<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. 2)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted By Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BPI PACKAGING TECHNOLOGIES, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies: N/A
(2) Aggregate number of securities to which transaction
applies: N/A
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined): N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: N/A
(2) Form, Schedule or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date Filed: N/A
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.
455 SOMERSET AVENUE
BUILDING NO. 3
NORTH DIGHTON, MA 02764
- --------------------------------------------------------------------------------
June ___, 1999
Dear Stockholder:
You are cordially invited to attend our Annual Meeting of Stockholders
on Thursday, July 22, 1999. The meeting will be held at The Courtyard by
Marriott, 35 Foxborough Boulevard, Foxborough, Massachusetts, at 10:00 a.m.,
eastern time.
This Notice of Annual Meeting of Stockholders and the Proxy Statement
accompanying this letter describe the business we will consider at the meeting.
In particular, please note that management is requesting the stockholders to
approve one item in addition to the election of directors and the ratification
of the Board of Directors appointment of independent accountants. Management
requests that the stockholders approve an amendment to the Company's Certificate
of Incorporation that would increase the number of authorized shares of Common
Stock of the Company.
Your vote is very important. I urge you to sign, date and return the
enclosed proxy in the envelope provided to be certain your shares are
represented at our Annual Meeting, even if you plan to attend our Annual
Meeting.
I look forward to seeing you at the meeting.
Ivan J. Hughes
CHAIRMAN OF THE BOARD OF DIRECTORS
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.
455 SOMERSET AVENUE
NORTH DIGHTON, MASSACHUSETTS 02764
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 22, 1999
--------------------
TO THE STOCKHOLDERS OF BPI PACKAGING TECHNOLOGIES, INC.:
The Annual Meeting of Stockholders of BPI Packaging Technologies, Inc.
(the "Company"), a Delaware corporation, will be held on Thursday, July 22, 1999
at 10:00 a.m. at The Courtyard by Marriott, 35 Foxborough Boulevard, Foxborough,
Massachusetts (the "Annual Meeting") for the following purposes:
1 To elect two Class I directors for a term expiring in 2002;
2. To vote on an amendment to the Company`s Certificate of Incorporation to
increase the number of authorized shares of the Company's common stock,
par value $.01 per share (the "Common Stock"), from 60,000,000 shares to
150,000,000 shares;
3. To ratify the appointment of Livingston & Haynes, P.C. as the Company's
independent accountants for the year ending December 31, 1999; and
4. To transact any other business that may be properly presented at the
meeting.
These items of business are more fully described in the Proxy Statement
accompanying this Notice.
Only stockholders of record at the close of business on June 3, 1999
are entitled to notice of and to vote at the Annual Meeting.
Your vote is important. Whether or not you plan to attend the Annual
Meeting, please mark, sign, date and return the enclosed proxy promptly. If you
are present at the Annual Meeting, and wish to do so, you may revoke the proxy
and vote in person.
This Proxy Statement, the proxy, Amendment No. 3 to the Company's
Annual Report on Form 10-K/A for the year ended December 31, 1998 and
Amendment No. 1 to the Company's Quarterly Report on Form 10-Q/A for the
three month period ended March 31, 1999 were first mailed to stockholders on
or about June ___, 1999.
By Order of the Board of Directors
Hanspeter Schulz
PRESIDENT
North Dighton, Massachusetts
June ___, 1999
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.
455 SOMERSET AVENUE
NORTH DIGHTON, MASSACHUSETTS 02764
JUNE ___, 1999
---------------
PROXY STATEMENT
---------------
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors (the "Board of Directors")
of BPI Packaging Technologies, Inc. (the "Company"), a Delaware corporation,
for use at the Annual Meeting of Stockholders (the "Annual Meeting") to be
held at The Courtyard by Marriott, 35 Foxborough Boulevard, Foxborough,
Massachusetts at 10:00 a.m. on Thursday, July 22, 1999, and at any
adjournments thereof.
At the Annual Meeting, holders of common stock of the Company (the
"Common Stock") and holders of the Series A Convertible Preferred Stock of
the Company (the "Series A Preferred Stock") will be asked to consider and
vote upon the following proposals (the "Proposals"): (i) the election of two
Class I directors for a term expiring in 2002; (ii) an amendment to the
Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 60,000,000 shares to 150,000,000 shares; and
(iii) the ratification of Livingston & Haynes, P.C. as the Company's
independent accountants for the year ending December 31, 1999. The Board of
Directors knows of no other matter to be presented at the meeting. If any
other matter should be presented at the meeting upon which a vote may be
taken, such shares represented by all proxies received by the Board of
Directors will be voted with respect thereto in accordance with the judgment
of the persons named as attorneys in the proxies.
MAILING
The Company is providing to each stockholder entitled to vote at the
Annual Meeting, simultaneously with the mailing of this Proxy Statement,
without charge, a copy of Amendment No. 3 to the Company's Annual Report on
Form 10-K/A for the year ended December 31, 1998 (the "Form 10-K/A") and
Amendment No. 1 to the Company's Quarterly Report on Form 10-Q/A for the
three month period ended March 31, 1999 (the "Form 10-Q/A"). This Proxy
Statement, the proxy, the Form 10-K/A and the Form 10-Q/A were first mailed
to stockholders on or about June ___, 1999.
RECORD DATE, VOTING
At the close of business on June 3, 1999, the record date for the
determination of stockholders of the Company entitled to receive notice of
and to vote at the Annual Meeting (the "Record Date"), 21,500,521 and 188,458
shares of the Company's Common Stock and Series A Preferred Stock,
respectively, were issued and outstanding. Each share of Common Stock and
Series A Preferred Stock is entitled to one vote upon each of the matters to
be voted on at the Annual Meeting. The Common Stock and Series A Preferred
Stock will vote together, as a class, on each proposal. The presence, in
person or by proxy (including abstentions and "broker non-votes"), of at
least a majority of the outstanding shares of securities entitled to vote,
including Common Stock and the Series A Preferred Stock, is required for a
quorum.
If you sign and return your proxy card but do not specify your
choices, your shares will be voted as recommended by your Board of Directors.
The Board of Directors recommends that you vote "For" the two nominees to the
Board of Directors who are listed in this Proxy Statement; "For" the
amendment to the Company's Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 60,000,000 shares to
150,000,000 shares; and "For" the appointment of Livingston & Haynes, P.C. as
the Company's independent accountants for the year ending December 31, 1999.
Four of the Company's directors are either affiliated with DGJ, L.L.C.
("DGJ") or have been designated by DGJ, which due to DGJ's affiliation with
the Company, described in Proposal No. 1, "Certain Relationships and Related
Transactions," may have a conflict of interest in recommending stockholder
approval of the Proposals to be voted upon at the Annual Meeting. See
"Security Ownership of
<PAGE>
Certain Beneficial Owners Management" for a description of the securities
held by the directors. See Proposal No. 2 for a description of DGJ's interest
in increasing the authorized number of shares of Common Stock.
There are different voting requirements for the various proposals.
Directors will be elected by a plurality of the votes cast at the Annual
Meeting in person or by proxy, meaning the two nominees receiving the most
votes will be elected as directors. Only votes cast for a nominee will be
counted, except that the accompanying proxy will be voted for the two
nominees unless the proxy contains instructions to the contrary. Abstentions,
broker non-votes and instructions on the accompanying proxy to withhold
authority to vote for one or more of the nominees will result in those
nominees receiving fewer votes. However, such action will not reduce the
number of votes otherwise received by the nominee.
The amendment to the Certificate of Incorporation and the
ratification of the independent accountants each require an affirmative vote
of a majority of the shares present in person or by proxy and entitled to
vote at the Annual Meeting. For these proposals, an abstention will have the
same effect as a vote against the proposal. Broker non-votes will not be
voted for or against the proposals, will not be counted as entitled to vote
and so will not have any effect on such proposals.
As of June 3, 1999, the directors and officers of the Company as a
group own or may be deemed to control 1,625,854 shares of Common Stock and
Series A Preferred Stock, constituting approximately 7.5% of the outstanding
shares of Common Stock and Series A Preferred Stock, voting as a single
class, of the Company.
REVOCABILITY OF PROXIES
Stockholders may vote in person or by proxy. Execution of a proxy
will not in any way affect a stockholder's right to attend the meeting and
vote in person. A proxy may be revoked at any time before it is exercised by
written notice to the Company's Chief Financial Officer prior to the meeting,
or by giving the Company's Chief Financial Officer a duly executed proxy
bearing a later date than the proxy being revoked at any time before such
proxy is voted, or by appearing at the meeting and voting in person. The
shares represented by all properly executed proxies received in time for the
meeting will be voted as specified therein. In the absence of a special
choice, shares will be voted in favor of the election of those persons named
in this Proxy Statement as directors and in favor of all other proposals set
forth herein.
SOLICITATION
The Company will bear the entire cost of the solicitation of proxies
from its stockholders, including preparation, assembly, printing and mailing
of this Proxy Statement, the proxy and any additional information furnished
to stockholders. Copies of solicitation materials will be furnished to banks,
brokerage houses, fiduciaries and custodians holding in their names shares of
the Company's stock beneficially owned by others to forward to such
beneficial owners. Original solicitation of proxies by mail may be
supplemented by telephone, facsimile, telegram or personal solicitation by
directors, officers or other regular employees of the Company. No additional
compensation will be paid to such persons for such services. The Company has
employed Beacon Hill Partners, Inc., a professional solicitation company
("Beacon Hill"), to assist with solicitation of stockholders. Beacon Hill
will be paid a fee of $5,000 plus out-of-pocket expenses.
American Stock Transfer & Trust Company, transfer agent and registrar
for the Company's Common Stock and Series A Preferred Stock, will be paid its
customary fee, estimated to be $5,000.
2
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Under the Company's Certificate of Incorporation and By-laws, each
as amended, the Board of Directors is classified into three classes, with
approximately one-third of the directors standing for election each year for
a three-year term. A classified board is designed to assure continuity and
stability in the Board's leadership and policies. Ivan J. Hughes and Allen S.
Gerrard (collectively, the "Nominees") serve as the Class I directors and
will be voted on at the Annual Meeting to be held in July 1999.
David N. Laux and Hanspeter Schulz are the Class II directors and
serve until the Annual Meeting of Stockholders to be held in the year 2001.
