<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted By Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under 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: N/A
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: N/A
(2) Form, Schedule or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date Filed: N/A
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.
455 SOMERSET AVENUE
BUILDING NO. 3
NORTH DIGHTON, MA 02764
- --------------------------------------------------------------------------------
May 8, 2000
Dear Stockholder:
You are cordially invited to attend our Annual Meeting of Stockholders
on Thursday, June 8, 2000. The meeting will be held at The Courtyard by
Marriott, 35 Foxborough Boulevard, Foxborough, Massachusetts, at 10:00 a.m.,
eastern time.
The 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 the election of directors and the ratification of the Board of
Directors' appointment of independent accountants.
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 JUNE 8, 2000
--------------------
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, June 8, 2000
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 three Class III directors for a term expiring in 2003;
2. To ratify the appointment of Livingston & Haynes, P.C. as the Company's
independent accountants for the year ending December 31, 2000; and
3. 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 April 7, 2000
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, you may revoke the proxy and vote in person,
if you wish to do so.
This Proxy Statement, the proxy, and the Company's Annual Report on
Form 10-K for the year ended December 31, 1999 were first mailed to stockholders
on or about May 8, 2000.
By Order of the Board of Directors
James F. Koehlinger
ACTING CHIEF OPERATING OFFICER
North Dighton, Massachusetts
April 28, 2000
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.
455 SOMERSET AVENUE
NORTH DIGHTON, MASSACHUSETTS 02764
APRIL 28, 2000
---------------
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, June 8, 2000, and at any adjournments thereof.
At the Annual Meeting, holders of common stock of the Company (the
"Common Stock") and holders of the Series A Convertible Preferred Stock of the
Company (the "Series A Preferred Stock") will be asked to consider and vote upon
the following proposals (the "Proposals"): (i) the election of three Class III
directors for a term expiring in 2003; and (ii) the ratification of Livingston &
Haynes, P.C. as the Company's independent accountants for the year ending
December 31, 2000. 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 the Company's Annual Report on Form 10-K for the year ended
December 31, 1999 (the "Form 10-K"). This Proxy Statement, the proxy, and the
Form 10-K were first mailed to stockholders on or about May 8, 2000.
RECORD DATE, VOTING
At the close of business on April 7, 2000, the record date for the
determination of stockholders of the Company entitled to receive notice of and
to vote at the Annual Meeting (the "Record Date"), 47,068,221 and 183,758 shares
of the Company's Common Stock and Series A Preferred Stock, respectively, were
issued and outstanding. Each share of Common Stock and Series A Preferred Stock
is entitled to one vote upon each of the matters to be voted on at the Annual
Meeting. The Common Stock and Series A Preferred Stock will vote together, as a
class, on each Proposal. The presence, in person or by proxy (including
abstentions and "broker non-votes"), of at least a majority of the outstanding
shares of securities entitled to vote, including Common Stock and Series A
Preferred Stock, is required for a quorum.
If you sign and return your proxy card but do not specify your choices,
your shares will be voted as recommended by the Board of Directors. The Board of
Directors recommends that you vote "For" the three nominees to the Board of
Directors who are listed in this Proxy Statement; and "For" the appointment of
Livingston & Haynes, P.C. as the Company's independent accountants for the year
<PAGE>
ending December 31, 2000. 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 as described in Proposal No. 1, "Certain
Relationships and Related Transactions," may have a conflict of interest in
recommending stockholder approval of the Proposals to be voted upon at the
Annual Meeting. See "Security Ownership of Certain Beneficial Owners and
Management" for a description of the securities held by the directors.
There are different voting requirements for the two Proposals.
Directors will be elected by a plurality of the votes cast at the Annual
Meeting in person or by proxy, meaning the three nominees receiving the most
votes will be elected as directors. Only votes cast for a nominee will be
counted, except that the accompanying proxy will be voted for the three
nominees unless the proxy contains instructions to the contrary. Abstentions,
broker non-votes and instructions on the accompanying proxy to withhold
authority to vote for one or more of the nominees will result in those
nominees receiving fewer votes. However, such action will not reduce the
number of votes otherwise received by the nominee.
The 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 proposal and will not be counted as entitled to vote.
As of March 31, 2000, the directors and executive officers of the
Company as a group own or may be deemed to control 84,510,000 shares of Common
Stock and Series A Preferred Stock, constituting approximately 68.57% 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 specific choice, shares will be voted in
favor of the election of those persons named in this Proxy Statement as
directors and in favor of the other proposal set forth herein.
SOLICITATION
The Company will bear the entire cost of the solicitation of proxies
from its stockholders, including preparation, assembly, printing and mailing of
this Proxy Statement, the proxy and any additional information furnished to
stockholders. Copies of solicitation materials will be furnished to banks,
brokerage houses, fiduciaries and custodians holding in their names shares of
the Company's stock beneficially owned by others to forward to such beneficial
owners. Original solicitation of proxies by mail may be supplemented by
telephone, facsimile, telegram or personal solicitation by directors, officers
or other regular employees of the Company. No additional compensation will be
paid to such persons for such services.
2
<PAGE>
American Stock Transfer & Trust Company, transfer agent and registrar
for the Company's Common Stock and Series A Preferred Stock, will be paid its
customary fee, estimated to be $5,000.
3
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
---------------------
Under the Company's Certificate of Incorporation and By-laws, each as
amended, the Board of Directors is classified into three classes, with
approximately one-third of the directors standing for election each year for a
three-year term. A classified board is designed to assure continuity and
stability in the Board of Directors' leadership and policies. Gary R. Edidin,
Bruce M. Fleisher and Theodore L. Koenig serve as the Class III directors and
will be voted on at the Annual Meeting.
David N. Laux and Hanspeter Schulz were the Class II directors,
however, Dr. Schulz resigned as a director on February 22, 2000 and Mr. Laux
resigned as a director on April 3, 2000. The Board of Directors is currently
considering several individuals to serve as Class II directors until the Annual
Meeting of Stockholders to be held in the year 2001. Ivan J. Hughes and Allen S.
Gerrard are the Class I directors and serve until the Annual Meeting of
Stockholder to be held in the year 2002. 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 agreements.
Directors will be elected by a plurality of the votes cast at the
Annual Meeting in present or by proxy, meaning the three 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 three director
nominees unless the proxy contains instructions to the contrary. Abstentions,
broker non-votes and instructions on the accompanying proxy to withhold
authority to vote for one or more of the nominees will result in those nominees
receiving fewer votes. However, such action will not reduce the number of votes
otherwise received by the nominee. Four of the Company's directors are either
affiliated with DGJ or have been designated by DGJ, which due to DGJ's
affiliation with the Company as described in "Certain Relationships and Related
Transactions," may have a conflict of interest in recommending stockholder
approval of this proposal and the proposal to ratify the appointment of the
Company's independent accountants. See "Security Ownership of Certain Beneficial
Owners and Management" for a description of the securities held by the
directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION
OF THE NOMINEES AS CLASS III DIRECTORS OF THE COMPANY TO SERVE UNTIL THE YEAR
2003.
The following table provides information regarding the Nominees and
continuing directors of the Company:
4
<PAGE>
<TABLE>
<CAPTION>
Class to which
Date First Nominee or
Became Positions and Offices Director
Name Age Director With the Company Belongs
- ---- --- -------- ---------------- -------
<S> <C> <C> <C> <C>
NOMINEES:
Gary R. Edidin 55 1/27/99 Director III
Bruce M. Fleisher 69 4/30/99 Director III
Theodore L. Koenig 41 4/30/99 Director III
CONTINUING DIRECTORS:
Ivan J. Hughes 71 7/13/98 Chairman of the Board of Directors I
Allen S. Gerrard 64 1/27/99 Director I
</TABLE>
BACKGROUND
The principal occupations during the past five years of each of the
Company's Directors and Nominees are as follows:
NOMINEES
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 a 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 1996 to 1998, he served as the Vice President and Division
Manager, Chicago for the Supply Systems Division of Unisource Worldwide, Inc.,
5
<PAGE>
a wholesale distributor of paper and packaging supplies. From 1993 to 1996, he
was the President and owner of Darter, Inc. In 1996, Darter, Inc. was purchased
by Unisource Worldwide, Inc. From 1996 to 1997, he was a member of the Board of
Directors and Chairman of the Industrial Committee for the National Paper Trade
Association. Mr. Fleisher received his Bachelor of Science degree in Economics
from the University of Pennsylvania, Wharton School, and his Masters degree in
Business Administration from George Washington University.
