<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 15, 1997
RADNOR HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 333-19495 23-2674715
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
THREE RADNOR CORPORATE CENTER
SUITE 300
RADNOR, PENNSYLVANIA
(Address of principal executive offices)
19087
(Zip Code)
(610) 341-9600
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
- --------------------------------------------------------------------------------
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<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 15, 1997, Radnor Holdings Corporation (the "Company"), through
certain newly-formed foreign subsidiaries of the Company (StyroChem Finland
Oy, ThermiSol Finland Oy, ThermiSol Sweden AB and ThermiSol Denmark ApS
(collectively, the "Subsidiaries")) acquired substantially all of the tangible
and intangible assets and long-term investments relating to the polystyrene
production and conversion operations of Neste Oy. The acquired assets
included, without limitation, real property, machinery and equipment,
intellectual property rights, permits and licenses, books and records,
contract rights, inventories and receivables. Following the acquisition, the
assets acquired by the Company and the Subsidiaries will continue to be
utilized for polystyrene production and conversion operations. The parties
made the purchase and sale pursuant to a Sale of Assets Agreement dated as of
September 17, 1997, among Neste Oy, Isora Oy, Neste Cellplast AB and Neste
Thermisol A/S and the Subsidiaries and the Company. Except with respect to
certain post-closing contractual arrangements described below, there was and
is no material relationship between any of the sellers and any of the buyers,
including the Company. The cash consideration for the acquired assets was
213.0 million Finnish markkas ($40.8 million as of the date of closing) plus
the value of the net working capital, which included accounts receivable,
inventory, trade accounts payable and accrued liabilities. The net working
capital was estimated to be 60.0 million Finnish markkas ($11.5 million as of
the date of closing), of which 16.5 million Finnish markkas were placed in an
escrow account at closing and 43.5 million Finnish markkas were paid to Neste
Oy at closing. The purchase price will be adjusted on a markka for markka
basis following an audit of net working capital to the extent that the net
working capital as of closing was greater or less than 60.0 million Finnish
markkas. The Company also obtained an option, pursuant to a letter agreement,
to acquire certain assets relating to conversion operations located in Russia
for a price of 2.0 million Finnish markkas, which the Company anticipates
exercising and closing in 1998. The purchase price was based on negotiations
with Neste Oy. Proceeds from the offering of $60.0 million of the Company's
Series B Senior Notes due 2003, issued pursuant to exemptions under the
Securities Act of 1933, as amended, were utilized to pay the cash
consideration.
In connection with the closing of the acquisition, the Company entered into
certain other arrangements with Neste Oy, including: (i) a Land Lease
Agreement; (ii) a Utilities Supply Agreement; (iii) a Neste Service Agreement;
(iv) a Sales and Marketing Agreement and (v) a Personnel Agreement. The Land
Lease Agreement relates to the land on which the principal expandable
polystyrene manufacturing facility in Porvoo, Finland is located and extends
for a period of 30 years for a nominal rent, with an option for the Company to
extend the lease or acquire the leased property following the initial term of
the lease. Through the Utilities Supply Agreement, which extends for a ten-
year term and thereafter continues unless 24 months' prior written notice of
termination is provided by one of the parties, the Company purchases
electricity, nitrogen, steam, drinking water and salt-free water from Neste
Oy. Pursuant to the Neste Service Agreement, Neste Oy provides certain site
services at the Porvoo industrial complex to the Company. The agreement
initially extends for a period of one year and thereafter continues for
additional one-year periods, with specific services subject to termination
upon written notice provided by either party in accordance with the agreement.
The Sales and Marketing Agreement pertains to the employment by the Company of
certain polystyrene products sales persons and brokerage services to be
provided by affiliates of Neste Oy in certain European countries. This
agreement also grants the Company an option to maintain offices and utilize
certain office services at five sales offices of affiliates of Neste Oy
throughout Europe and Russia. The Personnel Agreement separately relates to
the transfer of certain of Neste Oy's employees to the Company.
2
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a)Financial Statements of Businesses Acquired
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
NESTE OY POLYSTYRENE UPSTREAM BUSINESS IN PORVOO AND KOKEMAKI
Report of Independent Public Accountants................................ F-1
Balance Sheets as of December 31, 1995 and 1996 and June 30, 1997 (unau-
dited)................................................................. F-2
Statements of Operations for the Years ended December 31, 1994, 1995 and
1996 and the Six Months Periods Ended June 30, 1996 and 1997 (unau-
dited)................................................................. F-3
Statements of Changes in Owner's Investment for the Years Ended December
31, 1994, 1995 and 1996 and the Six Month Period Ended June 30, 1997
(unaudited)............................................................ F-4
Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and
1996 and the Six Month Periods Ended June 30, 1996 and 1997 (unau-
dited)................................................................. F-5
Notes to Financial Statements........................................... F-6
ISORA OY
Report of Independent Public Accountants................................ F-10
Balance Sheets as of December 31, 1995 and 1996 and June 30, 1997 (unau-
dited)................................................................. F-11
Statements of Operations for the Years Ended December 31, 1994, 1995 and
1996 and the Six Month Periods Ended June 30, 1996 and 1997 (unau-
dited)................................................................. F-12
Statements of Changes in Stockholder's Equity for the Years Ended Decem-
ber 31, 1994, 1995 and 1996 and the Six Month Period Ended June 30,
1997 (unaudited)....................................................... F-13
Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and
1996 and the Six Month Periods Ended June 30, 1996 and 1997 (unau-
dited)................................................................. F-14
Notes to Financial Statements........................................... F-15
NESTE CELLPLAST AB
Report of Independent Public Accountants................................ F-19
Auditors' Report on Neste Cellplast AB.................................. F-20
Auditors' Report on Neste Cellplast Aktiebolag.......................... F-21
Balance Sheets as of December 31, 1995 and 1996 and June 30, 1997 (unau-
dited)................................................................. F-22
Statements of Operations for the Years Ended December 31, 1994, 1995 and
1996 and the Six Month Periods Ended June 30, 1996 and 1997 (unau-
dited)................................................................. F-23
Statements of Changes in Stockholders' Equity for the Years Ended Decem-
ber 31, 1994, 1995 and 1996 and the Six Month Period Ended June 30,
1997 (unaudited)....................................................... F-24
Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and
1996 and the Six Month Periods Ended June 30, 1996 and 1997 (unau-
dited)................................................................. F-25
Notes to Financial Statements........................................... F-26
NESTE THERMISOL A/S
Report of Independent Public Accountants................................ F-30
Balance Sheets as of December 31, 1995 and 1996 and June 30, 1997 (unau-
dited)................................................................. F-31
Statements of Operations for the Years Ended December 31, 1994, 1995 and
1996 and the Six Month Periods Ended June 30, 1996 and 1997 (unau-
dited)................................................................. F-32
Statements of Changes in Shareholders' Equity for the Years Ended Decem-
ber 31, 1994, 1995 and 1996 and the Six Month Period Ended June 30,
1997 (unaudited)....................................................... F-33
Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and
1996 and the Six Month Periods Ended June 30, 1996 and 1997 (unau-
dited)................................................................. F-34
Notes to Financial Statements........................................... F-35
</TABLE>
3
<PAGE>
(b)Pro Forma Financial Information
<TABLE>
<S> <C>
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES PRO FORMA CONSOLIDATED FINAN-
CIAL DATA
Pro Forma Consolidated Statement of Operations for the Year Ended Decem-
ber 27, 1996 (unaudited)............................................... F-38
Notes to Pro Forma Consolidated Statement of Operations for the Year
Ended December 27, 1996 (unaudited).................................... F-39
Pro Forma Consolidated Statement of Operations for the Six Month Period
Ended June 27, 1997 (unaudited)........................................ F-41
Notes to Pro Forma Consolidated Statement of Operations for the Six
Month Period Ended June 27, 1997 (unaudited)........................... F-42
Pro Forma Consolidated Balance Sheet as of June 27, 1997 (unaudited).... F-43
</TABLE>
(c)Exhibits
2.1 Sale of Assets Agreement between Neste Oy, Isora Oy, Neste Cellplast AB,
Neste Thermisol A/S and StyroChem Finland Oy, ThermiSol Finland Oy,
ThermiSol Sweden AB, ThermiSol Denmark ApS and Radnor Holdings Corporation
dated as of September 17, 1997 (the schedules to this agreement have been
omitted pursuant to Item 601(b)(2) of Regulation S-K and will be provided
supplementally to the Commission upon its request).
4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED HEREUNTO DULY AUTHORIZED.
Radnor Holdings Corporation
/s/ Michael V. Valenza
By:__________________________________
TITLE: SENIOR VICE PRESIDENT--
FINANCE
DATE: OCTOBER 29, 1997
5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Neste Oy:
We have audited the accompanying balance sheets of NESTE OY POLYSTYRENE
UPSTREAM BUSINESS IN PORVOO AND KOKEMAKI (an operating unit of the NESTE Oy
Chemicals division) as of December 31, 1995 and 1996, and the related
statements of operations, changes in owner's investment and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NESTE OY POLYSTYRENE
UPSTREAM BUSINESS IN PORVOO AND KOKEMAKI as of December 31, 1995 and 1996, and
the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1996, in conformity with generally accepted
accounting principles (see Note 1).
ARTHUR ANDERSEN OY
Helsinki, Finland
September 5, 1997
(except with respect to the matters discussed in Note 10,
as to which the date is September 17, 1997)
F-1
<PAGE>
NESTE OY POLYSTYRENE UPSTREAM BUSINESS IN PORVOO AND KOKEMAKI
BALANCE SHEETS
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1995 1996 1997
------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
------
CURRENT ASSETS:
Accounts receivable.................... $ 7,615 $ 6,499 $ 9,885
Inventories, net....................... 10,498 5,149 5,146
Prepaid expenses and other............. 71 735 474
-------- -------- --------
18,184 12,383 15,505
-------- -------- --------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land and improvements.................. 483 453 406
Buildings and improvements............. 19,680 18,648 17,052
Machinery and equipment................ 30,374 28,146 25,506
-------- -------- --------
50,537 47,247 42,964
Less accumulated depreciation.......... (23,263) (22,963) (21,312)
-------- -------- --------
27,274 24,284 21,652
Share of common assets allocated by
Neste (Note 5)........................ 2,581 1,735 1,385
-------- -------- --------
Total property, plant, and
equipment........................... 29,855 26,019 23,037
-------- -------- --------
OTHER ASSETS............................. 332 344 336
-------- -------- --------
$ 48,371 $ 38,746 $ 38,878
======== ======== ========
LIABILITIES AND OWNER'S INVESTMENT
----------------------------------
CURRENT LIABILITIES:
Accounts payable....................... $ 3,811 $ 3,657 $ 5,421
Accrued liabilities.................... 1,024 1,353 1,588
-------- -------- --------
4,835 5,010 7,009
COMMITMENTS AND CONTINGENCIES (Note 9)
OWNER'S INVESTMENT....................... 43,536 33,736 31,869
-------- -------- --------
$ 48,371 $ 38,746 $ 38,878
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these finanacial statements.
F-2
<PAGE>
NESTE OY POLYSTYRENE UPSTREAM BUSINESS IN PORVOO AND KOKEMAKI
STATEMENTS OF OPERATIONS
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
FOR THE SIX MONTH PERIOD
FOR THE YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------- ---------------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES............... $ 58,188 $ 63,179 $ 60,805 $ 30,342 $ 29,735
COST OF GOODS SOLD...... 41,060 47,944 40,752 19,912 20,691
---------- ---------- ---------- ------------ ------------
GROSS PROFIT............ 17,128 15,235 20,053 10,430 9,044
OPERATING EXPENSES:
Distribution.......... 2,961 2,471 3,392 1,598 1,667
Selling, general and
administrative....... 7,515 10,652 10,768 4,874 5,845
Allocation from
Neste................ 1,529 2,026 1,610 925 --
---------- ---------- ---------- ------------ ------------
INCOME FROM OPERATIONS.. 5,123 86 4,283 3,033 1,532
OTHER INCOME............ 1 1 -- -- --
---------- ---------- ---------- ------------ ------------
INCOME BEFORE INCOME
TAXES.................. 5,124 87 4,283 3,033 1,532
PROVISION FOR INCOME
TAXES.................. 1,434 24 1,199 849 429
---------- ---------- ---------- ------------ ------------
NET INCOME.............. $ 3,690 $ 63 $ 3,084 $ 2,184 $ 1,103
========== ========== ========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
NESTE OY POLYSTYRENE UPSTREAM BUSINESS IN PORVOO AND KOKEMAKI
STATEMENTS OF CHANGES IN OWNER'S INVESTMENT
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<S> <C>
BALANCE, January 1, 1994........................................... $ 39,522
Net income....................................................... 3,690
Contributions from Neste......................................... 932
--------
BALANCE, December 31, 1994......................................... $ 44,144
Net income....................................................... 63
Distributions to Neste........................................... (2,107)
Translation adjustment........................................... 1,436
--------
BALANCE, December 31, 1995......................................... 43,536
Net income....................................................... 3,084
Distributions to Neste........................................... (10,170)
Translation adjustment........................................... (2,714)
--------
BALANCE, December 31, 1996......................................... 33,736
Net income (unaudited)........................................... 1,103
Contributions from Neste (unaudited)............................. 608
Translation adjustment (unaudited)............................... (3,578)
--------
BALANCE, June 30, 1997 (unaudited)................................. $ 31,869
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
NESTE OY POLYSTYRENE UPSTREAM BUSINESS IN PORVOO AND KOKEMAKI
STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
FOR THE SIX MONTH PERIOD
FOR THE YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------------- ----------------------------
1994 1995 1996 1996 1997
---------- ---------- ----------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERAT-
ING ACTIVITIES:
Net income............ $ 3,690 $ 63 $ 3,084 $ 2,184 $ 1,103
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation.......... 2,141 2,455 1,975 997 845
Changes in operating
assets and liabili-
ties--
Accounts receivable.. (3,739) 4,016 648 (4,148) (4,068)
Inventories, net..... (1,354) 306 4,704 4,038 (537)
Prepaid expenses and
other............... -- (71) (668) (274) 184
Accounts payable..... 541 (2,605) 80 777 2,270
Accrued liabilities.. (587) 903 392 468 256
---------- ---------- ----------- ------------ ------------
Net cash provided by
operating activi-
ties............... 692 5,067 10,215 4,042 53
---------- ---------- ----------- ------------ ------------
CASH FLOWS FROM INVEST-
ING ACTIVITIES:
Net purchases of
property, plant,
equipment and other
assets............... (1,517) (3,081) (699) (276) (790)
Net (increase)
decrease in share of
common assets
allocated by Neste... (485) 121 695 (294) 167
---------- ---------- ----------- ------------ ------------
Net cash used in in-
vesting activities... (2,002) (2,960) (4) (570) (623)
---------- ---------- ----------- ------------ ------------
CASH FLOWS FROM FINANC-
ING ACTIVITIES:
Other................. 378 -- (41) (14) (38)
Contributions from
(distributions to)
Neste................ 932 (2,107) (10,170) (3,458) 608
---------- ---------- ----------- ------------ ------------
Net cash (provided
by) used in
financing
activities......... 1,310 (2,107) (10,211) (3,472) 570
---------- ---------- ----------- ------------ ------------
CASH, BEGINNING OF PERI-
OD..................... -- -- -- -- --
---------- ---------- ----------- ------------ ------------
CASH, END OF PERIOD..... $ -- $ -- $ -- $ -- $ --
========== ========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
NESTE OY POLYSTYRENE UPSTREAM BUSINESS IN PORVOO AND KOKEMAKI
NOTES TO FINANCIAL STATEMENTS
(INCLUDING NOTES APPLICABLE TO UNAUDITED PERIODS)
(1) ORGANIZATION AND BASIS OF PRESENTATION:
The Business Unit
Neste Oy (Neste) is an international oil, exploration and production, energy
and chemicals company, which is registered in Espoo, Finland and the shares of
which are quoted on the Helsinki stock exchange. The Neste Oy Polystyrene
Upstream Business in Porvoo and Kokemaki (the Company) has been an operating
unit of the Neste Oy Chemicals division.
The production and sales of the Company consist of polystyrene resins
including expandable polystyrene (EPS), general purpose polystyrene (PS) and
high-impact polystyrene (HIPS). EPS is manufactured in the Porvoo and Kokemaki
plants and PS and HIPS are manufactured in the Porvoo plant. EPS is sold
through Neste Oy Chemicals' European sales network mainly to construction
applications and approximately 30% is sold for packaging uses. Approximately
70% of the PS and HIPS grades are sold in Finland through the Company's
salespeople. The remainder of the PS and HIPS is sold by the Neste Chemicals
sales force.
Neste is establishing a production base in St. Petersburg, Russia where
exploratory marketing efforts have been underway since 1994, using products
exported from Finland. The St. Petersburg plant started operations in the
spring of 1997. These financial statements do not include the St. Petersburg
conversion business.
Basis of Presentation
Neste Oy's records are maintained in accordance with Finnish law and
reporting requirements. These financial statements have been converted from
Finnish generally accepted accounting principles (GAAP) to U.S. GAAP.
The financial statements of the Company include certain amounts that have
been allocated to the Company by Neste Oy. These allocations include general
and administrative expenses incurred at the Porvoo site, but do not include
expenses incurred in the Espoo headquarters. The balance sheet includes a
share of common facilities at the Porvoo site. The definition of common
facilities and the method of allocating them has changed during 1997 such that
these costs are invoiced, not allocated, directly to the Company. Management
believes that the allocation methodologies used to allocate these costs and
corresponding assets to the Company represent a reasonable basis for
allocation. The amounts of the allocations have been shown as separate line
items in the balance sheets and statements of operations in 1994, 1995 and
1996 and are included in selling, general and administrative in the six month
period ended June 30, 1997.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Fiscal year
The fiscal year of the Company presented in the financial statements is the
calendar year.
Foreign Currency Translation
The assets and liabilities of the Company, whose functional currency is
other than the U.S. dollar, are translated into U.S. dollars at year end
exchange rates. Revenues and expense accounts are translated using the
weighted average exchange rate during the periods indicated. The functional
currency of the Company is the Finnish markka and the exchange rates used were
those quoted by the Bank of Finland. Translation gains and losses are not
included in determining net income but are accumulated in a separate component
of owner's investment, as is required by Statement of Financial Accounting
Standards No. 52, "Foreign Currency Translation."
F-6
<PAGE>
NESTE OY POLYSTYRENE UPSTREAM BUSINESS IN PORVOO AND KOKEMAKI
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Cash
The Company is an operating unit of the Neste Oy Chemicals division, and
participates in the cash pool of Neste Oy. All cash requirements of the
Company have been funded out of this cash pool. As a result, the entity has no
cash balances recorded on its books.
Revenue Recognition
Revenue is recognized when goods are shipped. Sales are recorded gross
before cash and other discounts, which are deducted from the value of sales,
when the customer fulfills the terms of trade agreed upon.
Research and Development
Research and development expenses are charged to operations as incurred.
Total research and development expenses were approximately $859,000,
$1,233,000, $1,206,000, $624,000 and $575,000 for the years ended December 31,
1994, 1995 and 1996 and the six month periods ended June 30, 1996 and 1997,
respectively.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of financial statements and the reported amounts of
revenues and expenses during the reported period. Actual results could differ
from those estimates.
Fair Value of Financial Instruments
The fair value of financial instruments, including accounts receivable and
accounts payable, approximate their recorded values due primarily to the
short-term nature of their maturities.
(3) ACCOUNTS RECEIVABLE
Accounts receivable include the following balances due from affiliated
companies:
<TABLE>
<CAPTION>
JUNE 30,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Isora Oy........................................... $ 949 $ 756 $1,701
Neste Cellplast AB................................. 691 380 309
Neste Thermisol A/S................................ 417 175 284
------ ------ ------
Total.............................................. $2,057 $1,311 $2,294
====== ====== ======
</TABLE>
(4) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market
and consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
1995 1996 1997
------- ------ -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Raw materials..................................... $ 5,130 $2,493 $2,373
Work-in-progress.................................. 382 187 247
Finished goods.................................... 4,986 2,469 2,526
------- ------ ------
Total........................................... $10,498 $5,149 $5,146
======= ====== ======
</TABLE>
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Expenditures for
improvements that increase the values or extend the useful life are
capitalized and maintenance repair costs are expensed as incurred.
Depreciation is
F-7
<PAGE>
NESTE OY POLYSTYRENE UPSTREAM BUSINESS IN PORVOO AND KOKEMAKI
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
recorded using the straight-line method over the useful lives of the
respective assets, which range from 20 to 40 years for buildings, 5 to 20
years for machinery and equipment and 5 to 10 years for other property and
equipment.
The share of common facilities allocated from Neste has been shown as a
separate line item, net of accumulated depreciation, in the balance sheets. In
addition to an allocated share of common facilities it includes spare parts
stored in a central stores location, but apportioned to the Company in the
Neste Oy stock records. The amount of spare parts at December 31, 1995 was
$565,000, at December 31, 1996 was $502,000, and at June 30, 1997 was
$450,000. Spare parts are expensed in the period they are needed and shipped
to the various manufacturing facilities.
(6) ACCRUED LIABILITIES
Accrued liabilities consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Accrued holiday................................... $ 764 $ 839 $ 996
Payroll related items............................. 322 318 259
Added value tax................................... (88) 95 273
Other............................................. 26 101 60
------ ------ ------
Total........................................... $1,024 $1,353 $1,588
====== ====== ======
</TABLE>
(7) PENSION COSTS
The pensions of the Company personnel are covered by the Joint Pension
Foundation of Neste Corporation (the Foundation) in accordance with the local
laws and practices. The Foundation has been able to offer pension services at
lower annual fees than the market prices of pension insurance companies. The
compulsory deficit of the foundation is immaterial but has been provided for
in the accounts of Neste Oy. Under Finnish GAAP the future salary increases
have not been taken into account when calculating the pension liability. U.S.
GAAP calculations have been prepared only for that part of pension liability
that exceeds the normal pension liability stipulated by law. The calculations
are at the level of total Neste Corporation only, and show that at December
31, 1996 the local method had resulted in a somewhat higher pension liability
and somewhat higher annual pension cost than the U.S. GAAP method.
(8) INCOME TAXES
The Company, having legally been part of Neste Oy, has been included in the
tax return of Neste Oy. The tax in the statements of operations has been
calculated by applying the general company tax rate of 28% to the income
before income taxes. No possible tax losses, accelerated depreciation or other
similar effects, which usually have been considered at the level of Neste Oy
only, have been reflected in the calculations. Accordingly no deferred tax
assets or liabilities have been recorded. All taxes are paid by the parent
company.
(9) COMMITMENTS AND CONTINGENCIES
The Company is a party to various legal actions arising in the ordinary
course of its business. The liability, if any, associated with these matters
will not have a material adverse effect upon financial condition, results of
operations or cash flows of the Company.
The Company is also subject to environmental regulations, including rules
relating to air and water pollution and the storage and disposal of chemicals
and waste. The Company believes it complies in all material respects with
applicable laws.
F-8
<PAGE>
NESTE OY POLYSTYRENE UPSTREAM BUSINESS IN PORVOO AND KOKEMAKI
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
It has been Neste Oy's policy to not make use of leased assets except for
minor office equipment.
(10) SUBSEQUENT EVENT
On September 17, 1997, Neste Oy, Isora Oy, Neste Cellplast AB and Neste
Thermisol A/S (the Sellers) entered into a sale of assets agreement, subject
to satisfactory resolution of financing, with StyroChem Finland Oy, Thermisol
Finland Oy, Thermisol Sweden AB and Thermisol Denmark ApS (the Purchasers) and
Radnor Holdings Corporation as parent and guarantor concerning the sale and
purchase of certain EPS, PS and HIPS assets in Finland, Sweden and Denmark,
which includes the assets of the Company.
F-9
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Isora Oy:
We have audited the accompanying balance sheets of ISORA OY (a Finnish Joint
Stock company) as of December 31, 1995 and 1996, and the related statements of
operations, changes in stockholder's equity and cash flows for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ISORA OY as of December
31, 1995 and 1996, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles (see Note 1).