Gary R. Edidin, Bruce M. Fleisher and Theodore L. Koenig are the Class III
directors and serve until the Annual Meeting of Stockholders to be held in
the year 2000. The successors to the class of directors whose terms expire at
an annual meeting would be elected for a term of office to expire at the
third succeeding annual meeting after their election and until their
successors have been duly elected by the stockholders. Directors chosen to
fill vacancies on a classified board hold office until the next election of
the class for which directors shall have been chosen, and until their
successors are duly elected by the stockholders. Officers are elected by and
serve at the discretion of the Board of Directors, subject to their
employment contracts.
Directors will be elected by a plurality of the votes cast at the
Annual Meeting in present or by proxy, meaning the two nominees receiving the
most votes will be elected directors. Only votes cast for a nominee will be
counted, except that the accompanying proxy will be voted for the two
management nominees unless the proxy contains instructions to the contrary.
Abstentions, broker non-votes and instructions on the accompanying proxy to
withhold authority to vote for one or more of the nominees will result in
those nominees receiving fewer votes. However, such action will not reduce
the number of votes otherwise received by the nominee. Four of the Company's
directors are either affiliated with DGJ or have been designated by DGJ,
which due to DGJ's affiliation with the Company, described in "Certain
Relationships and Related Transactions," may have a conflict of interest in
recommending stockholder approval of this proposal, the proposal to increase
the number of authorized shares of Common Stock and the proposal to ratify
the appointment of the Company's independent accountants. See "Security
Ownership of Certain Beneficial Owners Management" for a description of the
securities held by the directors. See Proposal No. 2 for a description of
DGJ's interest in increasing the authorized number of shares of Common Stock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
ELECTION OF THE NOMINEES AS CLASS I DIRECTORS OF THE COMPANY TO SERVE UNTIL
THE YEAR 2002.
The following table provides information regarding the Nominees and
continuing directors of the Company:
<TABLE>
<CAPTION>
Class to which
Date First Nominee or
Became Positions and Offices Director
Name Age Director with the Company Belongs
- ---- --- ---------- -------------------- --------------
<S> <C> <C> <C> <C>
NOMINEES:
Allen S. Gerrard 63 1/27/99 Director I
Ivan J. Hughes 70 7/13/98 Chairman of the Board of Directors I
CONTINUING DIRECTORS:
Gary R. Edidin 54 1/27/99 Director III
Bruce M. Fleisher 68 4/30/99 Director III
3
<PAGE>
<CAPTION>
Class to which
Date First Nominee or
Became Positions and Offices Director
Name Age Director with the Company Belongs
- ---- --- ---------- -------------------- --------------
<S> <C> <C> <C> <C>
Theodore L. Koenig 40 4/30/99 Director III
David N. Laux 71 1/1/93 Director II
Hanspeter Schulz, Ph.D. 60 1/27/99 President and Director II
</TABLE>
BACKGROUND
The principal occupations during the past five years of each of the
Company's directors and Nominees are as follows:
NOMINEES
ALLEN S. GERRARD. Mr. Gerrard has served as a Director of the
Company since January 1999. Since 1996, Mr. Gerrard has served as a Director
of Deere Park Capital Management, an investment and merchant banking firm,
and since April 1998 he has also served as Vice-Chairman of such company.
Beginning in January 1999, Mr. Gerrard has been a Member of the Board of
Managers and Treasurer of DGJ. From November 1998 to March 1999, Mr. Gerrard
served as Director of McConnell Dowell Corporation, Limited, a publicly
traded company involved in construction. Since 1997, Mr. Gerrard has served
as a Director of Dominion Bridge Company, a publicly-traded construction and
shipbuilding company. Mr. Gerrard was a Principal in the law firm of Allen S.
Gerrard & Associates from 1978 to 1999. Mr. Gerrard received his Bachelor of
Arts degree in Political Science from the University of Illinois in
Champaign-Urbana and his Juris Doctor degree from the University of Michigan
Law School.
IVAN J. HUGHES. Mr. Hughes was re-elected as a Director of the
Company on July 13, 1998 and became Chairman of the Board of Directors on
January 27, 1999. Mr. Hughes previously served as a Director of the Company
from March 1996 to February 1998. Since 1991, Mr. Hughes has been the
President of the Plastic Division of Duro Bag Manufacturing Company ("Duro
Bag"), a privately held company which manufactures grocery bags, shopping and
specialty bags for the food and retail industry. Mr. Hughes has been employed
by Duro Bag in various positions for the past 35 years and presently serves
on the Executive and Compensation Committees. Mr. Hughes received a Bachelor
of Science degree in Mechanical Engineering at Lafayette College and
completed his graduate studies at Columbia University.
CONTINUING DIRECTORS
GARY R. EDIDIN. Mr. Edidin has served as a Director of the Company
since January 1999. In January 1999, Mr. Edidin became a Member of the Board
of Managers, Chairman, President and Chief Executive Officer of DGJ. In 1975,
Mr. Edidin co-founded Edidin Associates, an investment banking firm. He has
been Managing Partner of Edidin Associates since 1980. In 1992, Mr. Edidin
co-founded Franklin Capital Corp., a regional asset based lender, and is
presently the Co-Chairman and member of its Board of Directors. In 1980, Mr.
Edidin served as the Chief Executive Officer and Chairman of Optique Du
Monde, Ltd. ("ODM"), an eyewear company. In 1988, ODM was sold to the Safilo
Group, an Italian publicly traded eyewear company. Since 1988, he has been a
management consultant to the Safilo Group and Safilo USA, its U.S.
subsidiary. In 1997, Mr. Edidin represented Safilo Group in its acquisition
of Smith Sports Optics, Inc. and began serving that company as a member of
the Board of Directors and Executive Committee. He has also served as the
Chairman and Chief Executive Officer of Clarin Corp., a manufacturer of
institutional seating, since 1993. Since 1998, Mr. Edidin has served as a
member of the Board of Directors of Colors For Plastic, a plastic coloration
company. In 1977, a group of investors, including Edidin Associates,
purchased the Lawndale Trust and Savings Bank, a community bank in Chicago.
The same investors subsequently purchased the Garfield Ridge Trust and
Savings Bank and the Bank of Chicago, two Chicago
4
<PAGE>
community banks. In 1995, these three banks were merged into one under the
name Bank of Chicago. In 1997, Bank of Chicago was sold to TCF, a publicly
traded savings bank headquartered in Minnesota. Mr. Edidin served these banks
in various capacities over the years, including Chairman and Chief Executive
Officer. Mr. Edidin received his Bachelor of Science degree from the
University of Pennsylvania, Wharton School, and his Juris Doctor degree from
the University of Chicago Law School. Mr. Edidin also attended the University
of Chicago Business School.
BRUCE M. FLEISHER. Mr. Fleisher has served as a Director of the
Company since April 1999. Since 1998, Mr. Fleisher has been involved in
private investing. From 1996 to 1998, he served as the Vice President and
Division Manager, Chicago for the Supply Systems Division of Unisource
Worldwide, Inc., a wholesale distributor of paper and packaging supplies.
From 1993 to 1996, he was the President and owner of Darter, Inc. In 1996,
Darter, Inc. was purchased by Unisource Worldwide, Inc. From 1996 to 1997, he
was a member of the Board of Directors and Chairman of the Industrial
Committee for the National Paper Trade Association. Mr. Fleisher received his
Bachelor of Science degree in Economics from the University of Pennsylvania,
Wharton School, and his Masters degree in Business Administration from George
Washington University.
THEODORE L. KOENIG. Mr. Koenig has served as a Director of the
Company since April 1999. In 1996, Mr. Koenig founded and since has served as
President of Monroe Investments, Inc., a Chicago-based investment and
merchant banking firm specializing in strategic growth investment
opportunities. Mr. Koenig's principal occupation is that of an attorney. He
has been a partner with Holleb & Coff, a Chicago-based law firm, since 1989.
Mr. Koenig received his Bachelor of Arts degree in Accounting from Indiana
University Kelley School of Business and his Juris Doctor degree from the
Illinois Institute of Technology, Chicago Kent School of Law. Mr. Koenig is
also a Certified Public Accountant.
DAVID N. LAUX. Mr. Laux has served as a Director of the Company
since January 1993. Since 1991, Mr. Laux has served as a Director of ROC
Taiwan Fund, a closed end fund listed on the New York Stock Exchange. Since
1990, Mr. Laux has been President of the USA-ROC Economic Council, a private
non-profit association which promotes business relations between the United
States and Taiwan. Mr. Laux received his Bachelor of Arts degree from Amherst
College and his Master of Business Administration degree from the American
University in Washington, D.C. He has done graduate work at the University of
California at Berkeley and Georgetown University. Mr. Laux is also a graduate
of the Advanced Management Program at Harvard Business School.
HANSPETER SCHULZ, PH.D. Dr. Schulz has been the Company's President
and a Director since January 1999. From August 1998 to January 1999, Dr.
Schulz served as a consultant to the Company. From 1996 to August 1998, Dr.
Schulz was a Director of Business Integration for Celanese Ltd. (a member of
the Hoechst Group), and was one of three managers responsible for the global
installation of Systems Anwendungen Prozesse technologies. From June 1995 to
1996, Dr. Schulz was Business Director for Methanol/Formaldehyde/Polyols, a
global commodity business of Celanese (a member of the Hoechst Group) with
production sites in the United States, Canada and Germany. From 1982 to June
1995, Dr. Schulz was Vice President and General Manager of the High Density
and Ultra High Molecular Weight Polyethylene business at American Hoechst (a
member of the Hoechst Group). From 1959 to 1969, Dr. Schulz studied chemistry
and related subjects at the Universities of Stuttgart, Germany, Kansas, USA
(on a scholarship basis) and Hamburg, Germany resulting in a Ph.D. of Natural
Sciences in 1969.
EXECUTIVE OFFICERS
The executive officers of the Company, their ages and positions held
in the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Hanspeter Schulz, Ph.D. 60 President and Director
Richard H. Nurse, Ph.D. 54 Vice President of Manufacturing
Peter W. Blackett 50 Senior Vice President of Sales
James F. Koehlinger 62 Chief Financial Officer and Treasurer
C. Jill Beresford 44 Vice President of Marketing
</TABLE>
5
<PAGE>
No director or executive officer is related by blood, marriage or
adoption to any other director or executive officer.
