<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 3, 1997
REGISTRATION NO. 333-19495
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------
RADNOR HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 6719 23-2674715
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)
WINCUP HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 3086 86-0699193
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)
WINCUP HOLDINGS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 3086 23-2648231
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)
SP ACQUISITION CO.
(Exact name of registrant as specified in its charter)
DELAWARE 6719 75-2524524
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)
STYROCHEM INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
TEXAS 3086 52-1592452
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)
STYROCHEM INTERNATIONAL, LTD.
(Exact name of registrant as specified in its charter)
QUEBEC 3086 NONE
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)
RADNOR MANAGEMENT, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 8741 23-2869197
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)
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RADNOR HOLDINGS CORPORATION
THREE RADNOR CORPORATE CENTER, SUITE 300
100 MATSONFORD ROAD
RADNOR, PENNSYLVANIA 19087
(610) 341-9600
(Name, address, including zip code, and telephone number,
including area code, of registrants' principal executive offices)
------------
MICHAEL T. KENNEDY, PRESIDENT
RADNOR HOLDINGS CORPORATION
THREE RADNOR CORPORATE CENTER, SUITE 300
100 MATSONFORD ROAD
RADNOR, PENNSYLVANIA 19087
(610) 341-9600
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------
WITH A COPY TO:
THOMAS G. SPENCER, ESQ.
DUANE, MORRIS & HECKSCHER
ONE LIBERTY PLACE, 42ND FLOOR
PHILADELPHIA, PENNSYLVANIA 19103-7396
(215) 979-1000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box: [_]
----------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS SUBJECT TO COMPLETION,
DATED APRIL 3, 1997
OFFER FOR ALL OUTSTANDING 10% SENIOR NOTES DUE 2003
IN EXCHANGE FOR 10% SENIOR NOTES DUE 2003,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
OF
[LOGO OF RADNOR HOLDINGS CORPORATION APPEARS HERE]
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., PHILADELPHIA TIME,
ON , 1997, UNLESS EXTENDED.
Radnor Holdings Corporation (the "Company" or "Radnor"), a Delaware
corporation, hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying Letter of Transmittal (which
together constitute the "Exchange Offer"), to exchange an aggregate principal
amount of up to $100 million of 10% Senior Notes due 2003 (the "New Notes") of
the Company, which have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), for a like principal amount of the issued and
outstanding 10% Senior Notes due 2003 (the "Old Notes") of the Company from the
registered holders thereof (the "Holders"). The terms of the New Notes are
identical in all material respects to the Old Notes, except for certain
transfer restrictions relating to the Old Notes. The New Notes will evidence
the same class of debt as the Old Notes and will be issued pursuant to and
entitled to the benefits of, the Indenture governing the Old Notes (the
"Indenture"). As used herein, the term "Notes" means the Old Notes and the New
Notes, treated as a single class.
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., Philadelphia time, on , 1997 unless
extended (as so extended, the "Expiration Date"). Tenders of Old Notes may be
withdrawn at any time prior to the Expiration Date. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange pursuant to the Exchange Offer. The Exchange Offer is subject to
certain other customary conditions. See "The Exchange Offer."
On December 5, 1996, the Company issued $100 million principal amount of Old
Notes (the "Offering") pursuant to exemptions from, or in transactions not
subject to, the registration requirements of the Securities Act and applicable
state securities laws.
Interest on the Notes will be payable semi-annually on June 1 and December 1
of each year, commencing June, 1997. The Notes are not redeemable by the
Company prior to December 1, 2000, except that, at any time on or prior to
December 1, 1999, the Company, at its option, may redeem up to $25.0 million
aggregate principal amount of the Notes from the net proceeds of one or more
Public Equity Offerings (as defined) by the Company, at a redemption price of
110% of the principal amount thereof, plus accrued interest to the date of
redemption; provided that at least $75.0 million in aggregate principal amount
of the Notes remains outstanding following such redemption. On and after
December 1, 2000, the Notes will be redeemable at the option of the Company, in
whole or in part, at the redemption prices set forth herein, plus accrued
interest to the date of redemption. In the event of a Change of Control (as
defined), each holder of Notes may require the Company to repurchase all or a
portion of such holder's Notes at 101% of the principal amount thereof, plus
accrued interest to the repurchase date. See "Description of the Notes--
Optional Redemption" and "--Change of Control."
(Continued on next page)
SEE "RISK FACTORS" ON PAGE 10 OF THIS PROSPECTUS FOR A DESCRIPTION OF CERTAIN
RISKS TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE
OFFER.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
The date of this Prospectus is , 1997.
<PAGE>
(Continued from previous page)
The New Notes will be, and the Old Notes are, senior unsecured obligations
of the Company. The New Notes will rank pari passu in right of payment with
all other existing and future senior indebtedness of the Company, including
the Old Notes. The New Notes will be, and the Old Notes are, effectively
subordinated in right of payment to all existing and future secured
indebtedness of the Company and the Company's subsidiaries, including
indebtedness under the Credit Agreements (as defined). The New Notes will be
fully and unconditionally guaranteed on a joint and several basis by
substantially all of the Company's subsidiaries. The New Guarantees (as
defined) will be effectively subordinated in right of payment to all existing
and future secured indebtedness of the Guarantors (as defined), including
their obligations in respect of the Credit Agreements. Under the terms of the
Indenture, the Company is permitted, upon the satisfaction of certain
conditions, to incur additional secured indebtedness. As of December 27, 1996,
the Company and its subsidiaries had no outstanding indebtedness other than
the Old Notes and approximately $4.6 million outstanding under the Credit
Agreements. See "Pro Forma Consolidated Financial Data" and "Description of
the Company's Credit Facilities."
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. The New Notes will bear interest from the most recent date to which
interest has been paid on the Old Notes or, if no interest has been paid on
the Old Notes, from December 5, 1996. Old Notes accepted for exchange will
cease to accrue interest from and after the date of consummation of the
Exchange Offer. Holders of Old Notes whose Old Notes are accepted for exchange
will not receive any payment in respect of accrued interest on such Old Notes.
Old Notes not tendered or not accepted for exchange will continue to accrue
interest from and after the date of consummation of the Exchange Offer. The
New Notes are being offered hereunder in order to satisfy certain obligations
of the Company contained in the Registration Rights Agreement (as defined).
Based on interpretations by the staff of the Securities and Exchange
Commission (the "SEC") as set forth in no-action letters issued to third
parties, the Company believes that New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by Holders thereof (other than any Holder which is an
"affiliate" of the Company within the meaning of rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such Holders' business and such Holders have no
arrangement or understanding with any person to engage in a distribution of
such New Notes. However, the SEC has not considered the Exchange Offer in the
context of a no-action letter and there can be no assurance that the staff of
the SEC would make a similar determination with respect to the Exchange Offer
as in such other circumstances. Each holder of the Old Notes who wishes to
exchange its Old Notes for New Notes in the Exchange Offer will be required to
make certain representations to the Company, including that (i) any New Notes
to be received by it will be acquired in the ordinary course of its business,
(ii) it has no arrangement or understanding with any person to participate in
a public distribution (within the meaning of the Securities Act) of the New
Notes and (iii) it is not an "affiliate," as defined in Rule 405 of the
Securities Act, of the Company or the Guarantors, or if it is such an
affiliate, that it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable to it. The Letter
of Transmittal states that by so acknowledging and by delivering a prospectus,
a broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. Each broker-dealer that receives New Notes
for its own account in exchange for Old Notes pursuant to the Exchange Offer
must acknowledge that such Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities and that it
will deliver a prospectus in connection with any resale of such New Notes.
This Prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with resales of New Notes received in
exchange for Old Notes. The Company has agreed that, for a period of 150 days
after the date of this Prospectus, it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses incident to the Exchange Offer. In the event
the Company terminates the Exchange Offer and does not accept for exchange any
Old Notes, the Company will promptly return the Old Notes to the Holders
thereof. See "The Exchange Offer."
2
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There is no existing trading market for the New Notes, and there can be no
assurance regarding the future development of a market for the New Notes. The
Initial Purchasers (as defined) have advised the Company that they currently
intend to make a market in the New Notes. The Initial Purchasers are not
obligated to do so, however, and any market-making with respect to the New
Notes may be discontinued at any time without notice. The Company does not
intend to apply for listing or quotation of the New Notes on any securities
exchange or stock market.
The Company expects that the New Notes initially will each be represented by
a single global certificate in fully registered form, except that New Notes
issued in exchange for Old Notes (i) originally purchased by institutional
investors that were Institutional Accredited Investors (as defined) who were
not QIBs (as defined) or (ii) held by QIBs who elected to take physical
delivery of these certificates instead of holding their interest through the
Global Note (as defined) (and which were thus ineligible to trade through The
Depository Trust Company) will be issued in registered form.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and is subject to, the
detailed information, consolidated financial statements and notes thereto
contained elsewhere in this Prospectus. As used herein, unless the context
otherwise requires, "Radnor" and the "Company" refer to Radnor Holdings
Corporation and its subsidiaries and their respective predecessors,"StyroChem"
refers to SP Acquisition Co. and its subsidiaries, and "J.R. Cup" refers to the
foam cup and container manufacturing business acquired (the "J.R. Cup
Acquisition") by Radnor from James River Paper Company, Inc. ("James River").
The term "Acquisitions" collectively refers to the Company's acquisition of SP
Acquisition Co. (the "StyroChem Acquisition") and the J.R. Cup Acquisition. See
"The Company--The Acquisitions."
THE COMPANY
The Company is the second largest manufacturer in the U.S. of disposable foam
cup and container products for the foodservice industry, with approximately a
35% share of this market segment in 1996. The Company manufactures foam cups
for hot and cold drinks, foam bowls and containers and thermoformed lids, as
well as the expandable polystyrene ("EPS") beads from which such foam products
are manufactured. The Company's 14 highly automated manufacturing facilities
produced 13 billion foam cups, containers and lids and 118 million pounds of
EPS beads in 1996. The brand names for the Company's foam products enjoy strong
recognition within the industry and include Dixie, COMpac, Profit Pals,
STYROcup, Handi-Kup HK and Simplicity. Through StyroChem, the Company
manufactures EPS beads for its own consumption as well as for third party
manufacturers of foam containers, insulation products and packaging products.
The Company believes that its acquisition of StyroChem, a supplier of EPS beads
to the Company since 1976, will strengthen the Company's competitive position
by lowering raw material costs, improving product quality and enhancing
manufacturing efficiencies. For the year ended December 27, 1996, pro forma for
the Acquisitions, the Company had net sales and income from continuing
operations before interest, income tax expense, depreciation, amortization and
restructuring charges of $233.5 million and $20.8 million, respectively.
Within the foodservice industry, the Company competes primarily in the
disposable cup and container market. An independent industry survey estimated
that this market had more than $2.0 billion of domestic revenues in 1994. The
use of disposable foam cups and containers has increased significantly over the
last two decades, with unit shipments (excluding lids) growing from 13 billion
in 1974 to 28 billion in 1994. Key growth factors for the foam cup and
container segment include the superior insulating quality of foam, lower labor,
maintenance and energy costs as compared to reusable products, sanitary
considerations, the growth in consumption of take-out foods and beverages and
the expansion of fast-food restaurant chains.
The Company sells to more than 1,600 national, institutional and retail
customers located throughout the U.S., in Mexico and in other countries through
its 64-person sales organization and its broad network of more than 50
independent sales representatives. Foam products are sold in the U.S. to nine
of the ten largest foodservice distributors, six of the ten largest supermarket
chains and a number of large national companies and warehouse clubs. Long-term
relationships have been maintained with many of the industry's largest
companies, including Sysco Corporation, Alliant Foodservice Inc. (formerly
known as Kraft Foodservice, Inc.), K-Mart Corporation, WAL-MART Stores, Inc.,
Perseco Co. (the distribution arm for McDonald's Corporation), Sam's Club
Division, Price/Costco, Inc., Fast Food Merchandisers (the distribution arm for
Hardee's Food Systems, Inc.), U.S. Foodservice Inc., Kroger Food Stores, Food
Services of America and Fleming Companies, Inc. Major end users of the
Company's foam products include fast-food restaurant chains, full-service
restaurants, hospitals, nursing homes, educational institutions, airlines,
business offices, movie theaters and other leisure time concessionaires, such
as sports stadiums. The
1
<PAGE>
Company also sells foam products for the consumer market through supermarket
chains, discount clubs and chains and other retailers.
COMPETITIVE STRENGTHS
The Company has a strong competitive position in the foam segment of the
disposable cup and container market. The Company attributes its prominent
market position to the following factors:
. Customer service and quality products. The Company's attention to
customer service and emphasis on high-quality products allow it to
continue to meet the needs of its existing customers and attract new
ones. Customer service is enhanced by the Company's breadth of product
offerings, extensive order-entry system and strategically located
manufacturing facilities. These attributes enable the Company to meet
the national distribution requirements of its customers in an efficient
and cost-effective manner. The Company also coordinates design efforts
with its customers to develop new products, such as the new "flare" cup
that combines an enhanced appearance with a stronger rim construction.
. Proprietary technology. The Company has developed a broad array of
proprietary technology that is utilized in various stages of its
manufacturing operations. Custom-designed and built molding equipment,
for example, allows the Company to better meet customer requests for
specialized container designs, custom printing or embossing, as well as
to maintain high-volume production runs. Other proprietary technology
includes automated materials handling and auto-case packaging machines.
With StyroChem, the Company also has the ability to customize EPS bead
formulations to further enhance manufacturing efficiencies and specific
product features.
. Strong customer relationships. Long-term relationships with its
customers have been an important factor in the Company's success. Of the
Company's ten largest customers, nine have been purchasing products from
the Company for more than ten years. The Company works closely with its
customers to address a variety of needs, including custom product
development and tooling, seasonal marketing programs and specialized
printing requirements. The Company believes that the strength of its
customer relationships results from consistently meeting or exceeding
customer expectations.
. Experienced management team. The Company's management team is highly
experienced, with a majority of the Company's senior sales,
manufacturing, administration and engineering executives having spent
more than 20 years in the foodservice industry. The Company's executive
management also has extensive experience in managing and integrating
acquisitions of businesses in various industries, including the
foodservice industry.
BUSINESS STRATEGY
The Company's business strategy is to increase revenues and profitability and
to further enhance its market position by emphasizing the following
initiatives:
. Cost reduction and productivity enhancements. The Company is continuing
to reduce manufacturing costs by upgrading existing equipment and
developing new equipment and processes that enhance productivity and
improve manufacturing quality. Production costs have also been and will
continue to be reduced by eliminating redundant facilities, lowering
transportation costs and exploiting economies of scale (including raw
material pricing) provided by the Company's high-volume production.
. Integrated manufacturing process. The StyroChem Acquisition will result
in a more integrated manufacturing process, thereby reducing the
Company's cost of raw materials and mitigating the impact of raw
material price fluctuations. Control over EPS bead manufacturing should
also provide more reliable, consistently high-quality EPS beads,
improving the Company's overall manufacturing efficiencies.
2
<PAGE>
. New markets and improved market position. The Company believes it has a
significant opportunity to increase its share of the disposable cup and
container market by positioning its foam products, with their superior
insulating qualities and lower production costs, as an alternative to
comparable paper products. The Company is also pursuing opportunities to
increase sales of its foam products to both current and new customers in
international markets.
. Product development and strategic acquisitions. The Company intends to
pursue further growth opportunities through the introduction of new and
enhanced products. In addition, the Company will seek strategic
acquisitions, joint ventures and alliances that may broaden the
Company's product lines.
THE ACQUISITIONS
In November 1995, the Company sold its cutlery, straws and plastic cup
operations to James River. Following this divestiture, effective in January
1996, the Company acquired the U.S. foam cup and container operations of James
River. Through the J.R. Cup Acquisition, the Company doubled its revenues,
added four manufacturing facilities and acquired additional proprietary
manufacturing processes, many of which are being integrated into the Company's
existing facilities. The J.R. Cup Acquisition has also permitted the Company's
management to rationalize its production by eliminating certain redundant
facilities. At the same time, the Company has been able to implement new
procurement programs, realign freight and related distribution arrangements
and, on a combined basis, significantly reduce manufacturing overhead and
selling, general and administrative costs. See "Pro Forma Consolidated
Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Certain Effects Resulting from the
Acquisitions." A substantial majority of these cost savings have been achieved
during 1996. See "The Company."
In December 1996, the Company acquired StyroChem, one of the five largest
producers of EPS beads in the U.S. The Company believes that the StyroChem
Acquisition will strengthen its manufacturing operations by providing more
reliable, consistently high-quality EPS beads at lower prices. The StyroChem
Acquisition will also mitigate the Company's exposure to raw material price
fluctuations by allowing the Company greater flexibility in procuring raw
materials. In addition, the StyroChem Acquisition positions the Company as a
supplier of EPS beads to manufacturers of insulation and packaging products. On
a pro forma basis, StyroChem represented 22.1% of the Company's consolidated
sales for the year ended December 27, 1996. See "The Company."
3
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THE EXCHANGE OFFER
On December 5, 1996, the Company issued $100 million principal amount of Old
Notes. The Old Notes were sold pursuant to exemptions from, or in transactions
not subject to, the registration requirements of the Securities Act and
applicable state securities laws. Alex. Brown & Sons Incorporated and NatWest
Capital Markets Limited (the "Initial Purchasers"), as a condition to their
purchase of the Old Notes, required that the Company agree to commence the
Exchange Offer following the offering of the Old Notes. The New Notes will
evidence the same class of debt as the Old Notes and will be issued pursuant
to, and entitled to the benefits of, the Indenture. As used herein, the term
"Notes" means the Old Notes and the New Notes, treated as a single class.
Securities Offered.......... Up to $100 million aggregate principal amount of
Company's 10% Senior Notes Due 2003, which have
been registered under the Securities Act (the
"New Notes"). The terms of the New Notes and the
Old Notes are identical in all material respects
(including principal amount, interest rate,
maturity and ranking), except for certain
transfer restrictions relating to the Old Notes.
The Exchange Offer.......... The New Notes are being offered in exchange for a
like principal amount of Old Notes. The issuance
of the New Notes is intended to satisfy
obligations of the Company contained in the
Exchange and Registration Rights Agreement, dated
December 5, 1996, among the Company, the
Guarantors (as defined) and the Initial
Purchasers (the "Registration Rights Agreement").
For procedures for tendering the Old Notes
pursuant to the Exchange Offer, see "The Exchange
Offer."
Tenders, Expiration Date;
Withdrawal.................. The Exchange Offer will expire at 5:00 p.m.,
Philadelphia time, on , 1997, or such later
date and time to which it is extended (as so
extended, the "Expiration Date"). A tender of Old
Notes pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration
Date. Any Old Note not accepted for exchange for
any reason will be returned without expense to
the tendering Holder thereof as promptly as
practicable after the expiration or termination
of the Exchange Offer.
Federal Income Tax
Consequences................ The exchange pursuant to the Exchange Offer
should not result in any income, gain or loss to
the Holders or the Company for federal income tax
purposes. See "Certain U.S. Federal Income Tax
Consequences."
Use of Proceeds............. There will be no proceeds to the Company from the
exchange pursuant to the Exchange Offer.
Exchange Agent.............. First Union National Bank is serving as the
Exchange Agent in connection with the Exchange
Offer.
Shelf Registration
Statement................... Under certain circumstances described in the
Registration Rights Agreement, certain holders of
Notes (including holders who are not permitted to
participate in the Exchange Offer or who may not
freely resell New Notes received in the Exchange
Offer) may require the Company and the Guarantors
to file, and
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use their best efforts to cause to become
effective, a shelf registration statement under
the Securities Act, which would cover resales of
Notes by such holders (the "Shelf Registration
Statement"). See "The Exchange Offer" and
"Registration Rights."
Conditions to the Exchange
Offer....................... The Exchange Offer is not conditioned on any
minimum principal amount of Old Notes being
tendered for exchange. The Exchange Offer is
subject to certain other customary conditions,
each of which may be waived by the Company. See
"The Exchange Offer--Certain Conditions to the
Exchange Offer."
CONSEQUENCES OF EXCHANGING OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate
that it will register Old Notes under the Securities Act. See "Description of
the Notes--Exchange Offer" and "Registration Rights." Based on interpretations
by the staff of the SEC, as set forth in no-action letters issued to third
parties, the Company believes that New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold or otherwise
transferred by holders thereof (other than any holder which is an "affiliate"
of the Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary
course of such holders' business and such holders, other than broker-dealers,
have no arrangement or understanding with any person to participate in the
distribution of such New Notes. However, the SEC has not considered the
Exchange Offer in the context of a no-action letter and there can be no
assurance that the staff of the SEC would make a similar determination with
respect to the Exchange Offer as in such other circumstances. Each holder of
the Old Notes who wishes to exchange its Old Notes for New Notes in the
Exchange Offer will be required to make certain representations to the Company,
including that (i) any New Notes to be received by it will be acquired in the
ordinary course of its business, (ii) it has no arrangement or understanding
with any person to participate in a public distribution (within the meaning of
the Securities Act) of the New Notes and (iii) it is not an "affiliate," as
defined in Rule 405 of the Securities Act, of the Company or the Guarantors, or
if it is such an affiliate, that it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable
to it. Each broker-dealer that receives New Notes for its own account in
exchange for Old Notes must acknowledge that such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities and that it will deliver a prospectus in connection with any resale
of such New Notes. See "Plan of Distribution." In addition, to comply with the
securities laws of certain jurisdictions, it may be necessary to qualify for
sale or register thereunder the New Notes prior to offering or selling such New
Notes. The Company has agreed, pursuant to the Registration Rights Agreement,
subject to certain limitations specified therein, to register or qualify the
New Notes for offer or sale under the securities laws of such jurisdictions as
any holder reasonably requests in writing. Unless a holder so requests, the
Company does not intend to register or qualify the sale of the New Notes in any
such jurisdictions. See "Risk Factors--Consequences of Failure to Exchange" and
"The Exchange Offer--Consequences of Exchanging Old Notes."
5
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SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and the Old Notes are identical in all material
respects, except for certain transfer restrictions relating to the Old Notes.
If the Exchange Offer is not consummated by May 4, 1997, the interest rate
borne by the Old Notes will increase by 25 basis points per annum for each 90-
day period following such date until but excluding the date of consummation of
the Exchange Offer, up to a maximum aggregate increase of 100 basis points per
annum. The New Notes will bear interest from the most recent date to which
interest has been paid on the Old Notes or, if no interest has been paid on the
Old Notes, from December 5, 1996. Accordingly, registered holders of New Notes
on the relevant record date for the first interest payment following the
consummation of the Exchange Offer will receive interest accruing from the most
recent date to which interest has been paid on the Old Notes or, if no interest
has been paid, from December 5, 1996. Old Notes accepted for exchange will
cease to accrue interest from and after the date of consummation of the
Exchange Offer. Holders whose Old Notes are accepted for exchange will not
receive any payment in respect of interest on such Old Notes otherwise payable
on any interest payment date the record date for which occurs on or after the
consummation of the Exchange Offer.
Notes Offered............... $100,000,000 aggregate principal amount of 10%
Senior Notes due 2003.
Maturity Date............... December 1, 2003.
Interest Payment Dates...... June 1 and December 1 of each year, commencing
June 1, 1997.
Optional Redemption......... The New Notes will not be redeemable by the
Company prior to December 1, 2000, except that,
at any time on or prior to December 1, 1999 the
Company, at its option, may redeem up to $25.0
million aggregate principal amount of the Notes
from the net proceeds of one or more Public
Equity Offerings by the Company, at a redemption
price of 110% of the principal amount thereof,
plus accrued interest to the date of redemption;
provided that at least $75.0 million in aggregate
principal amount of the Notes remains outstanding
following such redemption. Thereafter, the New
Notes will be redeemable at the option of the
Company, in whole or in part, at the redemption
prices set forth herein, plus accrued interest to
the date of redemption. See "Description of the
Notes--Optional Redemption."
Change of Control........... In the event of a Change of Control, each holder
of New Notes will have the right to require the
Company to repurchase all or a portion of such
holder's New Notes then outstanding at a purchase
price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if
any, to the repurchase date.
Ranking..................... The New Notes will be senior unsecured
obligations of the Company and will rank pari
passu in right of payment with all other existing
and future senior indebtedness of the Company,
including the Old Notes. The New Notes will be
effectively subordinated in right of payment to
all existing and future secured indebtedness of
the Company and the Company's
6
<PAGE>
subsidiaries, including indebtedness under the
Amended Credit Agreement (as defined) and the
Canadian Credit Agreement (as defined)
(collectively, the "Credit Agreements"). Under
the terms of the Indenture governing the New
Notes, the Company will be permitted, upon the
satisfaction of certain conditions, to incur
additional secured indebtedness. As of December
27, 1996, the Company and its subsidiaries had no
outstanding indebtedness other than the Old Notes
and approximately $4.6 million outstanding under
the Credit Agreements. See "Description of the
Company's Credit Facilities."
Guarantees.................. The New Notes will be fully and unconditionally
guaranteed on a joint and several basis (the "New
Guarantees") by substantially all of the
Company's subsidiaries (collectively, the
"Guarantors"). The New Guarantees will be
effectively subordinated in right of payment to
all existing and future secured indebtedness of
the Guarantors, including their obligations in
respect of the Credit Agreements. See
"Description of the Notes--Guarantees."
Certain Covenants........... The Indenture contains certain covenants with
respect to the Company and its subsidiaries that
will restrict, among other things, (a) the
incurrence of additional indebtedness, (b) the
payment of dividends and other restricted
payments, (c) the creation of certain liens, (d)
the use of proceeds from sales of assets and
subsidiary stock, (e) sale and leaseback
transactions and (f) transactions with
affiliates. The Indenture will also restrict the
Company's ability to consolidate or merge with or
into, or to transfer all or substantially all of
its assets to, another person. These restrictions
are subject to a number of important
qualifications and exceptions. See "Description
of the Notes--Certain Covenants."
