<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1 TO FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998, OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________
TO ___________________.
COMMISSION FILE NUMBER: 0-19561
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BPI PACKAGING TECHNOLOGIES, INC.
--------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-2997486
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
455 SOMERSET AVENUE, NORTH DIGHTON, MASSACHUSETTS 02764
-------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(508) 824-8636
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF CLASS
--------------
Common Stock, $.01 par value
Series A Convertible Preferred Stock, $.01 par value
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 60 days. Yes X No___.
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. X
The aggregate market value of the Registrant's voting stock issued
and outstanding as of April 9, 1999 was $3,224,343 for the Common Stock and
$193,358 for the Series A Convertible Preferred Stock.
As of April 9, 1999, 21,495,621 shares of Common Stock, $.01 par
value per share, were outstanding and 193,358 shares of Series A Convertible
Preferred Stock, $.01 par value per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The 1998 Annual Report to Stockholders - Items 1-9 and 14 are
incorporated by reference into those items of this Form 10-K/A.
This Form 10-K/A is being filed to amend Items 10-13 and Footnote
No. 2 to the Financial Statements attached to the Form 10-K filed on March
31, 1999.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
GENERAL INFORMATION
The Company's Certificate of Incorporation and By-laws, each as
amended, provide that the members of the Board will be classified as nearly
as possible into three classes, each with, as nearly as possible, one-third
of the members of the Board. A classified board is designed to assure
continuity and stability in the Board's leadership and policies. Ivan J.
Hughes and Allen S. Gerrard serve as the Class I directors until the Annual
Meeting of Stockholders to be held in 1999. David N. Laux and Hanspeter
Schulz serve as the Class II directors until the Annual Meeting of
Stockholders to be held in the year 2001. Gary R. Edidin serves as the Class
III director 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 will hold office until the next election of
the class for which directors will 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, subject to their employment contracts.
Pursuant to the Securities Purchase Agreement (as defined in Item 13
below) DGJ L.L.C. ("DGJ") has informed the Company that Bruce M. Fleisher and
Theodore L. Koenig will be the Designated Directors, each of whom has
consented to act as a director of the Company. The Designated Directors will
serve as the Class III directors until the Annual Meeting of Stockholders to
be held in the year 2000. The Designated Directors, along with Messrs. Edidin
and Gerrard, will constitute a majority of the Board after they are appointed.
DESIGNATED DIRECTORS
The Designated Directors will assume office on or about April 30,
1999 and then the Board of the Company will consist of seven members. This
step will be accomplished by written consent of the Board.
BRUCE M. FLEISHER. Mr. Fleisher will serve as a Director of the
Company beginning on or about April 30, 1999. Since 1998, Mr. Fleisher has
been involved in private investing. From October 1997 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 1996 to 1997, he was the President and Division
Manager of Darter, Inc., another division of Unisource Worldwide, Inc. Since
1996, he has been 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.
Mr. Fleisher does not beneficially own any equity securities, or
rights to acquire any equity securities of the Company, and has not been
involved in any transactions with the Company or any of its directors,
executive officers or affiliates which are required to be disclosed pursuant
to the rules of the Commission.
THEODORE L. KOENIG. Mr. Koenig will serve as a Director of the
Company beginning on or about April 30, 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.
Monroe Investments, Inc. is a member of Hilco BPI, L.L.C., a Delaware
limited liability company, which is a member of DGJ. Hence, through Mr. Koenig's
control status of Monroe Investments, Inc. through Hilco BPI, L.L.C., he
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is a beneficial owner of the equity securities owned by DGJ and has
participated in transactions with the Company to the extent of his indirect
ownership interest in Hilco BPI, L.L.C.
CURRENT DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company, their positions
held in the Company and their ages are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Hanspeter Schulz 60 President and Director
Richard H. Nurse 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
Ivan J. Hughes 70 Chairman of the Board
David N. Laux 71 Director
Gary R. Edidin 54 Director
Allen S. Gerrard 63 Director
</TABLE>
No director or executive officer is related by blood, marriage or
adoption to any other director or executive officer.