RICHARD H. NURSE, PH.D. Dr. Nurse has been the Company's Vice
President of Manufacturing since January 1999. Prior thereto, he was the
Company's Vice President of Technical Development since January 1995. From
1989 to 1995, Dr. Nurse was an independent consultant to the plastics
industry. From 1987 to 1988, Dr. Nurse was the Director of Research and
Development for Cookson Performance Plastics, a plastics additive
manufacturer. From 1985 to 1987, he was a Technical Manager for Nortech
Company, another plastics additive manufacturer. From 1973 to 1985, Dr. Nurse
was with Hoechst AG, a plastics resin manufacturer, serving in technical
application and development management in South Africa and Germany and since
1979, in the United States. Dr. Nurse received a Ph.D. degree in Polymer
Technology from the University of Manchester Institute of Science and
Technology in England and a Bachelor of Science degree in Chemical and
Plastics Technology from the Polytechnic of South Bank, London, England.
PETER W. BLACKETT. Mr. Blackett has been the Company's Senior Vice
President of Sales since March 1999. From 1997 to March 1999, he was employed
with Fina Oil and Chemical Company as Regional Sales Manager and from 1992 to
1997, as a Technical Service Manager for Fina's High Density Polyethylene
business group. Mr. Blackett holds a Higher National Certificate in Mechanical
Engineering from Peterborough Technical College and a Graduateship of the
Plastics Institute from Borough Polytechnic in South London.
JAMES F. KOEHLINGER. Mr. Koehlinger has been the Company's Chief
Financial Officer since January 1999. He previously served as a consultant to
the Company, on a part-time basis, from August 1998 to January 1999. From
October 1996 to January 1999, Mr. Koehlinger was a senior consultant with
Benchmark, a financial consulting firm. He previously served as the Company's
Chief Financial Officer from February 1988 to October 1996. Mr. Koehlinger
received a Bachelor of Science degree from Indiana University and a Master of
Business Administration degree from Clark University. He is also a certified
public accountant.
C. JILL BERESFORD. Ms. Beresford has been the Company's Vice
President of Marketing since January 1999. From June 1998 until January 1999,
she was the Company's Chairman, Chief Executive Officer and Chief Financial
Officer. She also served as the Chief Operating Officer of the Company from
1995 to 1998. She served as the Company's President from July 1996 to June
1998. She was Treasurer of the Company from May 1990 to January 1999 and a
Director of the Company from March 1989 until January 1999. From May 1990 to
July 1995, Ms. Beresford was the Company's Vice President of Marketing. Ms.
Beresford attended the University of Guelph, Ontario, Canada and received a
Masters degree in Business Administration from Boston University.
SIGNIFICANT EMPLOYEE
The following employee is not an executive officer of the Company
but is expected to make significant contributions to the business of the
Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Tracy L. McGrath 34 Vice President of Sales
</TABLE>
TRACY L. MCGRATH. Ms. McGrath has served as the Company's Vice
President of Sales since January 1999. Prior thereto, she was the Company's
Vice President of Marketing since December 1997 and, prior thereto, was the
Company's Marketing Manager since November 1993. Ms. McGrath has a Bachelor
of Science degree in Communications from Eastern Connecticut State University.
BOARD OF DIRECTORS, BOARD COMMITTEES AND MEETINGS
The Board of Directors has established an Audit Committee, a
Compensation Committee and an Executive Committee. The Board of Directors
held three meetings during 1998. Each director attended at least 75% of all
meetings of the Board of Directors and applicable Committees held during 1998.
6
<PAGE>
EXECUTIVE COMMITTEE
The Executive Committee is empowered to act with all authority
granted to the Board of Directors between Board of Directors meetings, except
with respect to those matters required by Delaware law or by the Company's
By-laws to be subject to the power and authority of the Board of Directors as
a whole. Messrs. Ivan J. Hughes, Hanspeter Schulz and Gary R. Edidin are the
current members of the Executive Committee. The former Executive Committee
did not meet during 1998.
AUDIT COMMITTEE
The Board of Directors has established an Audit Committee, whose
current members are David N. Laux, Bruce M. Fleisher, Gary R. Edidin and
Allen S. Gerrard. The purpose of the Audit Committee is to: (i) review the
Company's financial results and recommend the selection of the Company's
independent auditors; (ii) review the effectiveness of the Company's
accounting policies and practices, financial reporting and internal controls;
and (iii) review the scope of independent audit coverage, the fees charged by
the independent auditors, any transactions which may involve a potential
conflict of interest, and internal control systems.
The functions of the Audit Committee are to: (i) recommend annually
to the Board of Directors the appointment of the independent public
accountants of the Company; (ii) discuss and review the scope and the fees of
the prospective annual audit and to review the results thereof with the
Company's independent public accountants; (iii) review and approve non-audit
services of the independent public accountants; (iv) review compliance with
existing major accounting and financial policies of the Company; (v) review
the adequacy of the financial organization of the Company; and (vi) review
management's procedures and policies relative to the adequacy of the
Company's internal accounting controls.
During 1998, the former Audit Committee met one time and the new
Audit Committee has met once in 1999 for the purposes of: (i) reviewing the
arrangements and scope of the Company's annual audit; (ii) discussing the
matters of concern to the Committee with regard to the Company's financial
statements or other results of the audit; and (iii) reviewing the Company's
internal accounting procedures and controls and the activities and
recommendations of the Company's independent public accountants.
COMPENSATION COMMITTEE
David N. Laux, Bruce M. Fleisher, Gary R. Edidin and Allen S.
Gerrard serve on the Compensation Committee. The former Compensation
Committee did not meet during 1998.
BOARD OF DIRECTORS COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee believes that the primary objectives of
the Company's compensation policies are to attract and retain a management
team that can effectively implement and execute the Company's strategic
business plan. These compensation policies include: (i) an overall management
compensation program that is competitive with management compensation
programs at companies of similar size to attract, retain and motivate
superior talent in the Company's industry; (ii) short-term bonus incentives
for management to meet the Company's overall business strategy and
profitability goals, including net income performance goals; (iii) promoting
the Company's pay-for-performance philosophy; and (iv) long-term incentive
compensation which will encourage management to continue to focus on
stockholder return.
It is the intention of the Compensation Committee to utilize a
pay-for-performance compensation strategy that will facilitate the attainment
of the Company's sales growth and profitability goals. Also, the Compensation
Committee's goal is to use compensation policies to closely align the
interests of the Company with the interests of stockholders so that the
Company's management has incentives to achieve short-term performance goals
while building long-term value for the Company's stockholders. The
Compensation Committee will review its compensation policies from time to
time to determine the reasonableness of the Company's compensation programs
and to take into account factors which are unique to the Company.
7
<PAGE>
BONUS PLAN. To incentivize senior management of the Company, Ms.
Beresford, Mr. Koehlinger, Dr. Nurse, Dr. Schulz, Mr. Blackett and Mr. Hughes
will receive options to purchase Common Stock, at $0.04 per share, during the
term of their respective employment or consulting agreements if the Company
equals or exceeds certain financial performance goals in 1999, 2000 and 2001.
If the Company's net earnings for the particular fiscal years plus amounts
deducted in the computation thereof for: (a) interest expense; (b) Federal,
state and local income taxes; (c) depreciation; (d) amortization of
intangibles, as computed by the Company's accountants in accordance with
generally accepted accounting principals, consistently applied; and (e) any
expenses or other charges associated with the investment, loans, and
equipment leases made by DGJ to the Company and all other charges ("EBITDA"),
equals or exceeds one of the EBITDA performance goals as stated in the
employment or consulting agreements, the Company shall grant such individuals
options to purchase a certain number of shares of Common Stock. The maximum
number of shares of Common Stock, in the aggregate, these individuals and one
other employee, Ms. McGrath, can purchase under these options is 14,750,000
shares. See "Employment Contracts, Termination of Employment and Change in
Control Arrangements" section below for a description of these agreements.
COMPENSATION FOR PRIOR CHIEF EXECUTIVE OFFICERS. Mr. Caulfield's and
Ms. Beresford's compensation as Chief Executive Officer was based upon
analysis by the predecessor Compensation Committee of other comparable public
companies' chief executive officers' compensation and each's efforts and
success in the following areas: establishing strategic goals and objectives
for the long-term growth of the Company; raising equity and debt capital
needed to allow the Company to erase its working capital deficit and
adequately capitalizing the Company to move forward; improving the Company's
operating results; and establishing critical strategic partnerships with
vendors and distribution channels.
BASE SALARIES. Ms. Beresford's base salary will continue to be
$180,000 per annum until June 30, 1999 and for her employment term from July
1, 1999 to June 30, 2000, her base salary will be $125,000 per annum. The
current Compensation Committee believes that executive officer salaries
reflect base salaries paid to senior officers of other companies of similar
size.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally disallows tax deductions to public companies for
compensation over $1 million paid to a corporation's chief executive officer
and the four other most highly compensated executive officers. Qualifying
"performance-based" compensation will not be subject to the deduction limit
if certain requirements are met. The Compensation Committee has discussed and
considered and will continue to evaluate the potential impact Section 162(m)
has on the Company in making compensation determinations, but has not
established a set policy with respect to future compensation determinations.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of David N. Laux, Bruce M.
Fleisher, Gary R. Edidin and Allen S. Gerrard. None of the executive officers
of the Company have served on the Board of Directors of any other entity that
has had any of such entity's officers serve either on the Company's Board of
Directors or Compensation Committee. However, Ivan J. Hughes, the Chairman of
the Board of the Company, serves on the Compensation Committee of Duro Bag, a
customer of the Company. See "Certain Relationships and Related Transactions"
below.
CONCLUSION
The current Compensation Committee believes that the
newly-instituted executive compensation plan implemented as part of the
January 1999 Financing (as defined in "Certain Relationship and Related
Transactions" below) is consistent with the overall corporate strategy for
continued growth in sales, manufacturing and earnings and stockholder value.