ARTHUR ANDERSEN OY
Helsinki, Finland
September 5, 1997
(except with respect to the matters discussed in Note 12,
as to which the date is September 17, 1997).
F-10
<PAGE>
ISORA OY
BALANCE SHEETS
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1995 1996 1997
------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash................................... $ 3,182 $ 4,863 $ 3,537
Accounts receivable.................... 1,708 1,311 3,189
Inventories, net....................... 1,495 1,383 1,507
Prepaid expenses and other............. 378 199 783
Loans to Neste Oy and affiliates....... 2,960 2,048 800
------- ------- -------
9,723 9,804 9,816
------- ------- -------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Machinery and equipment................ 8,470 8,133 7,346
Less accumulated depreciation.......... (3,068) (3,887) (3,716)
------- ------- -------
5,402 4,246 3,630
------- ------- -------
OTHER ASSETS............................. 330 236 205
------- ------- -------
$15,455 $14,286 $13,651
======= ======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable....................... $ 1,656 $ 2,220 $ 2,532
Accrued liabilities.................... 1,048 1,260 2,215
Loans from credit institutions......... 23 95 --
------- ------- -------
2,727 3,575 4,747
------- ------- -------
LONG-TERM LIABILITIES.................... 3,597 1,818 919
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDER'S EQUITY
Common stock........................... 3,858 3,858 3,858
Retained earnings...................... 4,531 4,859 4,886
Cumulative translation adjustment...... 742 176 (759)
------- ------- -------
9,131 8,893 7,985
------- ------- -------
$15,455 $14,286 $13,651
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE>
ISORA OY
STATEMENTS OF OPERATIONS
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE SIX MONTH PERIOD
DECEMBER 31, ENDED JUNE 30,
------------------------- -----------------------------
1994 1995 1996 1996 1997
------- ------- ------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES............... $15,823 $20,561 $19,298 $ 8,466 $ 8,183
COST OF GOODS SOLD...... 12,484 16,800 14,960 6,151 5,680
------- ------- ------- ------------ ------------
GROSS PROFIT............ 3,339 3,761 4,338 2,315 2,503
OPERATING EXPENSES:
Distribution.......... 730 841 938 396 409
Selling, general and
administrative....... 3,069 3,567 3,336 2,222 2,127
------- ------- ------- ------------ ------------
INCOME (LOSS) FROM
OPERATIONS............. (460) (647) 64 (303) (33)
OTHER INCOME............ 32 637 112 55 60
------- ------- ------- ------------ ------------
INCOME (LOSS) BEFORE
INCOME TAXES........... (428) (10) 176 (248) 27
(PROVISION) BENEFIT FOR
INCOME TAXES........... (63) (17) 152 75 --
------- ------- ------- ------------ ------------
NET INCOME (LOSS)....... $ (491) $ (27) $ 328 $ (173) $ 27
======= ======= ======= ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE>
ISORA OY
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK CUMULATIVE
------------- RETAINED TRANSLATION
SHARES AMOUNT EARNINGS ADJUSTMENT TOTAL
------ ------ -------- ----------- ------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1994............. 18,300 $3,858 $4,744 $ 18 $8,620
Net loss........................... -- -- (491) --
Group contribution................. -- -- 305 --
Translation adjustment............. -- -- -- (18)
------ ------ ------ -----
BALANCE, December 31, 1994........... 18,300 3,858 4,558 -- 8,416
Net loss........................... -- -- (27) --
Translation adjustment............. -- -- -- 742
------ ------ ------ -----
BALANCE, December 31, 1995........... 18,300 3,858 4,531 742 9,131
Net income......................... -- -- 328 --
Translation adjustment............. -- -- -- (566)
------ ------ ------ -----
BALANCE, December 31, 1996........... 18,300 3,858 4,859 176 8,893
Net income (unaudited)............. -- -- 27 --
Translation adjustment
(unaudited)....................... -- -- -- (935)
------ ------ ------ -----
BALANCE, June 30, 1997 (unaudited)... 18,300 $3,858 $4,886 $(759) $7,985
====== ====== ====== ===== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE>
ISORA OY
STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE SIX MONTH
DECEMBER 31, PERIOD ENDED JUNE 30,
------------------------- ----------------------
1994 1995 1996 1996 1997
------- ------- ------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income(loss).......... $ (491) $ (27) $ 328 $ (173) $ 27
Adjustments to reconcile
net income (loss) to net
cash provided by (used
in) operating activities:
Depreciation............. 658 575 1,101 543 238
Other.................... 50 1 (19) 2 (1)
Changes in operating
assets and liabilities:
Accounts receivable..... (286) 476 293 (2,004) (2,016)
Inventories, net........ (935) 1,134 20 (235) (269)
Loans, prepaid expenses
and other.............. 500 1,325 887 258 428
Accounts payable........ 677 (934) 665 831 545
Loans from credit
institutions and
accrued liabilities.... (399) (154) 349 682 1,003
Other assets............ 2 (9) 28 6
------- ------- ------- ------- -------
Net cash (used in)
provided by operating
activities............ (224) 2,387 3,624 (68) (39)
------- ------- ------- ------- -------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Net purchases of property,
plant and equipment...... (589) (293) (190) (102) (67)
------- ------- ------- ------- -------
Net cash used in
investing activities.. (589) (293) (190) (102) (67)
------- ------- ------- ------- -------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Group contribution..... 305 -- -- -- --
Long-term liabilities.. (191) (95) (1,557) (139) (708)
------- ------- ------- ------- -------
Net cash provided by
(used in) financing
activities............ 114 (95) (1,557) (139) (708)
------- ------- ------- ------- -------
Translation effect on cash.. -- 95 (196) (195) (512)
------- ------- ------- ------- -------
CASH, BEGINNING OF PERIOD... 1,787 1,088 3,182 3,182 4,863
------- ------- ------- ------- -------
CASH, END OF PERIOD......... $ 1,088 $ 3,182 $ 4,863 $ 2,678 $ 3,537
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-14
<PAGE>
ISORA OY
NOTES TO FINANCIAL STATEMENTS
(INCLUDING NOTES APPLICABLE TO UNAUDITED PERIODS)
(1) ORGANIZATION AND BASIS OF PRESENTATION:
The Business Unit
Isora Oy (the Company) is a Finnish Joint Stock company 100% owned by Neste
Oy.
Isora has three production sites--Nurmijarvi, Vammala and Pietarsaari.
Nurmijarvi is an almost fully automated site for standard insulation products.
Vammala produces standard as well as special products. Pietarsaari, located on
the northwest coast, covers the northern region. In addition to its EPS
conversion business, Isora also produces and markets patented EPS sandwich
elements for a broad range of construction applications. Sales are carried out
through Isora's sales organization located at the three sites.
Neste is establishing a production base in St. Petersburg, Russia where
exploratory marketing efforts have been underway since 1994, using products
exported from Finland. The plant started operations in spring 1997. These
statements do not include any part of the St. Petersburg conversion business.
Basis of Presentation
Isora Oy's records are maintained in accordance with Finnish law and
reporting requirements. These financial statements have been converted from
Finnish generally accepted accounting principles (GAAP) to U.S. GAAP.
The following adjustments have been made to Finnish GAAP amounts to comply
with U.S. GAAP requirements:
. Voluntary provisions (difference between fiscal depreciation and the
planned depreciation) have been transferred to stockholder's equity.
Deferred tax at 28% has been deduced from the difference and added to
long-term liabilities. The change of deferred tax is included in the
statements of operations (provision for income taxes). The Company has
accumulated tax losses from fiscal years 1992 and 1994, which can be
deducted from future taxable profits. Deferred tax on accumulated tax
losses has not been calculated as the effect on income of the 1994 is not
material.
. Obligatory provisions have been classified as long term liabilities.
. In 1994 Neste Oy paid a group contribution of $305,000 to Isora Oy. In
these statements the amount has been reflected as a capital contribution,
so that it has no effect on the income of 1994.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Fiscal year
The fiscal year of the Company presented in the financial statements is the
calendar year.
Foreign Currency Translation
The assets and liabilities of the Company, whose functional currency is
other than the U.S. dollar, are translated into U.S. dollars at year end
exchange rates. Revenues and expense accounts are translated using the
weighted average exchange rate during the periods. The functional currency of
the Company is the Finnish markka and the exchange rates used were those
quoted by the Bank of Finland. Translation gains and losses are not included
in determining net income but are accumulated in a separate component of
owner's investment, as is required by Statement of Financial Accounting
Standards No. 52, "Foreign Currency Translation."
F-15
<PAGE>
ISORA OY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Revenue Recognition
Revenue is recognized when goods are shipped. Sales are recorded gross
before cash and other discounts, which are deducted from the value of sales,
when the customer fulfils the terms of trade agreed upon.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of financial statements and the reported amounts of
revenues and expenses during the reported period. Actual results could differ
from those estimates.
Fair Value of Financial Instruments
The fair value of financial instruments, including accounts receivables and
accounts payable, approximate their recorded values due primarily to the
short-term nature of their maturities.
(3) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market
and consist of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1995 1996 JUNE 30, 1997
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials.................................... $ 915 $1,086 $ 986
Work-in-progress................................. 247 149 290
Finished goods................................... 333 148 231
------ ------ ------
Total............................................ $1,495 $1,383 $1,507
====== ====== ======
</TABLE>
(4) PROPERTY PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Expenditures for
improvements that increase the values or extend the useful life are
capitalized and maintenance repair costs are expensed as incurred.
Depreciation is recorded using the straight-line method over the useful lives
of the respective assets, which is 15 years for machinery and equipment and 5
years for other capitalized expenditures.
(5) OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
-------------------------
1995 1996 JUNE 30, 1997
----- ----- -------------
(UNAUDITED)
<S> <C> <C> <C>
Intangible rights.................................. $ 17 $ 19 $ 17
Other capitalized expenditures..................... 155 82 67
Shares in housing and other corporations........... 158 135 121
----- ----- -----
Total.............................................. $ 330 $ 236 $ 205
===== ===== =====
</TABLE>
F-16
<PAGE>
ISORA OY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(6) ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
-----------------------------
1995 1996 JUNE 30, 1997
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Unpaid rent to Neste......................... $ -- $ 672 $ 301
Provision for holiday payment................ 441 377 628
Other accrued liabilities.................... 607 211 1,286
------- ------- -------
Total........................................ $ 1,048 $ 1,260 $ 2,215
======= ======= =======
(7) LONG-TERM LIABILITIES
Long-term liabilities consist of the following:
<CAPTION>
(IN THOUSANDS)
-----------------------------
1995 1996 JUNE 30, 1997
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Loans from pension institutions.............. $ 2,128 $ 756 $ --
Other non-current liabilities................ 69 43 --
Difference between fiscal and planned
depreciation................................ 1,032 835 747
Obligatory provisions........................ 368 184 172
------- ------- -------
Total........................................ $ 3,597 $ 1,818 $ 919
======= ======= =======
</TABLE>
(8) PENSION COSTS
The pensions of the personnel have been covered by the Joint Pension
Foundation of Neste Corporation in line with the local laws and practices. The
foundation has been able to offer pension services at lower annual fees than
the market prices of pension insurance companies. The compulsory deficit of
the foundation, which is immaterial, has been provided for in the accounts of
the company. In Finnish GAAP the future salary increases have not been taken
into account when calculating the pension liability. U.S. GAAP calculations
have been prepared only for that part of pension liability that exceeds the
normal pension liability stipulated by law. The calculations are at the level
of total Neste Corporation only, and show, that at December 31, 1996 the local
method had resulted in a somewhat higher pension liability and somewhat higher
annual pension cost than the U.S. GAAP method.
(9) INCOME TAXES
The tax in the statements of operations has been calculated by applying the
general company tax rate of 28% to the income before taxes (according to
Finnish GAAP). Deferred taxes on the differences between the fiscal and
planned depreciation has been added.
(10) COMMITMENTS AND CONTINGENCIES
The Company is a party to various legal actions arising in the ordinary
course of its business. The liability, if any, associated with these matters
will not have a material adverse effect upon financial condition, results of
operations or cash flows of the Company.
The Company is also subject to environmental regulations, including rules
relating to air and water pollution and the storage and disposal of chemicals
and waste. The Company believes it complies in all material respects with
applicable laws.
F-17
<PAGE>
ISORA OY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The land and buildings in Vammala and Nurmijarvi are owned by Neste Oy and
rented to the Company under two separate rental agreements. The annual rent of
the Vammala agreement is $480,000. The rental payment can be renegotiated
annually in February. The Nurmijarvi agreement is similar to the Vammala
agreement. The annual rent is $144,000. The right to rent the property cannot,
however be transferred to a third party without the consent of the lessor. The
Pietarsaari production facilities have been rented from a third party at an
annual rent of $65,000. The rental period ends 12th of April 2000, but notice
can be given by both parties any time upon six months notice. The contract
includes an option to buy the land and buildings at a price offered by a third
party. The contract cannot be transferred to a third party without the consent
of the lessor.
(11) RELATED PARTY TRANSACTIONS:
The Company had accounts receivable from Neste Oy of $125,000, $81,000 and
$71,000 at December 31, 1995 and 1996 and June 30, 1997, respectively.
Additionally, the Company had accounts payable to Neste Oy and Neste Cellplast
AB of $952,000 and $46,000 at December 31, 1995, $907,000 and $44,000 at
December 31, 1996 and $1,735,000 and $0 at June 30, 1997.
(12) SUBSEQUENT EVENT:
On September 17, 1997, Neste Oy, Isora Oy, Neste Cellplast AB and Neste
Thermisol A/S (the Sellers) entered into a sale of assets agreement, subject
to satisfactory resolution of financing, with StyroChem Finland Oy, Thermisol
Finland Oy, Thermisol Sweden AB and Thermisol Denmark ApS (the Purchasers) and
Radnor Holdings Corporation as parent and guarantor concerning the sale and
purchase of certain EPS, PS and HIPS assets in Finland, Sweden and Denmark,
which includes the assets of the Company.
F-18
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Neste Cellplast AB:
We have audited the accompanying balance sheet of NESTE CELLPLAST AB (a
Swedish Corporation and subsidiary of Neste Sverige AB) as of December 31,
1996, and the related statements of operations, changes in stockholders'
equity and cash flows for the year ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NESTE CELLPLAST AB as of
December 31, 1996, and the results of its operations and its cash flows for
the year ended December 31, 1996, in conformity with generally accepted
accounting principles (see Note 2).
The financial statements of Neste Cellplast AB for the two years ended
December 31, 1994 and 1995 were audited by other auditors whose reports dated
February 17, 1995 and February 21, 1996, respectively, expressed unqualified
opinions on these statements. The opinion of such auditors, however, does not
cover the restatement of those financial statements as described in Note 2.
We have also audited the adjustments described in Note 2 that were applied
to restate the December 31, 1994 and December 31, 1995 financial statements.
In our opinion, such adjustments are appropriate and have been properly
applied.
ARTHUR ANDERSEN AB
Stockholm, Sweden
September 12, 1997
(except with respect to the matters discussed in Note 10,
as to which the date is September 17, 1997).
F-19
<PAGE>
ORGANISATION NUMBER: 556190-3419
AUDITORS' REPORT ON NESTE CELLPLAST AB
We have examined the annual report, the accounting records and the
administration by the Board of Directors and the Managing Director for the
financial year 1995. The examination was made in accordance with generally
accepted auditing standards.
The accounts have been prepared in conformity with the Swedish Companies Act.
We recommend,
that the Income Statement and the Balance Sheet be adopted,
that the profit be disposed as proposed in the administration report and
that the members of the Board of Directors and the Managing Director be
discharged from personal liability for the fiscal year.
1996-02-21
Ohrlings Coopers & Lybrand AB
F-20
<PAGE>
ORGANISATION NUMBER: 556190-3419
AUDITORS' REPORT ON NESTE CELLPLAST AKTIEBOLAG
We have examined the annual report, the accounting records and the
administration by the Board of Directors and the Managing Director for the
financial year 1994. The examination was made in accordance with generally
accepted auditing standards.
The accounts have been prepared in conformity with the Swedish Companies
Act.
We recommend,
that the Income Statement and the Balance Sheet be adopted,
that the profit be disposed as proposed in the administration report and
that the members of the Board of Directors and the Managing Director be
discharged from personal liability for the fiscal year.
1995-02-17
Ohrlings Reveko AB
F-21
<PAGE>
NESTE CELLPLAST AB
BALANCE SHEETS
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1995 1996 1997
------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
------
CURRENT ASSETS
Cash................................... $1,029 $2,631 $1,226
Accounts receivable, net............... 1,159 727 1,298
Inventories, net....................... 489 439 451
Prepaid expenses and other current as-
sets.................................. 651 122 341
------ ------ ------
3,328 3,919 3,316
------ ------ ------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land................................... 11 11 8
Buildings and improvements............. 973 946 843
Machinery and equipment................ 4,478 4,546 4,117
------ ------ ------
5,462 5,503 4,968
Less--accumulated depreciation......... (4,789) (4,869) (4,427)
------ ------ ------
673 634 541
------ ------ ------
TOTAL ASSETS............................. $4,001 $4,553 $3,857
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENTS LIABILITIES
Accounts payable....................... $ 933 $1,748 $ 988
Accrued liabilities.................... 383 489 571
Other current liabilities.............. 333 60 155
------ ------ ------
1,649 2,297 1,714
------ ------ ------
DEFERRED TAX LIABILITY................... 61 51 39
------ ------ ------
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY
Share capital, 67,000 shares of nom.
SEK 100 each.......................... 804 804 804
Retained earnings...................... 1,130 1,131 1,277
Cumulative translation adjustment...... 357 270 23
------ ------ ------
Total stockholders' equity........... 2,291 2,205 2,104
------ ------ ------
TOTAL STOCKHOLDERS' EQUITY AND LIABILI-
TIES.................................... $4,001 $4,553 $3,857
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE>
NESTE CELLPLAST AB
STATEMENTS OF OPERATIONS
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
FOR THE SIX MONTH
FOR THE YEAR ENDED PERIOD ENDED
DECEMBER 31, JUNE 30,
------------------------- -----------------------
1994 1995 1996 1996 1997
------- ------- ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES.................. $ 8,961 $10,072 $10,319 $ 4,898 $ 4,876
COST OF GOODS SOLD......... (6,251) (7,810) (6,904) (3,275) (3,759)
------- ------- ------- ------- -------
GROSS PROFIT............... 2,710 2,262 3,415 1,623 1,117
OPERATING EXPENSES:
Distribution............. (736) (766) (870) (436) (524)
Selling, general and ad-
ministrative............ (1,236) (1,253) (1,725) (698) (104)
------- ------- ------- ------- -------
(1,972) (2,019) (2,595) (1,134) (628)
------- ------- ------- ------- -------
INCOME FROM OPERATIONS..... 738 243 820 489 489
OTHER INCOME:
Interest income, net..... 23 74 80 42 23
------- ------- ------- ------- -------
INCOME FROM CONTINUING OP-
ERATIONS BEFORE INCOME
TAXES..................... 761 317 900 531 512
Current income tax provi-
sion.................... (2) (6) (4) (4) (2)
Deferred income tax bene-
fit..................... 39 2 8 3 6
------- ------- ------- ------- -------
NET INCOME................. $ 798 $ 313 $ 904 $ 530 $ 516
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE>
NESTE CELLPLAST AB
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK CUMULATIVE
------------- RETAINED TRANSLATION
SHARES AMOUNT EARNINGS ADJUSTMENT TOTAL
------ ------ -------- ----------- ------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1994............. 67,000 $804 $1,244 $(127) $1,921
Net income......................... -- -- 798 --
Group contribution................. -- -- (895) --
Translation Adjustment............. -- -- -- 221
------ ---- ------ -----
BALANCE, December 31, 1994........... 67,000 804 1,147 94 2,045
Net income......................... -- -- 313 --
Group contribution................. -- -- (330) --
Translation Adjustment............. -- -- -- 263
------ ---- ------ -----
BALANCE, December 31, 1995........... 67,000 804 1,130 357 2,291
Net income......................... 904
Group contribution................. (903)
Translation Adjustment............. -- -- -- (87)
------ ---- ------ -----
BALANCE, December 31, 1996........... 67,000 804 1,131 270 2,205
Net income (unaudited)............. 516
Group contribution (unaudited)..... (370)
Translation Adjustment (unau-
dited)............................ -- -- -- (247)
------ ---- ------ -----
BALANCE, June 30, 1997 (unaudited)... 67,000 $804 $1,277 $ 23 $2,104
====== ==== ====== ===== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE>
NESTE CELLPLAST AB
STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
FOR THE SIX
FOR THE YEAR MONTH PERIOD
ENDED DECEMBER 31, ENDED JUNE 30,
------------------------ -----------------------
1994 1995 1996 1996 1997
------- ------ ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income................. $ 798 $ 313 $ 904 $ 530 $ 516
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depreciation.............. 336 205 233 105 107
Changes in operating
assets and liabilities
Accounts receivable...... (246) (296) 432 (322) (571)
Inventories.............. (255) 112 50 (139) (12)
Prepaid expense and
other................... 673 204 529 194 (219)
Accounts payable......... 423 (275) 815 (83) (760)
Accrued liabilities and
other liabilities....... 22 270 (177) (48) 165
------- ------ ------- ------ -------
Net cash provided by
(used in) operating
activities............. 1,751 533 2,786 237 (774)
------- ------ ------- ------ -------
CASH FLOWS FROM INVESTING
ACTIVITIES
Capital expenditures....... (110) (331) (212) (98) (80)
Group contribution......... (895) (330) (903) (241) (370)
------- ------ ------- ------ -------
Net cash used in
investing activities... (1,005) (661) (1,115) (339) (450)
------- ------ ------- ------ -------
CASH FLOWS FROM FINANCING
ACTIVITIES
Payments of bank loans..... (127) (142) -- -- --
------- ------ ------- ------ -------
Net cash used in
financing activities... (127) (142) -- -- --
------- ------ ------- ------ -------
Translation effect on
cash...................... 153 198 (69) 16 (181)
------- ------ ------- ------ -------
NET INCREASE (DECREASE) IN
CASH........................ 772 (72) 1,602 (86) (1,405)
CASH, beginning of period.... 329 1,101 1,029 1,029 2,631
------- ------ ------- ------ -------
CASH, end of period.......... $ 1,101 $1,029 $ 2,631 $ 943 $ 1,226
======= ====== ======= ====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE>
NESTE CELLPLAST AB
NOTES TO FINANCIAL STATEMENTS
(INCLUDING NOTES APPLICABLE TO UNAUDITED PERIODS)
(1) ORGANIZATION
The Company
Neste Cellplast AB (the Company), a Swedish company, is owned by Neste
Sverige AB (91%) and Gullfiber AB (9%). Neste Sverige AB is a wholly owned
subsidiary of the Finnish oil-chemistry and energy company, Neste Oy. The
Company carries on thermisol manufacturing for insulation purposes in the
building and packaging industry. The Company has two manufacturing plants, one
in Norrtalje, and one in Vargarda. The Company's headquarters are located in
Norrtalje.
Intercompany transaction
For 1995 and 1996 91% and 89%, respectively, of total purchases were made
from other group companies, and 1% and 0%, respectively, of total sales were
made to group companies.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The Company's records are maintained in accordance with Swedish laws and
reporting requirements. These financial statements have been prepared in
accordance with United States generally accepted accounting principles ("U.S.
GAAP") and have been translated into U.S. dollars.
For Swedish statutory reporting purposes, operating expenses in the
statement of operations include cost of goods sold, distribution cost and
selling, general and administration costs. For U.S. GAAP purposes these costs
have been separated.
Foreign currency translation
The functional currency for the Company's operations is Swedish krona. The
translation from Swedish krona to U.S. dollars is performed for the balance
sheet accounts using the exchange rates in effect at the balance sheet date
and for revenue and expense accounts using a weighted average exchange rate
during the period. Translation gains and losses are not included in
determining net income but are accumulated in a separate component of
stockholders' equity, as is required by Statement of Financial Accounting
Standards No. 52, "Foreign Currency Translation."
