SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. 1) <Strikeout><Strikeout>)</Strikeout>
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ X ]Preliminary Proxy Statement
[ ]Confidential, for Use of the Commission Only
(as permitted By Rule 14a-6(e)(2))
[ ]Definitive Proxy Statement
[ ]Definitive Additional Materials
[ ]Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BPI PACKAGING TECHNOLOGIES, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ]No fee required.
[ ]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
[ ]Fee paid previously with preliminary materials:
[ ]Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: N/A
(2) Form, Schedule or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date Filed: N/A
<PAGE>
BPI LETTERHEAD
<Strikeout>April 30</Strikeout>
June ___ , 1999
Dear Stockholder:
You are cordially invited to attend our Annual Meeting of
Stockholders on Thursday, <Strikeout>June 3</Strikeout> July 22 ,
1999. The meeting will be held at The Courtyard by Marriott, 35 Foxborough
Boulevard, Foxborough, Massachusetts, at 10:00 a.m., eastern time.
This Notice of Annual Meeting of Stockholders and the Proxy Statement
accompanying this letter describe the business we will consider at the
meeting. In particular, please note that management is requesting the
stockholders to approve one item in addition to the election of directors
and the ratification of the Board of Directors appointment of independent
accountants. <Strikeout>As management and the Board of Directors, we
strongly recommend increasing</Strikeout> Management requests that the
stockholders approve an amendment to the Company's Certificate of
Incorporation that would increase the number of authorized shares of
<Strikeout>common stock</Strikeout> 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 <Strikeout>JUNE 3</Strikeout> JULY 22 , 1999
____________________
TO THE STOCKHOLDERS OF BPI PACKAGING TECHNOLOGIES, INC.:
The Annual Meeting of Stockholders of BPI Packaging Technologies,
Inc. (the "Company"), a Delaware corporation, will be held on Thursday,
<Strikeout>June 3</Strikeout> July 22 , 1999 at 10:00 a.m. at The
Courtyard by Marriott, 35 Foxborough Boulevard, Foxborough, Massachusetts
(the "Annual Meeting") for the following purposes:
1. To elect two Class I directors for a term expiring in 2002;
2. To vote on an amendment to the Company's Certificate of Incorporation
to increase the number of authorized shares of the Company's common stock,
par value $.01 per share (the "Common Stock"), from 60,000,000 shares to
150,000,000 shares;
3. To ratify the appointment of Livingston & Haynes, P.C. as the
Company's independent accountants for the year ending December 31, 1999;
and
4. To transact any other business that may be properly presented at the
meeting.
These items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on
<Strikeout>April 9</Strikeout> June 3 , 1999 are entitled to notice
of and to vote at the Annual Meeting.
Your vote is important. Whether or not you plan to attend the Annual
Meeting, please mark, sign, date and return the enclosed proxy promptly.
If you are present at the Annual Meeting, and wish to do so, you may revoke
the proxy and vote in person.
This Proxy Statement, the proxy <Strikeout>and</Strikeout> ,
Amendment No. 2 to the Company's Annual Report on Form 10-
<Strikeout>K</Strikeout> K/A for the year ended December 31, 1998
and the Company's Quarterly Report on Form 10-Q for the three month
period ended March 31, 1999 were first mailed to stockholders on or
about <Strikeout>May 5</Strikeout> June ___ , 1999.
By Order of the Board of Directors
Hanspeter Schulz
President
North Dighton, Massachusetts
<Strikeout>April 30</Strikeout> June ___ , 1999
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.
455 SOMERSET AVENUE
NORTH DIGHTON, MASSACHUSETTS 02764
<Strikeout>April 30</Strikeout> June ___ , 1999
_______________
<Strikeout>PRELIMINARY</Strikeout> PROXY STATEMENT
_______________
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors (the "Board of Directors") of BPI
Packaging Technologies, Inc. (the "Company"), a Delaware corporation, for
use at the Annual Meeting of Stockholders (the "Annual Meeting") to be held
at The Courtyard by Marriott, 35 Foxborough Boulevard, Foxborough,
Massachusetts at 10:00 a.m. on Thursday, <Strikeout>June 3</Strikeout>
July 22 , 1999, and at any adjournments thereof.
At the Annual Meeting, holders of common stock of the Company (the
"Common Stock") and holders of the Series A Convertible Preferred Stock of
the Company (the "Series A Preferred Stock") <Strikeout>(collectively, the
"Voting Securities")</Strikeout> will be asked to consider and vote upon
the following proposals (the "Proposals"): (i) the election of two Class
<Strikeout>II</Strikeout> 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 the Company's 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. 2 to the <Strikeout>
Company's</Strikeout> Company's Annual Report on Form 10-
<Strikeout>K (the "Form 10-K")</Strikeout> K/A for the <Strikeout>
fiscal</Strikeout> year ended December 31, 1998 (the "Form 10-K/A") and
the Company's Quarterly Report on Form 10-Q for the three month period
ended March 31, 1999 (the "Form 10-Q") . This Proxy Statement, the
proxy , the Form 10-K/A and the Form 10-<Strikeout>K</Strikeout>
Q were first mailed to stockholders on or about <Strikeout>May
5</Strikeout> June ___ , 1999.
RECORD DATE, VOTING
At the close of business on <Strikeout>April 9</Strikeout> June
3 , 1999, the record date <Strikeout>(the "Record Date")</Strikeout> for
the determination of stockholders of the Company entitled to receive notice
of and to vote at the Annual Meeting<Strikeout>, 21,495,621 and
193,358</Strikeout> (the "Record Date"), ________ and ________
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 <Strikeout>the
Voting Securities</Strikeout> securities entitled to vote, including
Common Stock and the Series A Preferred Stock, is required for a
quorum.
<PAGE>
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 the Company's 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 proposal to increase
the number of authorized shares of Common Stock. See "Security Ownership
of Certain Beneficial Owners Management" for a description of the
securities held by the directors. See Proposal No. 2 for a description of
DGJ's interest in increasing the authorized number of shares of Common
Stock.