8
<PAGE>
COMPENSATION COMMITTEE
Gary R. Edidin
Bruce M. Fleisher
Allen S. Gerrard
David N. Laux
EXECUTIVE OFFICERS' COMPENSATION
The following table sets forth certain information with respect to
the annual and long term compensation for services in all capacities to the
Company during 1998, the 10 months ended December 31, 1997 and the fiscal
years ended February 28, 1997 ("Fiscal 1997") and February 23, 1996 ("Fiscal
1996"), of those persons who were, at December 31, 1998: (i) the Company's
Chief Executive Officer (including persons who held this position at any time
during 1998); and (ii) other executive officers of the Company receiving
total cash and bonus compensation in excess of $100,000. The Company did not
grant any restricted stock awards or stock appreciation rights or make any
long term incentive plan payouts to the individuals named in the tables below
during the periods indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation Awards
Annual Compensation --------------------
------------------- Securities
Underlying All Other
Name and Principal Position Fiscal Year Salary(1) Bonus(2) Options(#) Compensation
---------------------------- ----------- --------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Dennis N. Caulfield (3) 1998 $169,846 $0 0 $9,923 (3)
Former Chief Executive Officer 1997(A) $266,666 $0 0 $43,323(3)
1997 $320,000 $0 0 $130,220(3)
1996 $320,000 $0 0 $36,174(3)
C. Jill Beresford (4) 1998 $182,506 $0 0 $12,848(4)
Chief Executive Officer 1997(A) $150,000 $0 0 $6,424(4)
Chairman of the Board of 1997 $180,000 $0 0 $26,716(4)
Directors 1996 $180,000 $0 0 $14,612(4)
Alex F. Vaicunas (5) 1998 $124,856 $0 0 $1,746(5)
Former Vice President of Film 1997(A) $104,167 $0 0 $3,150(5)
Sales 1997 $125,000 $0 0 $3,232(5)
1996 $125,000 $0 0 $1,213(5)
Richard Nurse, Ph.D. (6) 1998 $119,115 $0 0 $8,935(6)
Vice President of Technical 1997(A) $64,399 $0 0 $3,410(6)
Development 1997 $77,279 $0 0 $4,401(6)
1996 $71,936 $0 0 $3,656(6)
Paul J. DeCristofaro (7) 1998 $32,332 $0 0 $668(7)
Former Chief Financial 1997(A) $83,410 $0 0 $0
Officer 1997 $100,092 $0 0 $0
</TABLE>
9
<PAGE>
(A) Reflects information for the 10 months ended December 31, 1997.
(1) Amounts shown indicate cash compensation earned and received by
executive officers. No amounts were earned but deferred at the election
of those officers. Executive officers participate in Company group life
and health insurance.
(2) From July 1, 1993 through December 31, 1998, Mr. Caulfield, Ms.
Beresford and Mr. Vaicunas were eligible to participate in an executive
compensation program which provided them with an aggregate bonus equal
to 6% of the Company's pre-tax profit for the first $1,000,000 in
pre-tax profits in any fiscal year, and 12% of pre-tax profits in
excess of $1,000,000 in any fiscal year except that in the discretion
of the Board of Directors the bonus would not exceed $750,000 in the
aggregate in any fiscal year beginning with fiscal year 1995. No
bonuses were paid to Mr. Caulfield, Ms. Beresford or Mr. Vaicunas
during 1998, the 10 month period ended December 31, 1997, in Fiscal
1997 or in Fiscal 1996 under this program. This program is no longer in
effect.
(3) In the periods presented, the Company paid approximately $335 and $990
per month for two personal term life insurance policies for Mr.
Caulfield and $700 per month for a disability policy. The Company also
made automobile and insurance payments of approximately $980 per month
during 1998, the 10 months ended December 31, 1997, in Fiscal 1997 and
in Fiscal 1996, for an automobile for Mr. Caulfield. The Fiscal 1997
amount includes $73,846 paid for unused vacation from prior fiscal
years and $12,308 for unused vacation from Fiscal 1997. This amount
also includes $0, $6,400, $8,000 and $0 the Company contributed to the
individual's 401(k) account during 1998, the 10 months ended December
31, 1997, in Fiscal 1997 and in Fiscal 1996, respectively. Mr.
Caulfield's employment with the Company terminated on July 2, 1998.
(4) In the periods presented, the Company paid approximately $80 per month
for a personal term life insurance policy for Ms. Beresford and
approximately $190 per month for a disability policy. In the periods
presented, the Company also made automobile and insurance payments of
approximately $435 and $790, respectively, per month for an automobile
for Ms. Beresford for 1998 and all other periods presented,
respectively. The amount also includes $10,385 and $7,616 of unused
vacation pay that was paid in Fiscal 1997 and Fiscal 1996,
respectively. This amount also includes $3,655, $3,655, $3,738 and $623
the Company contributed to the individual's 401(k) account during 1998,
the 10 months ended December 31, 1997, in Fiscal 1997 and in Fiscal
1996, respectively. Ms. Beresford began serving as the Chairman of the
Board of Directors and Chief Executive Officer on July 2, 1998, when
Mr. Caulfield's employment with the Company ceased.
(5) In the periods presented, the Company paid approximately $65 per month
for a disability policy for Mr. Vaicunas. This amount excludes
automobile and insurance payments from the Company on behalf of Mr.
Vaicunas of approximately $760 per month for an automobile. Mr.
Vaicunas reimburses the Company for any personal use of the automobile
This amount also includes $0, $2,500, $2,452 and $433 the Company
contributed to the individual's 401(k) account during 1998, the 10
months ended December 31, 1997 in Fiscal 1997 and in Fiscal 1996,
respectively. Mr. Vaicunas served as the Vice President of Film Sales
until December 26, 1998.
(6) In the periods presented, the Company reimbursed Dr. Nurse for mileage
on his car and travel expenses associated with Company business. Dr.
Nurse served as the Vice President of Technical Development throughout
1998.
(7) This amount includes $668 the Company contributed to the individual's
401(k) account during 1998. Mr. DeCristofaro served as the Company's
Chief Financial Officer until March 1998.
STOCK OPTION PLANS
In May 1990, the Company adopted a stock option plan and on October
25, 1993, the Company approved a stock option plan that provides certain
individuals the right to purchase up to 200,000 shares and 750,000 shares,
10
<PAGE>
respectively, of Common Stock. In September 1996, the Company adopted a stock
option plan that entitles certain individuals the right to purchase up to
1,000,000 shares of Common Stock. The Board of Directors determines those
individuals who shall receive options, the time period during which the
options may be exercised, the number of shares of Common Stock that may be
purchased and the exercise price (which cannot be less than the fair market
value of the Common Stock at the date of grant). Options generally vest
ratably over two to five years. The Company may not grant employee incentive
stock options with a fair value in excess of $100,000 that is exercisable
during any one calendar year. Options granted under the stock option plans
generally expire 10 years from the date of grant.
AGGREGATED OPTION EXERCISED IN THE LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised Options In-the-Money
at FY-End Options
Shares Acquired Exercisable/ Exercisable/
on Exercise Value Realized($) Unexercisable Unexercisable
Name ($)(1)
---- --------------- ----------------- ------------------ -------------
<S> <C> <C> <C> <C>
C. Jill Beresford............ 0 0 163,224/0 0 / 0
</TABLE>
(1) In-the-money options are those options for which the fair market value
of the underlying Common Stock is greater than the exercise price of
the option. On December 31, 1998, the fair market value of the
Company's Common Stock underlying the options (as determined by the
last sale price quoted on NASDAQ OTC Bulletin Board) was $0.19. Since
the exercise price of all of the options reflected in this table is
greater than $0.19, the options held by this individual were not
in-the-money and are, therefore, not included in this calculation.
401(K) RETIREMENT SAVINGS PLAN
The Company provides an employee retirement savings plan under
Section 401(k) of the Internal Revenue Code which covers substantially all
employees (the "Plan"). Under the terms of the Plan, employees may contribute
a percentage of their salary, up to a maximum of 15%, which is then invested
in one or more of several mutual funds selected by the employee. The Company
matches 100% of the employee contribution up to a maximum of 2% of their
salary.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Company entered into employment, non-competition, and
confidentiality agreements with each of Mr. Caulfield, Ms. Beresford and Mr.
Vaicunas. Base salaries for Mr. Caulfield, Ms. Beresford and Mr. Vaicunas
were $320,000, $180,000 and $125,000 per annum, respectively, subject to
periodic review by the Board of Directors. Each of these agreements expired
on June 30, 1998. Ms. Beresford's employment agreement was renewed for an
additional one year term. Her agreement provides for severance payments of 60
months base salary in the event her employment is terminated without cause
and prohibits her from competing with the Company for a period of 24 months
following termination of employment with the Company. In the event of a
change of control in the Company, she has the option to terminate her
employment and to receive additional severance compensation subject to the
provisions of their employment agreements. The Company has also entered into
non-competition and confidentiality agreements with certain other employees.
In conjunction with the January 1999 Financing, on January 27, 1999,
the Company entered into an employment agreement with each of Ms. Beresford,
Mr. Koehlinger, Dr. Nurse and Dr. Schulz and a consulting
11
<PAGE>
agreement with Mr. Hughes with terms as listed below. In addition, on March
22, 1999, the Company entered into an employment agreement with Peter W.
Blackett with terms as listed below.
EMPLOYMENT AND CONSULTING AGREEMENT TERMS
<TABLE>
<CAPTION>
EMPLOYEE/CONSULTANT BASE SALARY/FEE TERM WARRANT SHARES
- ------------------- --------------- ---- --------------
<S> <C> <C> <C>
C. Jill Beresford $125,000 7/1/99 - 6/30/00 937,000
James F. Koehlinger $125,000 1/27/99 - 1/27/02 1,719,000
Richard H. Nurse $125,000 1/27/99 - 1/27/02 1,719,000
Hanspeter Schulz $150,000 1/27/99 - 1/27/02 2,188,000
Ivan J. Hughes $ 52,000 1/27/99 - 1/27/02 937,000
Peter W. Blackett $125,000 3/22/99 - 3/21/02 0
</TABLE>
At the end of the terms of employment of Mr. Koehlinger, Dr. Nurse,
Dr. Schulz and Mr. Blackett, each individual's employment will revert to the
status of employment at will and will thereafter be subject to termination by
either party at any time and regardless of cause. Upon expiration of Ms.
Beresford's term, at the Company's option, the Company may extend her
employment term for an additional 18 months provided that Ms. Beresford is
given proper notice.
