the Company, his options shall terminate
immediately. Upon a merger or consolidation in which the Company is not
the surviving corporation, all options outstanding shall become vested and
exercisable immediately prior to such merger or consolidation.
(2) The potential realized value portion of the table illustrates value that
might be realized upon exercise of the options immediately prior to the
expiration of their term, assuming the specified compounded rates of
application on the Company's Common Stock over the term of the options.
(3) The options granted during the year ended December 31, 1999 are
exercisable beginning on the day immediately following the first
anniversary of the grant date, with 20% of such option becoming
exercisable at that time and with an additional 20% of such options
becoming exercisable on the day immediately following each successive
anniversary date. Full vesting occurs on the day immediately following the
fifth anniversary of the grant date. In the event of a "change in control"
(as defined in the optionees' stock option agreements), the options become
fully vested.
(4) The options were granted for a term of ten years, require the exercise of
10% of the vested options annually and are subject to earlier termination
in certain events related to termination of employment.

25
<PAGE>

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values

The following table summarizes the net value realized on the exercise of
options in 1999, and the value of the outstanding options at December 31,
1999, for each named Executive Officer.

<TABLE>
<CAPTION>
Number of securities
Shares underlying unexercised Value of unexercised
acquired Value options at fiscal year- in-the-money options at
on exercise Realized end fiscal year end
Name (#) ($) (#) ($)(1)
- ---- ----------- -------- ------------------------- -------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
N. Brian
Stevenson,
Chief
Executive
Officer -0- -0- 40,000 185,000 -0- -0-
John T.
Carper,
President
and Chief
Financial
Officer -0- -0- 11,000 54,000 -0- -0-
Ed
Stranberg,
Senior
Vice
President,
Operations -0- -0- 8,000 42,000 -0- -0-
A. Lawrence
Walton,
Senior
Vice
President,
New
Business
Development -0- -0- 6,000 34,000 -0- -0-
</TABLE>
- --------
(1) As December 31, 1999, the last reported sale price of the Company's Common
Stock, which was reported on the NASDAQ National Market System on December
31, 1999 was $2.97 per share.

JPS Packaging Company Savings Plan

The JPS Packaging Savings Plan (the "JPS Savings Plan") is a defined
contribution plan which is intended to be a 401(k) plan. All employees of the
Company not covered by a collective bargaining agreement are eligible for
participation in the JPS Savings Plan.

Participants in the JPS Savings Plan may elect to have up to fifteen
percent of their pre-tax compensation (up to a maximum of $10,000 per year)
and seven percent of their after-tax compensation contributed to the JPS
Savings Plan. For employees who have completed one year of service, the
Company will match fifty percent of each participant's pre-tax contribution,
but only to the extent that the participant's contribution does not exceed
five percent of compensation. Total contributions for a participant are
currently limited by Federal law to the lesser of twenty-five percent of such
participant's compensation or $30,000 per year. A participant's election
deferrals will be vested from the time made. The Company's matching
contributions will vest at the rate of twenty percent for each of the
participant's first five years of service and will be fully vested after five
years of employment or upon retirement, disability or death. In 1999, the
Company amended the Plan to direct the Company's matching contribution to be
invested in the Company's stock.

In addition to the Company's matching contributions, the Company may
contribute additional amounts determined by the Compensation Committee in its
sole discretion, which amounts will be allocated to each participant's account
in the proportion that such participant's compensation bears to the total
compensation of all participants for that plan year. These additional Company
contributions vest in the same manner as the Company matching contributions.

JPS Packaging 1998 Long-Term Compensation Plan

The Long-Term Plan, administered by the Compensation Committee, provides
for granting of stock options, restricted stock, performance shares and
performance units payable to employees of the Company, including the Company's
Directors and executive officers. Under the Long-Term Plan, the Compensation
Committee has sole discretion to determine those employees eligible to receive
awards and the amount and type of awards. Grants of awards to Directors of the
Company must be authorized by the Board of Directors.

The maximum number of shares of the Company's common stock subject to award
will be 550,000. No more than 55,000 shares may be issued pursuant to
restricted stock awards under the Long-Term Plan. Terms and conditions will be
set forth in written agreements, the terms of which will be consistent with
the Long-Term Plan.

26
<PAGE>

Under the Long-Term Plan, the Compensation Committee is authorized (i) to
grant stock options that qualify as "Incentive Stock Options" under Section 422
of the Internal Revenue Code of 1986, as amended, and (ii) to grant stock
options that do not so qualify. The option price for any stock options shall
not be less than 100% of the fair market value of the Company's common stock on
the date of grant. No stock options may be exercised more than ten years after
its date of grant. In the case of Incentive Stock Options, the aggregate fair
market value of the shares with respect to which options are exercisable for
the first time by any recipient during any calendar year cannot, under present
tax rules, exceed $100,000. The Compensation Committee has discretion to
determine the treatment of awards under the Long-Term Plan in the event of a
change in ownership or a change in control of the Company.

Employment Agreements

Mr. Stevenson entered into an employment agreement with the Company
effective September 14, 1998. Under the agreement, Mr. Stevenson is entitled to
an annual base salary of $250,000, subject to annual adjustment by the
Compensation Committee. Mr. Stevenson is also entitled to receive an annual
incentive compensation bonus in an amount up to his annual base salary as
determined by the Compensation Committee. Upon commencement of his employment
Mr. Stevenson received a bonus of $75,000. Mr. Stevenson was also granted
options to purchase 200,000 shares of the Company's common stock which vests
over a period of five years from September 14, 1998 (the "Date of Grant"), ten
percent of which must be exercised or lost each year over a ten year period,
subject to certain restrictions, at an exercise price equal to $4.0625 per
share. In addition, Mr. Stevenson will be granted options to purchase 25,000
shares of the Company's common stock in each of the calendar years ending 1999
and 2000, if certain financial targets are met. If Mr. Stevenson's employment
is terminated without cause or if he resigns for good reason, he is entitled to
receive one year's current base salary in twelve equal payments. All stock
options awarded to Mr. Stevenson will vest immediately upon a termination of
his employment without cause, due to his disability, his resignation for good
reason or upon a change of control (as defined in his employment agreement).

Mr. Carper entered into an employment agreement with the Company effective
July 1, 1998. Under the agreement, Mr. Carper is entitled to an annual base
salary of $155,000, subject to annual adjustment by the Compensation Committee.
Mr. Carper is also entitled to receive an annual incentive compensation bonus
in an amount up to 50% of his annual base salary as determined by the
Compensation Committee. Mr. Carper was also granted options to purchase 55,000
shares of the Company's common stock which vests over a period of five years
from July 1, 1998 (the "Date of Grant"), ten percent of which must be exercised
or lost each year over a ten year period, subject to certain restrictions, at
an exercise price equal to $4.00 per share. If Mr. Carper's employment is
terminated without cause or if he resigns for good reason, he is entitled to
receive one-half of his current base salary in a lump sum payment. All stock
options awarded to Mr. Carper will vest immediately upon a termination of his
employment without cause, due to his disability, his resignation for good
reason or upon a change of control (as defined in his employment agreement).

Mr. Stranberg entered into an employment agreement with the Company
effective November 9, 1998. Under the agreement, Mr. Stranberg is entitled to
an annual base salary of $175,000, subject to annual adjustment by the
Compensation Committee. Mr. Stranberg is also entitled to receive an annual
incentive compensation bonus in an amount up to 50% of his annual base salary
as determined by the Compensation Committee. Upon commencement of his
employment, Mr. Stranberg received a bonus of $40,000. Mr. Stranberg was also
granted options to purchase 40,000 shares of the Company's common stock which
vests over a period of five years from December 14, 1998 (the "Date of Grant"),
ten percent of which must be exercised or lost each year over a ten year
period, subject to certain restrictions, at an exercise price equal to $4.00
per share. In addition, Mr. Stranberg will be granted options to purchase
10,000 shares of the Company's common stock in each of the calendar years
ending 1999 and 2000, if certain financial targets are met. If Mr. Stranberg's
employment is terminated without cause or if he resigns for good reason, he is
entitled to receive one year's current base salary in twelve equal payments.
All stock options awarded to Mr. Stranberg will vest immediately upon a
termination of his employment without cause, due to his disability, his
resignation for good reason or upon a change of control (as defined in his
employment agreement).

27
<PAGE>

COMPENSATION COMMITTEE REPORT

The Compensation Committee consists of the Chairman of the Board of
Directors and two non-employee Directors. It recommends to the full Board of
Directors the compensation of the Chief Executive Officer. The Compensation
Committee also approves and monitors the Executive Incentive Plan ("EIP"), Key
Management Incentive Plan, Sales Management Incentive Plan and Sales Account
Managers Incentive Plan, and it administers the Long-Term Plan. The
Compensation Committee's report for fiscal 1999 is set forth below.

