<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MAY 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from ______ to ______
COMMISSION FILE NO. 33-95318
PORTOLA PACKAGING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-1582719
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
890 FAULSTICH COURT
SAN JOSE, CALIFORNIA 95112
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(408) 453-8840
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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. YES X NO .
--- ---
11,813,062 shares of Registrant's $.001 par value Common Stock, consisting of
2,134,992 shares of nonvoting Class A Common Stock and 9,678,070 shares in the
aggregate of voting Class B Common Stock, Series 1 and 2 combined, were
outstanding at July 2, 1996.
<PAGE>
PORTOLA PACKAGING, INC. AND SUBSIDIARIES
INDEX
Part I - Financial Information Page
- - ------------------------------ -----
Item 1. Financial Statements
Consolidated Balance Sheets at
May 31, 1996 (Unaudited)
and August 31, 1995 (Audited) ................ 3
Unaudited Consolidated Statements of
Operations for the Three and Nine Months Ended
May 31, 1996 and 1995 ........................ 5
Unaudited Consolidated Statements of
Cash Flows for the Nine Months Ended
May 31, 1996 and 1995 ........................ 6
Notes to Consolidated Financial Statements
(Unaudited)................................... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 10
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K ............ 14
Signatures ............................................ 15
Exhibit Index ......................................... 16
2
<PAGE>
PART I - FINANCIAL INFORMATION
- - ------------------------------
ITEM 1. FINANCIAL STATEMENTS
PORTOLA PACKAGING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MAY 31, AUGUST 31,
1996 1995
----------- ----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $10,885 $763
Short term investments 1,000
Accounts receivable, net of allowance for
doubtful accounts of $707 and $813,
respectively 22,841 20,323
Inventories 9,956 9,833
Other current assets 3,358 2,300
Deferred income taxes 2,068 2,248
---------- ----------
Total current assets 49,108 36,467
Notes receivable 384 518
Property, plant and equipment, net 65,375 53,132
Goodwill, net of accumulated amortization
of $2,360 and $1,314, respectively 21,947 21,580
Patents, net of accumulated amortization
of $11,646 and $10,413, respectively 6,374 7,607
Covenants not to compete, net of accumulated
amortization of $2,651 and $1,393,
respectively 4,037 5,295
Debt financing costs, net of accumulated
amortization of $375 and $526, respectively 4,105 1,937
Other assets 5,915 3,790
---------- ----------
Total assets $157,245 $130,326
---------- ----------
---------- ----------
</TABLE>
Continued
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
PORTOLA PACKAGING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MAY 31, AUGUST 31,
1996 1995
---------- ----------
(UNAUDITED)
<S> <C> <C>
LIABILITIES, REDEEMABLE WARRANTS, COMMON
STOCK AND OTHER STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $573 $5,668
Accounts payable 7,250 7,796
Accrued liabilities 7,731 7,449
Accrued interest 2,023 796
---------- ----------
Total current liabilities 17,577 21,709
Long term debt, less current portion 117,446 86,244
Other long term obligations 4,736 3,911
Deferred income taxes 7,946 8,103
---------- ----------
Total liabilities 147,705 119,967
---------- ----------
Contingencies (Note 4)
Redeemable warrants to purchase Class A
common stock 4,317 3,665
---------- ----------
Common stock and other stockholders' equity:
Class A convertible common stock of $.001
par value:
Authorized: 2,503 shares; Issued 2,135
shares and none 2 -
Class B, Series 1, common stock of $.001
par value:
Authorized: 17,715 shares; Issued: 8,492
and 9,225 shares 9 9
Class B, Series 2, convertible common stock
of $.001 par value:
Authorized: 2,571 shares; Issued: 1,171
and 2,571 shares 1 3
Additional paid in capital 9,213 9,205
Notes receivable from stockholders (494) (362)
Cumulative foreign currency translation
adjustments - (8)
Accumulated deficit (3,508) (2,153)
---------- ----------
Total common stock and other
stockholders' equity 5,223 6,694
---------- ----------
Total liabilities, redeemable warrants,
common stock and other stockholders'
equity $157,245 $130,326
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
PORTOLA PACKAGING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED MAY 31, ENDED MAY 31,
------------ ------------
1996 1995 1996 1995
---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Sales $41,373 $30,877 $115,250 $86,462
Cost of sales 29,359 24,144 85,216 65,674
------- ------- --------- --------
Gross profit 12,014 6,733 30,034 20,788
------- ------- --------- --------
Selling, general & administrative 5,377 2,987 13,622 9,973
Research and development 569 422 1,576 943
Amortization of intangibles 1,343 982 3,537 2,547
------- ------- --------- --------
7,289 4,391 18,735 13,463
------- ------- --------- --------
Income from operations 4,725 2,342 11,299 7,325
------- ------- --------- --------
Other (income) expense:
Interest income (369) (32) (1,053) (104)
Interest expense 3,246 2,232 9,626 6,235
Amortization of debt
financing costs 114 91 375 360
Other (income) expense, net 65 118 127 (60)
------- ------- --------- --------
3,056 2,409 9,075 6,431
------- ------- --------- --------
Income (loss) before
extraordinary item and
income taxes 1,669 (67) 2,224 894
Income taxes 907 (213) 1,662 517
------- ------- --------- --------
Income before extraordinary item 762 146 562 377
Extraordinary item, net of tax
benefit of $844 1,265
------- ------- --------- --------
Net income (loss) $762 $146 ($703) $377
------- ------- --------- --------
------- ------- --------- --------
Net income (loss) for common
stockholders $533 ($6) ($1,355) ($80)
Earnings (loss) per common share:
Income (loss) before
extraordinary item $0.05 $0.00 ($0.01) ($0.01)
Net income (loss) $0.05 $0.00 ($0.12) ($0.01)
Number of shares used in computing
per share amount 11,798 11,106 11,656 11,275
</TABLE>
The accompanying notes are an integral part of these financial statements
5
<PAGE>
PORTOLA PACKAGING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED MAY 31,
------------
1996 1995
---- ----
(UNAUDITED)
<S> <C> <C>
Cash flows provided by operating activities:
Net income (loss) ($703) $377
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 11,349 9,089
Deferred income taxes 23 (1,426)
Loss on property and equipment dispositions 126
Provision for losses on accounts receivable 204 147
Extraordinary loss on extinguishment of debt 1,952
Changes in working capital:
Accounts receivable (2,829) (1,567)
Inventories (123) (2,778)
Other current assets (1,058) 774
Accounts payable (546) (1,910)
Accrued liabilities 282 172
Accrued interest 1,227 42
------- -------
Net cash provided by operating activities 9,904 2,920
------- -------
Cash flows used in investing activities:
Additions to property and equipment (19,743) (8,247)
Proceeds from sale of property and equipment 287
Payment for acquisition, net of cash acquired (1,445)
Proceeds from short term investments 1,000
Issuance of notes receivable (173)
Increase in other assets (473) (856)
------- -------
Net cash used in investing activities (20,661) (8,989)
------- -------
Cash flows provided by financing activities:
Repayments under debt arrangements (88,443) (9,454)
Borrowings under debt arrangements 114,357 14,322
Payment of loan fees (4,324)
Sales of common stock 8 67
Payment under covenants (719) (595)
Repayment of note receivable from stockholders 15
------- -------
Net cash provided by financing activities 20,879 4,355
------- -------
Increase (decrease) in cash 10,122 (1,714)
Cash and cash equivalents at beginning of period 763 2,219
------- -------
Cash and cash equivalents at end of period $10,885 $505
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
Portola Packaging, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION:
The consolidated financial statements included herein have been prepared
by Portola Packaging, Inc. and its subsidiaries (the "Company") without audit
(except for the balance sheet information as of August 31, 1995) and in the
opinion of management include all adjustments (consisting only of normal
recurring adjustments) considered necessary for a fair presentation. The
accompanying financial statements should be read in conjunction with the
audited financial statements contained in the Company's Form 10-K previously
filed with the Securities and Exchange Commission. Interim results are
subject to significant seasonal variations and the results of operations for
the three and nine months ended May 31, 1996 are not necessarily indicative
of the results to be expected for the full year.