Amendment, Supplement and
Waiver...................... Subject to certain exceptions, the Indenture or
the Notes may be amended or supplemented, and any
past default or compliance with any provision may
be waived, with the consent of the Holders of a
majority in principal amount of the Notes then
outstanding. An amendment or waiver may not waive
the Company's obligation to make a Change of
Control Offer without the consent of the Holders
of at least two-thirds in outstanding principal
amount of the Notes. See "Description of the
Notes--Amendment, Supplement and Waiver."
Exchange Offer;
Registration Rights......... Holders of New Notes (other than as set forth
below) are not entitled to any registration
rights with respect to the New Notes. Pursuant to
the Registration Rights Agreement, the Company
and the Guarantors have agreed, for the benefit
of the holders of Old Notes, to file an exchange
offer registration
7
<PAGE>
statement (the "Exchange Offer Registration
Statement"). The Registration Statement of which
this Prospectus is a part constitutes the
Exchange Offer Registration Statement referred to
therein. Under certain circumstances described in
the Registration Rights Agreement, certain
holders of Notes (including holders who may not
participate in the Exchange Offer or who may not
freely resell New Notes received in the Exchange
Offer) may require the Company and the Guarantors
to file, and use their best efforts to cause to
become effective, the Shelf Registration
Statement. If the Shelf Registration Statement is
not filed or declared effective or ceases to be
effective within the applicable time periods
related thereto (each, a "Registration Default"),
the interest rate borne by Notes held by such
holders will increase by 25 basis points per
annum for the 90-day period following such
Registration Default. Such interest rate will
increase by an additional 25 basis points per
annum at the beginning of each subsequent 90-day
period, up to a maximum aggregate increase of 100
basis points per annum. If, subsequently, such
Registration Default is cured, the interest rate
borne by such Notes will be reduced by the amount
of the related increase in the interest rate. See
"Registration Rights."
Use of Proceeds............. The Company will not receive any proceeds from
the Exchange Offer. The net proceeds of the
Offering were used to repay certain indebtedness
and acquire the minority interest relating to the
J.R. Cup Acquisition, to purchase the outstanding
capital stock of and other equity interests in
StyroChem, to redeem certain shares of the
Company's preferred stock and certain then-
outstanding equity warrants held by a third party
and for general corporate purposes.
Risk Factors................ Potential investors in the New Notes should
carefully consider the matters set forth under
the caption "Risk Factors" prior to making an
investment decision with respect to the New
Notes.
8
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following summary financial, operating and pro forma data were derived
from the consolidated financial statements of Radnor, including the notes
thereto (the "Radnor Financial Statements"), as well as the selected financial,
operating and pro forma information included elsewhere in this Prospectus. The
pro forma consolidated statements of operations data reflect the Acquisitions
and the sale of the Notes as if they had occurred on December 30, 1995. 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 of the Company as if the Acquisitions and the sale of the Notes
had actually occurred on such date, nor are they necessarily indicative of the
results of operations that may be achieved in the future. The information set
forth below should be read in conjunction with "Pro Forma Consolidated
Financial Data," "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements (as defined) included elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------
HISTORICAL(1) PRO FORMA
-------------------------------------- ---------
DEC. 31, DEC. 30, DEC. 29, DEC. 27, DEC. 27,
1993 1994 1995 1996 1996
-------- -------- -------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Net sales.............. $83,569 $80,850 $86,239 $177,395 $233,507
Cost of goods sold..... 68,454 64,078 75,690 135,982 180,897
------- ------- ------- -------- --------
Gross profit........... 15,115 16,772 10,549 41,413 52,610
Distribution expense... 6,599 5,584 6,027 14,099 16,560
Selling, general and
administrative
expenses.............. 10,330 8,209 9,051 18,676 23,027
Restructuring charges.. -- -- -- 910 910
------- ------- ------- -------- --------
Income (loss) from op-
erations.............. (1,814) 2,979 (4,529) 7,728 12,113
Interest(2)............ 2,518 3,001 2,822 4,496 10,939
Other (income) expense,
net................... 386 290 526 374 285
------- ------- ------- -------- --------
Income (loss) from
continuing operations
before income taxes
and minority interest. (4,718) (312) (7,877) 2,858 889
Income tax expense(3).. -- -- -- 121 299
------- ------- ------- -------- --------
Income (loss) from
continuing operations
before minority
interest.............. (4,718) (312) (7,877) 2,737 590
Minority interest in
income................ -- -- -- 1,348 --
------- ------- ------- -------- --------
Income (loss) from con-
tinuing operations.... $(4,718) $ (312) $(7,877) $ 1,389 $ 590
======= ======= ======= ======== ========
OTHER FINANCIAL AND
OPERATING DATA:
Ratio of earnings to
fixed charges(4)...... 1.49x 1.07x
Deficiency of earnings
available to cover
fixed charges(4)...... $(4,718) $ (312) $(7,877)
Capital expenditures... $ 621 $ 1,645 $ 5,491 $ 4,944 $ 7,137
Depreciation and amor-
tization.............. $ 1,580 $ 1,303 $ 2,380 $ 4,844 $ 8,092
M Units shipped (in
thousands)(5)......... 12,959
EPS beads, pounds pro-
duced (in millions)... 118
BALANCE SHEET DATA (AT
END OF PERIOD):
Working capital........ $ 8,684
Total assets........... 172,369
Total debt (including
current portion)...... 104,599
Stockholders' equity... 14,329
</TABLE>
- --------
(1) The historical financial data include Radnor and its consolidated
subsidiaries, excluding discontinued operations, for each of the four years
in the period ended December 27, 1996. The Company's discontinued
operations were the cutlery, straws and plastic cup operations, which were
sold in 1995. Prior to January 20, 1996 and December 5, 1996, the Company's
results from continuing operations do not include the results of J.R. Cup
and StyroChem which were acquired on those dates, respectively.
(2) Interest expense includes amortization of debt issuance costs related to
the Credit Agreements and the Notes of $232 and $774 for the historical and
pro forma years ended December 27, 1996, respectively. The interest rate on
the Notes is 10%. The assumed interest rate on the Credit Agreements for
the pro forma year ended December 27, 1996 is approximately 7.5%.
(3) The Company recorded no federal income tax expense during the periods prior
to the acquisition of StyroChem due to the incurrence of operating losses
or the utilization of net operating loss carryforwards during those
periods. For the year ended December 27, 1996, the federal income tax
provision is for the Canadian operations, which are not able to utilize the
Company's net operating loss carryforwards.
(4) For purposes of this computation, fixed charges consist of interest,
amortization of deferred financing fees and that portion of lease rental
expense representative of the interest factor (deemed to be one-third of
lease rental expense). Earnings consist of income from continuing
operations before income taxes plus fixed charges.
(5) Each M Unit consists of 1,000 foam cups, containers or lids.
9
<PAGE>
RISK FACTORS
Potential investors in the New Notes, including Holders of the Old Notes
considering the Exchange Offer, should consider carefully all of the
information set forth in this Prospectus and, in particular, should evaluate
the following before making an investment decision with respect to the New
Notes, although the risk factors set forth below (other than "--Consequences
of Failure to Exchange Old Notes") are generally applicable to the Old Notes
as well as the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions
in the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon
as a consequence of the issuance of the Old Notes pursuant to exemptions from,
or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the Old Notes
may not be offered or sold, unless registered under the Securities Act and
applicable state securities laws. The Company does not currently anticipate
that it will register Old Notes under the Securities Act unless requested by
the holders of Old Notes who are not eligible to participate in the Exchange
Offer. See "The Exchange Offer" and "Registration Rights." Based on
interpretations by the staff of the SEC, as set forth in no-action letters
issued to third parties, the Company believes that New Notes issued pursuant
to the Exchange Offer in exchange for Old Notes may be offered for resale,
resold or otherwise transferred by holders thereof (other than any such holder
which is an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such holders' business and such holders,
other than broker-dealers, have no arrangement or understanding with any
person to participate in the distribution of such New Notes. However, the SEC
has not considered the Exchange Offer in the context of a no-action letter and
there can be no assurance that the staff of the SEC would make a similar
determination with respect to the Exchange Offer as in such other
circumstances. Each holder of the Old Notes who wishes to exchange its Old
Notes for New Notes in the Exchange Offer will be required to make certain
representations to the Company, including that (i) any New Notes to be
received by it will be acquired in the ordinary course of its business, (ii)
it has no arrangement or understanding with any person to participate in a
public distribution (within the meaning of the Securities Act) of the New
Notes and (iii) it is not an "affiliate," as defined in Rule 405 of the
Securities Act, of the Company or the Guarantors, or if it is such an
affiliate, that it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable to it. If any
Holder is an affiliate of the Company or in engaged in or intends to engage in
or has any arrangement or understanding with respect to the distribution of
the New Notes to be acquired pursuant to the Exchange Offer, such Holder (i)
may not rely on the applicable interpretations of the staff of the SEC and
(ii) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each broker-
dealer that receives New Notes for its own account in exchange for Old Notes
pursuant to the Exchange Offer must acknowledge that such Old Notes were
acquired by such broker-dealer as a result of market-making activities or
other trading activities and that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of New
Notes received in exchange for Old Notes where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 150 days after the
date of this Prospectus, it will make this Prospectus available to any broker-
dealer for use in connection with any such resale. See "Plan of Distribution."
In addition, to comply with the securities laws of certain jurisdictions, if
applicable, the New Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdictions or an exemption from
registration or qualification is available and is complied with. The Company
has agreed, pursuant to the Registration Rights Agreement, subject to certain
limitations
10
<PAGE>
specified therein, to register or qualify the New Notes for offer or sale
under the securities laws of such jurisdictions as any holder reasonably
requests in writing. Unless a holder so requests, the Company does not
currently intend to register or qualify the sale of the New Notes in any
jurisdictions. See "The Exchange Offer."
ADDITIONAL LEVERAGE
After giving effect to the sale of the Old Notes and the application of the
net proceeds therefrom, the Company's total debt was $104.6 million as of
December 27, 1996, the Company's ratio of pro forma income before taxes to
fixed charges would have been 1.1 to 1 for the year ended December 27, 1996
and the Company and the Guarantors would have had, subject to certain
restrictions (including borrowing base limitations), the ability to draw up to
$24.1 million of additional secured senior indebtedness under the Credit
Agreements.
A substantial increase in the Company's leverage and obligations could have
important consequences to the holders of Notes, including (i) the impairment
of the Company's ability to obtain additional financing for working capital,
capital expenditures, acquisitions or other purposes, (ii) the use of a
substantial portion of the Company's cash flow from operations for debt
service and (iii) making the Company more vulnerable to economic downturns and
limiting its ability to withstand competitive pressures.
In addition, the Company's operating flexibility with respect to certain
business matters are limited by covenants contained in the Indenture and the
Credit Agreements. Among other things, these covenants limit the ability of
the Company and its subsidiaries to incur additional indebtedness, create
liens upon assets, apply the proceeds from disposal of assets, make dividend
payments and other distributions on capital stock and redeem any capital
stock. There can be no assurance that such covenants will not adversely affect
the Company's ability to finance its future operations or capital needs or to
engage in other business activities that may be in the interest of the
Company. See "Description of the Company's Credit Facilities" and "Description
of the Notes--Certain Covenants."
The Company expects that its cash flow will be sufficient to cover its
expenses, including fixed charges. However, no assurance can be given that the
Company's operating results will be sufficient for the Company to meet such
obligations. The Company's ability to satisfy its obligations will be
dependent upon its future performance, which is subject to prevailing economic
conditions and financial, business and other factors, including factors beyond
the Company's control.
RAW MATERIAL PRICE VOLATILITY
The Company's foam products are manufactured from EPS beads, which are
produced from styrene monomer. Styrene monomer is a commodity petrochemical
that is readily available in bulk quantities from numerous large, vertically
integrated chemical companies. Since the consummation of the StyroChem
Acquisition, the Company has purchased styrene monomer to produce EPS beads
for its own consumption and has also continued to purchase EPS beads from Nova
Chemicals, Inc., which has been a long-term supplier to the Company. There are
currently more suppliers of styrene monomer than there are suppliers of cup-
grade EPS beads. Prices for both styrene monomer and EPS beads will fluctuate,
principally due to fluctuations in petrochemical feedstock prices, but also
because of supply and demand in the styrene monomer and EPS bead markets.
If raw material prices increase and the Company is unable to pass such price
increases on to its customers, employ successful hedging strategies, enter
into long-term supply contracts at favorable prices or buy on the spot market
at favorable prices, the Company's profitability may be adversely affected. To
the extent that the Company's supply of raw materials is hindered and no
alternative source can be found, the Company's profitability may be adversely
affected.
The Company believes that the StyroChem Acquisition and the new long-term
supply agreement with Chevron Chemical Company ("Chevron") for the purchase of
styrene monomer will mitigate the Company's exposure to fluctuations in
styrene monomer prices. The new agreement guarantees a supply of up to 11.6
11
<PAGE>
million pounds of styrene monomer per month at favorable prices, which include
rebates for all amounts purchased when purchases exceed 120 million pounds per
year. See "Business--Raw Materials."
OPERATING LOSSES
The Company had income from continuing operations for the year ended
December 27, 1996 of $1.4 million. Before giving effect to any pro forma
adjustments and without regard to income from discontinued operations, the
Company had losses from continuing operations of approximately $4.7 million,
$0.3 million and $7.9 million for 1993, 1994 and 1995, respectively. The
losses in 1993 and 1994 were primarily attributable to the high level of fixed
costs in relation to sales and the losses in 1995 were attributable to the
industry-wide increase in raw material costs, partially offset by an increase
in selling prices. On a pro forma basis, the Company would have had income
from continuing operations of $0.6 million for the year ended December 27,
1996. There can be no assurance that the Company's future operations will
continue to generate operating or net income or sufficient cash flow to permit
the Company to satisfy its obligations. See "Pro Forma Consolidated Financial
Data," "Selected Consolidated Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
COMPETITION
The Company competes in the highly competitive foodservice industry. Many of
the Company's competitors are larger and have significantly greater resources
than the Company. Within the foam segment of the disposable cup and container
market, the Company competes principally with Dart Container Corp. ("Dart"),
which has significantly greater financial resources than the Company and
controls the largest share of this market segment. See "Business--
Competition."
DEPENDENCE ON KEY CUSTOMERS
The Company supplies products to a number of large national companies and to
a number of large foodservice distributors. Pro forma for the Acquisitions, no
customer represented more than 9.0% of the Company's net sales for 1996. In
addition, the five largest accounts represented approximately 30.0% of the
Company's pro forma net sales for the year ended December 27, 1996. Although
the Company has not lost sales from its key customers in 1995, 1996 or 1997 to
date, if any of such customers substantially reduces its level of purchases
from the Company, the Company's profitability may be adversely affected.
Moreover, continued consolidation among distributors in the foodservice
industry could result in an increasingly concentrated customer base or the
loss of certain customers. See "Business--Sales, Marketing and Customers."
SUCCESSFUL INTEGRATION OF ACQUISITIONS
The integration of acquired businesses may result in unforeseen difficulties
that require a disproportionate amount of management's attention and the
Company's resources. There can be no assurance that the Company will be able
to achieve the synergies it anticipates from recent and current acquisitions
or that suitable additional acquisitions will be available.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the management experience and continued services
of the Company's executive officers, including Michael T. Kennedy. The loss of
the services of these officers could have a material adverse effect on the
Company's business. In addition, the Company's continued growth depends on its
ability to attract and retain experienced key employees.
CONTROL OF THE COMPANY
Michael T. Kennedy, the President, Chief Executive Officer and sole director
of the Company, beneficially owns 85.0% of the voting common stock of the
Company. Consequently, Mr. Kennedy has the ability to control the Company's
management, policies and financing decisions, to elect all of the Company's
directors and to control the vote on all matters coming before the
stockholders of the
12
<PAGE>
Company. As a result, circumstances could arise in which the interests of Mr.
Kennedy could be in conflict with the interests of the holders of Notes.
ENVIRONMENTAL MATTERS
The Company's operations are subject to federal, state, foreign and local
environmental laws and regulations. As a result, the Company is involved from
time to time in administrative or legal proceedings relating to environmental
matters. There can be no assurance that the aggregate amount of future clean
up costs and other environmental liabilities will not be material. The Company
cannot predict what environmental legislation or regulations will be enacted
in the future, how existing or future laws or regulations will be administered
or interpreted or what environmental conditions may be found to exist.
Enactment of more stringent laws or regulations or more strict interpretation
of existing laws and regulations may require additional expenditures by the
Company, some of which could be material. As part of the StyroChem
Acquisition, approximately $1.4 million of the purchase price has been placed
in escrow and may be used by the Company to offset certain expenses associated
with specified environmental matters relating to StyroChem's Texas and Quebec
facilities. However, there can be no assurance that the escrowed funds will be
sufficient to offset all expenses associated with such environmental matters.
See "Business--Environmental Matters."
FORWARD-LOOKING STATEMENTS
All statements contained in this Prospectus that are not historical facts,
including but not limited to the Company's plans for expansion, facility
consolidation and acquisitions, are based on current expectations. These
statements are forward-looking (as defined in the U.S. Private Securities
Litigation Reform Act of 1995) in nature and involve a number of risks and
uncertainties. Actual results may vary materially, as discussed in this "Risk
Factors" section. The factors that could cause actual results to vary
materially include: the availability and pricing of raw materials; the
availability of capital to finance the Company's expansion plans on terms
satisfactory to the Company; the integration of any new businesses acquired by
the Company; general business and economic conditions and other risks that may
be described from time to time in the reports that the Company will be
required to file with the SEC following consummation of the Exchange Offer.
The Company cautions potential investors not to place undue reliance on any
such forward-looking statements.
CHANGE OF CONTROL; POSSIBLE INABILITY TO SATISFY REDEMPTION OBLIGATIONS
Upon the occurrence of a Change of Control, each holder of Notes may require
the Company to repurchase all or a portion of such holder's Notes. If a Change
of Control were to occur, there can be no assurance that the Company would
have sufficient financial resources, or would be able to arrange financing to
pay the repurchase price for all Notes tendered by holders thereof. Further,
the provisions of the Indenture may not afford holders of Notes protection in
the event of a highly leveraged transaction, reorganization, restructuring,
merger or similar transaction involving the Company that may adversely affect
holders of Notes, if such transaction does not result in a Change of Control.
In addition, the terms of the Credit Agreements may limit the Company's
ability to purchase any Notes and will also identify certain events that would
constitute a Change of Control, as well as certain other events with respect
to the Company or certain of its subsidiaries, that would constitute an event
of default under the Credit Agreements. See "Description of the Company's
Credit Facilities." Any future credit agreements or other agreements relating
to other indebtedness to which the Company becomes a party may contain similar
restrictions and provisions. In the event a Change of Control occurs at a time
when the Company is prohibited from purchasing Notes, the Company could seek
the consent of its lenders to the purchase of Notes or could attempt to
refinance the borrowings that contain such prohibition. If the Company does
not obtain such consent or repay such borrowing, the Company would remain
prohibited from purchasing Notes. In such case, the Company's failure to
purchase tendered Notes would constitute an Event of Default under the
Indenture, which would, in turn, constitute a further default under certain of
the Company's existing debt agreements and may constitute a default under the
terms of other indebtedness that the Company may enter into from time to time.
See "Description of the Notes--Change of Control."
13
<PAGE>
RANKING OF THE NOTES
The New Notes will be, and the Old Notes are, senior unsecured obligations
of the Company. The New Notes will rank pari passu in right of payment with
all other existing and future senior indebtedness of the Company, including
the Old Notes. The New Notes will be, and the Old Notes are, effectively
subordinated in right of payment to all existing and future secured
indebtedness of the Company and the Company's subsidiaries, including
indebtedness under the Credit Agreements. Loans under the Amended Credit
Agreement are secured by the inventory, accounts receivable, general
intangibles, trademarks and licenses and the proceeds thereof of the Company
and its U.S. subsidiaries. Loans under the Canadian Credit Agreement are
secured by all of the material assets of the Company's Canadian subsidiary.
Under the terms of the Indenture, the Company is permitted, upon the
satisfaction of certain conditions, to incur additional secured indebtedness.
See "Description of the Company's Credit Facilities," "Description of the
Notes--Ranking" and "--Certain Covenants."
AMENDMENT, SUPPLEMENT AND WAIVER OF INDENTURE PROVISIONS
Subject to certain exceptions, the Indenture or the Notes may be amended or
supplemented, and any past default or compliance with any provision may be
waived, with the consent of the Holders of a majority in principal amount of
the Notes then outstanding. An amendment or waiver may not waive the Company's
obligation to make a Change of Control Offer without the consent of the
Holders of at least two-thirds in outstanding principal amount of the Notes.
Consequently, so long as the Holders of requisite principal amount of the
Notes consent, certain provisions of the Indenture may be amended,
supplemented or waived without the consent of a Holder of Notes.
HOLDING COMPANY STRUCTURE; POSSIBLE INVALIDITY OF GUARANTEES
The Company is a holding company, the assets of which consist principally of
the stock of its subsidiaries through which it conducts its operations. The
Company is dependent upon dividends and other payments from its subsidiaries
to generate the funds necessary to meet its obligations, including the payment
of principal of and interest on the Notes. Therefore, the Company's ability to
pay interest on the Notes and to satisfy its other obligations will depend
upon the future operating performance of its subsidiaries, which will be
affected by economic conditions, and financial, business and other factors,
some of which are beyond the Company's control. In addition, the ability of
the Company's subsidiaries to make such payments are subject to, among other
things, applicable state laws and certain restrictions contained in the Credit
Agreements that limit the ability of the Company to receive loans, dividends
or other payments or distributions from its subsidiaries.
The Company's obligations on the New Notes will be, and the Company's
obligations on the Old Notes are, guaranteed on a joint and several basis by
the Guarantors. The incurrence by the Company and the Guarantors of the
indebtedness evidenced by the Notes, the full and unconditional, joint and
several guarantees by the Guarantors of the Old Notes (the "Old Guarantees")
and the New Guarantees, and the use by the Company of the proceeds of the Old
Notes to effect the Acquisitions, may be subject to review under relevant
federal and state fraudulent conveyance statutes in a bankruptcy or
reorganization case or a lawsuit by or on behalf of creditors of the Company
or the Guarantors. Under these statutes, if a court were to find that at the
time the Notes, or the Old Guarantees or the New Guarantees (collectively, the
"Guarantees"), as the case may be, were issued, (a) the Company or any of the
Guarantors issued the Notes or a Guarantee with the intent of hindering,
delaying or defrauding current or future creditors or (b)(i) the Company or
any of the Guarantors received less than reasonably equivalent value or fair
consideration for issuing the Notes or a Guarantee, as the case may be, and
(ii) the Company or any such Guarantor, as the case may be, (A) was insolvent
or was rendered insolvent by reason of the Acquisitions, the Offering and the
Exchange Offer, (B) was engaged, or was about to engage, in a business or
transaction for which its assets constituted unreasonably small capital or (C)
intended to incur, or believed
14
<PAGE>
that it would incur, debts beyond its ability to pay as such debts matured (as
all of the foregoing terms are defined in or interpreted under the fraudulent
conveyance statutes), such court could void the Notes or such Guarantee or
subordinate such obligations to presently existing and future indebtedness of
the Company and such Guarantor.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the law of the jurisdiction that is being applied in any
such proceeding. Generally, however, the Company and the Guarantors would be
considered insolvent if, at the time they incur or incurred the indebtedness
constituting the Notes or the Guarantees, either (a) the fair market value (or
fair saleable value) of their assets on a going concern basis is less than the
amount required to pay the probable liability on their total existing debts
and liabilities (including contingent liabilities) as they become absolute and
matured or (b) they are incurring debt beyond their ability to pay as such
debt matures.
In addition, the Guarantees may be subject to the claim that, since the
Guarantees were incurred for the benefit of the Company (and only indirectly
for the benefit of the Guarantors), they were incurred for less than
reasonably equivalent value or fair consideration. As described above, a court
could therefore void the Guarantees or subordinate them to other obligations
of the Guarantors.
The Company and the Guarantors believe that, at the time of the issuance of
the Notes and the Guarantees, as the case may be, the Company and the
Guarantors were or will be, as the case may be, (a) neither insolvent nor
rendered insolvent thereby, (b) in possession of sufficient capital to pay
their debts as the same mature or become due and to operate their respective
businesses effectively and (c) incurring debts within their respective
abilities to pay. In reaching the foregoing conclusions, the Company and the
Guarantors have relied upon their analysis of internal cash flow projections
and estimated values of assets and liabilities of the Company and the
Guarantors (including rights of contribution and indemnification in connection
with the Guarantees). There can be no assurance, however, that a court passing
on such questions would reach the same conclusions. See "Description of the
Notes--Guarantees."
LACK OF PUBLIC MARKET FOR THE NOTES
The New Notes are being offered to the Holders of the Old Notes. The Old
Notes were issued on December 5, 1996 to qualified institutional buyers and
institutional accredited investors and the Old Notes issued to qualified
institutional buyers are eligible for trading in PORTAL, the National
Association of Securities Dealers' screenbased, automated market for trading
of securities eligible for resale under Rule 144A under the Securities Act. To
the extent that Old Notes are tendered and accepted in the Exchange Offer, the
trading market for the remaining untendered Old Notes could be adversely
affected. There can be no assurance regarding the development of a market for
the New Notes, or the ability of holders of the New Notes to sell their New
Notes or the price at which such holders may be able to sell their New Notes.