Compensation Philosophy

The Compensation Committee believes that it is in the best interest of the
stockholders of the Company to attract, retain and motivate dedicated and
talented management personnel by offering a competitive compensation package
that maintains an appropriate relationship between compensation and the
creation of stockholder value. The general philosophy of the Compensation
Committee is to integrate (i) reasonable levels of annual base salary, (ii)
annual incentive bonus awards based upon achievement of short-term corporate
and individual performance goals such that management compensation levels will
be higher in years in which performance goals are achieved or exceeded, and
(iii) equity-based grants to ensure that management has a continuing stake in
the long-term success of the Company in return for creating value to its
stockholders.

Base Salary

Base salary ranges are established each year for each executive position
based primarily on a review of salaries offered by other manufacturing
companies with revenues comparable to the Company for positions with comparable
responsibilities. The Compensation Committee may utilize external salary
surveys to establish base salaries in reference to comparable manufacturing
companies but has not yet undertaken or commissioned such a survey. The
Compensation Committee expects executive salaries each year to be based upon
job performance and results achieved, potential for future responsibilities,
and the overall financial performance of the Company. Based on the above, there
were no increases in the base salary of the executives.

Annual Incentive Compensation

Incentive compensation is based on Company and individual performance, with
overall Company financial performance as the team measurement, and quantitative
goals as the measurement for individual performance. Earnings before interest,
taxes, depreciation and amortization ("EBITDA") is currently used to measure
the Company's financial performance. The EIP adopted for 1999 set EBITDA
targets which were not achieved, and thus executive bonuses were not paid for
1999.

Equity-Based Grants

Individual stock options have been granted under the Long-Term Plan to the
Chairman of the Board and each of the other executive officers. The selection
of the participants, allotment of shares, exercise price, determination of the
vesting schedule and other conditions are established by the Compensation
Committee. While there is no explicit formula for deciding specific stock
option grants, the Chief Executive Officer and other executive officers have
been advised that they may receive additional option grants based upon the
Company's performance in 2000. In awarding options, the Committee also
evaluates the recipient's ability to influence the Company's long-term growth
and profitability as well as the number of options previously granted to the
recipient.

Chief Executive Officer Compensation

Mr. Stevenson was employed by the Company effective September 14, 1998, and
the terms of his employment agreement were negotiated by the Compensation
Committee. Under the terms of his employment

28
<PAGE>

agreement, his annual base salary will be reviewed annually and he will
participate in the EIP approved by the Compensation Committee. The number of
options granted upon commencement of his employment and for the years 1999 and
2000 were set in his employment agreement.

Deductibility of Compensation Expenses

Under the Omnibus Budget Reconciliation Act of 1993 the Company is not
allowed a tax deduction for compensation paid in excess of $1 million to any
officer listed in the Summary Compensation Table, subject to certain
exceptions. The Committee did not consider this restriction in setting
executive compensation because in no case does compensation subject to the
limitation paid to any executive approach the $1 million limit.

Summary

The Compensation Committee believes that the executive officers of the
Company are dedicated to achieving significant improvements in long-term
financial performance and that the compensation policies and programs
contribute to achieving this focus.

The Compensation Committee Report is submitted by:

G. Kenneth Baum
Leo Benatar
William D. Thomas

29
<PAGE>

COMPANY PERFORMANCE

The following graph shows a comparison of cumulative total returns for the
Company as of December 31, 1999, the NASDAQ Composite and an index of peer
companies selected by the Company.

Comparison of Cumulative Total Return for Fiscal Year Ended December 31, 1999
(JPS Packaging Company, NASDAQ Composite, and Peer Group)

<TABLE>
<CAPTION>
July December 31,
1, -------------
1998 1998 1999
------ ------ ------
<S> <C> <C> <C>
The Company.......................................... 100.00 83.33 65.97
NASDAQ............................................... 100.00 117.16 206.64
Peer Group........................................... 100.00 96.36 79.17
</TABLE>

The total cumulative return on investment (change in the year-end stock
price plus dividends reinvested at the ex-dividend date) for the fiscal year
ended December 31, 1999 for the Company, the peer group and the NASDAQ
Composite is based on the stock prices at the end of the fiscal year 1999,
assuming a $100 investment. The graph compares the performance of the Company
with that of the NASDAQ Composite and peer companies selected by the Company
with the investment weighted at the beginning of the period based on market
capitalization.

The peer group consists of the following companies: Bemis Company, Inc.,
Sonoco Products Company, Liqui-Box, Inc., and Ivex Packaging Corp. The peer
group was approved by the Compensation Committee.

30
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF JPS PACKAGING
COMMON STOCK

Amount and Nature of Beneficial Ownership

The following table sets forth with respect to the Company's common stock
as of December 31, 1999: (i) the only persons known to be beneficial owners of
more than five percent of the Company's voting common stock; (ii) the number
of shares beneficially owned by each current Director and nominee; (iii) the
number of shares beneficially owned by the executive officer named in the
"Summary Compensation Table" set forth herein; and (iv) the number of shares
beneficially owned by all Directors and executive officers as a group.

<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership(1) of Class
- ------------------- ---------------------- --------
<S> <C> <C>
G. Kenneth Baum............................... 1,866,137(2)(3) 32.9%
120 West 12th Street
Kansas City, MO 64105
William D. Thomas............................. 1,698,930(3)(4) 29.9%
120 West 12th Street
Kansas City, MO 64105
George K. Baum Group, Inc..................... 1,488,100(5) 26.2%
120 West 12th Street
Kansas City, MO 64105
Forum Capital Partners........................ 734,000(6) 12.9%
One Oxford Centre, Suite 3950
Pittsburgh, PA 15219
D. Patrick Curran............................. 206,280(7) 3.6%
N. Brian Stevenson............................ 74,073(8) 1.3%
John T. Carper................................ 68,507(9) 1.2
Leo Benatar................................... 47,000(10) *
Edwin W. Stranberg............................ 19,035(11) *
Charles A. Sullivan........................... 11,230(12) *
A. Lawrence Walton............................ 8,260(13) *
Directors and Executive Officers as a Group (9
Persons)..................................... 2,511,352 44.2%
</TABLE>
- --------
* Percentages do not exceed one percent of the issued and outstanding shares
of common stock.
(1) Calculated in accordance with Rule 13d-3 under the Securities Exchange Act
of 1934, as amended. Nature of beneficial ownership of securities is
direct unless indicated otherwise by footnote. Beneficial ownership as
shown in the table arises from sole voting power and sole investment power
unless otherwise indicated by footnote.
(2) Includes 371,787 shares held indirectly by Mr. Baum, as trustee of a
revocable trust established by him, and 5,625 shares issuable pursuant to
options, which are currently exercisable by Mr. Baum.
(3) Includes 1,488,100 shares owned by George K. Baum Group, Inc. ("Group").
Mr. Baum and Mr. Thomas are each officers and directors and have shared
voting and investment power over these shares. Mr. Baum is also a
shareholder of Group.
(4) Includes 151,105 shares held by Mr. Thomas as trustee of a revocable trust
established by him, 50,000 shares held by his spouse as trustee of a
revocable trust established by her, 4,100 shares held by his spouse as
custodian for their children, in which he disclaims beneficial ownership
and 5,625 shares issuable pursuant to options which are currently
exercisable by Mr. Thomas.
(5) Excludes shares owned by officers and employees of Group and its
subsidiaries.
(6) The ownership reported is based upon the amended Schedule 13G as filed
with the Securities and Exchange Commission, dated September 8, 1999.
(7) Includes 5,625 shares issuable pursuant to options which are currently
exercisable by Mr. Curran.

31
<PAGE>

(8) Includes 31,500 shares held directly by Mr. Stevenson, 2,000 shares held
by his spouse, 573 shares indirectly held in his account in the Company's
401(k) Plan and 40,000 shares issuable pursuant to options which are
currently exercisable by Mr. Stevenson.
(9) Includes 39,862 shares held directly by Mr. Carper, 13,200 shares held by
his spouse, and 3,900 shares held indirectly by Mr. Carper, as trustee of
an irrevocable trust, 545 shares held in his account in the Company's
401(k) Plan and 11,000 shares issuable pursuant to options which are
currently exercisable by Mr. Carper.
(10) Includes 11,000 shares held directly by Mr. Benatar and 36,000 shares
issuable pursuant to options which are currently exercisable by Mr.
Benatar.
(11) Includes 1,035 shares indirectly held in his account in the Company's
401(k) Plan and 8,000 shares issuable pursuant to options which are
currently exercisable by Mr. Stranberg.
(12) Includes 5,625 shares issuable pursuant to options which are currently
exercisable by Mr. Sullivan.
(13) Includes 632 shares indirectly held in his account in the Company's
401(k) Plan and 6,000 shares issuable pursuant to options which are
currently exercisable by Mr. Walton.