HANSPETER SCHULZ, PH.D. Dr. Schulz has been the Company's President
and Director since January 1999. Prior thereto, Dr. Schulz served as a
consultant to the Company since August 1998. From 1996 to 1998, Dr. Schulz
was a Director of Business Integration for Celanese Ltd., and was one of
three managers responsible for the global installation of SAP, including the
redesign of relevant business processes. From 1993 to 1996, Dr. Schulz was
Business Director for Methanol/Formaldehyde/Polyols, a global commodity
business of Celanese with production sites in the United States, Canada and
Germany. In 1995, Dr. Schulz served as a member of the Board of a Celanese
joint venture in Saudi Arabia. From 1982 to 1995, Dr. Schulz was Vice
President and General Manager of the High Density and Ultra High Molecular
Weight Polyethylene business at American Hoechst. 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.
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 the 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 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. Prior thereto, 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.
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C. JILL BERESFORD. Ms. Beresford has been the Company's Vice
President of Marketing since January 1999. From June 27, 1998 until January
27, 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
27, 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.
IVAN J. HUGHES. Mr. Hughes was re-elected as a Director of the
Company on July 13, 1998 and became Chairman of the Board 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.
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.
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 subsequently purchased the Garfield Ridge Trust and Savings Bank and
the Bank of Chicago, two Chicago 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 has 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.
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 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.
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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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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.
ITEM 11. EXECUTIVE 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 the 12 months ended December 31, 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 "Named Officers"). 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
Annual Compensation Compensation Awards
------------------- -------------------
Securities
Underlying All Other
Name and Principal Position Fiscal Year Salary(1) Bonus(2) Options(#) Compensation
--------------------------- ----------- --------- -------- ---------- ------------
<S> <C> <C> <C> <C>
Dennis N. Caulfield (3) 1998 $89,846 $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)
</TABLE>
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<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation Awards
------------------- -------------------
Securities
Underlying All Other
Name and Principal Position Fiscal Year Salary(1) Bonus(2) Options(#) Compensation
--------------------------- ----------- --------- -------- ---------- ------------
<S> <C> <C> <C> <C>
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
Vice President of Technical 1997(A) $64,399 $0 0 $8,935(6)
Development 1997 $77,279 $0 0 $3,410(6)
1996 $71,936 $0 0 $4,401(6)
$3,656(6)
Paul J. DeCristofaro (7) 1998 $32,332 $0 0 $668(7)
Former Chief Financial Officer 1997(A) $83,410 $0 0 $0
1997 $100,092 $0 0 $0
</TABLE>
(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 had been 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 Mr.
Caulfield'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,
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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 Ms. Beresford'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 Mr. Vaincunas' 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 Mr. DeCristofaro'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, 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 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
$100,000 that is exercisable during any one calendar year. Options granted under
the stock option plans generally expire 10 years from the date of grant.
AGGREGATED OPTION EXERCISED IN THE LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised Options In-the-Money
at FY-End Options
Shares Acquired Value Exercisable/ Unexercisable
Name on Exercise Realized($) Unexercisable ($)(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
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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
In prior years, 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 (as defined in Item
13 below), on January 27, 1999, the Company entered into an employment
agreement with each of Ms. Beresford, Mr. Koehlinger, Dr. Nurse and Dr.
Schulz (each a "Contracted Employee" or collectively, the "Contracted
Employees"). Base salaries for Ms. Beresford, Mr. Koehlinger and Dr. Nurse
are $125,000 each per annum. Dr. Schulz's base salary is $150,000 per annum.
Mr. Koehlinger's, Dr. Nurse's and Dr. Schulz's employment terms are from
January 27, 1999 to January 27, 2002 and after such terms, 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. Ms. Beresford's employment term begins on July 1, 1999
and terminates on June 30, 2000 and upon expiration of that term, the
Company, at its option, may extend her employment term for an additional 18
months provided the Company gives Ms. Beresford proper notice.