Under the terms of each agreement described above, each of these
individuals will receive options to purchase Common Stock during the term of
each's respective agreement if the Company equals or exceeds certain
financial performance goals. See "Compensation Committee Board Compensation
Committee Report on Executive Compensation - Bonus Plan" below for a
description of the performance goals. Also, in consideration of Ms.
Beresford, Mr. Koehlinger, Dr. Nurse, Dr. Schulz and Mr. Hughes entering into
his or her agreement, the Company granted each of these individuals a warrant
to purchase a certain number of shares of Common Stock at $0.04 per share.
Such warrants are not exercisable until the Company's stockholders approve an
amendment to the Company's Certificate of Incorporation increasing the number
of shares of authorized Common Stock. Such warrants expire on January 27,
2009. Please refer to the chart above, under the title "Warrant Shares," for
the number of shares of Common Stock each individual's warrant is exercisable
into. Each of these individuals has paid to the Company their respective
amount due under these warrants. Dr. Schulz, Mr. Koehlinger, Dr. Nurse and
Ms. Beresford borrowed funds in the aggregate amount of $262,520 from DGJ
necessary to exercise these warrants. In consideration for the loan from DGJ
to these individuals, these individuals pledged the shares which will be
issued upon exercise of the warrants. Dr. Schulz is also given, as
consideration for his employment, costs related to an apartment and an
automobile for the duration of his employment under his employment agreement.
Mr. Blackett will be given, as consideration for his employment,
reimbursement for reasonable and necessary expenses incurred in connection
with the relocation of his personal residence closer to the Company's office.
Each of the agreements between the Company and the employees and
consultant listed above contains a covenant not to compete provision and a
confidentiality provision.
COMPENSATION OF DIRECTORS
All outside Directors of the Company are paid $1,875 each per
calendar quarter. No other Directors receive any compensation. In June 1992,
David N. Laux, an outside Director, received options to purchase a total of
7,500 shares of Common Stock at a purchase price of $2.50 per share through
June 9, 2002. In March 1996, Ivan J. Hughes, then considered an outside
Director, received options to purchase a total of 7,500 shares of Common
Stock
12
<PAGE>
at a purchase price of $2.38 per share through June 9, 2003. In January 1998,
Mr. Laux received options to purchase a total of 25,000 shares of Common
Stock at a purchase price of $1.25 per share through December 31, 2003.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Ivan J. Hughes, a director of the Company, is the President of the
Plastic's Division, and a director and a member of the Executive and
Compensation Committees of Duro Bag. In January, February, March, April and
May, Duro Bag issued purchase orders for $192,000, $190,335, $209,513,
$255,729 and $0 to the Company to purchase bags for Duro Bag customers. The
Company expects similar orders from Duro Bag to those received in the first
four months of 1999 during the remainder of the year. The Company
manufactures these products on behalf of Duro Bag for its customers. The
Company sells these products on terms as contracted between Duro Bag and its
customers, which terms are equal, if not better, than the Company could
obtain from its other customers for these products.
In November 1990, the Company established an officer's loan
receivable from Dennis N. Caulfield, its then Chairman for $132,197. The note
was amended in April 1998 and the interest rate changed to 6% effective from
November 1990 and is now payable on or before January 1, 2001. Interest on
the loan, along with advances for travel not offset by expense records,
caused the loan balance to equal $586,978 as of December 31, 1997. Mr.
Caulfield did not make any payments against the loan from the period
beginning 1990 through December 31, 1997. Accordingly, the Company reserved
the full amount of this loan on that date. Also, no payments were made in
1998. In addition, the Company paid, on behalf of Mr. Caulfield,
approximately $36,000 of a $200,000 personal income tax levy imposed by the
Massachusetts Department of Revenue on Mr. Caulfield in exchange for an
interest bearing note due on or before June 30, 1998, which has not yet been
repaid. This note was reserved for as of March 31, 1999.
Effective February 26, 1994, Ronald Caulfield exchanged his 49,500
shares of common stock of RC America for 200,000 shares of the Company's
Common Stock, pursuant to the terms of a Stock Exchange Agreement by and
between the Company and Ronald Caulfield (the "Exchange Agreement"). The
Exchange Agreement also provides for the issuance to Ronald Caulfield of up
to an additional 100,000 shares of the Company's Common Stock over a five
year period based on RC America attaining certain levels of pre-tax earnings.
No shares of Common Stock were issued in 1998 or for the 10 month period
ended December 31, 1997. As a result of RC America's earnings for Fiscal Year
1997 and Fiscal Year 1996, 2,649 and 2,550 shares, respectively, of the
100,000 shares of Common Stock were issued to Mr. Ronald Caulfield. The
Exchange Agreement contains demand and piggy-back registration rights for the
shares.
On January 27, 1999, the Company entered into a Securities Purchase
Agreement (the "Securities Purchase Agreement") with DGJ (the "January 1999
Financing"), whereby the Company agreed to issue and sell to DGJ, and DGJ
agreed to purchase from the Company the following:
1. a Promissory Note in the aggregate principal amount of
$3,200,000 (the "Note");
2. a Common Stock Purchase Warrant for the purchase of up to
80,000,000 shares of the Company's Common Stock, at an
exercise price of $0.04 per share, exercisable until January
27, 2009; and
3. 1,629,930 shares of Series C Preferred Stock of the Company
for $100.
The Note matures on February 1, 2004 or earlier if the Company
enters into a merger agreement, completes a public offering in excess of
$10,000,000, defaults on the payment of interest or sells 50% or more of its
shares in the Company to a stockholder not previously an investor in the
Company. The Note has an interest rate of 6% per annum payable monthly in
arrears and is secured by all assets of the Company. The Note is subordinated
to the equipment lease and the factoring agreement, described below.
In conjunction with the January 1999 Financing, DGJ required certain
members of the Company's management, Ms. Beresford, Mr. Koehlinger, Dr.
Nurse, Dr. Schulz and Mr. Hughes, to invest, in the aggregate, $300,000 in
the Company's warrants. The Common Stock represented by the warrants cannot
be issued until approval for an increase in the Company's authorized shares
of Common Stock is obtained at the Annual Meeting. See "Employment Contracts,
Termination of Employment and Change In Control" above for a description of
these
13
<PAGE>
warrants, and a listing of each member of management owning these warrants
and how many shares of Common Stock each is exercisable into.
The shares of the Series C Preferred Stock were purchased by DGJ for
an aggregate purchase price of $100. Some of the rights and restrictions of
Series C Preferred Stock include the following: (i) the holders of Series C
Preferred Stock have no voting rights; provided, however, upon an Event of
Default, as defined in the Securities Purchase Agreement, holders of the
Series C Preferred Stock will be entitled to vote with the holders of the
Common Stock as a single class on each matter submitted to a vote to the
Company's stockholders, with each share of the Series C Preferred Stock
having 30 votes per one vote of each share of Common Stock; (ii) if the Note
has been retired in its entirety, the Company, at its option, may elect to
redeem all or a portion of the outstanding Series C Preferred Stock, at an
aggregated redemption price of $100 plus accrued interest at a rate of 6% per
annum commencing on January 27, 1999; and (iii) the shares of the Series C
Preferred Stock are not convertible into shares of Common Stock.
In conjunction with the January 1999 Financing, the Company entered
into agreements with most of its unsecured creditors that provided a
discounted payment in February 1999 or a non-interest bearing agreement to
pay the entire balance over a three-year period. The unsecured creditor
agreements, together with the financing referred to above, allowed the
Company to restructure trade notes payable of $584,000 and accounts payable
of $6,597,000, or a total of $7,181,000, compared to $1,874,000 of current
accounts payable and $1,426,000 of long-term debt, or a total of $3,300,000
after refinancing.
The gain on the restructuring of trade notes payable and accounts
payable was accounted for as an extraordinary item in the Company's
Consolidated Statement of Operations for the three month period ended March
31, 1999. The creditors who selected the long-term debt agreement are being
paid their balances due over a 36-month period in 36 equal installments with
no interest. The Company was involved in a patent infringement suit and
reached a settlement on January 27, 1999 to pay the balance due of $200,000
as part of the restructuring of the Company's debt described above.
A factoring agreement with a company related to DGJ now provides the
Company with $2,000,000 of financing secured by the Company's accounts
receivable and $1,000,000 secured by its inventory. The term for both the
accounts receivable and inventory financing is six months, subject to
automatic renewal unless the Company gives at least 90 days written notice of
termination. Written notice of termination regarding this factoring agreement
was given by the Company on March 30, 1999. The financing bears interest at
the prime rate plus 5% on the outstanding balance on the inventory loan and
the prime rate plus 2% on all accounts receivable submitted for financing.
The Company may borrow up to 85% of its qualified accounts receivable and 33%
of its qualified inventory.
The Company's equipment, capital and operating leases are now funded
by a new equipment lease with DGJ. Current obligations of $3,800,000 and
accrued lease obligations of $1,643,000 were retired and $1,679,000 of
equipment previously treated as operating leases was added to the property
and equipment accounts. The new lease carries no debt reduction obligation
and is treated as long-term debt. The Company's combined monthly payments
under the retired leases were reduced from approximately $305,000 per month
to $102,000 per month under the new lease agreement with DGJ. The lease
obligation is a ten-year lease with monthly payments of $102,000 representing
interest only. The total principal amount of the lease is $6,800,000 and is
due at the end of the lease term. The lease has been recorded as a capital
lease during the quarter ended March 31, 1999 and will be treated as such in
future periods. The lease requires the Company to meet certain financial
covenants, including, but not limited to, earnings targets and debt-to-equity
ratios.
In February 1999, the Company borrowed approximately $219,000 from
DGJ to purchase additional pieces of equipment. This loan bears interest at a
rate of 18% per annum and matures in September 1999.
Four of the Company's directors, Gary R. Edidin, Allen S. Gerrard,
Theodore L. Koenig and Bruce M. Fleisher, are either affiliated with DGJ or
have been appointed by DGJ. The January 1999 Financing and all other
transactions between the Company and DGJ will be deemed to be related party
transactions due to the relationship of these directors with DGJ. Also, Mr.
Koenig is a partner with the Chicago-based law firm of Holleb & Coff, which
provides legal services to the Company.