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 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<Strikeout>,</Strikeout> 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 <Strikeout>March 31</Strikeout> May 17 , 1999, the
directors and officers of the Company as a group own or may be deemed to
control <Strikeout>1,775,749</Strikeout> 1,629,054 shares of
<Strikeout>Voting Securities,</Strikeout> Common Stock and Series A
Preferred Stock, constituting approximately
<Strikeout>8.11%</Strikeout> 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.
<PAGE>
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 <Strikeout>also intends to employ the services
of</Strikeout> 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 <Strikeout>Corporation</Strikeout> & 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.
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
<Strikeout>June</Strikeout> July 1999.
David N. Laux and Hanspeter Schulz are the Class II directors and
serve until the Annual Meeting of Stockholders to be held in the year 2001.
Gary R. Edidin, Bruce M. Fleisher and Theodore L. Koenig are the Class III
directors and serve until the Annual Meeting of Stockholders to be held in
the year 2000. The successors to the class of directors whose terms expire
at an annual meeting would be elected for a term of office to expire at the
third succeeding annual meeting after their election and until their
successors have been duly elected by the stockholders. Directors chosen to
fill vacancies on a classified board hold office until the next election of
the class for which directors shall have been chosen, and until their
successors are duly elected by the stockholders. Officers are elected by
and serve at the discretion of the Board of Directors, subject to their
employment contracts.
Directors will be elected by a plurality of the votes cast at the
Annual Meeting in present or by proxy, meaning the two nominees receiving
the most votes will be elected directors. Only votes cast for a nominee
will be counted, except that the accompanying proxy will be voted for the
two management nominees unless the proxy contains instructions to the
contrary. Abstentions, broker non-votes<Strikeout>,</Strikeout> 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 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.
<PAGE>
The following table provides information regarding the Nominees and
continuing directors of the Company:
Class to
which
Date First Positions and Nominee or
Became Offices with Director
Name Age Director the Company Belongs
- ---- --- ---------- ------------ -----------
NOMINEES:
Allen S. Gerrard 63 1/27/99 Director I
Ivan J. Hughes 70 7/13/98 Chairman of the I
Board of Directors
<Strikeout>
I Allen S. Gerrard
63 1/27/99 Director
</Strikeout>
CONTINUING DIRECTORS:
Gary R. Edidin 54 1/27/99 Director III
Bruce M. Fleisher 68 4/30/99 Director III
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 II
Director
<Strikeout>
Gary R. Edidin 54 1/27/99 Director III
Bruce M. Fleisher 68 4/26/99 Director III
Theodore L. Koenig 40 4/26/99 Director III
</Strikeout>
BACKGROUND
The principal occupations during the past five years of each of the
Company's directors and nominees are as follows:
NOMINEES
* 1 moved from here; text not shown
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<Strikeout>, L.L.C. ("DGJ")</Strikeout>. 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.
<PAGE>
** 1 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
* 2 moved from here; text not shown
* 3 moved from here; text not shown
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 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 <Strikeout>October 1997</Strikeout> 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
<Strikeout>to 1997</Strikeout>, he was the President and
<Strikeout>Division Manager</Strikeout> owner of Darter,
Inc.<Strikeout>, another division of</Strikeout> In 1996, Darter, Inc.
was purchased by Unisource Worldwide, Inc.
<Strikeout>Since</Strikeout> From 1996 to 1997 , he
<Strikeout>has been</Strikeout> 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.
<PAGE>
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.
** 2 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.
** 3 HANSPETER SCHULZ, PH.D. Dr. Schulz has been the
Company's President and a Director since January 1999. <Strikeout>Prior
thereto</Strikeout> From August 1998 to January 1999 , Dr. Schulz
served as a consultant to the Company <Strikeout>since August
1998</Strikeout>. From 1996 to August 1998, Dr. Schulz was a
Director of Business Integration for Celanese Ltd., and was one of three
managers responsible for the global installation of SAP, including the
redesign of relevant business processes. From <Strikeout>1993</Strikeout>
1995 to 1996, Dr. Schulz was Business Director for
Methanol/Formaldehyde/Polyols, a global commodity business of Celanese with
production sites in the United States, Canada and Germany.<Strikeout> In
1995, Dr. Schulz served as a member of the Board of a Celanese joint
venture in Saudi Arabia.</Strikeout> From 1982 to 1995, Dr. Schulz was
Vice President and General Manager of the High Density and Ultra High
Molecular Weight Polyethylene business at American Hoechst. From 1959 to
1969, Dr. Schulz studied chemistry and related subjects at the Universities
of Stuttgart, Germany, Kansas, USA (on a scholarship basis) and Hamburg,
Germany resulting in a Ph.D. of Natural Sciences in 1969.
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
No director or executive officer is related by blood, marriage or
adoption to any other director or executive officer.
<PAGE>
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. <Strikeout>Prior thereto</Strikeout>
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.<Strikeout> Commencing February 1988, Mr.
Koehlinger began working on a part-time basis as the Company's Chief
Financial Officer.</Strikeout> 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 27, 1998 until
January 27, 1999, she was the Company's Chairman, Chief Executive Officer
and Chief Financial Officer. She also served as the Chief Operating
Officer of the Company from 1995 to 1998. She served as the Company's
President from July 1996 to June 1998. She was Treasurer of the Company
from May 1990 to January 27, 1999 and a Director of the Company from March
1989 until January 1999. From May 1990 to July 1995, Ms. Beresford was the
Company's Vice President of Marketing. Ms. Beresford attended the
University of Guelph, Ontario, Canada and received a Masters degree in
Business Administration from Boston University.
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.
<PAGE>
BOARD OF DIRECTORS, BOARD COMMITTEES AND MEETINGS
The Board of Directors has established an Audit Committee, a
Compensation Committee and an Executive Committee. The Board of Directors
held three meetings during 1998. Each director attended at least 75% of all
meetings of the Board of Directors and applicable Committees held during
1998.