2. ACQUISITION:
On September 1, 1995 the Company completed the acquisition of the 50%
interest it had not previously owned in Cap Snap (UK) Ltd., now known as
Portola Packaging Ltd. ("Portola Packaging (UK)") for a purchase price of
approximately $1.5 million. Portola Packaging (UK) is a British corporation
engaged in manufacturing and distributing small closures in the United
Kingdom. The transaction has been accounted for as a purchase and the
results of operations subsequent to the acquisition date have been
consolidated with the Company. Portola Packaging (UK) is being operated as an
"unrestricted subsidiary". Accordingly, amounts that may be invested by the
Company in Portola Packaging (UK) are subject to limitations pursuant to the
terms of the Indenture pertaining to the senior notes issued in October 1995
(see Note 3).
Consideration for the acquisition was allocated as follows:
Total consideration paid $1,463,000
Fair value of net assets acquired 159,000
----------
Goodwill $1,304,000
----------
----------
3. NOTES OFFERING:
On October 2, 1995 the Company completed an offering of $110 million of
senior notes that mature on October 1, 2005 and bear interest at 10.75%.
Interest is payable semi-annually on April 1 and October 1 of each year,
commencing on April 1, 1996. Of the approximately $106 million net proceeds of
the offering, $83 million was used to retire the Company's outstanding debt
under its senior term loans, revolving facility and senior subordinated notes,
$7.2 million was used to purchase the Company's San Jose, California facilities,
$10.8 million was used to purchase machinery and equipment, $3 million was used
to make a loan to the Company's 50% joint venture in Mexico and $2 million was
used for working capital needs.
7
<PAGE>
Portola Packaging, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, continued
(Unaudited)
3. NOTES OFFERING, continued:
Concurrently with the offering, the Company entered into a new five-year
senior revolving credit facility of up to $35.0 million, subject to a
borrowing base of eligible receivables, inventory, property, plant and
equipment, which serve as collateral for the line. The credit facility
contains covenants and provisions that restrict, among other things, the
Company's ability to: (i) incur additional indebtedness, (ii) incur liens on
its property, (iii) make investments, (iv) enter into guarantees and other
contingent obligations, (v) merge or consolidate with or acquire another
person or engage in other fundamental changes, (vi) engage in certain sales
of assets, (vii) engage in certain transactions with affiliates and (viii)
make restricted junior payments. At May 31, 1996 no amounts were outstanding
under this credit facility and the full amount was available for draw.
4. CONTINGENCIES:
The Company has been engaged in patent infringement litigation with
Scholle Corporation ("Scholle"), which commenced an action against the
Company in the United States District Court, Northern District of California
in July 1992 alleging that the Company infringed upon certain patents of
Scholle relating to five-gallon non-spill closures. In February 1995, a jury
rendered a verdict adverse to the Company, which verdict was entered by the
court on January 2,1996, making the Company liable for damages of $0.01 per
closure unit sold. In June 1996, the Company entered into a settlement
agreement with Scholle, the terms of which provide for the grant by Scholle
of a non-exclusive license to use certain of its patents and the payment by
the Company of a royalty in the amount of $0.01 per five gallon non-spill
closure unit. The Company remained liable for damages of $0.01 per closure
unit sold prior to the date of execution and delivery of the settlement
agreement, plus interest at a rate of 10% on all past due amounts. The
Company made a payment of $1.7 million to Scholle on July 1, 1996 in
settlement of all amounts due, including interest, through May 31, 1996.
Such amount had been previously accrued in the Company's financial statements.
The Company is also party to a number of other lawsuits and claims arising
out of the normal course of business. Management does not believe the final
disposition of these matters will have a material adverse effect on the
financial position, results of operations or cash flows of the Company.
8
<PAGE>
Portola Packaging, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, continued
(Unaudited)
5. INVENTORIES:
Inventories at May 31, 1996 and August 31, 1995 consisted of:
MAY 31, AUG 31,
1996 1995
---- ----
(unaudited)
Raw materials $4,593 $4,850
Work in process 849 1,455
Finished goods 4,514 3,528
--------- ----------
Total inventories $9,956 $9,833
--------- ----------
--------- ----------
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED MAY 31,
1996 AND 1995
(amounts in thousands)
Sales increased $10.5 million or 34.0% to $41.4 million for the three
months ended May 31, 1996 from $30.9 million for the same period in fiscal
1995 and $28.8 million or 33.3%, to $115.3 million for the nine months ended
May 31, 1996 from $86.5 million for the nine months ended May 31, 1995.