THEODORE L. KOENIG. Mr. Koenig has served as a Director of the Company
since April 1999. In 1999, Mr. Koenig founded and since has served as President
and Chief Executive Officer of Hilco Capital, L.P., a fund providing junior
secured debt and senior secured bridge financing. Mr. Koenig also serves as
President of Monroe Investments, Inc., an investment and merchant banking firm
specializing in strategic growth investment opportunities. Mr. Koenig had been a
partner with Holleb & Coff, a Chicago-based law firm, from 1987 until June 1999.
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.
CONTINUING DIRECTORS
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 36 years and presently serves on the Executive and
Compensation Committees. Mr. Hughes received a Bachelor of Science degree in
Mechanical Engineering from Lafayette College and completed his graduate studies
at Columbia University.
ALLEN S. GERRARD. Mr. Gerrard has served as a Director of the
Company since January 1999. Since February 1999, Mr. Gerrard has served as a
Director of Fortune Financial Systems, Inc. Since 1996, Mr. Gerrard has
served as a Director of Deere Park Capital Management, Inc., an investment
and merchant banking firm, and since April 1998 he has also served as Vice
Chairman of such company. Since January 1999, Mr. Gerrard has been a Member
of the Board of Managers and Treasurer of DGJ. From November 1998 to March
1999, Mr. Gerrard served as Director of McConnell Dowell Corporation,
Limited, a publicly traded company involved in construction. Since 1997, Mr.
Gerrard has served as a Director of Dominion Bridge Company, a publicly
traded construction and shipbuilding company, and since April 1998, he has
also served as Chairman of such 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.
EXECUTIVE OFFICERS
The executive officers of the Company, their ages and positions held in
the Company are as follows:
6
<PAGE>
<TABLE>
<CAPTION>
Name Age Positions With the Company
---- --- --------------------------
<S> <C> <C>
James F. Koehlinger 63 Acting Chief Operating Officer,
Chief Financial Officer, Treasurer
Peter W. Blackett 51 Senior Vice President of Sales
Richard H. Nurse, Ph.D. 55 Vice President of Technology
</TABLE>
No director or executive officer is related by blood, marriage or
adoption to any other director or executive officer.
JAMES F. KOEHLINGER. Mr. Koehlinger has been the Company's Acting Chief
Operating Officer since February 2000 and Chief Financial Officer and Treasurer
since January 1999. He previously served as a consultant to the Company, on a
part-time basis, from August 1998 to January 1999. From October 1996 to January
1999, Mr. Koehlinger was a senior consultant with Benchmark, a financial
consulting firm. He previously served as the Company's Chief Financial Officer
from February 1988 to October 1996. Mr. Koehlinger received a Bachelor of
Science degree from Indiana University and a Master of Business Administration
degree from Clark University. He is also a certified public accountant.
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.
RICHARD H. NURSE, PH.D. Dr. Nurse has been the Company's Vice President
of Technology since November 1999. He served as the Company's Vice President of
Manufacturing from January 1999 to November 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.
SIGNIFICANT EMPLOYEES
The following employees are not executive officers of the Company, but
are expected to make significant contributions to the business of the Company:
7
<PAGE>
<TABLE>
<CAPTION>
Name Age Positions With the Company
---- --- --------------------------
<S> <C> <C>
C. Jill Beresford 45 Vice President of Marketing
Tracy L. McGrath 34 Vice President of Sales
Jay Shapiro 54 Vice President of Operations
</TABLE>
C. JILL BERESFORD. Ms. Beresford has been the Company's Vice President
of Marketing since January 1999. From June 1998 until January 1999, she was the
Company's Chairman, Chief Executive Officer and Chief Financial Officer. She
also served as the Chief Operating Officer of the Company from 1995 to 1998. She
served as the Company's President from July 1996 to June 1998. She was Treasurer
of the Company from May 1990 to January 1999 and a Director of the Company from
March 1989 until January 1999. From May 1990 to July 1995, Ms. Beresford was the
Company's Vice President of Marketing. Ms. Beresford attended the University of
Guelph, Ontario, Canada and received a Masters degree in Business Administration
from Boston University.
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.
JAY SHAPIRO. Mr. Shapiro has been the Company's Vice President of
Operations since November 1999. From 1997 to 1999, Mr. Shapiro was the General
Manager of Manufacturing for Eldorado Industries Plasicas of Sao Paulo, Brazil.
From 1991 to 1997, Mr. Shapiro was the Plant Manager of World-Pak Corporation,
Lolita, Texas. Mr. Shapiro received his Bachelor of Science degree in Secondary
Education form the University of Wyoming.
BOARD OF DIRECTORS, BOARD COMMITTEES AND MEETINGS
The Board of Directors has established an Audit Committee, a
Compensation Committee and an Executive Committee. Currently, the Company does
not have a Nominating Committee. The Board of Directors held three meetings
during 1999. Each director attended at least 75% of all meetings of the Board of
Directors held during 1999.
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, Gary R. Edidin and Theodore L. Koenig are the current
members of the Executive Committee. The Executive Committee met twice in 1999.
AUDIT COMMITTEE
The Board of Directors has established an Audit Committee, whose
current members are Gary R. Edidin, Bruce M. Fleisher and Allen S. Gerrard. The
Audit Committee met twice in 1999.
8
<PAGE>
The Audit Committee of the Board of Directors is responsible for
providing independent, objective oversight of the Company's accounting functions
and internal controls. The Audit Committee acts under a written charter adopted
and approved by the Audit Committee on August 24, 1999. A copy of the charter is
attached to the Proxy Statement as Appendix A. The charter states that the Audit
Committee is comprised of independent directors. However at this time, only one
member of the Audit Committee, Mr. Bruce M. Fleisher, who acts as Chairman, is
independent as defined by the National Association of Securities Dealers'
listing standards. The Board of Directors is currently considering several
individuals to serve as members of the Board of Directors. New independent
members of the Board of Directors may be appointed to serve on the Audit
Committee.
The responsibilities of the Audit Committee include recommending to the
Board of Directors an accounting firm to be engaged as the Company's independent
accountants. Additionally, and as appropriate, the Audit Committee reviews and
evaluates, and discusses and consults with the Company's management, the
Company's internal audit personnel and the independent accountants regarding the
following: (i) the plan for, and the independent accountants' report on, each
audit of the Company's financial statements; (ii) the Company's financial
disclosure documents, including all financial statements and reports filed with
the Securities and Exchange Commission or sent to stockholders; (iii) changes in
the Company's accounting practices, principles, controls or methodologies, or in
the Company's financial statements; (iv) significant developments in accounting
rules; (v) the adequacy of the Company's internal accounting controls, and
accounting, financial and auditing personnel; and (vi) the establishment and
maintenance of an environment at the Company that promotes ethical behavior.
The Audit Committee is responsible for recommending to the Board of
Directors that the Company's financial statements be included in the Company's
Annual Report. The Audit Committee took a number of steps in making this
recommendation for 1999. First, the Audit Committee discussed with Livingston &
Haynes, P.C., the Company's independent accountants for 1999, those matters
Livingston & Haynes, P.C. communicated to and discussed with the Audit Committee
under applicable auditing standards, including information regarding the scope
and results of the audit. These communications and discussions are intended to
assist the Audit Committee in overseeing the financial reporting and disclosure
process. Second, the Audit Committee discussed Livingston & Haynes, P.C.'s
independence with Livingston & Haynes, P.C. and received a letter from
Livingston & Haynes, P.C. concerning independence as required under applicable
independence standards for auditors of public companies. This discussion and
disclosure informed the Audit Committee of Livingston & Haynes, P.C.'s
independence, and assisted the Audit Committee in evaluating such independence.