If such a market were to develop, the New Notes could trade at prices that may
be higher or lower than their principal amount or purchase price, depending on
many factors, including prevailing interest rates, the Company's operating
results and the market for similar securities. Each Initial Purchaser has
advised the Company that it currently intends to make a market in the New
Notes. The Initial Purchasers are not obligated to do so, however, and any
market-making with respect to the New Notes may be discontinued at any time
without notice. In addition, such market-making activities will be subject to
the limits imposed by the Securities Act and the Exchange Act and may be
limited during the Exchange Offer or the pendency of an applicable Shelf
Registration Statement. Therefore, there can be no assurance as to the
liquidity of any trading market for the New Notes or that an active public
market for the New Notes will develop. The Company does not intend to apply
for listing or quotation of the New Notes on any securities exchange or stock
market.
Historically, the market for noninvestment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the New Notes will
not be subject to similar disruptions. Any such disruptions may have an
adverse effect on holders of the New Notes.
15
<PAGE>
THE COMPANY
BACKGROUND
The Company was incorporated as a Delaware corporation in November 1991 in
connection with its acquisition of the plastic and foam cup and container
business of Kimberly-Clark Tissue Company, formerly known as Scott Paper
Company ("KCTC"). In February 1992, the Company, through WinCup Holdings, Inc.
("WinCup"), acquired all of the capital stock of Scott Container Products
Group, Inc. from Scott Paper Company. In November 1995, the Company sold to
James River its cutlery, straws and plastic cup operations. See Note 1 to the
Radnor Financial Statements.
The Company, through WinCup and J.R. Cup, has been manufacturing foam cups
and containers for more than 30 years. The WinCup foam cup and container
business was established in 1961 and began purchasing EPS beads from StyroChem
when that company began operations in 1976. J.R. Cup's predecessor began
manufacturing foam cups and containers in 1963 and was purchased by James
River in 1986. The Company believes that the consolidation of StyroChem and
J.R. Cup with the Company's foam cup and container operations is a significant
strategic opportunity due to the technological synergies, expected cost
reductions and broader geographic distribution of the combined businesses.
THE ACQUISITIONS
In January 1996, WinCup acquired substantially all of the assets of the U.S.
foam cup and container operations of James River, which comprised James
River's J.R. Cup division. The J.R. Cup Acquisition was structured as a joint
venture between WinCup and James River known as WinCup Holdings, L.P. The
Company used a portion of the proceeds of the Offering to acquire the minority
interest and repay obligations and certain subordinated notes issued to James
River related to the J.R. Cup Acquisition. See Note 1 to the Radnor Financial
Statements. In connection with the purchase of James River's interest in the
Joint Venture, the Company entered into various agreements with James River,
including five-year extensions of a sales agent agreement, an equipment use
agreement and a license relating to certain trademark rights, a sublease on
manufacturing and warehouse facilities and a settlement of a dispute relating
to certain disability claims. See "Business--Proprietary Technology and
Trademarks," "--Facilities" and "--Legal Proceedings."
Through the J.R. Cup Acquisition, the Company doubled its revenues, added
four manufacturing facilities and acquired proprietary manufacturing
processes, many of which are being integrated into the Company's existing
facilities. The J.R. Cup Acquisition has also permitted the Company's
management to rationalize its production by eliminating certain redundant
facilities. At the same time, the Company has been able to implement new
procurement programs, realign freight and related distribution arrangements
and, on a combined basis, significantly reduce manufacturing overhead and
selling, general and administrative costs. See "Pro Forma Consolidated
Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Certain Effects Resulting from the
Acquisitions." A substantial majority of these cost savings have been achieved
during 1996.
In December 1996, the Company acquired StyroChem for an aggregate cash
purchase price of $30.1 million, including certain noncompete payments, plus
$0.9 million of assumed indebtedness and consulting payments. The purchase
price is subject to post-closing adjustment based upon any positive or
negative change in StyroChem's net working capital between August 3, 1996 and
the closing date of the acquisition, for which a $1.0 million escrow account
has been created. The Company has notified StyroChem's former shareholders
that it believes the adjustment is a $1.8 million reduction in the purchase
price, which claim is being reviewed pursuant to the terms of the agreement.
In addition, approximately $1.4 million of the purchase price has been placed
in a separate escrow account, and may be used by the Company to satisfy
obligations associated with specified environmental matters relating to
StyroChem's Texas and Quebec facilities. See "Business--Environmental
Matters."
16
<PAGE>
As part of the acquisition, StyroChem's President and majority voting
stockholder entered into an agreement with the Company that prohibits him from
engaging in certain businesses competitive with the Company in the U.S. and
Canada for a period of five years and from interfering with or entering into
employment relationships with StyroChem employees for a period of two years.
StyroChem's President and majority stockholder also entered into a six-month
consulting agreement with the Company pursuant to which he provides up to 40
hours a month of consulting services, as requested by the Company.
The Company believes that the StyroChem Acquisition will strengthen the
Company's manufacturing operations by providing more reliable, consistently
high-quality EPS beads at lower prices and will mitigate the Company's
exposure to raw material price fluctuations by allowing greater flexibility in
procuring raw materials. In addition, the StyroChem Acquisition positions the
Company as a supplier of EPS beads to manufacturers of insulation and
packaging products.
GENERAL
The Company's and each of the Guarantor's executive offices are located at
Three Radnor Corporate Center, Suite 300, 100 Matsonford Road, Radnor,
Pennsylvania 19087, and their telephone number is (610) 341-9600.
17
<PAGE>
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as of
December 27, 1996.
<TABLE>
<CAPTION>
<S> <C>
Long-term debt, including current portion
Amended Credit Agreement /(1)/...................................... $ 4,125
Canadian Credit Agreement /(1)/..................................... 474
Senior Notes due 2003............................................... 100,000
--------
Total long-term debt.............................................. 104,599
--------
Stockholders' equity
Common stock and additional paid-in capital......................... 17,721
Cumulative translation adjustment................................... 28
Accumulated deficit................................................. (3,420)
--------
Total stockholders' equity........................................ 14,329
--------
Total capitalization............................................ $118,928
========
</TABLE>
- --------
(1) At December 27, 1996, the Company had $24.1 million of availability under
the Credit Agreements.
18
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL DATA
The following pro forma consolidated financial data have been prepared by
the Company based on certain adjustments to the Radnor Financial Statements,
the financial statements of the J.R. Cup Foam Container Operations of James
River Paper Company, Inc., including the notes thereto (the "J.R. Cup
Financial Statements") and the consolidated financial statements of StyroChem,
including the notes thereto (the "StyroChem Financial Statements"), all of
which are included elsewhere herein. The Radnor Financial Statements, the J.R.
Cup Financial Statements and the StyroChem Financial Statements are referred
to collectively as the "Financial Statements." The pro forma consolidated
statement of operations reflects the Acquisitions and the sale of the Notes as
if they had occurred on December 30, 1995. The pro forma consolidated
statement of operations is based on the assumptions and adjustments described
in the accompanying notes and does not purport to present the results of
operations of the Company as if the Acquisitions and the sale of the Notes had
actually occurred on such date, nor is it necessarily indicative of the
results of operations that may be achieved in the future. See "The Company--
The Acquisitions," "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements appearing elsewhere in this Prospectus.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 27, 1996
-------------------------------------------------------------
HISTORICAL
------------------------------------- PRO FORMA PRO
RADNOR J.R. CUP/(1)/ STYROCHEM/(1)/ ADJUSTMENTS FORMA
-------- ------------- -------------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales............... $177,395 $4,482 $69,366 $(17,736)(2) $233,507
Cost of goods sold...... 135,982 3,599 59,690 (17,736)(2)
(638)(3) 180,897
-------- ------ ------- -------- --------
Gross profit............ 41,413 883 9,676 638 52,610
Distribution expense.... 14,099 338 2,123 -- 16,560
Selling, general and
administrative
expenses............... 18,676 1,019 4,850 (1,518)(4) 23,027
Restructuring charges... 910 -- -- -- 910
-------- ------ ------- -------- --------
Income (loss) from
operations............. 7,728 (474) 2,703 2,156 12,113
Interest................ 4,496 -- 901 5,542 (5) 10,939
Other (income) expense,
net.................... 374 (18) 49 (120)(6) 285
-------- ------ ------- -------- --------
Income (loss) from
continuing operations
before income taxes and
minority interest...... 2,858 (456) 1,753 (3,266) 889
Income tax expense
(benefit).............. 121 -- 730 (552)(7) 299
-------- ------ ------- -------- --------
Income (loss) from
continuing operations
before minority
interest............... 2,737 (456) 1,023 (2,714) 590
Minority interest in
income................. 1,348 -- -- (1,348)(8) --
-------- ------ ------- -------- --------
Income (loss) from
continuing operations.. $ 1,389 $ (456) $ 1,023 $ (1,366) $ 590
======== ====== ======= ======== ========
</TABLE>
19
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 27, 1996
(IN THOUSANDS)
(1) On January 20, 1996 and December 5, 1996, J.R. Cup and StyroChem,
respectively, were acquired by Radnor, and their operating results from
the dates of acquisition forward are included in the Radnor statement of
operations. The results of operations for J.R. Cup are from January 1
through January 19, 1996 and for StyroChem are from December 30, 1995
through December 5, 1996.
(2) Reflects elimination of StyroChem and Radnor intercompany sales.
(3) Reflects savings of $638 related to the Acquisitions as follows:
(a) StyroChem Acquisition:
<TABLE>
<S> <C>
Reduction of cost of goods sold for material purchase costs
related to the revised Chevron contract (see "Business--Raw
Materials").................................................. $ 1,288(a)
=======
(b) Other adjustments:
Additional depreciation as a result of the step-up in
StyroChem asset value........................................ $ (324)
Additional depreciation as a result of the step-up in J.R. Cup
asset value.................................................. (326)
-------
$(650)
=======
(4) Reflects savings (costs) related to the following:
Exclusion of certain special bonuses and other non-recurring
costs paid prior to the acquisition of StyroChem pursuant to
the acquisition agreement.................................... 2,470(b)
Amortization of noncompetition agreement with the former Pres-
ident of StyroChem........................................... (952)
-------
$ 1,518
=======
(5) Adjustment for interest is comprised of the following:
Interest on the Notes......................................... $10,000
Elimination of interest on debt repaid........................ (4,889)
Amortization of deferred financing costs related to the offer-
ing of the Notes............................................. 542
Elimination of the amortization of StyroChem's deferred fi-
nancing costs................................................ (111)
-------
$ 5,542
=======
</TABLE>
The interest rate on the Notes is 10%. The assumed interest rate on the
Credit Agreements is approximately 7.5%. Pro forma interest expense does
not include amortization of estimated debt issuance costs related to the
Credit Agreements and the Notes.
(6) Elimination of $120 prepayment penalty for StyroChem notes payable to
stockholders.
(7) Elimination of income tax provision of the U.S. operations of StyroChem
due to the Company's net operating loss carryforwards, which are available
to reduce income tax provisions.
(8) Elimination of minority interest in income of WinCup Holdings, L.P.
- --------
EXPLANATORY NOTES:
(a) Management believes the resulting reduction in raw material cost would not
have had an effect on the Company's selling prices or revenues for the
year ended December 27, 1996. The pro forma adjustment has been calculated
by multiplying the actual quantity of raw material purchased by StyroChem
during the pro forma period by the price differential arising as a result
of the new purchase contract executed as part of the StyroChem
Acquisition.
(b) Payments of the special bonuses (approximately $1.6 million), which were
paid to both employees and directors of StyroChem, were contingent upon
the closing of the sale transaction, and actual payment was made upon
closing. In addition, certain non-recurring payments were made to or on
behalf of the former owner of StyroChem prior to the closing of the
acquisition (approximately $0.5 million) and the former owner of StyroChem
incurred certain legal and accounting expenses (approximately $0.4
million) in connection with the execution of the acquisition agreement.
20
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below as of December 29,
1995 and December 27, 1996, and for each of the three years in the period
ended December 27, 1996, have been derived from the audited Radnor Financial
Statements and should be read in conjunction with such audited Radnor
Financial Statements which are included herein. The selected consolidated
financial data presented below as of December 30, 1994 and for the year ended
December 31, 1993 have been derived from Radnor's audited consolidated
financial statements not included herein. The selected consolidated financial
data presented below as of January 1, 1993 and December 31, 1993 and for the
year ended January 1, 1993 have been derived from Radnor's and its
predecessors' unaudited consolidated financial statements not included herein.
The unaudited Radnor Financial Statements have been prepared on the same basis
as the audited Radnor Financial Statements included herein and, in the opinion
of management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the Company's financial
position and results of operations for the period. Financial results for the
year ended December 27, 1996 are not fully comparable to any of the prior
periods, which contain only the results of operations from the Radnor foam cup
and container business and exclude any adjustments to reflect the J.R. Cup
Acquisition and the StyroChem Acquisition. The selected consolidated financial
data should be read in conjunction with "Pro Forma Consolidated Financial
Data," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Radnor Financial Statements included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR(/1/) RADNOR(/1/)
---------------- -----------------------------------------------------------
FISCAL YEAR ENDED
---------------------------------------
DEC. 29, 1991- FEB. 29, 1992- DEC. 31, DEC. 30, DEC. 29, DEC. 27,
FEB. 28, 1992 JAN. 1, 1993 1993 1994 1995 1996(/2/)
---------------- -------------- -------- -------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net sales.............. $12,883 $67,904 $83,569 $ 80,850 $ 86,239 $177,395
Cost of goods sold..... 12,878 57,231 68,454 64,078 75,690 135,982
------- ------- ------- -------- -------- --------
Gross profit........... 5 10,673 15,115 16,772 10,549 41,413
Distribution expense... 1,018 4,427 6,599 5,584 6,027 14,099
Selling, general and
administrative ex-
penses................ 3,245 8,298 10,330 8,209 9,051 18,676
Restructuring charges.. -- -- -- -- -- 910
------- ------- ------- -------- -------- --------
Income (loss) from op-
erations.............. (4,258) (2,052) (1,814) 2,979 (4,529) 7,728
Interest............... -- 1,562 2,518 3,001 2,822 4,496
Other (income) expense,
net................... 222 386 290 526 374
------- ------- ------- -------- -------- --------
Income (loss) from con-
tinuing operations be-
fore income taxes and
minority interest..... (4,258) (3,836) (4,718) (312) (7,877) 2,858
Income tax ex-
pense(/3/)............ -- -- -- -- -- 121
------- ------- ------- -------- -------- --------
Income (loss) from
continuing operations
before minority
interest.............. (4,258) (3,836) (4,718) (312) (7,877) 2,737
Minority interest in
income................ -- -- -- -- -- 1,348
------- ------- ------- -------- -------- --------
Income (loss) from con-
tinuing operations.... $(4,258) $(3,836) $(4,718) $ (312) $ (7,877) $ 1,389
======= ======= ======= ======== ======== ========
Ratio of earnings to
fixed charges(/4/).... 1.49x
Deficiency of earnings
available to cover
fixed charges(/4/).... $(4,258) $(3,836) $(4,718) $ (312) $ (7,877)
BALANCE SHEET DATA (AT
END OF PERIOD):
Working capital........ $ (647) $ (112) $ 1,620 $(10,362) $ 8,684
Total assets........... 48,851 36,650 43,033 46,588 172,369
Total debt (including
current portion)...... 26,446 31,531 35,410 16,252 104,599
Stockholders' equity
(deficit)............. 5,751 (6,575) (11,969) 6,554 14,329
</TABLE>
- -------
(1) The historical financial data for the period prior to February 29, 1992
include only the results of operations of Scott Container Products Group,
Inc. which was acquired by Radnor from KCTC on February 28, 1992. The
Company's financial data do not include the results from the cutlery,
straws and plastic cup operations, which were sold in 1995 and reflected
as discontinued operations in the Radnor Financial Statements. See Note 1
to the Radnor Financial Statements.
(2) The historical financial data include Radnor and its consolidated
subsidiaries, excluding discontinued operations, as of and for the year
ended December 27, 1996. Prior to January 20, 1996 and December 5, 1996,
the Company's results from continuing operations do not include the
results of J.R. Cup and StyroChem, respectively, which were acquired on
those respective dates.
21
<PAGE>
(3) The Company recorded no federal income tax expense during the periods
prior to the acquisition of StyroChem due to the incurrence of operating
losses or the utilization of net operating loss carryforwards during those
periods. For the year ended December 27, 1996, the income tax provision is
for the Canadian operations, which are not able to utilize the Company's
net operating loss carryforwards.
(4) For purposes of this computation, fixed charges consist of interest,
amortization of deferred financing fees and that portion of lease rental
expense representative of the interest factor (deemed to be one-third of
lease rental expense). Earnings consist of income from continuing
operations before income taxes plus fixed charges.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is the second largest producer in the U.S. of foam cup and
container products for the foodservice industry. The Company manufactures foam
cups for hot and cold drinks, foam bowls and containers and thermoformed lids
and sells its products to national, institutional and retail customers located
throughout the U.S., in Mexico and in other countries. The Company, through
its predecessors, has been manufacturing foam cups and containers since 1961.
The Company was organized in 1991 to facilitate the acquisition of Scott
Container Products Group, Inc. from KCTC, which occurred in February 1992. In
January 1996, the Company executed an agreement with James River, which
resulted in the acquisition of its J.R. Cup business. In December 1996, the
Company purchased the outstanding capital stock of and other equity interests
in StyroChem. StyroChem supplies the Company with approximately 50% of the EPS
beads used in its manufacture of foam products. See "The Company--The
Acquisitions."
Net sales
Net sales represent the gross sales of the Company's products less cash
discounts and allowances, which historically have averaged approximately 2% of
net sales. Sales incentives and volume rebates to customers are classified as
selling expenses and are included in selling, general and administrative
expenses.
Cost of goods sold
Raw material costs represent a large portion of the Company's cost of goods
sold and are susceptible to price fluctuations based upon supply and demand
and general market conditions. Beginning in April 1994 and continuing through
August 1995, prices of raw materials reached historically high levels. Since
that time, raw material prices have declined and are near early 1994 levels.
Although future raw material prices cannot be predicted with accuracy, the
prices for the raw materials used in the Company's products are forecasted by
independent industry surveys and producer reports to remain stable over the
next several years.
In connection with the Company's engineering initiatives, the Company has
invested significant resources in research and development. The Company
expenses all research and development costs in the period incurred and
includes such costs in cost of goods sold. As a percentage of net sales, these
costs have represented 0.5%, 0.9% and 1.3% in 1994, 1995 and 1996,
respectively.
Distribution expense
The Company ships its products from manufacturing locations using a
combination of common carriers, its own fleet and leased vehicles.
Distribution expense consists of the costs to ship products, including costs
of labor and leased vehicles.
Restructuring charges
During the first quarter of 1996, the Company closed its Des Plaines,
Illinois manufacturing facility and consolidated those operations into its
West Chicago, Illinois facility. In addition, the Company consolidated certain
warehousing facilities and relocated its executive offices to Radnor,
Pennsylvania. The plant and warehouse consolidations, together with the
relocation of its executive offices, resulted in $0.9 million of restructuring
charges expensed and paid during the year ended December 27, 1996.
23
<PAGE>
Net operating loss carryforwards
The Company had net operating loss carryforwards of approximately $14.0
million as of December 27, 1996. The carryforwards expire through 2010.
Management believes that the Company's future taxable income will be
sufficient to use the $14.0 million of net operating loss carryforwards prior
to their expiration; however, there can be no assurance that the Company's net
operating loss carryforwards will become available or that the Company will
generate future taxable income. The future benefit of the net operating loss
carryforwards has not been reflected in the Company's financial statements.
COMPARABILITY OF PERIODS
Financial results for 1996 are not fully comparable to 1992, 1993, 1994 and
1995 because of the January 1996 acquisition of the J.R. Cup business and the
December 1996 acquisition of StyroChem. Fiscal years 1993, 1994 and 1995
contain only the results of operations from the Radnor foam cup and container
business and exclude any adjustments to reflect the J.R. Cup Acquisition or
the StyroChem Acquisition.
24
<PAGE>
CERTAIN EFFECTS RESULTING FROM THE ACQUISITIONS
The Company believes that the Acquisitions will result in certain cost
savings, including, but not limited to, the following: (i) a reduction in raw
material costs, (ii) the elimination of certain selling, general,
administrative and corporate expenses, and (iii) the elimination of other non-
recurring costs. The Company has now taken all of the actions that it believes
necessary to achieve these cost savings. The Company believes that, had such
cost savings been implemented as of December 30, 1995, such savings would have
approximated $3.9 million in the aggregate for the year ended December 27,
1996, as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 27,
1996
------------
(IN THOUSANDS)
<S> <C>
StyroChem Acquisition:
Reduction for material purchase costs related to the
revised Chevron contract due to volume rebates and
pricing................................................... $1,288
Elimination of certain general, administrative and
corporate costs........................................... 2,470
Elimination of prepayment penalty for StyroChem notes
payable to stockholders................................... 120
------
$3,878
======
</TABLE>
In addition to these cost savings, the Company believes that it may be able
to achieve additional cost savings from (i) reductions in facility costs
arising from renegotiated rents or reduced space, (ii) a reduction in labor
costs from production efficiencies and a reduced number of direct production
employees, (iii) elimination of certain allocated corporate selling, general
and administrative expenses and (iv) potential further raw materials cost
reductions from the StyroChem Acquisition. Programs intended to realize the
following specifically identified cost savings were implemented during 1996,
and such savings are expected to be realized during 1997, as follows:
<TABLE>
<CAPTION>
AMOUNT
EXPECTED TO BE
REALIZED IN 1997
----------------
<S> <C>
StyroChem Acquisition:
Reduction in workers compensation, other insurance and
employee benefit plan costs due to more favorable Radnor
plan costs................................................. $ 466
J.R. Cup Acquisition:
Reduction in shipping costs between manufacturing facilities
due to the addition of J.R. Cup manufacturing facilities... 17
Reduction in manufacturing overhead, including personnel and
related fringe benefits.................................... 139
Elimination of corporate selling, general and administrative
expenses allocated to J.R. Cup by James River.............. 854
Savings related to closing and consolidating the Des
Plaines, Illinois plant ($308) and the West Chicago
warehouse ($88) into the West Chicago, Illinois
manufacturing facility..................................... 396(a)
------
$1,872
======
</TABLE>
(a) The closing and consolidating of the Des Plaines, Illinois plant and the
West Chicago warehouse into the West Chicago, Illinois manufacturing facility
occurred on March 31, 1996 and May 1, 1996, respectively. The savings noted
above represent only the fixed manufacturing and lease costs of the closed
facilities. The West Chicago, Illinois manufacturing facility had the excess
capacity to absorb the additional operations without incurring any additional
fixed operating costs or any other incremental costs that would offset such
savings. As a result of actions taken through May 1, 1996, annual fixed costs
will be reduced by approximately $1.5 million, of which approximately $1.1
million has been realized in 1996.
25
<PAGE>
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the Radnor Financial Statements
included elsewhere in this Prospectus.
The following table sets forth, for the periods indicated, certain operating
data as a percentage of net sales.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
----------------------------
FISCAL YEAR ENDED
----------------------------
DEC. 30, DEC. 29, DEC. 27,
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Net sales............................................ 100.0% 100.0% 100.0%
Cost of goods sold................................... 79.3 87.8 76.6
----- ----- -----
Gross profit......................................... 20.7 12.2 23.4
Distribution expense................................. 6.9 7.0 8.0
Selling, general and administrative expenses......... 10.1 10.5 10.5
Restructuring charges................................ -- -- 0.5
----- ----- -----
Income (loss) from operations........................ 3.7 (5.3) 4.4
Interest............................................. 3.7 3.3 2.5
Minority interest in income.......................... -- -- 0.8
Income (loss) from continuing operations............. (0.4%) (9.1%) 0.8%
===== ===== =====
</TABLE>
YEAR ENDED DECEMBER 27, 1996 COMPARED TO YEAR ENDED DECEMBER 29, 1995
Net sales for 1996 were $177.4 million, more than double the net sales of
$86.2 million for 1995. The increase was due primarily to the acquisitions of
J.R. Cup on January 20, 1996 and StyroChem on December 5, 1996.
Costs of goods sold increased to $136.0 million or 76.6% of net sales for
1996, from $75.7 million or 87.8% of net sales in 1995. The decline in cost of
goods sold as a percentage of net sales was due primarily to a decline in raw
material prices resulting from improved market conditions, the increased
purchasing power of the combined company and reductions in manufacturing
overhead as a result of the J.R. Cup Acquisition.
Gross profit increased to $41.4 million or 23.4% of net sales for 1996, from
$10.5 million or 12.2% of net sales in 1995. The increase in gross profit as a
percentage of net sales was due primarily to lower raw material prices and
cost reductions related to the J.R. Cup Acquisition.
Distribution expense increased to $14.1 million or 8.0% of net sales for
1996, from $6.0 million or 7.0% of net sales in 1995. The increase in
distribution expense as a percentage of net sales was due primarily to rate
increases by freight carriers and a higher percentage of consumer sales, which
require greater delivery costs. The Company also temporarily incurred
additional freight costs as a result of a plant closure and the realignment of
customer shipping locations.
Selling, general and administrative expenses increased to $18.7 million or
10.5% of net sales for 1996, from $9.1 million or 10.5% of net sales in 1995.
Selling, general and administrative expenses were fairly constant as a
percentage of net sales.
Income (loss) from operations increased to $7.7 million or 4.4% of net sales
for 1996, from a loss from operations of $4.5 million in 1995. As noted above,
during 1996, the Company recorded restructuring charges of $0.9 million, due
primarily to a plant closure and the relocation of its executive offices.
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<PAGE>
Interest increased to $4.5 million or 2.5% of net sales for 1996, from $2.8
million or 3.3% of net sales in 1995 due primarily to an increase in
borrowings related to the J.R. Cup Acquisition, the StyroChem Acquisition and
the Offering.