These increases were primarily due to increases in domestic closure sales,
increases in equipment sales, and increases in sales from operations in the
United Kingdom and Canada that were acquired subsequent to the third quarter
of fiscal 1995. The Company anticipates sales to continue to increase in the
fourth quarter of fiscal 1996 compared to the fourth quarter of fiscal 1995.
Cost of sales increased $5.2 million or 21.6% to $29.3 million for the
three months ended May 31, 1996 from $24.1 million for the same period in
fiscal 1995 and $19.5 million or 29.8%, to $85.2 million for the nine months
ended May 31, 1996 from $65.7 million for the same period in fiscal 1995.
These increases in absolute dollars are due to increases in sales in the
respective periods. As a percentage of sales, cost of sales decreased to
71.0% for the three months ended May 31, 1996 from 78.2% for the three months
ended May 31, 1995. Cost of sales decreased slightly to 73.9% for the nine
months ended May 31, 1996 from 76.0% for the same period in fiscal 1995. The
decrease in the three months ended May 31, 1996 is primarily due to an
increase in sales volume due to the seasonal nature of the business,
particularly because the seasonal pickup in the third quarter of fiscal 1995
was unusually late. The decrease in the nine months ended May 31, 1996, and
to a lesser extent, the three months ended May 31, 1996, is attributable to
decreases in resin prices, somewhat offset by increases in packaging
materials, and a decline in the margins on equipment sales. In addition,
sales from the recently acquired Canadian and UK operations have relatively
low gross margins as well.
Selling, general and administrative expenses increased $2.4 million or
80% to $5.4 million for the three months ended May 31, 1996 from $3.0 million
for the same period in fiscal 1995, and $3.6 million or 36.6% to $13.6
million for the nine months ended May 31, 1996 from $10.0 million for the
same period in fiscal 1995. These increases were the result of higher sales
commissions due to an increase in sales levels, an increase in travel costs,
an increase in insurance costs and an increase in the accrual for future
bonus payments due to the improvement in financial results. The Company
anticipates selling, general and administrative costs to continue at their
current level for the remainder of this fiscal year.
Research and development expenses increased $147 or 34.8% to $569 for
the three months ended May 31, 1996 from $422 for the same period in fiscal
1995 and $633 or 67.1% to $1,576 for the nine months ended May 31, 1996 from
$943 for the same period in fiscal 1995. These increases were primarily due
to increased staffing to address expanded new product development
opportunities, and in addition, for the nine month period ended May 31, 1996,
patent expenses were higher than usual. The Company anticipates research and
development expenses to approximate 1.5% of sales for the remainder of fiscal
1996.
10
<PAGE>
Amortization of intangibles (consisting of amortization of patents,
goodwill and covenants not to compete) increased $361 or 36.8% to $1,343 for
the three months ended May 31, 1996 from $982 for the same period in fiscal
1995, and $990 or 38.9% to $3,537 for the nine months ended May 31, 1996 from
$2,547 for the same period in fiscal 1995. The increases are primarily due
to the amortization of goodwill and covenants not to compete resulting from
the acquisition of the Company's Canadian subsidiary, Portola Packaging
Canada Ltd. in June 1995.
Interest income increased $337 to $369 for the three months ended May
31, 1996 from $32 for the same period in fiscal 1995, and increased $949 to
$1,053 for the nine months ended May 31, 1996 from $104 for the same period
in fiscal 1995. These increases are due to higher levels of available cash
and investments in fiscal 1996 as compared to fiscal 1995, primarily as a
result of the $110 million senior notes offering completed in October 1995.
Interest expense increased $1,014 to $3,246 for the three months ended
May 31, 1996 from $2,232 for the same period in fiscal 1995, and increased
$3,391 to $9,626 for the nine months ended May 31, 1996 from $6,235 for the
same period in fiscal 1995. This increase is due to a higher level of
interest-bearing debt in fiscal 1996 as compared to fiscal 1995, related to
debt incurred by Portola Packaging Canada Ltd. ("Portola Canada") to finance
the Canadian acquisition completed in June 1995, and the $110 million of
senior notes, which were used in part to repay prior indebtedness.
Other (income) expense, net, decreased to a net expense of $65 for the
three months ended May 31, 1996 from a net expense of $118 for the same
period in fiscal 1995, and decreased to a net expense of $127 for the nine
months ended May 31, 1996 from a net income of $60 for the same period in
fiscal 1995.
Income taxes are reflected at an effective tax rate of 74.7% for fiscal
1996 in anticipation of the Company's expected tax rate for the entire fiscal
year. The Company had an effective tax rate of 90.2% for fiscal 1995. Income
tax expense does not bear a normal relationship to income before income taxes
primarily due to nondeductible goodwill and other intangibles arising from
the acquisitions.
An extraordinary item of $1,265 net of taxes was recorded for the nine
months ended May 31, 1996, as loan fees and other costs were expensed in
connection with an early extinguishment of debt resulting from the $110
million senior notes issue. There were no extraordinary items for any other
period presented.
LIQUIDITY AND CAPITAL RESOURCES
The Company has relied primarily upon cash from operations, supplemented
as necessary from time to time by borrowings from financial institutions and
sales of common stock, to finance its operations, repay long-term
indebtedness and fund capital expenditures and acquisitions. At May 31,
1996, primarily as a result of the senior note offering in October 1995, the
Company had cash, cash equivalents and short-term investments of $10.9
million, an increase of $9.1 million from August 31, 1995.
Cash provided by operations totaled $9.9 million for the nine months
ended May 31, 1996, a $7.0 million increase from the $2.9 million provided by
operations for the nine months
11
<PAGE>
ended May 31, 1995. This improvement in cash provided by operations is
primarily due to increased depreciation and amortization expense in fiscal
1996, relatively unchanged inventory levels in fiscal 1996 compared to a
build-up in inventories of $2.8 million in fiscal 1995, an increase in
accrued interest expense in fiscal 1996 due to a higher level of
indebtedness, relatively unchanged non-current deferred income taxes in
fiscal 1996 compared to a $1.4 million decrease in fiscal 1995, and an
extraordinary loss on the extinguishment of debt in fiscal 1996. Additions
to property, plant and equipment were $19.7 million for the nine months ended
May 31, 1996. The increase included the acquisition, for $7.2 million, of
the Company's headquarters and manufacturing facilities in San Jose,
California, on February 9, 1996. The balance of the increase in capital
expenditures is for increased production capacity for fitments, push-pull and
snap-screw closures, replacement molds and a reconfiguration of the New
Castle, Pennsylvania plant layout for increased efficiency. Capital
expenditures, excluding the San Jose plant purchase, are currently expected
to be approximately $18 million for fiscal 1996 and should be financed
through cash from operations, excluding potential expansion activity in
Canada and the United Kingdom.