ITEM 13. CERTAIN RELATIONSHIPS AND OTHER TRANSACTIONS

The Company's Directors, G. Kenneth Baum and William D. Thomas, have
certain affiliations with George K. Baum & Company ("GKB"), one of the
Company's financial advisors. Mr. Baum is an employee and Mr. Thomas is a Vice
President of GKB, and both Mr. Baum and Mr. Thomas are affiliated with George
K. Baum Group, Inc., which holds 1,488,100 shares of the Company's common
stock.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(1) Financial Statements

The Company's financial statement, prepared in accordance with Regulation
S-X, including statements of operations, cash flow, and stockholders' equity,
for the three fiscal periods ended December 31, 1999, 1998, and 1997, and
balance sheets as of December 31, 1999 and 1998, and related notes and the
independent auditors' opinion thereon are included under Item 8.

(2) Schedule II. Valuation and Qualifying Accounts

<TABLE>
<CAPTION>
Balance at Balance at
Beginning of End of
Period Period
------------ ----------
<S> <C> <C>
Allowance for doubtful accounts (in thousands):
1999.............................................. $ 214 $ 165
1998.............................................. $ 254 $ 214
1997.............................................. $ 321 $ 254

Inventory valuation allowance (in thousands):
1999.............................................. $1,100 $ 746
1998.............................................. $ 502 $1,100
1997.............................................. $ 668 $ 502
</TABLE>

32
<PAGE>

(3) Exhibits

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
3 (a) Amendment to Certificate of Incorporation, as amended, of the
Registrant (Incorporated by reference from Exhibit 3.1(c) to Form
S-4 dated June 9, 1998)

3 (b) Amended and Restated Bylaws dated April 22, 1998 (Incorporated by
reference from Exhibit 3.2 to Form S-4 dated June 9, 1998)
4 (a) Specimen Common Stock Certificate (Incorporated by reference from
Exhibit 4.1 to Form S-4 dated June 9, 1998)
4 (b) Credit Agreement with Harris Trust and Savings Bank, dated June
30, 1998, for a $15 million line of credit. (Incorporated by
reference to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1998, filed March 29, 1999)
4 (c) Amendment to Credit Agreement with Harris Trust and Savings Bank,
dated January 24, 2000, filed herewith.
10 (a) Long-Term Compensation Plan of JPS Packaging Company, effective
May 4, 1998 (Incorporated by reference from Exhibit 10.2 to Form
S-4 dated June 9, 1998)
10 (b) JPS Packaging Company Savings Plan, effective July 1, 1998
(Incorporated by reference to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1998, filed March 29,
1999)
10 (c) Employment Agreement with N. Brian Stevenson, effective September
14, 1998 (Incorporated by reference to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1998, filed
March 29, 1999)
10 (d) Employment Agreement with John T. Carper, effective July 1, 1998,
filed herewith.
10 (e) Employment Agreement with Edwin W. Stranberg, effective November
9, 1999, filed herewith.
18 Letter Regarding Change of Accounting Principle (Incorporated by
reference to the Registrant's Quarterly Report on Form 10-Q for
the period ended September 30, 1999, filed November 10, 1999)
21 Subsidiaries of the registrant (Incorporated by reference from
Exhibit 21.1 to Form S-4 dated June 9, 1998)
27 Financial Data Schedule
</TABLE>

(4) Reports on Form 8-K

None.

33
<PAGE>

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.

JPS Packaging Company

/s/ N. Brian Stevenson
-------------------------------------
N. Brian Stevenson
Chief Executive Officer
Dated: March 15, 2000

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

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
/s/ N. Brian Stevenson Chief Executive Officer March 15, 2000
____________________________________
N. Brian Stevenson

/s/ John T. Carper President and Chief March 15, 2000
____________________________________ Financial Officer
John T. Carper
/s/ D. Patrick Curran Director March 15, 2000
____________________________________
D. Patrick Curran

/s/ Charles A. Sullivan Director March 15, 2000
____________________________________
Charles A. Sullivan

/s/ William D. Thomas Director March 15, 2000
____________________________________
William D. Thomas

/s/ G. Kenneth Baum Director March 15, 2000
____________________________________
G. Kenneth Baum

/s/ Leo Banatar Director March 15, 2000
____________________________________
Leo Banatar
</TABLE>

<PAGE>

Exhibit 4C

JPS Packaging Company
First Amendment To Credit Agreement

This First Amendment to Credit Agreement (herein, the "Amendment") is
entered into as of January 24, 2000, between JPS Packaging Company, a Delaware
corporation (the "Company"), and Harris Trust and Savings Bank (the "Bank").

Preliminary Statements

A. The Company and the Bank entered into a certain Credit Agreement,
dated as of June 30, 1998 (the Credit Agreement, as the same has been amended
prior to the date hereof, being referred to herein as the "Credit Agreement").
All capitalized terms used herein without definition shall have the same
meanings herein as such terms have in the Credit Agreement.

B. The Company has requested that the Bank amend certain financial
covenants and make certain other amendments to the Credit Agreement, and the
Bank is willing to do so under the terms and conditions set forth in this
Amendment.

Now, Therefore, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

Section 1. Amendments.

Subject to the satisfaction of the conditions precedent set forth in
Section 2 below, the Credit Agreement shall be and hereby is amended as follows:

1.1. Section 5.1 of the Credit Agreement shall be and is hereby
amended by adding the following definition at the end thereof:

"Year 2000 Problem" means any significant risk that computer hardware,
software, or equipment containing embedded microchips essential to the
business or operations of the Company or any of its Subsidiaries will
not, in the case of dates or time periods occurring after December 31,
1999, function at least as efficiently and reliably as in the case of
times or time periods occurring before January 1, 2000, including the
making of accurate leap year calculations.

1.2. Section 6 of the Credit Agreement shall be and is hereby
amended by adding the following Section at the end thereof:

Section 6.18. Year 2000 Compliance. The Company has conducted a
comprehensive review and assessment of the computer applications of
the Company and its Subsidiaries and is making inquiry of their
material suppliers, vendors (including data
<PAGE>

processors) and customers, with respect to any defect in computer
software, data bases, hardware, controls and peripherals related to
the occurrence of the year 2000 or the use at any time of any date
which is before, on and after December 31, 1999, in connection
therewith. Based on the foregoing review, assessment and inquiry, the
Company believes that no such defect could reasonably be expected to
have a material adverse effect on the business or financial affairs of
the Company (or of the Company and its Subsidiaries taken on a
consolidated basis).

1.3. Section 8 of the Credit Agreement shall be and is hereby amended
by adding the following Section at the end thereof:

Section 8.22. Year 2000 Assessment. The Company shall take all actions
necessary and commit adequate resources to assure that its computer-
based and other systems (and those of all Subsidiaries) are able to
effectively process dates, including dates before, on and after
January 1, 2000, without experiencing any Year 2000 Problem that could
cause a material adverse effect on the business or financial affairs
of the Company (or of the Company and its Subsidiaries taken on a
consolidated basis). At the request of the Bank, the Company will
provide the Bank with written assurances and substantiation
(including, but not limited to, the results of internal or external
audit reports prepared in the ordinary course of business) reasonably
acceptable to the Bank as to the capability of the Company and its
Subsidiaries to conduct its and their businesses and operations
before, on and after January 1, 2000, without experiencing a Year 2000
Problem causing a material adverse effect on the business or financial
affairs of the Company (or of the Company and its Subsidiaries taken
on a consolidated basis).

1.4. Sections 8.7, 8.8 and 8.9 of the Credit Agreement shall be
amended in the entirety and as so amended shall be restated as follows:

Section 8.7. Tangible Net Worth. The Company shall, at all times
during each of the periods below, maintain Tangible Net Worth at not
less than:

Tangible Net Worth
From and To and shall not be
including including less than:

November 1, 1999 December 31, 2000 $36,000,000
January 1, 2001 December 31, 2001 $36,500,000

-2-
<PAGE>

Section 8.8. EBITDA. (a) Quarterly Test. The Company shall, as of the
last day of each calendar month ending during any one of the periods
specified below, maintain EBITDA for the three calendar months then
ended of not less than:

From and To and EBITDA shall not
including including be less than:

12/16/99 3/15/00 $ 300,000
3/16/00 At all times thereafter $1,000,000

(b) Annual Test. The Company shall, as of December 31, 2000 and
December 31, 2001, maintain EBITDA for the fiscal year of the Company
ended on or about such date of not less than $3,300,000 and
$4,000,000, respectively.

Section 8.9. Capital Expenditures. The Company shall not, nor shall
it permit any Subsidiary to, expend or become obligated for capital
expenditures (as determined in accordance with GAAP) in an aggregate
amount during any fiscal year of the Company in excess of the amount
set forth for such year below:

For the year ending on: Capital Expenditures shall
not be more than:

12/31/00 $4,500,000

12/31/01 $5,000,000

Section 2. Conditions Precedent.