EXECUTIVE COMMITTEE
The Executive Committee is empowered to act with all authority
granted to the Board of Directors between Board of Directors meetings,
except with respect to those matters required by Delaware law or by the
Company's By-laws to be subject to the power and authority of the Board of
Directors as a whole. Messrs. Ivan J. Hughes, Hanspeter Schulz and Gary R.
Edidin are the current members of the Executive Committee. The former
Executive Committee did not meet during 1998.
AUDIT COMMITTEE
The Board of Directors has established an Audit Committee ,
whose current members are David N. Laux, <Strikeout>an outside
director</Strikeout> 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 <Strikeout>twice</Strikeout> 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.
<Strikeout>Compensation Committee Interlocks and Insider Participation
</Strikeout>
* 4 moved from here; text not shown
COMPENSATION COMMITTEE
<Strikeout>Messrs.</Strikeout> 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.
<PAGE>
BOARD OF DIRECTORS COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------
The Compensation Committee believes that the primary objectives of
the Company's compensation policies are to attract and retain a management
team that can effectively implement and execute the Company's strategic
business plan. These compensation policies include: (i) an overall
management compensation program that is competitive with management
compensation programs at companies of similar size to attract, retain and
motivate superior talent in the Company's industry; (ii) short-term bonus
incentives for management to meet the Company's overall business strategy
and profitability goals, including net income performance goals; (iii)
promoting the Company's pay-for-performance philosophy; and (iv) long-term
incentive compensation which will encourage management to continue to focus
on stockholder return.
It is the intention of the Compensation Committee to utilize a pay-
for-performance compensation strategy that will facilitate the attainment
of the Company's sales growth and profitability goals. Also, the
Compensation Committee's goal is to use compensation policies to closely
align the interests of the Company with the interests of stockholders so
that the Company's management has incentives to achieve short-term
performance goals while building long-term value for the Company's
stockholders. The Compensation Committee will review its compensation
policies from time to time to determine the reasonableness of the Company's
compensation programs and to take into account factors which are unique to
the Company.
BONUS PLAN. To incentivize senior management of the Company, Ms.
Beresford, Mr. Koehlinger, Dr. Nurse, Dr. Schulz, Mr. Blackett and Mr.
Hughes <Strikeout>shall</Strikeout> 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 <Strikeout>options to purchase</Strikeout> shares
of Common Stock, in the aggregate <Strikeout>for all such individuals
will not exceed 14,500,000 shares of Common Stock</Strikeout> , 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 <Strikeout>predessor</Strikeout> 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.
<PAGE>
BASE SALARIES. Ms. Beresford's base salary will continue to be
$180,000 per annum until June 30, 1999 and for her employment term from
July 1, 1999 to June 30, 2000, her base salary will be $125,000 per annum.
The current Compensation Committee believes that executive officer salaries
reflect base salaries paid to senior officers of other companies of similar
size.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally disallows tax deductions to public companies for
compensation over $1 million paid to a corporation's chief executive
officer and the four other most highly compensated executive officers.
Qualifying "performance-based" compensation will not be subject to the
deduction limit if certain requirements are met. The Compensation Committee
has discussed and considered and will continue to evaluate the potential
impact Section 162(m) has on the Company in making compensation
determinations, but has not established a set policy with respect to future
compensation determinations.
Compensation Committee Interlocks and Insider Participation
** 4 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, <Strikeout>a Director</Strikeout> 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.
COMPENSATION COMMITTEE
Gary R. Edidin
<Strikeout>David N. Laux</Strikeout> 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
<Strikeout>(the "Named Officers")</Strikeout>. 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.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Compensation Awards
Annual Compensation -----------------------------
------------------------------ Securities
Name and Underlying All Other
Principal Position Fiscal Year Salary (1) Bonus (2) Options (#) Compensation
- ------------------ ------------ ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
<Strikeout>
Dennis N. Caulfield (3) 1988 $89,846 $0 0 $9,923 (3)
Former Chief Executive </Strikeout>
Officer 1997(A) $169,846 $0 0 $43,232 (3)
1997 $266,666 $0 0 $130,220 (3)
1996 $320,000 $0 0 $36,174 (3)
$320,000
C. Jill Beresford (4) 1998 $182,506 $0 0 $12,848 (4)
Chief Executive 1997(A) $150,000 $0 0 $6,242 (4)
Officer Chairman of 1997 $180,000 $0 0 $26,716 (4)
the Board of Directors 1996 $180,000 $0 0 $14,612 (4)
Alex F. Vaicunas (5) 1998 $124,856 $0 0 $1,746 (5)
Former Vice President 1997(A) $104,167 $0 0 $3,150 (5)
of Film 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 1997(A) $64,399 $0 0 $3,410 (6)
Technical 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
<Strikeout>Include 401(k)
Matching in last column.</Strikeout>
</TABLE>
<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 <Strikeout>had been</Strikeout> 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. <Strikeout>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.</Strikeout>
(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. <Strikeout>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.</Strikeout>
<PAGE>
(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.
<Strikeout>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.</Strikeout>
(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. <Strikeout>Includes
$668 the Company contributed to the individual's 401(k) account during
1998.</Strikeout>
STOCK OPTION PLANS
In May 1990, the Company adopted a stock option plan and on
October 25, 1993, the Company approved a stock option plan that provides
certain individuals the right to purchase up to 200,000 shares and 750,000
shares, respectively, of Common Stock. In September 1996, the Company
adopted a stock option plan that entitles certain individuals the right to
purchase up to 1,000,000 shares of Common Stock. The Board of Directors
determines those individuals who 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
$100,000 that is exercisable during any one calendar year. Options granted
under the stock option plans generally expire 10 years from the date of
grant.