On October 2, 1995, the Company completed an offering of $110 million of
senior notes that mature on October 1, 2005 and bear interest at 10.75%.
Interest is payable semi-annually on April 1 and October 1 of each year,
commencing on April 1, 1996. The net proceeds of the offering were
approximately $106 million, of which $83 million was used to retire the
Company's outstanding debt under its senior term loans, revolving facility
and senior subordinated notes, $7.2 million was used to purchase the
Company's San Jose facilities, $10.8 million was used to purchase machinery
and equipment, $3 million was used to make a loan to the Company's 50% joint
venture in Mexico and $2 million was used for working capital needs.
The Company has been the defendant in litigation with Scholle
Corporation ("Scholle") related to alleged patent infringement on five-gallon
non-spill caps (see Note 4 of the unaudited financial statements). On
January 2, 1996, the court denied further motions and entered the jury's
verdict making the Company liable for damages of $0.01 per closure unit sold.
In June 1996, the Company reached a settlement agreement with Scholle,
whereby Scholle granted to the Company a non-exclusive license to use certain
of its patents, and the Company agreed to pay a royalty to Scholle of $0.01
per five gallon non-spill closure unit sold. The Company remained liable for
damages of $0.01 per closure unit sold prior to the date of the settlement
agreement, plus interest at a rate of 10% on all past due amounts. The
Company made a payment of $1.7 million to Scholle on July 1, 1996 in
settlement of all amounts due, including interest, through May 31, 1996.
Such amount had been accrued in the Company's financial statements.
At May 31, 1996, the Company had $10.9 million in cash and cash
equivalents as well as borrowing capacity under the revolving credit facility
which is currently unused. Management believes that these resources,
together with anticipated cash flow from operations, will be adequate to fund
the Company's operations, debt service requirements and capital expenditures
through fiscal 1997.
RECENT ACCOUNTING PRONOUNCEMENTS
During March 1995, the Financial Accounting Standards Board issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of" (SFAS 121), which required the
Company to review for impairment long-lived assets, certain identifiable
intangibles, and goodwill related to those assets whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable.
12
<PAGE>
This statement requires impairment losses to be recognized for assets that do
not have realizable carrying values. SFAS 121 will be effective for the
Company's fiscal year 1997. The Company is currently studying the
implications of the statement to determine its impact on the Company's
financial condition and results of operations.
During October 1995, the Financial Accounting Standards Board issues
Statement No. 123 (SFAS 123), "Accounting for Stock-Based Compensation",
which establishes a fair value based method of accounting for stock-based
compensation plans. The Company is currently following the requirements of
APB Opinion No. 25, "Accounting for Stock Issued to Employees" while it
studies the implications of SFAS 123 and evaluates the effect, if any, on the
financial condition and results of operations of the Company. SFAS 123 will
be effective for the Company's fiscal year 1997.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith.
Exhibit
Number Exhibit Title
- - -------- -------------
10.34 Settlement Agreement dated July 1, 1996, by and
between the Registrant and Scholle Corporation
11.01 Computation of Net Income Per Share
(b) The Company did not file any reports on Form 8-K during the three month
period ended May 31, 1996.
14
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
PORTOLA PACKAGING, INC.
(Registrant)
Date: July 11, 1996 /s/ Robert R. Strickland
-------------------------
Robert R. Strickland
Vice-President - Finance and
Chief Financial Officer
(Principal Financial Officer
and Duly Authorized Officer)
Date: July 11, 1996 /s/ Patricia Voll
-------------------------
Patricia Voll
Vice President - Finance and
Accounting (Principal
Accounting Officer)
15
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit Title
- - -------- --------------
10.34 Settlement Agreement, dated July 1, 1996, by and
between the Registrant and Scholle Corporation
11.01 Computation of Net Income Per Share
16
<PAGE>
EXHIBIT 10.34
<PAGE>
EXHIBIT 10.34
SETTLEMENT AGREEMENT
This is a settlement agreement ("Settlement Agreement") between
Scholle Corporation ("Scholle"), a Nevada corporation, located at 19500 Jamboree
Blvd., Irvine, California 92715, and Portola Packaging, Inc. ("Portola"), a
Delaware corporation located at 890 Faulstich Ct., San Jose, California 95112.
WHEREAS, Scholle filed a lawsuit ("Lawsuit") against Portola in the
United States District Court for the Northern District of California, San Jose
Division ("Court") (Case No. C92-20414-RMW) alleging infringement of U.S. Patent
RE32,354, entitled "CONTAINER FOR HOLDING AND DISPENSING FLUID;"
WHEREAS, the trial of the issues of liability, wilfulness and damages
in the Lawsuit were bifurcated;
WHEREAS, the issues of liability and wilfulness have been tried and
determined by the jury, but not the issue of damages;
WHEREAS, the jury found that Portola's manufacture, sale and use of
the water bottle plugs which were numbers 1-3 during trial and which are
illustrated in the drawing attached as Exhibit 5 ("Infringing Product")
infringed the Patent; that Portola's infringement was not wilful; and that the
Patent was valid and enforceable;
WHEREAS, all post-trial motions filed by the parties to alter these
jury verdicts were denied by the Court;
WHEREAS, in the event of a finding of liability, Portola agreed to pay
Scholle One Cent ($.01) for each product which was found to infringe the patent;
WHEREAS, Portola would like to continue selling one or more of the
Infringing Products for use with water bottles;
WHEREAS, Scholle is willing to license Portola to do so at the rate of
One Cent ($. 01) per plug;
WHEREAS, Scholle and Portola would like to resolve all of their
remaining differences, including the issue of damages and issues which might
arise by virtue of one or more appeals from one or more of the determinations
made by the trial court or its jury;
NOW, THEREFORE, Scholle and Portola agree as follows:
1
<PAGE>
1.0 DAMAGES
1.1 Portola represents that the total number of Infringing
Product and any substantial equivalent (including, without limitation, the
unnumbered version on the attached drawing marked "Two-Step Prototype") which
Portola directly or indirectly has sold as of May 31, 1996, is 147,713,500.