The effectiveness of this Amendment is subject to the satisfaction of
all of the following conditions precedent:

2.1. The Company and the Bank shall have executed and delivered
this Amendment.

2.2. The Bank shall have received copies (executed or certified,
as may be appropriate) of all legal documents or proceedings taken in
connection with the execution and delivery of this Amendment to the
extent the Bank or its counsel may reasonably request.

2.3. Legal matters incident to the execution and delivery of this
Amendment shall be satisfactory to the Bank and its counsel.

-3-
<PAGE>

Section 3. Representations.

In order to induce the Bank to execute and deliver this Amendment, the
Company hereby represents to the Bank that as of the date hereof the
representations and warranties set forth in Section 6 of the Credit Agreement
are and shall be and remain true and correct (except that the representations
contained in Section 6.5 shall be deemed to refer to the most recent financial
statements of the Company delivered to the Bank) and the Company is in
compliance with the terms and conditions of the Credit Agreement and no Default
or Event of Default has occurred and is continuing under the Credit Agreement or
shall result after giving effect to this Amendment.

Section 4. Miscellaneous.

4.1. The Company heretofore executed and delivered to the Bank the Security
Agreement, Mortgages, Patent Agreement and Trademark Agreement and certain other
Collateral Documents. The Company hereby acknowledges and agrees that the Liens
created and provided for by the Collateral Documents continue to secure, among
other things, the Obligations arising under the Credit Agreement as amended
hereby; and the Collateral Documents and the rights and remedies of the Bank
thereunder, the obligations of the Company thereunder, and the Liens created and
provided for thereunder remain in full force and effect and shall not be
affected, impaired or discharged hereby. Nothing herein contained shall in any
manner affect or impair the priority of the liens and security interests created
and provided for by the Collateral Documents as to the indebtedness which would
be secured thereby prior to giving effect to this Amendment.

4.2. Except as specifically amended herein, the Credit Agreement shall
continue in full force and effect in accordance with its original terms.
Reference to this specific Amendment need not be made in the Credit Agreement,
the Revolving Credit Note, or any other instrument or document executed in
connection therewith, or in any certificate, letter or communication issued or
made pursuant to or with respect to the Credit Agreement, any reference in any
of such items to the Credit Agreement being sufficient to refer to the Credit
Agreement as amended hereby.

4.3. The Company agrees to pay on demand all costs and expenses of or
incurred by the Bank in connection with the negotiation, preparation, execution
and delivery of this Amendment, including the fees and expenses of counsel for
the Bank.

4.4. This Amendment may be executed in any number of counterparts, and by
the different parties on different counterpart signature pages, all of which
taken together shall constitute one and the same agreement. Any of the parties
hereto may execute this Amendment by signing any such counterpart and each of
such counterparts shall for all purposes be deemed to be an original. This
Amendment shall be governed by the internal laws of the State of Illinois.

[Signature Page to Follow]

-4-
<PAGE>

This First Amendment to Credit Agreement is entered into as of the date and
year first above written.

JPS Packaging Company

By
Name
-----------------------------
Title
-----------------------------

Accepted and agreed to.

Harris Trust And Savings Bank

Name
------------------------------
Title
------------------------------

-5-

<PAGE>

Exhibit 10d

EMPLOYMENT AGREEMENT
--------------------

THIS AGREEMENT is made and entered into as of the 1st day of July,
1998, by and between JPS PACKAGING COMPANY (the "Company") and JOHN T. CARPER
("Employee").

RECITALS

A. The Company is duly organized and validly existing as a
corporation in good standing under the laws of the State of Delaware and is
engaged principally in the design and manufacture of flexible packaging
products.

B. Employee is duly qualified to render services in connection with
the business of the Company.

C. The Company has offered to employ Employee on the basis set forth
in this Agreement, and Employee has indicated his willingness to accept said
offer.

D. The parties believe that it is in their best interests to provide
for the specific terms and conditions of Employee's employment.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual promises and covenants
as hereinafter set forth, the parties agree as follows:

1. Employment.

The Company agrees to employ Employee as President and Chief Operating
Officer of the Company pursuant to the terms set forth below, and Employee
agrees to accept such employment with the Company in accordance with the terms
and conditions set forth in this Agreement.

2. Term.

The term of this Agreement shall begin on July 1, 1998, and shall
continue until either party gives the other thirty (30) days written notice of
its/his election to terminate this Agreement.

3. Compensation.

For services rendered by Employee pursuant to this Agreement, Employee
shall receive from the Company the following:

(a) Base Compensation. Employee's starting base monthly salary
shall be $12,916.67 ($155,000, annualized amount ["Base Annual Salary"]).
On or before July 1 of each year (commencing in 1999) during the term of
this Agreement, the
<PAGE>

Compensation Committee of the Board of the Directors of the Company (the
"Board") (or, if no such committee or similar committee exists, the entire
Board) (the "Compensation Committee") shall review the performance of
Employee, which review shall serve as the basis for determining the amount
of increase, if any, of Employee's Base Annual Salary. The amount and terms
of any such adjustments shall be in the discretion of the Compensation
Committee; however, typically adjustments to base salary are effective as
of an employee's employment anniversary date.

(b) Incentive Compensation. As an executive officer of the
Company, Employee will be eligible to participate in the Company's
Incentive Compensation Plan (the "Incentive Plan"). Pursuant to the
Incentive Plan, the Compensation Committee will annually establish both the
Company-wide goal and individual target awards; provided, however, the
first period for the Company-wide goal and individual target awards will be
July 1, 1998 to December 31, 1998. Employee's target award initially will
be 50% of his Base Annual Salary, prorated for the initial partial year. In
each successive calendar year, Employee's individual target award will be
as set at a level not less than 50% of Base Annual Salary by the
Compensation Committee and Employee's actual incentive bonus will be based
entirely upon the Company's performance relative to the Company-wide goal,
all subject to the Incentive Plan as then in effect. Notwithstanding the
foregoing, payment of bonuses under the Incentive Plan for any year is
dependent upon Employee's employment with the Company at the end of such
calendar year.

(c) Vacation. Assuming an employment starting date of July 1,
1998, Employee will be entitled to accrue two weeks of paid vacation during
the remainder of 1998 in addition to any carryover of accrued vacation from
Sealright Co., Inc. at the applicable compensation rate. Commencing in
1999, Employee will be entitled to accrue four weeks of paid vacation each
calendar year.

(d) Stock Options. Subject to the terms and conditions of the
JPS Packaging Company 1998 Long-Term Compensation Plan (the "Plan") and the
Stock Option Agreement between the Company and Employee attached hereto as
Schedule A (the "Option Agreement"), the Company will grant to Employee on
"incentive stock option" (as defined in the Plan) to purchase 55,000 shares
of the common stock of the Company (the "Option"). The terms and conditions
of the Option are set forth in the Option Agreement, which is incorporated
herein and made part of this Agreement.

4. Benefits.

Employee shall be entitled to participate in all benefit programs and
incentive compensation plans that the Company makes generally available to its
executive officers, subject to Employee's meeting the eligibility provisions
thereof and, if applicable, as determined by the Compensation Committee.
Nothing contained herein shall preclude the Company, in its sole discretion,
from changing or amending, in whole or in part, or revoking any one or more of
such benefit programs or compensation plans or adopting new employee benefit
programs or compensation plans.

2
<PAGE>

5. Duties.

During Employee's term of employment by the Company, Employee shall
devote his normal working hours, attention and energies to the Company. Employee
shall serve to the best of his ability and shall perform the duties and have
such responsibilities consistent with Employee's position as President and Chief
Operating Officer of the Company, which duties and responsibilities shall be
similar to those of presidents and chief operating officers of companies in the
packaging industry having revenues comparable to those of the Company. Employee
agrees to abide by the rules, procedures, regulations, instructions, and
practices of the Company and any changes therein which may be adopted from time
to time by the Company.

6. Business Expenses.

In addition to compensation paid to Employee pursuant to Section 3,
during the term of Employee's employment hereunder, the Company agrees to
reimburse Employee for all reasonable and necessary business expenses which
Employee incurs in the performance of his duties hereunder in accordance with
the policies and procedures adopted from time to time by the Company (whether or
not in writing).

7. Sale of the Company.

In the event the Board has resolved to sell the Company (either by
sale of substantially all the assets, merger, consolidation, or other similar
transaction) (the "JPS Sale") and has entered into a letter of intent or
definitive agreement for the JPS Sale with a prospective purchaser within twelve
(12) months of the date of this Agreement, Employee shall receive a bonus in the
amount of:

(a) $100,000, if the total sale price of the Company (as
determined by the actual proceeds received by stockholders of JPS) (the
"JPS Sale Price") is less than $45,000,000; or

(b) $100,000, plus one percent (1%) of the JPS Sale Price in
excess of $45,000,000, up to a maximum aggregate bonus of $250,000, if the
JPS Sale Price exceeds $45,000,000.