14
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS AND FIVE-PERCENT BENEFICIAL OWNERS
The following table sets forth the beneficial ownership of Common
Stock or Series A Convertible Preferred Stock as of June 3, 1999 by: (i)
directors of the Company; (ii) executive officers of the Company; (iii)
directors and executive officers of the Company as a group; and (iv) persons
who beneficially owned more than 5% of the Common Stock and Series A
Preferred Stock, in the aggregate, or by persons who did not beneficially own
more than 5% of the Common Stock and Series A Preferred Stock but who
constituted members of a "group" within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended, beneficially owning more
than 5% of the Common Stock and Series A Preferred Stock. Some of the persons
listed below are a a member of such a group by virtue of being a party to a
lockup agreement (the "Lockup Agreement") by and among Ms. Beresford, Mr.
Hughes and DGJ, dated January 27, 1999, pursuant to which the parties agreed
to vote their shares of stock as directed by DGJ on any matters presented to
the Company's stockholders with respect to the Securities Purchase Agreement.
Each of the persons listed below disclaims beneficial ownership in any shares
beneficially owned by the others. The number of shares beneficially owned of
Common Stock and Series A Convertible Preferred Stock listed below is based
on information contained in a Schedule 13D filed with the Commission on
behalf of the named persons and on information provided to the Company by the
named persons. The percentage of shares of the class each person is listed as
beneficially owning is based upon 21,500,521 and 188,458 shares of Common
Stock and Series A Convertible Preferred Stock outstanding, respectively, as
of June 3, 1999. Except as otherwise indicated, the stockholders listed in
the table have sole voting and investment powers with respect to the shares
indicated.
15
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENTAGE OF COMMON
NAME AND ADDRESS COMMON STOCK STOCK AND SERIES A
OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) PREFERRED STOCK (2)(3)
- ------------------- ---------------------- ----------------------
<S> <C> <C>
Hanspeter Schulz, Ph.D. (4)(5) 2,188,000 9.16%
Richard H. Nurse, Ph.D.(4)(5) 1,725,000 7.37%
C. Jill Beresford (4)(5)(6)(7) 2,561,249 11.32%
James F. Koehlinger (4)(5) 1,719,000 7.34%
Peter W. Blackett (4) 0 0%
Ivan J. Hughes (5)(7)(8)
Davis and Oak Streets
Ludlow, Kentucky 41016-0250 1,027,000 4.54%
David N. Laux (9)
1700 N. Moore St, Suite 1703
Arlington, Virginia 22209 52,500 *
Gary R. Edidin (10)
Edidin & Associates
600 Central Avenue
Suite 262
Highland Park, IL 60035 80,000,000 78.67%
Allen S. Gerrard (11)
Deere Park Capital Management
40 Skokie Boulevard
Suite 110
Northbrook, IL 60062 80,000,000 78.67%
Theodore L. Koenig (12)
55 East Monroe Street, Suite 4100
Chicago, Illinois 60603 0 0%
Bruce M. Fleisher
2350 North Lincoln Park West
Chicago, Illinois 60614 0 0%
DGJ (13)
600 Central Avenue, Suite 262
Highland Park, Illinois 60036 80,000,000 78.67%
All Officers and Directors
as a Group (11 persons)(6)(7)(8)(9) 89,220,249 81.71%
</TABLE>
* Less than one percent.
(1) None of these Beneficial Owners owns any Series A Preferred Stock.
No other stockholder owns at least 5% of the Common Stock and Series A
Preferred Stock, combined.
(2) Pursuant to the rules of the Commission, shares of Common Stock
which an individual or group has a right to acquire within 60 days pursuant
to the exercise of options or warrants are deemed to be outstanding for the
purpose of computing the percentage ownership of such individual or group,
but are not deemed to be outstanding for the purpose of computing the
percentage ownership of any other person shown in the table. This table
reflects the ownership of all shares of Common Stock and the Series A
Convertible Preferred Stock voting as a single class, since each is entitled
to one vote per share.
(3) Except as otherwise noted, does not give effect to the issuance of:
(i) up to 335,153 shares of Common Stock issuable upon conversion of Series A
and Series B Convertible Preferred Stock; (ii) up to 180,372 shares issuable
upon exercise of warrants issued to an individual and principals of the
placement agent in the Company's private placements to overseas investors;
(iii) up to 1,950,000 shares issuable upon exercise of options granted or
available for grant under the Company's 1990, 1993 and 1996 Stock Option
Plans; (iv) up to 200,000 shares of Common Stock issuable upon the exercise
of warrants issued to financial consultants of the Company, subject to
adjustment; and (v) up to 5,000,000 and 900,000 shares of Common
16
<PAGE>
Stock issuable upon the exercise of warrants expiring January 27, 2009 and
January 27, 2003, respectively, issued to consultants of the Company, subject
to adjustments.
(4) These individuals may be reached at the Company's headquarters
located at 455 Somerset Avenue, North Dighton, Massachusetts 02764.
(5) These individuals acquired warrants to purchase a certain
number of shares Common Stock at $0.04 per share. These warrants expire
on January 27, 2009 and are described above in "Board of Directors and
Executive Officers - Employment Contracts, Termination of Employment
and Change in Control Arrangements." These warrants are not exercisable
until the Company's stockholders approve an amendment to the Company's
Certificate of Incorporation increasing the number of authorized shares
of Common Stock. The following table lists the name of the individual
and the corresponding number shares of Common Stock his or her warrant
is convertible into (the "Warrant Shares"):
<TABLE>
<CAPTION>
Name Warrant Shares
---- --------------
<S> <C>
Hanspeter Schulz, Ph.D. 2,188,000
Richard H. Nurse, Ph.D. 1,719,000
C. Jill Beresford 937,000
James F. Koehlinger 1,719,000
Ivan J. Hughes 937,000
--------
7,500,000
</TABLE>
(6) Includes: (i) 1,314,130 shares of Common Stock; (ii) 146,695 shares
of Series B Convertible Preferred Stock; (iii) 163,224 shares of Common Stock
issuable upon the exercise of an option at a price of $2.50 per share through
June 30, 2003; and (iv) 937,000 shares of Common Stock issuable upon the
exercise of a warrant (see footnote 5).
(7) Under the terms of the Lockup Agreement, this individual agreed to
vote as directed by DGJ with respect to any matters presented to the
Company's stockholders with respect to the Securities Purchase Agreement and
agreed not to sell shares of Common Stock without the prior written consent
of DGJ.
(8) Includes: (i) 82,500 shares of Common Stock; (ii) 7,500 shares of
Common Stock issuable upon exercise of an option at a purchase price of $2.38
per share through March 24, 2006; and (iii) 937,000 shares of Common Stock
issuable upon the exercise of a warrant (see footnote 5).
(9) Includes: (i) 20,000 shares of Common Stock; (ii) 7,500 shares of
Common Stock issuable upon exercise of an option at a purchase price of $2.50
per share through June 9, 2002; and (iii) 25,000 shares of Common Stock
issuable upon exercise of an option at a purchase price of $1.25 per share
through December 31, 2003.
(10) A member of DGJ and also a member of the Board of Managers,
Chairman, President and Chief Executive Officer of DGJ. Mr. Edidin holds no
shares of the Company directly, but may be deemed to beneficially own
80,000,000 shares of Common Stock beneficially owned by DGJ by virtue of his
positions with DGJ. See footnote (13) for a description of DGJ's beneficial
ownership of 80,000,000 shares of Common Stock. Does not include 1,629,930
shares of Series C Preferred Stock of the Company owned by DGJ, which do not
have voting rights at this Annual Meeting. Mr. Edidin disclaims beneficial
ownership of all such shares.
(11) A Director of Deere Park Capital Management, which is a member of
DGJ. He is also a Member of the Board of Managers and Treasurer of DGJ. Mr.
Gerrard holds no shares of the Company directly, but may be deemed to
beneficially own 80,000,000 shares of Common Stock beneficially owned by DGJ
by virtue of his positions with DGJ. See footnote (13) for a description of
DGJ's beneficial ownership of 80,000,000 shares of Common Stock. Does not
include 1,629,930 shares of Series C Preferred Stock of the Company owned by
DGJ, which do not have voting rights at this Annual Meeting. Mr. Gerrard
disclaims beneficial ownership of all such shares.
17
<PAGE>
(12) A member of Monroe Investments, Inc., which is a member of Hilco
BPI, L.L.C., which is a member of DGJ. He disclaims beneficial ownership of
stock of the Company except to the extent of his membership interest in DGJ
through such entities.
(13) Includes 30,937,500 shares of Common Stock currently issuable upon
the exercise of a warrant at a price of $0.04 per share through January 27,
2009 and 49,062,500 shares of Common Stock issuable upon the exercise of a
warrant at a price of $0.04 per share through January 27, 2009 if the
stockholders approve at the Annual Meeting or a special meeting of
stockholders the increase in the authorized number of shares of Common Stock,
as described in Proposal No. 2. However, DGJ has indicated that it has no
current intention of exercising this warrant to purchase Common Stock. Does
not include 1,629,930 shares of Series C Preferred Stock of the Company,
which do not have voting rights at this Annual Meeting. See "Certain
Relationships and Related Transactions" above for a description of the rights
and privileges of the Series C Preferred Stock.
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return
(assuming reinvestment of dividends) from investing $100 on December 31, 1993,
and plotted at December 31, 1994, 1995, 1996, 1997 and 1998 in each of: (i) the
Company's Common Stock; (ii) The National Association of Securities Dealers
Automated Quotation System ("NASDAQ") National Market System Index of Companies;
and (iii) Media General Industry Group representing Packaging and Container
Companies, which consists of other companies in the packaging and containers
manufacturing industry.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN AMONG BPI PACKAGING TECHNOLOGIES,
INC., NASDAQ MARKET INDEX AND PEER GROUP INDEX
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
BPI Packaging Technologies, Inc. $100 $62.26 $32.08 $28.77 $16.98 $10.85
NASDAQ Market Index $100 $104.99 $136.18 $169.23 $207.00 $291.96
Peer Companies Group $100 $101.48 $100.15 $108.45 $100.92 $87.00
</TABLE>
GRAPHIC OMITTED
COMPLIANCE WITH SECTION 16(A)
Section 16(a) of the Exchange Act requires the Company's directors
and officers, and persons who own more than 10% of a registered class of the
Company's equity securities, to file with the Commission reports of ownership
and changes in ownership of Common Stock and other equity securities of the
Company. Officer, directors and greater-than-10% stockholders are required by
the Commission regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on review of the copies of such reports furnished to
the Company or written representations that no other reports were required,
the Company believes that, during 1998, its officers, directors and
greater-than-10% beneficial owners were in compliance with all filing
requirements.