This amount may be verified by an independent certified accountant under the
conditions set forth in paragraph 1.5 below.
1.2 Portola agrees to pay Scholle One Cent ($.01) for each of
such sales, plus ten percent (10%) interest from the date of each of such sales.
The date of each sale shall be deemed to have occurred on the ending date of the
quarter of the year in which the sale was made. Portola represents that this
interests computes to $175,387.75.
1.3 Portola agrees to and has signed the Stipulation As To
Damages which is attached as Exhibit "1" ("Stipulation") and agrees to deliver
it upon execution of this Agreement to Scholle.
1.4 Scholle agrees to and has signed the Stipulation and agrees
to file it with the Court immediately.
1.5 Scholle shall have the right to request verification of the
accuracy of the amounts set forth in paragraphs 1.1 and 1.2 by independent
certified account selected jointly by Scholle and Portola. The fees of the
accountant shall be paid half by Scholle and half by Portola. In the event of
any reported difference in the numbers, payment by the appropriate party shall
be made to conform to the actual payment with the reported amounts. In the
event that there is under reporting by Portola and this under reporting is the
result of willful concealment, Portola shall pay Scholle four times the amount
of any such concealment.
2.0 ENTRY OF JUDGMENT AND WAIVER OF APPEAL OR OTHER CHALLENGE
2.1 Portola agrees to and has signed the Judgment For Damages
and Permanent Injunction which is attached as Exhibit "2" ("Judgment") and
agrees to deliver it upon execution of this Agreement to Scholle.
2.2 Scholle agrees to and has signed the Judgment and agrees to
immediately lodge it with the Court for signature and entry.
2.3 Scholle and Portola agree not to challenge any ruling
previously made by the Court or the jury or the filing or entry of the
Stipulation or Judgment at the trial or appellate level and hereby waive their
right to do so.
3.0 SATISFACTION OF JUDGMENT
3.1 Upon execution of this Settlement Agreement, Portola shall
deliver to Scholle a cashier's check in the amount of one-million-six-hundred-
eighty-five-thousand-fifty-five dollars ($1,685,055.00), made payable to Scholle
Corporation. This represents the payment
2
<PAGE>
required to be made under paragraphs 1.2, plus standard costs of the
litigation in the amount of $32,532.25.
3.2 Scholle agrees to and has signed the Acknowledgment of
Satisfaction of Judgment For Damages which is attached as Exhibit "3"
("Acknowledgment") and agrees to deliver it to Portola upon execution of this
Agreement.
3.3 Portola shall have the right to file the Acknowledgment with
the Court upon receipt.
4.0 NON-EXCLUSIVE LICENSE
4.1 Scholle and Portola agree to and have executed the
Non-Exclusive Patent License attached as Exhibit "4" ("License") and shall both
fully comply with its duties and obligations.
5.0 RELEASE
5.1 Scholle and Portola hereby release each other, as well as
each of their respective officers, directors, shareholders, agents, employees,
attorneys, accountants and assigns from any and all claims, demands, actions,
causes of action, or suits of any kind, as of the date of this agreement
including, without limitation, the Lawsuit, except for the duties and
obligations arising out of this Settlement Agreement and all of the attachments
to it.
5.2 Scholle and Portola each acknowledge that Section 1542 of
the California Civil Code provides that:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him
must have materially affected his settlement with the
debtor.
5.3 Scholle and Portola waive and release all rights against
each other under this Section and agree that this release extends to all claims
of every nature and kind whatsoever, including all claims which are contingent,
unmatured, unknown or unsuspected at the time this Settlement Agreement is
signed.
5.4 This release shall not extend to any company which
manufactured or sold probes for use in conjunction with any Infringing Product.
6.0 BINDING EFFECT
6.1 Nothing in this Settlement Agreement is intended to alter
the binding legal effect of the rulings and determinations which have been made
in the Lawsuit, nor the binding legal effect of the attachments to this
Settlement Agreement.
7.0 SUCCESSORS AND ASSIGNS
3
<PAGE>
7.1 This Settlement Agreement shall be binding upon and shall
inure to the benefit of the respective successor and assigns of Scholle and
Portola.
8.0 ATTORNEY FEES
8.1 In the event of any legal dispute relating to or arising out
of this Settlement Agreement, the prevailing party in such dispute shall be
entitled to an award of reasonable attorney fees, in addition to all other
relief provided for by law.
9.0 GOVERNING LAW
9.1 This Settlement Agreement shall be governed by the laws of
the State of California.
9.2 In the event of any dispute relating to or arising out of
this Settlement Agreement, it shall, to the extent permitted by law, be
exclusively resolved by motion to the Court. The parties hereby waive any right
they might otherwise have to any different type of proceeding, such as a trial
by jury.
10.0 MERGER
10.1 This Settlement Agreement contains the entire understanding
and agreement between the parties. Scholle and Portola agree that they are not
relying upon any representation or understanding which is not expressed in this
Settlement Agreement and that any
4
<PAGE>
such other representation or understanding shall be null, void and of no legal
effect. Scholle and Portola further agree that the terms of this Settlement
Agreement may not be modified or altered, except by a written instrument signed
by both Scholle and Portola.
SCHOLLE CORPORATION
Date: JULY 1,1996 By: /S/ WILLIAM J. SCHOLLE
----------------------------------
[signature]
WILLIAM J. SCHOLLE
---------------------------------
[print name]
VICE PRESIDENT
----------------------------------
[official title or capacity]
PORTOLA PACKAGING, INC.
Date: JUNE 28, 1996 By: /S/ JACK L. WATTS
--------------------------------
[signature]
JACK L. WATTS
--------------------------------
[print name]
CHAIRMAN
--------------------------------
[official title or capacity]
5
<PAGE>
APPROVED AS TO FORM AND CONTENT:
Dated: JULY 1, 1996 /S/ EDWARD O'CONNOR
--------------------------------
Marc E. Brown, a member of
POMS, SMITH, LANDE & ROSE
PROFESSIONAL CORPORATION
Attorneys for Scholle Corporation
Dated: /S/ WILLIAM W. ANTHONY
--------------------------------
William W. Anthony, a member of
BROBECK, PHLEGHER & HARRISON
Attorneys for Portola Packaging, Inc.