<PAGE>
AGGREGATED OPTION EXERCISED IN THE LAST FISCAL YEAR
AND FY-END OPTION VALUES
---------------------------------------------------
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options Options
Shares at FY-End Exercisable/
Acquired Value Exercisable/ Unexercisable
Name on Exercise Realized($) Unexercisable ($) (1)
- ---- ----------- ---------- ------------- -------------
C. Jill Beresford 0 0 163,224/0 0 / 0
(1) In-the-<Strikeout>Money</Strikeout> 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
<Strikeout>NASDAQ/OTC</Strikeout> 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
<Strikeout>In-</Strikeout> in- the-<Strikeout>Money</Strikeout>
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. <Strikeout> Company contributions to the
plan were $33,165, $47,604, $80,503 and $52,120 for 1998, the 10 month
period ended December 31, 1997, Fiscal Year 1997 and Fiscal Year 1996,
respectively.</Strikeout>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
<Strikeout>In prior years, the</Strikeout> The Company entered
into employment, non-competition, and confidentiality agreements with each
of Mr. Caulfield, Ms. Beresford and Mr. Vaicunas. Base salaries for Mr.
Caulfield, Ms. Beresford and Mr. Vaicunas were $320,000, $180,000 and
$125,000 per annum, respectively, subject to periodic review by the Board
of Directors. Each of these agreements expired on June 30, 1998. Ms.
Beresford's employment agreement was renewed for an additional one year
term. Her agreement provides for severance payments of 60 months base
salary in the event her employment is terminated without cause and
prohibits her from competing with the Company for a period of 24 months
following termination of employment with the Company. In the event of a
change of control in the Company, she has the option to terminate her
employment and to receive additional severance compensation subject to the
provisions of their employment agreements. The Company has also entered
into non-competition and confidentiality agreements with certain other
employees.
<PAGE>
In conjunction with the January 1999 Financing<Strikeout>(as defined
in "Certain Relationships and Related Transactions" below), on January 27,
1999</Strikeout> , on January 27,1999 , the Company entered into an
employment agreement with each of Ms. Beresford, Mr. Koehlinger, Dr. Nurse
and Dr. Schulz <Strikeout>(each as an "Employee" or collectively, the
"Employees"). Base salaries for</Strikeout> and a consulting agreement
with Ivan J. 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
Base Salary/
Employee/Consultant Fee Term Warrant Shares
- ------------------- ------------ ---------- --------------
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
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
<Strikeout>and Dr. Nurse are $125,000 each per annum. Dr. Schulz's base
salary is $150,000 per annum. Mr. Koehlinger's, Dr. Nurse's and Dr.
Schulz's employment terms are from January 27, 1999 to January 27, 2002 and
after such terms, each individual's employment shall revert to the status
of employment at will and shall thereafter be subject to termination by
either party at any time and regardless of cause. Ms. Beresford's
employment term begins on July 1, 1999 and terminates on June 30, 2000 and
upon expiration of her term, the Company, at its option, may extend her
employment term for an additional 18 months provided the Company gives Ms.
Beresford proper notice.
Under the terms of each Employee's employment agreement, each
Employee shall receive options to purchase Common Stock during the term of
each's respective agreement if the Company equals or exceeds certain
financial performance goals. See "Compensation Committee - Board of
Directors Compensation Committee Report on Executive Compensation Bonus
Plan" above for a description of the performance goals. Also, in
consideration of the Employee</Strikeout> entering into his or her
<Strikeout>employment</Strikeout> agreement, the Company granted each
<Strikeout>Employee</Strikeout> of these individuals a warrant to
<PAGE>
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<Strikeout>(see Proposal No. 2) and such</Strikeout> . Such
warrants expire on January 27, 2009. <Strikeout>Dr. Schulz was granted a
warrant to purchase 2,188,000</Strikeout> Please refer to the chart
above, under the title "Warrant Shares," for the number of shares of
Common Stock <Strikeout>at $0.04 per share. Dr. Nurse and Mr. Koehlinger
were each granted a warrant to purchase 1,719,000 shares of Common Stock at
$0.04 per share. Ms. Beresford was granted a warrant to purchase 937,000
shares of Common Stock at $0.04 per share. Each of the
Employees</Strikeout> each individual's warrant is exercisable into.
Each of these individuals has paid to the Company their respective
amount due under these warrants. <Strikeout>Messrs.</Strikeout> Dr.
Schulz, Mr. Koehlinger <Strikeout>and</Strikeout> , Dr. Nurse
and Ms. Beresford borrowed funds in the aggregate amount of $262,520 from
DGJ necessary to exercise <Strikeout>their</Strikeout> these
warrants <Strikeout>described above</Strikeout>. In consideration for the
loan from DGJ to these individuals, <Strikeout>each Employee</Strikeout>
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 <Strikeout>.
On March 22, 1999, the Company entered into an employment agreement
with Peter M. Blackett with a base salary of $125,000 per annum. The term
of</Strikeout> his employment agreement <Strikeout>is three years,
terminating on March 21, 2002. After the stated term in this agreement, Mr.
Blackett's employment with the Company will revert to the status of
employment at will and shall thereafter be subject to termination by either
party at any time regardless of cause. Under the terms of the agreement,
Mr. Blackett shall receive options to purchase Common Stock during the term
of employment if the Company equals or exceeds certain performance goals.
See "Compensation Committee - Board of Directors Compensation Committee
Report on Executive Compensation Bonus Plan" above for a description of the
performance goals. Mr. Blackett is also given</Strikeout> . Mr.
Blackett will be given, as consideration for his employment ,
reimbursement for reasonable and necessary expenses incurred in
connection with the <Strikeout>moving</Strikeout> relocation of his
personal residence <Strikeout>close</Strikeout> closer to the
Company's office.