Finally, the Audit Committee reviewed and discussed with management of the
Company and Livingston & Haynes, P.C. the Company's audited financial
statements. Based on the discussions with Livingston & Haynes, P.C. concerning
the audit, the independence discussions, and the financial statement review, and
such other matters deemed relevant and appropriate by the Audit Committee, the
Audit Committee recommended to the Board of Directors that the Company's
financial statements be included in its 1999 Annual Report on Form 10-K.
9
<PAGE>
The Audit Committee believes strongly in the principles underlying the
requirement that independent accountants maintain their independence in strict
compliance with applicable independence rules.
Audit Committee
Gary R. Edidin
Bruce M. Fleisher
Allen S. Gerrard
COMPENSATION COMMITTEE
Gary R. Edidin, Bruce M. Fleisher and Allen S. Gerrard serve on the
Compensation Committee. The Compensation Committee did not meet during 1999.
However, in connection with the negotiations by and between the Company and DGJ
with respect to the January 1999 Financing, as hereinafter defined, David N.
Laux, a Director of the Company from January 1993 through April 3, 2000, and
Messrs. Gary R. Edidin and Allen S. Gerrard had numerous discussions with
respect to structuring the compensation packages for the Company's executive
officers subsequent to the consummation of the January 1999 Financing. Further
review of these compensation packages, and the compensation packages provided to
executive officers and other significant employees retained by the Company
subsequent to the January 1999 Financing, were reviewed by the Company's Board
of Directors in its entirety. Mr. Bruce M. Fleisher was added to the Company's
Compensation Committee on April 27, 1999 by the Board of Directors.
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.
The compensation of the Company's former Chief Executive Officer was
based upon analysis by the predecessor Compensation Committee of other
comparable public companies' chief executive officers' compensation and each's
efforts and success in the following areas: establishing strategic goals and
objectives for the long-term growth of the Company; raising equity and debt
capital needed to allow the Company to erase its working capital deficit and
adequately capitalizing the Company to move forward; improving the Company's
10
<PAGE>
operating results; and establishing critical strategic partnerships with vendors
and distribution channels. The Compensation Committee anticipates utilizing
similar analyses when the Company retains its new Chief Executive Officer.
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
None of the executive officers of the Company have served on the Board
of Directors of any other entity that has had any of such entity's officers
serve either on the Company's Board of Directors or Compensation Committee.
However, Ivan J. Hughes, the Chairman of the Board of the Company, serves on the
Compensation Committee of Duro Bag, a customer of the Company. See "Certain
Relationships and Related Transactions" below.
CONCLUSION
The Compensation Committee believes that the executive compensation
plan implemented as part of the January 1999 Financing is consistent with the
overall corporate strategy for growth in sales, manufacturing and earnings and
stockholder value.
Compensation Committee
Gary R. Edidin
Bruce M. Fleisher
Allen S. Gerrard
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 the years ended 1999, 1998 and the 10 months ended December 31, 1997, of
those persons who were, at December 31, 1999: (i) the Company's Chief Executive
Officer (including persons who held this position at any time during the periods
set forth in the table); and (ii) other executive officers of the Company
receiving total cash and bonus compensation in excess of $100,000. The Company
did not grant any restricted stock awards or stock appreciation rights or make
any long-term incentive plan payouts to the individuals named in the tables
below during the periods indicated.
11
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation Awards
-------------------
Annual Compensation Securities
------------------- Underlying All Other
Name and Principal Position Fiscal Year Salary(1) Bonus(2)(3) Options(#) Compensation
- --------------------------- ----------- --------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Richard H. Nurse(4) 1999 $125,000 $0 0 $ 4,532(4)
Vice President of Technology, 1998 $119,115 $0 0 $ 8,935(4)
Manufacturing, Technical 1997 $ 64,399 $0 0 $ 3,410(4)
Development
Peter W. Blackett(5) 1999 $ 98,009 $0 0 $ 13,091(5)
Senior Vice President of Sales
James F. Koehlinger 1999 $134,793 $0 0 $ 0
Acting Chief Operating Officer, 1998 $ 71,854 $0 0 $ 0
Chief Financial Officer, 1997 $ 5,482 $0 0 $ 0
Treasurer, Consultant
Hanspeter Schulz, Ph.D.(6) 1999 $146,579 $0 0 $ 7,953(6)
Former President, Former Chief 1998 $ 30,702 $0 0 $ 0
Executive Officer, Consultant
C. Jill Beresford(7) 1999 $159,423 $0 0 $ 0
Vice President of Marketing, 1998 $182,506 $0 0 $ 12,848(7)
Former Chief Executive 1997 $150,000 $0 0 $ 6,424(7)
Officer and Chairman of the
Board of Directors
Dennis N. Caulfield(8) 1998 $169,846 $0 0 $ 9,923(8)
Former Chief Executive Officer 1997 $266,666 $0 0 $ 43,323(8)
Alex F. Vaicunas(9)
Consultant, 1999 $ 45,912 $0 0 $ 0
Former Vice President of 1998 $124,856 $0 0 $ 1,746(9)
Film Sales 1997 $104,167 $0 0 $ 3,150(9)
Paul J. DeCristofaro(10) 1998 $ 32,332 $0 0 $ 668(10)
Former Chief Financial 1997 $ 83,410 $0 0 $ 0
Officer
</TABLE>
(1) Amounts shown indicate cash compensation earned and received by such
individuals. No amounts were earned but deferred at the election of
those individuals. Executive officers participate in the Company's
group life and health insurance.
(2) From July 1, 1993 through December 31, 1998, Mr. Caulfield, Ms. Beresford
and Mr. Vaicunas were eligible to participate in an executive
compensation program. This program 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. However, at 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 under this program. This
program is no longer in effect.
(3) In connection with the January 1999 Financing and to incentivize senior
management of the Company, the respective consulting or employment
12
<PAGE>
agreements of Mr. Koehlinger, Dr. Nurse, Dr. Schulz, Ms. Beresford,
Mr. Hughes and Mr. Blackett provide they will receive options to
purchase Common Stock 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. Such performance
goals are described below in "Employment and Consulting Contracts." As
the Company did not meet its financial performance goals in 1999, none
of these individuals received the options to purchase Common Stock for
such year.
(4) 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,
Vice President of Manufacturing to November 1999 and Vice President of
Technology since November 1999.
(5) In the periods presented, the Company paid approximately $13,090 for
expenses incurred in connection with the moving of Mr. Blackett's
personal residence to an area reasonably close to the Company's office.
(6) Dr. Schulz served as the Company's President and Chief Executive Officer
from January 27, 1999 through February 22, 2000, when he resigned to
pursue personal interests. Dr. Schulz has been serving the Company as a
consultant since February 22, 2000. In the periods presented, the Company
paid approximately $6,053 for expenses incurred related to the rental of
an apartment located near the Company's office and paid $1,900 to
terminate such lease due to Dr. Schulz's resignation on February 22,
2000. The Company also made automobile and insurance payments of
approximately $818.99 per month for an automobile for Dr. Schulz.
(7) 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. This amount includes $3,655 and $3,655 the Company
contributed to Ms. Beresford's 401(k) account during 1998 and the 10
months ended December 31, 1997, 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 ceased. Ms. Beresford's
employment as the Chairman of the Board of Directors terminated on
January 27, 1999. Since such date, she has been serving the Company as
the Vice President of Marketing.
(8) 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 from
January through June 1998 and the 10 months ended December 31, 1997 for
an automobile for Mr. Caulfield. This amount includes $0, and $6,400 the
Company contributed to Mr. Caulfield's 401(k) account during 1998 and the
10 months ended December 31, 1997, respectively. Mr. Caulfield's
employment was terminated on July 2, 1998.