18
<PAGE>
PROPOSAL NO. 2
INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
The Board of Directors recommends an amendment to the Certificate of
Incorporation, as amended, to increase the authorized number of shares of
Common Stock from 60,000,000 shares to 150,000,000 shares. Four of the
Company's directors are either affiliated with DGJ or have been designated by
DGJ, which due to DGJ's affiliation with the Company, described in Proposal
No. 1, "Certain Relationships and Related Transactions," may have a conflict
of interest in recommending stockholder approval of this proposal, the
proposal to elect Class I Directors and the proposal to ratify the
appointment of the Company's independent accountants. See "Security Ownership
of Certain Beneficial Owners Management" for a description of the securities
held by the directors. See below for a description of DGJ's interest in
increasing the authorized number of shares of Common Stock.
On January 27, 1999, the Company undertook a refinancing of its
business which allowed the Company to avoid seeking protection from its
creditors through a bankruptcy filing, pay-off and terminate equipment leases
that were in default and provide available funds to continue operations and
lease or acquire new equipment necessary for its future success.
DGJ was created to invest in and finance the Company. There was no
affiliation between DGJ and the Company prior to the January 1999 Financing.
Before commencing the negotiations for the transactions with DGJ, the Company
attempted to raise funds from numerous sources. Only after the consummation
of other possible alternatives could not be achieved and the Company's
creditors had obtained judgments against the Company, did the Company agree
to the terms of the January 1999 Financing. The Company's directors at the
time felt that the terms of the January 1999 Financing were a better
alternative for the stockholders than having the Company seek bankruptcy
protection, in which case the stockholders could have lost their investment
in the Company.
The Company, with the aid of consultants and financial advisors,
sought to restructure its financial situation in four ways: (i) refinancing
with commercial or asset-based lenders; (ii) infusing third-party equity;
(iii) renegotiating with the then equipment lessors that the Company was
already in default with; and (iv) renegotiating with its then unsecured
vendors. In attempts to refinance with a lender, the Company was able to
secure a commitment for a $10,000,000 credit facility but this transaction
required the Company to find a $4,500,000 subordinated, working capital
facility. However, the Company was unable to locate this junior financing.
Other available deals with lenders were similar in that they required the
Company to have another lender provide funds for working capital on a
subordinated basis. When the Company, and its advisors, could not obtain
funds from a lender, they tried to locate strategic investors, however, due
to the Company's strained financial situation, an equity raise could not be
completed. Although, the Company was successful in negotiating with its then
equipment lessors for short-term extensions of its leases, it could not
rework the lease terms in a manner which would provide the Company long-term
viability.
By December 1998, the Company's creditors, including its equipment
lessors, had obtained judgments against the Company and had begun the
execution process. The Company began drafting Chapter 11 bankruptcy
documentation. As the secured creditors had anti-bankruptcy clauses in their
contracts and leases, they could have converted the bankruptcy into a Chapter
7 proceeding, meaning that they had the right to close the business and
auction off the assets. The secured creditors began proceedings to secure and
liquidate the Company's plant equipment.
A financial broker, on the Company's behalf, sought out lenders to
refinance all of the plant equipment leases and retire the obligations due to
the secured creditors. This financial broker introduced the Company to DGJ.
DGJ evaluated the Company and devised both short-term and long-term operating
and financial proposals that could allow the Company to avoid bankruptcy,
obtain additional funds for working capital and continue to operate and
employ its entire work force. At the eleventh hour, an agreement was reached
between DGJ and the Company. The then directors of the Company believed that
if the Company had rejected the terms of the January 1999 Financing and gone
through the bankruptcy process, the stockholders would have lost their entire
investment in the Company. At the time of the January 1999 Financing, the
Company and DGJ were not affiliates.
19
<PAGE>
In connection with the January 1999 Financing, DGJ received the
right to appoint four of the directors of the Company, which constitutes a
majority of the Board. As a result, the Board may have a conflict of interest
in recommending stockholder approval of this proposal to increase the number
of authorized shares of Common Stock. However, none of these four directors
owns any stock, warrants or options outright. See "Security Ownership of
Certain Beneficial Owners and Management" in Proposal No. 1 for a description
of shares beneficially owned by each director.
As part of the January 1999 Financing, DGJ purchased from the
Company, for $100, a warrant which grants DGJ the right to purchase up to
80,000,000 shares of Common Stock at an exercise price of $0.04 per share,
for an aggregate purchase price of $3,200,000. On January 27, 1999, the day
of the January 1999 Financing, the closing price of the Common Stock was
$0.28 per share. If DGJ had exercised its warrant to purchase Common Stock on
that date, it would have received, in effect, a discount of $0.24 per share.
If DGJ had exercised its warrant to purchase 30,937,500 shares of Common
Stock on January 27, 1999, the number of shares reserved for DGJ's warrants
exercise, would have resulted in an aggregate discount to market price of
$7,425,000, assuming full exercise. If DGJ was able to and did exercise its
warrant to purchase 80,000,000 shares of Common Stock on this date, this
would have resulted in an aggregate discount to market price of $19,200,000,
assuming full exercise. The Company used the proceeds of the sale of the
warrant to purchase 80,000,000 shares of Common Stock as working capital. It
will use any future proceeds from the exercise of this warrant as working
capital or to finance additional equipment acquisitions.
In the Securities Purchase Agreement, the Company agreed to hold the
Annual Meeting to approve an amendment to the Company's Certificate of
Incorporation increasing the authorized number of shares of Common Stock no
later than May 1, 1999. Due to the Company's compliance requirements under
federal securities laws, the Annual Meeting was delayed until July 1999. DGJ
has agreed to the timing of this meeting.
To reserve the appropriate number of shares for issuance upon the
exercise of DGJ's warrant, the number of authorized shares of Common Stock
must be increased by approximately 49,000,000 shares, as 30,937,500 shares of
Common Stock have already been reserved for issuance upon the exercise of
DGJ's warrant. As described below, DGJ cannot exercise its warrant for these
approximately 49,000,000 shares of Common Stock unless and until the number
of authorized shares of Common Stock is increased by that amount. However,
because DGJ has appointed a majority of the Board of Directors and because it
can exercise its warrant to obtain voting control, the January 1999 Financing
resulted in DGJ having control of the Company's material decisions.
Also, as part of the January 1999 Financing, the Company issued
warrants to purchase 5,900,000 shares of Common Stock for financial advisory
services, of which 900,000 shares of Common Stock must still be reserved for.
None of these entities has any affiliation with DGJ.
The following table is a list of the financial consultants that
received warrants to purchase a certain number of shares of Common Stock (the
"Warrant Shares") as compensation for services provided in the January 1999
Financing:
<TABLE>
<CAPTION>
Financial Consultant Warrant Shares
-------------------- --------------
<S> <C>
The Brantrock Group * 5,000,000
Global Financial Services, Inc. 500,000
Investor Awareness, Inc. 400,000
---------
5,900,000
</TABLE>
*These shares are currently exercisable and, thus, are not included in
the uses for the increase in authorized number of shares of Common
Stock, as described in the table below.
Assuming the stockholders approve the increase of the authorized
number of shares of Common Stock and if DGJ were to exercise the warrant in
full, DGJ would own in excess of 50% of the issued and outstanding shares of
20
<PAGE>
Common Stock on a fully diluted basis (assuming conversion into Common Stock
of all outstanding shares of Series A and Series B Preferred Stock and
exercise of all issued and outstanding warrants and options). See "Certain
Relationships and Related Transactions" in Proposal No. 1 for a description
of the January 1999 Financing.
In addition, as described in Proposal No. 1, to incentivize new
management of the Company, management received warrants to purchase 7,500,000
shares of Common Stock as well as options to purchase up to an additional
14,750,000 shares of Common Stock if the Company succeeds in reaching its
performance objectives over the next three years. None of these individuals
has any affiliation with DGJ. To fulfill the terms of these agreements, it is
necessary to increase the number of authorized shares of Common Stock. Thus,
management of the Company has an interest in amending the Certificate of
Incorporation.
The following table lists the individuals that received the above
described warrants and the opportunity to be granted options.
<TABLE>
<CAPTION>
Management Warrant Shares Performance Options
---------- -------------- -------------------
<S> <C> <C>
Hanspeter Schulz, Ph.D. 2,188,000 3,359,000
Richard H. Nurse, Ph.D. 1,719,000 2,632,000
C. Jill Beresford 937,000 1,560,000
James F. Koehlinger 1,719,000 2,632,000
Ivan J. Hughes 937,000 1,435,000
Peter W. Blackett -0- 2,632,000
Tracy L. McGrath -0- 500,000
------------ ------------
7,500,000 14,750,000
============ ============
</TABLE>
As a condition to the January 1999 Financing, the prior Board of
Directors of the Company, which included Messrs. Hughes and Laux, required
the Company to use its reasonable efforts to register a rights offering with
the Securities and Exchange Commission in order to offer to stockholders of
the Company, other than DGJ, the proportionate right to purchase up to
15,000,000 shares of Common Stock on a certain record date. The Board felt it
was important to provide to these stockholders the opportunity to make an
additional investment in the Company at the same price per share as DGJ to
express appreciation to the stockholders who maintained their support of the
Company as it teetered on the brink of bankruptcy.
Proceeds from the rights offering will be used as general working
capital. DGJ agreed that it would cooperate with the Company in such rights
offering. In order to have the stockholders' rights offering, it is necessary
for the number of authorized shares of Common Stock to be increased.
The following table summarizes the uses for the increase in the
number of authorized shares of Common Stock:
<TABLE>
<S> <C>
Reserve for exercise of DGJ Warrant 49,062,500
Reserve for exercise of Global Financial Series, Inc. Warrant 500,000
Reserve for exercise of the Investor Awareness, Inc. Warrant 400,000
Reserve for exercise of warrants granted to employees and consultant 7,500,000
Reserve for granting and exercise of options if performance goals are
met by the Company 14,750,000
Reserve for shares available to stockholders in rights offering 15,000,000
Unallocated shares 2,787,500
------------
Total increase in authorized number of shares of Common Stock 90,000,000
============
</TABLE>
Any proceeds that are received by the Company upon exercise of
warrants or options or the sale of new securities will be used as general
working capital. Currently, the Company has no present plans, commitments or
understandings with regard to the issuance of any of the unallocated shares.