Contributions to Neste Sverige AB
The Company has given group contribution to Neste Sverige AB during each of
the three years ended December 31, 1994, 1995 and 1996. Group contributions
are principally made to transfer taxable income from one group entity with the
objective of reducing the group's total current tax expenses. These
contributions lead to a taxable income for the recipient and a taxable expense
for the donor. The Company's annual current tax expense has therefore been
impacted by the group contributions. Since the contributions are permanent
differences for tax purposes, no deferred tax accounting related to group
contribution has been made.
For Swedish statutory reporting purposes, group contributions are accounted
for as an appropriation in the statement of operations. This accounting
methodology is utilized primarily to obtain an agreement between a company's
financial statement income and taxable income. Group contributions are thus
not related to a company's operations. For U.S. GAAP purposes, group
contributions provided have been treated as a transfer from stockholders'
equity.
F-26
<PAGE>
NESTE CELLPLAST AB
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Cash
Cash is deposited on a group account held by the Swedish parent company
Neste Sverige AB. The Company has access to these accounts. For Swedish
statutory purposes these liquid funds are disclosed as a short-term receivable
from the parent company. For U.S. GAAP purposes the item is restated to cash.
Revenue Recognition
Revenue is recognized when goods are shipped.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of financial statements and the reported amounts of
revenues and expenses during the reported period. Actual results could differ
from those estimates.
Fair Value of Financial Instruments
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques, as appropriate. Unless
otherwise disclosed, the fair value of financial instruments, including
accounts receivable and accounts payable, approximate their recorded values
due primarily to the short-term nature of their maturities.
(3) INVENTORY
Inventories are valued at the lower of cost (first-in, first-out) or market.
Provision for obsolescence has been calculated based on review of individual
items. Inventories at December 31, 1995 and 1996, and for the six month
periods ended June 30, 1996 and 1997 consist of the following items:
<TABLE>
<CAPTION>
(IN THOUSANDS)
JUNE 30,
1995 1996 1997
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw material.............................................. $199 $171 $180
Work in progress.......................................... 87 72 77
Finished goods............................................ 203 196 194
---- ---- ----
Total................................................... $489 $439 $451
==== ==== ====
</TABLE>
The Company purchases most of its raw material from Neste in Finland. The
prices are based on market prices of polystyrene, the primal component of
thermisol products.
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost and depreciated using the
straight-line method with estimated lives ranging as follows:
<TABLE>
<S> <C>
Land................................................................ None
Land improvements................................................... 27 years
Buildings........................................................... 20 years
Equipment........................................................... 5 years
</TABLE>
F-27
<PAGE>
NESTE CELLPLAST AB
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(5) PROVISION FOR PENSION LIABILITIES
Providing for future pension liabilities, two main systems are used in
Sweden. One where actuarially computed premiums are currently paid to an
independent pension insurance company, and the other where an independent body
computes the actuarial liability for unfunded pensions which a company has to
include among long-term liabilities (the book reserve method).
When a company uses the method by paying premiums to an insurance company
there is no remaining risk or cost to the company for benefits earned to date
once the premium is paid. It is only benefits financed by the book reserve
method that has to be actuarially valued according to FAS 87.
The Company is paying a fixed premium to a Swedish independent insurance
company, SPP. The Company has therefore no pension liability to provide for
and no restatement is to be made according to FAS 87.
(6) INCOME TAXES
Deferred income taxes are provided under the asset and liability method.
This method requires recognition of deferred tax liabilities and assets for
the expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this period, deferred income taxes
are determined based on the difference between the financial statement and tax
basis of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts
expected to be realized. Income tax expense consists of the Company's current
liability for income taxes and the change in the Company's deferred tax assets
and liabilities.
The provision for income taxes varies from the amount of income tax
determined by applying the applicable domestic statutory tax rate to pre-tax
income as a result of the following:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Statutory tax rate........................................ 28% 28% 28%
Group contribution........................................ (26)% (27)% (27)%
Other..................................................... -- (1)% (1)%
--- --- ---
Effective tax rate........................................ 2% 0% 0%
=== === ===
</TABLE>
(7) COMMITMENTS AND CONTINGENCIES
Shareholder agreement with Gullfiber AB
Neste Sverige AB has reached an agreement to acquire the minority interest
of Gullfiber AB.
Patent dispute with Sundolitt AB
The Company is involved in a patent dispute with Sundolitt AB, a Swedish
competitor. In 1991, Sundolitt commented a patent infringement for the product
"Makribbdack". In 1995, the Swedish Patent and Registration Office accorded
another patent for the product to Sundolitt AB. In November 1995, Sundolitt
claimed damages of $110,000. The Company has filed an objection towards the
patent to the Swedish Patent and Registration Office in June 1997. The dispute
is expected to be settled in 1997. If the Company loses the dispute, they are
to pay $110,000 in damages to Sundolitt AB.
The Company is a party to various legal actions arising in the ordinary
course of its business. The liability, if any, associated with these matters
will not have a material adverse effect upon financial condition, results of
operations or cash flows of the Company.
F-28
<PAGE>
NESTE CELLPLAST AB
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company is also subject to environmental regulations, including rules
relating to air and water pollution and the storage and disposal of chemicals
and waste. The Company believes it complies in all material respects with
applicable laws.
(8) EMPLOYEE BENEFIT PLAN:
The Company has a profit sharing plan, which covers all employees. The
Company will pay the employees a total annual bonus amounting to 10% of income
after depreciation. The profit sharing plan exists on a voluntary basis and
the management is free to abolish the plan from one year to another. The board
of directors has decided that a bonus will be paid to the employees according
to the plan in 1997. The bonus amounted to $82,000, $29,000 and $38,000 in
1996, 1995 and 1994, respectively. The amount for 1997 has not yet been
decided upon.
(9) RESTRICTIONS ON RETAINED EARNINGS
Retained earnings available for dividends are based upon statutory financial
statements. Under the provisions of the Swedish Companies Act a legal reserve
must be established in an amount equal to 20% of the share capital. This
reserve is established by appropriating 10% of the statutory net income each
year until the prescribed amount has been appropriated. The legal reserve may
be used to absorb deficit, but usually may not be distributed as dividends.
Retained earnings available for dividends were $905,000 at December 31,
1996.
(10) SUBSEQUENT EVENT:
On September 17, 1997, Neste Oy, Isora Oy, Neste Cellplast AB and Neste
Thermisol A/S (the Sellers) entered into a sale of assets agreement, subject
to satisfactory resolution of financing, with StyroChem Finland Oy, Thermisol
Finland Oy, Thermisol Sweden AB and Thermisol Denmark ApS (the Purchasers) and
Radnor Holdings Corporation as parent and guarantor concerning the sale and
purchase of certain EPS, PS and HIPS assets in Finland, Sweden and Denmark,
which includes the assets of the Company.
F-29
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Neste Thermisol A/S:
We have audited the accompanying balance sheets of NESTE THERMISOL A/S as of
December 31, 1995 and 1996, and the related statements of operations, changes
in shareholder's equity and cash flows for each of the three years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NESTE Thermisol A/S as of
December 31, 1995 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles (see Note 1).
ARTHUR ANDERSEN
Arhus, Denmark
August 29, 1997
(except with respect to the matters discussed in Note 8,
as to which the date is September 17, 1997).
F-30
<PAGE>
NESTE THERMISOL A/S
BALANCE SHEETS
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1995 1996 1997
------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............. $ 787 $ 872 $ 839
Accounts receivable.................... 403 327 468
Inventories, net....................... 481 242 286
Prepaid expenses and other............. 174 32 58
------- ------- ------
1,845 1,473 1,651
------- ------- ------
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements.................. 207 193 173
Buildings and improvements............. 2,076 1,979 1,773
Machinery and equipment................ 2,920 2,864 2,598
------- ------- ------
5,203 5,036 4,544
Less accumulated depreciation.......... (1,758) (1,936) (1,872)
------- ------- ------
Total fixed assets................... 3,445 3,100 2,672
------- ------- ------
$ 5,290 $ 4,573 $4,323
======= ======= ======
LIABILITIES AND OWNER'S INVESTMENT
CURRENT LIABILITIES:
Accounts payable....................... $ 652 $ 439 $ 423
Accrued liabilities.................... 1,248 1,280 1,139
------- ------- ------
1,900 1,719 1,562
OTHER LONG-TERM LIABILITIES.............. 2,073 1,710 1,431
COMMITMENTS AND CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY:
Share capital.......................... 2,398 2,237 2,003
Accumulated deficit.................... (1,074) (1,096) (655)
Translation adjustment................. (7) 3 (18)
------- ------- ------
1,317 1,144 1,330
------- ------- ------
$ 5,290 $ 4,573 $4,323
======= ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE>
NESTE THERMISOL A/S
STATEMENTS OF OPERATIONS
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
FOR THE SIX MONTH
FOR THE YEAR ENDED DECEMBER 31, PERIOD ENDED JUNE 30,
---------------------------------- ----------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET SALES............... $ 4,538 $ 5,675 $ 5,470 $ 2,541 $ 3,178
COST OF GOODS SOLD...... 3,105 3,800 3,405 1,702 1,760
---------- ---------- ---------- ---------- ----------
GROSS PROFIT............ 1,433 1,875 2,065 839 1,418
OPERATING EXPENSES
Distribution.......... 561 624 642 286 387
Selling, general and
administrative....... 1,094 1,241 1,368 678 654
---------- ---------- ---------- ---------- ----------
INCOME (LOSS) FROM OPER-
ATIONS................. (222) 10 55 (125) 377
FINANCIAL EXPENSES...... 186 151 142 81 54
---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS)....... $ (408) $ (141) $ (87) $ (206) $ 323
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE>
NESTE THERMISOL A/S
STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<S> <C>
BALANCE, January 1, 1994................................................ $1,070
Increase to share capital............................................. 575
Reduction of share capital............................................ (575)
Share capital transferred to cover the loss........................... 575
Net loss.............................................................. (408)
Translation adjustment................................................ 98
------
BALANCE, December 31, 1994.............................................. 1,335
Net loss.............................................................. (141)
Translation adjustment................................................ 123
------
BALANCE, December 31, 1995.............................................. 1,317
Net loss.............................................................. (87)
Translation adjustment................................................ (86)
------
BALANCE, December 31, 1996.............................................. 1,144
Net income (unaudited)................................................ 323
Translation adjustment (unaudited).................................... (137)
------
BALANCE, June 30, 1997 (unaudited)...................................... $1,330
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE>
NESTE THERMISOL A/S
STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
FOR THE SIX MONTH
FOR THE YEAR ENDED PERIOD ENDED
DECEMBER 31, JUNE 30,
---------------------- -----------------------
1994 1995 1996 1996 1997
------ ------ ------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVI-
TIES:
Net income (loss)............. $ (408) $ (141) $ (87) $(206) $323
Adjustments to reconcile net
income (loss) to net cash
provided by operating activi-
ties:
Depreciation.................. 372 413 320 161 147
Changes in operating assets
and liabilities:
Accounts receivable........... (17) (145) 76 170 (140)
Inventories, net.............. (76) (77) 238 73 (42)
Prepaid expenses and other.... (41) (107) 142 (6) (26)
Accounts payable.............. 357 39 (212) (359) (17)
Accrued liabilities........... 362 83 50 (279) (122)
------ ------ ----- ----- ----
Net cash provided (used) by
operating activities....... 549 65 527 (446) 123
------ ------ ----- ----- ----
CASH FLOWS FROM INVESTING ACTIV-
ITIES:
Net purchases of property,
plant & equipment............ (121) (134) (201) (66) (38)
------ ------ ----- ----- ----
Net cash used in investing
activities................. (121) (134) (201) (66) (38)
------ ------ ----- ----- ----
CASH FLOWS FROM FINANCING ACTIV-
ITIES:
Increase of share capital..... 575
Installment on bank debt...... (133) (7) -- -- --
Installment on loan........... -- (29) (232) (117) (106)
------ ------ ----- ----- ----
Net cash (provided by) used
in financing activites..... 442 (36) (232) (117) (106)
------ ------ ----- ----- ----
Increase (decrease) in cash..... 870 (105) 94 (629) (21)
CASH, beginning of period....... 46 878 787 787 872
Translation effect on cash.... (38) 14 (9) (6) (12)
------ ------ ----- ----- ----
CASH, end of period............. $ 878 $ 787 $ 872 $ 152 $839
====== ====== ===== ===== ====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE>
NESTE THERMISOL A/S
NOTES TO FINANCIAL STATEMENTS
(INCLUDING NOTES APPLICABLE TO UNAUDITED PERIODS)
(1) ORGANIZATION AND BASIS OF PRESENTATION:
The Business Unit
Neste Thermisol A/S (the Company) is owned by the Finnish concern Neste Oy,
who has activities within chemistry, gas and natural gas. The company is
registered in Denmark.
The Company produces and markets insulation material made of polystyrene for
the Danish and German construction activities, and has considerable market
shares within floor- and roof insulation.
Basis of Presentation
The Company's records are maintained in accordance with Danish law and
reporting requirements. These financial statements have been converted from
Danish GAAP to U.S. GAAP.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Fiscal year
The fiscal year of the Company presented in the financial statements is the
calendar year.
Foreign Currency Translation
The assets and liabilities of the Company, whose functional currency is
other than the U.S. dollar, are translated into U.S. dollars at year end
exchange rates. Revenues and expense accounts are translated using the
weighted average exchange rate during the periods. Translation gains and
losses are not included in determining net income but are accumulated in a
separate component of owner's investment, as is required by Statement of
Financial Accounting Standards No. 52, "Foreign Currency Translation."
Cash
The Company is an operating unit of Neste Oy, and participates in the cash
pool of Neste Oy. All cash requirements of the Company have been funded out of
this cash pool.
Revenue Recognition
Revenue is recognized when goods are shipped. Sales are recorded gross
before cash and other discounts, which are deducted from the value of sales,
when the customer fulfills the terms of trade agreed upon.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of financial statements and the reported amounts of
revenues and expenses during the reported period. Actual results could differ
from those estimates.
Fair Value of Financial Instruments
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques, as appropriate. Unless
otherwise disclosed, the fair value of financial instruments, including
accounts
F-35
<PAGE>
NESTE THERMISOL A/S
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
receivables and accounts payable, approximate their recorded values due
primarily to the short-term nature of their maturities.
(3) INVENTORIES
Inventories are stated at acquisition cost or production cost--determined on
the basis of FIFO (first-in, first-out) method and include the cost of
materials, labor and manufacturing overhead.
<TABLE>
<CAPTION>
(IN THOUSANDS)
-----------------------
1995 1996 JUNE 30, 1997
---- ---- -------------
(UNAUDITED)
<S> <C> <C> <C>
Raw material and supplies............................ $204 $ 69 $ 115
Work in progress..................................... 213 104 86
Finished goods....................................... 64 69 85
---- ---- -----
$481 $242 $ 286
==== ==== =====
</TABLE>
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost, less accumulated
depreciation. Expenditures for improvements that increase the values or extend
the useful life are capitalized and maintenance repair costs are expensed as
incurred. For financial reporting purposes, depreciation is computed using the
straight-line method over the useful lives of the respective assets, which
range from 10 to 25 years for buildings and 3 to 15 years for machinery and
equipment. The depreciation time for the production plant has from 1996 been
changed from 10 to 15 years.
(5) ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
-----------------------------
1995 1996 JUNE 30, 1997
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Bonus due to customers......................... $ 510 $ 591 $ 303
A-Tax, vacation pay, etc....................... 178 185 165
Other accrued liabilities...................... 320 280 470
Current part of long term liabilities.......... 240 224 201
------- ------- -------
$ 1,248 $ 1,280 $ 1,139
======= ======= =======
(6) LONG-TERM LIABILITIES
Long-term liabilities consist of the following:
<CAPTION>
(IN THOUSANDS)
-----------------------------
1995 1996 JUNE 30, 1997
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Due 1-5 years.................................. $ 1,322 $ 1,065 $ 879
Due after 5 years.............................. 751 645 552
------- ------- -------
$ 2,073 $ 1,710 $ 1,431
======= ======= =======
</TABLE>
F-36
<PAGE>
NESTE THERMISOL A/S
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(7) COMMITMENTS AND CONTINGENCIES
The Company is a party to various legal actions arising in the ordinary
course of its business. The liability if any, associated with these matters
will not have a material adverse effect upon financial condition, results of
operations or cash flows of the Company.
The Company is also subject to environmental regulations, including rules
relating to air and water pollution and the storage and disposal of chemicals
and waste. The Company believes it complies in all material respects with
applicable laws.
The company has no contracts of guarantee or pension provisions.
(8) SUBSEQUENT EVENT:
On September 17, 1997, Neste Oy, Isora Oy, Neste Cellplast AB and Neste
Thermisol A/S (the Sellers) entered into a sale of assets agreement, subject
to satisfactory resolution of financing, with StyroChem Finland Oy, Thermisol
Finland Oy, Thermisol Sweden AB and Thermisol Denmark ApS (the Purchasers) and
Radnor Holdings Corporation parent and as guarantor concerning the sale and
purchase of certain EPS, PS and HIPS assets in Finland, Sweden and Denmark,
which includes the assets of the Company.
F-37
<PAGE>
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES PRO FORMA CONSOLIDATED FINANCIAL
DATA
The following pro forma consolidated financial data have been prepared based
on certain adjustments to the financial statements of Radnor Holdings
Corporation, the J.R. Foam Container Operations of James River Paper Company,
Inc., SP Acquisition Co. and Subsidiaries, the Neste Oy Polystyrene Upstream
Business in Porvoo and Kokemaki, Isora Oy, Neste Cellplast AB, and Neste
Thermisol A/S, including the notes thereto. The pro forma consolidated
statements of operations reflect the acquisition of the U.S. foam cup and
container operations of James River Paper Company, Inc. (the "J.R. Cup
Acquisition"), the acquisition of SP Acquisition Co. and its subsidiaries (the
"StyroChem Acquisition") and the sale of $100 million of Radnor Holdings
Corporation Senior Notes due 2003 on December 5, 1996 (the "Prior Notes") as
well as the acquisition (the "StyroChem Europe Acquisition") of substantially
all of the polystyrene production and conversion operations of Neste Oy
("StyroChem Europe") and the sale of $60 million of Radnor Holdings
Corporation Series B Senior Notes due 2003 on October 15, 1997 (the "Notes")
as though they had occurred on December 30, 1995. The J.R. Cup Acquisition,
the StyroChem Acquisition and the StyroChem Europe Acquisition are referred to
collectively as the "Acquisitions." The pro forma consolidated balance sheet
reflects the StyroChem Europe Acquisition and the sale of the Notes as though
they had occurred on June 27, 1997. The pro forma consolidated financial data
are based on the assumptions and adjustments described in the accompanying
notes and do not purport to present the results of operations and financial
position of Radnor Holdings Corporation and its Subsidiaries as if the
Acquisitions and the sale of the Prior Notes and the Notes had actually
occurred on such dates, nor are they necessarily indicative of the results of
operations that may be achieved in the future.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 27, 1996
------------------------------------------------------------------
1996
RADNOR ACQUISITION RADNOR STYROCHEM PRO FORMA PRO
ACTUAL ADJUSTMENTS(1) PRO FORMA EUROPE(2) ADJUSTMENTS FORMA
-------- -------------- --------- --------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net sales............... $177,395 $56,112 $233,507 $83,618 $ -- $317,125
Cost of goods sold...... 135,982 44,915 180,897 53,648 (482)(3) 234,063
-------- ------- -------- ------- ------- --------
Gross profit............ 41,413 11,197 52,610 29,970 482 83,062
Distribution expense.... 14,099 2,461 16,560 5,842 22,402
Selling, general and ad-
ministrative expenses.. 18,676 4,311 22,987 18,807 (1,906)(4) 39,888
Restructuring charges... 910 -- 910 -- -- 910
-------- ------- -------- ------- ------- --------
Income (loss) from oper-
ations................. 7,728 4,425 12,153 5,321 2,388 19,862
Interest................ 4,496 6,443 10,939 142 4,998 (5) 16,079
Other (income) expense,
net.................... 374 (89) 285 (192) -- 93
-------- ------- -------- ------- ------- --------
Income (loss) from con-
tinuing operations be-
fore income taxes and
minority interest...... 2,858 (1,929) 929 5,371 (2,610) 3,690
Income tax expense (ben-
efit).................. 121 178 299 1,043 (887)(6) 455
-------- ------- -------- ------- ------- --------
Income from continuing
operations before mi-
nority interest........ 2,737 (2,107) 630 4,328 (1,723) 3,235
Minority interest in in-
come................... 1,348 (1,348) -- -- -- --
-------- ------- -------- ------- ------- --------
Income (loss) from con-
tinuing operations..... $ 1,389 $ (759) $ 630 $ 4,328 $(1,723) $ 3,235
======== ======= ======== ======= ======= ========
OTHER CONSOLIDATED AND
PRO FORMA DATA:
EBITDA (7).............. $ 11,760 $ 9,110 $ 20,870 $ 9,142 $ 3,207 $ 33,219
Ratio of EBITDA to in-
terest (8)............. 2.1x
Depreciation and amorti-
zation................. $ 4,844 $ 3,248 $ 8,092 $ 3,629 $ 819 $ 12,540
Capital expenditures.... 4,944 2,193 7,137 1,302 8,439
Cash interest (9)....... 4,264 5,901 10,165 142 4,955 15,262
Ratio of EBITDA to cash
interest............... 2.2x
</TABLE>
F-38
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 27, 1996
(IN THOUSANDS)
(1) Reflects the historical results of operations and purchase price and pro
forma adjustments of the J.R. Cup Acquisition and StyroChem Acquisition as
if they had occurred on December 30, 1995 until their respective dates of
acquisition.
(2) These amounts have been derived from the Neste Oy Polystyrene Upstream
Business in Porvoo and Kokemaki, Isora Oy, Neste Cellplast AB, and Neste
Thermisol A/S financial statements, including the notes thereto, on pages
F-1 to F-37, for the year ended December 31, 1996.
(3) Reflects savings (cost) of $482 related to the StyroChem Europe
Acquisition as follows:
<TABLE>
<S> <C>
Reduction of cost of goods sold to reflect provisions of new raw
material purchase contract to be entered into as a condition of
the agreement pursuant to which StyroChem Europe was acquired
(the "Acquisition Agreement").................................... $1,251
Elimination of sick leave and disability payments made to
employees who are not part of StyroChem Europe; liability is
retained by the seller........................................... 50
Additional depreciation as a result of the step-up in StyroChem
Europe asset value............................................... (819)
------
$ 482
======
</TABLE>
(4) Reflects savings of $1,906 related to the Acquisitions as follows:
<TABLE>
<S> <C>
Reduction of specific administrative cost allocations from parent
company pursuant to the new Neste Service Agreement entered into
as part of Acquisition Agreement, including training, personnel
services, environmental and security, accounting, procurement,
and other administrative services................................ $1,554
Reduction of insurance expense as a result of terminating Neste Oy
captive insurance arrangement pursuant to the Acquisition
Agreement and instituting a stand-alone coverage program......... 352
------
$1,906
======
</TABLE>
(5) Adjustment for interest is comprised of the following:
<TABLE>
<S> <C>
Interest on the Notes ........................................... $6,000
Amortization of premium on the Notes............................. (290)
Elimination of interest on debt repaid........................... (1,045)
Amortization of deferred financing costs related to the offering
of the Notes.................................................... 333
------
$4,998
======
</TABLE>
The interest rate on the Notes is 10%. The premium on the Notes is
calculated at 3.67% of the principal of the Notes and is amortized using
the effective interest rate method. The assumed interest rate on the
Amended and Restated Credit and Security Agreement with BNY Financial
Corporation (successor in interest to The Bank of New York Commercial
Corporation), as agent and lender, as amended to date, and the Agreement
Respecting a Term Loan and other Credit Facilities dated February 25, 1994
between StyroChem International, Ltd. and the Bank of Montreal, as amended
to date (collectively, the "Credit Agreements") is approximately 7.5%.
(6) Reduction of income tax provision due to reduction in taxable income from
pro forma adjustments.
(7) EBITDA represents income (loss) from continuing operations before
interest, income tax expense, depreciation and amortization and
restructuring and other non-recurring charges. EBITDA is presented here to
provide additional information about the Company's ability to meet its
future debt service, capital expenditure and working capital requirements.