C:\Scholle.SA
6
<PAGE>
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
(SAN JOSE DIVISION)
SCHOLLE CORPORATION,
) CASE NO. C-92-20414-RMW
PLAINTIFF, )
) STIPULATION AS TO DAMAGES
V. )
)
CAP SNAP CO. AND CAP SNAP SEAL, )
INC. )
)
DEFENDANTS. )
)
)
The parties to this action previously stipulated that Portola Packaging,
Inc. would pay Scholle Corporation One Cent ($.01) for each plug found to
infringe.
Infringement has now been established and the Court has denied all
post-trial motion to alter this determination.
Defendant Portola Packaging, Inc. represents that it has directly or
indirectly sold 147,713,500 units of product found to have infringed (plugs
numbered 1-3 during trial), including all substantial equivalents thereof.
The parties therefore stipulate that Plaintiff Scholle Corporation is
entitled to an award of damages against Defendant Portola Packaging, Inc. in the
amount of $1,477,135.00, plus 10% interest from the date of each sale. The
date of each sale shall be deemed to have occured on the ending date of the
quarter of the year in which the sale was made. Portola represents that this
interest is $175,382.75.
The parties further stipulate that Plaintiff Scholle Corporation is
entitled to an award of costs in the amount of $32,523.25.
Total damages, therefore, are stipulated to be $1,685,055.00.
1
<PAGE>
POMS, SMITH, LANDE & ROSE
PROFESSIONAL CORPORATION
DATED: JULY 1, 1996 BY: /S/ EDWARD O'CONNOR
------------------------------
MARC E. BROWN,
ATTORNEYS FOR PLAINTIFF
SCHOLLE CORPORATION
BROBECK, PHLEGHER & HARRISON,
DATED: JUNE 28, 1996 BY: /S/ WILLIAM L. ANTHONY
------------------------------
WILLIAM L. ANTHONY,
ATTORNEYS FOR DEFENDANTS
PORTOLA PACKAGING, INC.
SCHOLLE.STP
2
<PAGE>
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
(SAN JOSE DIVISION)
SCHOLLE CORPORATION,
) CASE NO. C-92-20414-RMW
PLAINTIFF, )
) JUDGMENT FOR DAMAGES
V. ) AND PERMANENT INJUNCTION
)
CAP SNAP CO. AND CAP SNAP SEAL, INC.)
)
DEFENDANTS. )
)
)
)
)
- - ------------------------------------
WHEREAS, Scholle Corporation ("Scholle") filed this lawsuit against
Portola Packaging, Inc. ("Portola") et al. alleging infringement of U.S.
Patent RE32,354, entitled "CONTAINER FOR HOLDING AND DISPENSING FLUID;"
WHEREAS, the trial of the issues of liability, wilfulness and damages in
the Lawsuit;
WHEREAS, the issues of liability and wilfulness have been tried and
determined by the jury, but not the issue of damages were bifurcated;
WHEREAS, the jury found that Portola's manufacture, sale and use of the
water bottle plugs which were numbered 1-3 during trial ("Infringing Product")
infringed the Patent; that Portola's infringement was not wilful; and that the
Patent was valid and enforceable;
WHEREAS, all post-trial motions filed by the parties to alter these jury
verdicts have been denied by the Court;
WHEREAS, in the event of a finding of liability, Portola agreed to pay
Scholle One Cent ($.01) for each product which was found to infringe the patent;
1
<PAGE>
WHEREAS, the parties have filed a Stipulation as to Damages, specifying
the amount of damages Scholle is entitled to receive from Portola in view of the
determinations made by the Court and jury;
WHEREAS, there are no more issues left for the Court or jury to determine;
WHEREAS, the sole role left for the Court to perform is to enter judgment
in accordance with the jury verdicts and the Stipulation As to Damages filed by
the parties;
NOW, THEREFORE, the Court hereby:
1. Orders judgment to be entered in favor of Plaintiff Scholle
Corporation and against Defendant Portola Packaging, Inc. in the amount of
$1,685,055.00.
2. Permanently enjoins Defendant Portola Packaging, Inc., together
with its officers, directors, agents, servants, employees, and attorneys, and
all those persons in active concert or participation with it who receive actual
notice of this injunction by personal service or otherwise, from making, using,
selling, importing into the United States, or offering to sell or otherwise
exercising the exclusive rights provided for under the Patent Act in connection
with:
(a) the plugs referred to during the course of this lawsuit as plug
nos. 1, 2 and 3;
(b) any plug which is not materially different from one of the plugs
1, 2 or 3, including, without limitation, the plug referred to by the parties as
the "Two-Step Prototype;"
(c) any product which contains any of the plugs described in (a) or
(b) above; and
(d) any product which infringes claims 1, 2 or 4 of U.S. Patent
RE32,354, entitled "CONTAINER FOR HOLDING AND DISPENSING FLUID;" for so long as
these claims have not been declared invalid in another proceeding;
3. Notwithstanding, this Permanent Injunction shall not apply to any
product which falls within the scope of the Non-Exclusive Patent License, a copy
of which is attached as Exhibit "1," so long as it is fully and strictly
complied with, as a part of and in accordance with the Settlement Agreement, a
copy of which is attached as Exhibit "2."
2
<PAGE>
4. The Court hereby retains jurisdiction to enforce the terms of
this Permanent Injunction and the attached Non-Exclusive Patent License and
Settlement Agreement.
Dated: __________________________________________
Judge, United States District Court
APPROVED AS TO FORM AND CONTENT:
POMS, SMITH, LANDE & ROSE
PROFESSIONAL CORPORATION
Dated: JULY 1, 1996 By: /S/ EDWARD O'CONNOR
------------------------------
Marc E. Brown,
Attorneys for Plaintiff
Scholle Corporation
BROBECK, PHLEGHER & HARRISON
Dated: __________, 1996 By: /S/ WILLIAM L. ANTHONY
------------------------------
William L. Anthony
Attorneys for Defendants
Portola Packaging, Inc.
SCHOLLE.JDG
3
<PAGE>
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
(SAN JOSE DIVISION)
SCHOLLE CORPORATION, ) CASE NO. C-92-20414-RMW
)
PLAINTIFF, ) ACKNOWLEDGEMENT OF
) SATISFACTION OF JUDGMENT
V. ) FOR DAMAGES
)
CAP SNAP CO. AND CAP SNAP SEAL,)
INC. )
)
DEFENDANTS. )
)
)
- - -------------------------------
Plaintiff Scholle Corporation hereby acknowledges full satisfaction of
the damages portion of the Judgment for Damages and Permanent Injunction filed
in this action.