(9) 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 made by the Company on behalf of Mr. Vaicunas of
approximately $760 per month for an automobile. Mr. Vaicunas reimbursed
the Company for any personal use of the automobile. This amount includes
$0 and
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<PAGE>
$2,500 the Company contributed to Mr. Vaicunas' 401(k) account during
1998 and the 10 months ended December 31, 1997, respectively. Mr.
Vaicunas served as the Vice President of Film Sales until December 26,
1998.
(10) This includes $668 the Company contributed to Mr. DeCristofaro's 401(k)
account during 1998. Mr. DeCristofaro served as Chief Financial Officer
until March 1998.
STOCK OPTION PLANS
In May 1990, the Company adopted the 1990 Stock Option Plan. On October
25, 1993, the Company approved the 1993 Stock Option Plan. The 1990 and 1993
Stock Option Plans provide 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 $100,000 that is
exercisable during any one calendar year. Options granted under the stock option
plans generally expire ten years from the date they are granted.
AGGREGATED OPTION EXERCISED IN THE LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Securities Underlying In-the-Money
Unexercised Options Options
at FY-End Exercisable/
Shares Acquired Exercisable/ Unexercisable
Name On Exercise Value Realized($) Unexercisable ($)(1)
- ---- ----------- ----------------- ------------- ------
<S> <C> <C> <C> <C>
C. Jill Beresford ......... 0 0 163,224/0 0 / 0
</TABLE>
(1) In-the-money options are those options for which the fair market
value of the underlying Common Stock is greater than the exercise
price of the option. On December 31, 1999, the fair market value
of the Company's Common Stock underlying the options (as
determined by the last sale price quoted on NASDAQ OTC Bulletin
Board) was $0.09. Since the exercise price of all of the options
reflected in this table is greater than $0.09, the options held by
this individual were not in-the-money and are, therefore, not
included in this calculation.
401(K) RETIREMENT SAVINGS PLAN
The Company provides an employee retirement savings plan under Section
401(k) of the 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 dollar for dollar of annual
401(k) contributions up to 3% and $0.50 for a dollar for the next 2% of their
salary.
14
<PAGE>
EMPLOYMENT AND CONSULTING CONTRACTS
In conjunction with the January 1999 Financing, on January 27, 1999,
the Company entered into an employment agreement with each of Mr. Koehlinger,
Dr. Nurse, Ms. Beresford and Dr. Schulz and a consulting agreement with Mr.
Hughes. In addition, on March 22, 1999, the Company entered into an employment
agreement with Mr. Blackett. The basic terms of these agreements are listed
below.
EMPLOYMENT AND CONSULTING AGREEMENT TERMS
<TABLE>
<CAPTION>
Employee/consultant Base Salary/fee Term Warrant Shares
- ------------------- --------------- ---- --------------
<S> <C> <C> <C>
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
C. Jill Beresford $125,000 7/1/99 - 6/30/00 937,000
Hanspeter Schulz (1) $150,000 1/27/99 - 1/27/02 2,188,000
Ivan J. Hughes $ 52,000 1/27/99 - 1/27/02 937,000
Peter W. Blackett $125,000 3/22/99 - 3/21/02 0
</TABLE>
(1) On February 22, 2000, Dr. Schulz resigned as President, Chief Executive
Officer and as a member of the Board of Directors of the Company to
pursue personal interests. On such date, his employment agreement was
terminated and the Company entered into a consulting agreement with him
for a term expiring on February 22, 2002. Under such agreement, Dr.
Schulz performs consulting services on an independent contractor basis
and his consulting fee is $52,000 per annum. This agreement is subject
to termination at any time upon 30 days written notice. In conjunction
with Dr. Schulz's resignation, the Board of Directors promoted Mr.
Koehlinger, the Company's Chief Financial Officer and Treasurer, to the
position of Acting Chief Operating Officer.
Also, in consideration of Mr. Koehlinger, Dr. Nurse, Ms. Beresford, Dr.
Schulz and Mr. Hughes entering into his or her agreement, the Company granted
each of these individuals a warrant to purchase a certain number of shares of
Common Stock at $0.04 per share. Such warrants expire on January 27, 2009.
Please refer to the chart above, under the title "Warrant Shares," for the
number of shares of Common Stock each individual's warrant is exercisable into.
Each of these individuals has paid to the Company their respective amount due
under these warrants. Mr. Koehlinger, Dr. Nurse, Ms. Beresford and Dr. Schulz
borrowed funds in the aggregate amount of $262,520 from DGJ necessary to
exercise these warrants. In consideration for the loan from DGJ to these
individuals, these individuals pledged the shares issuable upon exercise of the
warrants. Each individual, except Ms. Beresford, has satisfied his obligations
under such loans from DGJ. As of March 31, 2000, 6,563,000 of the 7,500,000
issued warrant shares were converted into Common Stock by each individual.
In connection with the January 1999 Financing and to incentivize senior
management of the Company, the respective consulting or employment agreements of
Mr. Koehlinger, Dr. Nurse, Ms. Beresford, Mr. Hughes and Mr. Blackett provide
they 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)
15
<PAGE>
Federal, state and local income taxes; (c) depreciation; (d) amortization of
intangibles, as computed by the Company's accountants in accordance with
generally accepted accounting principals, consistently applied; and (e) any
expenses or other charges associated with the investment, loans, and equipment
leases made by DGJ to the Company and all other charges ("EBITDA"), equals or
exceeds one of the EBITDA performance goals as stated in the employment or
consulting agreements, the Company shall grant such individuals options to
purchase a certain number of shares of Common Stock. The maximum number of
shares of Common Stock, in the aggregate, Mr. Koehlinger, Dr. Nurse, Ms.
Beresford, Mr. Blackett and one other significant employee, Ms. McGrath, can
purchase under these options is 11,391,000 shares. Dr. Schulz's employment
agreement provided Dr. Schulz the right to receive 3,359,000 options to purchase
Common Stock. However, at the time of his resignation as the Company's
President, his employment agreement was terminated and such options were
cancelled. Dr. Schulz's consulting agreement entered into with the Company does
not provide for performance-based options. As the Company did not meet its
financial performance goals in 1999, none of these individuals received the
options to purchase Common Stock for such year.
Each of the employment and consulting agreements contains a covenant
not to compete and a confidentiality provision. At the end of the terms of
employment of Mr. Koehlinger, Dr. Nurse 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.
During 1997 and 1998, 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. However, Ms. Beresford's employment agreement was
renewed for an additional one year term, which term expired on June 30, 1999.
Ms. Beresford entered into a new employment agreement with the Company in
connection with the January 1999 Financing, as described above.
COMPENSATION OF DIRECTORS
All outside Directors of the Company are paid $1,875 each per calendar
quarter. No other Directors receive any compensation. 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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Ivan J. Hughes, the Company's Chairman of the Board, is the President
of the Plastic's Division, and a member of the Executive and Compensation
Committees of Duro Bag. For the year ended December 31, 1999 and the three
months ended March 31, 2000, Duro Bag issued purchase orders to the Company for
$3,625,654 and $351,122, respectively, to purchase bags for Duro Bag customers.
The Company manufactures these products on behalf of Duro Bag for its customers.
The Company sells these products on terms as contracted between Duro Bag and its
customers, which terms are equal, if not better, than the Company could obtain
from its other customers for these products. There are no
16
<PAGE>
assurances that the Company will receive similar orders from Duro Bag during the
remainder of this year.
In November 1990, the Company established an officer's loan receivable
from Dennis N. Caulfield, its then Chairman for $132,197. The note was amended
in April 1998 and the interest rate changed to 6% effective from November 1990
and is now payable on or before January 1, 2001. Interest on the loan, along
with advances for travel not offset by expense records, caused the loan balance
to equal $586,978 as of December 31, 1997. Mr. Caulfield did not make any
payments against the loan from the period beginning 1990 through December 31,
1997. Accordingly, the Company reserved the full amount of this loan on that
date. Also, no payments were made in 1998 or 1999. In addition, the Company
paid, on behalf of Mr. Caulfield, approximately $36,000 of a $200,000 personal
income tax levy imposed by the Massachusetts Department of Revenue on Mr.