<Strikeout>Consulting Agreement
Also in connection with the January 1999 Financing, the Company
entered into a consulting agreement with Mr. Hughes for a three year term
ending on January 27, 2002. Mr. Hughes receives a consulting fee of $1,000
per week and will receive options to purchase Common Stock during the term
of his agreement if the Company equals or exceeds certain financial
performance goals. See "Compensation Committee - Board of Directors
Compensation Committee Report on Executive Compensation Bonus Plan" above
for a description of the performance goals. Also, in consideration of Mr.
Hughes execution of the consulting agreement, the Company granted him a
warrant to purchase 937,000 shares of Common Stock at $0.04 per share. Mr.
Hughes has paid to the Company the full amount due under this warrant. Such
warrant is not exercisable until the Company's stockholders approve an
amendment to the Company's Certificate of Incorporation increasing the
number of shares of authorized Common Stock and the warrant expires on
January 27, 2009.
Each of the employment agreements with the Employees and Mr. Blackett
and the consulting agreement with Mr. Hughes</Strikeout> 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.
<PAGE>
COMPENSATION OF DIRECTORS
All outside Directors of the Company are paid $1,875 each per
calendar quarter. No other Directors receive any compensation. In June
1992, David N. Laux, an outside Director, received options to purchase a
total of 7,500 shares of Common Stock at a purchase price of $2.50 per
share through June 9, 2002. In March 1996, Ivan J. Hughes, then considered
an outside Director, received options to purchase a total of 7,500 shares
of Common Stock at a purchase price of $2.38 per share through June 9,
2003. In January 1998, Mr. Laux received options to purchase a total of
25,000 shares of Common Stock at a purchase price of $1.25 per share
through December 31, 2003.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Ivan J. Hughes, a <Strikeout>Director</Strikeout> director of
the Company, is the President of the Plastic's Division, and a
<Strikeout>Director</Strikeout> director and a member of the
Executive and Compensation Committees of Duro Bag. In January, February
<Strikeout>and</Strikeout> , March and April , Duro Bag issued
purchase orders for $192,000, $190,335 <Strikeout>and</Strikeout> ,
$209,513 and $255,729 to the Company to purchase bags for Duro Bag
customers. The Company expects similar monthly orders from Duro Bag
throughout 1999.
In November 1990, the Company established an officer's loan
receivable <Strikeout>to</Strikeout> 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. <Strikeout>As the Company has
suffered recurring net losses and operating cash flow deficiencies, a
reserve of $586,978 established for this loan</Strikeout> 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
<Strikeout>the former Chairman</Strikeout> Mr. Caulfield ,
approximately $36,000 of a $200,000 <Strikeout>levy</Strikeout> 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");
<PAGE>
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 5% 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 <Strikeout>.
In addition,</Strikeout> certain members of the Company's management
<Strikeout>invested</Strikeout> , Ms. Beresford, Mr. Koehlinger, Dr.
Nurse, Dr. Schulz and Mr. Hughes, to invest, in the aggregate, $300,000
in the Company's warrants. The Common Stock represented by the warrants
cannot be issued until approval for an increase in the Company's authorized
shares of Common Stock is obtained at the Annual Meeting. See "Employment
Contracts, Termination of Employment and Change In Control"
<Strikeout>section</Strikeout> 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 per one vote of each share of Common Stock; (ii) if the
Note has been retired in its entirety, the Company, at its option, may
elect to redeem all or a portion of the outstanding Series C Preferred
Stock, at an aggregated redemption price of $100 plus accrued interest at a
rate of 6% per annum commencing on January 27, 1999; and (iii) the shares
of the Series C Preferred Stock are not convertible into shares of Common
Stock.
In conjunction with the January 1999 Financing, the Company
entered into agreements with most of its unsecured creditors that provided
a discounted payment in February 1999 or a non-interest bearing agreement
to pay the entire balance over a three-year period. The unsecured creditor
agreements, together with the financing referred to above, allowed the
Company to restructure trade notes payable of $584,000 and accounts payable
of $6,597,000, or a total of $7,181,000, compared to $1,874,000 of current
accounts payable and $1,426,000 of long-term debt, or a total of $3,300,000
after refinancing.
The gain on the restructuring of trade notes payable and accounts
payable was accounted for as an extraordinary item in the Company's
Consolidated Statement of Operations for the three month period ended
March 31, 1999. The creditors who selected the long-term debt
agreement are being paid their balances due over a 36-month period in 36
equal installments with no interest. The Company was involved in a patent
infringement suit and reached a settlement on January 27, 1999 to pay the
balance due of $200,000 as part of the restructuring of the Company's debt
described above.
<PAGE>
A factoring agreement with <Strikeout>Pursuant to a Factoring
Agreement, dated January 27, 1999, between the Company and Franklin Capital
Corporation ("Franklin"),</Strikeout> a company related to DGJ<Strikeout>,
Franklin</Strikeout> 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.
<Strikeout>Pursuant to an Equipment Lease, dated January 27, 1999,
the</Strikeout> 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 <Strikeout>under</Strikeout>
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.
<Strikeout>Four of the Company's directors are either related to DGJ
or have been designated by DGJ. Gary R. Edidin and Allen S. Gerrard were
appointed to the Board of Directors in January 1999. In April 1999, the
Company appointed Bruce M. Fleisher and Theodore L. Koenig as Class III
directors. Mr. Koenig is a partner with the Chicago-based law firm of
Holleb & Coff, which is now providing legal services to the
Company.</Strikeout>
In February 1999, the Company borrowed approximately $219,000 from
DGJ to purchase an additional piece of equipment. This loan bears interest
at a rate of 18% per annum and matures in September 1999.