21
<PAGE>
DGJ's intention is not to exercise its warrant in the near future
nor does it have an obligation to exercise its warrant at any time.
Currently, DGJ can only exercise its warrant for 30,937,500 shares of Common
Stock as this is the number of remaining authorized but unissued shares of
Common Stock, which have been reserved for DGJ's exercise. For DGJ to
exercise its warrant for unreserved shares of Common Stock, the total number
of authorized shares of Common Stock must be increased. Hence, DGJ and the
directors appointed by it have an interest in having this proposal being
approved. However, if the increase in the number of authorized shares of
Common Stock is not approved at the July 1999 Annual Meeting, DGJ will
exercise its warrants to the extent necessary and, at a special meeting of
stockholders, vote those shares in favor of the increase in the authorized
number of shares of Common Stock.
Management of the Company believes that the increase in the
authorized number of shares is necessary to fulfill the agreements entered
into in connection with the January 1999 Financing. Should DGJ be required to
exercise its warrants to vote at a special meeting of stockholders, DGJ would
own up to 30,937,500 shares of issued and outstanding Common Stock. This
large number of issued and outstanding shares would have a dilutive effect on
the value of the Company's existing issued and outstanding shares of Common
Stock and would probably decrease their value per share.
The holders of any of the additional shares of Common Stock issued
in the future would have the same rights and privileges as the holders of the
shares of Common Stock currently authorized and outstanding. These rights do
not include preemptive rights with respect to the future issuance of any
additional shares. The issuance of additional shares of Common Stock will
have the effect of diluting the Company's existing stockholders. Issuance of
additional shares of Common Stock could be used to make a change of control
of the Company more difficult or costly by diluting the ownership of persons
seeking to obtain control of the Company. The Company is unaware of any
effort to accumulate the Company's shares or to obtain control of the Company
by means of a merger, tender offer, solicitation in opposition to management
or otherwise. The Board of Directors has no current intention to use the
additional shares to impede a takeover attempt.
The amendment to the Certificate of Incorporation to increase the
number of authorized shares of Common Stock requires an affirmative vote of a
majority of the shares present in person or by proxy and entitled to vote at
the Annual Meeting. For this proposal, an abstention will have the same
effect as a vote against the proposal. Broker non-votes will not be voted for
or against the proposals and will not be counted as entitled to vote.
Four of the Company's directors are either affiliated with DGJ or
have been designated by DGJ, which due to DGJ's affiliation with the Company,
described in Proposal No. 1, "Certain Relationships and Related
Transactions," may have a conflict of interest in recommending stockholder
approval of this proposal, the proposal to elect Class I Directors and the
proposal to ratify the appointment of the Company's independent accountants.
See "Security Ownership of Certain Beneficial Owners Management" for a
description of the securities held by the directors. See above for a
description of DGJ's interest in increasing the authorized number of shares
of Common Stock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
AMENDMENT TO THE CERTIFICATE OF INCORPORATION INCREASING THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK FROM 60,000,000 SHARES TO 150,000,000
SHARES.
22
<PAGE>
PROPOSAL NO. 3
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has appointed the firm of
Livingston & Haynes, P.C. as the Company's independent accountants for the
fiscal year ending December 31, 1999, subject to the ratification by the
Company's stockholders. Representatives of Livingston & Haynes, P.C. are
expected to be present at the Annual Meeting and will have an opportunity to
make a statement, if they desire to do so, and to respond to appropriate
questions from those attending the meeting. Livingston & Haynes, P.C. has
served as auditors for the Company since July 1998.
On July 6, 1998, the Company reported on Form 8-K the resignation of
PricewaterhouseCoopers LLP as the Company's independent accountants. In
connection with the audits of the Company's financial statements for the 10
month period ended December 31, 1997 and the years ended February 28, 1997
and February 23, 1996, and during the subsequent interim period through July
6, 1998, there were no disagreements between the Company and
PricewaterhouseCoopers LLP relative to accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which, if not
resolved to the satisfaction of PricewaterhouseCoopers LLP, would have caused
PricewaterhouseCoopers LLP to make reference to the matter in its reports on
the financial statements for such periods.
On July 22, 1998, the Company reported on Form 8-K the engagement of
Livingston & Haynes, P.C. as the Company's independent accountants. The
decision to engage Livingston & Haynes, P.C. was approved by the Company's
Audit Committee.
The ratification of the independent accountants requires an
affirmative vote of a majority of the shares present in person or by proxy
and entitled to vote at the Annual Meeting. For this proposal, an abstention
will have the same effect as a vote against the proposal. Broker non-votes
will not be voted for or against the proposals and will not be counted as
entitled to vote. If the resolution is rejected, or if Livingston & Haynes,
P.C. declines to act or becomes incapable of action, or its employment is
discontinued, the Board of Directors will appoint other independent
accountants whose continued employment after the following Annual Meeting of
Stockholders will be subject to ratification by stockholders.
Four of the Company's directors are either affiliated with DGJ or
have been designated by DGJ, which due to DGJ's affiliation with the Company,
described in Proposal No. 1, "Certain Relationships and Related
Transactions," may have a conflict of interest in recommending stockholder
approval of this proposal, the proposal to elect Class I Directors and the
proposal to increase the number of authorized shares of Common Stock. See
"Security Ownership of Certain Beneficial Owners Management" for a
description of the securities held by the directors. See Proposal No. 2 for a
description of DGJ's interest in increasing the authorized number of shares
of Common Stock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
RATIFICATION OF LIVINGSTON & HAYNES, P.C. AS INDEPENDENT ACCOUNTANTS FOR THE
COMPANY FOR THE YEAR ENDING DECEMBER 31, 1999.
23
<PAGE>
PROPOSALS OF STOCKHOLDERS
Any proposal of a stockholder intended to be presented at the Annual
Meeting of Stockholders to be held in 2000 must be in the form required by
the Company's By-laws and received at the Company's principal executive
offices no later than February 25, 2000, if the proposal is to be considered
for inclusion in the Company's proxy statement relating to such meeting. It
is suggested that proponents submit their proposals by certified mail, return
receipt requested, addressed to the Chief Financial Officer of the Company.
INCORPORATION BY REFERENCE
The following items are incorporated by reference from our Amendment
No. 3 to the Annual Report on Form 10-K/A filed with the commission on June
16, 1999 (Commission file number: 1-10648):
- Financial Statements for the years ended December 31, 1998 and
1997;
- Management's Discussion and Analysis of Financial Condition and
Results of Operations;
- Changes to and Disagreements with Accountants on Accounting and
Financial Disclosure; and
- Quantitative and Qualitative Disclosures about Market Risk.
The following item is incorporated by reference from our Amendment
No. 1 to the Quarterly Report on Form 10-Q/A, filed with the Commission on
May 17, 1999, as amended on June 16, 1999:
- Comparative Financial Statements for the three month period ending
March 31, 1999;
- Management Discussion and Analysis of Financial Condition and
Results of Operations, and
- Quantitative and Qualitative Disclosures about Market Risk.
OTHER MATTERS
The management of the Company does not know of any other matters
which may come before this Annual Meeting. However, if any other matters are
properly presented to the meeting, it is the intention of the persons named
in the accompanying proxy to vote, or otherwise act, in accordance with their
judgment on such matters.
By Order of the Board of Directors
Hanspeter Schulz
President
North Dighton, Massachusetts
June ___, 1999
24
<PAGE>
PROXY
BPI PACKAGING TECHNOLOGIES, INC.
455 SOMERSET AVENUE
NORTH DIGHTON, MA 02764
510-623-9001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
JULY 22, 1999
The undersigned hereby appoints Hanspeter Schulz and James F.
Koehlinger and each of them, as proxies of the undersigned, with full power
of substitution, to vote all of the shares of stock of BPI Packaging
Technologies, Inc. (the "Company") which the undersigned may be entitled to
vote at the Annual Meeting of Stockholders of the Company to be held at The
Courtyard by Marriott, 35 Foxborough Boulevard, Foxborough, Massachusetts on
July 22, 1999, at 10:00 a.m., eastern time, and at any and all continuations
and adjournments thereof, with all powers that the undersigned would possess
if personally present, upon and in respect of the following matters and in
accordance with the following instructions, with discretionary authority as
to any and all other matters that may properly come before the meeting.
(Continued, and to be signed on the other side)
<PAGE>
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE
NOMINEES LISTED IN PROPOSAL 1, AND FOR PROPOSALS 2 AND 3, AS MORE
SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE
INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTORS
LISTED BELOW AND A VOTE FOR PROPOSALS 2 AND 3. THE BOARD MAY HAVE A CONFLICT
OF INTEREST IN RECOMMENDING THE VOTE FOR THESE PROPOSALS (SEE PROXY
STATEMENT).
1. PROPOSAL 1: To elect two Class I directors to hold office until the
Annual Meeting of Stockholders to be held in the year 2002.
FOR WITHHOLD
FOR ALL
/ / / /
NOMINEES: Ivan J. Hughes and Allen S. Gerrard
(INSTRUCTION: To withhold authority to vote for any nominee, write the
nominee's name in the space provided below.)
2. PROPOSAL 2: To authorize an amendment to our Certificate of
Incorporation to increase the number of authorized shares of Common
Stock from 60,000,000 shares to 150,000,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
3. PROPOSAL 3: To ratify the selection of Livingston & Haynes, P.C. as
independent accountants of the Company for the year ending December 31,
1999.
FOR AGAINST ABSTAIN
/ / / / / /
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I PLAN TO ATTEND THE MEETING
Please sign exactly as your name appears
hereon. If the stock is registered in the
YES NO names of two or more persons, each should
sign. Executors, administrators, trustees,
guardians or attorneys-in-fact should add
their titles. If signer is a corporation,
please give full corporate name and have a
duly authorized officer sign, stating title.
If signer is a partnership, please sign in
partnership name by authorized person.
Date: _______________________
_____________________________
Signature
_____________________________
Signature (if held jointly)
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Please vote, date and promptly return this proxy in the enclosed envelope
which is postage prepaid if mailed in the United States.