EBITDA is not a measure of financial performance under Generally Accepted
Accounting Principles ( "GAAP") and should not be considered as an
alternative either to net income as an indicator of the Company's
operating performance or to cash flows as a measure of the Company's
liquidity.
F-39
<PAGE>
(8) Interest includes amortization of debt issuance costs related to the
Credit Agreements, the Prior Notes and the Notes and amortization of
premium related to the Notes of $232 and $817 for the historical and pro
forma years ended December 27, 1996, respectively. The interest rate on
the Notes and the Prior Notes is 10%. The assumed interest rate on the
Credit Agreements for the pro forma year ended December 27, 1996 is
approximately 7.5%. The premium on the Notes of 3.67% is amortized over
the life of the Notes.
(9) Cash interest consists of interest less the amortization of deferred
financing fees, plus the amortization of the premium on the Notes.
F-40
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 27, 1997
------------------------------------------
RADNOR STYROCHEM PRO FORMA PRO
ACTUAL EUROPE(1) ADJUSTMENTS FORMA
-------- --------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net sales........................... $114,455 $40,741 $ -- $155,196
Cost of goods sold.................. 85,431 26,744
(312)(2) 111,863
-------- ------- ------ --------
Gross profit........................ 29,024 13,997 312 43,333
Distribution expense................ 8,545 2,987 11,532
Selling, general and administrative
expenses........................... 11,440 8,730 (804)(3) 19,366
Restructuring charges............... -- -- --
-------- ------- ------ --------
Income (loss) from operations....... 9,039 2,280 1,116 12,435
Interest............................ 5,788 54 2,519 (4) 8,361
Other (income) expense, net......... (138) (83) (221)
-------- ------- ------ --------
Income (loss) from continuing
operations before income taxes and
minority interest.................. 3,389 2,309 (1,403) 4,295
Income tax expense (benefit)........ 319 425 (425)(5) 319
-------- ------- ------ --------
Income (loss) from continuing
operations before minority
interest........................... 3,070 1,884 (978) 3,976
Minority interest in income......... -- -- --
-------- ------- ------ --------
Income (loss) from continuing
operations......................... $ 3,070 $ 1,884 $ (978) $ 3,976
======== ======= ====== ========
OTHER CONSOLIDATED PRO FORMA DATA:
EBITDA(6)........................... $ 13,030 $ 3,700 $1,525 $ 18,255
Ratio of EBITDA to interest(7)...... 2.2x
Depreciation and amortization....... $ 3,853 $ 1,337 $ 409 $ 5,599
Capital expenditures................ 6,981 975 -- 7,956
Cash interest(8).................... 5,512 54 2,494 8,060
Ratio of EBITDA to cash interest.... 2.3x
</TABLE>
F-41
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 27, 1997
(IN THOUSANDS)
(1) These amounts have been derived from the Neste Oy Polystyrene Upstream
Business in Porvoo and Kokemaki, Isora Oy, Neste Cellplast AB, and Neste
Thermisol A/S financial statements, including the notes thereto, on pages
F-1 to F-37, for the six months ended June 30, 1997.
(2)Reflects savings (cost) of $312 related to the StyroChem Europe Acquisition
as follows:
<TABLE>
<S> <C>
Reduction of cost of goods sold to reflect provisions of new raw
material purchase contract to be entered into as a condition of
the Acquisition Agreement........................................ $ 671
Elimination of sick leave and disability payments made to
employees who are not part of StyroChem Europe; liability is
retained by the seller........................................... 50
Additional depreciation as a result of a step-up in StyroChem
Europe asset value............................................... (409)
------
$ 312
======
(3)Reflects savings of $804 related to the Acquisitions as follows:
Reduction of specific administrative cost allocations from parent
company pursuant to the new Neste Service Agreement entered into
as part of Acquisition Agreement, including training, personnel
services, environmental and security, accounting, procurement,
and other administrative services................................ $ 459
Reduction of insurance expense as a result of terminating Neste Oy
captive insurance arrangement pursuant to the Acquisition
Agreement and instituting a stand-alone coverage program ........ 145
Elimination of payments made to former owners of SP Acquisition
Co. in connection with the acquisition of StyroChem.............. 200
------
$ 804
======
(4)Adjustment for interest is comprised of the following:
Interest on the Notes............................................. $3,000
Amortization of premium on the Notes.............................. (142)
Elimination of interest on debt repaid............................ (506)
Amortization of deferred financing fees related to the offering of
the Notes........................................................ 167
------
$2,519
======
</TABLE>
The interest rate on the Notes is 10%. The premium on the Notes is
calculated at 3.67% of the Notes and is amortized using the effective
interest rate method. The assumed interest rate on the Credit Agreements is
approximately 7.5%.
(5)Elimination of income tax provision due to reduction in taxable income from
pro forma adjustments.
(6) EBITDA represents income (loss) from continuing operations before
interest, income tax expense, depreciation and amortization and
restructuring and other non-recurring charges. EBITDA is presented here to
provide additional information about the Company's ability to meet its
future debt service, capital expenditure and working capital requirements.
EBITDA is not a measure of financial performance under GAAP and should not
be considered as an alternative either to net income as an indicator of
the Company's operating performance or to cash flows as a measure of the
Company's liquidity.
(7) Interest includes amortization of debt issuance costs related to the
Credit Agreements, the Prior Notes and the Notes and amortization of
premium related to the Notes of $276 and $301 for the historical and pro
forma six months ended June 27, 1997, respectively. The interest rate on
the Notes and the Prior Notes is 10%. The assumed interest rate on the
Credit Agreements for the pro forma six months ended June 27, 1997 is
approximately 7.5%. The premium on the Notes of 3.67% is amortized over
the life of the Notes.
(8) Cash interest consists of interest less the amortization of deferred
financing fees, plus the amortization of the premium on the Notes.
F-42
<PAGE>
PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF JUNE 27, 1997
----------------------------------------------------------------
RADNOR STYROCHEM EUROPE(1) PRO FORMA ADJUSTMENTS(2) PRO FORMA
-------- ------------------- ------------------------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash.................. $ 1,349 $ 5,602 $(5,602)(3) $ 1,349
Accounts receivable,
net.................. 22,495 12,546 (100)(3) 34,941
Inventory............. 22,566 7,390 (100)(3) 29,856
Deferred tax asset.... 2,380 -- 2,380
Prepaid expenses and
other................ 3,142 2,456 (2,456)(3) 3,142
-------- ------- --------
Total current
assets............. 51,932 27,994 71,668
Property, plant and
equipment, net......... 115,311 29,880 12,282 (3) 157,473
Other assets............ 10,434 541 1,459 (4) 12,434
-------- ------- --------
Total assets........ $177,677 $58,415 $241,575
======== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities
Accounts payable...... $ 24,640 $ 7,070 $ 31,710
Accrued liabilities... 11,378 5,513 1,000 (3) 17,891
Other current
liabilities.......... -- 155 155
Current portion of
long-term debt....... 235 -- 235
-------- ------- --------
Total current
liabilities........ 36,253 12,738 49,991
Credit Agreements....... 15,192 -- (12,043)(5) 3,149
Term Notes.............. 118 -- 118
Series B Senior Notes
due 2003............... -- -- 62,203 (6) 62,203
Senior Notes due 2003... 100,000 -- 100,000
-------- ------- --------
Total long-term
debt............... 115,310 -- 165,470
Deferred income taxes... 11,286 39 (39)(3) 11,286
Other noncurrent
liabilities............ 450 2,350 (2,350)(3) 450
Commitments and contingencies
Stockholders' equity
Common stock.......... 1 6,665 (6,665)(3) 1
Additional paid-in
capital.............. 17,720 -- 17,720
Division equity....... -- 31,869 (31,869)(3) --
Foreign currency
translation
adjustment........... 7 (754) 754 (3) 7
Retained earnings
(deficit)............ (3,350) 5,508 (5,508)(3) (3,350)
-------- ------- --------
Total stockholders'
equity............. 14,378 43,288 14,378
-------- ------- --------
Total liabilities
and stockholders'
equity........... $177,677 $58,415 $241,575
======== ======= ========
</TABLE>
----------------
(1) These amounts have been derived from the Neste Oy Polystyrene Upstream
Business in Porvoo and Kokemaki, Isora Oy, Neste Cellplast AB, and Neste
Thermisol A/S financial statements, including the notes thereto, on pages
F-1 to F-37, as of June 30, 1997.
(2) A purchase accounting valuation of StyroChem Europe's assets and
liabilities has not been completed. Upon completion of such valuation, the
purchase price will be allocated to StyroChem Europe's assets and
liabilities, both tangible and intangible. Management expects that, based
on such allocation, additional purchase accounting adjustments will be
made to assets and liabilities and, among other adjustments, property,
plant and equipment will increase.
(3) Purchase accounting adjustments related to the acquisition of StyroChem
Europe.
(4) Transaction costs of $2.0 million, net of purchase accounting adjustments
of $0.5 million related to assets not being acquired in connection with
the acquisition of StyroChem Europe.
(5) Repayment of debt outstanding under the Credit Agreements.
(6) Gross proceeds from the issuance of the Notes. The proceeds include the
premium on the Notes, which is calculated at 3.67% of the principal of the
Notes.
F-43
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
Exhibit
Number Description
2.1 Sale of Assets Agreement between Neste Oy, Isora Oy, Neste Cellplast
AB, Neste ThermiSol A/S and StyroChem Finland Oy, ThermiSol Finland
Oy, ThermiSol Sweden AB, ThermiSol Denmark ApS and Radnor Holdings
Corporation dated as of September 17, 1997 (the schedules to this
agreement have been omitted pursuant to Item 601(b)(2) of Regulation
S-K and will be provided supplementally to the Commission upon its
request).
</TABLE>
1
<PAGE>
SALE OF ASSETS AGREEMENT
between
NESTE OY
ISORA OY
NESTE CELLPLAST AB
NESTE THERMISOL A/S
as Sellers and Transferors
and
STYROCHEM FINLAND OY (under formation)
THERMISOL FINLAND OY (under formation)
THERMISOL SWEDEN AB (under formation)
THERMISOL DENMARK ApS (under formation)
as Purchasers and Transferees
and
RADNOR HOLDINGS CORPORATION
as Guarantor under Article 14 hereof
CONCERNING THE SALE AND PURCHASE OF
CERTAIN EPS, PS AND HIPS ASSETS IN
FINLAND, SWEDEN, AND DENMARK
dated as of September 17, 1997
<PAGE>
2
SCHEDULES:
1 REAL PROPERTY and Buildings
2 EQUIPMENT
3 INTELLECTUAL PROPERTY
4 Permits
5 Contracts
A) Description of the CONTRACTS
B) Description of the ASSIGNED CONTRACTS
6 Records
A) Description of the RECORDS
B) Description of the records belonging to the EXCLUDED ASSETS
7 [not used]
8 [not used]
9 Allocation of the PURCHASE PRICE
10 Approvals and consents
11 Form of certificate of General Counsel
12 ESTIMATED NET WORKING CAPITAL
13 List of the CLOSING DOCUMENTS
14 Specification of computer software and hardware and other items
included in the EXCLUDED ASSETS
15 Specification of costs of a recurrent nature referred to in Article
5.4
16 ACCOUNTS RECEIVABLE
17 [not used]
18 List of employees referred to in Article 8.28
19 List of agreements with labor unions/employee associations
20 Description of labor grievances during 1994 - 1997
21 [not used]
22 Disclosure by the SELLERS of matters constituting exceptions from
representations and warranties referred to in Article 8 as of the
date hereof
<PAGE>
3
SALE OF ASSETS AGREEMENT
THIS AGREEMENT, dated as of the 17 day of September, 1997, has
been entered into between
STYROCHEM FINLAND OY, a Finnish corporation (under formation),
THERMISOL FINLAND OY, a Finnish corporation (under formation),
THERMISOL SWEDEN AB, a Swedish corporation (under formation), and
THERMISOL DENMARK ApS, a Danish corporation (under formation)
(hereinafter referred to as the "PURCHASERS") and RADNOR HOLDINGS
CORPORATION ("RADNOR"), a Delaware corporation, as guarantor
pursuant to Article 14 of this AGREEMENT; and
NESTE OY, a Finnish corporation having offices at Keilaniemi,
FIN-02150 Espoo, Finland, ISORA OY, a Finnish corporation having
offices at Toravantie 18, FIN-38200 Vammala, Finland, NESTE
CELLPLAST AB, a Swedish corporation having offices at Braxenvagen
8, 761 41 Norrtalje, Sweden, and NESTE THERMISOL A/S, a Danish
corporation having offices at Lundagervej 20, DK-8722, Hedensted
Denmark (hereinafter referred to as the "SELLERS").
The SELLERS and the PURCHASERS are some times referred to herein
individually as a "PARTY" and collectively as the "PARTIES".
1. BACKGROUND
1.1 The SELLERS are engaged in the production and sale of EPS, PS and
HIPS (as such terms are hereinafter defined, all such products
being hereinafter referred to as the "POLYSTYRENE PRODUCTS"), and
the conversion of the POLYSTYRENE PRODUCTS into downstream
products such as packaging materials and insulation and the sale
of such converted products (the "CONVERTED PRODUCTS"), as follows:
(i) Neste Oy is a producer and seller of Expandable Polystyrene
(hereinafter referred to as "EPS"), General Purpose
Polystyrene (hereinafter referred to as "PS") and
High-Impact Polystyrene (hereinafter referred to as "HIPS")
and is the owner and operator of EPS, PS and HIPS plants
located in Kulloo, 06100 Porvoo, Finland, as well as in
Kokemaki, Finland,
(ii) Isora Oy, a wholly owned subsidiary of Neste Oy, is the
owner and operator of EPS conversion plants in Roykka,
Vammala and Pietarsaari, Finland;
(iii) Neste Cellplast Ab, an indirectly owned subsidiary of Neste
Oy, is the owner and operator of EPS conversion plants in
Norrtalje and Vargarda, Sweden; and
(iv) Neste Thermisol A/S, an indirectly wholly owned subsidiary
of Neste Oy, is the owner and operator of an EPS conversion
plant in Hedensted, Denmark;
as conducted by the SELLERS in the ordinary course of business
preceding the CLOSING DATE (as such term is later defined herein),
the foregoing activities described in this Article 1.1 being
collectively referred to herein as the "BUSINESS".
<PAGE>
4
1.2 The PURCHASERS intend to expand their POLYSTYRENE PRODUCTS and
CONVERTED PRODUCTS business and in furtherance of such intention,
the PURCHASERS seek (i) to purchase the tangible and intangible
assets (including buildings, machinery and equipment in order to
make, use and sell POLYSTYRENE PRODUCTS and CONVERTED PRODUCTS,
but excluding the EXCLUDED ASSETS (as such term is later defined
herein)) related to the BUSINESS, and (ii) to have the currently
active employees of the BUSINESS transfer to the PURCHASERS'
employment in accordance with the terms of the PERSONNEL
AGREEMENT, and (iii) to enter into agreements on the procurement
of the UTILITIES and SERVICES as set forth in the UTILITIES SUPPLY
AGREEMENT (as hereinafter defined) and the NESTE SERVICE
AGREEMENT. After the acquisition of such assets and technology as
well as procurement of the UTILITIES and SERVICES, the PURCHASERS
intend to utilize the same in, among other things, the manufacture
of POLYSTYRENE PRODUCTS and CONVERTED PRODUCTS at the PLANTS (as
such term is later defined herein) and the sale and marketing of
such POLYSTYRENE PRODUCTS and CONVERTED PRODUCTS.
1.3 Subject to the terms and conditions hereof, the SELLERS desire to
sell and the PURCHASERS desire to purchase the ASSETS (as such
term is later defined herein).
2. DEFINITIONS
Unless otherwise defined herein, the following terms shall have
the following meanings for all purposes of this AGREEMENT:
2.1 "ACCOUNTS RECEIVABLE" shall have the meaning given therefor in
Article 5.1 b).
2.2 "AFFILIATE" shall mean in relation to any PARTY
(i) any person which owns and controls more than fifty per cent
(50%) of the capital stock and voting rights of such PARTY;
(ii) any person more than fifty per cent (50%) of the capital
stock and voting rights of which are owned and controlled
by such PARTY; or
(iii) any person more than fifty per cent (50%) of the capital
stock and voting rights of which are owned and controlled
by one or more persons qualifying as AFFILIATES under (i)
or (ii) above.
2.3 "AGREEMENT" shall mean this Sale of Assets Agreement and all the
Schedules hereto as the same may be amended, modified and/or
restated from time to time and in effect.
2.4 "ANCILLARY CONTRACTS" shall mean the SERVICE AGREEMENTS, the
UTILITIES SUPPLY AGREEMENT, the STYRENE MONOMER SUPPLY AGREEMENT,
the LAND LEASE AGREEMENT, the SALES AND MARKETING AGREEMENTS and
the PERSONNEL AGREEMENT.
<PAGE>
5
2.5 "ASSETS" shall have the meaning given therefor in Article 4.1 b)
below.
2.6 "ASSIGNED CONTRACTS" shall have the meaning given therefor in
Article 4.1 b) 5).
2.7 "ASSUMED LIABILITIES" shall have the meaning given therefor in
Article 4.3 b).
2.8 "BUSINESS" shall have the meaning given therefor in Article 1.1
above.
2.9 "BUSINESS DAY" shall mean a day on which banks are open for
business both in the state of Pennsylvania, U.S.A. and in Finland.
2.10 "CLAIMS" shall mean any and all debts, obligations, claims,
lawsuits, actions, liabilities, damages, costs and expenses
(including legal expenses, settlement payments and reasonable
attorneys' fees) of every kind (whether absolute, accrued,
contingent or other) which may be brought against or suffered,
incurred or paid by any person.
2.11 "CLOSING DOCUMENTS" shall mean the documents (other than this
AGREEMENT) described or listed in Schedule 13.
-----------
2.12 "CONTRACTS" shall have the meaning given therefor in Article 8.15.
2.13 "ENCUMBRANCE" shall mean any charge, claim, community property
interest, condition, equitable interest, lien, option, pledge,
hypothec, mortgage, business mortgage, security interest, right of
first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership.
2.14 "ENVIRONMENT" shall mean soil, land surface or subsurface strata,
surface waters, wetlands, groundwater, stream sediments, air
outside any building at any PLANT, plant and animal life, and any
other environmental medium.
2.15 "ENVIRONMENTAL, HEALTH AND SAFETY LIABILITIES" shall mean any
demands, losses, claims, costs, fines, penalties, judgments,
settlements, damages, expenses, or liability arising from or under
ENVIRONMENTAL LAW or OCCUPATIONAL SAFETY AND HEALTH LAW and
consisting of or relating to:
a) environmental, health, or safety conditions (including but
not limited to on-site or off-site contamination, claims
for personal injury and/or property damage, occupational
safety and health, and regulation of chemical substances or
products); and
<PAGE>
6
b) corrective action, investigation, cleanup, removal,
containment, or other remediation or response actions
required by applicable ENVIRONMENTAL LAW or OCCUPATIONAL
SAFETY AND HEALTH LAW ("CLEAN-UP") in response to the
operations or condition at any PLANT.
2.16 "ENVIRONMENTAL LAW" shall mean statute, regulation or judgment
that is applicable at or prior to CLOSING and that requires:
a) advising appropriate authorities, employees, and/or the
public of releases, storage or use of HAZARDOUS MATERIALS,
violations of discharge limits, or other prohibitions;
b) preventing or reducing to acceptable levels established by
statute, regulation or judgment the release of HAZARDOUS
MATERIALS into the ENVIRONMENT;
c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are
generated;
d) assuring that products are designed, formulated, packaged,
and used so that they do not present unreasonable risks to
human health or the ENVIRONMENT;
e) protecting human health or the ENVIRONMENT;
f) cleaning up HAZARDOUS MATERIALS that have been released,
preventing the release, or paying the costs of such
CLEAN-UP or prevention; or
g) making payments to private parties for damages to health or
the ENVIRONMENT, or to representatives of the public
interest to recover for injuries done to human health or
the ENVIRONMENT.
2.17 "EPS" shall have the meaning given therefor in Article 1.1.
2.18 "EQUIPMENT" shall have the meaning as set out in Article 4.1. b).
2.19 "EXCLUDED ASSETS" shall have the meaning given therefor in Article
4.2.
2.20 "FIM", "Finnish markka" or "markka" shall mean Finnish Markka, the
lawful currency and legal tender in Finland.
2.21 "FINANCIAL STATEMENTS" shall have the meaning given therefor in
Article 8.10.
2.22 "GOODWILL" shall mean the intangible added value to the BUSINESS
caused by the SELLERS or any previous owner of the ASSETS or the
BUSINESS.
<PAGE>
7
2.23 "HAZARDOUS ACTIVITY" shall mean the distribution, generation,
handling, importing, management, manufacturing, processing,
production, refinement, RELEASE, storage, transfer,
transportation, treatment, or use (including any withdrawal or
other use of groundwater) of HAZARDOUS MATERIALS in, on, under,
about, or from the PLANTS or any part thereof or in connection
with the BUSINESS into the ENVIRONMENT.
2.24 "HAZARDOUS MATERIALS" shall mean any chemical, waste or other
substance that is listed, defined, designated, or classified as,
or otherwise determined to be, hazardous, radioactive, or toxic
under or pursuant to any ENVIRONMENTAL LAW, including any
admixture or solution thereof, and specifically including
petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
2.25 "HIPS" shall have the meaning given therefor in Article 1.1.
2.26 "INTELLECTUAL PROPERTY" shall have the meaning given therefor in
Article 4.1 (b).
2.27 "LAND LEASE AGREEMENT" shall mean an agreement in form and
substance reasonably satisfactory to Neste Oy and StyroChem
Finland Oy, to be executed at the CLOSING and covering the right
of StyroChem Oy to lease the REAL PROPERTY in Porvoo.
2.28 "NESTE SERVICE AGREEMENT" shall mean an agreement to be entered
into between Neste Oy and StyroChem Finland Oy in form and
substance reasonably satisfactory to such parties, whereby Neste
agrees to provide certain services to StyroChem Finland Oy in
Porvoo.
2.29 "NET WORKING CAPITAL" shall mean the net working capital of the
BUSINESS determined in accordance with Article 5.1 (b).
2.30 "OCCUPATIONAL SAFETY AND HEALTH LAW" shall mean any legal
requirement that is applicable at or prior to CLOSING designed to
provide safe and healthful working conditions and to reduce
occupational safety and health hazards.
2.31 "PERMITTED ENCUMBRANCES" shall mean, with respect to the REAL
PROPERTY, as of any particular time:
(a) liens for current taxes levied in respect of REAL PROPERTY,
but not yet due and payable;
(b) covenants, restrictions, reservations, easements and
agreements contained in instruments of record relating to REAL
PROPERTY (as such term is defined below) and affecting the
ASSETS but excluding any right of first refusal by any party
to purchase any REAL PROPERTY whether or not contained in such
instruments of record and excluding any mortgages, business
mortgages and other similar security interests;
<PAGE>
8
(c) zoning laws, ordinances, restrictions on use imposed by law
and similar restrictions relating to and affecting the REAL
PROPERTY, if any, that do not impair the present or continued
use of the REAL PROPERTY subject thereto;
(d) as to the REAL PROPERTY, the terms, conditions and
restrictions contained in the LAND LEASE AGREEMENT and REAL
PROPERTY TRANSFER DEEDS (as later defined herein) and covering
the land which is part of the REAL PROPERTY.
2.32 The word "person" shall mean any individual, company, corporation,
partnership or other entity recognised as a person under the law
governing this AGREEMENT.
2.33 "PERSONNEL AGREEMENT" shall mean an agreement to be entered into
between Neste Oy and StyroChem Finland Oy in form and substance
reasonably satisfactory to such parties, whereby such parties
agree upon certain principles applicable to employees in
connection with the TRANSFER.
2.34 "PLANTS" shall mean the production facilities used exclusively in
the BUSINESS, including, without limitation, the plants specified
in Article 1.1.
2.35 "PS" shall have the meaning given therefor in Article 1.1.