Under the terms of each Contracted Employee's employment agreement,
each Contracted Employee is to 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 of Directors Compensation Committee Report on Executive Compensation -
Bonus Plan" below for a description of the performance goals. Also, in
consideration of the Contracted Employee entering into his or her employment
agreement, the Company granted each Contracted Employee a warrant to purchase
a certain number of shares of Common Stock. 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. Dr. Schulz was
granted a warrant to purchase 2,188,000 shares of Common Stock at $0.04 per
share. Dr. Nurse and Mr. Koehlinger were each granted a warrant to purchase
1,719,000 shares of Common Stock at $0.04 per share. Ms. Beresford was
granted a warrant to purchase 937,000 shares of Common Stock at $0.04 per
share. Each of the Contracted Employees has paid to the Company their
respective amount due under these warrants. Messrs. Schulz, Koehlinger and
Nurse and Ms. Beresford borrowed funds in the aggregate amount of $262,520
from DGJ necessary to exercise their warrants described above. In
consideration for the loan from DGJ to these individuals, each Contracted
Employee 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.
On March 22, 1999, the Company entered into an employment agreement
with Peter W. Blackett with a base salary of $125,000 per annum. The term of his
employment agreement is three years, terminating on March 21, 2002. After the
stated term in this agreement, Mr. Blackett's employment with the Company will
revert to the status
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of employment at will and will thereafter be subject to termination by either
party at any time regardless of cause. Under the terms of the agreement, Mr.
Blackett will receive options to purchase Common Stock during the term of
employment if the Company equals or exceeds certain performance goals. See
"Compensation Committee Board of Directors Compensation Committee Report on
Executive Compensation - Bonus Plan" below for a description of the
performance goals. Mr. Blackett is also given as consideration for his
employment reasonable and necessary expenses incurred in connection with the
moving of his personal residence close to the Company's office.
CONSULTING AGREEMENT
Also in connection with the January 1999 Financing, the Company
entered into a consulting agreement with Mr. Hughes for a three year term
ending on January 27, 2002. Mr. Hughes receives a consulting fee of $1,000
per week and will receive options to purchase Common Stock during the term of
his agreement if the Company equals or exceeds certain financial performance
goals. See "Compensation Committee - Board of Directors Compensation
Committee Report on Executive Compensation - Bonus Plan" below for a
description of the performance goals. Also, in consideration of Mr. Hughes
executing the consulting agreement, the Company granted him a warrant to
purchase 937,000 shares of Common Stock at $0.04 per share. Mr. Hughes has
paid to the Company the full amount due under this warrant. Such warrant is
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. Mr. Hughes' warrant expires on January 27, 2009.
Each of the employment agreements with the Contracted Employees and
Mr. Blackett and the consulting agreement with Mr. Hughes 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 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.
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.
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, an outside director, 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.
9
<PAGE>
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 INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of David N. Laux, 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, a Director of the Company,
serves on the Compensation Committee of Duro Bag, a customer of the Company.
See "Certain Relationships and Related Transactions" in Item 13 below.
COMPENSATION COMMITTEE
Messrs. David N. Laux, 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.
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 will grant such individuals
options to purchase a certain number of shares of Common Stock. The
10
<PAGE>
maximum number of options to purchase Common Stock, in the aggregate for all
such individuals will not exceed 14,250,000 shares of Common Stock. These
options 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. See "Employment Contracts, Termination
of Employment and Change in Control Arrangements" section above 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 predessor 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.
CONCLUSION
The current Compensation Committee believes that the
newly-instituted executive compensation plan implemented as part of the
January 1999 Financing is consistent with the overall corporate strategy for
continued growth in sales, manufacturing and earnings and stockholder value.
COMPENSATION COMMITTEE
Gary R. Edidin
David N. Laux
Allen S. Gerrard
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.
11
<PAGE>
COMPARISON FOR FIVE YEAR CUMULATIVE TOTAL RETURN
<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
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
FIVE-PERCENT BENEFICIAL OWNERS
The following table sets forth the beneficial ownership of Common Stock
and Series A Preferred Stock as of March 31, 1999 by persons who beneficially
owned more than 5% of the Common Stock and Series A Preferred Stock 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 Exchange Act, beneficially owning more than 5% of the
Common Stock and Series A Preferred Stock. Each of the persons listed below was
a member of such a group by virtue of being a party to the 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 of Common Stock and Series A Preferred Stock
beneficially owned by each person listed below is based on information contained
in the Schedule 13D filed with the Commission on behalf of the listed persons.