Other expense, net decreased to $0.4 million or 0.2% of net sales for 1996
from $0.5 million or 0.6% of net sales in 1995.
Income (loss) from continuing operations increased to $1.4 million or 0.8%
of net sales for 1996, from a loss from continuing operations of $7.9 million
in 1995, for the reasons outlined above.
YEAR ENDED DECEMBER 29, 1995 COMPARED TO YEAR ENDED DECEMBER 30, 1994
Net sales increased to $86.2 million in 1995, representing an increase of
$5.3 million or 6.6% over net sales of $80.9 million in 1994. The increase in
net sales was primarily due to increased selling prices announced in the
fourth quarter of 1994 as a result of rising raw material costs experienced by
the industry. Unit volume for 1995 remained constant due primarily to
increases in consumer product sales, offset by a reduction in institutional
sales volume.
Cost of goods sold increased to $75.7 million or 87.8% of net sales in 1995,
from $64.1 million or 79.3% of net sales in 1994. The increase in cost of
goods sold as a percentage of net sales was due primarily to the industry-wide
rise in raw material costs, which began in April 1994 and continued through
August 1995.
Gross profit decreased to $10.6 million or 12.2% of net sales in 1995, from
$16.8 million or 20.7% of net sales in 1994. The decrease in gross profit as a
percentage of net sales was due primarily to the rise in raw material costs,
which was only partially offset by selling price increases during 1995.
Distribution expense increased slightly to $6.0 million or 7.0% of net sales
in 1995, from $5.6 million or 6.9% of net sales in 1994. The increase in
distribution expense as a percentage of net sales for 1995 was due primarily
to slightly higher freight rates incurred in early 1995.
Selling, general and administrative expenses increased to $9.1 million or
10.5% of net sales in 1995, from $8.2 million or 10.1% of net sales in 1994.
The increase in selling, general and administrative expenses as a percentage
of net sales was due primarily to an increase in commissions related to retail
sales.
Income (loss) from operations declined to a loss from operations of $4.5
million in 1995, from income from operations of $3.0 million in 1994. The
reduction in income from operations was due primarily to the increase in raw
material costs, partially offset by an increase in selling prices.
Interest decreased to $2.8 million or 3.3% of net sales in 1995, from $3.0
million or 3.7% of net sales in 1994. The decrease in interest as a percentage
of net sales was due primarily to lower debt levels as a result of a
divestiture in 1995.
Other expense, net was $0.5 million for 1995, as compared to $0.3 million in
1994.
Loss from continuing operations was $7.9 million in 1995, as compared to
$0.3 million in 1994. The increase in the loss from continuing operations
resulted from the industry-wide increase in raw material costs, partially
offset by an increase in selling prices.
LIQUIDITY AND CAPITAL RESOURCES
During fiscal years 1994, 1995 and 1996, the Company's principal sources of
funds consisted of cash from operations and financing sources. For 1996, cash
provided by operating activities was $6.2 million
27
<PAGE>
compared to cash used in operating activities of $0.2 million in 1995. While
net income for 1996 was $3.4 million compared to net income for 1995 of $18.5
million, working capital increased by $19.0 million in 1996, primarily from
prepayment of revolving credit classified as current in 1995, an increase of
accounts receivable and inventory due to a higher level of sales following the
J.R. Cup Acquisition and working capital purchased in the StyroChem
Acquisition. The Company has managed its growth in working capital through a
combination of working capital financing, favorable terms from vendors and
proceeds of debt financing for capital expenditures.
Upon consummation of the Offering, approximately $47.9 million of the net
proceeds were used to repay indebtedness of the Company. The weighted average
interest rate of the repaid indebtedness was 8.8% as of December 27, 1996. The
Company used approximately $16.6 million of the net proceeds to repay
obligations arising from the acquisition of J.R. Cup and approximately $29.0
million to pay the cash portion of the StyroChem Acquisition purchase price.
The Company also used approximately $3.0 million of the net proceeds from the
Offering to redeem from KCTC 2,000 shares of the Company's outstanding
redeemable convertible preferred stock and outstanding warrants to acquire
2,150 shares of the Company's Nonvoting Common Stock.
In connection with the consummation of the Offering, the Company entered
into the Amended Credit Agreement under which the Existing Credit Agreement
was amended and restated primarily to increase the revolving credit facility
to $30.0 million and to include Radnor, WinCup, SP Acquisition Co. and
StyroChem International, Inc. as borrowers. As of December 27, 1996, there was
$3.8 million outstanding under the Amended Credit Agreement. See "Description
of the Company's Credit Facilities--The Amended Credit Agreement." Also, in
February 1994, the Company's Canadian subsidiary entered into the Canadian
Credit Agreement, certain terms of which have been amended through an annual
review process. The Canadian Credit Agreement consists of a term loan in the
principal amount of $0.5 million Canadian and a revolving credit facility of
up to $2.5 million Canadian. As of December 27, 1996, there was $0.3 million
outstanding under the Canadian Credit Agreement. At December 27, 1996,
availability under the Credit Agreements was approximately $24.1 million. See
"Description of the Company's Credit Facilities--The Canadian Credit
Agreement."
The Company's principal uses of cash for the next several years will be
working capital requirements and capital expenditures. By completing the
Offering and entering into the Credit Agreements, thereby extending the
maturity of the Company's long-term debt, the Company believes that it has
increased its flexibility over the next five years to make capital
expenditures that management believes will provide an attractive return on
investment. Management expects that annual capital expenditures will increase
from historical levels during the next few years as the Company pursues new
development and cost-reduction opportunities. Management has identified
potential capital investment opportunities of approximately $6.0 million over
the next twelve months, in addition to approximately $2.0 million of non-
discretionary capital expenditures anticipated during such period.
The Company's capital expenditures for fiscal years 1994, 1995 and 1996 were
$1.6 million, $5.5 million and $4.9 million, respectively. Total capital
expenditures increased in 1995 due to the implementation of the engineering
initiatives, which began in 1994.
Following consummation of the Offering, the Company has had an increase in
annual debt service requirements from historical levels due primarily to its
acquisition of StyroChem and redemption of the redeemable convertible
preferred stock. As a holding company, the Company is dependent upon dividends
and other payments from its subsidiaries to generate the funds necessary to
meet its obligations. Subject to certain limitations, the Company is, and will
continue to be, able to control its receipt of dividends and other payments
from its subsidiaries. See "Risk Factors--Holding Company Structure; Possible
Invalidity of Guarantees." Management believes that cash generated from
operations, together with available borrowings from the revolving credit
facilities under the Credit Agreements, will be sufficient to meet the
Company's expected operating needs, planned capital expenditures and debt
service requirements. However, there can be no assurance that sufficient funds
will be available from operations or borrowings under the Credit Agreements to
meet the Company's cash needs.
28
<PAGE>
BUSINESS
GENERAL
The Company is the second largest manufacturer in the U.S. of disposable
foam cup and container products for the foodservice industry, with
approximately a 35% share of this market segment in 1996. The Company
manufactures foam cups for hot and cold drinks, foam bowls and containers and
thermoformed lids, as well as the EPS beads from which such foam products are
manufactured. The Company's 14 highly automated manufacturing facilities
produced 13 billion foam cups, containers and lids and 118 million pounds of
EPS beads in 1996. Through StyroChem, the Company manufactures EPS beads for
its own consumption as well as for third party manufacturers of foam
containers, insulation products and packaging products. The Company believes
that its acquisition of StyroChem, a supplier of EPS beads to the Company
since 1976, will strengthen the Company's competitive position by lowering raw
material costs, improving product quality and enhancing manufacturing
efficiencies. For the year ended December 27, 1996, pro forma for the
Acquisitions, the Company had net sales and income from continuing operations
before interest, income tax expense, depreciation, amortization and
restructuring charges of $233.5 million and $20.8 million, respectively.
HISTORY
The Company, through WinCup and J.R. Cup, has been manufacturing foam cups
and containers for more than 30 years. The WinCup foam cup and container
business was established in 1961 and began purchasing EPS beads from StyroChem
when that company began operations in 1976. J.R. Cup's predecessor began
manufacturing foam cups and containers in 1963 and was purchased by James
River in 1986. The Company believes that the consolidation of StyroChem and
J.R. Cup with the Company's foam cup and container operations is a significant
strategic opportunity due to the technological synergies, economies of scale
and broader geographic distribution of the combined businesses.
INDUSTRY OVERVIEW
The Company competes primarily within the disposable cup and container
market of the foodservice industry, which includes products manufactured with
paper, plastic, foam and other materials. A recent independent industry survey
estimated that sales of disposable foodservice products were in excess of $7.0
billion in 1994, with sales of disposable cups and containers estimated to
have been more than $2.0 billion. The foam segment of the disposable cup and
container market, which the Company believes had sales of approximately $550.0
million in 1996, is highly concentrated, with the Company and its primary
competitor accounting for more than 80%. The market for other plastic and
paper cups and containers is more fragmented, with at least six different
manufacturers.
The factors that originally gave rise to the use of disposable products
continue to support the market's growth. These include lower labor,
maintenance and energy costs as compared to reusable products, as well as
sanitary considerations and growth in the consumption of take-out foods and
beverages. The expansion of fast-food restaurant chains and the consolidation
of some foodservice distributors into larger companies with a national
presence have also increased the use of disposable products.
In addition to the factors described above, the use of foam cups and
containers has increased significantly over the last two decades due to the
superior insulating qualities of foam and its lower production costs, as
compared to paper. Industry unit shipments of foam cups and containers grew
from 13 billion in 1974 to 28 billion in 1994. The success of foam cups to
date has been primarily in the hot drink cup segment. The Company believes
there is significant growth opportunity in the sale of foam cold drink cups,
particularly the large (16 through 44 ounce) sizes on which the Company makes
higher margins.
29
<PAGE>
In addition to being used in the manufacture of foam cups and containers,
EPS beads are also used by manufacturers of insulation products and packaging
products. Insulation products are typically used as insulation materials for
roofs, walls and foundations. Packaging products are usually custom molded and
are used to protect products such as computers, electronic consumer products
and appliances from damage while being shipped.
COMPETITIVE STRENGTHS
The Company has a strong competitive position in the foam segment of the
disposable cup and container market. The Company attributes its prominent
market position to the following factors:
. Customer service and quality products. The Company's attention to customer
service and emphasis on high-quality products allow it to continue to meet
the needs of its existing customers and attract new ones. Customer service
is enhanced by the Company's breadth of product offerings, extensive order-
entry system and strategically located manufacturing facilities. These
attributes enable the Company to meet the national distribution
requirements of its customers in an efficient and cost-effective manner.
The Company also coordinates design efforts with its customers to develop
new products, such as the new "flare" cup that combines an enhanced
appearance with a stronger rim construction.
. Proprietary technology. The Company has developed a broad array of
proprietary technology that is utilized in various stages of its
manufacturing operations. Custom-designed and built molding equipment, for
example, allows the Company to better meet customer requests for
specialized container designs, custom printing or embossing, as well as to
maintain high-volume production runs. Other proprietary technology includes
automated materials handling and auto-case packaging machines. With
StyroChem, the Company also has the ability to customize EPS bead
formulations to further enhance manufacturing efficiencies and specific
product features.
. Strong customer relationships. Long-term relationships with its customers
have been an important factor in the Company's success. Of the Company's
ten largest customers, nine have been purchasing products from the Company
for more than ten years. The Company works closely with its customers to
address a variety of needs, including custom product development and
tooling, seasonal marketing programs and specialized printing requirements.
The Company believes that the strength of its customer relationships
results from consistently meeting or exceeding customer expectations.
. Experienced management team. The Company's management team is highly
experienced, with a majority of the Company's senior sales, manufacturing,
administration and engineering executives having spent more than 20 years
in the foodservice industry. The Company's executive management also has
extensive experience in managing and integrating acquisitions of businesses
in various industries, including the foodservice industry.
BUSINESS STRATEGY
The Company's business strategy is to increase its revenues and
profitability and to further enhance its market position by emphasizing the
following initiatives:
. Cost reduction and productivity enhancements. The Company is continuing to
reduce manufacturing costs by upgrading existing equipment and developing
new equipment and processes that enhance productivity and improve
manufacturing quality. The Company's goal is to move toward a just-in-time
manufacturing process. Production costs have also been and will continue to
be reduced by eliminating redundant facilities, lowering transportation
costs and exploiting economies of scale (including raw material pricing)
provided by the Company's high-volume production. The Company has closed
several manufacturing and distribution facilities and the Company continues
to evaluate consolidation opportunities. In addition, the Company has taken
advantage of its nationwide network of manufacturing facilities to route
product shipments from the nearest plant, thereby reducing transportation
costs.
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<PAGE>
. Integrated manufacturing process. The StyroChem Acquisition will result in
a more integrated manufacturing process, thereby reducing the Company's
cost of raw materials and mitigating the impact of raw material price
fluctuations. Control over EPS bead manufacturing should also provide more
reliable, consistently high-quality EPS beads, improving the Company's
overall manufacturing efficiencies. Following the StyroChem Acquisition,
the Company has continued to purchase a significant amount of its EPS beads
requirements from Nova Chemicals, Inc. The Company intends to increase over
time the amount of EPS beads manufactured for its own internal consumption.
. New markets and improved market position. The Company believes it has a
significant opportunity to increase its share of the disposable cup and
container market by positioning foam products, with their superior
insulating qualities and lower production costs, as an alternative to
comparable paper products. The Company is developing new products, such as
the "flare" cup, that will provide potential customers with an attractive
low-cost alternative to paper cups. In addition, the Company is pursuing
opportunities to increase sales of its foam products to both current and
new customers in international markets. In particular, the Company believes
that there are significant growth opportunities in European and Asian
markets. Foam cup and container use in these markets is significantly less
than in the U.S. The Company has had discussions with suppliers and
customers regarding expansion in these markets.
. Product development and strategic acquisitions. The Company intends to
pursue further growth opportunities through the introduction of new and
enhanced products. In addition, the Company will seek strategic
acquisitions, joint ventures and alliances that may broaden the Company's
product lines.
PRODUCTS
The Company manufactures a broad range of foam cups, bowls and containers,
foam packaging products and thermoformed plastic lids. The use of foam
provides an insulating feature to the Company's products, allowing them to be
used for both hot and cold beverages and food products while enhancing comfort
for the end user. Foam cups are manufactured in varying sizes (4 to 44 ounces)
for both hot and cold beverages and are sold under the Dixie, COMpac, Profit
Pals, STYROcup, Handi-Kup HK and Simplicity brand names. Foam bowls and other
containers are made in varying sizes (3.5 to 32 ounces) for both hot and cold
food products and are sold under the STYROcontainers brand name. The Company
also manufactures thermoformed leak-resistant plastic lids for its cups, bowls
and containers. These lids feature a "stacking ring" that minimizes the
shifting of a second cup when placed on top of the first cup. Other enhanced
lid features include vents, tear-away tabs and straw slots, depending on the
intended use. Cups, bowls, containers and lids are designed so that the same
lid can be interchanged with many different cup, bowl or container sizes,
which simplifies inventory and display area requirements.
The Company's cups, bowls and containers are available in both smooth and
patterned designs and are available with custom offset or embossed printing.
The Company also manufactures a broad range of custom-designed foam containers
for many of its large national accounts. A significant component of this
business is the manufacture of containers for customers such as Nissin Food
Products Co., Ltd., Maruchan, Inc. and Campbell Soup Co., which use the
containers for dried noodle products sold through retail grocery and
supermarket chains. The Company also supplies its products in private label
packaging for certain of its customers.
The Company works continuously with its customers to develop new products.
The recently introduced "flare" cup design, for example, replaces the heavier
rim typically built into the top of a foam cup with a smooth, flared edge that
improves the stability of the cup's construction. Management believes that the
flare cup has been well-received by customers because it combines the
favorable appearance of paper with the insulating qualities of foam.
StyroChem manufactures EPS beads for the Company's internal consumption, in
addition to selling directly to third party manufacturers of foam containers,
insulation products and packaging products.
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StyroChem has been a long-term supplier of EPS beads to the Company. The EPS
beads are categorized by grade, with the highest grade, cup-grade beads, used
to manufacture foam cups and containers. Block-grade and shape-grade beads are
sold to manufacturers of insulation and packaging products, respectively.
SALES, MARKETING AND CUSTOMERS
The Company sells its products through a 64-person sales organization and
through an extensive network of more than 50 independent sales
representatives. Sales and marketing efforts are directed by the Company's
Senior Vice President of Sales and Marketing and are supported by 12 senior
sales managers with an average of more than 14 years' experience in the
foodservice industry. The Company believes its experienced sales team and
long-term representative relationships enhance the Company's ability to
provide high levels of customer service and specialized marketing programs,
including custom-designed foam products. Major end users of the Company's
products include fast-food restaurants, full-service restaurants, hospitals,
nursing homes, educational institutions, airlines, business offices, movie
theaters and other leisure time concessionaires, such as sports stadiums.
The Company sells to more than 1,600 national, institutional and retail
accounts throughout the U.S., in Mexico and in other countries. This customer
base, which includes many of the foodservice industry's largest companies, can
be divided into three major categories:
. National Accounts. National accounts are customers that utilize foam
products in the sale of their own products and consist primarily of large
fast-food restaurant chains and convenience stores. During 1996, sales to
these customers accounted for approximately 14.5% of the Company's net
sales pro forma for the Acquisitions, and included Perseco Co. (the
distribution arm for McDonald's Corporation), Fast Food Merchandisers (the
distribution arm for Hardee's Food Systems, Inc.), Kentucky Fried Chicken
Corp., Marriott International, Inc., Dunkin' Donuts Incorporated and The
Southland Corporation.
. Institutional Accounts. Institutional accounts are customers that purchase
foam products with a view toward reselling such products in bulk to
institutional end users, such as hospitals, nursing homes, educational
institutions, airlines, movie theaters and similar leisure time
concessionaires, such as sports stadiums. These customers, representing
approximately 49.7% of the Company's net sales in 1996 pro forma for the
Acquisitions, are primarily large foodservice distributors and warehouse
clubs. Companies such as Sysco Corporation, Alliant Foodservice Inc., U.S.
Foodservice Inc. and Food Services of America have all been customers for
more than ten years. This group also includes key buying organizations such
as ComSource Independent Foodservices Cos., Inc. and Affiliated Paper
Companies, Inc.
. Retail Accounts. Retail accounts are customers that purchase foam products
for resale to actual consumers of the products and consist primarily of
supermarket chains and discount stores. In 1996, retail customers accounted
for approximately 12.8% of the Company's net sales pro forma for the
Acquisitions and also included ten of the largest supermarket chains in the
U.S. Representative customers include Sam's Club Division, WAL-MART Stores,
Inc., K-Mart Corporation, Kroger Food Stores, Winn-Dixie Stores, Inc., Food
Lion, Inc. and Albertson's, Inc.
Pro forma for the Acquisitions, no customer represented more than 9.0% of
the Company's net sales for 1996. In addition, the five largest accounts
represented approximately 30.0% of the Company's pro forma net sales for 1996.
Approximately 10% of the Company's foam product sales are made pursuant to
contracts under which product prices are automatically adjusted based on
changes in EPS bead prices. Substantially all of the Company's other foam
product sales are made pursuant to contracts or other arrangements under which
the Company has the right to change product prices on 30 to 60 days' prior
written notice.
32
<PAGE>
MANUFACTURING
The Company's highly automated manufacturing facilities produced 13 billion
foam cups, containers and lids and 118 million pounds of EPS beads,
respectively, in 1996. The Company's foam products are made with custom-
designed foam cup molding machines, lid production machines and foam cup and
container printing machines. The Company's ten foam plants, located throughout
the U.S., generally operate 24 hours a day, seven days a week and 355 days a
year. StyroChem operates four plants located in the U.S. and Canada that
manufacture EPS beads from styrene monomer.
Manufacturing Process
The manufacture of EPS beads, the primary raw material in the manufacture of
foam products, has two steps: polymerization and impregnation. In the
polymerization phase, styrene monomer, which is a commodity petrochemical
derived primarily from benzene and ethylene, is suspended in water and then
treated with chemicals and catalysts to produce polystyrene crystal in various
sizes, each of which has different end-use applications. To produce EPS beads,
the crystal is impregnated with a high-purity pentane gas.
The Company manufactures its foam cups and containers utilizing a custom
molding process. First, the cup-grade EPS beads are blended with a lubricating
agent and then pre-expanded so that the EPS beads are of the appropriate
density. These pre-expanded EPS beads are then fed through special screeners
to remove undersized and oversized beads. The pre-expanded EPS beads are then
injected into machine molds and fused by injecting steam into the mold cavity.
After the EPS beads are fused, the mold shells are cooled, the mold halves are
opened and the finished cups are ejected. The finished products are vacuum
tested, counted and packaged.
The Company's lid products are produced from high-impact polystyrene
("HIPS"), which is subjected to heat and pressure, after which the product is
extruded through a thin die. The lids are then trimmed for finished goods
packing, while the scrap is ground and reintroduced into the original material
blend. In order to further reduce costs, the Company intends to examine
whether StyroChem can produce HIPS.
Quality Control
The Company's manufacturing quality control program involves random testing
performed at least hourly at each facility for four attributes: seepage,
weight, appearance and strength. A statistical analysis of these test results
is completed and reviewed by the Company. In addition, each machine operator
and packer performs various quality checks during the production process. The
Company also obtains random samples of finished products from its various
manufacturing facilities and performs an analysis similar to that described
above at its Phoenix laboratory.
In addition to the Company's own programs, certain of the Company's larger
customers have established their own product standards and perform periodic
manufacturing audits at the Company's facilities, either through their own
personnel or through an independent testing group such as the American
Institute of Baking.
The Company utilizes its quality, service, manufacturing and customer
partners to enact and follow through on initiatives consistent with total
quality management and good manufacturing practices. Through these programs,
the Company works with its customers to ensure product quality and to create
new products that reflect the present and future needs of its customers.
StyroChem's quality control laboratory includes infrared spectrograph and
atomic absorption units. Laboratory chemists are capable of performing complex
chemical and atomic analysis of styrene monomer, polystyrene crystal,
expandable polystyrene and all other material components of EPS bead
production. This gives StyroChem the ability to customize EPS bead formulas to
meet any special customer
33
<PAGE>
requirements. StyroChem's quality control program includes testing every
production batch of EPS beads to ensure it meets specific customer
requirements. Each batch is tested for particle sizes, pentane gas volume and,
if the EPS beads are to be used for insulation, their fire retardation
capability.
Engineering
The Company employs more than 40 full-time technical personnel, including 30
full-time engineers and engineering managers, based in the Phoenix, Corte
Madera and Fort Worth facilities. The engineering staff uses computer-aided
design and computer-aided manufacturing systems to design advanced, three-
dimensional models of products and molds. Once an electronic image of the
machine and mold part design is generated, the part can be custom
manufactured. The Company has the capacity to construct all of the proprietary
equipment and machines used in the production, testing and packaging of its
foam products. The Company has also developed and is installing in its
manufacturing facilities automated materials handling equipment which includes
in-line printing, automatic case packaging equipment and more advanced molding
machines.
The Company continually examines how to improve its manufacturing process
efficiencies. Sophisticated infra-red imaging systems, providing real-time
video displays, are used to evaluate the thermal efficiency of molds and
machines under development. The Company also can create special prototype mold
forms for new lid designs and single-cavity cup and container molds, both of
which enhance the Company's ability to evaluate customer design requests
rapidly.
RAW MATERIALS
The Company's foam products are manufactured from EPS beads, which are
produced from styrene monomer. Styrene monomer is a commodity petrochemical
that is readily available in bulk quantities from numerous large, vertically
integrated chemical companies. Styrene monomer prices have fluctuated
significantly as a result of changes in petrochemical prices and the capacity,
supply and demand for styrene monomer. For example, the contract price for
styrene monomer ranged from $.23 to $.25 per pound during 1993, rose to $.40
per pound during 1994 and to $.52 per pound during 1995, before decreasing to
$.29 per pound by the end of 1995. Styrene monomer prices during 1996 ranged
from $.27 to $.30 per pound. During 1997, styrene monomer prices have ranged
from $.27 to $.28 per pound. Styrene monomer purchases during 1996 represented
approximately 29% of the Company's cost of goods sold on a pro forma basis.
The StyroChem Acquisition will not insulate the Company from price
fluctuations for styrene monomer, although it will mitigate the impact of such
fluctuations by increasing the Company's flexibility to purchase styrene
monomer. StyroChem has historically purchased all of its styrene monomer
pursuant to a contract with Chevron. In December 1996, the Company
renegotiated its contract with Chevron, to provide a long-term supply of
styrene monomer with volume discounts. The initial term of the new contract
will extend for seven years. Under the contract, the Company will be required
to purchase the first 120 million pounds of its styrene monomer requirements
per year from Chevron and will have certain rights to purchase additional
styrene monomer.
The Company also has a short-term supply contract for EPS beads with Nova
Chemicals, Inc. This contract provides that the Company has the obligation to
purchase 16 million pounds of EPS beads at a price based upon a styrene
monomer index published in an industry trade journal by an independent third
party. The Company purchases additional amounts of EPS beads from Nova
Chemicals, Inc. on substantially the same terms as this contract.
StyroChem purchases high-purity pentane, which is used as the expanding
agent in the production of EPS beads, from South Hampton Refining Co. and
Ashland Chemical Company. High-purity pentane is available from a limited
number of suppliers. Should high-purity pentane become unavailable, however,
high-purity butane may be substituted as the expanding agent.