2.36 "REAL PROPERTY" shall have the meaning set forth in Article 4.1 b)
1).
2.37 "REAL PROPERTY TRANSFER DEED" shall mean the deed(s) to effectuate
the TRANSFER in respect of REAL PROPERTY, in form and substance
satisfactory to the PARTIES.
2.38 "RECORDS" shall have the meaning given therefor in Article 4.1 b)
6).
2.39 "RELEASE" shall mean any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into
the ENVIRONMENT, whether intentional or unintentional.
2.40 "SALES AND MARKETING AGREEMENTS" shall mean (i) an agreement to be
entered into between Neste Oy and StyroChem Finland Oy in form and
substance reasonably satisfactory to such parties whereby Neste Oy
or its subsidiaries shall provide certain support and services to
StyroChem Finland Oy in respect of the sale and marketing of EPS,
and (ii) sales agency agreements for EPS to be entered into
between Neste Oy or its subsidiaries and StyroChem Finland Oy
pursuant to which Neste Oy or its subsidiaries, as the case may
be, shall act as the sales agent for StyroChem Finland Oy in
respect of certain countries.
<PAGE>
9
2.41 "SEC" shall have the meaning given therefor in Article 6.2 a).
2.42 "SERVICE AGREEMENTS" shall mean the NESTE SERVICE AGREEMENT and
the STYROCHEM SERVICE AGREEMENT.
2.43 "STYRENE MONOMER SUPPLY AGREEMENT" shall mean an agreement to be
entered into between Neste Oy and StyroChem Finland Oy in form and
substance reasonably satisfactory to such parties whereby
StyroChem Finland Oy shall supply styrene monomer to Neste Oy.
2.44 "STYROCHEM SERVICE AGREEMENT" shall mean an agreement to be
entered into between StyroChem Finland Oy and Neste Oy, in form
and substance reasonably satisfactory to such parties, whereby
StyroChem Finland Oy shall provide certain services to Neste Oy.
2.45 "TAXES" shall mean all taxes and all assessments of taxes and
reassessments of taxes, and all other taxes, governmental charges,
social security withholdings and contributions, adjustments,
penalties, interest and fines.
2.46 "TRANSFER" shall mean, individually and collectively;
(i) the sale, assignment, transfer and delivery by the SELLERS
to PURCHASERS of valid and legal title and possession to
the ASSETS, free and clear of all ENCUMBRANCES, other than
the PERMITTED ENCUMBRANCES and the purchase, receipt and
acceptance of such valid and legal title by PURCHASERS from
the SELLERS;
(ii) the payment by the PURCHASERS of the PURCHASE PRICE (as
later defined herein) other than the portion thereof
attributable to the NET WORKING CAPITAL and receipt thereof
by the SELLERS; and
(iii) the taking of all action (including the execution, delivery
and performance of statements, agreements, certificates and
documents) related or necessary to the implementation of
this AGREEMENT.
2.47 "UTILITIES SUPPLY AGREEMENT" shall mean an agreement to be entered
into between Neste Oy and StyroChem Finland Oy, in form and
substance reasonably satisfactory to such parties, whereby Neste
Oy will provide certain utilities to StyroChem Finland Oy at
Porvoo.
<PAGE>
10
3. CONSTRUCTION OF CERTAIN WORDS AND PHRASES
3.1 The index, captions and headings are for convenience only and shall not
define, limit or affect the scope, intent, construction or interpretation
of this AGREEMENT or any provision hereof.
3.2 The words "herein", "hereof", "hereunder", "hereby", "hereto", "herewith"
and words of similar import shall refer to this AGREEMENT as a whole and
not to any particular Article, subsection or other subdivision.
3.3 The words "include", "includes", "including" and all forms and
derivations thereof shall mean including but not limited to.
3.4 Words of the singular number shall include correlative words of the
plural number and vice versa.
3.5 References to a specified Article or Schedule shall be construed as a
reference to that specified Article or Schedule in this AGREEMENT.
3.6 The headings and the Table of Contents are inserted for convenience of
reference only and shall not affect the interpretation of this AGREEMENT.
3.7 Unless otherwise provided herein, all references to a fixed time of a day
shall mean Helsinki, Finland time as in effect on such day and all
references to a "day" shall mean a calendar day.
4. SALE AND PURCHASE OF THE ASSETS
4.1 Sale and Purchase
a) The SELLERS agree to sell, assign, transfer and deliver, and the
PURCHASERS agree to purchase, accept and receive, all of the rights,
title and interest of the SELLERS in and to the ASSETS all upon the
terms and conditions hereof.
b) Subject to and in accordance with the terms and conditions hereof,
the PARTIES shall effect the TRANSFER at and as of the CLOSING and
pursuant to the completion of such CLOSING, the SELLERS shall have
sold, assigned and transferred to the PURCHASERS and the PURCHASERS
shall have purchased from the SELLERS the ASSETS free and clear of
all ENCUMBRANCES other than the PERMITTED ENCUMBRANCES, in accordance
herewith. For purposes of this AGREEMENT, the "ASSETS" shall mean all
assets (excluding the EXCLUDED ASSETS) in which the SELLERS have an
ownership or other interest, which are exclusively used in the
BUSINESS and which include, without limitation, the assets
specifically described as follows:
<PAGE>
11
1 REAL PROPERTY and buildings
The real property, buildings and improvements (the "REAL
PROPERTY"). The REAL PROPERTY is listed and described in
Schedule 1.
----------
2 Machinery and Equipment
The machinery, equipment and spare parts. Such items are
collectively referred to herein as the "EQUIPMENT" and are listed
or described in Schedule 2.
----------
3 Intellectual and Intangible Property
The intangible property rights, including, without limitation,
the patent rights and copyrights (including applications,
registrations and certificates), all utility models, all
trademark and service mark rights (except to the extent provided
in Article 11.5 below), all trade secrets including all product
formulations, know-how, proprietary processes, formulas and all
other confidential information, all business names, trade names,
product or service designs, computer programs, and technical
information, together with all GOODWILL associated with the
foregoing. Such items are collectively referred to as
"INTELLECTUAL PROPERTY" and are listed or described in
Schedule 3.
----------
4 Permits and Licenses
The rights, titles and interests of the SELLERS in, to and under
applicable permits, licenses and other governmental approvals
legally required by or essential or material to the operation of
the BUSINESS. Such items are collectively referred to herein as
the "PERMITS" and are listed or described in Schedule 4.
----------
5 Contracts and Leases
The rights and interests of SELLERS in and to the contracts,
leases, agreements and commitments currently in effect with
respect to the BUSINESS and described in Schedule 5 B. Such items
-------------
are collectively referred to as the "ASSIGNED CONTRACTS".
6 Records
The books, records and information which are used in the BUSINESS
(but excluding the EXCLUDED ASSETS) and the right to use such
copies and the information contained therein. Such books, records
and information are collectively referred to herein as the
"RECORDS" and are listed or described in Schedule 6 A.
Notwithstanding the foregoing, excluded from the RECORDS are tax
returns and all statutory bookkeeping records relating to the
BUSINESS, except that copies of such records shall be provided to
the PURCHASERS promptly if requested by any PURCHASER.
<PAGE>
12
7 Purchase orders and other materials
The purchase orders, forms, labels, stationary, shipping
materials, catalogues, brochures, art work, photographs and
advertising materials related to the BUSINESS.
8 Inventories
The raw materials, work-in progress and finished goods related to
the BUSINESS.
9 Receivables
The trade accounts receivable, notes receivable and other
receivables related to the BUSINESS.
4.2 Excluded Assets
The following items are hereby expressly excluded from the ASSETS and the
TRANSFER (such excluded items are collectively referred to herein as the
"EXCLUDED ASSETS") and no right, title or interest whatsoever in, to or
under any of the EXCLUDED ASSETS is sold, granted, conveyed or
transferred by, under or pursuant to this AGREEMENT:
a) cash and cash equivalents;
b) rights, assets and properties disposed of prior to the CLOSING DATE
in the ordinary conduct of the BUSINESS;
c) tax returns (including attachments and supporting schedules)
unrelated to the BUSINESS;
d) books, records (including agreements, contracts and documents),
information and items which are unrelated to the BUSINESS or are not
part of the ASSETS and are specified in Schedule 6 B;
------------
e) Computer software and hardware related to internal management
information systems and services of Neste group and described in
Schedule 14; and
-----------
f) assets other than the ASSETS.
4.3 Assumption of liabilities; retention of liabilities
a) Except to the extent set forth in paragraph b) below, the PURCHASERS
will assume no liabilities or obligations of any of the SELLERS, and
no liabilities or obligations of or related to the ASSETS or the
BUSINESS. Without limiting the foregoing, the SELLERS shall retain
and the PURCHASERS will assume no liabilities or obligations for,
related to, arising out of or under or in respect of any of the
following:
<PAGE>
13
(i) any TAXES incurred by any of the SELLERS in the conduct of the
BUSINESS prior to the CLOSING;
(ii) any actual or alleged violation by any of the SELLERS, or any
previous owner of the ASSETS or the BUSINESS, of any applicable
law;
(iii) any litigation pending or threatened at the time of CLOSING or
litigation resulting from or arising out of events occurring or
conditions existing prior to the CLOSING;
(iv) any breach by any of the SELLERS of any contract, agreement or
other commitment, including the CONTRACTS;
(v) the operation of the BUSINESS prior to the CLOSING or the
ownership or utilisation of the ASSETS by any of the SELLERS or
any previous owner of the ASSETS or the BUSINESS; or
(vi) the acts or omissions of any of the SELLERS prior to the
CLOSING with respect to the BUSINESS or the ASSETS.
b) The PURCHASERS shall assume, bear, discharge and perform only
(i) all obligations and liabilities of any kind whatsoever arising
out of or under or in respect of the ASSIGNED CONTRACTS after
the CLOSING;
(ii) all trade accounts payable and other current liabilities of the
BUSINESS as of the CLOSING, to the extent such payables and
other current liabilities are included in the NET WORKING
CAPITAL (except liabilities arising from the CONTRACTS other
than the ASSIGNED CONTRACTS);
(iii) any TAXES incurred by any of the PURCHASERS and/or their
successors and assigns in the conduct or operation of the
BUSINESS or the ownership or utilisation of the ASSETS after
the CLOSING;
(iv) all obligations and liabilities of any kind whatsoever related
to, arising out of or under or in respect of the conduct or
operation of the BUSINESS or the ownership or utilisation of
the ASSETS after the CLOSING;
(v) all obligations and liabilities of any kind whatsoever related
to, arising out of or under or in respect of the acts or
omissions of any of the PURCHASERS and/or their successors and
assigns with respect to the BUSINESS and/or the ASSETS after
the CLOSING; and
(vi) accrued supplemental pension plan liabilities, by means of a
transfer by Nesteen Elakesaatio (Neste Pension Fund, herein
referred to as "NPF") of the funds of NPF (the approximate
amount of which as of June 30, 1997 was FIM 10,500,000)
covering the liabilities of NPF calculated according to the
Finnish pension legislation and regulations accrued prior to
the CLOSING DATE in respect of employees of Neste Oy,
transferring to the employment of the PURCHASERS in connection
with the TRANSFER, entitled to the benefits of "Category A"
(the "Supplemental Pension Liabilities") as defined in the
Rules of NPF, to an
<PAGE>
14
insurance company selected by the PURCHASERS for the purpose of
continuing the coverage of the Supplemental Pension Liabilities
in respect of such employees after the CLOSING DATE;
(collectively, the "ASSUMED LIABILITIES").
c) Neste Oy shall retain, bear, discharge and perform (i) all CLAIMS
relating to the EXCLUDED ASSETS, and (ii) all CLAIMS related to the
ASSETS or the BUSINESS other than the ASSUMED LIABILITIES; and (iii)
all CLAIMS described in Article 4.3 a).
4.4 Nature of the TRANSFER
Although the SELLERS believe that the ASSETS, when taken in combination
with the SELLERS' employees to be transferred to the PURCHASERS and other
items to be acquired by the PURCHASERS together with the procured
services and utilities, should be sufficient for the PURCHASERS to
continue the BUSINESS, the SELLERS make no representation or warranty
that the ASSETS or the SELLERS' use or operation thereof will yield any
given economic, financial, profit or business result or structure or will
result in Purchasers Polystyrene Products' business having any given
standing or position in the Polystyrene Products' markets or industry.
Although the provisions of Article 8 do not contain any representation
and warranty from the SELLERS that expressly states that the ASSETS or
the SELLERS' use or operation thereof will yield any given economic,
financial, profit or business result or structure or will result in the
PURCHASERS' Polystyrene Products' business having any given standing or
position in the Polystyrene Products' markets or industry, the provisions
of this Article 4.4 shall not prejudice or otherwise affect the
provisions of Article 8.
4.5 Manner of implementing the TRANSFER
Unless otherwise agreed between the SELLERS and the PURCHASERS, the
TRANSFER shall be implemented between the PARTIES as follows:
a) The ASSETS relating to the part of the BUSINESS carried on by Neste
Oy shall be transferred by Neste Oy to StyroChem Finland Oy,
b) the ASSETS relating to the part of the BUSINESS carried on by Isora
Oy shall be transferred by Isora Oy to Thermisol Finland Oy,
c) the ASSETS relating to the part of the BUSINESS carried on by Neste
Cellplast AB shall be transferred by Neste Cellplast AB to Thermisol
Sweden AB, and
d) the ASSETS relating to the part of the BUSINESS carried on by Neste
Thermisol A/S shall be transferred by Neste Thermisol A/S to
Thermisol Denmark ApS.
<PAGE>
15
5. PURCHASE PRICE AND RELATED MATTERS
5.1 PURCHASE PRICE and Payment
a) The total purchase price for the ASSETS shall be (i)
twohundredthirteenmillion Finnish Markkas (FIM 213,000,000), and (ii)
the value of the NET WORKING CAPITAL as of the CLOSING DATE, as
determined in accordance with paragraph (b) below (collectively
referred to as the "PURCHASE PRICE"). As of the CLOSING DATE, the
PURCHASE PRICE based on SELLERS' estimate of the value of the NET
WORKING CAPITAL of sixtymillion Finnish Markkas (FIM 60,000,000) as
of the CLOSING DATE, the details of which are attached hereto as
Schedule 12, (the "ESTIMATED NET WORKING CAPITAL VALUE"), is expected
-----------
to be twohundredseventythreemillion Finnish Markkas (FIM 273,000,000)
(the "ESTIMATED PURCHASE PRICE"). Schedule 16 contains a complete and
-----------
accurate list of all ACCOUNTS RECEIVABLE, which list sets forth the
aging of such ACCOUNTS RECEIVABLE. At the CLOSING, the PURCHASERS
shall pay to the SELLERS the ESTIMATED PURCHASE PRICE less 16,500,000
Finnish Markkas (the "ESCROWED AMOUNT") in immediately available
funds by bank wire transfer to such account(s) and institution(s) as
may be designated by the SELLERS in a notice to PURCHASERS at least
seven (7) days prior to the CLOSING. In addition, at the CLOSING the
PURCHASERS shall pay the ESCROWED AMOUNT to Merita Bank Ltd. or to
such other institution as shall be agreed among the SELLERS and the
PURCHASERS under terms reasonably satisfactory to the SELLERS and the
PURCHASERS pursuant to which the ESCROWED AMOUNT shall be disposed of
in the manner set forth in Article 5.1 b) (ii) below.
b) (i) For purposes of determining the ESTIMATED NET WORKING CAPITAL
and the NET WORKING CAPITAL as of the CLOSING DATE: (i) NET
WORKING CAPITAL shall mean the sum of the trade accounts
receivable (which each represent valid obligations due from
third parties and arising from sales actually made or services
actually performed in the ordinary course of business by one of
the SELLERS) (the "ACCOUNTS RECEIVABLE") and inventories, less
the sum of trade accounts payable and other current liabilities
incurred in the conduct of the BUSINESS, (ii) cash shall be
excluded, (iii) ACCOUNTS RECEIVABLE, trade accounts payable and
other current liabilities shall be valued markka for markka,
(iv) raw materials and other inventory shall be valued at the
lower of cost or market on a first-in-first-out basis, and (v)
all working capital accounts shall be valued in accordance with
generally accepted accounting principles of the respective
country concerned and on a consistent basis with prior periods.
(ii) The SELLERS and the PURCHASERS shall jointly engage Arthur
Andersen Oy, a firm of chartered accountants, to determine the
NET WORKING CAPITAL as of the CLOSING DATE, requiring such
accountants to deliver to the SELLERS and the PURCHASERS within
sixty (60) days after the CLOSING DATE a statement showing the
calculation of the NET WORKING CAPITAL as of the CLOSING DATE
(the "CLOSING STATEMENT"). The SELLERS and the PURCHASERS shall
each bear 50% of the fees of such accountants. If, within thirty
(30) days following delivery of the CLOSING STATEMENT to the
SELLERS and the PURCHASERS, the SELLERS have not given the
PURCHASERS written notice of any objection to the CLOSING
STATEMENT and/or the PURCHASERS have not given to the SELLERS
written notice of any objection to the CLOSING
<PAGE>
16
STATEMENT (which notice in each case, must contain a
statement of the basis of the objection), then the NET WORKING
CAPITAL reflected in the CLOSING STATEMENT shall be deemed to be
the NET WORKING CAPITAL of the BUSINESS as of the CLOSING DATE.
If the SELLERS or the PURCHASERS give such notice of objection
within the allotted time period and the parties are unable to
resolve the subject of such objection within thirty (30) days
after such notice, then the issues in dispute will be submitted
to Price Waterhouse, London (the "ACCOUNTANTS"), for resolution
with instructions to the ACCOUNTANTS to resolve such dispute
within forty-five (45) days. If issues in dispute are submitted
to the ACCOUNTANTS for resolution, (i) each party will furnish
to the ACCOUNTANTS such work papers and other documents and
information relating to the disputed issues as the ACCOUNTANTS
may request and are available to that party (or its independent
public accountants) and each party will be afforded the
opportunity to present to the ACCOUNTANTS any material relating
to the determination and to discuss the determination with the
ACCOUNTANTS; (ii) the determination by the ACCOUNTANTS, as set
forth in a notice delivered to both PARTIES by the ACCOUNTANTS,
will be binding and conclusive on the PARTIES; and (iii) the
PURCHASERS and the SELLERS will each bear fifty percent (50%) of
the fees of the ACCOUNTANTS for such determination.
If a CLOSING STATEMENT which neither the SELLERS nor the
PURCHASERS have objected to in accordance with the provisions
set out above confirms, or if after resolution of all the
disputes it is determined by the ACCOUNTANTS that the value of
the NET WORKING CAPITAL as of the CLOSING DATE is more than the
ESTIMATED NET WORKING CAPITAL, the ESCROWED AMOUNT shall be
immediately paid to the SELLERS, and in addition the PURCHASERS
shall immediately pay to the SELLERS in immediately available
funds the amount of such difference, together with interest on
such amounts at the prevailing HELIBOR interest rate at 12:00
noon on the CLOSING DATE for three month deposits (the "INTEREST
RATE").
If a CLOSING STATEMENT which neither the SELLERS nor the
PURCHASERS have objected to in accordance with the provisions
set out above confirms, or if after resolution of all the
disputes it is determined by the ACCOUNTANTS that the value of
the NET WORKING CAPITAL as of the CLOSING DATE is less than the
ESTIMATED WORKING CAPITAL by more than the ESCROWED AMOUNT, then
the ESCROWED AMOUNT shall be immediately paid to the PURCHASERS
and the SELLERS shall immediately pay to the PURCHASERS in
immediately available funds the amount of such difference,
together with interest on such amounts at the INTEREST RATE.
If a CLOSING STATEMENT which neither the SELLERS nor the
PURCHASERS have objected to in accordance with the provisions
set out above confirms, or if after resolution of all the
disputes it is determined by the ACCOUNTANTS that the value of
the NET WORKING CAPITAL as of the CLOSING DATE is less than the
ESTIMATED NET WORKING CAPITAL but by an amount (the
"DIFFERENCE") not exceeding the ESCROWED AMOUNT, that portion of
the ESCROWED AMOUNT representing the difference between the
ESCROWED AMOUNT and the DIFFERENCE shall be immediately paid to
the SELLERS, and the PURCHASERS shall pay to the SELLERS
interest on such portion at the
<PAGE>
17
INTEREST RATE, and the remaining portion of the ESCROWED
AMOUNT shall be paid to the PURCHASERS.
Any interest earned on the ESCROWED AMOUNT shall be paid to the
PURCHASERS at such time as the ESCROWED AMOUNT is paid in
accordance with the foregoing provisions.
5.2 Allocation of the PURCHASE PRICE
The PURCHASE PRICE shall be allocated among the ASSETS as stated in
Schedule 9.
----------
5.3 Costs of the TRANSFER
The PURCHASERS shall pay all taxes, fees and expenses related to the
TRANSFER, including all notarial fees and expenses, registration taxes,
fees connected with license transfers, filing fees and recordation
expenses, but excluding (i) the expenses to be borne by the SELLERS
referred to in Article 5.5 hereof, (ii) income taxes, capital gains taxes
and other taxes related to the income of the SELLERS, and (iii) such
taxes, fees and expenses that by law or regulation, or by virtue of a
contract between the SELLERS (or any of them) and a third party, must be
paid by the SELLERS.
5.4 Apportionments and Prepaid Items
a) Costs of a recurrent nature which are incurred in respect of the
ASSETS and all of which are specified in Schedule 15 and which relate
to the period both prior to and subsequent to the CLOSING, shall be
apportioned between the PARTIES according to the number of days in
the period covered by such items which occurred respectively prior to
and subsequent to the CLOSING DATE. The PARTIES shall determine the
respective apportioned amounts and the necessary payments to be made
between the PARTIES with respect thereto and such payments shall be
made at the CLOSING or as soon as practicable after the CLOSING.
b) In the event that the PARTIES by a date not later than thirty (30)
days after the CLOSING DATE do not reach an agreement in respect of
the apportioned amounts and the necessary payments to be made by each
PARTY in accordance with paragraph a) above, the SELLERS and the
PURCHASERS shall jointly engage Arthur Andersen Oy, a firm of
chartered accountants, to determine such amounts and payments to be
made, requiring such accountants to deliver to the SELLERS and the
PURCHASERS within thirty (30) days after their engagement a statement
showing such amounts and payments to be made by each PARTY.
c) If, within thirty (30) days following delivery of the statement
referred to in paragraph b) above to the SELLERS and the PURCHASERS,
the SELLERS have not given to the PURCHASERS written objection to
such statement, and/or the PURCHASERS have not given to the SELLERS
written objection to such statement, then the apportioned amounts and
the payments specified in such statement shall be deemed accepted by
all the PARTIES and the payments specified in such statement shall be
paid within seven (7) days of the date when such period of thirty
(30) days expired. If the SELLERS or the
<PAGE>
18
PURCHASERS give such notice of objection within the allotted time
period and the parties are unable to resolve the subject of the
objection within thirty (30) days after such notice, then the issues
at dispute will be submitted to the ACCOUNTANTS, for resolution with
instructions to the ACCOUNTANTS to resolve such dispute within forty-
five (45) days. If the issues in dispute are submitted to the
ACCOUNTANTS for resolution, (i) each PARTY will furnish to the
ACCOUNTANTS such work papers and other documents and information
relating to the disputed issues as the ACCOUNTANTS may request and
are available to that PARTY (or its independent public accountants)
and each PARTY will be afforded the opportunity to present the
ACCOUNTANTS any material relating to the determination and discuss
the determination with the ACCOUNTANTS; and (ii) the determination by
the ACCOUNTANTS set forth in a notice delivered to the PARTIES
involved in such dispute will be binding and conclusive on such
PARTIES.
d) The SELLERS and the PURCHASERS shall each bear 50% of the fees of the
accountants referred to in paragraph b) above and of the fees of the
ACCOUNTANTS referred to in paragraph c) above.
5.5 Expenses of the PARTIES
Each PARTY shall bear all costs (including fees and expenses of or for
attorneys, consultants, financial advisors, tax advisors and their
respective employees, servants and agents) incurred by it or on its
behalf, in connection with the TRANSFER. For the avoidance of doubt,
RADNOR shall pay in full the costs of the extraordinary audit of the
BUSINESS done by Arthur Andersen Oy in connection with the TRANSFER.