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
FIVE-PERCENT BENEFICIAL OWNERS
The following table sets forth the beneficial ownership of Common
Stock and Series A Preferred Stock as of <Strikeout>March 31</Strikeout>
May 17 , 1999 by 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
<PAGE>
amended, beneficially owning more than 5% of the Common Stock and Series A
Preferred Stock. Each of the persons listed below was a member of such a
group by virtue of being a party to a <Strikeout>Lockup Agreement
</Strikeout> lockup agreement (the "Lockup Agreement") by and among
Ms. Beresford, Mr. Hughes and DGJ, dated January 27, 1999, pursuant to
which the parties agreed to vote their shares of stock as directed by DGJ
on any matters presented to the Company's stockholders with respect to the
Securities Purchase Agreement. Each of the persons listed below disclaims
beneficial ownership in any shares beneficially owned by the others. The
number of shares of Common Stock and Series A Preferred Stock beneficially
owned by each person listed below is based on information contained in the
Schedule 13D filed with the Commission on behalf of the listed persons.
The percentage of shares of the Common Stock and Series A Preferred Stock
each listed person is indicated as beneficially owning is based on
21,495,621 and <Strikeout>193,358 </Strikeout> 212,258 shares of
Common Stock and Series A Preferred Stock, respectively, outstanding on
<Strikeout>March 31</Strikeout> May 17 , 1999.
Percentage of
Common Stock
<Strikeout>
(1)(2)
Number of Shares </Strikeout>
of Common Stock and Series A
Name and Address Beneficially Owned Preferred Stock
Of Beneficial Owner (1) (2)(3)
- ------------------- ----------------------- -----------------
C. Jill Beresford
<Strikeout>(3)(5)
</Strikeout>
(4)(5)
455 Somerset Avenue <Strikeout>7.45%
North Dighton, </Strikeout>
Massachusetts 07264 1,624,249 6.81%
Ivan J. Hughes
<Strikeout>(4)(5)
</Strikeout>
(5)(6)
Davis and Oak Streets
Ludlow, Kentucky
41016-0250 90,000 *
DGJ <Strikeout>(6)
</Strikeout>
(7)
600 Central Avenue,
Suite 262 <Strikeout>58.79%
Highland Park, </Strikeout>
Illinois 60036 30,937,500 51.56%
* Less than one percent.
(1) None of these Beneficial Owners own any shares of Series A
Preferred Stock. Except for those listed in the next table, no other
stockholder owns at least 5% of the Common Stock and the 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.
<PAGE>
<Strikeout>(2)</Strikeout> (3) Does not give effect to the
issuance of: (i) up to <Strikeout>340,053</Strikeout> 358,953
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 <Strikeout>options</Strikeout>
warrants expiring January 27, 2009 and January 27, 2003,
respectively, issued to consultants of the Company, subject to
adjustments.
<Strikeout>(3)</Strikeout> (4) Includes: (i) 1,314,130 shares
of Common Stock; (ii) 146,695 shares of Series B Convertible Preferred
Stock; and (iii) 163,224 shares of Common Stock issuable upon the exercise
of an option at a price of $2.50 per share through June 30, 2003.
(5) These individuals received warrants to purchase a
certain number of shares Common Stock at $0.04 per share. These warrants
expire on January 27, 2009 and are described above in "Board of Directors
and Executive Officers - Employment Contracts, Termination of Employment
and Change in Control Arrangements." These warrants are not exercisable
until the Company's stockholders approve an amendment to the Company's
Certificate of Incorporation increasing the number of shares of the
Company's authorized Common Stock. The following table lists the name of
the individual and the corresponding number shares of Common Stock their
warrant is exercisable into (the "Warrant Shares"):
Name Warrant Shares
C. Jill Beresford 937,000
Ivan J. Hughes 937,000
(6) <Strikeout>(4)</Strikeout> Includes 82,500 shares of
Common Stock and 7,500 shares of Common Stock issuable upon exercise of an
option at a purchase price of $2.38 per share through March 24, 2006.
* 5 moved from here; text not shown
<Strikeout>(6)</Strikeout> (7) Includes 30,937,500 shares of
Common Stock issuable upon the exercise of a warrant at a price of $0.04
per share through January 27, 2009. However, DGJ has indicated that it has
no current intention of exercising this warrant to purchase Common Stock.
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.
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of Common
Stock or Series A Convertible Preferred Stock as of <Strikeout>March 31
</Strikeout> May 17 , 1999 by: (i) directors of the Company; (ii)
executive officers of the Company; and (iii) directors and executive
officers of the Company as a group. The number of shares beneficially
owned of Common Stock and Series A Convertible Preferred Stock listed below
is based on information contained in a Schedule 13D filed with the
Commission on behalf of the named persons and on information provided to
the Company by the named persons. The percentage of shares of the class
each person is listed as beneficially owning is based upon 21,495,621 and
<Strikeout>193,358</Strikeout> 212,258 shares of Common Stock and
Series A Convertible Preferred Stock outstanding, respectively, as of
<Strikeout>March 31</Strikeout> May 17 , 1999. Except as otherwise
indicated, the stockholders listed in the table have sole voting and
investment powers with respect to the shares indicated.
Percentage of
<Strikeout>
Class (1)(2)
</Strikeout>
Number of Shares Common Stock
of Common Stock and Series A
Name and Address Beneficial Owned Preferred Stock
Of Beneficial Owner (1) (2)(3)
- ------------------- ------------------ --------------------
Hanspeter Schulz, Ph.D.
<Strikeout>(3)(11)
</Strikeout>
(4)(5) 0 0%
Richard H. Nurse, Ph.D.