The percentage of shares of the Common Stock and Series A Preferred Stock each
listed person is indicated as beneficially owning is based on 21,495,621 and
193,358 shares of Common Stock and Series A Preferred Stock, respectively,
outstanding on March 31, 1999.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE OF COMMON STOCK
OF BENEFICIAL OWNER BENEFICIALLY OWNED (1)(2)
<S> <C> <C>
C. Jill Beresford(3)(5) 1,624,249 7.45%
455 Somerset Avenue
North Dighton, Massachusetts 07264
Ivan J. Hughes(4)(5) 90,000 *
Davis and Oak Streets
Ludlow, Kentucky 41016-0250
DGJ (6) 30,937,500 58.79%
600 Central Avenue, Suite 262
Highland Park, Illinois 60036
</TABLE>
* Less than one percent.
(1) 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
12
<PAGE>
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.
(2) Does not give effect to the issuance of: (i) up to 340,053 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 DGJs;
(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 5,500,000 shares of
Common Stock issuable upon the exercise of options expiring January 27,
2009 issued to consultants of the Company, subject to adjustments.
(3) Includes: (i) 1,314,130 shares of Common Stock; (ii) 146,695 shares of
Series B Convertible Preferred Stock; and (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.
(4) Includes 82,500 shares of Common Stock and 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.
(5) These individuals received 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 Section "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
shares of the Company's authorized Common Stock.
(6) Includes 30,937,500 shares of Common Stock issuable upon the exercise
of a warrant at a price of $0.04 per share through January 27, 2009.
However, DGJ has indicated that it has no current intention of
exercising this warrant to purchase Common Stock. This amount does not
include 1,629,930 shares of Series C Preferred Stock of the Company.
DIRECTORS, DESIGNATED DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of Common Stock
or Series A Convertible Preferred Stock as of March 31, 1999 by: (i) directors
and Designated Directors of the Company; (ii) executive officers of the Company;
and (iii) directors, Designated Directors and executive officers of the Company
as a group. 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
21,495,621 and 193,358 shares of Common Stock and Series A Convertible Preferred
Stock outstanding, respectively, as of March 31, 1999. Except as otherwise
indicated, the stockholders listed in the table have sole voting and investment
powers with respect to the shares indicated.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES
OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENTAGE OF CLASS (1)(2)
- ------------------- ------------------ --------------------------
<S> <C> <C>
Hanspeter Schulz, Ph.D.(3)(11) 0 0%
Richard H. Nurse, Ph.D.(3)(11) 6,000 *
C. Jill Beresford(3)(4)(6)(11) 1,627,249 7.45%
James F. Koehlinger(3)(11) 0 0%
Peter W. Blackett (3) 0 0%
Ivan J. Hughes(5)(6)(11) 90,000 *
Davis and Oak Streets
Ludlow, Kentucky 41016-0250
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES
OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENTAGE OF CLASS (1)(2)
- ------------------- ------------------ --------------------------
<S> <C> <C>
David N. Laux(7) 52,500 *
1700 N. Moore St, Suite 1703
Arlington, Virginia 22209
Gary R. Edidin (8) 30,937,500 58.79%
Edidin & Associates
600 Central Avenue
Suite 262
Highland Park, IL 60035
Allen S. Gerrard (9) 30,937,500 58.79%
Deere Park Capital Management
40 Skokie Boulevard
Suite 110
Northbrook, IL 60062
Theodore L. Koenig (10) ** 0 0%
55 East Monroe Street, Suite 4100
Chicago, Illinois 60603
Bruce M. Fleisher ** 0 0%
2350 N. Lincoln Park West
Chicago, Illinois 60614
All Officers and Directors 32,713,249 54.52%
as a Group (11 persons)(4)(5)(6)(7)
</TABLE>
* Less than one percent.
** Designated Director.
(1) 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.
(2) Except as otherwise noted, does not give effect to the issuance of: (i)
up to 340,053 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 DGJs; (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
5,500,000 shares of Common Stock issuable upon the exercise of options
expiring January 27, 2009 issued to consultants of the Company, subject
to adjustments.