6. CLOSING AND RELATED MATTERS
6.1 The CLOSING
The complete effectuation of the TRANSFER (such effectuation is referred
to herein as the "CLOSING") shall take place at 10.00 a.m. on October 15,
1997, or on such other date as the PARTIES may mutually agree, at the
offices of Neste Oy, Finland. The PARTIES shall act diligently to cause
the conditions set forth in Articles 6.2 and 6.3 to be satisfied as soon
as practicable after the date hereof. However, the CLOSING may be held at
such other time, date and/or place as may be agreed upon by the PARTIES.
If, at any time, any of the PURCHASERS or the SELLERS has reason to
believe that the CLOSING cannot be held on October 15, 1997, it shall
promptly notify the other PARTIES and the PARTIES shall attempt in good
faith to agree upon and take such actions as may be reasonably necessary
to conduct the CLOSING as soon as practicable as the then circumstances
will permit.
The date of the commencement of the CLOSING is referred to herein as the
"CLOSING DATE". The CLOSING, when completed, shall be effective as of
00.01 a.m. local time at each of the PLANTS, on the CLOSING DATE, which
is the time of the normal opening of business at the PLANTS.
<PAGE>
19
If the CLOSING does not occur by October 31, 1997, each PARTY shall have
the right to terminate this AGREEMENT forthwith by a written notice to
the other PARTIES. Termination pursuant to this Article 6.1 shall not
give the PURCHASERS the right to make claims or demands against the
SELLERS nor the SELLERS the right to make claims or demands against the
PURCHASERS, unless the CLOSING does not occur by reason of a PARTY's
failure to cause the CLOSING to occur by such date.
6.2 Conditions to the PURCHASERS' obligations to complete the CLOSING
a) The obligation of the PURCHASERS to complete the CLOSING shall be
subject to the fulfilment, in a manner satisfactory to the
PURCHASERS, prior to or concurrently with the CLOSING, of the
following conditions:
1) Each of the PURCHASERS having acquired all governmental and
other consents and approvals which are required for each
PURCHASER to execute and deliver this AGREEMENT and the CLOSING
DOCUMENTS and to effectuate its part of the TRANSFER;
2) There not having occurred, between the date hereof and the
CLOSING DATE, any act or omission by any of the SELLERS that
would constitute a breach of any of the material obligations of
any of the SELLERS under this AGREEMENT;
3) The representations and warranties made by the SELLERS in this
AGREEMENT and the CLOSING DOCUMENTS being true and correct in
all material respects (except with respect to (i)
representations and warranties which are themselves qualified by
materiality which shall be true and correct in accordance with
their terms, and (ii) the representations and warranties listed
in Articles 8.1, 8.4, 8.5 (i), 8.18, and in the second sentence
of Article 8.2, all of which shall be true and correct in all
respects) on and as of the CLOSING DATE as if made and repeated
on and as of the CLOSING DATE with reference to the facts and
circumstances existing on the CLOSING DATE. For the avoidance of
doubt, the notices (if any) given by the SELLERS prior to the
CLOSING DATE pursuant to the introductory paragraph of Article 8
and the notices (if any) given by the PURCHASERS under Article
9.5 b) shall not in any way be deemed to affect such
representations and warranties for purposes of this Article 6.2
a) 3);
4) The PURCHASERS having received reasonable assurances that the
PERMITS can and will, subject to the PURCHASERS complying with
all the terms and conditions set forth therein, be transferred
to the PURCHASERS as of the CLOSING DATE on substantially the
same terms and conditions as the current permits or that prior
to or in sufficient time after the CLOSING DATE a new permit
will be issued in the name of PURCHASERS on substantially the
same terms and conditions as the current permits to replace any
PERMITS which cannot be so transferred; provided, however, the
foregoing provisions shall not apply to PERMITS or instances
where such transfer or issuance is prevented, hindered or
delayed by the unreasonable action or inaction of PURCHASERS,
and/or their respective subsidiaries or affiliates, including a
failure to meet the reasonable requests or demands of
governmental authorities in connection with or as a condition of
such transfer or issuance;
<PAGE>
20
5) The independent public accountants referred to in
Article 8.10 (a) having agreed in writing to consent
in writing to the inclusion of the FINANCIAL
STATEMENTS in any filings with the United States
Securities and Exchange Commission (the "SEC"); and
6) The PURCHASERS having received a certificate from
General Counsel of Neste Oy in form and substance
reasonably satisfactory to the PURCHASERS and
substantially in the form set out in Schedule 11.
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b) The PURCHASERS may at any time waive any of the conditions
set out in this Article 6.2 and such waiver may be made
subject to such reasonable terms and conditions as are
determined by the PURCHASERS.
6.3 Conditions to the SELLERS' obligations to complete the CLOSING
a) The obligation of the SELLERS to complete the CLOSING shall
be subject to the fulfilment, in a manner satisfactory to
the SELLERS, prior to or concurrently with the CLOSING, of
the following conditions:
1) The SELLERS shall have acquired substantially all
governmental and other consents and approvals (if any)
which are necessary for the SELLERS to execute and
deliver this AGREEMENT and to effectuate its part of
the TRANSFER;
2) the SELLERS shall have obtained from third parties
such consents as are necessary or required for the
SELLERS to effect the TRANSFER, including, without
limitation, all contractual rights related to the
BUSINESS;
3) there not having occurred, between the date hereof and
the CLOSING DATE, any act or omission by any of the
PURCHASERS that would constitute a breach of any of
the material obligations of any of the PURCHASERS
under this AGREEMENT;
4) the representations and warranties made by the
PURCHASERS in this AGREEMENT and the other CLOSING
DOCUMENTS being true and correct in all material
respects on and as of the CLOSING DATE as if made and
repeated on and as of the CLOSING DATE with reference
to the facts and circumstances existing on the CLOSING
DATE; and
5) the SELLERS having received a certificate from
Corporate Counsel to RADNOR in form and substance
reasonably satisfactory to the SELLERS and
substantially in the form set out in Schedule 11.
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b) The SELLERS may at any time waive any of the conditions set
out in this Article 6.3 and such waiver may be made subject
to such reasonable terms and conditions as are determined
by the SELLERS.
<PAGE>
21
6.4 Deliveries at the CLOSING
The CLOSING shall be consummated by payment of the PURCHASE PRICE
in the manner set forth in Article 5.1 without any off-set or
deduction and the execution and delivery at the CLOSING of the
following:
a) the deeds, bills of sale, agreements, receipts,
instruments, assignments, acknowledgements and documents
listed in Schedule 13 together with such other documents as
-----------
the PARTIES jointly deem reasonably necessary to effectuate
the TRANSFER (collectively referred to herein as the
"CLOSING DOCUMENTS"); all in form and substance reasonably
satisfactory to the PURCHASERS and the SELLERS;
b) the ANCILLARY CONTRACTS;
c) if requested by the SELLERS, the PURCHASERS shall deliver
to the SELLERS a Certificate, dated as of the CLOSING DATE,
and in form and substance reasonably satisfactory to the
SELLERS, signed by duly authorized officers of PURCHASERS
in which such officers certify that the PURCHASERS are in
compliance with all of their obligations hereunder and that
the representations and warranties made by the PURCHASERS
and referred to in Article 6.3 (a) (4) are true and correct
as of the CLOSING DATE in the manner set forth in Article
6.3 (a) (4); and
d) if requested by the PURCHASERS, the SELLERS shall deliver
to PURCHASERS a Certificate, dated as of the CLOSING DATE,
and in form and substance reasonably satisfactory to the
PURCHASERS, signed by duly authorized officers of the
SELLERS in which such officers certify that the SELLERS are
in compliance with all of their obligations hereunder and
that the representations and warranties made by the SELLERS
and referred to in Article 6.2 (a) (3) are true and correct
as of the CLOSING DATE in the manner set forth in Article
6.2 (a) (3).
6.5 Approvals and Consents
a) Each PARTY represents and warrants that prior to its
signing of this AGREEMENT, it obtained the corporate
approvals necessary to its execution and delivery of this
AGREEMENT and the effectuation of its part of the TRANSFER.
b) The PURCHASERS represent and warrant that to their actual
knowledge after reasonable investigation in Schedule 10 are
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listed or described all non-corporate approvals and
consents necessary to the execution and delivery of this
AGREEMENT by PURCHASERS and the effectuation of PURCHASERS'
part of the TRANSFER. The SELLERS represent and warrant
that there are no non-corporate approvals and consents
necessary for the execution and delivery of this AGREEMENT
by the SELLERS and the effectuation of the SELLERS' part of
the TRANSFER save the transfer of permits referred to in
Article 6.2 and other consents specified in Schedule 10 and
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as specified in Article 8.2.
<PAGE>
22
c) Promptly after the execution of this AGREEMENT, the SELLERS
and the PURCHASERS shall commence and diligently pursue the
acquisition of all approvals and consents (other than
corporate approvals) necessary to the effectuation of its
part of the TRANSFER, including the consents and approvals
listed or described in Schedule 10.
6.6 Acts after the CLOSING
From and after the CLOSING and without limiting in any way Article
6.4 hereof, the PARTIES shall, as appropriate, duly execute,
acknowledge, deliver and perform all such further acts, documents
and assurances as may be reasonably required to effectuate the
TRANSFER as contemplated herein.
7. INDEMNIFICATION
7.1 Indemnification by the PURCHASERS
The PURCHASERS agree to and shall protect, defend, indemnify and
save harmless the SELLERS and their AFFILIATES, and their
respective directors, officers, employees, servants and agents
from and against all CLAIMS resulting from or relating to (i) the
failure of PURCHASERS to perform or satisfy any act, duty,
liability or obligation assumed by or which is to be performed or
satisfied by or on behalf of the PURCHASERS hereunder or in
connection herewith (including the items referred to in Article
4.3 b)), or (ii) the breach of any of the representations and
warranties set forth in Article 9 hereof, or (iii) any liabilities
to third parties arising from any violation of U.S. securities
laws or otherwise in connection with the filings referred to in
Article 6.2 a) 5) and related offering documents. The PURCHASERS
shall have the right to assume the defence and/or intervene (with
counsel of their choice and at their expense), and upon the
SELLERS' request the PURCHASERS shall so assume such defence
and/or intervene, in any discussion, suit, action or proceeding
which could reasonably be expected to result in the PURCHASERS
having to indemnify any person hereunder. The PURCHASERS shall not
bear or be responsible for any fees, costs or expenses incurred by
the SELLERS in connection with such discussion, suit, action or
proceeding after the PURCHASERS' assumption of such defence unless
and to the extent that the SELLERS' involvement in such
discussion, suit, action or proceeding after such assumption by
the PURCHASERS is compelled by law.
7.2 Indemnification by Neste Oy
Neste Oy agrees to and shall protect, defend, indemnify and hold
harmless the PURCHASERS and their AFFILIATES, and their respective
directors, officers, employees, servants and agents from and
against all CLAIMS resulting from or relating to (i) the failure
of the SELLERS to perform or satisfy any act, duty, liability or
obligation retained by or which is to be performed or satisfied by
or on behalf of the SELLERS hereunder or in connection herewith
(other than the items referred to in Article 7.2 (iii) and 7.2
(iv) below), (ii) the breach of any of the representations and
warranties set forth in Article 8 hereof, (iii) all CLAIMS related
to the ASSETS or the BUSINESS other than the ASSUMED LIABILITIES;
and (iv) all CLAIMS relating to the EXCLUDED ASSETS. Neste Oy
shall have the right to defend against and/or intervene (with
counsel of its choice and at its expense), and upon the
PURCHASERS' request,
<PAGE>
23
Neste Oy shall so assume such defence and/or intervene, in any
discussion, suit, action or proceeding which could reasonably be
expected to result in Neste Oy having to indemnify any person
hereunder. Neste Oy shall not bear or be responsible for any fees,
costs or expenses incurred by PURCHASERS in connection with such
discussion, suit, action or proceeding after Neste Oy's assumption
of such defence unless and to the extent that PURCHASERS'
involvement in such discussion, suit, action or proceeding after
such assumption by Neste Oy is compelled by law.
7.3 Claims for Indemnification
a) The SELLERS shall not be liable to PURCHASERS under Article
7.2 (i) or 7.2 (ii), and the PURCHASERS shall not be liable
to the SELLERS under Article 7.1 (i) or 7.1 (ii), in
respect of any individual claim the indemnifiable amount of
which is below FIM 50,000 and unless the aggregate amount
of liability under such Article exceeds FIM 1,500,000 in
the aggregate (not including individual claims the
indemnifiable amount of which is below FIM 50,000),
provided that once the aggregate amount of liability under
such Article exceeds FIM 1,500,000 (not including
individual claims the indemnifiable amount of which is
below FIM 50,000), the PARTY claiming indemnification shall
be entitled to the whole amount of all such liability (not
including individual claims the indemnifiable amount of
which is below FIM 50,000) and not merely the excess.
Notwithstanding the foregoing, the limitations set out in
paragraphs a) and b) of this Article 7.3 shall not apply to
any breach of the representations and warranties set out in
Article 8.14 (Taxes), the obligations of the SELLERS
pursuant to Article 11.2 (Accounts Receivable), or the
obligations of any PARTY under Articles 5.1 b) (ii)
(Purchase Price and Payment), 5.3 (Costs of the Transfer),
5.4 (Apportionments and Prepaid Items), and 5.5 (Expenses
of the Parties).
b) Any claims for damages under Articles 7.1 (i), 7.1 (ii), or
7.1 (iii) or 7.2 (i) or 7.2 (ii) may not exceed an amount
equivalent to 75% of the PURCHASE PRICE in the aggregate.
The provisions in this Article 7 shall be the exclusive
remedy (other than proceedings for injunctive or other
equitable relief) of a PARTY for any breach of any of the
representations, warranties, covenants or agreements of the
other PARTY in this AGREEMENT.
c) Each PARTY shall endeavour to take all reasonable measures
within its control to mitigate damages arising in
connection with any breach of representation or warranty
under this Agreement. For the avoidance of doubt, any costs
incurred by a PARTY in connection with the mitigation of
damages caused by the breach of representations and
warranties by any other PARTY shall be included in the
CLAIMS to be indemnified under Article 7.1 (ii) or 7.2
(ii), as the case may be.
d) Notwithstanding any other provisions in this AGREEMENT, the
SELLERS shall not be liable to the PURCHASERS, and the
PURCHASERS shall not be liable to the SELLERS, for any
exemplary, punitive, speculative, remote, lost profits,
consequential or indirect damages suffered by the
PURCHASERS or the SELLERS, respectively, arising from any
event that would otherwise give the right to seek
indemnification under this Article 7 from the SELLERS or
the PURCHASERS, respectively.
<PAGE>
24
7.4 Right to Information about Liabilities
Each PARTY shall furnish from time to time the other PARTY with
such information as such other PARTY may reasonably request with
respect to the satisfaction and discharge of all acts, duties,
liabilities and obligations that are assumed or retained by or are
to be performed or satisfied by or on behalf of such PARTY
hereunder or in connection herewith (including the items referred
to in Articles 4.3 (a) - (c) hereof, as the case may be).
7.5 Notice and Assistance
a) If, after the CLOSING, any PARTY becomes aware of any
matter or event, or becomes a participant in any suit,
action or proceeding (whether legal, administrative,
arbitration or other) which could reasonably be expected to
result in a CLAIM indemnified against hereunder, then such
PARTY shall promptly notify the other PARTY thereof. Upon
the reasonable request of the PARTY giving such notice (the
"Requestor"), the other PARTY will assist and cooperate
with the Requestor, at the Requestor's expense, in any
legal action or defense undertaken by or against the
Requestor relating to such event, suit, action and/or
proceeding and in which such other PARTY does not have an
adverse interest to that of the Requestor.
b) The PURCHASERS must notify Neste Oy, as to each claim for
indemnification under Article 7.2(ii) other than
indemnification based on Articles 8.14 or 8.25, within
eighteen (18) months from the CLOSING DATE.
c) The PURCHASERS must notify Neste Oy, as to each claim for
indemnification under Article 7.2(ii) based on Article 8.25
(Environmental, Health and Safety Matters), within five (5)
years from the CLOSING DATE.
d) The PURCHASERS must notify Neste Oy, as to each claim for
indemnification under Article 7.2(ii) based on Article 8.14
(Taxes), within the applicable statute of limitations plus
a period of thirty (30) days.
e) The SELLERS must notify the PURCHASERS, as to each claim
for indemnification under Article 7.1(ii), within eighteen
(18) months from the CLOSING DATE
7.6 For the avoidance of doubt, to the extent a CLAIM can be asserted
both as a breach of representations and warranties of the SELLERS
hereunder, and as a liability to be retained or assumed by the
SELLERS in accordance with Article 4.3, such CLAIM shall be
asserted as a liability to be retained or assumed by the SELLERS
in accordance with Article 4.3.
8. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The provisions in the following subparagraphs (i) - (ii) shall
apply in respect of notices concerning alleged breaches of
representations and warranties set forth in this Article 8:
<PAGE>
25
(i) each notice from the PURCHASERS concerning an alleged
breach of a representation or warranty set forth in this
Article 8 must set out in reasonable detail the action,
event, matter or item in question, the representations or
warranties alleged to have been breached and the factual,
legal and other bases upon which the PURCHASERS have relied
in support of such allegation; and
(ii) the failure of the PURCHASERS to give such notice within
the period specified in Article 7.5 above, shall be an
absolute and complete bar to the exercise of all rights,
remedies and causes of action of every kind which the
PURCHASERS have or may have as a result of a breach
(whether alleged or actual) of the applicable
representation or warranty.
Subject to paragraphs (i) through (ii) above, and except as
otherwise specified in Schedule 22, except as otherwise specified
-----------
in the Schedules referred in this Article 8 and except as
otherwise specified in one or more notices (if any) given by the
SELLERS to the PURCHASERS by a date not later than the fourth
(4th) BUSINESS DAY prior to the CLOSING DATE, the SELLERS jointly
and severally represent and warrant to PURCHASERS all of the
following, as of the date hereof, and as of the CLOSING:
8.1 Organisation
a) Neste Oy is a corporation duly organized and existing under
the laws of Finland. Neste Oy has the full corporate, legal
and other power and authority, which is necessary (i) to
sell, own, lease, hold and operate the ASSETS referred to
in Article 4.5 a) as and where now located and to carry on
that portion of the BUSINESS related to such ASSETS as and
where now conducted, (ii) to execute and deliver this
AGREEMENT, the CLOSING DOCUMENTS and the ANCILLARY
CONTRACTS, and (iii) to effectuate its part of the
TRANSFER.
b) Isora Oy is a corporation which is a wholly owned
subsidiary of Neste Oy, and is duly organized and existing
under the laws of Finland. Isora Oy has the full corporate,
legal and other power and authority, which is necessary (i)
to sell, own, lease, hold and operate the ASSETS referred
to in Article 4.5 b) as and where now located and to carry
on that portion of the BUSINESS related to such ASSETS as
and where now conducted, (ii) to execute and deliver this
AGREEMENT, the CLOSING DOCUMENTS and the ANCILLARY
CONTRACTS, and (iii) to effectuate its part of the
TRANSFER.
c) Neste Cellplast Ab is a corporation which is an indirectly
owned subsidiary of Neste Oy, and is duly organized and
existing under the laws of Sweden. Neste Cellplast Ab has
the full corporate, legal and other power and authority,
which is necessary (i) to sell, own, lease, hold and
operate the ASSETS referred to in Article 4.5 c) as and
where now located and to carry on that portion of the
BUSINESS related to such ASSETS as and where now conducted,
(ii) to execute and deliver this AGREEMENT, the CLOSING
DOCUMENTS and the ANCILLARY CONTRACTS, and (iii) to
effectuate its part of the TRANSFER.
<PAGE>
26
d) Neste Thermisol A/S is a corporation which is indirectly
wholly owned by Neste Oy, and is duly organized and
existing under the laws of Denmark. Neste Thermisol A/S has
the full corporate, legal and other power and authority,
which is necessary (i) to sell, own, lease, hold and
operate the ASSETS referred to in Article 4.5 d) as and
where now located and to carry on that portion of the
BUSINESS related to such ASSETS as and where now conducted,
(ii) to execute and deliver this AGREEMENT, the CLOSING
DOCUMENTS and the ANCILLARY CONTRACTS, and (iii) to
effectuate its part of the TRANSFER.
8.2 Due Authorization and Validity
There are no consents or approvals of government, and there are no
material consents or approvals (or other consents or approvals the
absence of which would cause the PURCHASERS or any of their
directors, officers or employees to be subject to fines or other
criminal or administrative sanctions) of any other third parties,
which are necessary for the SELLERS to effectuate their part of
the TRANSFER except those consents described in Article 6.5 b).
When duly executed by the PARTIES, this AGREEMENT and each of the
CLOSING DOCUMENTS and ANCILLARY CONTRACTS will be a valid and
legally binding obligation of the SELLERS enforceable against the
SELLERS in accordance with the terms hereof, except as such
enforcement may be limited or affected by bankruptcy, insolvency,
reorganization, moratorium and similar laws, by laws affecting
creditors' rights generally or by the general principles of
equity.
8.3 Real Property Transfer Deeds
The REAL PROPERTY TRANSFER DEEDS are in proper legal form and as
of the CLOSING DATE the SELLERS have completed all the formalities
to be completed to cause the TRANSFER to occur in respect of the
REAL PROPERTY covered by the REAL PROPERTY TRANSFER DEEDS. Without
limitation to the foregoing, the SELLERS as of the CLOSING DATE
have obtained all necessary confirmations to ensure that no third
party, including any governmental authority or municipality, will
exercise any rights of first refusal or other redemption rights
whether contractual or statutory in respect of the REAL PROPERTY.
8.4 Corporate Approvals
All necessary corporate approvals have been obtained for the
execution of this AGREEMENT, the ANCILLARY CONTRACTS and all
CLOSING DOCUMENTS and the performance of obligations thereunder by
each of the SELLERS.
<PAGE>
27
8.5 Ability to Carry out
Neither the execution and delivery of this AGREEMENT, the CLOSING
DOCUMENTS nor the ANCILLARY CONTRACTS by the SELLERS nor the
effectuation by the SELLERS of their part of the TRANSFER results
in or constitutes or will result in or will constitute a default
or an event that, with notice or lapse of time or both, would be a
default, breach or violation of (i) the articles of association or
other governing documents of the SELLERS, or (ii) any material
contract, agreement or instrument or any judgement, decree or
court order by which the SELLERS are bound or to which the SELLERS
are subject.
8.6 Compliance with Law
The SELLERS' use and operation of the ASSETS and their conduct of
the BUSINESS, do not constitute a material violation of any
applicable law, statute, rule, ordinance, regulation (including
safety regulations) or governmental order.
8.7 Litigation
There are no claims, lawsuits, actions or other legal or
administrative proceedings (including proceedings relating to
Taxes) pending or, to the actual knowledge of SELLERS after
reasonable investigation, threatened, by or against the SELLERS
relating to the BUSINESS or any of the ASSETS.
8.8 Interests of the SELLERS in the ASSETS
The SELLERS have valid and legal title and possession to the
ASSETS free and clear of all ENCUMBRANCES except the PERMITTED
ENCUMBRANCES and when the TRANSFER shall have been completed, the
SELLERS will have conveyed to the PURCHASERS valid and legal title
and possession to the ASSETS free and clear of all ENCUMBRANCES
except the PERMITTED ENCUMBRANCES.
8.9 Completeness and condition of the ASSETS
The ASSETS comprise all the assets used by SELLERS in the
BUSINESS, except the EXCLUDED ASSETS. The ASSETS are structurally
sound, in good operating condition and repair, and adequate for
the uses to which they are being put, and are not in need of
maintenance or repairs except for ordinary, routine maintenance
and repairs that are not material in nature or cost. The ASSETS
are in good operating condition and repair and are sufficient for
the continued conduct of the BUSINESS after the CLOSING in
substantially the same manner as conducted prior to the CLOSING
excepting ordinary wear and tear.