8. Employment Termination.

The employment of Employee by the Company pursuant to this Agreement
shall terminate upon the occurrence of any of the following:

(a) Death or Disability. Immediately upon the death or
disability of Employee. For purposes of this Agreement, "disability" shall
mean the inability of Employee to perform his duties hereunder for a period
of ninety (90) consecutive calendar days, or for a period of one hundred
twenty (120) calendar days whether or not consecutive, during any three
hundred and sixty (360) day period due to a physical or mental incapacity.
The determination of disability shall be made by a disinterested medical
doctor, licensed to practice in the State of Kansas, chosen jointly by the
parties. Notwithstanding the definition of "disability" herein, if and only
if the Company provides disability insurance coverage to Employee at the
Company's cost, Employee's

3
<PAGE>

employment hereunder shall not be terminated by reason of disability until
the Company's disability insurance carrier has certified Employee as
disabled and has commenced (or agreed in writing) to pay disability
benefits to Employee.

(b) Cause. At the election of the Company for cause,
immediately (except as provided below) upon written notice by the Company
to Employee. For purposes of this Agreement, "cause" shall mean:

(i) The willful failure by Employee to perform his material
duties hereunder (other than any such failure resulting from
Employee's death or disability), as determined in good faith by a
majority of the Board;

(ii) The (A) continued failure (which failure need not be
willful) by Employee to perform his material duties hereunder (other
than any such failure resulting from Employee's death or disability)
or (B) breach by Employee of any material provision of this Agreement
(which failure or breach has not been cured by Employee within thirty
(30) days after written notice thereof by the Board of Directors), all
as determined in good faith by a majority of the Board;

(iii) Employee's conviction of a felony by a trial court of
competent jurisdiction, whether or not an appeal is taken; or

(iv) The willful engaging by Employee in unlawful conduct
(including acts of dishonesty) in connection with the business of the
Company, as determined in good faith by a majority of the Board.

(c) Good Reason. At the election of Employee for good reason,
immediately upon written notice by Employee to the Company. For purposes of
this Agreement, "good reason" shall mean:

(i) A change in Employee's responsibilities, titles, or
offices that is not consistent with Employee's status and duties
hereunder; or

(ii) A Change of Control (as hereinafter defined) during the
period of Employee's employment hereunder. For the purposes of this
Agreement, the term "Change of Control" shall mean: (A) a person,
corporation, entity or group, which (collectively) does not
beneficially own at least twenty-five percent (25%) of the Company's
issued and outstanding voting stock as of the date hereof, (I) makes a
tender or exchange offer for the issued and outstanding voting stock
of the Company and beneficially owns 25% or more of the issued and
outstanding voting stock after such tender or exchange offer, or (II)
acquires, directly or indirectly, the beneficial ownership of 25% or
more of the issued and outstanding voting stock of the Company in a
single transaction or series of transactions (excluding the
acquisition of newly issued voting stock of the Company issued in full
or part payment for the purchase by the Company or any subsidiary of
the Company of stock or assets), or (B) the Company is a party to a
merger, consolidation or similar transaction and following such
transaction 50%

4
<PAGE>

or more of the issued and outstanding voting securities of the
resulting entity is beneficially owned by a person, corporation,
entity or group other than the stockholders of the Company immediately
prior to the transaction, or (C) the Company sells 50% or more of its
assets to any other person or persons.

(d) Election of Company. Upon thirty (30) days prior written
notice from the Company to Employee, for reasons other than "cause," as
defined in 8(b), above.

(e) Election of Employee. Upon thirty (30) days prior written
notice from Employee to Company, for reasons other than "good reason," as
defined in 8(c), above.

9. Effect of Termination.

(a) Base Compensation and Benefits. In the event Employee's
employment is terminated for any reason, all compensation and benefits
shall cease, except that the Company shall pay to Employee that portion of
his then Base Annual Compensation that has been earned but unpaid at the
time of such termination and reimbursable expenses incurred by but not yet
reimbursed to Employee at the time of such termination.

(b) Termination Payment. In the event Employee's employment is
terminated by Employee pursuant to Section 8(c) or by the Company pursuant
to Section 8(d) within twelve (12) months of the date of this Agreement,
the Company shall pay to Employee a lump sum payment of $168,000, as a
termination payment, within thirty (30) days of his date of termination, in
addition to any amounts owed to Employee pursuant to Section 9(a). In the
event Employee's employment is terminated by Employee pursuant to Section
8(c) or by the Company pursuant to Section 8(d), at anytime after twelve
(12) months from the date of this Agreement, the Company shall pay to
Employee a lump sum payment equal to one-half of his then Base Annual
Salary, as a termination payment, within thirty (30) days of his date of
termination, in addition to any amounts owed to Employee pursuant to
Section 9(a).

(i) In the event Employee's employment is terminated
pursuant to Section 8(a), (c) or (d), Employee's Option, to the extent
not previously vested, shall immediately vest and shall become
exercisable for the total amount of unexercised Option Shares (as
defined in the Option Agreement) thereunder until the first to occur
of: (A) midnight on the tenth anniversary of the Grant Date; or (B)
the one year anniversary date of the termination of Employee. Any such
exercise following Employee's death may be made only by such
Employee's personal representative, unless Employee's will
specifically disposes of the Option, in which case such exercise shall
be made only by the recipient of such specific disposition. If
Employee's personal representative, or such recipient, shall be
entitled to exercise the Option pursuant to the preceding sentence,
such representative or recipient shall be bound by all the terms and

5
<PAGE>

conditions of this Agreement, the Option Agreement and the Plan which
would have applied to Employee's exercise of the Option.

(ii) In the event Employee's employment is terminated
pursuant to Section 8(b) or by Employee pursuant to Section 8(e), the
Option shall terminate and expire on the day Employee's employment
terminates; provided, however, that in the discretion of the Board,
the Option shall terminate and expire on the day Employee is notified
of his dismissal.

10. Notices.

Any notice required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if delivered
personally or if sent by certified mail, return receipt requested, with first
class postage prepaid, addressed (a) to Employee at 4208 West 91st Street,
Prairie Village, KS 66207, and (b) to the Company at 9201 Packaging Drive,
DeSoto, Kansas 66018, Attention: Chief Executive Officer. Any notice which is
required to be made within a stated period of time shall be deemed timely if
made before midnight of the last day of such period.

11. Alteration, Amendment or Termination.

No change or modification of this Agreement shall be valid unless the
same is in writing and signed by all the parties hereto. No waiver of any
provision of this Agreement shall be valid unless in writing and signed by the
person against whom it is sought to be enforced. The failure of any party at any
time to insist, or a delay in insisting, upon strict performance of any
condition, promise, agreement or understanding set forth herein shall not be
construed as a waiver or relinquishment of the right to insist upon strict
performance of the same condition, promise, agreement, or understanding at a
future time. A waiver or consent given by a party hereto on one occasion shall
be effective only in that instance and shall not be construed as a bar or waiver
of any right on any other occasion. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provisions were omitted.

12. Integration.

This Agreement sets forth (and is intended to be an integration of)
all of the promises, agreements, conditions, understandings, warranties and
representations, oral or written, express or implied, among the parties hereto
with respect to the terms of employment, and there are no promises, agreements,
conditions, understandings, warranties or representations, oral or written,
express or implied, among the parties hereto with respect to the terms of
employment other than as set forth herein.

13. Governing Law and Venue.

This Agreement and all disputes arising hereunder shall be subject to,
governed by and construed in accordance with the laws of the State of Kansas,
irrespective of the fact that one or more of the parties now is or may become a
resident of a different state. Employee hereby expressly submits and consents
to the exclusive in personam jurisdiction and exclusive venue of

6
<PAGE>

the courts of competent jurisdiction in the State of Kansas, including the
United States District Court for the District of Kansas.

14. Benefit and Burden.

This Agreement shall inure to the benefit of, and shall be binding
upon, the parties hereto and their respective successors, heirs, and personal
representatives. This Agreement, including the Option granted herein, shall not
be assignable, except the Option may be assignable pursuant to Section 9(c)(i).

15. Captions.

The headings of the sections and paragraphs are for convenience only
and in no way define, limit or affect the scope or substance of any section or
paragraph of this Agreement.

IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by its duly authorized officers and its corporate seal to be affixed hereto, and
each of the parties hereto has executed this Agreement effective as of the date
and year first above written.