Dated: JULY 1, 1996 By: EDWARD O'CONNOR
-------------------------
Marc E. Brown
POMS, SMITH, LANDE & ROSE
PROFESSIONAL CORPORATION
ATTORNEYS FOR PLAINTIFF
SCHOLLE CORPORATION
1
<PAGE>
NON-EXCLUSIVE PATENT LICENSE
This is a non-exclusive patent license ("License") between Scholle
Corporation ("Scholle"), a Nevada corporation, located at 19500 Jamboree Blvd.,
Irvine, California 92715, and Portola Packaging, Inc. ("Portola"), a Delaware
corporation located at 890 Faulstich Ct., San Jose, California 95112.
WHEREAS, Scholle filed a lawsuit ("Lawsuit") against Portola in the
United States District Court for the Northern District of California, San Jose
Division ("Court") (Case No. C92-20414-RMW) alleging infringement of U.S. Patent
RE32,354, entitled "CONTAINER FOR HOLDING AND DISPENSING FLUID ("Patent");"
WHEREAS, the trial of the issues of liability, wilfulness and damages
in the Lawsuit were bifurcated;
WHEREAS, the issues of liability and wilfulness have been tried and
determined by the jury,
WHEREAS, the jury found that Portola's manufacture, sale and use of
the water bottle plugs which were numbered 1-3 during trial and which are
illustrated in the attached drawing ("Infringing Product") infringed the Patent;
that Portola's infringement was not wilful; that the Patent was valid and
enforceable; and that all defenses which Portola had asserted were without
merit;
WHEREAS, all post-trial motions filed by the parties to alter these
jury verdicts were denied by the Court;
WHEREAS, Portola would like to continue selling one or more of the
Infringing Products for use with water bottles;
WHEREAS, Scholle is willing to license Portola to do so at the rate of
One Cent ($. 01) per plug;
NOW, THEREFORE, Scholle and Portola agree as follows:
1. GRANT
1.0 Scholle hereby grants Portola a non-exclusive license to
make, use, import into the U.S., sell and offer for sale caps and plugs (but not
probes) ("Licensed Products") falling within the scope of the Patent. Such
products shall include, without limitation:
(a) the plugs referred to during the course of the Lawsuit as plug
nos. 1, 2 and 3;
(b) any plug which is not materially different from plugs 1, 2 or 3,
including, without limitation, the unnumbered plug in the attached drawing
marked "Two-Step Prototype;" and
(c) any product which contains any of the plugs referred to in (a) or
(b) above.
2. LIMITATION ON FIELD OF USE
1
<PAGE>
2.1 The License granted herein is limited to Licensed Products
used in the field of water dispensing products for water dispensers. No other
field of use is licensed, including, without limitation, the field of dispensers
for fluids other than water.
2.2 The license granted herein shall under no circumstances
extend to any manufacturer, seller or user of probes, even if those probes are
used in conjunction with Licensed Products.
3. PAYMENTS
3.1 Cap snap shall pay Scholle One Cent ($.01) for each Licensed
Product which Portola directly or indirectly sells after May 31, 1996, and prior
to the expiration of the Patent.
3.2 Payment shall be calculated quarterly. The first quarter
begins on January 1; the second on April 1; the third on July 1; and the fourth
on October 1.
3.3 Within thirty (30) days following the close of each quarter,
payment for all sales made in the previous quarter shall be delivered to
Scholle, together with a statement identifying each Licensed Product and the
number which were sold during the last quarter. The statement shall state that
it is based on a reasonable investigation and is believed to be accurate and
shall be signed under penalty of perjury.
3.4 Portola shall pay Scholle Four Cents ($.04) for each plug
Licensed Product sold but not reported in the appropriate quarterly statement.
4. INTEREST
4.1 Portola shall pay Scholle interest at the annual rate of
Eighteen Percent (18%) on any payment required to be made under this License
which is late for any reason, in addition to all other payments required to be
made herein.
5. ACCOUNTING
5.1 Portola agrees to keep detailed records which would enable
an accountant to easily and completely verify the accuracy of all accounting
statements which Portola provides to Scholle under this License. For each
payment which is due, Portola agrees to keep and maintain the records relating
to this payment for at least four (4) years following the due date of the
payment.
5.2 Upon reasonable notice and not more than three (3) times in
any calendar year, Portola shall permit an independent certified public
accountant selected by Scholle to inspect all books and records relevant to
verifying the accuracy of the accounting statements which
2
<PAGE>
Portola has provided to Scholle under this License. The fees for said
accountant shall be paid by Scholle. However, if the accountant discovers an
error in a quarterly statement by Portola of more than five percent (5%), the
fees of the accountant shall be paid by Portola.
6. DEFEND AND HOLD HARMLESS
6.1 Portola agrees to defend and indemnify Scholle against any
claim which is asserted against Scholle arising out of or related to Portola's
manufacture, use, importation, sale or offer for sale of Licensed Products.
7. NO EMPLOYMENT, AGENCY, PARTNERSHIP
OR JOINT VENTURE
7.1 This agreement is intended to be a license agreement only.
It is not intended and shall not create any employment, agency, partnership or
joint venture relationship between Scholle and Portola.
8. PATENT MARKING
8.1 Portola shall mark all Licensed Products in accordance
with all of the requirements of 35 U.S.C. Section 287. Portola shall compensate
Scholle for any and all damages which Scholle sustains because of a breach of
this obligation.
9. TERMINATION
9.1 In the event of any breach of this License, the aggrieved
party shall be entitled to terminate this License by providing a notice of
termination to the breaching party, together with a statement of the grounds for
termination. In the event that any breach of this agreement is capable of being
cured and was unintentionally committed, the breaching party shall
have thirty (30) days following delivery of said notice in which to cure said
breach and, if it does so, the notice of termination shall be ineffective. No
cure shall deprive the aggrieved party of its right to seek damages because of
the breach.
10. NOTICES AND DELIVERIES
10.1 All notices and deliveries required to be made under this
agreement shall be presumed to have been made if they are mailed by First Class
U.S. Mail, addressed as follows:
To: SCHOLLE CORPORATION
19500 Jamboree Boulevard
Irvine, California 92715
Attn: Mr. William J. Scholle
To: PORTOLA CO.