34
<PAGE>
The raw materials used by the Company for the manufacture of thermoformed
lids are primarily plastic resins such as HIPS. The Company's HIPS resin
supplies are purchased under agreements with Huntsman Chemical Corp., Chevron,
BASF Corporation and Fina Oil & Chemical Company. Most of the Company's
agreements to purchase HIPS resin contain minimum and maximum purchase
requirements. Furthermore, with the exception of the Company's agreement with
Chevron, the price the Company pays for HIPS resin is determined at the time
of purchase. Most of the plastic resins used by the Company, including HIPS,
are available from a variety of sources.
PROPRIETARY TECHNOLOGY AND TRADEMARKS
The Company has developed a broad array of proprietary technology that is
utilized in various stages of its manufacturing operations. The Company relies
primarily upon confidentiality agreements and restricted plant access to
protect its proprietary technology. The Company does own or hold license
rights with respect to numerous patents relating to its lid design in
manufacturing, embossed cup design and continuous formed foam cup
manufacturing processes. However, the Company does not consider these patents
material to its operations.
The Company holds approximately 30 registered trademarks. The Company does
not consider these trademarks material to its operations.
Pursuant to a license agreement (the "Dixie Agreement"), James River granted
the Company a royalty-free, non-exclusive, non-transferable license to use the
Dixie name on boxes, packaging materials, plastic drinking cups and lids
manufactured by the Company and sold to Sam's Club Division. The Dixie
Agreement terminates on the expiration of a separate Sales Agent Agreement
between the Company and James River concerning sales to Sam's Club Division.
This Sales Agent Agreement, scheduled to expire on January 20, 1997, has been
extended for a new, five-year term which will expire on January 20, 2002.
Pursuant to another license agreement, James River granted the Company a
royalty-free, non-exclusive, non-transferable license to use a patent relating
to a beverage container lift tab lid with an accordion hinge.
COMPETITION
The Company competes in the highly competitive foodservice industry. The
foam segment of the disposable cup and container market is highly concentrated
and, within this segment, the Company competes principally with Dart, which
has significantly greater financial resources than the Company and controls
the largest share of this market segment. The Company does not believe that
companies operating in related markets are likely to enter the foam segment
due to the significant investment that would be required.
The Company believes that competition within the foam segment of the market
is based primarily on customer service, product quality and the price at which
products are offered. The Company believes that its market position is
attributable to its high level of customer service and product quality,
strategically located manufacturing facilities, proprietary technology and
experienced management team.
The Company also competes with the paper segment, which is more fragmented
than the foam segment. The Company believes that competition between foam and
paper is based on product appearance, quality and price.
StyroChem also competes in a concentrated industry. Management believes that
each of Nova Chemicals, Inc., Huntsman Chemical Corp. and BASF Corporation,
which are larger and have greater financial resources than the Company,
controls a significant share of the market for supplying EPS beads
35
<PAGE>
to manufacturers of insulation and packaging products. The Company believes
that competition within this industry is primarily based on price, although
customer service and support can be a significant competitive factor,
particularly among the smaller manufacturers of foam insulation and packaging
products.
ENVIRONMENTAL MATTERS
The Company's facilities are used for manufacturing or warehousing of foam
container products or the EPS beads from which such products are manufactured.
Many of these facilities are subject to federal, state, local and, in one
case, foreign laws and regulations relating to, among other things, emissions
to air, discharges to water and the generation, handling, storage,
transportation and disposal of hazardous and non-hazardous materials and
wastes.
Certain of the Company's manufacturing facilities generate air emissions,
including volatile organic compounds and particulate matter, that are
regulated and require permits and/or emissions control equipment. While the
Company believes that the majority of the air emissions from its facilities
are properly permitted and controlled, certain of the Company's facilities
have been cited for instances of noncompliance, although no material citations
were issued within the periods covered by the Financial Statements included in
this Prospectus and all of these citations have been resolved without a
material adverse effect on the Company's financial condition or results of
operations. Certain of the Company's facilities also have failed to report
certain emissions as required, and it is possible that certain of these
permits do not address all regulated emissions and that certain of the
facilities are not in full compliance with all permit conditions. The Company
has no knowledge of any claims regarding air emissions that could be expected
to have a material adverse effect on the Company's financial condition or
results of operations. The Company believes that the costs of achieving and
maintaining compliance with laws and regulations regarding air emissions are
not reasonably likely to have a material adverse effect on the Company's
financial condition or operating results, based on its prior experience in
addressing compliance matters that raised potentially similar issues for other
facilities and on the existence of the StyroChem environmental escrow.
However, it is possible that the Company could incur significant fines,
penalties or capital costs associated with any confirmed noncompliance.
Furthermore, there can be no assurance that future environmental laws or
regulations, or permit requirements under Title V of the Clean Air Act, will
not require substantial expenditures by the Company or significant
modifications of the Company's operations.
Certain of the Company's manufacturing facilities generate wastewater that
is regulated and requires permits for discharge. While the Company believes
that the majority of the wastewater discharges from its facilities are
properly permitted, certain of the Company's facilities have been cited for
instances of past noncompliance, although the only material citation issued
within the periods covered by the Financial Statements included in this
Prospectus was in 1995 for alleged noncompliance by a StyroChem Fort Worth,
Texas facility with a municipal wastewater discharge ordinance. All of these
citations, including the StyroChem citation, have been resolved without a
material adverse effect on the Company's financial condition or results of
operations. Moreover, it is possible that certain of the Company's facilities
currently lack proper wastewater discharge permits and/or are not in full
compliance with all permit conditions. The Company has no knowledge of any
claims regarding wastewater discharge that could be expected to have a
material adverse effect on the Company's financial condition or results of
operations. The Company believes that the costs of achieving and maintaining
compliance with laws and regulations regarding wastewater discharges is not
reasonably likely to have a material adverse effect on the Company's financial
condition or results of operations, based both on the Company's prior
experience in obtaining similar permits or addressing compliance matters that
raised potentially similar issues for other facilities and on preliminary
estimates of the cost of addressing such potential permit issues, which would
be within the scope of, and are preliminarily estimated to be significantly
less than, the StyroChem environmental
36
<PAGE>
escrow. However, it is possible that the Company could become subject to
significant fines, penalties or capital costs associated with any confirmed
noncompliance. Furthermore, there can be no assurance that future
environmental laws or regulations will not require substantial expenditures by
the Company or significant modifications of the Company's operations.
The Company generates and handles certain hazardous substances, including
petroleum products, and wastes in connection with its manufacturing processes.
The handling and disposal of these substances and wastes is subject to
federal, state and local regulations, and site contamination originating from
the release or disposal of such substances or wastes can lead to significant
liabilities. It is possible that certain of the Company's current or former
facilities are or were not in full compliance with applicable laws regarding
the handling and disposal of these substances and wastes. The soil and shallow
groundwater at the StyroChem facilities are known to contain elevated levels
of various contaminants. However, the Company does not believe, based on the
results of soil and groundwater testing, that material remediation efforts
with respect to these conditions will be required. Although the Company
believes that the elevated levels of various contaminants in the soil and
shallow groundwater at the StyroChem facilities and any confirmed
noncompliance with applicable laws regarding the handling and disposal of
certain hazardous substances have not had, and are not reasonably likely to
have, either individually or in the aggregate, a material adverse effect on
the Company's financial condition or results of operations, and the Company
has no knowledge of claims that could be expected to have a material adverse
effect on its financial condition or operations, there can be no assurance
that the Company will not incur significant costs, fines or penalties in
connection with historical on- or off-site handling or disposal of such
substances and wastes or cleanup costs for site contamination.
The Company owns and operates underground storage tanks ("USTs") at two of
its facilities for the storage of liquid pentane and diesel fuel. Leak
detection or containment systems are in place at both facilities. One of the
tanks, located at the StyroChem Fort Worth, Texas facility, was recently
pressure tested and no leaks were detected. USTs are generally subject to
federal, state and local laws and regulations that require testing and
upgrading of USTs and remediation of polluted soils and groundwater resulting
from leaking USTs. In addition, if leakage from the Company's UST migrates
onto the property of others, the Company may be subject to civil liability to
third parties for remediation costs or other damages. Based on historical
experience, the Company believes that its liabilities associated with UST
testing, upgrades and remediation are unlikely to have a material adverse
effect on its financial condition or operating results.
Certain of the Company's current and former facilities are located in
industrial areas and have been in operation for many years. As a consequence,
it is possible that historical or neighboring activities have affected
properties currently or formerly owned by the Company and that, as a result,
additional environmental issues may arise in the future, the precise nature of
which the Company cannot now predict.
As part of the StyroChem Acquisition, approximately $1.4 million of the
purchase price has been placed in escrow and may be used by the Company to
offset certain expenses associated with specified environmental matters
relating to StyroChem's Texas and Quebec facilities. The categories of
expenses which may be offset with these escrowed funds include consulting
fees, fines and penalties, costs of process changes, costs of changes to and
upgrades, purchases and installation of equipment and/or facilities and any
other capital expenditures for fixed assets, and costs of investigation and
remediation work. The specified environmental matters include matters relating
to compliance with air, wastewater, hazardous and solid waste, and stormwater
permits and laws, as well as matters relating to soil, surface water and
shallow groundwater conditions associated with past operations at StyroChem's
Texas and Quebec facilities and at neighboring properties. However, there can
be no assurance that the escrowed funds will be sufficient to offset all
expenses associated with such environmental matters.
37
<PAGE>
FACILITIES
The Company leases approximately 8,000 square feet in Radnor, Pennsylvania,
a suburb of Philadelphia, for its executive offices.
The Company owns or leases manufacturing, office and warehouse facilities at
the locations shown in the following table:
<TABLE>
<CAPTION>
SIZE
(APPROX.
OWNED/ SQUARE TYPE OF
LOCATION LEASED FEET) FACILITY(1)
-------- ------ -------- -----------
<S> <C> <C> <C>
Radnor Facilities:
Corte Madera, California (3 facilities)............. L 40,880 M
L 38,000 W
L 6,590 O/MA
Richmond, California................................ L 103,000 W
El Campo, Texas..................................... O 91,000 M/W
Higginsville, Missouri.............................. O 68,000 M/W
Jacksonville, Florida............................... L 128,090 M/W
Edison, New Jersey.................................. L 94,696 W
Metuchen, New Jersey................................ O 85,000 M
Mount Sterling, Ohio................................ O 50,000 M/W
Shreveport, Louisiana............................... O 73,260 M/W
Stone Mountain, Georgia (2 facilities).............. L 170,375 M
L 145,000 W
Phoenix, Arizona (2 facilities)..................... L 169,840 M
L 12,174 MA
West Chicago, Illinois (4 facilities)............... O 87,249 M
O 67,620 W
O 42,411 O/W
L 90,000 W
StyroChem Facilities:
Fort Worth, Texas (2 facilities).................... O 20,874 M/W/O
L 54,810 W
Saginaw, Texas (2 facilities)....................... O 36,988 M/W/O
O 68,999 M/W/O
Baie D'Urfe, Quebec (2 facilities).................. O 16,200 M/O
L 74,000 W
</TABLE>
- --------
(1) M = Manufacturing; W = Warehouse; O = Office; MA = Machine assembly.
The Company's Corte Madera, California facilities are leased by a third
party landlord to James River. The Company and James River entered into a
sublease expiring June 30, 1998 for the Corte Madera facilities. The Company
intends to use reasonable efforts to negotiate a new lease for the
manufacturing and warehouse facilities with the landlord prior to the
expiration of the sublease.
The Company occupies its Baie D'Urfe, Quebec warehouse facility under a
month-to-month sublease that is terminable by either party upon 45 days' prior
notice.
The Company believes that its present facilities are adequate for its
current and projected operations.
EMPLOYEES
As of December 27, 1996, Radnor and StyroChem had 1,335 and 138 full-time
employees, respectively. The Company's employees are not represented by any
union. The Company considers its relations with its employees to be good.
38
<PAGE>
LEGAL PROCEEDINGS
On November 25, 1996, Jackson National Life Insurance Company ("Jackson")
and Benchmark Holdings, Inc. ("Holdings") filed suit in Cook County, Illinois
Circuit Court against Michael T. Kennedy, Radnor, WinCup, the Joint Venture,
James River and James River Corporation of Virginia. The suit relates to the
November 1995 sale to James River by Holdings of substantially all of
Holdings' assets, consisting of its cutlery and straws operations, and by
WinCup of its plastic cup operations. See Note 1 to the Radnor Financial
Statements. Holdings had issued to Jackson certain shares of nonvoting
preferred stock in connection with the May 1991 acquisition of the cutlery and
straws operations, in which Jackson previously held an unsecured subordinated
debt position.
The suit alleges that, in connection with such sale, (i) certain terms of
the nonvoting preferred stock held by Jackson were breached, (ii) Mr. Kennedy
breached his fiduciary duties to Jackson and Holdings and (iii) Radnor and
certain defendants committed fraud that prevented Jackson from exercising
certain alleged rights as a nonvoting preferred stockholder in a timely manner
so as to prevent the sale from occurring. The suit seeks a broad range of
remedies, including rescission of the November 1995 sale to James River,
payment to Holdings of the profits received by James River and the Joint
Venture since the sale and the Joint Venture's formation, disgorgement of $2.5
million received by certain former key employees of Holdings in consideration
for certain noncompetition covenants, payment by WinCup to Holdings of the $10
million of sale proceeds allocated to the assets sold by WinCup, payment to
Holdings of all funds distributed to WinCup, Radnor and James River in
connection with the formation of the Joint Venture and costs of suit.
Alternatively, the suit seeks actual damages in excess of $30 million and
punitive damages in excess of $10 million, together with costs of suit.
The Company believes that the allegations in the complaint are without
merit. Holdings, through its investment banker, actively solicited a large
number of prospective purchasers regarding the sale of the cutlery and straws
operations. The Company believes that Jackson had no right to prevent the sale
of Holdings' assets. In connection with the sale, Holdings obtained opinions
from independent investment banking firms as to the fairness, from a financial
point of view, of the transaction to Holdings' stockholders and as to the
reasonableness of the negotiated value of the noncompetition agreements. The
proceeds received by Holdings from the sale of the cutlery and straws
operations, together with all remaining assets of Holdings, were significantly
less than the aggregate outstanding indebtedness of Holdings. As a result, no
proceeds were available for distribution to any of Holdings' stockholders,
including Jackson. The Company intends to defend this suit vigorously and does
not believe that the suit will have a material adverse effect on the Company's
financial condition or results of operations.
The Company is also involved in a number of legal proceedings arising in the
ordinary course of business, none of which is expected to have a material
adverse effect on the Company's financial condition or results of operations.
39
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The sole director and executive officers of the Company and their ages as of
March 1, 1997 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Michael T. Kennedy.......... 42 President, Chief Executive Officer and Director
Michael V. Valenza.......... 37 Senior Vice President--Finance
Richard C. Hunsinger........ 48 Senior Vice President--Sales and Marketing
Donald D. Walker............ 55 Senior Vice President--Operations
John P. McNiff.............. 36 Senior Vice President--Corporate Development
R. Radcliffe Hastings....... 46 Senior Vice President, Treasurer
Donald C. Rogalski.......... 51 Senior Vice President--Administration
John P. McKelvey............ 56 Vice President--Human Resources
Van D. Groenwold............ 64 Vice President--Engineering
</TABLE>
Michael T. Kennedy has served as President, Chief Executive Officer and the
sole director of the Company since its formation in November 1991. Between
March 1985 and July 1990, Mr. Kennedy served as Chief Financial Officer of
Airgas, Inc., a New York Stock Exchange-listed distributor of industrial
gases. Mr. Kennedy is also a director of Consolidated Asset Management, Inc.
Michael V. Valenza has served as Senior Vice President-Finance of the
Company since April 1993. He joined the Company in September 1992 as Director
of Finance. From 1984 until joining the Company, Mr. Valenza served in a
variety of positions with Arthur Andersen LLP, most recently as a manager in
the Enterprise Group.
Richard C. Hunsinger has served as Senior Vice President-Sales and Marketing
of the Company since its formation in November 1991. From 1979 through August
1991, Mr. Hunsinger served in various management positions, including Vice
President of Sales and Marketing, for Winkler/Flexible Products, Inc., a
former division of The Coca Cola Company.
Donald D. Walker has served as Senior Vice President-Operations of the
Company since November 1992. Mr. Walker served as Vice President of
Manufacturing and as Director of Manufacturing of the Company from February
1992 through November 1992. From 1969 until February 1992, Mr. Walker served
in various management positions with Scott Container Products Group, Inc.
(WinCup's predecessor), WMF Corporation and Thompson Industries.
John P. McNiff has served as Senior Vice President-Corporate Development of
the Company since its formation in November 1991. Previously Mr. McNiff was
Vice President-Corporate Development of Airgas, Inc., a New York Stock
Exchange-listed distributor of industrial gases. Mr. McNiff is also a director
of Consolidated Asset Management, Inc.
R. Radcliffe Hastings has served as Senior Vice President and Treasurer of
the Company since June 1996. Previously, Mr. Hastings was with Continental
Bank, N.A. and its successor, Bank of America, for 18 years. Mr. Hastings has
held a variety of management positions in the U.S. banking group and in Bank
of America's securities operation, BA Securities, Inc. and was most recently
Managing Director of the Money Manager Group.
Donald C. Rogalski has served as Senior Vice President-Administration of the
Company since July 1993. Previously Mr. Rogalski held the positions of Chief
Financial Officer and Vice President of Finance for Stiffel Lamp Co. for seven
years. Prior to that, Mr. Rogalski worked for Packard Instrument Company for
nine years, with his last position there as Controller.
40
<PAGE>
John P. McKelvey has served as Vice President--Human Resources for the
Company since October 1992. From February 1992 until October 1992, Mr.
McKelvey was Director of Human Resources for the Company. From 1971 until
joining the Company, Mr. McKelvey served in a variety of human resources
management positions for Scott Container Products Group, Inc., Texstyrene
Corporation, WMF Corporation and Thompson Industries.
Van D. Groenwold has served as Vice President--Engineering for the Company
since November 1992. From February 1992 until November 1992, Mr. Groenwold was
Director of Engineering for the Company. From 1982 until joining the Company,
Mr. Groenwold held various engineering and quality assurance management
positions with Scott Container Products Group, Inc., WMF Corporation and
Thompson Industries.
The Company anticipates adding directors, including non-employee directors,
to its Board of Directors following the consummation of the Exchange Offer.
DIRECTOR AND EXECUTIVE COMPENSATION
Mr. Kennedy does not receive separate compensation for his service as a
director of the Company. The following table sets forth certain information
concerning the compensation paid to the Company's chief executive officer and
the Company's four other most highly compensated executive officers whose
total annual salary and bonus exceeded $100,000 (collectively, the "Named
Executive Officers") for the year ended December 27, 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1)
--------------------------- ---- -------- -------- ---------------
<S> <C> <C> <C> <C>
Michael T. Kennedy........................ 1996 $863,597 $ -- $4,276
President and Chief Executive Officer
Michael V. Valenza........................ 1996 126,923 100,000 3,536
Senior Vice President--Finance
Richard C. Hunsinger...................... 1996 146,742 50,000 4,654
Senior Vice President--Sales and Market-
ing
Donald D. Walker.......................... 1996 146,154 50,000 5,550
Senior Vice President--Operations
R. Radcliffe Hastings..................... 1996 85,755 200,266 275
Senior Vice President and Treasurer
</TABLE>
- --------
(1) Includes Company matching contributions under the 401(k) Retirement
Savings Plan and payments of premiums for certain supplementary term life
insurance coverage as follows:
<TABLE>
<CAPTION>
LIFE
401(K) INSURANCE
NAME YEAR CONTRIBUTION PREMIUM
---- ---- ------------ ---------
<S> <C> <C> <C>
Michael T. Kennedy.................................. 1996 $3,766 $ 510
Michael V. Valenza.................................. 1996 3,359 177
Richard C. Hunsinger................................ 1996 4,070 584
Donald D. Walker.................................... 1996 4,073 1,477
R. Radcliffe Hastings............................... 1996 -- 275
</TABLE>
41
<PAGE>
FISCAL YEAR-END OPTIONS VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING
UNEXERCISED OPTIONS AT
DECEMBER 27, 1996(/1/)
-------------------------
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
<S> <C> <C>
Michael T. Kennedy.................................... -- --
Michael V. Valenza.................................... 16 22
Richard C. Hunsinger.................................. 50 50
Donald D. Walker...................................... 45 55
R. Radcliffe Hastings................................. -- --
</TABLE>
- --------
(1) As of December 27, 1996, based on the estimated fair value (as determined
by the Company's Board of Directors) of the underlying securities, there
were no unexercised in-the-money options.
EMPLOYMENT AGREEMENTS
In January 1996, the Company entered into an employment agreement with
Michael T. Kennedy pursuant to which Mr. Kennedy serves as the President,
Chief Executive Officer and Chairman of the Board of Directors. The agreement
is for an initial term of five years and, absent 180 days' prior written
notice by either party before the end of the initial or any renewal term,
renews from year to year thereafter; provided, however, that the agreement is
terminable by Mr. Kennedy at any time on 180 days' prior written notice. Mr.
Kennedy is entitled to an annual salary of $360,000, subject to annual review
by the Board of Directors. The agreement contains a covenant not to compete in
any business that sells or manufactures one-piece foam cups in the U.S. or
Canada during his employment and for a period of five years following any
termination of such employment.
In May 1993, the Company entered into an employment agreement with Richard
C. Hunsinger, which was amended in January 1996, pursuant to which Mr.
Hunsinger serves as Senior Vice President--Sales and Marketing of the Company.
The agreement is for an initial term of seven years and six months and, absent
180 days' prior written notice by either party before the end of the initial
or any renewal term, renews from year to year thereafter. Under the agreement
as amended, Mr. Hunsinger is entitled to an annual salary of not less than
$145,000 beginning in 1996, subject to annual cost of living increases. The
agreement contains a covenant not to engage in any business that is
competitive with the business of the Company in any geographical area in which
it does business during the term of the agreement and for a period of two
years immediately following the termination of the agreement.
In April 1996, the Company entered into an employment agreement with R.
Radcliffe Hastings, pursuant to which Mr. Hastings serves as Senior Vice
President and Treasurer of the Company. The agreement is for an initial term
of three years and, absent 90 days' prior written notice by either party
before the end of the initial or any renewal term, renews from year to year
thereafter. Mr. Hastings received a bonus of $64,000 upon the signing of the
agreement, and is entitled to an annual salary of not less than $125,000,
subject to annual review by the Board of Directors. The agreement contains a
covenant not to compete in any business that is competitive with the business
of the Company in the U.S. during the term of the agreement.
CERTAIN TRANSACTIONS
The Company has advanced $75,000 on a non-interest-bearing basis to Michael
V. Valenza, the Company's Senior Vice President--Finance, for certain incurred
relocation costs.
42
<PAGE>
LIMITATION OF LIABILITY; INDEMNIFICATION
As permitted by the General Corporation Law of the State of Delaware, the
Company's Certificate of Incorporation provides that directors of the Company
will not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the General Corporation Law of the State of Delaware, relating to
prohibited dividends, distributions and repurchases or redemptions of stock,
or (iv) for any transaction from which the director derives an improper
personal benefit. However, such limitation of liability would not apply to
violations of the federal securities laws, nor does it limit the availability
of non-monetary relief in any action or proceeding against a director. The
Certificate of Incorporation also includes provisions for indemnification of
the Company's directors and officers to the fullest extent permitted by the
General Corporation Law of the State of Delaware as now or hereafter in
effect. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the Company has been
informed that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
43
<PAGE>
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 1, 1997, with
respect to each person who is known by the Company to own beneficially 5% or
more of each class of voting securities of the Company.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT
NAME OF INDIVIDUAL TITLE OF CLASS OF BENEFICIALLY OF
OR IDENTITY OF GROUP CAPITAL STOCK OWNED(/1/) CLASS
-------------------- ------------------- ------------ -------
<S> <C> <C> <C>
Michael T. Kennedy..................... Voting Common Stock 510.1 85.02%
Three Radnor Corporate Center
Suite 300
100 Matsonford Road
Radnor, PA 19087
John P. McNiff......................... Voting Common Stock 60.0 10.00%
Three Radnor Corporate Center
Suite 300
100 Matsonford Road
Radnor, PA 19087
</TABLE>
- --------
(1) Gives effect to the recapitalization in October 1996, pursuant to which
each outstanding share of Voting Common Stock was converted into 0.1
shares of Voting Common Stock and 0.9 shares of Class B Nonvoting Common
Stock.
The following table sets forth certain information as of March 1, 1997, with
respect to beneficial ownership of each class of equity securities of the
Company by (a) the director of the Company, (b) the Named Executive Officers
and (c) the director and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT
NAME OF INDIVIDUAL TITLE OF CLASS OF BENEFICIALLY OF
OR IDENTITY OF GROUP CAPITAL STOCK OWNED(/1/) CLASS(/2/)
-------------------- ------------------------------ ------------ ----------
<S> <C> <C> <C>
Michael T. Kennedy...... Voting Common Stock 510.1 85.02%
Class B Nonvoting Common Stock 3,929.9 72.78%
Michael V. Valenza...... Nonvoting Common Stock 44.0 16.36%
Richard C. Hunsinger.... Nonvoting Common Stock 120.0 38.10%
Donald D. Walker........ Nonvoting Common Stock 115.0 37.10%
R. Radcliffe Hastings... Voting Common Stock 29.9 4.98%
Class B Nonvoting Common Stock 370.1 6.85%
Director and executive
officers as a group
(9 persons)............ Voting Common Stock 600.0 100.00%
Class B Nonvoting Common Stock 4,840.0 89.63%
Nonvoting Common Stock 453.0 89.17%
</TABLE>
- --------
(1) Includes shares of Nonvoting Common Stock that certain individuals have
the right to acquire, on or before April 30, 1997, upon the exercise of
stock options granted pursuant to the Company's Equity Incentive Plan, as
follows: Michael V. Valenza--24; Richard C. Hunsinger--70; Donald D.