Caulfield in exchange for an interest bearing note due on or before June 30,
1998, which has not yet been repaid. This note was reserved for as of December
31, 1999.
Effective February 26, 1994, Ronald Caulfield exchanged his 49,500
shares of common stock of RC America, Inc., a former subsidiary of the Company,
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 provided 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 1999, 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 contained demand and piggy-back registration rights for the
shares. The Company suspended operations and terminated the employment of Ronald
Caulfield, the Chief Executive Officer and President of RC America on June 27,
1998.
Theodore L. Koenig, a Director of the Company, was a partner with
Holleb & Coff, a Chicago-based law firm, from 1987 through June 1999. Holleb &
Coff has been providing legal services to the Company since February 1999.
On January 27, 1999, the Company entered into a Securities Purchase
Agreement (the "Agreement") with DGJ (the "January 1999 Financing"), under which
the Company issued and sold to DGJ:
1. a Promissory Note in the aggregate principal amount of $3,200,000 (
the "Note");
2. a Common Stock Purchase Warrant for the purchase of up to
80,000,000 shares of the Company's Common Stock, at an exercise price of
$0.04 per share, exercisable until January 27, 2009; and
3. 1,629,930 shares of Series C Preferred Stock of the Company for
$100.
In connection with the January 1999 Financing, DGJ required certain
members of the Company's management, C. Jill Beresford, James F. Koehlinger,
Hanspeter Schulz, Richard H. Nurse and Ivan J. Hughes, to invest $300,000, in
the aggregate, in the Company's warrants. As of March 31, 2000, 6,563,000 of the
7,500,000 issued warrant shares were converted into Common Stock.
17
<PAGE>
As part of the January 1999 Financing, the Company entered into a
factoring agreement with Franklin Capital Corporation ("Franklin"), an entity
affiliated with Gary Edidin, one of the Company's Directors and a member of DGJ,
whereby the Company, with full recourse, assigned and sold to Franklin its
entire interests in all of its present and future accounts and similar rights
and instruments arising from its sales of goods, then existing or created
thereafter. The Company paid Franklin a factoring fee in an amount equal to 2%
of the gross amount of such receivables, however, the minimum commission for any
receivable was $5.00.
Under this factoring agreement, Franklin was able to advance to the
Company up to 85% of the purchase price of the Company's receivables as they
were created, subject to a maximum advance at any time outstanding of
$2,000,000. Interest was charged for the number of days that advances of the
purchase price of the receivables were made to the Company prior to the date
they were paid and the number of days that the advances from Franklin's account
remain outstanding at the prime rate plus 2% per annum, except that interest was
in no event less than 8% per annum. The Company retired this factoring agreement
on August 19, 1999 when the Company entered into the relationship with LaSalle
Business Credit, Inc. ("LaSalle") and DGJ, as described below.
The Company also issued a demand revolving note to Franklin in the
principal sum of $1,000,000 at an interest rate of 5% above the prime rate,
however, the interest charged could not be less than a minimum annual fixed rate
of 12 3/4%. This note was secured by a security agreement between the Company
and Franklin, which granted Franklin a continuing security interest in the
Company's present and future accounts, inventory, equipment and other property.
Pursuant to the terms of this agreement, the amount eligible to be advanced to
the Company under this revolving note was limited to the lesser of $1,000,000 or
the sum of 50% of eligible inventory and 50% of eligible raw materials. The
Company retired its obligations under this note on August 19, 1999.
The Company also refinanced its equipment, capital and operating leases
in January 1999 when it entered into an equipment lease with DGJ. The new lease
carries no debt reduction obligation and is treated as long-term debt. The
combined monthly payments under the retired leases were reduced from
approximately $305,000 per month to $102,000 per month under the new equipment
lease with DGJ. The term of the lease is ten years and its monthly payment of
$102,000 represents interest only.
The Company is in default on the equipment lease with DGJ as it failed
to make lease payments of $102,000 per month for the months of September 1999
through April 2000, or $816,000 in total. As this has caused an event of
default, as defined in the equipment lease, DGJ is entitled to various rights
and remedies under the equipment lease and the Agreement including, but not
limited to, the right to have any and all remaining sums under the lease become
immediately due and payable and the right to repossess the leased equipment. As
of April 30, 2000, DGJ has indicated a willingness to defer exercising its
rights and remedies upon default pending discussion with the Company regarding
how the equipment lease default is to be cured.
Also in January 1999, the Company entered into agreements with most of
its unsecured creditors that provided for a discounted payment in February 1999
or permitted the Company to pay the entire balance without interest over a
three-year period.
18
<PAGE>
On August 19, 1999, the Company entered into a series of transactions
with LaSalle and DGJ to refinance the indebtedness incurred as part of the
January 1999 Financing. The Company's loan agreement with LaSalle provides the
Company with a $4,000,000 revolving line of credit. This credit facility is
secured by a first priority security interest in its accounts receivable,
inventory and certain other assets. DGJ is the lessor of substantially all the
equipment that the Company uses, under a capital lease, and holds a first
priority security interest in its equipment. LaSalle received a second priority
security interest in the Company's equipment. Certain of the proceeds of this
credit facility were used to retire existing indebtedness the Company owed to
Franklin, including the factoring agreement and revolving note described above,
while the remaining proceeds were used to retire some of the Company's other
indebtedness and for working capital purposes. This credit facility bears
interest at a fluctuating rate equal to 1.5% per annum above the prime rate of
LaSalle in effect from time to time and matures in three years. As of March 31,
2000, the balance outstanding under this agreement is $2,636,259.
In addition, the Company and DGJ amended and restated the Note since
the Company was unable to fulfill the financial obligations under the terms of
the loan and lease documents with DGJ. To cure the defaults, the Company
restated the Note to include, in addition to the original principal and interest
accrued thereunder at 6%, all amounts outstanding under: (i) an equipment loan
made by DGJ to the Company as of March 1, 1999 in the original principal amount
of $218,665; (ii) a series of advances made to the Company by Franklin during
the second quarter of 1999 (which totaled approximately $900,000, and were
reduced to approximately $660,000 after application of proceeds of the credit
facility), rights to repayment of which were subsequently assigned by Franklin
to the Company; (iii) delinquent payments under the DGJ lease of approximately
$570,000; and (iv) interest on the foregoing. The resulting balance of
$4,773,585 was restated as the principal amount of a new amended promissory
note. The amended promissory note is in the original principal amount of
$4,773,585 and is payable as follows: $3,200,000 of principal is due and payable
on February 1, 2004, or earlier by acceleration, as described in the Agreement,
or otherwise, and $1,573,585 is due and payable pursuant to the terms of an
intercreditor agreement between DGJ and LaSalle. The amended promissory note
bears interest at a rate of 10% per annum, and is secured by all Company assets,
subordinated to LaSalle except as to equipment.
The Company failed to make interest payments to DGJ totaling
approximately $342,000 during the period of September 1999 through April 2000.
As this has caused an event of default, as defined in the amended promissory
note, DGJ is entitled to various rights and remedies under the amended
promissory note and the Agreement including, but not limited to, the right to
declare all or any part of the unpaid principal amount of the amended promissory
note outstanding to be due and payable. As of April 30, 2000, DGJ has indicated
a willingness to defer exercising its rights and remedies upon default pending
discussion with the Company regarding how the amended promissory note default is
to be cured.
During the period of September 1, 1999 through March 31, 2000, DGJ made
additional advances to the Company totaling $1,300,000. These loans bear
interest at the rate of 10% per annum with interest payable monthly and the
principal is due and payable on the same date as the maturity date of the
amended promissory note discussed above.
