<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted By Rule 14a-6(e)(2))
[X] 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
- --------------------------------------------------------------------------------
July 12, 1999
Dear Stockholder:
You are cordially invited to attend our Annual Meeting of Stockholders
on Tuesday, August 24, 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 AUGUST 24, 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 Tuesday, August 24,
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 $0.01 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 July 6, 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. 4 to the Company's
Annual Report on Form 10-K/A for the year ended December 31, 1998 and Amendment
No. 2 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 July
16, 1999.
By Order of the Board of Directors
Hanspeter Schulz
PRESIDENT
North Dighton, Massachusetts
July 12, 1999
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.
455 SOMERSET AVENUE
NORTH DIGHTON, MASSACHUSETTS 02764
JULY 12, 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 Tuesday, August 24, 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 July
16, 1999.
RECORD DATE, VOTING
At the close of business on July 6, 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 Certain
1
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Beneficial Owners and 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 July 6, 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 August 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 and 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>
Class to which
Date First Nominee or
Became Positions and Offices Director
Name Age Director with the Company Belongs
- ---- --- -------- ---------------- -------
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:
NAME AGE POSITION
---- --- --------
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
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:
NAME AGE POSITION
---- --- --------
Tracy L. McGrath 34 Vice President of Sales
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 was $180,000 for the 12
month period ended 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.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
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 $100,000 that is exercisable during any one calendar
year. Options granted under the stock option plans generally expire 10 years
from the date of grant.
AGGREGATED OPTION EXERCISED IN THE LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options Options
at FY-End Exercisable/
Shares Acquired Exercisable/ Unexercisable
Name on Exercise Value Realized($) 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 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 provided for severance payments of 60 months base
salary in the event her employment was terminated without cause and prohibited
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 had 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, May and
June, Duro Bag issued purchase orders for $192,000, $190,335, $209,513,
$255,729, $0 and $350,019 to the Company to purchase bags for Duro Bag
customers. The Company expects similar orders from Duro Bag to those received in
the first six 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.
13
<PAGE>
See "Employment Contracts, Termination of Employment and Change In Control"
above for a description of these 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; (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. Unsecured creditors
of the Company owed approximately $3,009,000 as of January 27, 1999 selected the
discounted payment plan resulting in extraordinary income of $1,731,762 during
the first quarter of 1999. The balance of the unsecured creditors selected the
three year payment plan or are currently negotiating with the Company or did not
reach discounted or deferred agreements with the Company. The Company did not
recognize any gain under the three year payment arrangement. This gain of
$1,731,762 was recorded as extraordinary income amounting to $0.08 per share.
The tax effect of this gain reduced the net operating tax loss carryforward from
prior years which has been fully reserved and, therefore, has no impact on
current operations.
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.
14
<PAGE>
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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock
or Series A Convertible Preferred Stock as of July 6, 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 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. All of the persons listed below disclaim 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 July 6, 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>
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 10.60%
James F. Koehlinger (4)(5) 1,719,000 7.34%
Peter W. Blackett (4) 0 0%
Ivan J. Hughes (5)(7)(8) 1,027,000 4.54%
Davis and Oak Streets
Ludlow, Kentucky 41016-0250
David N. Laux (9) 52,500 *
1700 N. Moore St, Suite 1703
Arlington, Virginia 22209
Gary R. Edidin (10) 80,000,000 78.67%
Edidin & Associates
600 Central Avenue
Suite 262
Highland Park, IL 60035
15
<PAGE>
<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>
Allen S. Gerrard (11) 80,000,000 78.67%
Deere Park Capital Management
40 Skokie Boulevard
Suite 110
Northbrook, IL 60062
Theodore L. Koenig (12) 0 0%
55 East Monroe Street, Suite 4100
Chicago, Illinois 60603
Bruce M. Fleisher 0 0%
2350 North Lincoln Park West
Chicago, Illinois 60614
DGJ (13) 80,000,000 78.67%
600 Central Avenue, Suite 262
Highland Park, Illinois 60036
All Officers and Directors as a
Group (11 persons) (6)(7)(8)(9) 89,220,249 81.43%
</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 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"):
16
<PAGE>
<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.
(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.
17
<PAGE>
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.
<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
and 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. The Annual Meeting was delayed until August 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 August 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 and 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 and 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 March 15, 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. 4 to the Annual Report on Form 10-K/A filed with the commission on July 12,
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.
2 to the Quarterly Report on Form 10-Q/A, filed with the Commission on July 12,
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
July 12, 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
AUGUST 24, 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 August 24, 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
0 0
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.)
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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
0 0 0
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
0 0 0
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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
Date: 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.
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Signature
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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.