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28
8.10 Financial Statements
a) The SELLERS have delivered to the PURCHASERS (i) audited
financial statements in respect of Isora Oy, Neste
Cellplast AB, Neste Thermisol A/S and the Polystyrene
Operations of Neste Oy, as of December 31, 1994, December
31, 1995, and December 31, 1996, together with a report
thereon by independent certified public accountants and
(ii) unaudited financial statements in respect of Isora Oy,
Neste Cellplast AB, Neste Thermisol A/S and the Polystyrene
Operations of Neste Oy as of June 30, 1997 and June 30,
1996, which are subject to normal recurring audit
adjustments and which are not necessarily indicative of the
results of operations for a full year (collectively, the
"FINANCIAL STATEMENTS"). The FINANCIAL STATEMENTS have been
prepared in accordance with generally accepted accounting
principles of the respective country and applied on a basis
consistent with that of prior fiscal years, fairly
represent the financial position of the BUSINESS as of the
dates thereof and the results of operations and cash flows
of the BUSINESS for the periods then ended, except for
those FINANCIAL STATEMENTS related to the unaudited
periods. Those liabilities and obligations which in the
ordinary course of business and in accordance with
generally accepted accounting principles of the respective
country should be accrued or for which reserves should be
provided are fully accrued on the said FINANCIAL STATEMENTS
and accounting records of the BUSINESS or fully covered by
reserves established on said FINANCIAL STATEMENTS and
accounting records, except for those FINANCIAL STATEMENTS
related to the unaudited periods.
b) The SELLERS have delivered to the PURCHASERS the unaudited
management reports in respect of ISORA OY, NESTE CELLPLAST
AB, NESTE THERMISOL A/S and the Polystyrene Operations of
Neste Oy as of July 31, 1997 and August 31, 1997.
8.11 Liabilities
There are no liabilities or obligations of the BUSINESS of any
kind whatsoever, absolute, tangible, intangible, accrued or
determinable, or to the actual knowledge of SELLERS after
reasonable investigation, contingent or not determinable, other
than:
(i) liabilities or obligations disclosed on, reflected in or
provided for in the FINANCIAL STATEMENTS;
(ii) liabilities or obligations disclosed or referred to in this
Agreement or in the Schedules attached hereto;
(iii) liabilities or obligations incurred in the ordinary course
of business and attributable to the period since 30 June
1997, none of which has been materially adverse to the
nature of the business, results of operations, assets,
financial condition, prospects or manner of conducting the
BUSINESS; and
(iv) the PERMITTED ENCUMBRANCES.
8.12 [not used]
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29
8.13 Inventory
The inventory of the BUSINESS consists of a quality and quantity
usable and saleable in the ordinary course of business. All
inventories not written off or written down have been valued at
lower of cost or market on a first-in first-out basis in
accordance with generally accepted accounting principles of the
respective country concerned and on a consistent basis with
previous periods.
8.14 Taxes
a) Each of the SELLERS has paid all TAXES which are due and
payable related to the BUSINESS or the ASSETS on or before
the CLOSING DATE.
b) Neither the execution and delivery of this AGREEMENT nor
the consummation of the TRANSFER will, directly or
indirectly (with or without notice or lapse of time) cause
the PURCHASERS or the BUSINESS to become subject to, or to
become liable for the payment of, any TAX (except those
TAXES for which the PURCHASERS are responsible under
Article 5.3).
8.15 Contracts
The SELLERS are not a party to any material contract or agreement
(including contracts or agreements with agents or management),
except the contracts and agreements listed in Schedule 5 A (the
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"CONTRACTS"). The CONTRACTS comprise all material contracts,
agreements and leases which are required for the operation of the
BUSINESS, including the PLANTS.
8.16 Absence of breaches and defaults
None of the SELLERS is in material default or material breach or
to the actual knowledge of the SELLERS after reasonable
investigation, capable of being declared in material default or
material breach of any of the CONTRACTS, and none of the SELLERS
is in default or breach under any of the CONTRACTS which default
or breach constitutes a reason under which any other party under
such CONTRACT is entitled to terminate the CONTRACT or exercise
other remedies under the written terms of such CONTRACT, and all
of the CONTRACTS are now in good standing and each of the SELLERS
is entitled to all benefits under the CONTRACTS to which such
SELLER is a party.
8.17 Agreements with labour unions/employee associations
None of the SELLERS is bound by or has made any collective
bargaining agreements or any other material agreements with any
labour union or employee association nor made material commitments
to or conducted negotiations in respect of material commitments
with any labour union or employee association except those
specified in Schedule 19.
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<PAGE>
30
8.18 Absence of other agreements for sale of BUSINESS
The SELLERS have not since June 10, 1997 entered into any
agreements with any party other than the PURCHASERS relating to
the sale or other disposition of all or a substantial part of the
BUSINESS.
8.19 SELLERS' right to intellectual property
The INTELLECTUAL PROPERTY ASSETS are all those necessary for the
operation of the BUSINESS as currently conducted. The SELLERS have
the full right, title, and interest to the INTELLECTUAL PROPERTY
being transferred hereunder and full right, title and interest
thereto is being transferred to the PURCHASERS with the exception
of the office application computer software referred to in Article
11.7.
8.20 Completeness of RECORDS
The RECORDS are true, complete and not misleading in any material
respects.
8.21 Valid PERMITS
The PERMITS constitute the material licenses, permits and
consents, and the licences, permits and consents the absence of
which would cause the PURCHASERS or any of their directors,
officers or employees to be subject to fines or other criminal or
administrative sanctions, which are required for the operation of
the BUSINESS, including the operation of the PLANTS, provided that
the foregoing shall not apply to licences, permits or consents
relating to the EXCLUDED ASSETS. To the actual knowledge of the
SELLERS after reasonable investigation, there is no pending or
threatened material breach or material default by any party under
any of the PERMITS or any breach or default that would cause the
PURCHASERS or any of their directors, officers or employees to be
subject to fines or other criminal or administrative sanctions.
The PERMITS are in full force and effect. Except as set forth in
Schedule 4, no SELLER is or will be required to give any notice to
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or obtain any consent from any person with respect to the PERMITS
in connection with the execution and delivery of this AGREEMENT or
the consummation or performance of the TRANSFER. To the actual
knowledge of SELLERS after reasonable investigation, the PERMITS
are readily transferable to PURCHASERS or capable of being
re-issued in the name of the PURCHASERS prior to or immediately
after the CLOSING DATE without unreasonable efforts on the part of
SELLERS or PURCHASERS.
8.22 Absence of non-competition restrictions
The BUSINESS is not subject to restrictions, contractual or, to
the actual knowledge of the SELLERS, after reasonable
investigation, otherwise, preventing the owner and operator of the
BUSINESS to compete in the fields of business in which the
BUSINESS is presently conducted.
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31
8.23 Labour relations
There have been no strikes or work stoppages by employees of the
BUSINESS nor any other labour grievances at any of the facilities
comprising the BUSINESS, including any of the PLANTS, at any time
during the years 1994, 1995, 1996 and 1997, except as set forth in
Schedule 20.
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8.24 Accuracy
No representation or warranty of the SELLERS in this AGREEMENT or
any Schedule hereto or other documents executed in connection
herewith nor any certificate furnished or to be furnished by the
SELLERS to PURCHASERS pursuant hereto or in connection with the
transactions contemplated hereby, when taken as a whole with any
information contained in this AGREEMENT or any such Schedule,
document or certificate, contains any untrue or misleading
statement of any material fact or omits to state any material fact
necessary to make the statements contained therein, under the
circumstances in which they are made, not misleading in any
material respect.
8.25 Environmental, Health and Safety Matters
a) Each of the SELLERS is, and at all times before CLOSING has
been, in material compliance with, and has not been and is
not in material violation of any ENVIRONMENTAL LAW or
OCCUPATIONAL SAFETY AND HEALTH LAW;
b) no SELLER has received or to the actual knowledge of each
SELLER after reasonable investigation, has any basis to
expect, and to the actual knowledge of each SELLER, after
reasonable investigation, no other party for whose conduct
they or any of them are or may be held to be legally
obligated has received or has any basis to expect, any
written order, notice, or other communication from (i) any
governmental body or private citizen or organization, or
(ii) the current or prior owner or operator of any PLANT,
of any violation of any ENVIRONMENTAL LAW, or of any
required legal obligation to undertake or bear the cost of
any ENVIRONMENTAL, HEALTH AND SAFETY LIABILITIES with
respect to the BUSINESS or any of the PLANTS or any other
properties or assets related to the BUSINESS (whether real,
personal, or mixed) in which any of the SELLERS has an
interest, or with respect to any property or PLANT at or to
which HAZARDOUS MATERIALS were generated, manufactured,
refined, transferred, imported, used, or processed by
SELLERS, or to the actual knowledge of each SELLER after
reasonable investigation any other party for whose conduct
they are or may be held legally obligated;
c) there are no pending or, to the knowledge of the SELLERS
after reasonable investigation, threatened CLAIMS or
ENCUMBRANCES of any material adverse nature, resulting from
any ENVIRONMENTAL, HEALTH AND SAFETY LIABILITIES arising
under or pursuant to any ENVIRONMENTAL LAW, related to the
operation or condition of the BUSINESS or any of the PLANTS
in which any of the SELLERS has an interest;
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32
d) no SELLER has received, and to the actual knowledge of each
SELLER after reasonable investigation, no SELLER has any
basis to expect that it will receive, and to the actual
knowledge of each SELLER after reasonable investigation, no
other party for whose conduct they are or may be held
legally obligated has received or has any basis to expect,
any written directive, inquiry, notice, order, or warning
that relates to material HAZARDOUS ACTIVITY, material
HAZARDOUS MATERIALS, a material actual or potential
violation or requirement under ENVIRONMENTAL LAW, material
ENVIRONMENTAL, HEALTH AND SAFETY LIABILITIES, or of any
other required legal obligations to undertake with respect
to the BUSINESS, any of the PLANTS or any other properties
or assets (whether real, personal, or mixed) in which
SELLERS have an interest, or with respect to any property
or facility to which HAZARDOUS MATERIALS generated,
manufactured, refined, transferred, imported, used, or
processed by SELLERS, or to the actual knowledge of the
SELLERS, after reasonable investigation any other party for
whose conduct they are or may be held legally obligated,
have been transported, treated, stored, handled,
transferred, disposed, recycled, or received;
e) no SELLER has, and to the actual knowledge of SELLERS after
reasonable investigation, no other party for whose conduct
they are or may be held legally obligated has, or has any
basis to expect any, material adverse ENVIRONMENTAL, HEALTH
AND SAFETY LIABILITIES with respect to the PLANTS;
f) no SELLER has, and to the actual knowledge of SELLERS,
after reasonable investigation, no other party for whose
conduct they are or may be held legally obligated has,
permitted or conducted, any HAZARDOUS ACTIVITY with respect
to the BUSINESS or the PLANTS, except in material
compliance with all applicable ENVIRONMENTAL LAWS;
g) there has been no release or, to the knowledge of SELLERS
after reasonable investigation, threat of RELEASE, of any
HAZARDOUS MATERIALS at or from the PLANTS where any
HAZARDOUS MATERIALS were generated, manufactured, refined,
transferred, produced, imported, used, or processed from or
by the PLANTS or the BUSINESS, except in material
compliance with ENVIRONMENTAL LAWS;
h) SELLERS have made available to PURCHASERS true and complete
copies and results of all reports, studies, analyses,
tests, and monitoring in the possession custody or control
of SELLERS pertaining to HAZARDOUS MATERIALS or HAZARDOUS
ACTIVITIES in, on, or under the PLANTS, or concerning
compliance by SELLERS with ENVIRONMENTAL LAWS;
i) all discharges to land, water or air from all facilities
included in the BUSINESS, including the PLANTS; are as of
the CLOSING DATE allowed by law and/or covered by valid and
current agreements, permits, permit applications, and
certificates;
j) there are no pending or to the actual knowledge of the
SELLERS, threatened claims against any SELLER for injury to
health or property from any employees or other person or
entity under any ENVIRONMENTAL LAWS or OCCUPATIONAL SAFETY
AND HEALTH LAW;
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33
k) all process equipment included in the BUSINESS is installed
in accordance with applicable codes. Mandatory periodic
inspections have been conducted and current records of such
tests are available on site. Examples of such requirements
include testing of pressure vessels, relief valves and
radiation sources.
The representations and warranties set forth in this Article 8.25
shall constitute the only representations and warranties in
respect to those matters explicitly addressed in this Article
8.25. For the avoidance of doubt, no claims may be asserted under
Articles 8.6, 8.7, 8.11, 8.21 or 8.26 (ii) with respect to
ENVIRONMENTAL LAWS, ENVIRONMENTAL HEALTH AND SAFETY LIABILITIES,
HAZARDOUS ACTIVITY, HAZARDOUS MATERIALS and/or OCCUPATION SAFETY
AND HEALTH LAW.
8.26 Conduct of the BUSINESS since June 30, 1997
From June 30, 1997 and through the CLOSING DATE, the BUSINESS has
been conducted and will be conducted only (i) in the ordinary
course of business and (ii) in material compliance with all
applicable laws and regulations.
8.27 No material adverse change
From December 31, 1996 and through the CLOSING DATE, there has not
been and will not be any material adverse change in the assets,
financial position, results of operations, properties, prospects,
or condition of the BUSINESS, and no event has occurred or
circumstance exists that is likely to result in such a material
adverse change provided that the foregoing shall not apply to
events or circumstances affecting the economy generally
(including, without limitation, economic cycles affecting the
BUSINESS).
8.28 Employees
a) Schedule 18 contains a complete and accurate list of the
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following information for each employee employed in the
BUSINESS by the SELLERS, including each employee on leave
of absence or layoff status: employer, name, current
compensation paid or payable; and the SELLERS have
separately delivered or made available to the PURCHASERS
information regarding vacation accrued, service credited
for purposes of vesting and eligibility to participate
under any pension, retirement, profit-sharing, deferred
compensation, bonus, severance pay, insurance, medical,
welfare, or vacation plan, other employee pension benefit
plan or employee welfare benefit plan, or any other
employee benefit plan.
b) To the SELLERS knowledge after reasonable investigation, no
employee employed in the BUSINESS by the SELLERS is a party
to, or is otherwise bound by, any agreement or arrangement,
including any confidentiality, noncompetition, or
proprietary rights agreement, between such employee and any
other party ("PROPRIETARY RIGHTS AGREEMENT") that in any
way adversely affects or will affect (i) the performance of
his/her duties as an employee employed in the BUSINESS, or
(ii) the ability of the PURCHASER to conduct the BUSINESS,
including any PROPRIETARY RIGHTS AGREEMENT with SELLERS by
any such employee. To the SELLERS' knowledge, after
reasonable investigations, no key employee employed in the
BUSINESS intends to
<PAGE>
34
terminate his employment in the BUSINESS in connection with
the TRANSFER or in the foreseeable future.
c) Each employee employed by the BUSINESS in Sweden and listed
in Schedule 18 has acknowledged in writing that he/she will
not utilize his/her option to continue employment with the
SELLERS.
9. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
The provisions in the following subparagraphs (i) - (ii) shall
apply in respect of notices concerning alleged breaches of
representations and warranties set forth in this Article 9:
(i) each NOTICE from the SELLERS concerning an alleged breach
of a representation or warranty set forth in this Article 9
must set out in reasonable detail the action, event, matter
or item in question, the representations or warranties
alleged to have been breached and the factual, legal and
other bases upon which the SELLERS have relied in support
of such allegation; and
(ii) the failure by the SELLERS to give such notice within the
period specified in Article 7.5 (e) above, shall be an
absolute and complete bar to the exercise of all rights,
remedies and causes of action of every kind which the
SELLERS have or may have as a result of a breach (whether
alleged or actual) of the applicable representation or
warranty.
Subject to the subparagraphs (i) - (ii) above, the PURCHASERS
represent and warrant to the SELLERS the following, as of the date
hereof, and as of the CLOSING:
9.1 Organization
As of the CLOSING DATE: 1) StyroChem Finland Oy is a corporation
duly organized and existing under the laws of Finland; 2)
Thermisol Finland Oy is a corporation duly organized and existing
under the laws of Finland; 3) Thermisol Sweden AB is a corporation
duly organized and existing under the laws of Sweden; 4) Thermisol
Denmark A/S is a corporation duly organized and existing under the
laws of Denmark; and each of the PURCHASERS specified in
paragraphs 1) - 4) above as of the CLOSING DATE will have the full
corporate, legal and other power and authority which is necessary
(i) to purchase, own and lease the ASSETS, (ii) to execute and
deliver this AGREEMENT, and (iii) to effectuate its part of the
TRANSFER.
9.2 Due Authorization and Validity
Listed or described in Schedule 10 are all the consents and
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approvals (other than corporate approvals) of governmental and
other persons which to the best knowledge of the PURCHASERS are
necessary for PURCHASERS to effectuate their part of the TRANSFER.
When duly executed by the PARTIES, this AGREEMENT will be a valid
and legally binding obligation of PURCHASERS enforceable against
PURCHASERS in accordance with the terms hereof, except as such
enforcement may be limited or affected by bankruptcy, insolvency,
reorganization, moratorium and similar laws or by laws affecting
creditors rights generally.
<PAGE>
35
9.3 Ability to Carry out
Neither the execution and delivery of this AGREEMENT or any of the
ANCILLARY CONTRACTS by the PURCHASERS or RADNOR nor the
effectuation by the PURCHASERS or RADNOR of their part of the
TRANSFER results in or constitutes or will result in or will
constitute a default or an event that, with notice or lapse of
time or both, would be a default, breach or violation of (i) the
articles of incorporation or by-laws of any of the PURCHASERS or
RADNOR, as the case may be, or (ii) any material contract,
agreement, instrument, judgement, decree or court order which any
of the PURCHASERS or RADNOR, as the case may be, is subject to or
by which any of the PURCHASERS is bound and (iii) will not violate
any law, governmental rule, order, arbitration award, judgement to
which RADNOR and/or any of the PURCHASERS is subject.
9.4 Good Standing
RADNOR is a corporation validly existing and in good standing
under the laws of the State of Delaware. RADNOR has all necessary
corporate power to cause the PURCHASERS to purchase and own the
ASSETS and enter into the ANCILLARY CONTRACTS and to cause the
PURCHASERS the due performance of this AGREEMENT and any ANCILLARY
AGREEMENT and the assumption of any and all liabilities resulting
to PURCHASERS therefrom.
9.5 Due Diligence
a) RADNOR and/or its representatives have been afforded access
to properties, books, records and or other sources of
information of the SELLERS which comprise the purchased
ASSETS, and have had the opportunity to ask questions of,
and to receive answers and information from, certain
officers of the SELLERS regarding the ASSETS and the
BUSINESS.
b) (i) If any RADNOR Specified Person (as hereinafter
defined) has or obtains actual knowledge at any time
on or prior to four (4) BUSINESS DAYS prior to the
CLOSING DATE (the "NOTIFICATION PERIOD") of any
information which renders inaccurate in any material
respect any representation and warranty made by the
SELLERS in this AGREEMENT, the PURCHASERS will, as
soon as practicable (but in no event later than the
second (2nd) BUSINESS DAY prior to the CLOSING DATE),
advise the SELLERS thereof. The SELLERS shall
thereupon use their best reasonable efforts to cure
such inaccuracy. If the SELLERS are not able, despite
the use of their best reasonable efforts, to remedy
such inaccuracy, and if the PURCHASERS nevertheless
decide to complete the CLOSING, the inaccuracy shall
be deemed to have been waived and the PURCHASERS will
not be entitled to indemnification in respect of such
inaccuracy.
(ii) The provisions of Article 9.5 b) (i) shall not be
applicable in the event of fraudulent conduct by the
SELLERS.
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36
c) Nothing in this Article 9.5 shall affect the right to
indemnification based on representations and warranties of
the SELLERS arising from any breaches of representations
and warranties of which the PURCHASERS become aware after
the NOTIFICATION PERIOD.
d) The term "Radnor Specified Person" shall mean the
President, any Senior Vice President, and Vice President
and Corporate Counsel of RADNOR. As of the date hereof, (i)
the President is Michael Kennedy, (ii) the Senior Vice
Presidents are Donald Walker (Senior Vice President,
Operations), Michael Valenza (Senior Vice President,
Finance), Donald Rogalski (Senior Vice President,
Administration), Richard Hunsinger (Senior Vice President,
Sales), and R. Radcliffe Hastings (Treasurer), and (iii)
the Vice President and Corporate Counsel is Caroline
Williamson.
9.6 Consents
As of the CLOSING DATE, the PURCHASERS have all authorisation,
consents and approvals of, and all registrations and filings with
any governmental or public authority required to be obtained by
the PURCHASERS before the CLOSING in connection with the ANCILLARY
CONTRACTS or the consummation of this transaction.
9.7 Availability of Financing
As of the date hereof, the PURCHASERS have at their disposal an
amount sufficient for them to pay the PURCHASE PRICE in full, with
interest (if any) payable hereunder. As of the CLOSING DATE,
RADNOR and the PURCHASERS will have an amount sufficient to pay
the PURCHASE PRICE, in full, with interest (if any) payable
hereunder.
9.8 Third parties
As of the CLOSING DATE, the PURCHASERS have obtained consents from
all third parties from which RADNOR or any of the PURCHASERS are
obligated to obtain prior the TRANSFER.
9.9 Litigation
There are no suits, actions, claims, demands or other proceedings
pending or, to the best knowledge of RADNOR and/or the PURCHASERS
after reasonable investigation, threatened, by or against any of
the PURCHASERS and affecting the execution and delivery of this
AGREEMENT by the PURCHASERS or the effectuation by any of the
PURCHASERS of its part of the TRANSFER.
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37
10. DELIVERY OF THE ASSETS
10.1 Delivery of ASSETS
The SELLERS shall ensure that, (i) all tangible ASSETS including
the inventories are located at the PLANTS on the day prior to the
CLOSING and shall remain there through the CLOSING, and (ii) at
the CLOSING, the SELLERS shall deliver to PURCHASERS such items
(e.g. keys) as are necessary to give the PURCHASERS possession of
all tangible ASSETS located at the PLANTS and possession of all
intangible ASSETS wherever located. All of the RECORDS shall be
delivered to the PURCHASERS or their designee on the CLOSING DATE,
including blueprints, designs, process diagrams and flow sheets,
equipment and building layouts, descriptions of instrumentation,
descriptions of operating analytical procedures, operating manuals
and operating and maintenance records.
10.2 Retention of RECORDS
a) For a period from the CLOSING DATE until the later of six
(6) years thereafter or all tax years of the SELLERS prior
to and through the 1997 tax year of the SELLERS are finally
closed, the PURCHASERS shall ensure that the RECORDS remain
in the custody of the PURCHASERS at the PLANTS and the
SELLERS shall have full access thereto (including the right
to inspect, review, copy and make extracts from the
RECORDS) during reasonable business hours for any proper
purpose (e.g. tax, law, and financial, accounting or
governmental reporting) connected with the affairs of the
SELLERS. The SELLERS shall notify the PURCHASERS of the
closing of the said tax years as soon as practicable after
such closing.
b) The SELLERS agree to promptly provide to the PURCHASERS at
any time during the period referred to in Article 10.2 a)
above copies of tax returns and statutory bookkeeping
materials relating to the BUSINESS when reasonably
requested by the PURCHASERS.
10.3 Removal of Certain Property
Not later than ninety (90) days after the CLOSING and at SELLER's
expense, the SELLERS shall remove from the PLANTS all EXCLUDED
ASSETS. The PURCHASERS shall reasonably cooperate with the SELLERS
to facilitate such removal.
11. COVENANTS OF THE PARTIES
11.1 The SELLERS' Pre-CLOSING Conduct of the BUSINESS
From the date hereof through the CLOSING, the SELLERS shall (a)
conduct the BUSINESS in the ordinary course of business and (b)
maintain the ASSETS, including the EQUIPMENT and the REAL
PROPERTY, in substantially the same condition as existing on the
date of signing of the Letter of Intent (defined in Article 11.2
below), except for normal maintenance requirements; ordinary wear,
tear and consumption; and changes, actions and matters made, taken
or occurring in the ordinary conduct of the BUSINESS or approved
by PURCHASER, (c) use their reasonable best efforts to preserve
intact the current business organization of the
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38
BUSINESS, keep available the services of the current officers,
employees, and agents of the BUSINESS, and maintain the relations
and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with
the BUSINESS; (d) consult as soon as reasonably practicable with
the PURCHASERS concerning operational matters of a material
nature; (e) otherwise report periodically to the PURCHASERS
concerning the status of the BUSINESS including any changes in
respect of the matters referred to in c) above.