<Strikeout>(3)(11)
</Strikeout>
(4)(5) 6,000 *
C. Jill Beresford <Strikeout>
<Strikeout>(3)(4)(6)(11) 7.45%
</Strikeout> </Strikeout>
(4)(5)(6)(7) 1,627,249 6.81%
James F. Koehlinger
<Strikeout>(3)(11)
</Strikeout>
(4)(5) 0 0%
Peter W. Blackett
<Strikeout>(3)</Strikeout>
(4) 0 0%
Ivan J. Hughes
<Strikeout>(5)(6)(11)
</Strikeout>
(5)(7)(8)
Davis and Oak Streets
Ludlow, Kentucky
41016-0250 90,000 *
David N. Laux
<Strikeout>(7)</Strikeout>
(9)
1700 N. Moore St,
Suite 1703
Arlington, Virginia
22209 52,500 *
<PAGE>
Percentage of
<Strikeout>
Class (1)(2)
</Strikeout>
Number of Shares Common Stock
of Common Stock and Series A
Name and Address Beneficial Owned Preferred Stock
Of Beneficial Owner (1) (2)(3)
- ------------------- ------------------ --------------------
Gary R. Edidin
<Strikeout>(8)</Strikeout>
(10)
Edidin & Associates <Strikeout>
600 Central Avenue 58.79%
Suite 262 </Strikeout>
Highland Park, IL 60035 30,937,500 51.56%
Allen S. Gerrard
<Strikeout>(9)</Strikeout>
(11)
Deere Park Capital
Management <Strikeout>
40 Skokie Boulevard 58.79%
Suite 110 </Strikeout>
Northbrook, IL 60062 30,937,500 51.56%
Theodore L. Koenig
<Strikeout>(10)</Strikeout>
(12)
55 East Monroe Street,
Suite 4100
Chicago, Illinois 60603 0 0%
Bruce M. Fleisher
<Strikeout>0 0</Strikeout>
2350 North Lincoln
Park West
Chicago, Illinois 60614 0 0%
All Officers and Directors
as a Group (11 persons) <Strikeout>
<Strikeout>(4)(5)(6)(7) 54.52%
</Strikeout> </Strikeout>
(6)(7)(8)(9) 32,713,249 54.09%
* 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.
<PAGE>
<Strikeout>(2)</Strikeout> (3) Except as otherwise noted, does
not give effect to the issuance of: (i) up to
<Strikeout>340,053</Strikeout> 358,953 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
<Strikeout>5,500,000</Strikeout> 5,000,000 and 900,000 shares of
Common Stock issuable upon the exercise of <Strikeout>options</Strikeout>
warrants expiring January 27, 2009 and January 27, 2003,
respectively, issued to consultants of the Company, subject to
adjustments.
<Strikeout>(3)</Strikeout> (4) These individuals may be
reached at the Company's headquarters located at 455 Somerset Avenue, North
Dighton, Massachusetts 02764.
** 5 (5) These individuals <Strikeout>received</Strikeout>
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 <Strikeout>Section "Board</Strikeout> "Board
of Directors and Executive Officers - Employment Contracts, Termination of
Employment and Change in Control Arrangements." These warrants are not
exercisable until the Company's stockholders approve an amendment to the
Company's Certificate of Incorporation increasing the number of shares of
the Company's authorized Common Stock.
The following table lists the name of the individual and the
corresponding number shares of Common Stock their warrant is convertible
into (the "Warrant Shares"):
Name Warrant Shares
---- --------------
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
(6) <Strikeout>(4)</Strikeout> Includes: (i) 1,314,130 shares
of Common Stock; (ii) 146,695 shares of Series B Convertible Preferred
Stock; and (iii) 163,224 shares of Common Stock issuable upon the exercise
of an option at a price of $2.50 per share through June 30, 2003.
* 6 moved from here; text not shown
<Strikeout>(6)</Strikeout> (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 .
** 6 <Strikeout>(5)</Strikeout> (8) Includes 82,500
shares of Common Stock and 7,500 shares of Common Stock issuable upon
exercise of an option at a purchase price of $2.38 per share through March
24, 2006.
<PAGE>
<Strikeout>(7)</Strikeout> (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 30,937,500 shares of Common Stock beneficially owned by
DGJ by virtue of his positions with DGJ. 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. 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 30,937,500 shares of Common Stock beneficially
owned by DGJ by virtue of his positions with DGJ. 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. Mr. Gerrard disclaims beneficial
ownership of 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.
<Strikeout>These individuals acquired warrants to purchase a certain
number of shares Common Stock at $0.04 per share. These warrants expire on
January 27, 2009 and are described above in Section "Board of Directors and
Executive Officers Employment Contracts, Termination of Employment and
Change in Control Arrangements." These warrants are not exercisable until
the Company's stockholders approve an amendment to the Company's
Certificate of Incorporation increasing the number of shares of the
Company's authorized Common Stock.</Strikeout>
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return
(assuming reinvestment of dividends) from investing $100 on December 31,
1993, and plotted at December 31, 1994, 1995, 1996, 1997 and 1998 in each
of: (i) the Company's Common Stock; (ii) The National Association of
Securities Dealers Automated Quotation System ("NASDAQ") National
Market System Index of Companies; and (iii) Media General Industry
Group representing Packaging and Container Companies, which consists of
other companies in the packaging and containers manufacturing industry.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN AMONG
BPI PACKAGING TECHNOLOGIES, INC.,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
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
<PAGE>
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 not 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.
<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.
On January 27, 1999, the Company undertook a <Strikeout>financing
</Strikeout> refinancing of <Strikeout>the</Strikeout> its
business<Strikeout>, the January 1999 Financing, with DGJ,</Strikeout>
which allowed the Company to avoid seeking protection from its creditors
<Strikeout>filing for</Strikeout> through a bankruptcy
filing , pay-off and terminate equipment leases that were in default
and provide <Strikeout>positive cash flow for the business to allow it to
continue its</Strikeout> 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. However, 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. 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
<Strikeout>DGJ warrant. Assuming the stockholders approve the increase of
the authorized number of</Strikeout> DGJ's warrant. As described below,
DGJ cannot exercise its warrant for these approximately 49,000,000
shares of Common Stock <Strikeout>and if DGJ were to exercise the warrant
in full, DGJ would own approximately 64% of the issued and
outstanding</Strikeout> unless and until the number of authorized
shares of Common Stock <Strikeout>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). Accordingly, the Securities and Exchange Commission
(the "SEC") may deem the issuance of the warrant to DGJ to be a change of
control of the Company. See "Certain Relationships and Related
Transactions."</Strikeout> is increased by that amount.