COMPANY:

JPS PACKAGING COMPANY

/s/ William D. Thomas
By: ___________________________
William D. Thomas
Name: ___________________________
Director
Title: ___________________________

EMPLOYEE:

/s/ John T. Carper
__________________________________
John T. Carper

<PAGE>

Exhibit 10e

EMPLOYMENT AGREEMENT
--------------------

THIS AGREEMENT is made and entered into as of the 24th day of October,
1998, by and between JPS PACKAGING COMPANY (the "Company") and EDWIN W.
STRANBERG ("Executive").

RECITALS

B. Executive is duly qualified to render services in connection with
the business of the Company.

C. The Company has offered to employ Executive on the basis set forth
in this Agreement, and Executive has indicated his willingness to accept said
offer.

D. The parties believe that it is in their best interests to provide
for the specific terms and conditions of Executive's employment.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual promises and covenants
as hereinafter set forth, the parties agree as follows:

1. Employment.

The Company agrees to employ Executive as Senior Vice President -
Operations of the Company pursuant to the terms set forth below, and Executive
agrees to accept such employment with the Company in accordance with the terms
and conditions set forth in this Agreement.

2. Term.

The term of this Agreement shall begin on November 9, 1998, and
shall continue until either party gives the other thirty (30) days written
notice of its/his election to terminate this Agreement.
<PAGE>

3. Compensation.

For services rendered by Executive pursuant to this Agreement,
Executive shall receive from the Company the following:

(a) Base Compensation. Executive's starting monthly salary shall
be $14,583 ($175,000, annualized amount ["Base Compensation"]). During the
term of this Agreement, the Compensation Committee of the Board of the
Directors of the Company (the "Board") (or, if no such committee or similar
committee exists, the entire Board) (the "Compensation Committee") shall
review the performance of Executive, which review shall serve as the basis
for determining the amount of increase, if any, of Executive's Base
Compensation. The amount and terms of any such adjustments shall be in the
discretion of the Compensation Committee.

(b) Bonuses/Incentive Compensation. Upon commencement of
employment with the Company, Executive shall receive a one-time bonus
payment of $40,000. As an executive officer of the Company, Executive will
be eligible to participate in the Company's Incentive Compensation Plan
(the "Incentive Plan"), which shall be jointly developed by Executive and
the Compensation Committee. Under the Incentive Plan, Executive will be
eligible to receive annual incentive compensation in an amount of not less
than 50% of his current Base Compensation, including any adjustments
thereto. Pursuant to the Incentive Plan, the Compensation Committee will
annually establish both the Company-wide goal and individual target awards.
Notwithstanding the foregoing, payment of bonuses under the Incentive Plan
for any year is dependent upon Executive's employment with the Company at
the end of such calendar year.

(c) Stock Options. Subject to the terms and conditions of the JPS
Packaging Company 1998 Long-Term Compensation Plan (the "Plan") and the
Stock Option Agreement between the Company and Executive attached hereto as
Exhibit A (the "Option Agreement") and subject to approval by the Board of
Directors at its scheduled December 1998 meeting, the Company will grant to
Executive an "incentive stock option" (as defined in the Plan) to purchase
40,000 shares of the common stock of the Company (the "Option"). The terms
and conditions of the Option are set forth in the Option Agreement, which
is incorporated herein and made part of this Agreement. Additionally,
Executive will receive additional stock options to purchase 10,000 shares
of the Company's common stock at the end of each of the calendar years 1999
and 2000 (an aggregate of 20,000 shares), provided, that specified and
mutually agreeable financial targets for the Company are met or exceeded in
each such calendar year. Thereafter, Executive will be eligible to
participate in any incentive stock option plan then in place for employees
and officers of the Company.

4. Benefits.

Executive shall be entitled to participate in all benefit programs and
incentive compensation plans that the Company makes generally available to its
executive officers, subject to Executive's meeting the eligibility provisions
thereof and, if applicable, as

2
<PAGE>

determined by the Compensation Committee. With respect to the Company's
qualified benefit plans (including the Company's Savings Plan), Executive
shall receive credit (for purposes of qualification, vesting and benefit
calculation) for the period of his prior employment with Huntsman Packaging
Corporation or its affiliates and Packaging Industries. Nothing contained
herein shall preclude the Company, in its sole discretion, from changing or
amending, in whole or in part, or revoking any one or more of such benefit
programs or compensation plans or adopting new employee benefit programs or
compensation plans.

5. Duties.

During Executive's term of employment by the Company, Executive
shall devote his normal working hours, attention and energies to the
Company. Executive shall serve to the best of his ability and shall perform
the duties and have such responsibilities consistent with Executive's
position as Senior Vice President - Operations of the Company, which duties
and responsibilities shall be similar to those of Senior Vice President -
Operations of companies in the packaging industry having revenues
comparable to those of the Company. Executive agrees to abide by the rules,
procedures, regulations, instructions, and practices of the Company and any
changes therein which may be adopted from time to time by the Company.

6. Business Expenses.

In addition to compensation paid to Executive pursuant to Section
3, during the term of Executive's employment hereunder, the Company agrees
to reimburse Executive for all reasonable and necessary business expenses
which Executive incurs in the performance of his duties hereunder in
accordance with the policies and procedures adopted from time to time by
the Company (whether or not in writing).

7. Employment Termination.

The employment of Executive by the Company pursuant to this
Agreement shall terminate upon the occurrence of any of the following:

(a) Death or Disability. Immediately upon the death or disability
of Executive. For purposes of this Agreement, "disability" shall mean the
inability of Executive to perform his duties hereunder for a period of
ninety (90) consecutive calendar days, or for a period of one hundred
twenty (120) calendar days whether or not consecutive, during any three
hundred and sixty (360) day period due to a physical or mental incapacity.
The determination of disability shall be made by a disinterested medical
doctor, licensed to practice in the State of Kansas, chosen jointly by the
parties. Notwithstanding the definition of "disability" herein, if and only
if the Company provides disability insurance coverage to Executive at the
Company's cost, Executive's employment hereunder shall not be terminated by
reason of disability until the Company's disability insurance carrier has
certified Executive as disabled and has commenced (or agreed in writing) to
pay disability benefits to Executive.

3
<PAGE>

(b) Cause. At the election of the Company for cause, immediately
(except as provided below) upon written notice by the Company to Executive.
For purposes of this Agreement, "cause" shall mean:

(i) The willful failure by Executive to perform his material
duties hereunder (other than any such failure resulting from Executive's
death or disability), as determined in good faith by a majority of the
Board;

(ii) The (A) continued failure (which failure need not be willful)
by Executive to perform his material duties hereunder (other than any such
failure resulting from Executive's death or disability) or (B) breach by
Executive of any material provision of this Agreement (which failure or
breach has not been cured by Executive within thirty (30) days after
written notice thereof by the Board of Directors), all as determined in
good faith by a majority of the Board;

(iii) Executive's conviction of a felony by a trial court of
competent jurisdiction, whether or not an appeal is taken; or

(iv) The willful engaging by Executive in unlawful conduct
(including acts of dishonesty) in connection with the business of the
Company, as determined in good faith by a majority of the Board.

(c) Good Reason. At the election of Executive for good reason,
immediately upon written notice by Executive to the Company. For purposes of
this Agreement, "good reason" shall mean:

(i) A change in Executive's responsibilities, titles, or offices
(including directorships) that is not consistent with Executive's status
and duties hereunder; or

(ii) A Change of Control (as hereinafter defined) during the
period of Executive's employment hereunder. For the purposes of this
Agreement, the term "Change of Control" shall mean: (A) a person,
corporation, entity or group, which (collectively) does not beneficially
own at least twenty-five percent (25%) of the Company's issued and
outstanding voting stock as of the date hereof, (I) makes a tender or
exchange offer for the issued and outstanding voting stock of the Company
and beneficially owns 25% or more of the issued and outstanding voting
stock after such tender or exchange offer, or (II) acquires, directly or
indirectly, the beneficial ownership of 25% or more of the issued and
outstanding voting stock of the Company in a single transaction or series
of transactions (excluding the acquisition of newly issued voting stock of
the Company issued in full or part payment for the purchase by the Company
or any subsidiary of the Company of stock or assets), or (B) the Company is
a party to a merger, consolidation or similar transaction and following
such transaction 50% or more of the issued and outstanding voting
securities of the resulting entity is beneficially owned by a person,
corporation, entity or group other than the

4
<PAGE>

stockholders of the Company immediately prior to the transaction, or
(C) the Company sells 50% or more of its assets to any other person or
persons.

(d) Election of Company. Upon thirty (30) days prior written
notice from the Company to Executive, for reasons other than "cause," as
defined in 7(b), above.

(e) Election of Executive. Upon thirty (30) days prior written
notice from Executive to Company, for reasons other than "good reason," as
defined in 7(c), above.

8. Effect of Termination.

(a) Base Compensation and Benefits. In the event Executive's
employment is terminated for any reason, all compensation and benefits
shall cease, except that the Company shall pay to Executive that portion of
his then Base Annual Compensation that has been earned but unpaid at the
time of such termination and reimbursable expenses incurred by but not yet
reimbursed to Executive at the time of such termination.