Walker--65; and the director and all executive officers as a group--263.
Gives effect to the recapitalization in October 1996, pursuant to which
each outstanding share of Voting Common Stock was converted into 0.1
shares of Voting Common Stock and 0.9 shares of Class B Nonvoting Common
Stock.
(2) Based upon 600, 245 and 5,400 outstanding shares of Voting Common Stock,
Nonvoting Common Stock and Class B Nonvoting Common Stock, respectively.
44
<PAGE>
DESCRIPTION OF THE COMPANY'S CREDIT FACILITIES
THE AMENDED CREDIT AGREEMENT
On December 5, 1996, the Company entered into an Amended and Restated
Revolving Credit and Security Agreement (the "Amended Credit Agreement") with
The Bank of New York Commercial Corporation, as agent and lender, pursuant to
which the Revolving Credit, Term Loan and Security Agreement dated January 22,
1996 (the "Existing Credit Agreement") was amended and restated. The Amended
Credit Agreement includes the Company and its U.S. subsidiaries as borrowers.
The Amended Credit Agreement provides for a revolving credit facility in the
aggregate principal amount of up to $30.0 million. Revolving loans under the
Amended Credit Agreement are limited, in the aggregate, to the lesser of the
$30.0 million commitment amount and a "borrowing base" amount less, in each
case, the principal amount of outstanding letters of credit. The borrowing
base may not exceed the sum of: (i) 85% of eligible accounts receivable, plus
(ii) the lesser of $15.0 million or 60% of eligible raw materials and finished
goods inventories of the Company and its U.S. subsidiaries. In addition, there
is a $5.0 million sublimit on standby letters of credit and a $1.0 million
sublimit on documentary letters of credit.
Revolving loans under the Amended Credit Agreement bear interest payable at
the Company's option at a rate not greater than either (i) the sum of 0.25%
plus a rate equal to the greater of (a) Bank of New York's prime rate or (b)
the sum of the federal funds rate plus 0.5% or (ii) the sum of 1.75% plus a
rate equal to the LIBOR rate with respect to the period during which such
interest rate shall be applicable. The revolving loans under the Amended
Credit Agreement will mature on January 22, 2001. In addition, the Amended
Credit Agreement provides for a fee of 0.375% per annum on the undrawn amount
of the credit facility and letter of credit fees of 1.75% and 1.5% of the
aggregate face amount of standby letters of credit and documentary letters of
credit, respectively, under the Amended Credit Agreement. The Amended Credit
Agreement provides for an agency fee, payable annually during the term of the
Amended Credit Agreement, in the amount of $90,000 per year. Under certain
circumstances, if the Company elects to terminate the Amended Credit
Agreement, the Company will incur a prepayment penalty of $1.5 million prior
to January 22, 1997, $1.0 million prior to January 22, 1998 and $500,000 prior
to January 22, 1999.
The Amended Credit Agreement contains certain restrictive covenants that,
among other things, impose limitations upon the Company's ability to merge,
consolidate or dispose of assets; incur liens; make loans and investments;
incur indebtedness; engage in certain transactions with affiliates; incur
certain contingent obligations; pay dividends and other distributions; enter
into lease arrangements; form subsidiaries and make capital expenditures. The
obligations of the Company under the Amended Credit Agreement are secured by a
lien on all of the Company's and its U.S. subsidiaries' inventory, accounts
receivable, general intangibles, trademarks and licenses and the proceeds
thereof.
The Amended Credit Agreement contains events of default customary for
facilities of its type, including without limitation, the Company's failure to
pay principal, interest, fees or other amounts when due; the Company's
material breach of any covenants, representations or warranties; cross-default
and cross-acceleration; change of control of the Company; bankruptcy,
insolvency or similar events involving the Company or its U.S. subsidiaries;
certain adverse events under ERISA plans of the Company or its U.S.
subsidiaries and any of the agreements or liens securing payment of the
obligations under the Amended Credit Agreement ceasing to be enforceable.
THE CANADIAN CREDIT AGREEMENT
The Company's Canadian subsidiary has entered into the Agreement Respecting
a Term Loan and other Credit Facilities dated February 25, 1994 between
StyroChem International, Ltd. ("StyroChem
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Limited") and the Bank of Montreal (as amended through annual review
processes, the "Canadian Credit Agreement"). The credit facilities under the
Canadian Credit Agreement consist of the following: (i) a term loan in the
principal amount of $0.7 million Canadian (the "Canadian Term Loan") and (ii)
a revolving credit facility with a borrowing capacity of up to $2.5 million
Canadian, that includes a letter of credit subfacility and a Foreign Exchange
Future Contracts subfacility (the "Canadian Revolver").
Canadian Dollar advances under the Canadian Revolver bear interest at a rate
equal to the Bank of Montreal's prime rate plus 1.0%. U.S. Dollar advances
under the Canadian Revolver bear interest at the Bank of Montreal's U.S. base
rate plus 1.0%. Loans under the Canadian Revolver are payable on demand. The
Canadian Term Loan bears interest at the Bank of Montreal's prime rate plus
1.5% and is payable in equal quarterly installments of $81,250 Canadian
through the last banking day of November 1998. The Canadian Term Loan is
subject to mandatory prepayments in an amount equal to 100% of the net cash
proceeds from the permitted sale or sale/leaseback of any of StyroChem
Limited's fixed assets, to the extent such proceeds are not reinvested in
replacement assets.
The Canadian Credit Agreement contains covenants that, among other things,
impose limitations upon StyroChem Limited's ability to merge, consolidate or
dispose of assets; make loans and investments; incur indebtedness; engage in
certain transactions with affiliates; pay dividends and other distributions;
make capital expenditures and amend certain material contracts to which it is
a party.
The obligations of StyroChem Limited under the Canadian Credit Agreement are
secured by a first priority perfected security interest in all of the material
assets of StyroChem Limited. In addition, SP Acquisition Co. guaranteed the
obligations of StyroChem Limited under the Canadian Credit Agreement up to a
maximum amount of $3.3 million Canadian. SP Acquisition Co. has pledged all of
the issued and outstanding shares of StyroChem Limited as security for its
obligations under its guarantee. Certain long-term advances payable by
StyroChem Limited to SP Acquisition Co. and StyroChem International, Inc. are
subordinated to the obligations of StyroChem Limited under the Canadian Credit
Agreement.
The Canadian Credit Agreement contains customary events of default,
including without limitation, the following: StyroChem Limited's failure to
pay principal, interest, fees or other amounts when due; StyroChem Limited's
violation or material breach of any covenants, representations or warranties;
cross-default and cross-acceleration; change of control of StyroChem Limited;
bankruptcy, insolvency or similar events involving StyroChem Limited;
cessation of StyroChem Limited's business and the levy of certain material
judgments against StyroChem Limited.
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THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Old Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m.,
Philadelphia time, on , 1997; provided, however, that if the Company, in
its sole discretion, has extended the period of time during which the Exchange
Offer is open, the term "Expiration Date" means the latest time and date to
which the Exchange Offer is extended.
As of the date of this Prospectus, $100 million aggregate principal amount
of the Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1997, to all holders of
Old Notes known to the Company. The Company's obligation to accept Old Notes
for exchange pursuant to the Exchange Offer is subject to certain customary
conditions as set forth under "--Certain Conditions to the Exchange Offer"
below.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby acceptance for exchange of any Old Notes, by giving oral or written
notice of such extension to the holders thereof as described below. During any
such extension, all Old Notes previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by the Company. Any Old Notes
not accepted for exchange for any reason will be returned without expense to
the tendering holder thereof as promptly as practicable after the expiration
or termination of the Exchange Offer.
Old Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 or any integral multiple thereof.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted
for exchange, upon the occurrence of any of the conditions of the Exchange
Offer specified below under "--Certain Conditions to the Exchange Offer." The
Company will give oral or written notice of any extension, amendment, non-
acceptance or termination to the holders of the Old Notes as promptly as
practicable, such notice in the case of any extension to be issued by means of
a press release or other public announcement no later than 9:00 a.m.,
Philadelphia time, on the next business day after the previously scheduled
Expiration Date.
PROCEDURES FOR TENDERING OLD NOTES
Only a registered holder of Old Notes may tender such Old Notes in the
Exchange Offer. The tender to the Company of Old Notes by a holder thereof as
set forth below and the acceptance thereof by the Company will constitute a
binding agreement between the tendering holder and the Company upon the terms
and subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal. Except as set forth below, a holder who
wishes to tender Old Notes for exchange pursuant to the Exchange Offer must
transmit a properly completed and duly executed Letter of Transmittal,
including all other documents required by such Letter of Transmittal, to First
Union National Bank (the "Exchange Agent") at one of the addresses set forth
below under "Exchange Agent" on or prior to the Expiration Date. In addition,
either (i) certificates for such Old Notes must be received by the Exchange
Agent along with the Letter of Transmittal, (ii) a timely confirmation of a
book-entry transfer ("a Book-Entry Confirmation") of such Old Notes, if such
procedure is available, into the Exchange Agent's account at The Depository
Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedure
for book-entry transfer described below, must be received by the Exchange
Agent prior to the Expiration Date, or (iii) the holder must comply with the
guaranteed delivery procedures described below. THE METHOD OF
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DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS
IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS
RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT
REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE
COMPANY.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering
such owner's Old Notes, either make appropriate arrangements to register
ownership of the Old Notes in such beneficial owner's name or obtain a
properly completed bond power from the registered holder. The transfer of
registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "--Withdrawal Rights"), as the case may be, must be guaranteed (see
"--Guaranteed Delivery Procedures") unless the Old Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered holder of the Old
Notes who has not completed the box entitled "Special Issuance Instructions"
or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for
the account of an Eligible Institution (as defined below). In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantees must be by a financial
institution (including most banks, savings and loan associations and brokerage
houses) that is a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Program or the Stock Exchanges
Medallion Program (collectively, "Eligible Institutions"). If Old Notes are
registered in the name of a person other than a signer of the Letter of
Transmittal, the Old Notes surrendered for exchange must be endorsed by or be
accompanied by a written instrument or instruments of transfer or exchange, in
satisfactory form as determined by the Company in its reasonable judgment,
duly executed by the registered holder exactly as the name or names of the
registered holder or holders appear on the Old Notes with the signature
thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined
by the Company in its reasonable judgment, which determination shall be final
and binding. The Company reserves the right, in its reasonable judgment, to
reject any and all tenders of any particular Old Notes not properly tendered
or not to accept any particular Old Note which acceptance might, in the
reasonable judgment of the Company or its counsel, be unlawful. The Company
also reserves the right, in its reasonable judgment, to waive any defects or
irregularities or conditions of the Exchange Offer as to any particular Old
Notes before the Expiration Date (including the right to waive the
ineligibility of any holder who seeks to tender Old Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange Offer
as to any particular Old Notes before the Expiration Date (including the
Letter of Transmittal and the instructions thereto) by the Company shall be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of Old Notes for exchange must be cured within such
reasonable period of time as the Company shall determine. None of the Company,
the Exchange Agent or any other person shall be under any duty to give
notification of any defect or irregularity with respect to any tender of Old
Notes for exchange, nor shall any of them incur any liability for failure to
give such notification.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such person should so indicate when signing, and, unless waived by
the Company before the Expiration Date, proper evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
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By tendering, each holder will represent to the Company that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the holder, and that neither the holder
nor such other person has any arrangement or understanding with any person to
participate in the distribution of the New Notes. If any holder or any such
other person is an "affiliate," as defined under Rule 405 of the Securities
Act, of the Company or is engaged in or intends to engage in, or has an
arrangement or understanding with any person to participate in, a distribution
of such New Notes to be acquired pursuant to the Exchange Offer, such holder
or any such other person (i) may not rely on the applicable interpretation of
the staff of the SEC and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. Each broker-dealer that receives New Notes for its own account in
exchange for Old Notes pursuant to the Exchange Offer must acknowledge that
such Old Notes were acquired by such broker-dealer as a result of market-
making activities or other trading activities and that it will deliver a
prospectus in connection with any resale of such New Notes. See "Plan of
Distribution." The Letter of Transmittal states that by so acknowledging and
by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of
the Old Notes. See "--Certain Conditions to the Exchange Offer" below. For
purposes of the Exchange Offer, the Company will be deemed to have accepted
properly tendered Old Notes for exchange when, as and if the Company has given
oral or written notice thereof to the Exchange Agent.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive as set forth below under "Description of the Notes--Book-Entry,
Delivery and Form" a New Note having a principal amount equal to that of the
surrendered Old Note. Accordingly, registered holders of the New Notes on the
relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the
most recent date to which interest has been paid on the Old Notes or, if no
interest has been paid, from December 5, 1996. Old Notes accepted for exchange
will cease to accrue interest from and after the date of consummation of the
Exchange Offer. Holders whose Old Notes are accepted for exchange will not
receive any payment in respect of accrued interest on such Old Notes otherwise
payable on any interest payment date the record date for which occurs on or
after consummation of the Exchange Offer. If the Exchange Offer is not
consummated by May 4, 1997, the interest rate borne by the Old Notes shall be
increased by 25 basis points per annum for each 90-day period from and
including May 4, 1997 until but excluding the date of consummation of the
Exchange Offer, up to a maximum aggregate increase of 100 basis points per
annum. Old Notes not tendered or not accepted for exchange will continue to
accrue interest from and after the date of consummation of the Exchange Offer.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-
Entry Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are
not accepted for any reason set forth in the terms and conditions of the
Exchange Offer or if Old Notes are submitted for a greater principal amount
than the holder desires to exchange, such unaccepted or non-exchanged Old
Notes will be returned without expense to the tendering holder thereof (or, in
the case of Old Notes tendered by book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry
procedures described below, such non-exchanged Old Notes will be credited to
an account maintained with such
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<PAGE>
Book-Entry Transfer Facility) as promptly as practicable after the expiration
or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the Book-
Entry Transfer Facility, the Letter of Transmittal or a facsimile thereof,
with any required signature guarantees and any other required documents, must,
in any case, be transmitted to and received by the Exchange Agent at one of
the addresses set forth below under "--Exchange Agent" on or prior to the
Expiration Date or the guaranteed delivery procedures described below must be
complied with.
DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through DTC. To accept the Exchange Offer through
ATOP, participants in DTC must send electronic instructions to DTC through
DTC's communication system in place of sending a signed, hard copy of the
Letter of Transmittal. DTC is obligated to communicate those electronic
instructions to the Exchange Agent. To tender Old Notes through ATOP, the
electronic instructions sent to DTC and transmitted by DTC to the Exchange
Agent must contain the character by which the participant acknowledges its
receipt of, agrees to be bound by and confirms the representations, warranties
and other statements made by or deemed to be made by the participant pursuant
to the Letter of Transmittal.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes and
the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is
made through an Eligible Institution, (ii) on or prior to 5:00 p.m.,
Philadelphia time, on the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form provided by the Company (by telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of Old Notes and the amount of Old Notes tendered,
stating that the tender is being made thereby and guaranteeing that within
three New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with the
Exchange Agent, and (iii) the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution within three NYSE trading days after the
date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m.,
Philadelphia time, on the Expiration Date. For a withdrawal to be effective, a
written or electronic ATOP transmission (for DTC participants) notice of
withdrawal must be received by the Exchange Agent at one of the addresses set
forth below under "--Exchange Agent." Any such notice of withdrawal must
specify the name of the person being tendered the Old Notes to be withdrawn,
identify the Old Notes to be withdrawn (including
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the principal amount of such Old Notes), and (where certificates for Old Notes
have been transmitted) specify the name in which such Old Notes are
registered, if different from that of the withdrawing holder. If certificates
for Old Notes have been delivered or otherwise identified to the Exchange
Agent, then, prior to the release of such certificates the withdrawing holder
must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such holder is an Eligible Institution in which
case such guarantee will not be required. If Old Notes have been tendered
pursuant to the procedure for book-entry transfer described above, any notice
of withdrawal must specify the name and number of the account at the Book-
Entry Transfer Facility to be credited with the withdrawn Old Notes and
otherwise comply with the procedures of such facility. All questions as to the
validity, form and eligibility (including time of receipt) of such notices
will be determined by the Company, whose determination will be final and
binding on all parties. Any Old Notes so withdrawn will be deemed not to have
been validly tendered for exchange for purposes of the Exchange Offer. Any Old
Notes which have been tendered for exchange but which are not exchanged for
any reason will be returned to the holder thereof without cost to such holder
(or, in the case of Old Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described above, such Old Notes will be
credited to an account maintained with such Book-Entry Transfer Facility for
the Old Notes) as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under "--Procedures
for Tendering Old Notes" above at any time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, and subject to
its obligations pursuant to the Registration Rights Agreement, the Company
shall not be required to accept for exchange, or to issue New Notes in
exchange for, any Old Notes and may terminate or amend the Exchange Offer, if
at any time before the acceptance of such New Notes for exchange, any of the
following events shall occur:
(i) any injunction, order or decree shall have been issued by any court
or any governmental agency that would prohibit, prevent or otherwise
materially impair the ability of the Company to proceed with the Exchange
Offer; or
(ii) the Exchange Offer will violate any applicable law or any applicable
interpretation of the staff of the SEC.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company in whole or in part at any time and from time to time
in its reasonable discretion. The failure by the Company at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and such right shall be deemed an ongoing right which may be asserted at
any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes,
if at such time any stop order is threatened by the SEC or in effect with
respect to the Registration Statement of which this Prospectus is a part or
the qualification of the Indenture under the Trust Indenture Act of 1939, as
amended.
The Exchange Offer is not conditioned on any minimum principal amount of Old
Notes being tendered for exchange.
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EXCHANGE AGENT
First Union National Bank has been appointed as the Exchange Agent for the
Exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at one of the addresses set forth below. Questions and requests
for assistance, requests for additional copies of this Prospectus or of the
Letter of Transmittal and requests for Notices of Guaranteed Delivery should
be directed to the Exchange Agent addressed as follows:
First Union National Bank, Exchange Agent
123 South Broad Street
12th Floor
PA 1249
Corporate Trust Administration
Philadelphia, PA 19109
By Hand or Overnight Courier:
123 South Broad Street
12th Floor
PA 1249
Corporate Trust Administration
Philadelphia, PA 19109
By Facsimile:
(215) 985-3428
Confirm by Telephone:
(215) 985-7207
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers, or others
soliciting acceptances of the Exchange Offer.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
$150,000.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct
the Company to register New Notes in the name of, or request that Old Notes
not tendered or not accepted in the Exchange Offer be returned to, a person
other than the registered tendering holder will be responsible for the payment
of any applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions
in the Indenture regarding transfer and exchange of the
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Old Notes and the restrictions on transfer of such Old Notes as set forth in
the legend thereon as a consequence of the issuance of the Old Notes pursuant
to exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Old Notes may not be offered or sold, unless registered under the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register Old Notes under the Securities Act
unless requested by the holders of Old Notes who are not eligible to
participate in the Exchange Offer. See "The Exchange Offer" and "Registration
Rights." Based on interpretations by the staff of the SEC, as set forth in no-
action letters issued to third parties, the Company believes that New Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold or otherwise transferred by holders thereof (other than any
such holder which is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course or such holders' business and such
holders, other than broker-dealers, have no arrangement or understanding with
any person to participate in the distribution of such New Notes. However, the
SEC has not considered the Exchange Offer in the context of a no-action letter
and there can be no assurance that the staff of the SEC would make a similar
determination with respect to the Exchange Offer as in such other
circumstances. Each holder of the Old Notes who wishes to exchange its Old
Notes for New Notes in the Exchange Offer will be required to make certain
representations to the Company, including that (i) any New Notes to be
received by it will be acquired in the ordinary course of its business, (ii)
it has no arrangement or understanding with any person to participate in a
public distribution (within the meaning of the Securities Act) of the New
Notes and (iii) it is not an "affiliate," as defined in Rule 405 of the
Securities Act, of the Company or the Guarantors, or if it is such an
affiliate, that it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable to it. If any
holder is an affiliate of the Company or is engaged in or intends to engage in
or has any arrangement or understanding with respect to the distribution of
the New Notes to be acquired pursuant to the Exchange Offer, such holder (i)
may not rely on the applicable interpretations of the staff of the SEC and
(ii) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each broker-
dealer that receives New Notes for its own account in exchange for Old Notes
pursuant to the Exchange Offer must acknowledge that such Old Notes were
acquired by such broker-dealer as a result of market-making activities or
other trading activities and that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of New
Notes received in exchange for Old Notes where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 150 days after the
date of this Prospectus, it will make this Prospectus available to any broker-
dealer for use in connection with any such resale. See "Plan of Distribution."
In addition, to comply with the securities laws of certain jurisdictions, if
applicable, the New Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdictions or any exemption from
registration or qualification is available and is complied with. The Company
has agreed, pursuant to the Registration Rights Agreement, subject to certain
limitations specified therein, to register or qualify the New Notes for offer
or sale under the securities laws of such jurisdictions as any holder
reasonably requests in writing. Unless a holder so requests, the Company does
not currently intend to register or qualify the sale of the New Notes in any
such jurisdictions.
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DESCRIPTION OF THE NOTES
GENERAL
The Old Notes were issued under an Indenture dated December 5, 1996 (the
"Indenture") among the Company, as issuer, substantially all of the Company's
subsidiaries (collectively, the "Guarantors") and First Union National Bank,
as trustee (the "Trustee"). The terms and conditions of the Notes include
those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act") as in
effect on the Issue Date. The Notes are subject to all such terms and
conditions, and reference is made to the Indenture and the Trust Indenture Act
for a statement thereof. The following statements are summaries of the
provisions of the Notes and the Indenture and do not purport to be complete.
Such summaries make use of certain terms defined in the Indenture and are
qualified in their entirety by express reference to the Indenture. Certain of
such defined terms are set forth below under "--Certain Definitions." For
purposes of this "Description of the Notes," the "Company" means Radnor
Holdings Corporation. A copy of the Indenture will be available upon request
to the Company, and has been filed as an exhibit to the Registration Statement
on Form S-4 of which this Prospectus is a part. See "Additional Information."
The Company must deliver to the Trustee, within 120 days after the end of each
fiscal year, a certificate stating that the Company and each of its
subsidiaries have fulfilled all of their obligations under the Indenture
during the preceding fiscal year.
The Notes are limited to $100.0 million aggregate principal amount and
issued in fully registered form without coupons in denominations of $1,000 and
any integral multiple of $1,000. In the case of certificated Notes, principal
of, premium, if any, and interest on the Notes are payable, and the Notes are
transferable, at the corporate trust office or agency of the Trustee
maintained for such purposes in Philadelphia, Pennsylvania. Initially, the
Trustee is acting as paying agent and registrar under the Indenture. The
Company may act as paying agent and registrar under the Indenture, and the
Company may change any paying agent and registrar without notice to the
Persons who are registered holders ("Holders") of the Notes. The Company may
pay principal, premium and interest by check and may mail an interest check to
a Holder's registered address. Holders of certificated Notes must surrender
such Notes to the paying agent to collect principal and premium payments. No
service charge will be made for any registration of transfer or exchange of
the Notes, except for any tax or other governmental charge that may be imposed
in connection therewith.
PAYMENT TERMS
Interest on the New Notes will accrue from the most recent date to which
interest has been paid on the Old Notes or, if no interest has been paid on
the Old Notes, from December 5, 1996 and will be payable semi-annually on June
1 and December 1 of each year, commencing June 1, 1997, at the rate of 10% per
annum (unless such rate has been temporarily or permanently increased under
the circumstances described in "Registration Rights" below) to holders of the
Notes as of the close of business on the May 15 and November 15 next preceding
the applicable interest payment date. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months. The Notes mature on
December 1, 2003.
Payment of the Old Notes is, and payment of the New Notes will be,
guaranteed by the Guarantors, jointly and severally, on a senior basis. See
"--Guarantees."
RANKING
The Old Notes are, and the New Notes will be, senior unsecured obligations
of the Company and rank pari passu in right of payment with all other existing
and future senior indebtedness of the Company. The Old Notes are, and the New
Notes will be, effectively subordinated in right of payment to all existing
and future secured indebtedness of the Company and the Company's subsidiaries,
including indebtedness under the Credit Agreements. Loans under the Amended
Credit Agreement are secured by the inventory, accounts receivable, general
intangibles, trademarks and licenses and the proceeds thereof
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of the Company and its U.S. subsidiaries. Loans under the Canadian Credit
Agreement are secured by all of the material assets and a pledge of the stock
of the Company's Canadian subsidiary. Pursuant to the Indenture governing the
Notes, the Company and the Guarantors are permitted, upon the satisfaction of
certain conditions, to incur additional secured indebtedness or provide
guarantees of secured indebtedness. As of December 27, 1996, the Company and
its subsidiaries had no outstanding indebtedness other than the Old Notes and
approximately $4.6 million outstanding under the Credit Agreements. See "--
Certain Covenants," "Risk Factors--Ranking of the Notes," and "Description of
the Company's Credit Facilities."
Holders of secured indebtedness of the Company or the Guarantors have claims
with respect to the assets constituting collateral for such indebtedness that
are prior to the claims of Holders of the Notes and the Guarantees,
respectively. In the event of a default on the Notes, or a bankruptcy,
liquidation or reorganization of the Company or the Guarantors, such assets
will be available to satisfy obligations with respect to the indebtedness
secured thereby before any payment therefrom could be made on the Notes or the
Guarantees, as the case may be. To the extent that the value of such
collateral is not sufficient to satisfy the indebtedness secured thereby,
amounts remaining outstanding on such indebtedness would be entitled to share,
together with the indebtedness under the Notes and the Guarantees, as the case
may be, with respect to any other assets of the Company and the Guarantors.