The Series C Preferred Stock is redeemable in the Company's discretion
if the amended promissory note to DGJ has been retired in its entirety. The
shares of the Series C Preferred Stock are not convertible into shares of
19
<PAGE>
Common Stock and have no preferences upon liquidation, dissolution, winding up
or insolvency. The holders of the Series C Preferred Stock have no voting right;
provided, however, upon an event of default, as defined in the Agreement,
holders of the Series C Preferred Stock will be entitled to vote with holders of
Common Stock as a single class in each matter submitted to a vote of the
Company's stockholders, with each share of the Series C Preferred Stock having
30 votes.
At the Company's annual meeting of stockholders on August 24, 1999, its
stockholders approved the increase in its authorized number of shares of Common
Stock from 60,000,000 to 150,000,000 shares. The Company utilized some of these
newly authorized shares to complete a rights offering of 15,000,000 shares of
its Common Stock in March 2000 resulting in the Company receiving $600,000 of
gross proceeds for working capital and other corporate-related purposes.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth the beneficial ownership of Common
Stock or Series A Convertible Preferred Stock as of March 31, 2000 by: (i)
directors of the Company; (ii) executive officers of the Company; (iii)
directors and executive officers of the Company as a group; and (iv) persons
who beneficially owned more than 5% of the Common Stock and Series A
Preferred Stock, in the aggregate, or by persons who did not beneficially own
more than 5% of the Common Stock and Series A Preferred Stock but who
constituted members of a "group" within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended, beneficially owning more
than 5% of the Common Stock and Series A Preferred Stock. Some of the persons
listed below are a member of such a group by virtue of being a party to a
lockup agreement (the "Lockup Agreement") by and among Ms. Beresford, Mr.
Hughes and DGJ, dated January 27, 1999, pursuant to which the parties agreed
to vote their shares of stock as directed by DGJ on any matters presented to
the Company's stockholders with respect to the Agreement. All of the persons
listed below disclaim beneficial ownership in any shares beneficially owned
by the others. The number of shares beneficially owned of Common Stock and
Series A Convertible Preferred Stock listed below is based on information
contained in a Schedule 13D filed with the Commission on behalf of the named
persons and on information provided to the Company by the named persons. The
percentage of shares of the class each person is listed as beneficially
owning is based upon 43,068,221 and 183,758 shares of Common Stock and Series
A Convertible Preferred Stock outstanding, respectively, as of March 31,
2000. Except as otherwise indicated, the stockholders listed in the table
have sole voting and investment powers with respect to the shares indicated.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS OF COMMON STOCK PERCENTAGE OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) CLASS(2)(3)
- ------------------- --------------------- -------------------
<S> <C> <C>
James F. Koehlinger(4)(5) 1,719,000 3.97%
Richard H. Nurse, Ph.D.(4)(5) 1,719,000 3.97%
Peter W. Blackett(4) 0 0%
C. Jill Beresford(4)(5)(6)(7) 2,561,249 5.92%
Ivan J. Hughes(5)(7)(8) 1,019,500 2.36%
20
<PAGE>
Davis and Oak Streets
Ludlow, Kentucky 41016-0250
David N. Laux(9) 52,500 *
1700 N. Moore St, Suite 1703
Arlington, Virginia 22209
Hanspeter Schulz, Ph.D.(4)(5)(10) 2,273,000 5.26%
Gary R. Edidin(11) 80,000,000 64.91%
Edidin & Associates
600 Central Avenue
Suite 262
Highland Park, IL 60035
Allen S. Gerrard(12) 80,000,000 64.91%
Deere Park Capital Management, Inc.
40 Skokie Boulevard
Suite 110
Northbrook, IL 60062
Theodore L. Koenig(13) 0 0%
Monroe Investments, Inc.
5 Revere Drive
Suite 206
Northbrook, Illinois 60062
Bruce M. Fleisher 0 0%
2350 N. Lincoln Park West
Chicago, Illinois 60614
DGJ, L.L.C.(7)(14) 80,000,000 64.91%
600 Central Avenue, Suite 262
Highland Park, Illinois 60035
All Executive Officers and
Directors as a Group
(9 persons)(6)(7)(8)(9) 84,510,000 68.57%
</TABLE>
* Less than one percent.
(1) None of these Beneficial Owners owns any Series A Preferred Stock. No other
stockholder owns at least 5% of the Common Stock and Series A Preferred
Stock, combined.
(2) Pursuant to the rules of the Securities and Exchange Commission, shares of
Common Stock which an individual or group has a right to acquire within 60
days pursuant to the exercise of options or warrants are deemed to be
outstanding for the purpose of computing the percentage ownership of such
individual or group, but are not deemed to be outstanding for the purpose
of computing the percentage ownership of any other person shown in the
table. This table reflects the ownership of all shares of Common Stock and
the Series A Convertible Preferred Stock voting as a single class, since
each is entitled to one vote per share.
(3) Except as otherwise noted, the table does not give effect to the issuance
of: (i) up to 335,153 shares of Common Stock issuable upon conversion of
Series A and Series B Convertible Preferred Stock; (ii) up to 180,372
21
<PAGE>
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; (v) up to 900,000 shares of Common Stock
issuable upon the exercise of warrants expiring January 27, 2003 issued to
consultants of the Company, subject to adjustments; and (vi) up to
5,000,000 shares of Common Stock issuable upon the exercise of warrants
expiring January 27, 2009, issued to consultants of the Company, subject to
adjustments; the holders of these warrants exercised such warrants as of
April 7, 2000 and elected to utilize the net issue option, resulting in the
issuance of 4,000,000 shares.
(4) These individuals may be reached at the Company's headquarters located at
455 Somerset Avenue, North Dighton, Massachusetts 02764.
(5) These individuals acquired warrants to purchase a certain number of shares
Common Stock at $0.04 per share. These warrants expire on January 27, 2009
and are described above in "Employment and Consulting Contracts." The
following table lists the name of the individual and the corresponding
number shares of Common Stock his or her warrant convertible into (the
"Warrant Shares"):
<TABLE>
<CAPTION>
Name Warrant Shares
---- --------------
<S> <C>
Hanspeter Schulz, Ph.D. 2,188,000
Richard H. Nurse, Ph.D. 1,719,000
James F. Koehlinger 1,719,000
C. Jill Beresford 937,000
Ivan J. Hughes 937,000
---------
7,500,000
</TABLE>
As of March 31, 2000, 6,563,000 of the 7,500,000 issued warrant shares were
converted into Common Stock by each individual except Ms. Beresford.
(6) Includes: (i) 1,314,130 shares of Common Stock; (ii) 146,695 shares of
Series B Convertible Preferred Stock; (iii) 163,224 shares of Common Stock
issuable upon the exercise of an option at a price of $2.50 per share
through June 30, 2003; and (iv) 937,000 shares of Common Stock issuable
upon the exercise of a warrant (see footnote 5).
(7) Under the terms of the Lockup Agreement, the individuals agreed to vote
their stock as directed by DGJ with respect to any matters presented to the
Company's stockholders with respect to the Agreement and agreed not to sell
shares of Common Stock without the prior written consent of DGJ.
(8) Includes: (i) 82,500 shares of Common Stock; and (ii) 7,500 shares of
Common Stock issuable upon exercise of an option at a purchase price of
$2.38 per share through March 24, 2006.
(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
22
<PAGE>
share through December 31, 2003. Mr. Laux resigned as a Director of the
Company on April 3, 2000.
(10) Dr. Schulz resigned as President, Chief Executive Officer and as a member
of the Board of Directors on February 22, 2000 to pursue personal
interests. However, Dr. Schulz has been serving the Company as a consultant
since such date.
(11) A member of DGJ and also a member of the Board of Managers, Chairman,
President and Chief Executive Officer of DGJ. Mr. Edidin holds no shares of
the Company directly, but may be deemed to beneficially own 80,000,000
shares of Common Stock beneficially owned by DGJ by virtue of his positions
with DGJ. See footnote (14) for a description of DGJ's beneficial ownership
of 80,000,000 shares of Common Stock. This amount does not include
1,629,930 shares of Series C Preferred Stock of the Company owned by DGJ,
which do not have voting rights at this Annual Meeting. Mr. Edidin
disclaims beneficial ownership of all such shares.