(b) Termination Payment. In the event Executive's employment is
terminated by Executive pursuant to Section 7(c) or by the Company pursuant
to Section 7(d), the Company shall pay to Executive an amount equal to
Executive's current Base Compensation, including any adjustments thereto,
as a termination payment, payable in equal installments over the twelve
(12) months following the date of Executive's termination and including
continuation of existing medical coverage for 12 months. Such termination
payment shall be in addition to any amounts owed to Executive pursuant to
Section 8(a).

(i) In the event Executive's employment is terminated
pursuant to Section 7(a), (c) or (d), Executive's Option, to the extent not
previously vested, shall immediately vest and shall become exercisable for
the total amount of unexercised Option Shares (as defined in the Option
Agreement) thereunder until the first to occur of: (A) midnight on the
tenth anniversary of the Grant Date; or (B) the one year anniversary date
of the termination of Executive. Any such exercise following Executive's
death may be made only by such Executive's personal representative, unless
Executive's will specifically disposes of the Option, in which case such
exercise shall be made only by the recipient of such specific disposition.
If Executive's personal representative, or such recipient, shall be
entitled to exercise the Option pursuant to the preceding sentence, such
representative or recipient shall be bound by all the terms and conditions
of this Agreement, the Option Agreement and the Plan which would have
applied to Executive's exercise of the Option.

(ii) In the event Executive's employment is terminated pursuant to
Section 7(b) or by Executive pursuant to Section 7(e), the Option shall

5
<PAGE>

terminate and expire on the day Executive's employment terminates;
provided, however, that in the discretion of the Board, the Option
shall terminate and expire on the day Executive is notified of his
dismissal.

9. Restrictive Covenants. In consideration of the Company employing
Executive as the Senior Vice President - Operations of the Company, during
Executive's employment with the Company hereunder or otherwise and for a period
equal to two (2) years after Executive is no longer employed by the Company,
Executive shall not:

(a) directly or indirectly, either individually, or as a principal,
partner, member, manager, agent, employee, employer, consultant,
stockholder, joint venturer, or investor, or as a director or officer of
any corporation or association, or in any other manner or capacity
whatsoever, (i) divert or attempt to divert from the Company any customer
or account as set forth on a mutually agreeable list attached hereto as
Schedule A, or (ii) induce or cause, or attempt to induce or cause, any
employee, member, manager, partner, shareholder, director or officer of the
Company to leave the employ of the Company.

(b) If Executive violates any of the provisions of this Section 9
after the date hereof, the time period set forth in this Section 9 shall be
extended for a period of time equal to the period of any such violation.

10. Non-Disclosure. Executive shall not at any time or in any manner,
directly or indirectly, use or disclose to any party other than the Company any
trade secrets or other Confidential Information (defined herein) learned or
obtained by him while a shareholder, officer or director of the Company. As used
herein, the term "Confidential Information" means information disclosed to or
known by Executive as a consequence of his position with the Company and not
generally known in the industry in which the Company is engaged and that in any
way relates to the products, processes, services, inventions (whether patentable
or not), formulas, techniques or know-how, including, but not limited to,
information relating to distribution systems and methods, research, development,
manufacturing, purchasing, accounting, procedures, engineering, marketing,
merchandising and selling, of the Company.

11. Affiliate Transactions. For as long as Executive is employed by
the Company, neither Executive, any member of his family nor any affiliate of
Executive shall engage, directly or indirectly, in any business transaction with
the Company without the written approval of the Board of Directors of the
Company.

12. Specific Performance. The parties hereto agree that their rights
under Sections 9 and 10 of this Agreement are special and unique and that any
violation thereof would not be adequately compensated by money damages, and each
grants the other the right to specifically enforce (including injunctive relief
where appropriate) the terms of Sections 9 and 10 of this Agreement. In any
proceeding, in equity or law, Executive specifically waives any proof that any
violation of the terms of Sections 9 or 10 of this Agreement will cause
irreparable injury or that there is not an adequate remedy at law. In addition,
Executive also agrees not to raise as a defense in any such proceeding any
allegation that any of the provisions of Sections 9 or 10 of

6
<PAGE>

this Agreement are either unnecessary or unreasonable or that any of them
illegally restrain trade or any of his personal rights or that payments
made by the Company subsequent to gaining knowledge of a violation of this
Agreement prejudices the Company's rights to enforce this Agreement or to
recover payments made.

13. Notices.

Any notice required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if delivered
personally or if sent by certified mail, return receipt requested, with first
class postage prepaid, addressed (a) to Executive at 6371 Hardwick Circle,
Hudson, Ohio 44236, and (b) to the Company at 4200 Somerset Drive, Prairie
Village, Kansas 66208, Attention: Brian Stevenson. Any notice which is required
to be made within a stated period of time shall be deemed timely if made before
midnight of the last day of such period.

14. Alteration, Amendment or Termination.

No change or modification of this Agreement shall be valid unless
the same is in writing and signed by all the parties hereto. No waiver of any
provision of this Agreement shall be valid unless in writing and signed by the
person against whom it is sought to be enforced. The failure of any party at any
time to insist, or a delay in insisting, upon strict performance of any
condition, promise, agreement or understanding set forth herein shall not be
construed as a waiver or relinquishment of the right to insist upon strict
performance of the same condition, promise, agreement, or understanding at a
future time. A waiver or consent given by a party hereto on one occasion shall
be effective only in that instance and shall not be construed as a bar or waiver
of any right on any other occasion. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provisions were omitted.

15. Integration.

This Agreement sets forth (and is intended to be an integration
of) all of the promises, agreements, conditions, understandings, warranties and
representations, oral or written, express or implied, among the parties hereto
with respect to the terms of employment, and there are no promises, agreements,
conditions, understandings, warranties or representations, oral or written,
express or implied, among the parties hereto with respect to the terms of
employment other than as set forth herein.

16. Governing Law and Venue.

This Agreement and all disputes arising hereunder shall be subject
to, governed by and construed in accordance with the laws of the State of
Kansas, irrespective of the fact that one or more of the parties now is or may
become a resident of a different state. Executive hereby expressly submits and
consents to the exclusive in personam jurisdiction and exclusive venue of the
courts of competent jurisdiction in the State of Kansas, including the United
States District Court for the District of Kansas.

7
<PAGE>

17. Benefit and Burden.

This Agreement shall inure to the benefit of, and shall be binding
upon, the parties hereto and their respective successors, heirs, and
personal representatives. This Agreement, including the Option granted
herein, shall not be assignable, except the Option may be assignable
pursuant to Section 9(c)(i).

18. Captions.

The headings of the sections and paragraphs are for convenience
only and in no way define, limit or affect the scope or substance of any
section or paragraph of this Agreement.

IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by its duly authorized officers and its corporate seal to be affixed
hereto, and each of the parties hereto has executed this Agreement
effective as of the date and year first above written.

COMPANY:

JPS PACKAGING COMPANY

/s/ Brian Stevenson
By: ________________________________
Name: Brian Stevenson
Title: Chief Executive Officer

EXECUTIVE:

/s/ Edwin W. Stranberg
_____________________________________
Name: Edwin W. Stranberg

8
<PAGE>

EXHIBIT A

INCENTIVE STOCK OPTION AGREEMENT
UNDER THE
JPS PACKAGING COMPANY
1998 LONG-TERM COMPENSATION PLAN

THIS AGREEMENT, made effective as of the 14th day of December, 1998
("Date of Grant"), by and between JPS PACKAGING COMPANY, a Delaware corporation
(hereinafter called the "Company"), and EDWIN W. STRANBERG (hereinafter called
"Optionee"),

WITNESSETH THAT:

WHEREAS, the Board of Directors of the Company ("Board of Directors")
has adopted the JPS Packaging Company 1998 Long-Term Compensation Plan (the
"Plan") pursuant to which options covering shares of the Common Stock of the
Company may be granted to employees of the Company; and

WHEREAS, Optionee is employed as the Senior Vice President -
Operations of the Company; and

WHEREAS, the Company has granted to Optionee the option to purchase
certain shares of its stock under the terms of the Plan in accordance with this
Agreement.

NOW, THEREFORE, in consideration of the premises, and of the mutual
agreements hereinafter set forth, it is agreed as follows:

1. Grant Subject to Plan. This option is granted under, and is
expressly subject to, all the terms and provisions of the Plan and Sections 7
and 8 of the Employment Agreement dated as of even date herewith between the
Company and Optionee (the "Employment Agreement"), which terms are incorporated
herein and made part of this Agreement. The Compensation Committee ("Committee")
of the Board of Directors has been appointed by the Board of Directors, and
designated by it, to make grants of options.