3
<PAGE>
890 Faulstich Ct.
San Jose, California 95112
Attn: Mr. Robert Strickland, CFO
10.2 Any party may provide the other with a written notice of a
change in this address.
11. SUCCESSORS AND ASSIGNS
11.1 Except as otherwise noted herein, this License shall be
binding upon and shall inure to the benefit of the successors and assigns of the
parties.
12. RESTRICTION ON TRANSFER
12.1 Portola shall not assign, sublicense or otherwise transfer
any of the rights granted under this License, without the prior written consent
of Scholle. Such written consent shall not be withheld unreasonably.
Notwithstanding, Portola shall be entitled to transfer all of its rights under
this license in connection with the transfer and sale of all or substantially
all of its interests in or assets relating to that aspect of its business which
uses or sells the Licensed Products. Scholle shall not be obligated to consent
to any such transfer if it involves an increase in concerns over actually
receiving payment, an adverse impact upon Scholle's position in the marketplace,
an increase in exposure to liability because of this License, or an adverse
impact upon the Patent.
13. FAVORED LICENSEE
In the event Licensor subsequently extends a license under the
Licensed Patent to another licensee for use in the field of water dispensing
products for water dispensers which includes a more favorable royalty rate than
that provided herein, Licensee shall be entitled to secure for itself such more
favorable royalty rate and this agreement shall be amended accordingly.
14. ATTORNEY FEES
14.1 In the event of any legal dispute relating to or arising out
of this License, the prevailing party in such dispute shall be entitled to an
award of reasonable attorney fees, in addition to all other relief provided for
by law.
15. GOVERNING LAW
15.1 This License shall be governed by the laws of the State of
California.
14.2 In the event of any dispute relating to or arising out of
this License, it shall, to the extent permitted by law, be exclusively resolved
by motion to the Court. The parties hereby waive any right they might otherwise
have to any different type of proceeding, such as a
4
<PAGE>
trial by jury.
16. MERGER
16.1 This License contains the entire understanding and agreement
between the parties. Scholle and Portola agree that they are not relying upon
any representation or understanding which is not expressed in this License and
that any such other representation or understanding shall be null, void and of
no legal effect. Scholle and Portola further agree that the terms of this
License may not be modified or altered, except by a written instrument signed by
both Scholle and Portola.
SCHOLLE CORPORATION
Date: JULY 1, 1996 /S/ WILLIAM J. SCHOLLE
--------------------------------------
[signature]
WILLIAM J. SCHOLLE
--------------------------------------
[print name]
VICE PRESIDENT
--------------------------------------
[official title or capacity]
PORTOLA PACKAGING, INC.
Date: JUNE 28, 1996 /S/ JACK L. WATTS
--------------------------------------
[signature]
JACK L. WATTS
--------------------------------------
[print name]
CHAIRMAN
--------------------------------------
[official title or capacity]
APPROVED AS TO FORM AND CONTENT:
Dated: JULY 1, 1996 /S/ EDWARD O'CONNOR
--------------------------------------
Marc E. Brown, a member of
POMS, SMITH, LANDE & ROSE
PROFESSIONAL CORPORATION
Attorneys for Scholle Corporation
Dated: JUNE 28, 1996 /S/ WILLIAM W. ANTHONY
--------------------------------------
William W. Anthony, a member of
5
<PAGE>
BROBECK, PHLEGHER & HARRISON
Attorneys for Portola Packaging, Inc.
C:\Scholle.la
6
<PAGE>
INFRINGING PRODUCT
This page contains four illustrations of water bottle plugs and captioned
"one-step prototype", "two-step prototype". "two-step with bead" and
"two-step with groove"
1 [ILLUSTRATION]
ONE-STEP PROTOTYPE
[ILLUSTRATION]
TWO-STEP PROTOTYPE
2 [ILLUSTRATION]
TWO-STEP WITH BEAD
3 [ILLUSTRATION]
TWO-STEP WITH GROOVE
<PAGE>
EXHIBIT 11.01
<PAGE>
PORTOLA PACKAGING, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE (1)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED MAY 31, ENDED MAY 31,
-------------- ---------------
1996 1995 1996 1995
------ ------ ------ -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Weighted average common shares
outstanding for the period 11,798 11,106 11,656 11,275
--------- --------- ---------- ---------
--------- --------- ---------- ---------
Income before extraordinary item $762 $146 $562 $377
Less the increase in the put value
of warrants (229) (152) (652) (457)
--------- --------- ---------- ---------
Income (loss) before extraordinary
item $533 ($6) ($90) ($80)
--------- --------- ---------- ---------
--------- --------- ---------- ---------
Extraordinary item $1,265
---------
---------
Net income (loss) $762 $146 ($703) $377
Less the increase in the put value
of warrants (229) (152) (652) (457)
--------- --------- ---------- ---------
Net income (loss) $533 ($6) ($1,355) ($80)
--------- --------- ---------- ---------
--------- --------- ---------- ---------
Net income (loss) per share
before extraordinary item $0.05 $0.00 ($0.01) ($0.01)
Effect of extraordinary item per share ($0.11)
Net income (loss) per share $0.05 $0.00 ($0.12) ($0.01)
</TABLE>
(1) There is no difference between primary and fully diluted net income
(loss) per share for all periods presented.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> MAY-31-1996
<CASH> 10885
<SECURITIES> 0
<RECEIVABLES> 22841<F1>
<ALLOWANCES> 707
<INVENTORY> 9956
<CURRENT-ASSETS> 49108
<PP&E> 65375<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 157245
<CURRENT-LIABILITIES> 17577
<BONDS> 117446
0
0
<COMMON> 12
<OTHER-SE> 5211
<TOTAL-LIABILITY-AND-EQUITY> 157245
<SALES> 115250
<TOTAL-REVENUES> 115250
<CGS> 85216
<TOTAL-COSTS> 100414
<OTHER-EXPENSES> 3664
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10022
<INCOME-PRETAX> 2224
<INCOME-TAX> 1662
<INCOME-CONTINUING> 562
<DISCONTINUED> 0
<EXTRAORDINARY> 1265
<CHANGES> 0
<NET-INCOME> (703)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
<FN>
<F1>SHOWN NET OF ALLOWANCE
<F2>SHOWN NET OF DEPRECIATION
</FN>
</TABLE>