(12) A Director of Deere Park Capital Management, Inc., which is a member of
DGJ. He has no direct or indirect beneficial ownership in the equity
securities owned by DGJ. He is also a Member of the Board of Managers and
Treasurer of DGJ. Mr. Gerrard holds no shares of the Company directly, but
may be deemed to beneficially own 80,000,000 shares of Common Stock
beneficially owned by DGJ by virtue of his positions with DGJ. See footnote
(14) for a description of DGJ's beneficial ownership of 80,000,000 shares
of Common Stock. Does not include 1,629,930 shares of Series C Preferred
Stock of the Company owned by DGJ, which do not have voting rights at this
Annual Meeting. Mr. Gerrard disclaims beneficial ownership of all such
shares. Mr. Douglas Gerrard, a principal of Deere Park Capital Management,
Inc., and the son of Mr. Allen Gerrard, has exclusive investment power and
voting power for Deere Park Capital Management, Inc., with respect to the
investment in the Company.
(13) 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. Mr. Koenig has exclusive investment power and voting
power for Hilco BPI, L.L.C., with respect to the investment in the Company.
(14) Includes 80,000,000 shares of Common Stock currently issuable upon the
exercise of warrants at a price of $0.04 per share through January 27,
2009. However, DGJ has indicated that it has no current intention of
exercising this warrant to purchase Common Stock. This amount does not
include 1,629,930 shares of Series C Preferred Stock of the Company, 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. The members of DGJ
are entities controlled by Gary R. Edidin, Lawrence A. Sherman, Deere Park
Capital Management, Inc., and BPI Hilco, L.L.C., and their ownership
interests in DGJ are 24.54%, 1.84%, 49.08% and 24.54%, respectively.
23
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return
(assuming reinvestment of dividends) from investing $100 on December 31, 1994,
and plotted at December 31, 1995, 1996, 1997, 1998 and 1999 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.
[GRAPHIC]
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
BPI Packaging Technologies, Inc. $100 $ 51.52 $ 46.21 $ 27.27 $ 17.43 $ 2.18
Packaging and Containers $100 $ 98.69 $106.87 $ 99.44 $ 85.73 $ 79.22
NASDAQ Market Index $100 $129.71 $161.18 $197.16 $278.08 $490.46
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
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
Securities and Exchange Commission reports of ownership and changes in ownership
of Common Stock and other equity securities of the Company. Officers, directors
and greater-than-10% stockholders are required by the Securities and
24
<PAGE>
Exchange Commission regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on review of the copies of such reports furnished to the
Company or written representations that no other reports were required, the
Company believes that, during 1999, its officers, directors and greater-than-10%
beneficial owners were in compliance with all filing requirements, except that
one report covering four transactions was filed late by Hanspeter Schulz, the
former President and Chief Executive Officer and a former Director of the
Company.
25
<PAGE>
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT ACCOUNTANTS
---------------------------------------
The Board of Directors of the Company has appointed the firm of
Livingston & Haynes, P.C. as the Company's independent accountants for the
fiscal year ending December 31, 2000, 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 fiscal years ended February 28,
1997 and February 23, 1996, and during the subsequent interim period through
July 6, 1998: (i) PricewaterhouseCoopers LLP did not issue an adverse opinion,
disclaimer of opinion, modification or qualifications; and (ii) there were no
disagreements between the Company and PricewaterhouseCoopers LLP relative to
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which, if not resolved to the satisfaction of
PricewaterhouseCoopers LLP, would have caused PricewaterhouseCoopers LLP to make
reference to the matter in its reports on the financial statements for such
periods.
On July 22, 1998, the Company reported on Form 8-K the engagement of
Livingston & Haynes, P.C. as the Company's independent accountants. The decision
to engage Livingston & Haynes, P.C. was approved by the Company's Audit
Committee.
The ratification of the independent accountants requires an affirmative
vote of a majority of the shares present in person or by proxy and entitled to
vote at the Annual Meeting. For this proposal, an abstention will have the same
effect as a vote against the proposal. Broker non-votes will not be voted for or
against the proposal and will not be counted as entitled to vote. If the
resolution is rejected, or if Livingston & Haynes, P.C. declines to act or
becomes incapable of action, or its employment is discontinued, the Board of
Directors will appoint other independent accountants whose continued employment
after the following Annual Meeting of Stockholders will be subject to
ratification by stockholders.
Four of the Company's directors are either affiliated with DGJ or have
been designated by DGJ, which due to DGJ's affiliation with the Company as
described in Proposal No. 1, "Certain Relationships and Related Transactions,"
may have a conflict of interest in recommending stockholder approval of this
proposal and the proposal to elect Class III Directors. See "Security Ownership
of Certain Beneficial Owners and Management" for a description of the securities
held by the directors.
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, 2000.
26
<PAGE>
PROPOSALS OF STOCKHOLDERS
Any proposal of a stockholder intended to be presented at the Annual
Meeting of Stockholders to be held in 2001 must be in the form required by the
Company's By-laws and received at the Company's principal executive offices no
later than March 1, 2001, 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 the Company's
Annual Report on Form 10-K filed with the Securities and Exchange Commission on
March 30, 2000 (Commission file number: 1-10648):
- Financial Statements for the years ended December 31, 1999 and 1998;
- Management's Discussion and Analysis of Financial Condition and
Results of Operations;
- Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure; and
- Quantitative and Qualitative Disclosures about Market Risk.
OTHER MATTERS
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
James F. Koehlinger
Acting Chief Operating Officer
North Dighton, Massachusetts
April 28, 2000
27
<PAGE>
APPENDIX A
BPI PACKAGING TECHNOLOGIES, INC.
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
AUGUST 24, 1999
ORGANIZATION
COMPOSITION AND TERM
There is a committee of the board of directors (the "Board") of BPI
Packaging Technologies, Inc. (the "Company") known as the audit committee
(the "Committee"). The Committee is composed of directors who are independent
of the management of the Company and are free of any relationship that, in
the opinion of the Board, would interfere with their exercise of independent
judgment as a Committee member. The Committee members shall be appointed for
one year terms. The chairman of the Committee shall be designated by the
Board.
ADMINISTRATIVE MATTERS
The Committee shall meet at such times and from time-to-time as it
deems to be appropriate, but not less than three times each year. The Committee
shall report to the full Board at the first Board meeting following each
Committee meeting. The Company's independent accountants and internal auditors
shall attend at least two of the Committee's meetings each year. The Committee
may request members of management or others to attend meetings and provide
pertinent information as necessary. The Committee shall provide management, the
independent accountants and internal auditors with appropriate opportunities to
meet privately with the Committee.
STATEMENT OF POLICY
The Committee shall provide assistance to the Company's directors in
fulfilling their responsibility to the Company's stockholders, potential
stockholders and investment community relating to corporate accounting,
reporting practices of the Company, and the quality and integrity of the
financial reports of the Company. In doing so, it is the responsibility of the
Committee to maintain free and open means of communication among the directors,
the independent accountants, the internal auditors and the Company's financial
management.
RESPONSIBILITIES
In carrying out its responsibilities, the Committee believes its
policies and procedures should remain flexible to best react to changing
conditions and to ensure to the directors and stockholders that the corporate
accounting and reporting practices of the Company are in accordance with all
requirements and are of the highest quality.
The responsibilities of the Committee are generally premised on:
1. a broad understanding of the relationships between the operations
of the Company and its financial position and performance;
A-1
<PAGE>
2. an awareness of the Company's major financial, economic and
operating risks; and
3. an informed view of the effectiveness of the Company's internal
control systems.