In order to facilitate discussions between the SELLERS and the
PURCHASERS as to unusual matters which may arise during the period
between the date hereof and the CLOSING, the SELLERS and the
PURCHASERS have designated the following respective
representatives for purposes of such discussions:
The SELLERS - Kyosti Sysio, Neste Oy as to all matters; and the
PURCHASERS - Michael Kennedy, RADNOR; and in his absence Michael
Valenza.
11.2 Accounts Receivable
a) From the date of the CLOSING until a date 180 days after
the CLOSING DATE (the "COLLECTION PERIOD"), the PURCHASERS
shall scrupulously and consistent with customary collection
practices for the BUSINESS, attempt to collect all ACCOUNTS
RECEIVABLE. The SELLERS shall when needed cooperate and
consult with the PURCHASERS in such collection measures. It
is expressly agreed that the PURCHASERS shall not be
required to use any method of collection different from
that customarily used by the BUSINESS in the collection of
accounts. It is further agreed that the PURCHASERS shall
have no obligation to institute legal proceedings to
collect all or any portion of the ACCOUNTS RECEIVABLE.
b) During the COLLECTION PERIOD, the PURCHASERS shall not have
the right to settle, release or otherwise compromise any
ACCOUNTS RECEIVABLE without the prior written consent of
the SELLERS, which consent shall not be unreasonably
withheld, unless such settlement, release or compromise
results in the immediate payment to the PURCHASERS in full
of the amount outstanding on such ACCOUNT RECEIVABLE.
c) During the COLLECTION PERIOD, the PURCHASERS shall provide
the SELLERS upon reasonable request of the SELLERS with a
status report as to the collection of the ACCOUNTS
RECEIVABLE, which report shall include reasonable details
regarding the collection efforts by the PURCHASERS and the
debtor's response.
d) To the extent any debtor on any of the ACCOUNTS RECEIVABLE
is also a debtor to the PURCHASERS for debts incurred after
the CLOSING DATE, a remittance by such debtor shall be
deemed to be on account of the earliest unpaid invoice for
such debtor. Notwithstanding the foregoing, if any such
debtor disputes a specific ACCOUNT RECEIVABLE attributable
to such debtor (based on a claim of product defect,
non-delivery, double payment or other legitimate reason for
nonpayment) and requests that the remittance be credited
against one or more debts incurred by such debtor after the
CLOSING DATE, the remittance shall be credited in
accordance with the debtor's instructions.
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39
e) Upon the expiration of the COLLECTION PERIOD, Neste Oy
shall purchase from the PURCHASERS, for full face amount
together with interest thereon accrued thereon at the
INTEREST RATE, all of the ACCOUNTS RECEIVABLE which the
PURCHASERS have not been able to collect in full in
accordance with the provisions of this Article 11.2, as
shown on a statement issued by the PURCHASERS and including
the details referred to in paragraph c) above with respect
to the date when the COLLECTION PERIOD expires. Such
payment shall be made to an account specified by the
PURCHASERS within ten (10) days after the expiration of the
COLLECTION PERIOD.
f) Upon payment of the purchase price referred to in paragraph
e) above, the PURCHASERS shall assign the ACCOUNTS
RECEIVABLE to be purchased under such paragraph e) to the
SELLERS.
11.3 Secrecy Obligations of the PURCHASERS
If the TRANSFER is not effectuated, then the PURCHASERS covenant
that, without prejudice to any other secrecy undertaking by the
PURCHASERS in connection herewith, for a period of five (5) years
after the date hereof the PURCHASERS shall hold and cause each
person receiving from or on behalf of the PURCHASERS any part of
the information delivered by the SELLERS pursuant hereto or in
connection herewith (such person being a "Recipient"), including
representatives of the law firms of Luostarinen & Mettala and
Duane, Morris & Heckscher LLP, the investment banking firm of Bear
Sterns, and the respective parents, subsidiaries, affiliates,
directors, members, partners, officers, employees, servants and
agents of the PURCHASERS and such law and investment banking firms
to hold such information in strict confidence and not disclose the
same to any person without the prior written approval of the
SELLERS in each instance except and unless (i) such disclosure is
compelled by law or a valid court order, provided all reasonable
efforts (e.g. protective orders) have been made to preserve the
confidentiality or trade secret status of such information, (ii)
the part of such information to be disclosed has become generally
available to the public other than as a result of a disclosure by
the PURCHASERS, or (iii) the part of such information to be
disclosed has become available to the PURCHASERS on a
non-confidential basis from a source other than the SELLERS,
unless the PURCHASERS knew or reasonably should have known, that
such source owed to the SELLERS and/or any of its respective
subsidiaries or affiliates a confidentiality or non-disclosure
obligation relating to such information and in all instances, the
PURCHASERS shall make reasonable inquiries to ascertain whether
such source owes or owed such an obligation. If the TRANSFER is
not effectuated, then the PURCHASERS shall cause all originals and
all copies of all tangible items (including books, records,
documents, blueprints and drawings) possessed by or on behalf of
the PURCHASERS or a Recipient and containing such information to
be promptly delivered to the SELLERS, provided however that the
foregoing provisions shall not create any obligation for the
PURCHASERS to return to the SELLERS the Letter of Intent dated 10
July 1997 between Neste Oy and RADNOR (the "Letter of Intent") nor
any document containing professional advice received by RADNOR in
connection with said Letter of Intent.
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40
11.4 Secrecy obligations of the SELLERS
If the TRANSFER is effectuated, the SELLERS covenant that, for a
period of five (5) years after the date hereof the SELLERS shall
hold in strict confidence and not disclose to any third person
information or trade secrets relating to or belonging to the
BUSINESS unless (i) such disclosure is compelled by law or a valid
court order, provided all reasonable efforts (e.g. protective
orders) have been made to preserve the confidentiality or trade
secret status of such information, or (ii) the part of such
information to be disclosed has become generally available to the
public other than as a result of a disclosure by the SELLERS.
11.5 Post-CLOSING Identification
As soon as may be practicable after the effectuation of the
TRANSFER, and in any event no later than six (6) months from the
CLOSING DATE, the PURCHASERS shall take all steps necessary to
print over, mask with an adhesive label, or otherwise obliterate
all references to the trade name "NESTE" on all existing
literature, forms and stationary supplied to third parties and on
all labels and shipping containers. Except as provided in this
Article 11.5 no other right or license to use the name "NESTE" is
granted hereby.
11.6 Introduction to Customers
The SELLERS shall prepare and jointly develop with the PURCHASERS
a letter to be sent by the SELLERS and the PURCHASERS jointly to
the customers of the BUSINESS as soon as practicable after the
signing of this AGREEMENT by the PARTIES.
11.7 Office application software
If the transfer of any office application software (e.g. Microsoft
Windows) included in the INTELLECTUAL PROPERTY requires the
consent or approval of any third party to the transfer thereof to
the PURCHASERS or is subject to other restrictions on transfer set
forth in any license agreement or otherwise, then the SELLERS
shall use their reasonable best efforts to obtain such consent,
approval or waiver of such restriction on transfer (but without
the obligation to expend any money in connection therewith),
provided, that if the payment of any money is needed to effectuate
such transfer then the SELLERS shall notify the PURCHASERS thereof
and shall give the PURCHASERS the right to make such payment to
effectuate such transfer.
11.8 Transition support services
If after the date hereof the PURCHASERS determine that they will
reasonably require the SELLERS to continue to provide any
administrative, data systems or other support services that are
currently being provided by the SELLERS to the BUSINESS, such
services being in addition to the services to be provided under
the terms of the SERVICE AGREEMENTS, then the PURCHASERS shall
notify the SELLERS accordingly and the SELLERS shall provide such
services for the period reasonably required by the PURCHASERS on
the following basis:
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41
a) during the period of the first thirty (30) days (the
"Initial Period") after the PURCHASERS notify the SELLERS
in accordance with the foregoing with respect to a specific
service, such service shall be provided free of charge,
other than the SELLERS' reasonable out-of-pocket expenses
paid to third parties which shall be reimbursed by the
PURCHASERS to the SELLERS;
b) during the period of the first two (2) months after the
expiration of the Initial Period, such service shall be
provided at the SELLERS' direct cost;
c) during the period of the third (3rd), fourth (4th) and
fifth (5th) month after the expiration of the Initial
Period, such service shall be provided at the SELLERS'
direct cost plus 15%;
d) notwithstanding anything to the contrary, in no event shall
the services described in this Article 11.8 be provided for
longer than a six (6) month period of transition
immediately after the CLOSING; and
e) such support services shall be provided on such other terms
as are currently applicable to the provision of such
services to the BUSINESS.
11.9 Corrections to Inaccuracies or Omissions in certain Schedules
At any time not later than the fourth (4th) BUSINESS DAY prior to
the CLOSING DATE, the SELLERS may provide to the PURCHASERS one or
more notices (if any) setting forth corrections in respect of
inaccuracies or omissions in any Schedule to this Agreement (other
than Schedules 9, 11, 12 and 18 - 22), and the relevant Schedule
shall thereby be deemed to be amended to incorporate such
correction; provided, however, that no such notice shall qualify
or amend any of the representations or warranties of SELLERS under
Article 8.
12. OBLIGATION TO USE THE PLANTS AND DISPOSAL OF THE ASSETS
12.1 The PURCHASERS will endeavour to use the PLANTS after the CLOSING
in a manner and scope as at current levels consistent with the
maintenance and development of the BUSINESS.
12.2 Upon the termination of the LAND LEASE AGREEMENT Neste Oy shall
have an option to redeem the buildings and other assets and
general purpose equipment at the Porvoo PLANT under the terms and
conditions set forth in the LAND LEASE AGREEMENT.
13. MISCELLANEOUS
13.1 Notices
Each agreement, election, exercise of a right or remedy (e.g.
right to terminate this AGREEMENT), communication, request,
notice, waiver, approval and consent requested or given hereunder
or in connection herewith or referred to herein (the foregoing
items are individually and collectively referred to herein as a
"NOTICE") shall be in writing and in English. Each NOTICE to be
given or communicated to a PARTY shall be delivered by courier,
telefax, hand or mail (postage prepaid) to the address specified
below or to such other
<PAGE>
42
address for notices as may be designated by such intended
receiving PARTY from time to time in a NOTICE to the other PARTY.
Each NOTICE shall be only for the specific instance and matters
covered thereby and shall not affect any future or other instance
or matter, whether of a similar or dissimilar nature or involving
the same or any other provision of this AGREEMENT. Any NOTICE
given hereunder shall be effective upon actual receipt.
For purposes of this AGREEMENT, any NOTICE that any of the SELLERS
is entitled to or obligated to give to any of the PURCHASERS
hereunder shall be effective when given to RADNOR in accordance
with this Article 13.1, and any NOTICE that any of the PURCHASERS
is entitled to or obligated to give to any of the SELLERS
hereunder shall be effective when given to Neste Oy in accordance
with this Article 13.1.
<TABLE>
<CAPTION>
Address for notices to the SELLERS: Address for notices to the PURCHASERS:
<S> <C>
Neste Oy Radnor Holdings Corporation
Keilaniemi Three Radnor Corporate Center
FIN-02150 Espoo Radnor, Pennsylvania 19087
Finland USA
Telefax: +358 20 450 5205 Telefax: +1 610 995 2697
Attention: Kyosti Sysio, Attention: Michael Kennedy, President
Senior Vice President
With a copy to: With a copy to:
Vinson & Elkins L.L.P. Luostarinen & Mettala
47 Charles Street Etelaesplanadi 18, 8th floor
Berkeley Square FIN-00130 Helsinki
London W1X 7PB Finland
United Kingdom
Telefax: +44 171 499 5320 Telefax: +358 9 621 7202
Attention: John C. La Master Attention: Kimmo Mettala
</TABLE>
13.2 Announcements
All public announcements, releases, statements and communications
by the SELLERS and/or PURCHASERS to third persons (excluding the
employees of either PARTY and customers covered by Article 11.5
hereof) relating to this AGREEMENT or the TRANSFER shall be made
only at such time and in such manner as may be agreed upon by the
PARTIES, unless otherwise required by law, or the rules of
Helsinki Stock Exchange or the SEC. To the greatest extent
practicable, the SELLERS and PURCHASERS shall discuss with each
other the form, timing and substance of such announcements,
releases, statements and communications prior to the dissemination
thereof.
<PAGE>
43
13.3 Brokers and Finders
Each PARTY agrees to protect, defend, indemnify and hold harmless
the other PARTY against and from all CLAIMS relating to the
indemnifying PARTY'S attorneys', brokers' (including CSDI retained
by the SELLERS), finders', consultants' or advisers' fees in
connection with this AGREEMENT or the TRANSFER and arising from an
understanding, engagement, arrangement or agreement made or
claimed by a third person to have been made by or on behalf of the
indemnifying PARTY.
13.4 Undertaking Not to Compete
a) Recognising that the TRANSFER includes a transfer of the
GOODWILL and of the INTELLECTUAL PROPERTY, comprising know-
how of significant value that can not be protected by
patents or by other registered rights, the SELLERS hereby
agree that, for a period of five (5) years after the
CLOSING DATE, none of the SELLERS nor any of their
AFFILIATES shall directly or indirectly own, manage,
operate, control, engage in, participate in, or serve as a
consultant with any business entity which engages in any
business which sells, distributes or manufactures in the
RESTRICTED TERRITORY and of the PRODUCTS or the
SUBSTITUTIVE PRODUCTS, subject to the PERMITTED ACTIVITIES,
and except as may otherwise be agreed by the PARTIES.
b) The term "RESTRICTED TERRITORY" shall include all
geographic regions represented by the following countries
as of the date hereof: all countries belonging to the
European Union, the former Soviet Union (CIS), Estonia,
Latvia, Lithuania, Poland, Czech Republic, Slovakia,
Hungary, former Yugoslavia, Bulgaria, Romania, Switzerland,
Norway, Iceland, Canada, the United States, Mexico, Iran
and Turkey.
c) The term "PRODUCTS" shall mean the products sold,
distributed or manufactured by the BUSINESS during the
period of three (3) years prior to the CLOSING DATE.
d) The term "SUBSTITUTIVE PRODUCTS" shall mean products that
could be used by the CUSTOMERS of the BUSINESS as directly
interchangeable substitutes for the PRODUCTS.
e) The term "PERMITTED ACTIVITIES" means the following
activities, which shall not be restricted in any manner or
at any time, except as expressly set forth in this
paragraph e):
i) AOZT Neste St. Petersburg ("AOZT") may remain a
subsidiary of Neste Oy, and AOZT may continue and
develop its CONVERTED PRODUCTS business and
operations; provided, however, that:
1) AOZT may sell, distribute or manufacture any of
the CONVERTED PRODUCTS or the SUBSTITUTIVE
PRODUCTS for the CONVERTED PRODUCTS in the
former Soviet Union (CIS), Estonia, Latvia and
Lithuania, but shall not sell, distribute or
manufacture any of the PRODUCTS or the
SUBSTITUTIVE PRODUCTS for the CONVERTED
PRODUCTS in any other parts of the RESTRICTED
TERRITORY, and AOZT will not set up any
distribution system for sales of any of the
CONVERTED PRODUCTS or the
<PAGE>
44
SUBSTITUTIVE PRODUCTS for the CONVERTED
PRODUCTS in any other parts of the RESTRICTED
TERRITORY;
2) none of the PURCHASERS or any of their
AFFILIATES shall directly or indirectly own,
manage, operate, control, engage in,
participate in, or serve as a consultant with
any business entity which engages in any
business which sells, distributes or
manufactures any of the PRODUCTS or the
SUBSTITUTIVE PRODUCTS in the former Soviet
Union (CIS) provided, however, that Thermisol
Finland Oy may sell, distribute or manufacture
any of the PRODUCTS or the SUBSTITUTIVE
PRODUCTS in the former Soviet Union (CIS) that
are not at such time being, and have not in the
immediately preceding year been, manufactured
by AOZT;
3) AOZT may continue to use all of the business
names, trademarks, tradenames, designs and
models currently used by AOZT; and
4) if the assets and business of AOZT related to
the POLYSTYRENE PRODUCTS and CONVERTED PRODUCTS
are sold to the PURCHASERS or any of their
AFFILIATES at any time prior to the expiration
of the five (5) year term of this Article 13.4,
then the provisions of this sub-paragraph e) i)
shall thereupon be void; and
(ii) NCT Holland B.V. and its subsidiaries, branches and
group of companies ("NCT") may purchase, sell and
trade the PRODUCTS; provided, however, that NCT will
not sell any of the PRODUCTS in Finland, Sweden,
Norway, Denmark, Poland, Latvia, Estonia or Lithuania
at any time during the five (5) year term of this
Article 13.4.
f) The term "CUSTOMERS" shall mean the PURCHASERS' customers
as of the date of this AGREEMENT and the PURCHASERS' actual
customers at any time during the five (5) year term of this
Article 13.4.
g) After the CLOSING DATE, the SELLERS shall cease using the
business names, trademarks, tradenames, designs and models
listed in Schedule 3, and shall not use confusingly similar
----------
trademarks, tradenames, designs and models in connection
with their business or otherwise; provided, however, that
nothing herein shall restrict or limit in any way the
SELLERS' right to use the name "Neste" and the Isora Oy
logo or the shape thereof (but not the name "Isora").
h) The non-compete obligation set forth in paragraph a) above
does not apply if Neste Oy or its AFFILIATE acquires a
business in a larger acquisition, where the volume of the
POLYSTYRENE PRODUCTS and/or CONVERTED PRODUCTS does not
amount to more than 20% of the total sales volume acquired,
provided that Neste Oy or its AFFILIATE divests such
POLYSTYRENE PRODUCTS and/or CONVERTED PRODUCTS business to
a party other than an AFFILIATE of Neste Oy or to an entity
50% of the capital stock or voting rights of which are
owned or controlled by Neste Oy within a period of nine (9)
months from the date of such acquisition, and prior to any
divestment of such business shall first offer to RADNOR the
opportunity to acquire such business.
<PAGE>
45
i) In the event that Neste Oy or any of its AFFILIATES or
divisions is acquired by or merged with a company that
operates a business which competes with the BUSINESS, the
non-compete obligation set forth in paragraph a) shall not
apply to the resulting merged, acquired or acquiring
company.
j) Neste Oy and its AFFILIATES may acquire and hold directly
or indirectly up to 10% of the shares of a publicly traded
or floated company as a financial investment even though
activities of such company compete with the BUSINESS.
k) Without affecting the provisions in Article 13.9, the
PARTIES hereby agree that should the duration or the
geographic scope of the obligations of the SELLERS as
defined in paragraph a) above be prohibited or not
enforceable in any jurisdiction, then such obligations
shall remain in force to the fullest extent permitted by
law.
13.5 Successors and Assigns
a) This AGREEMENT shall be binding upon and shall inure to the
benefit of the PARTIES and their respective successors and
assigns, but neither PARTY may, directly or indirectly,
assign or transfer this AGREEMENT or any right, obligation
or interest herein in whole or in part without the prior
written consent of the other PARTY in each instance.
Regardless of any such written consent which may be
granted, no assignment or transfer shall be binding and
valid until and unless the assignee or transferee shall
have assumed in writing all of the duties and obligations
of the assignor or transferor hereunder and furthermore the
assignor or transferor shall remain primarily liable
hereunder. Any attempted assignment or transfer in
violation of this Article 13.5 shall be null and void.
b) Notwithstanding the foregoing, any PARTY may assign its
rights and obligations under this AGREEMENT to an AFFILIATE
of such PARTY, provided that no assignment or transfer
shall be binding and valid until and unless the assignee or
transferee shall have assumed in writing all of the duties
and obligations of the assignor or transferor hereunder and
furthermore the assignor or transferor shall remain
primarily liable hereunder and provided further that Neste
Oy may not assign its obligations under Article 7 of this
AGREEMENT to an AFFILIATE, and RADNOR may not assign its
obligations under Article 14 of this AGREEMENT to an
AFFILIATE, and no such assignment by Neste Oy and RADNOR of
such respective obligations shall be permitted.
13.6 Discharge, Amendments, etc.
(i) This AGREEMENT may not be released, discharged, abandoned,
changed, amended or modified in any manner in any instance,
except by a written document signed by the PARTY sought to
be charged thereby.
(ii) The failure of any PARTY to enforce at any time any of the
provisions of this AGREEMENT shall in no way be construed
to be a waiver of any such provision, nor in any way to
affect the validity of this AGREEMENT or any part thereof
or the right of any party thereafter to enforce each and
every such provision.
<PAGE>
46
(iii) No waiver of any provision (whether in whole or in part) of
this AGREEMENT in any instance shall be held to be a waiver
of any other similar or dissimilar provision, part or
instance.
(iv) The exercise by any PARTY of a right to terminate this
AGREEMENT in itself shall not create or give rise to any
obligation by such PARTY to the other PARTY as a result of
such termination.
13.7 Governing Law
This AGREEMENT shall be governed by the law of Finland without
giving effect to any principle of law which would result in the
application of the law of some other jurisdiction.
13.8 Resolution of Disputes
All disputes arising in connection with this AGREEMENT shall be
finally settled under the Rules of Conciliation and Arbitration of
the International Chamber of Commerce by three arbitrators
appointed in accordance with the said Rules, provided, however,
that the SELLERS may appoint jointly only one arbitrator and,
correspondingly, the PURCHASERS and RADNOR may jointly appoint
only one arbitrator. The arbitration shall be held in London,
England, unless otherwise agreed among the PARTIES, and shall be
conducted in the English language. Each PARTY shall use its best
reasonable efforts to take all action which it reasonably can take
or cause to be taken to facilitate the conduct of the arbitration
and the rendering of the arbitral award at the earliest possible
date.
13.9 Severability
Any provision of this AGREEMENT which is prohibited or
unenforceable in any jurisdiction, shall be ineffective to the
extent of such prohibition or unenforceability without affecting,
impairing or invalidating the remaining provisions hereof or the
enforceability of such provision in such jurisdiction or any other
jurisdiction.
13.10 Counterparts
This AGREEMENT may be executed in one or more counterparts, each
of which shall be deemed to be an original and all of which shall
constitute one and the same instrument.
13.11 This AGREEMENT shall not confer any rights or remedies upon any
person or entity other than the PARTIES hereto the persons and
entities indemnified in Article 7 (provided that such persons and
entities shall assert any claims through the PARTIES) and their
respective successors and permitted assigns.
<PAGE>
47
14. PARENT COMPANY GUARANTEE
RADNOR and the PURCHASERS hereby irrevocably jointly and severally
guarantee any obligation of any of the PURCHASERS and their
successors, assignees and transferees set forth in this AGREEMENT
or in any ANCILLARY CONTRACT and undertake to fulfil them as their
own obligations.
IN WITNESS WHEREOF, each PARTY, with the intention of being
legally bound, has duly executed this AGREEMENT by affixing its
signature below as of the date first written above.
STYROCHEM FINLAND OY NESTE OY
(under formation)
By: /s/ Michael T. Kennedy By: /s/ Kosti J. Sysio
----------------------- ----------------------
THERMISOL FINLAND OY ISORA OY
(under formation)
By: /s/ Michael T. Kennedy By: /s/ Kosti J. Sysio
----------------------- ----------------------
THERMISOL SWEDEN AB NESTE CELLPLAST AB
(under formation)
By: /s/ Michael T. Kennedy By: /s/ Kosti J. Sysio
----------------------- ----------------------
THERMISOL DENMARK ApS NESTE THERMISOL A/S
(under formation)
By: /s/ Michael T. Kennedy By: /s/ Kosti J. Sysio
----------------------- ----------------------
RADNOR HOLDINGS CORPORATION
as Guarantor under Article 14 hereof
By: /s/ Michael T. Kennedy
-----------------------