GUARANTEES
The Guarantors have, jointly and severally, fully and unconditionally
guaranteed the due and punctual payment of principal of, premium, if any, and
interest on, the Old Notes. The Guarantors will also jointly and severally,
full and unconditionally guarantee the due and punctual payment of principal
of, premium, if any, and interest on the New Notes. The Old Guarantees are,
and the New Guarantees will be, senior unsecured obligations of each
Guarantor, and rank pari passu in right of payment with all other existing and
future senior indebtedness of such Guarantor and senior to all subordinated
indebtedness of such Guarantor. The Old Guarantees are, and the New Guarantees
will be, effectively subordinated in right of payment to all existing and
future secured indebtedness of the Guarantors, including their obligations in
respect of the Credit Agreements.
The Guarantors on the Issue Date included substantially all of the Company's
then existing Subsidiaries and will thereafter include such other Subsidiaries
of the Company that become Guarantors as described under "--Certain
Covenants--Subsidiary Guarantees." The Indenture provides that the obligations
of the Guarantors under their respective Guarantees will be reduced to the
extent necessary to prevent the Guarantees from violating or becoming voidable
under applicable law relating to fraudulent conveyance or fraudulent transfer
or similar laws affecting the rights of creditors generally. See "Risk
Factors--Holding Company Structure; Possible Invalidity of Guarantees."
Upon any sale, exchange, transfer or other disposition, to any Person not an
Affiliate of the Company, of all of the Company's Equity Interest in, or all
or substantially all of the assets of, any Guarantor, which is in compliance
with the Indenture, such Guarantor will be released from all its obligations
under its Guarantee.
OPTIONAL REDEMPTION
The Notes are not redeemable at the option of the Company prior to December
1, 2000. On or after that date, the Notes will be redeemable at the option of
the Company, in whole or in part from time to time, on not less than 30 nor
more than 60 days' prior notice, mailed by first-class mail to the Holders'
registered addresses, in cash, at the following redemption prices (expressed
as percentages of the
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principal amount), if redeemed in the 12-month period commencing December 1 in
the year indicated below, in each case plus accrued and unpaid interest to the
date fixed for redemption:
<TABLE>
<CAPTION>
YEAR REDEMPTION
---- ----------
<S> <C>
2000......................................................... 105.00 %
2001......................................................... 102.50 %
2002 and thereafter.......................................... 100.00 %
</TABLE>
The Notes are not subject to, or entitled to the benefits of, any sinking
fund.
Notwithstanding the foregoing, at any time on or prior to December 1, 1999,
the Company, at its option, may redeem up to $25.0 million aggregate principal
amount of the Notes from the net proceeds of one or more Public Equity
Offerings by the Company, at a redemption price of 110% of the principal
amount thereof, plus accrued interest to the date of redemption; provided that
at least $75.0 million in aggregate principal amount of the Notes remains
outstanding following such redemption.
Notes may be redeemed or repurchased as set forth below under "--Change of
Control" and "--Certain Covenants--Limitations on Asset Sales" in part in
multiples of $1,000. If less than all the Notes issued under the Indenture are
to be redeemed, the Trustee will select the Notes to be redeemed pro rata, by
lot or by any other method which the Trustee deems fair and appropriate. The
Indenture provides that if any Note is to be redeemed or repurchased in part
only, the notice which relates to the redemption or repurchase of such Note
will state the portion of the principal amount of such Note to be redeemed or
repurchased and will state that on or after the date fixed for redemption or
repurchase a new Note equal to the unredeemed portion thereof will be issued.
On and after the date fixed for redemption or repurchase, interest will
cease to accrue on the Notes or portions thereof called for redemption or
tendered for repurchase.
CHANGE OF CONTROL
The Indenture provides that in the event of a Change of Control (the date of
such occurrence being the "Change of Control Date"), the Company will notify
the Holders in writing of such occurrence and will make an irrevocable offer
(the "Change of Control Offer") to purchase on a business day (the "Change of
Control Payment Date") not later than 60 days following the Change of Control
Date, all Notes then outstanding at a purchase price (the "Purchase Price")
equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the Change of Control Payment Date.
Notice of a Change of Control Offer will be mailed by the Company to the
Holders at their registered addresses not less than 30 days nor more than 60
days before the Change of Control Payment Date. The Change of Control Offer is
required to remain open for at least 20 business days and until 5:00 p.m., New
York City time, on the Change of Control Payment Date. The notice will contain
all instructions and materials necessary to enable Holders to tender (in whole
or in part in a principal amount equal to $1,000 or a whole multiple thereof)
their Notes pursuant to the Change of Control Offer.
The notice, which governs the terms of the Change of Control Offer, will
state: (i) that the Change of Control Offer is being made pursuant to this
covenant as described herein; (ii) the Purchase Price and the Change of
Control Payment Date; (iii) that any Notes not surrendered or accepted for
payment will continue to accrue interest; (iv) that any Notes accepted for
payment pursuant to the Change of Control Offer will cease to accrue interest
after the Change of Control Payment Date; (v) that any Holder electing to have
a Note purchased (in whole or in part) pursuant to a Change of Control Offer
will be required to surrender the Note, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Note completed, to the Paying
Agent at the address specified in the notice (or otherwise make effective
delivery of the Note pursuant to book-entry procedures and the related rules
of the applicable
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depositories) at least five business days before the Change of Control Payment
Date, and (vi) that any Holder will be entitled to withdraw its election if
the Paying Agent receives, not later than three business days prior to the
Change of Control Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the Note
the Holder delivered for purchase and a statement that such Holder is
withdrawing its election to have such Note purchased.
On the Change of Control Payment Date, the Company will: (i) accept for
payment the Notes, or portions thereof, surrendered and properly tendered and
not withdrawn, pursuant to the Change of Control Offer; (ii) deposit with the
Paying Agent money sufficient to pay the Purchase Price of all the Notes, or
portions thereof, so accepted; and (iii) deliver to the Trustee the Notes so
accepted together with an officer's certificate stating that such Notes have
been accepted for payment by the Company. The Paying Agent will promptly mail
or deliver to Holders of Notes so accepted payment in an amount equal to the
Purchase Price. Holders whose Notes are purchased only in part will be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered.
"Change of Control" is defined in the Indenture to mean the occurrence of
any of the following events: (i) any "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act), other than Permitted
Holders (as defined below), is or becomes the "beneficial owner" (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person will be
deemed to have beneficial ownership of all shares that such Person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 50% of the voting
power of the total outstanding Voting Stock of the Company voting as one
class; (ii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election to such Board or whose
nomination for election by the stockholders of the Company was approved by a
vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) for any reason cease to constitute a
majority of such Board of Directors then in office; (iii) the Company
consolidates with or merges with or into any Person or conveys, transfers or
leases all or substantially all of its assets to any Person other than a
wholly-owned Subsidiary (in one transaction or a series of related
transactions), or any corporation consolidates with or merges into or with the
Company, in any such event pursuant to a transaction in which the outstanding
Voting Stock of the Company is changed into or exchanged for cash, securities
or other property, and as a result of such transaction any "person" or
"group," other than Permitted Holders, is or becomes the "beneficial owner"
(as described in clause (i) above) immediately after such transaction,
directly or indirectly, of more than 50% of the voting power of the total
outstanding Voting Stock of the surviving corporation voting as one class; or
(iv) the Company is liquidated or dissolved or adopts a plan of liquidation or
dissolution other than in a transaction which complies with the provisions
described under "--Merger, Consolidation and Sale of Assets."
The Company will comply, to the extent applicable, with the requirements of
Rule 14e-1 under the Exchange Act, any other tender offer rules under the
Exchange Act and other securities laws or regulations in connection with the
offer to repurchase and the repurchase of the Notes as described above.
The Company's ability to repurchase the Notes pursuant to a Change of
Control Offer will be limited by, among other things, the Company's financial
resources at the time of repurchase. There can be no assurance that sufficient
funds will be available at the time of any Change of Control to make any
required repurchases. Furthermore, there can be no assurance that the Company
will be able to fund the repurchase of Notes upon a Change of Control within
the limitations imposed by the terms of other then-existing Senior
Indebtedness. In addition, the terms of the Credit Agreements may limit the
Company's ability to purchase any Notes upon the occurrence of a Change of
Control. In the event a Change of Control occurs at a time when the Company is
prohibited from purchasing Notes, the Company will be required under the
Indenture, within 30 days following a Change of Control to (i) seek the
consent of its
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lenders to the purchase of the Notes or (ii) refinance the Indebtedness that
prohibits such purchase. If the Company does not obtain such a consent or
refinance such borrowings, the Company will remain prohibited from
repurchasing Notes. The Company's failure to purchase tendered Notes or make a
Change of Control Offer following a Change of Control would constitute an
Event of Default under the Indenture. An amendment of or waiver under the
Indenture may not waive the Company's obligation to make a Change of Control
Offer without the consent of the Holders of at least two-thirds in outstanding
principal amount of the Notes.
The existence of the right of Holders to require the Company to repurchase
their Notes upon the occurrence of a Change of Control may deter a third party
from acquiring the Company in a transaction which would constitute a Change of
Control. Subject to certain limitations described below in "--Certain
Covenants," including the limitation on incurrence of additional Indebtedness,
the Company could, in the future, enter into certain transactions, including
acquisitions, refinancings or other recapitalizations, that would not
constitute a Change of Control under the Indenture, but that could increase
the amount of Senior Indebtedness (or any other Indebtedness) outstanding at
such time or otherwise affect the Company's capital structure or credit
ratings. The Change of Control provisions will not prevent a leveraged buyout
led by the Company management, a recapitalization of the Company or a change
in a majority of the members of the Board of Directors of the Company which is
approved by the then-present Board of Directors, as the case may be.
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, create or permit to exist or become effective
any restriction (other than restrictions not more restrictive than those in
effect under the Credit Agreements or Existing Indebtedness) that would
materially impair the ability of the Company to make a Change of Control Offer
to purchase the Notes or, if such Change of Control Offer is made, to pay for
the Notes tendered for purchase.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitations on Indebtedness. The Indenture provides that the Company will
not, and will not permit its Restricted Subsidiaries to, directly or
indirectly, create, incur, issue, assume, guarantee or otherwise become liable
with respect to or become responsible for the payment of, contingently or
otherwise ("incur"), any Indebtedness (including any Acquired Indebtedness);
provided, however, that the Company, or a Restricted Subsidiary of the
Company, may incur Indebtedness if at the time of such incurrence and after
giving pro forma effect thereto, the Company's Interest Coverage Ratio for the
most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such
Indebtedness is incurred, calculated on a pro forma basis as if such
Indebtedness was incurred on the first day of such four full fiscal quarter
period, would be at least 2.0 to 1.0.
The Indenture further provides that notwithstanding the foregoing
limitations, the incurrence of the following will not be prohibited:
(a) Indebtedness of the Company evidenced by the Old Notes and
Indebtedness of any Guarantor evidenced by the Old Guarantees;
(b) Indebtedness of the Company evidenced by the New Notes and
Indebtedness of any Guarantor evidenced by the New Guarantees;
(c) Indebtedness of the Company or any Restricted Subsidiary constituting
Existing Indebtedness and any extension, deferral, renewal, refinancing or
refunding thereof;
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(d) Indebtedness of the Company or any Restricted Subsidiary incurred
under the Credit Agreements in an aggregate principal amount at any one
time outstanding not to exceed the greater of (x) $30.0 million and (y) the
Borrowing Base at the time such Indebtedness was incurred, or any
refinancing, refunding, deferral, renewal or extension thereof not in
excess of such amount;
(e) Capitalized Lease Obligations of the Company or any Restricted
Subsidiary and Indebtedness of the Company or any Restricted Subsidiary
secured by Liens that secure the payment of all or part of the purchase
price of assets or property acquired or constructed in the ordinary course
of business after the Issue Date; provided, however, that the aggregate
principal amount of such Capitalized Lease Obligations plus such
Indebtedness of the Company and all of the Restricted Subsidiaries does not
exceed $3.0 million outstanding at any time;
(f) Indebtedness of the Company to any Restricted Subsidiary or of any
Restricted Subsidiary to the Company or another Restricted Subsidiary (but
only so long as such Indebtedness is held by the Company or a Restricted
Subsidiary);
(g) Indebtedness in respect of Hedging Obligations; provided, however,
that the notional principal amount of any such Hedging Obligation does not
exceed the principal amount of the Indebtedness to which such Hedging
Obligation relates;
(h) Indebtedness represented by performance, completion, guarantee, surety
and similar bonds provided by the Company or any Restricted Subsidiary in
the ordinary course of business consistent with past practice;
(i) In addition to any Indebtedness otherwise permitted to be incurred
under the Indenture, up to $10.0 million aggregate principal amount of
Indebtedness at any one time outstanding; and
(j) Any refinancing, refunding, deferral, renewal or extension (each, a
"Refinancing") of any Indebtedness of the Company or any Restricted
Subsidiary permitted by the initial paragraph of this covenant (the
"Refinancing Indebtedness"); provided, however, that (x) such Refinancing
does not increase the total Consolidated Indebtedness of the Company and
its Restricted Subsidiaries outstanding at the time of such Refinancing,
(y) the Refinancing Indebtedness does not provide for any mandatory
redemption, amortization or sinking fund requirement in an amount greater
than or at a time prior to the amounts and times specified in the
Indebtedness being refinanced, refunded, deferred, renewed or extended and
(z) if the Indebtedness being refinanced, refunded, deferred, renewed or
extended is subordinated to the Notes, the Refinancing Indebtedness
incurred to refinance, refund, defer, renew or extend such Indebtedness is
subordinated in right of payment to the Notes on terms at least as
favorable to the Holders as those contained in the documentation governing
the Indebtedness being so refinanced, refunded, deferred, renewed or
extended.
Limitations on Restricted Payments. The Indenture provides that the Company
will not, nor will it cause, permit or suffer any Restricted Subsidiary to,
(i) declare or pay any dividends or make any other distributions (including
through mergers, liquidations or other transactions) on any class of Equity
Interests of the Company or such Restricted Subsidiary (other than dividends
or distributions payable by a wholly-owned Restricted Subsidiary on account of
its Equity Interests held by the Company or another Restricted Subsidiary or
payable in shares of Capital Stock of the Company other than Redeemable
Stock), (ii) make any payment on account of, or set apart money for a sinking
or other analogous fund for, the purchase, redemption or other retirement of
such Equity Interests, (iii) purchase, defease, redeem or otherwise retire any
Indebtedness issued by the Company or any Restricted Subsidiary that is
Subordinated Indebtedness to the Notes, or (iv) make any Restricted
Investment, either directly or indirectly, whether in cash or property or in
obligations of the Company (all of the foregoing being called "Restricted
Payments"), unless, (x) in the case of a dividend, such dividend is payable
not more than 60 days after the date of declaration and (y) after giving
effect to such proposed Restricted Payment, all the conditions
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set forth in clauses (1) through (3) below are satisfied (A) at the date of
declaration (in the case of any dividend), (B) at the date of such setting
apart (in the case of any such fund) or (C) on the date of such other payment
or distribution (in the case of any other Restricted Payment) (each such date
being referred to as a "Computation Date"):
(1) no Default or Event of Default has occurred and is continuing or would
result from the making of such Restricted Payment;
(2) at the Computation Date for such Restricted Payment and after giving
effect to such Restricted Payment on a pro forma basis, the Company or such
Restricted Subsidiary could incur $1.00 of additional Indebtedness pursuant
to the covenant described in the initial paragraph under "--Limitations on
Indebtedness;" and
(3) the aggregate amount of Restricted Payments declared, paid or
distributed subsequent to the Issue Date (including the proposed Restricted
Payment) does not exceed the sum of (i) 50% of the cumulative Consolidated
Net Income of the Company for the period (taken as one accounting period)
commencing on the first day of the first full quarter after the Issue Date
to and including the last day of the Company's last fiscal quarter ending
prior to the Computation Date (each such period to constitute a
"Computation Period") (or, in the event Consolidated Net Income of the
Company during the Computation Period is a deficit, then minus 100% of such
deficit), (ii) the aggregate Net Cash Proceeds of the issuance or sale or
the exercise (other than to a Subsidiary or an employee stock ownership
plan or other trust established by the Company or any of its Subsidiaries
for the benefit of their employees) of the Company's Equity Interests
(other than Redeemable Stock) subsequent to the Issue Date, and (iii) $3.0
million.
If no Default or Event of Default has occurred and is continuing or would
occur as a result thereof, the prohibitions set forth above are subject to the
following exceptions: (a) Restricted Investments acquired by the Company in
connection with any Asset Sale consummated in accordance with the covenant
described under "--Limitations on Asset Sales" to the extent such Investments
are permitted under such covenant, provided, however, that such Restricted
Investments will be excluded in the calculation of the amount of Restricted
Payments previously made for purposes of clause (3) of the preceding
paragraph; (b) any purchase or redemption of Equity Interests or Subordinated
Indebtedness made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Equity Interests of the Company (other than Redeemable
Stock and other than Equity Interests issued or sold to a Subsidiary or an
employee stock ownership plan), provided, however, that (x) such purchase or
redemption will be excluded in the calculation of the amount of Restricted
Payments previously made for purposes of clause (3) of the preceding paragraph
and (y) the Net Cash Proceeds from such sale will be excluded for purposes of
clause 3(ii) of the preceding paragraph to the extent utilized for purposes of
such purchase or redemption; (c) any purchase or redemption of Subordinated
Indebtedness of the Company made by exchange for, or out of the proceeds of
the substantially concurrent sale of, Subordinated Indebtedness of the Company
or any Restricted Subsidiary which is permitted to be issued pursuant to the
provisions of the covenant described under "--Limitation on Indebtedness,"
provided, however, that such purchase or redemption will be excluded in the
calculation of the amount of Restricted Payments previously made for purposes
of clause (3) of the preceding paragraph; (d) the purchase of Capital Stock
held by employees of the Company or any Subsidiary pursuant to any employee
stock ownership plan thereof upon the termination, retirement or death of any
such employee in accordance with the provisions of any such plan in an amount
not greater than $500,000 in any calendar year, provided, however, that any
such purchase will be included in the calculation of the amount of Restricted
Payments previously made for purposes of clause (3) of the preceding
paragraph; and (e) Investments described in clause (vi) of the definition of
Permitted Investments, provided, however, that such Investments will be
included in the calculation of the amount of Restricted Payments previously
made for purposes of clause (3) of the preceding paragraph.
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For purposes of this covenant, (a) the amount of any Restricted Payment
declared, paid or distributed in property of the Company or any Restricted
Subsidiary will be deemed to be the net book value of any such property that
is intangible property and the Fair Market Value (as determined in good faith
by and set forth in a resolution of the Board of Directors) of any such
property that is tangible property at the Computation Date, in each case,
after deducting related reserves for depreciation, depletion and amortization;
(b) the amount of any Restricted Payment declared, paid or distributed in
obligations of the Company or any Restricted Subsidiary will be deemed to be
the principal amount of such obligations as of the date of the adoption of a
resolution by the Board of Directors or such Restricted Subsidiary authorizing
such Restricted Payment; and (c) a distribution to holders of the Company's
Equity Interests of (i) shares of Capital Stock or other Equity Interests of
any Restricted Subsidiary of the Company or (ii) other assets of the Company,
without, in either case, the receipt of equivalent consideration therefor will
be regarded as the equivalent of a cash dividend equal to the excess of the
Fair Market Value of the Equity Interests or other assets being so distributed
at the time of such distribution over the consideration, if any, received
therefor.
Limitations on Liens. The Indenture provides that the Company will not, and
will not permit any Restricted Subsidiary to, create, incur, assume or suffer
to exist any Lien upon any of their respective assets or properties now owned
or acquired after the Issue Date, or any income or profits therefrom, unless
the Notes are directly secured equally and ratably (or prior to in the case of
Liens with respect to Indebtedness subordinated to the Notes or the
Guarantees, as the case may be), excluding, however, from the operation of the
foregoing any of the following:
(a) Liens existing as of the Issue Date or pursuant to an agreement in
existence on the Issue Date, including the Credit Agreements;
(b) Permitted Liens;
(c) Liens on assets or properties of the Company, or on assets or
properties of Restricted Subsidiaries, to secure the payment of all or a
part of the purchase price of assets or property acquired or constructed
after the Issue Date; provided, however, that (i) the aggregate principal
amount of Indebtedness secured by such Liens does not exceed the original
cost or purchase price of the assets or property so acquired or
constructed, (ii) the Indebtedness secured by such Liens is otherwise
permitted to be incurred under the Indenture and (iii) such Liens do not
encumber any other assets or property of the Company or any Restricted
Subsidiary and the Indebtedness secured by the Lien may not be created more
than 90 days after the later of the acquisition, completion of
construction, repair, improvement, addition or commencement of full
operation of the property subject to the Lien;
(d) Liens on the assets or property acquired by the Company or any
Restricted Subsidiary after the Issue Date; provided, however, that (i)
such Liens existed on the date such asset or property was acquired and were
not incurred as a result of or in anticipation of such acquisition and (ii)
such Liens do not extend to or cover any property or assets of the Company
or any Restricted Subsidiary other than the property or assets so acquired;
(e) Liens securing Indebtedness which is incurred to refinance
Indebtedness which has been secured by a Lien permitted under the Indenture
and which is permitted to be refinanced under the Indenture; provided,
however, that such Liens do not extend to or cover any property or assets
of the Company or any Restricted Subsidiary not securing the Indebtedness
so refinanced;
(f) Liens on assets or property of the Company or any Restricted
Subsidiary that is subject to a Sale and Leaseback Transaction, provided,
that the aggregate principal amount of Attributable Indebtedness in respect
of all Sale and Leaseback Transactions then outstanding does not at the
time such a Lien is incurred exceed $5.0 million;
(g) Liens on property or shares of Capital Stock of a Person at the time
such Person becomes a Restricted Subsidiary; provided, however, that such
Liens are not created, incurred or assumed in contemplation of the
acquisition thereof by the Company or a Subsidiary; provided further, that
such Liens may not extend to any other property owned by the Company or a
Restricted Subsidiary;
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(h) Liens securing Indebtedness of a Restricted Subsidiary owing to the
Company or a wholly-owned Restricted Subsidiary;
(i) Liens on inventory, accounts receivable, general intangibles,
trademarks and licenses and the proceeds thereof of the Company or any
Restricted Subsidiary securing the obligations under clause (d) of the
covenant described under "--Limitations on Indebtedness;" and
(j) Liens securing Indebtedness in respect of Hedging Obligations
permitted to be incurred pursuant to the provisions of the covenant
described under "--Limitations on Indebtedness."
Limitations on Payment Restrictions Affecting Restricted Subsidiaries. The
Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction
of any kind on the ability of any Restricted Subsidiary to (i) pay dividends
or make any other distribution to the Company or its Restricted Subsidiaries
on its Equity Interests, (ii) pay any Indebtedness owed to the Company or any
other Restricted Subsidiary, (iii) make loans or advances to the Company or
any other Restricted Subsidiary or (iv) transfer any of its property or assets
to the Company or any other Restricted Subsidiary, except (A) consensual
encumbrances or restrictions contained in or created pursuant to the Credit
Agreements and other Existing Indebtedness listed on a schedule to the
Indenture, (B) consensual encumbrances or restrictions in the Notes and the
Indenture, (C) any restriction, with respect to a Restricted Subsidiary of the
Company that is not a Subsidiary of the Company on the Issue Date, in
existence at the time such entity becomes a Restricted Subsidiary of the
Company and not created as a result of or in anticipation of such entity
becoming a Restricted Subsidiary of the Company; provided that such
encumbrance or restriction is not created in anticipation of or in connection
with such entity becoming a Subsidiary of the Company and is not applicable to
any Person or the properties or assets of any Person other than a Person that
becomes a Subsidiary, (D) any encumbrances or restrictions pursuant to an
agreement effecting a refinancing of Indebtedness referred to in clauses (A)
or (C) of this covenant or contained in any amendment to any agreement
creating such Indebtedness, provided that the encumbrances and restrictions
contained in any such refinancing or amendment are not more restrictive taken
as a whole (as determined in good faith by the chief financial officer of the
Company) than those provided for in such Indebtedness being refinanced or
amended, (E) encumbrances or restrictions contained in any other Indebtedness
permitted to be incurred subsequent to the Issue Date pursuant to the
provisions of the covenant described under "--Limitations on Indebtedness",
provided that any such encumbrances or restrictions are not more restrictive
taken as a whole (as determined in good faith by the chief financial officer
of the Company) than the most restrictive of those provided for in the
Indebtedness referred to in clauses (A) or (C) of this covenant, (F) any such
encumbrance or restriction consisting of customary nonassignment provisions in
leases governing leasehold interests to the extent such provisions restrict
the transfer of the lease, (G) any restriction with respect to a Restricted
Subsidiary imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of such
Restricted Subsidiary in compliance with the Indenture pending the closing of
such sale or disposition, provided that such restrictions apply solely to the
Capital Stock or assets of such Restricted Subsidiary which are being sold; or
(H) any encumbrance or restriction due to applicable law.
Limitations on Asset Sales. The Indenture provides that the Company will
not, and will not permit any Restricted Subsidiary to, make any Asset Sale
(other than to the Company or another Restricted Subsidiary) unless (i) the
Company or such Restricted Subsidiary receives consideration at the time of
such Asset Sale at least equal to the Fair Market Value of the assets sold or
otherwise disposed of, and at least 85% of the consideration received by the
Company or such Restricted Subsidiary from such Asset Sale is in the form of
cash or Cash Equivalents and (ii) the Net Proceeds received by the Company or
such Restricted Subsidiary from such Asset Sale are applied in accordance with
the following paragraphs.