FINANCIAL REPORTING
The responsibilities and functions of the Committee are basically
two-fold. The first area concerns financial reporting. The responsibility of the
Committee is to provide assurance that financial disclosures made by management
reasonably portray the Company's financial condition, results of operations,
plans and long term commitments. In fulfilling this responsibility, the
Committee's duties include the following:
o Review with the Company's management, independent accountants and internal
audit personnel the Company's general policies and procedures to reasonably
assure the adequacy of internal accounting and financial reporting
controls.
o Have familiarity with the accounting and reporting principles and practices
applied by the Company in preparing its financial statements and make, or
cause to be made, all necessary inquiries of management and the independent
accountants concerning established standards of corporate conduct,
performance and deviations therefrom.
o Arrange for periodic reports from management, the independent accountants
and the internal auditors to assess the impact of significant regulatory
changes and accounting or reporting developments proposed by various
regulatory authorities or any other significant matters that may affect the
Company.
o Make recommendations to the Board as to the selection of the firm of
independent public accountants to examine the books and accounts of the
Company and its subsidiaries, if any, for each fiscal year (including a
review of the independence of the independent public accountants).
o Review the amount and nature of non-audit services provided by the
independent accountants and, in light of these services, analyze the
ability of the accountants to retain their independence.
o Review, prior to each annual audit, the scope and general extent of the
independent accountants' audit examination, including their engagement
letter. The Committee's review should include a discussion with the
independent accountants of the factors considered by them in determining
the audit scope.
o Review the independent accountants' fee arrangements.
o Review with management and the independent accountants, upon completion of
their audit, financial results for the year, including:
o industry and business risk characteristics of the Company;
o external reporting requirements;
o materiality of the various segments of the Company's consolidated and
non-consolidated activities;
A-2
<PAGE>
o quality of internal accounting controls;
o extent of involvement of internal audit in the audit examination;
o the existence and substance, if any, of significant accounting
accruals, reserves or estimates made by management that had or may
have a material impact on the financial statements; and
o any significant reporting or operational issues affecting the
financial statements that were discussed during the accounting period
and, if so, how they were resolved.
o Review with management the management's discussion and analysis section of
the annual report and quarterly reports filed with the Securities and
Exchange Commission and/or provided to investors including:
o significant transactions not normally part of the Company's
operations; and
o changes, if any, during the year in the Company's accounting
principles or their application.
o Review with management and the independent accountants prior to release of
the Company's annual report to stockholders, the Company's Form 10-K,
including the financial statements and supplemental disclosures required by
generally accepted accounting principles and the Securities and Exchange
Commission.
o Review interim financial statements prior to release to the public.
o Review with the Company's legal counsel, any legal matters that could have
a significant impact on the Company's financial statements.
o Review the findings of any examinations by regulatory agencies, such as the
Securities and Exchange Commission.
o Provide sufficient opportunity for the internal auditors and independent
accountants to meet with the members of the Committee without members of
management present. Among items to be discussed in these meetings are the
independent accountants' evaluation of the Company's financial, accounting
and auditing personnel, and the cooperation that the independent
accountants received during the course of the audit.
o Discuss with management the responsiveness of the independent accountants
to the Company's needs.
o Review with the independent accountants reporting issues on federal income
tax returns and whether there are any significant items that the Internal
Revenue Service has or might dispute and inquire about the status of
related tax reserves.
o Require management to provide notification of issues and responses whenever
an independent accountant seeks a second opinion.
o Review the letter of management representations given to the independent
accountants and inquire whether the independent accountants encountered any
difficulties in obtaining the letter.
A-3
<PAGE>
o Review accounting and financial human resources and succession planning
within the Company.
o Submit the minutes of all meetings of the Committee to, or discuss the
matters discussed at each Committee meeting with, the Board.
o Review the policies and procedures in effect for the review of officers'
expenses and prerequisites.
INTERNAL CONTROL
The second major area concerns internal control. To carry out this
responsibility, the Committee's duties include the following:
o Meet privately with the independent accountants to discuss pertinent
matters, including quality of management, financial, accounting and
internal audit personnel and to determine if any restrictions have been
placed by management on the scope of their examination or if there are
other matters that should be discussed with the Committee.
o Review with the independent auditors, the Company's internal auditor and
financial and accounting personnel, the adequacy and effectiveness of the
accounting and financial controls of the Company, and elicit any
recommendation for the improvement of such internal control procedures or
particular areas where new or more detailed controls or procedures are
desirable. Particular emphasis should be given to the adequacy of such
internal controls to expose any payments, transactions or procedures that
might be deemed illegal or otherwise improper. Further, the Committee
periodically should review the Company's policy statements to determine
their adherence to the code of conduct.
o Provide for periodic quality assurance reviews to ensure that the internal
auditing function is operating in accordance with the STANDARDS FOR THE
PROFESSIONAL PRACTICE OF INTERNAL AUDITING.
o Review the internal audit function of the Company including the
independence and authority of its reporting obligations, the proposed audit
plans for the coming year, and the coordination of such plans with the
independent accountants.
o Request information on the results of the most recent peer review of
independent accountants and the nature of any needed corrective measures.
o Review different aspects of the Company on a planned basis to ensure a
general understanding of the operations and functional areas of the
organization.
o Review management's monitoring of compliance with the Company's code of
corporate conduct and with the Foreign Corrupt Practices Act.
o Direct special investigations into significant matters brought to its
attention within the scope of its duties.
o Determine the extent to which the Company can rely on the planned scope of
internal auditing and the independent accountants to detect fraud or
weaknesses in internal controls, and review management's plans to monitor
compliance with these internal controls.
A-4
<PAGE>
o Discuss with the internal auditor and the Company's independent accountants
the review of the Company's electronic data processing procedures and
controls and inquire about specific security programs to protect against
computer fraud or misuse both within and outside the Company.
In addition, the Committee shall make a periodic self-assessment,
including a review of this charter, using assessment tools available through
third parties or developed internally. The Committee shall also undertake such
additional activities within the scope of its primary function as the Committee
may from time to time determine. The Committee may retain independent counsel,
accountants or others to assist it in the conduct of any investigation.
A-5
<PAGE>
PROXY
BPI PACKAGING TECHNOLOGIES, INC.
455 SOMERSET AVENUE
NORTH DIGHTON, MA 02764
508-824-8636
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
JUNE 8, 2000
The undersigned hereby appoints James F. Koehlinger and Lisa M. Lima
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 June 8, 2000, 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)
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE
NOMINEES LISTED IN PROPOSAL 1, AND FOR PROPOSAL 2, 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 PROPOSAL 2. THE BOARD MAY HAVE A CONFLICT OF INTEREST IN
RECOMMENDING THE VOTE FOR THESE PROPOSALS (SEE PROXY STATEMENT).
1. PROPOSAL 1: To elect three Class III directors to hold office until the
Annual Meeting of Stockholders to be held in the year 2003.
<TABLE>
<CAPTION>
FOR WITHHOLD
FOR ALL
<S> <C>
0 0
</TABLE>
NOMINEES: Gary R. Edidin, Bruce M. Fleisher and Theodore L. Koenig
(INSTRUCTION: To withhold authority to vote for any nominee, write
the nominee's name in the space provided below.)
-----------------------------
<PAGE>
2. PROPOSAL 2: To ratify the selection of Livingston & Haynes, P.C. as
independent accountants of the Company for the year ending December
31,2000.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C>
0 0 0
</TABLE>
- --------------------------------------------------------------------------------
I PLAN TO ATTEND THE MEETING Please sign exactly as
your name appears hereon. If the stock is
registered in the
YES NO names of two or more persons, each should sign.
Executors, administrators, trustees, guardians
or attorneys-in-fact should add their titles. If
Date: signer is a corporation, please give full
----------------------- corporate name and have a duly authorized officer
sign, stating title. If signer is a partnership,
please sign in partnership name by authorized
person.
- ----------------------------
Signature
- ----------------------------
Signature (if held jointly)
- --------------------------------------------------------------------------------
Please vote, date and promptly return this proxy in the enclosed envelope which
is postage prepaid if mailed in the United States.