(3) These individuals may be reached at the Company's headquarters
located at 455 Somerset Avenue, North Dighton, Massachusetts 02764.
(4) Includes: (i) 1,314,130 shares of Common Stock; (ii) 146,695 shares of
Series B Convertible Preferred Stock; and (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.
(5) Includes 82,500 shares of Common Stock and 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.
14
<PAGE>
(6) Under the terms of the Lockup Agreement, agreed to vote as directed by
DGJ with respect to any matters presented to the Company's stockholders
with respect to the Agreement and agreed not to sell shares of Common
Stock without the prior written consent of DGJ.
(7) 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.
(8) 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 deemed to beneficially own
30,937,500 shares of Common Stock beneficially owned by DGJ by virtue
of his positions with DGJ. This amount does not include 1,629,930
shares of Series C Preferred Stock of the Company owned by DGJ. Mr.
Edidin disclaims beneficial ownership of all such shares.
(9) 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 deemed to
beneficially own 30,937,500 shares of Common Stock beneficially owned
by DGJ by virtue of his positions with DGJ. This amount does not
include 1,629,930 shares of Series C Preferred Stock of the Company
owned by DGJ. Mr. Gerrard disclaims beneficial ownership of such
shares.
(10) 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.
(11) 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 Section "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
shares of the Company's authorized Common Stock.
ITEM 13. 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 and March, Duro Bag
issued purchase orders for $192,000, $190,335 and $209,513 to the Company to
purchase bags for Duro Bag customers. The Company expects similar monthly orders
from Duro Bag throughout 1999.
In November 1990, the Company established an officer's loan receivable
to Dennis N. Caulfield, its 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. As the Company has suffered recurring net
losses and operating cash flow deficiencies, a reserve of $586,978 established
for this loan and additional loans the Company made to Mr. Caulfield as of
December 31, 1997. In addition, the Company paid, on behalf of the former
Chairman, approximately $36,000 of a $200,000 levy in exchange for an interest
bearing note due on or before June 30, 1998, which has not yet been repaid.
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,
15
<PAGE>
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:
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.
In addition, certain members of the Company's management invested
$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" section above for a
description of these warrants.
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.
Pursuant to a Factoring Agreement, dated January 27, 1999, between the
Company and Franklin Capital Corporation ("Franklin"), a company related to DGJ,
Franklin 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. 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.
Pursuant to an Equipment Lease, dated January 27, 1999, 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 under 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 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.
Four of the Company's directors are either related to DGJ or have been
designated by DGJ. Gary R. Edidin and Allen S. Gerrard were appointed to the
Board of Directors in January 1999. On April 30, 1999, the Company will appoint
Bruce M. Fleisher and Theodore L. Koenig as Class III directors. Mr. Koenig is a
partner with the Chicago-based law firm of Holleb & Coff, which is now providing
legal services to the Company.
In February 1999, the Company borrowed approximately $219,000 from DGJ
to purchase an additional piece of equipment. This loan bears interest at a rate
of 18% per annum and matures in September 1999.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
BPI PACKAGING TECHNOLOGIES, INC.
Date: April 26, 1999
By: /s/ Hanspeter Schulz
--------------------------------------
Hanspeter Schulz, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Hanspeter Schulz President and Director April 26, 1999
- --------------------
/s/ Ivan J. Hughes Chairman of the Board of Directors April 26, 1999
- ------------------
/s/ Richard H. Nurse Vice President of Manufacturing April 26, 1999
- --------------------
/s/ C. Jill Beresford Vice President of Marketing April 26, 1999
- ---------------------
/s/ James F. Koehlinger Chief Financial Officer, April 26, 1999
- ----------------------- Principal Accounting Officer and
Treasurer
/s/ David N. Laux Director April 26, 1999
- -----------------
/s/ Gary R. Edidin Director April 26, 1999
- ------------------
/s/ Allen S. Gerrard Director April 26, 1999
- --------------------
</TABLE>
17
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE FOLLOWING IS AMENDED AND RESTATED CONSOLIDATED FINANCIAL STATEMENTS FOOTNOTE
NO. 2 FOR THE YEAR ENDED DECEMBER 31, 1998 FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ON MARCH 31, 1999.