2. Grant and Terms of Option. As of the Date of Grant, pursuant to
action of the Committee, the Company has granted to Optionee the option to
purchase all or any part of forty thousand (40,000) shares (the "Option Shares")
of the common stock of the Company, par value $.01 per share ("Common Stock"),
for a period of ten (10) years from the Date of Grant, unless the option is
sooner terminated pursuant to Section 7 below, at the purchase price per share
equal to $4.00 per share (the "Option Price"); provided, however, that the right
to exercise such option shall be, and is hereby, restricted as follows:

9
<PAGE>

<TABLE>
<CAPTION>
Cumulative Shares/Percentage
Commencing Exercisable (Vested)
---------- --------------------
<S> <C>
12/ /98 (Grant Date) 0/0%

12/ /99 8,000/20%

12/ /00 16,000/40%

12/ /01 24,000/60%

12/ /02 32,000/80%

12/ /03 40,000/100%
</TABLE>

Notwithstanding the foregoing, if a "Change of Control" (as defined in the
Employment Agreement) occurs, any portion of this option which is unvested shall
immediately mature and vest in full. It is intended that the option shall
qualify as an "incentive stock option" as defined in Section 422A of the
Internal Revenue Code of 1986, as amended.

3. Exercise of Option. Optionee shall exercise the option by giving
written notice to the Company, indicating that he desires to exercise the option
and the number of Option Shares he desires to purchase. The Option Price shall
be paid in full (a) in cash, (b) by the tender to the Company of shares of
Common Stock of the Company owned by Optionee and registered in his name having
a Fair Market Value equal to the Option Price, or (c) by any combination of the
payment methods specified in (a) and (b). After receipt of such notice, the
Company shall provide Optionee with a restricted, legended certificate for the
Option Shares. Optionee is required to exercise this option with respect to 10%
of the vested Option Shares annually, as measured from the date of this
Agreement (the "Mandatory Option Exercise"); provided, however, all prior
exercises of this option will be considered in satisfying this requirement.
Failure to comply with the Mandatory Option Exercise will result in the
termination of Optionee's right to exercise the number of vested Option Shares
which were required to be purchased.

4. Anti-Dilution Provisions. In the event that, during the term of
this Agreement, there is any change in the number of shares of outstanding
Common Stock of the Company by reason of stock dividends, recapitalizations,
mergers, consolidations, split-ups, combinations or exchanges of shares and the
like, the number of shares covered by this option agreement and the price
thereof shall be adjusted, to the same proportionate number of shares and price
as in this original agreement so that the value of the option to the Optionee
shall remain the same, all as provided for pursuant to the Plan.

5. Investment Purpose. Optionee represents that, in the event of the
exercise by him of the option hereby granted, or any part thereof, he intends to
purchase the shares acquired on such exercise for investment and not with a view
to resale or other distribution and Optionee agrees to execute and deliver to
the Company a letter or certificate containing such investment representations,
agreements restricting sale (including, without limitation, provision for stop
transfer orders and restrictive legend on stock certificates) and

10
<PAGE>

confirmation of other relevant facts to support any exemption from the
registration requirements under the Securities Act of 1933 and such state
securities laws on which the Company intends to rely, all as shall be deemed
reasonably necessary by counsel for the Company and in such form as such counsel
shall determine; except that the Company, at its election, may waive or release
this condition in the event the shares acquired on exercise of the option are
registered under the Securities Act of 1933, or upon the happening of any other
contingency which the Company shall determine warrants the waiver or release of
this condition. Optionee agrees that the certificates evidencing the shares
acquired by him on exercise of all or any part of this option, may bear a
restrictive legend, if appropriate, indicating that the shares have not been
registered under said Act and are subject to restrictions on the transfer
thereof, which legend may be in the following form (or such other form as the
Company shall determine to be proper), to-wit:

(i) "The shares represented by this certificate have not been registered
under the Securities Act of 1933, but have been issued or transferred to
the registered owner pursuant to the exemption afforded by Section 4(2) of
said Act. No transfer or assignment of these shares by the registered owner
shall be valid or effective, and the issuer of these shares shall not be
required to give any effect to any transfer or attempted transfer of these
shares, including without limitation, a transfer by operation of law,
unless (a) the issuer shall have received an opinion of its counsel that
the shares may be transferred without requirement of registration under
said Act, or (b) there shall have been delivered to the issuer a `no-
action' letter from the staff of the Securities and Exchange Commission, or
(c) the shares are registered under said Act."

6. Non-Transferability. Neither the option hereby granted nor any
rights thereunder or under this Agreement may be assigned, transferred or in any
manner encumbered except by will or the laws of descent and distribution, and
any attempted assignment, transfer, mortgage, pledge or encumbrance, shall be
void and of no effect. The option hereby granted may be exercised, during the
lifetime of Optionee, only be Optionee.

7. Termination of Employment. In the event of Optionee's Termination
of employment with the Company, the treatment of Optionee's vested and unvested
options shall be governed by the terms of the Employment Agreement.

8. Shares Issued on Exercise of Option. Upon any exercise of this
option, the Company will transfer to Optionee shares of its Common Stock to
satisfy its obligations to deliver shares on any exercise hereof.

9. Committee Administration. This option has been granted pursuant
to a determination made by the Committee or the Board of Directors, and such
Committee or any successor or substitute committee authorized by the Board of
Directors or the Board of Directors itself, subject to the express terms of this
option, shall have plenary authority to interpret any provision of this option
and to make any determinations necessary or advisable for the administration of
this option and the exercise of the rights herein granted, and may waive or
amend any provisions hereof in any manner not adversely affecting the rights
granted to Optionee by the express terms hereof.

11
<PAGE>

10. Non-Waiver of Rights. The failure to enforce at any time any of
the provisions of this Agreement or to require at any time performance by the
other party of any of the provisions hereof shall in no way be construed as a
waiver of such provisions or to affect either the validity of this Agreement, or
any part hereof, or the right of either party thereafter to enforce each and
every provision in accordance with the terms of this Agreement.

11. Invalidity of Provisions. If any provision of this Agreement is
declared invalid by any tribunal, then such provision shall be deemed
automatically adjusted to the minimum extent necessary to conform to the
requirements for validity as declared at such time and, as so adjusted, shall be
deemed a provision of this Agreement as though originally included herein. In
the event that the provision invalidated is of such a nature that it cannot be
so adjusted, the provision shall be deemed deleted from this Agreement as though
such provision had never been included herein. In either case, the remaining
provisions of this Agreement shall remain in effect.

12. Assignments. This Agreement shall be assignable without
Optionee's consent by the Company to, and upon such assignment shall be binding
upon and inure to the benefit of, any other entity which shall succeed to the
business presently being operated by the Company.

13. Amendments. No modification, amendment or waiver of any of the
provisions of this Agreement shall be effective unless in writing specifically
referring hereto, and signed by the parties hereto.

14. Governing Law. This Agreement shall be interpreted in accordance
with and governed by the laws of the State of Kansas as applied to contracts to
be wholly performed within such state.

15. Definitions. Unless otherwise defined herein, all capitalized
terms shall be defined as set forth in the Plan.

12
<PAGE>

IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf, pursuant to due authorization, and Optionee has signed
this Agreement to evidence his acceptance of the option herein granted and of
the terms hereof, effective as of the Date of Grant.

COMPANY:

JPS PACKAGING COMPANY

/s/ Brian Stevenson
By: __________________________________
Name: Brian Stevenson
Title: Chief Executive Officer

OPTIONEE:

/s/ Edwin W. Stranberg
_______________________________________
Edwin W. Stranberg

<PAGE>

<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the Company's 10K and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 34 2,414
<SECURITIES> 0 0
<RECEIVABLES> 10,585 10,017
<ALLOWANCES> 165 214
<INVENTORY> 12,141 9,066
<CURRENT-ASSETS> 23,608 22,076
<PP&E> 70,302 67,464
<DEPRECIATION> 43,699 39,110
<TOTAL-ASSETS> 52,714 53,707
<CURRENT-LIABILITIES> 8,562 8,314
<BONDS> 0 0
0 0
0 0
<COMMON> 56 56
<OTHER-SE> 40,246 41,502
<TOTAL-LIABILITY-AND-EQUITY> 52,714 53,707
<SALES> 80,575 78,869
<TOTAL-REVENUES> 80,575 78,869
<CGS> 73,328 72,740
<TOTAL-COSTS> 73,328 72,740
<OTHER-EXPENSES> 8,891 12,302
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 37 (54)
<INCOME-PRETAX> (1,266) (6,389)
<INCOME-TAX> 0 (1,375)
<INCOME-CONTINUING> (1,681) (4,744)
<DISCONTINUED> 415 (1,645)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,266) (6,389)
<EPS-BASIC> (0.23) (1.15)
<EPS-DILUTED> (0.23) (1.15)

</TABLE>