Also, as part of the January 1999 Financing, the Company issued
warrants to purchase <Strikeout>5,500,000</Strikeout> 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 .
<PAGE>
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:
Financial Consultant Warrant Shares
The Brantrock Group * 5,000,000
Global Financial Services, Inc. 500,000
Investor Awareness, Inc. 400,000
---------
5,900,000
* 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 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.
Performance
Management Warrant Shares Options
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
As a condition to <Strikeout>As part of</Strikeout> the
January 1999 Financing, the <Strikeout>Company and DGJ agreed that the
Company would use </Strikeout> 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 <Strikeout>SEC
and to offer rights</Strikeout> Securities and Exchange Commission in
order to offer to stockholders of the Company , other than DGJ,
the <Strikeout>Company or their affiliates,</Strikeout> proportionate
right to purchase up to 15,000,000 shares of Common Stock <Strikeout>at
a price of $0.04 per share, pro rata according to their ownership of Common
Stock</Strikeout> 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.
<PAGE>
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 <Strikeout>and not take any action intended to prevent the
consummation thereof</Strikeout>. In order to have the stockholders'
rights offering, it is necessary for the number of authorized shares of
Common Stock to be increased.
<Strikeout>It is not DGJ's intention to exercise its warrants in the
near future. However, if</Strikeout> The following table summarizes the
uses for the increase in the number of authorized shares of Common
Stock <Strikeout>is not increased by stockholder vote so as to fulfill all
of the requirements of the Securities Purchase Agreement and other related
agreements, DGJ may be forced to exercise its warrant to the extent shares
of Common Stock are reserved for such issuance (30,937,500 shares) and vote
in favor of the increase in the</Strikeout>
:
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
<Strikeout>Additionally, the proposed</Strikeout> 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.
DGJ's intention is not to exercise its warrants in the near future.
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 <Strikeout>shares of authorized Common Stock will ensure that shares can
be issued by the Company if needed, in connection with stock splits, stock
dividends, acquisitions and other corporate purposes. The Board of
Directors believes that it is beneficial to the Company to have the
additional shares available for such purposes without delay or the
necessity and expense of a special stockholders' meeting.
</Strikeout> authorized shares of Common Stock is not approved at the
July 1999 Annual Meeting, DGJ will exercise its warrants to the extent
necessary and, at a special meeting of stockholders, vote those shares in
favor of the increase in the authorized number of shares of Common Stock.
<Strikeout>No further action by the Company's stockholders would be
necessary to issue the additional</Strikeout> 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
<Strikeout>unless required by applicable law or regulatory agencies or by
the rules of any stock exchanges on which the Company's securities may then
be listed.</Strikeout> 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.
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.
<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 accouyntants 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 29, 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.
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.
<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 January 5, 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. 2 to the Annual Report on Form 10-K/A filed with the commission on
June 1, 1999:
. 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 Quarterly
Report on Form 10-Q, filed with the Commission on May 17, 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
<Strikeout>April 30,</Strikeout>
June_____, 1999
<PAGE>
<Strikeout>PRELIMINARY</Strikeout>
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
<Strikeout>June 3,</Strikeout> July 22, 1999
The undersigned hereby appoints Hanspeter Schulz and James F.
Koehlinger and each of them, as proxies of the undersigned, with full power
of substitution, to vote all of the shares of stock of BPI Packaging
Technologies, Inc. (the "Company") which the undersigned may be entitled to
vote at the Annual Meeting of Stockholders of the Company to be held at The
Courtyard by Marriott, 35 Foxborough Boulevard, Foxborough, Massachusetts
on <Strikeout>June 3</Strikeout> July 22 , 1999, at 10:00 a.m.,
eastern time, and at any and all continuations and adjournments thereof,
with all powers that the undersigned would possess if personally present,
upon and in respect of the following matters and in accordance with the
following instructions, with discretionary authority as to any and all
other matters that may properly come before the meeting.
(Continued, and to be signed on the other side)
<PAGE>
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE
NOMINEES LISTED IN PROPOSAL 1, AND FOR PROPOSALS 2 AND 3, AS MORE
SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS
ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTORS
LISTED BELOW AND A VOTE FOR PROPOSALS 2 AND 3. THE BOARD MAY HAVE A
CONFLICT OF INTEREST IN RECOMMENDING THE VOTE FOR PROPOSAL 2 (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.)
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
<PAGE>
I PLAN TO ATTEND THE MEETING
YES NO
Date: ______________________________
_____________________________________
_____________________________________
Signature
_____________________________________
Signature (if held jointly)
Please sign exactly as your name appears hereon. If the stock is
registered in the names of two or more persons, each should sign.
Executors, administrators, trustees, guardians or attorneys-in-fact should
add their titles. If signer is a corporation, please give full corporate
name and have a duly authorized officer sign, stating title. If signer is
a partnership, please sign in partnership name by authorized person.
Please vote, date and promptly return this proxy in the enclosed envelope
which is postage prepaid if mailed in the United States.
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.
455 SOMERSET AVENUE
NORTH DIGHTON, MA 02764
June 1, <Strikeout>April 13,</Strikeout> 1999
VIA EDGAR
- ----------------
Office of Document Control/EDGAR
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: BPI PACKAGING TECHNOLOGIES, INC.
COMMISSION FILE NO.: 1-10648
SCHEDULE 14(A) AND PRELIMINARY PROXY STATEMENT
,AMENDMENT NO. 1
Ladies and Gentlemen:
Enclosed for filing on this date via EDGAR are Schedule 14(a) and a
Preliminary Proxy Statement Amendment No. 1 for BPI Packaging
Technologies, Inc., a Delaware corporation with its principal executive
offices located at 455 Somerset Avenue, North Dighton, Massachusetts
02764.
Very truly yours,
/s/ Hanspeter <Strikeout>Schultz</Strikeout>
Schulz
President
Enclosures
cc: Don S. Hershman, Esq.