NOTE 2: GOING CONCERN AND MANAGEMENT'S PLAN
On January 27, 1999, the Company entered into a Securities Purchase
Agreement (the "Purchase Agreement") with an investor, DGJ, L.L.C., a Delaware
limited liability company ("DGJ"), 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;
2. a Common Stock Purchase Warrant for the purchase of up to
80,000,000 shares of the Company's common stock, $.01 par value per share
(the "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.
The $3,200,000 subordinated note with a term of payment due
February 1, 2004 or earlier: if the Company enters into a merger, into a public
offering in excess of $10,000,000, defaults on the payment of interest or
sell 50% or more of its shares in the Company to a shareholder not previously
an investor in the Company. The note has an interest rate of 6% per annum
payable monthly in arrears. The note is secured by all assets of the Company.
In addition, Company management invested $300,000 in warrant
exercises that appear as subscribed stock on the Pro Forma Balance Sheet. The
Common Stock represented by the warrants cannot be issued until approval for
an increase in the authorized shares outstanding is obtained at the next
annual meeting of stockholders.
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
accounts receivable and inventory financing is six months, subject to
automatic renewal unless the Company gives at least 90 days written notice of
termination. The financing bears interest at 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.
In conjunction with the financing, the Company entered into
agreements with most of its unsecured creditors that provided for 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 Company's equipment, capital and operating leases were funded by
the 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 under operating leases were added to the property and
equipment
18
<PAGE>
accounts. The new lease carries no debt reduction obligation and is treated
as long-term debt. The 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.
A note payable, warrants and Series C Preferred Stock purchased by DGJ
for $3,200,200 were valued at the discounted fair market value at an assumed
rate of 14%. Of the $3,200,000, $480,000 has been recorded as additional capital
in excess of par value related to the warrants. The Series C Preferred Stock is
determined to have no value separate from the warrants. The Series C Preferred
Stock is not convertible and has no preference in liquidation, although, it has
a voting preference.
The plan to restructure the Company's operations and management, which
began in the third quarter of 1998, to satisfy past due trade creditors and past
due operating and capital lease balances, is progressing.
19
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.
Pro Forma Balance Sheet
<TABLE>
<CAPTION>
As audited Pro Forma
December 31, 1998 December 31, 1998
----------------- -----------------
<S> <C> <C>
Current assets
Cash $ 73,116 $ 977,216
Accounts receivable, net 882,389 882,389
Inventories, net 717,413 717,413
Prepaid expenses 51,420 51,420
--------------- -------------
Total current assets 1,724,338 2,628,438
--------------- -------------
Property and equipment, net 15,290,305 16,969,278
--------------- -------------
Deposits - leases and equipment purchases 149,851 73,911
Loans to officers, net 6,072 6,072
Other assets, net 581,399 1,219,703
--------------- -------------
737,322 1,299,686
--------------- -------------
$ 17,751,965 $ 20,897,402
--------------- -------------
--------------- -------------
Current liabilities
Note payable $ 814,311 $ 1,064,311
Trade notes payable 584,433 --
Capital lease obligations due within one year 3,800,286 --
Accounts payable 6,597,223 1,874,000
Accrued expenses 2,676,239 1,032,862
--------------- -------------
Total current liabilities 14,472,492 3,971,173
--------------- -------------
Capital lease obligations - long-term portion -- 6,800,000
--------------- -------------
Long-term debt - Accounts Payable -- 1,425,540
--------------- -------------
Notes payable -- 2,720,000
--------------- -------------
Stockholders' equity
Subscribed stock -- 300,000
Series B convertible preferred stock, $.01 par value 1,466,954 1,466,954
Series A convertible preferred stock, $.01 par value 674,032 674,032
Series C redeemable preferred stock, $.01 par value -- 100
Common stock, $.01 par value; shares authorized -- 60,000,000 214,956 214,956
Capital in excess of par value 44,912,833 45,392,733
Accumulated deficit (43,989,302) (42,068,086)
---------------- --------------
3,279,473 5,980,689
--------------- -------------
$ 17,751,965 $ 20,897,402
--------------- -------------
--------------- -------------
</TABLE>
20