If all or a portion of the Net Proceeds of any Asset Sale are not required
to be applied to repay permanently any Senior Indebtedness of the Company then
outstanding as required by the terms thereof,
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or the Company determines not to apply such Net Proceeds to the permanent
prepayment of any Senior Indebtedness outstanding or if no such Senior
Indebtedness is then outstanding, then the Company may within 180 days of the
Asset Sale, invest the Net Proceeds in the Company or one or more Restricted
Subsidiaries. The amount of such Net Proceeds neither used to permanently
repay or prepay Senior Indebtedness nor used or invested as set forth in this
paragraph constitutes "Excess Proceeds."
When the aggregate amount of Excess Proceeds from one or more Asset Sales
equals $5.0 million or more, the Company will apply 100% of such Excess
Proceeds within 180 days subsequent to the consummation of the Asset Sale
which resulted in the Excess Proceeds equaling $5.0 million or more to the
purchase of Notes tendered to the Company for purchase at a price equal to
100% of the principal amount thereof, plus accrued interest, if any, to the
date of purchase pursuant to an offer to purchase made by the Company (an
"Asset Sale Offer") with respect to the Notes. Any Asset Sale Offer may
include a pro rata offer under similar circumstances to purchase other Senior
Indebtedness requiring a similar offer. Any Asset Sale Offer will be made
substantially in accordance with the procedures for a Change of Control Offer
described under "--Change of Control." Until such time as the Net Proceeds
from any Asset Sale are applied in accordance with this covenant, such Net
Proceeds will be segregated from the other assets of the Company and the
Subsidiaries and invested in cash or Cash Equivalents, except that the Company
or any Restricted Subsidiary may use any Net Proceeds pending the utilization
thereof in the manner (and within the time period) described above, to repay
revolving loans (under the Credit Agreements or otherwise) without a permanent
reduction of the commitment thereunder.
The Company will cause a notice of any Asset Sale Offer to be mailed to the
Holders at their registered addresses not less than 30 days nor more than 60
days before the purchase date. Such notice will contain all instructions and
materials necessary to enable Holders to tender their Notes to the Company.
Upon receiving notice of an Asset Sale Offer, Holders may elect to tender
their Notes in whole or in part in integral multiples of $1,000 in exchange
for cash. To the extent that Holders properly tender Notes in an amount
exceeding the Asset Sale Offer, Notes of tendering Holders will be repurchased
on a pro rata basis (based on amounts tendered).
The Credit Agreements and any future credit agreements to which the Company
becomes a party may restrict the Company's ability to repurchase the Notes
pursuant to an Asset Sale Offer. In the event the Company is required to make
an Asset Sale Offer at a time when the Company is prohibited from making such
Offer, the Company will be required under the Indenture, on or prior to the
date that the Company is required to make an Asset Sale Offer, to (i) seek the
consent of its lenders to repurchase Notes pursuant to such Asset Sale Offer
or (ii) refinance the Indebtedness that prohibits such Asset Sale Offer. If
the Company does not obtain such a consent or refinance such borrowings, the
Company will remain prohibited from making such Offer. The Company's failure
to purchase Notes pursuant to an Asset Sale Offer or make such Asset Sale
Offer would constitute an Event of Default under the Indenture.
The Company will comply, to the extent applicable, with the requirements of
Rule 14e-1 under the Exchange Act, any other tender offer rules under the
Exchange Act and other securities laws or regulations in connection with any
offer to repurchase and the repurchase of the Notes as described above.
The Company will not, and will not permit any of its Restricted Subsidiaries
to, create or permit to exist or become effective any restriction (other than
restrictions not more restrictive than those in effect under the Credit
Agreements or Existing Indebtedness) that would materially impair the ability
of the Company to comply with the provisions of this "Limitations on Asset
Sales" covenant.
Limitations on Sale and Leaseback Transactions. The Indenture provides that
the Company will not, and will not permit any Restricted Subsidiary to, enter
into any Sale and Leaseback Transaction unless (i) at the time of the
occurrence of such transaction and after giving effect to such transaction and
(x) in the case of a Sale and Leaseback Transaction which is a Capitalized
Lease Obligation, giving effect to the Indebtedness in respect thereof, and
(y) in the case of any other Sale and Leaseback Transaction, giving
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effect to the Attributable Indebtedness in respect thereof, the Company or
such Restricted Subsidiary could incur $1.00 of additional Indebtedness
pursuant to the covenant described in the initial paragraph under "--
Limitations on Indebtedness," (ii) at the time of the occurrence of such
transaction, the Company or such Restricted Subsidiary could incur
Indebtedness secured by a Lien on property in a principal amount equal to or
exceeding the Attributable Indebtedness in respect of such Sale and Leaseback
Transaction pursuant to the covenant described under "--Limitations on Liens",
and (iii) the transfer of assets in such Sale and Leaseback Transaction is
permitted by, and the Company applies the proceeds of such transaction in
compliance with, the covenant described under "--Limitations on Asset Sales."
Limitations on Mergers; Sales of Assets. The Indenture provides that the
Company will not consolidate with or merge into, or sell, assign, convey,
lease or transfer all or substantially all of its assets and those of its
Subsidiaries taken as a whole to, any Person, unless (i) the resulting,
surviving or transferee Person expressly assumes all the obligations of the
Company under the Notes and the Indenture; (ii) such Person is organized and
existing under the laws of the United States of America, a state thereof or
the District of Columbia; (iii) at the time of the occurrence of such
transaction and after giving effect to such transaction on a pro forma basis,
such Person could incur $1.00 of additional Indebtedness pursuant to the
covenant described in the initial paragraph under "--Limitations on
Indebtedness"; (iv) at the time of the occurrence of such transaction and
after giving effect to such transaction on a pro forma basis, the Consolidated
Net Worth of such Person is equal to or greater than the Consolidated Net
Worth of the Company immediately prior to such transaction; (v) each
Guarantor, to the extent applicable, will by supplemental indenture confirm
that its Guarantee will apply to such Person's obligations under the Notes;
and (vi) immediately before and immediately after giving effect to such
transaction and treating any Indebtedness which becomes an obligation of the
Company or any of its Subsidiaries or of such Person as a result of such
transaction as having been incurred by the Company or such Subsidiary or such
Person, as the case may be, at the time of such transaction, no Default or
Event of Default has occurred and is continuing.
The Indenture provides that no Guarantor will, and the Company will not
permit a Guarantor to, in a single transaction or series of related
transactions merge or consolidate with or into any other corporation (other
than the Company or any other Guarantor) or other entity, or sell, assign,
convey, transfer, lease or otherwise dispose of all or substantially all of
its properties and assets to any entity (other than the Company or any other
Guarantors) unless at the time and giving effect thereto: (i) either (1) such
Guarantor is the continuing corporation or (2) the entity (if other than such
Guarantor) formed by such consolidation or into which such Guarantor is merged
or the entity which acquires by sale, assignment, conveyance, transfer, lease
or disposition the properties and assets of such Guarantor is a corporation
duly organized and validly existing under the laws of the United States of
America, any state thereof or the District of Columbia and expressly assumes
by a supplemental indenture, executed and delivered to the Trustee, in a form
reasonably satisfactory to the Trustee, all the obligations of such Guarantor
under the Notes and the Indenture; and (ii) immediately before and immediately
after giving effect to such transaction, no Default or Event of Default has
occurred and is continuing. The provisions of this paragraph will not apply to
any transaction (including any Asset Sale made in accordance with "--
Limitations on Asset Sales" above) with respect to any Guarantor if the
Guarantee of such Guarantor is released in connection with such transaction in
accordance with the applicable provisions of the Indenture. Upon any sale,
exchange, transfer or other disposition, to any Person not an Affiliate of the
Company, of all of the Company's or a Restricted Subsidiary's Equity Interests
in, or all or substantially all of the assets of, any Guarantor, which is in
compliance with the Indenture, such Guarantor will be released from all its
obligations under its Guarantee.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraphs
in which the Company or any Guarantor is not the continuing corporation, the
successor Person formed or remaining will succeed to, and be substituted for,
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and may exercise every right and power of, the Company or such Guarantor, as
the case may be, and the Company or such Guarantor, as the case may be, would
be discharged from its obligations under the Indenture, the Notes or its
Guarantee, as the case may be.
Subsidiary Guarantees. The Indenture provides that if (i) any Subsidiary of
the Company becomes a Restricted Subsidiary after the Issue Date, (ii) the
Company or any Subsidiary of the Company that is a Guarantor transfers or
causes to be transferred, in one transaction or a series of related
transactions, property or assets (including, without limitation, businesses,
divisions, real property, assets or equipment) which in the aggregate have a
value equal to or greater than 15% of the Company's total assets determined on
a consolidated basis as of the time of transfer to any Subsidiary or
Subsidiaries of the Company that is not a Guarantor or are not Guarantors, or
(iii) any Subsidiary of the Company which has a value equal to or greater than
5% of the Company's total assets determined on a consolidated basis as of the
time of determination directly or indirectly guarantees or otherwise becomes
obligated with respect to any Senior Indebtedness of the Company, the Company
will cause such Subsidiary or Subsidiaries to execute and deliver to the
Trustee a supplemental indenture pursuant to which such Subsidiary or
Subsidiaries will unconditionally guarantee all of the Company's obligations
under the Indenture and the Notes on the same terms as the other Guarantors,
which Guarantee will rank pari passu with any Senior Indebtedness of such
Subsidiary. See "--Guarantees". The provisions of clauses (ii) and (iii) of
this paragraph will not apply to any transaction permitted by the covenant
described under "--Limitations on Asset Sales" above.
Transactions with Affiliates. The Indenture provides that the Company and
its Restricted Subsidiaries will not, directly or indirectly, enter into any
transaction or series of related transactions with or for the benefit of any
of their respective Affiliates other than with the Company or any Restricted
Subsidiaries, except on an arm's-length basis and if (x)(i) in the case of any
such transaction in which the aggregate remuneration, rental value or other
consideration (including the value of a loan), together with the aggregate
remuneration, rental value or other consideration (including the value of a
loan) of all such other transactions consummated in the year during which such
transaction is proposed to be consummated, exceeds $500,000, the Company
delivers board resolutions to the Trustee evidencing that the Board of
Directors and the Independent Directors that are disinterested each have (by a
majority vote) determined in good faith that such transaction is in the best
interests of the Company and that the aggregate remuneration, rental value or
other consideration (including the value of any loan) inuring to the benefit
of such affiliate from any such transaction is not greater than that which
would be charged to or extended by the Company or its Subsidiaries, as the
case may be, on an arm's-length basis for similar properties, assets, rights,
goods or services by or to a Person not affiliated with the Company or its
Subsidiaries, as the case may be, and (ii) in the case of any such transaction
in which the aggregate remuneration, rental value or other consideration
(including the value of any loan), together with the aggregate remuneration,
rental value or other consideration (including the value of any loan) of all
such other transactions consummated in the year during which such transactions
are proposed to be consummated, exceeds $2.5 million, in addition to the
requirements set forth in clause (x)(i) above, the Company delivers to the
Trustee an opinion evidencing that a nationally recognized investment banking
firm, unaffiliated with the Company and the Affiliate which is party to such
transaction, has determined that the aggregate remuneration, rental value or
other consideration (including the value of a loan) inuring to the benefit of
such Affiliate from any such transaction is not greater than that which would
be charged to or extended by the Company or its Subsidiaries, as the case may
be, on an arm's-length basis for similar properties, assets, rights, goods or
services by or to a Person not affiliated with the Company or its
Subsidiaries, as the case may be, and (y) all such transactions referred to in
clauses x(i) and (ii) are entered into in good faith. Any transaction required
to be approved by Independent Directors pursuant to the preceding paragraph
must be approved by at least one such Independent Director.
The provisions of the preceding paragraph do not prohibit (i) any Restricted
Payment permitted to be paid pursuant to the provisions of the covenant
described under "--Limitations on Restricted Payments", (ii) any issuance of
securities, or other payments, awards or grants in cash, securities or
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otherwise pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans approved by the Board of Directors, (iii)
loans or advances to employees in the ordinary course of business consistent
with past practices, not to exceed $500,000 aggregate principal amount
outstanding at any time, and (iv) the payment of fees and compensation to, and
indemnity provided on behalf of, officers, directors, employees or consultants
of the Company or any of its Subsidiaries, as determined by the Board of
Directors in good faith and as paid or provided pursuant to agreements or
arrangements entered into in the ordinary course of business.
Limitation on Issuances and Sales of Capital Stock of Restricted
Subsidiaries. The Indenture provides that the Company (i) will not, and will
not permit any Restricted Subsidiary to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of any Restricted Subsidiary to any
person other than the Company or a wholly-owned Restricted Subsidiary, unless
(a) such transfer, conveyance, sale, lease or other disposition is of all the
Capital Stock of such Restricted Subsidiary and (b) the cash Net Proceeds from
such transfer, conveyance, sale, lease or other disposition are applied in
accordance with the covenant "--Limitation on Asset Sales" covenant, and (ii)
will not permit any Restricted Subsidiary to issue any of its Capital Stock
(other than directors' qualifying shares) to any Person other than to the
Company or a wholly-owned Restricted Subsidiary.
Limitations on Investments. The Indenture provides that the Company will
not, and will not permit any Restricted Subsidiaries, directly or indirectly,
to make any Investment after the Issue Date, other than (i) Permitted
Investments and (ii) Restricted Investments to the extent permitted pursuant
to the covenant described under "--Limitations on Restricted Payments."
Provision of Financial Statements. The Indenture provides that, whether or
not the Company is subject to Section 13(a) or 15(d) of the Exchange Act, the
Company will, to the extent permitted under the Exchange Act, file with the
SEC the annual reports, quarterly reports and other documents which the
Company would have been required to file with the SEC pursuant to such Section
13(a) or 15(d) if the Company were so subject, such documents to be filed with
the SEC on or prior to the respective dates (the "Required Filing Dates") by
which the Company would have been required so to file such documents if the
Company were so subject. The Company will also in any event (x) within 15 days
of each Required Filing Date (i) transmit by mail to all Holders of Notes, as
their names and addresses appear in the security register, without cost to
such Holders and (ii) file with the Trustee copies of the annual reports,
quarterly reports and other documents which the Company would have been
required to file with the SEC pursuant to Section 13(a) or 15(d) of the
Exchange Act if the Company were subject to such Sections and (y) if filing
such documents by the Company with the SEC is not permitted under the Exchange
Act, promptly upon written request and payment of the reasonable cost of
duplication and delivery, supply copies of such documents to any prospective
holder of Notes at the Company's cost.
Additional Covenants. The Indenture also contains covenants with respect to
the following matters: (i) payment of principal, premium and interest; (ii)
maintenance of an office or agency in the City of New York; (iii) arrangements
regarding the handling of money held in trust; (iv) maintenance of corporate
existence; (v) payment of taxes and other claims; (vi) maintenance of
properties; and (vii) maintenance of insurance.
DEFAULTS AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in payment of Interest on the Notes; (ii)
default in payment of principal of, or premium with respect to, the Notes;
(iii) failure by the Company or a Guarantor, if applicable, to comply with the
covenants entitled "Limitations on Restricted Payments," "Limitations on
Indebtedness," "Subsidiary Guarantees," "Limitations on Liens," "Limitations
on Asset Sales," "Limitations on Sale and Leaseback Transactions,"
"Limitations on Issuances and Sales of Capital Stock of Restricted
Subsidiaries," "Change of Control," and "Limitations on Mergers; Sales of
Assets;" (iv) failure by the Company or a Guarantor, if applicable, to
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comply with any of its other agreements in the Indenture, or the Notes for a
period that continues for 60 days after receipt of written notice from the
Trustee or from the Holders of at least 25% of the aggregate principal amount
of the Notes then outstanding, specifying such default; (v) the Company denies
or disaffirms in writing its obligations under the Indenture or the Notes;
(vi) a Guarantor denies or disaffirms in writing its obligations under its
Guarantee, or any Guarantee for any reason ceases to be, or is asserted in
writing by any Guarantor or the Company not to be, in full force and effect
and enforceable in accordance with its terms, except to the extent
contemplated by the Indenture and any such Guarantee; (vii) a default under
any Indebtedness of the Company or any of its Subsidiaries, which default (A)
is caused by a failure to pay the final scheduled principal installment on
such Indebtedness on the stated maturity date thereof (which failure continues
beyond any applicable grace period) or (B) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of such Indebtedness, together with the principal amount of any other
such Indebtedness with respect to which the principal amount remains unpaid at
its final maturity or the maturity of which has been so accelerated,
aggregates $5.0 million or more; (viii) final judgments rendered against the
Company or any of its Restricted Subsidiaries (other than any judgment as to
which and only to the extent, a reputable insurance company has acknowledged
coverage of such claim in writing) of $5.0 million or more which remain
undischarged or unstayed for a period of 60 days, and (ix) certain events of
bankruptcy or insolvency of the Company or any of the Restricted Subsidiaries.
If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the Notes may declare the Notes due and
payable immediately. However, if an Event of Default resulting from bankruptcy
or insolvency occurs, such amount will be due and payable without any
declaration or any act on the part of the Trustee or the Holders. Such
declaration or acceleration may be rescinded and past defaults may be waived
by the Holders of a majority in principal amount of the Notes upon conditions
provided in the Indenture.
Holders may not enforce the Indenture, or the Notes, except as provided
therein. The Trustee may require an indemnity satisfactory to it before
enforcing the Indenture or the Notes. Subject to certain limitations, Holders
of a majority in principal amount of the Notes will have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee. The Trustee, however, may refuse to follow any direction that
conflicts with law or such Indenture, that is unduly prejudicial to the rights
of any Holder or that would subject the Trustee to personal liability. The
Trustee may withhold from the Holders of the Notes notice of any continuing
default (except a default in payment of principal, premium, if any, or
interest) if it determines in good faith that withholding notice is in their
interest. The Company is required to file periodic reports with the Trustee as
to the absence of Default. If a Default exists, the Company is required to
describe the Default and efforts undertaken to remedy the Default.
Directors, officers, employees or stockholders, as such, of the Company, the
Guarantors and the other Subsidiaries of the Company will not have any
liability for any obligations of the Company or any Guarantors under the
Notes, any Guarantee or the Indenture or for any claim based on, in respect
of, or by reason of, such obligations. Each Holder of a Note by accepting a
Note waives and releases all such liability. The waiver and release are part
of the consideration for the issue of the Notes. Such waiver may not be
effective to waive liabilities under the Federal securities laws and it is the
view of the SEC that such a waiver is against public policy.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law. The Registrar need not transfer or exchange any Note previously selected
for redemption. A registered Holder of a Note will be treated as the owner
thereof for
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all purposes. No Note will be valid until the Trustee or an authenticating
agent manually signs the certificate of authentication on the Note. Each Note
will become effective on the date upon which it is so signed.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Indenture or the Notes may be amended or
supplemented, and any past default or compliance with any provision may be
waived, with the consent of the Holders of a majority in principal amount of
the Notes then outstanding. Without the consent of any Holder, the Company and
the Guarantors may amend or supplement the Indenture or the Notes to comply
with the provisions of the Indenture in the case of a consolidation, merger or
sale of all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole, to provide for uncertificated Notes in addition
to or in place of certificated Notes, to cure any ambiguity, defect or
inconsistency, to comply with any requirement of the SEC in connection with
the qualification of the Indenture under the Trust Indenture Act, to comply
with any requirement of the SEC or applicable law to effectuate the Exchange
Offer, to add additional guarantees with respect to the Notes, to further
secure the Notes or the Guarantees, to add to the covenants of the Company or
any Subsidiary for the benefit of the Holders of the Notes, to surrender any
right or power conferred upon the Company or any Subsidiary or to make any
other change that does not adversely affect the rights of any Holder.
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder) (i) reduce the
principal amount of Notes whose Holders must consent to an amendment or
waiver; (ii) reduce the rate of, or change the time for payment of, interest,
including default interest, on any Notes; (iii) reduce the principal of or
change the fixed maturity of any Note(s), or alter the optional redemption
provisions, or alter the price at which the Company will offer to purchase
such Notes pursuant to an Asset Sale Offer or a Change of Control Offer; (iv)
make any Note payable in money other than that stated in such Note; (v) make
any change in the provisions of the Indenture relating to waivers of past
Defaults or the rights of Holders of the Notes to receive payments of
principal of or interest on the Notes; (vi) waive a Default or Event of
Default in the payment of principal of, premium if any, or interest on the
Notes, including any such obligation arising pursuant to an Asset Sale Offer,
a Change of Control Offer (except a rescission of acceleration of the Notes by
the Holders of at least a majority (or, in the case of the failure to make a
Change of Control Offer, two-thirds) in principal amount of the Notes then
outstanding and a waiver of the payment default that resulted from such
acceleration); (vii) waive the obligation to make an Asset Sale Offer or any
payment required to be made pursuant to an Asset Sale Offer, a Change of
Control Offer or a Guarantee; or (viii) make any change in the foregoing
amendment and waiver provisions. An amendment or waiver may not waive the
Company's obligation to make a Change of Control Offer without the consent of
the Holders of at least two-thirds in outstanding principal amount of the
Notes.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of the
obligations of the Company and each Guarantor discharged with respect to the
outstanding Notes ("Legal Defeasance") except for (i) the rights of Holders of
outstanding Notes to receive payments in respect of the principal of, premium,
if any, and interest on such Notes when such payments are due but only from
assets deposited by the Company pursuant to clause (i) of the following
paragraph, (ii) the Company's obligations with respect to the Notes concerning
issuing temporary Notes, registration or transfer of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (iii) the rights,
powers, trusts, duties and immunities of the Trustee, and the Company's
obligations in connection therewith and (iv) the Legal Defeasance provisions
of the Indenture. In addition, the Company may, at its option and at any time,
elect to have the obligations of the Company and any Guarantor released with
respect to certain covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations will
not constitute a Default or
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Event of Default with respect to the Notes. In the event Covenant Defeasance
occurs, certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to effect either a Legal Defeasance or a Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders of the Notes, cash in U.S. dollars, non-callable U.S.
Government Obligations, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest on
the outstanding Notes on the stated maturity or on the applicable redemption
date, as the case may be, of such principal or installment of principal of,
premium, if any, or interest on the outstanding Notes; (ii) in the case of
Legal Defeasance, the Company will deliver to the Trustee an opinion of
counsel reasonably acceptable to the Trustee confirming that (A) the Company
has received from the Internal Revenue Service a ruling or (B) since the Issue
Date, there has been a change in the applicable Federal income tax law,
including by means of a Revenue Ruling published by the Internal Revenue
Service, in either case to the effect that, and based thereon such opinion of
counsel will confirm that, the Holders of the outstanding Notes will not
recognize income, gain or loss for Federal income tax purposes as a result of
such Legal Defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Company will deliver to the Trustee an opinion of counsel
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for Federal income
tax purposes as a result of such Covenant Defeasance and will be subject to
Federal income tax, on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred; (iv) no Default or Event of Default has occurred and is continuing
on the date of such deposit or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the 91st
day after the date of deposit; (v) such Legal Defeasance or Covenant
Defeasance will not result in a breach or violation of, or constitute a
default under any material agreement or instrument (other than the Indenture)
to which the Company or any Guarantor is a party or by which the Company or
any Guarantor is bound; (vi) the Company will deliver to the Trustee an
opinion of counsel to the effect that (A) the trust funds will not be subject
to any rights of holders of Senior Indebtedness of the Company or of any
Guarantor and (B) after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; (vii)
the Company will deliver to the Trustee an officers' certificate stating that
the deposit was not made by the Company with the intent of preferring the
Holders of Notes or any Guarantee over the other creditors of the Company or
any Guarantor or with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or any Guarantor or others; and (viii) the
Company will deliver to the Trustee an officers' certificate and an opinion of
counsel, each stating that all conditions precedent provided for relating to
the Legal Defeasance or the Covenant Defeasance have been complied with.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the
Trustee will exercise such rights and powers vested in it under the Indenture
and use the same degree of care and skill in their exercise as a prudent
Person would exercise under the circumstances in the conduct of such Person's
own affairs.
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of the Company or any Guarantor, to obtain payment of claim
in certain cases or to realize on certain property received by it in respect
of any such claim as security or otherwise. The Trustee will be permitted to
engage in other transactions; however, if it acquires any conflicting
interest, it must eliminate such conflict or resign.
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The Company or any Guarantor may have customary banking relationships with
the Trustee in the ordinary course of business.
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the New Notes will be issued in fully
registered form. Except as described in the next paragraph, the Company
expects that the New Notes initially will each be represented by a single
global certificate in fully registered form (the "Global Note") and will be
deposited with the Trustee as custodian for The Depository Trust Company
("DTC") and registered in the name of a nominee of DTC.
New Notes issued in exchange for Old Notes (i) originally purchased by
institutional investors that were "accredited investors" (as defined in Rule
501(a)(1),(2),(3) or (7) under the Securities Act) ("Institutional Accredited
Investors") who were not "Qualified Institutional Buyers" (as defined in Rule
144A under the Securities Act) ("QIBs"), or (ii) held by QIBs who elected to
take physical delivery of their certificates instead of holding their interest
through the Global Note (and which were thus ineligible to trade through DTC)
(collectively referred to herein as the "Non-Global Purchasers") will be
issued in registered form (the "Certificated Notes"). The Company expects that
upon the transfer to a QIB of Certificated Notes initially issued to a Non-
Global Purchaser, such Certificated Notes will, unless the transferee requests
otherwise or the Global Note has previously been exchanged in whole for
Certificated Notes, be exchanged for an interest in the Global Note.
Global Note. The Company expects that upon the issuance of the Global Note,
DTC or its custodian will credit, on its book-entry registration and transfer
system, the respective principal amount of Notes of the individual beneficial
interests represented by such Global Note to the accounts of Persons who have
accounts with such depositary. Such accounts initially will be designated by
or on behalf of the Initial Purchaser. Ownership of beneficial interests in
the Global Note will be limited to Persons who have accounts with DTC
("participants") or Persons who hold interests through participants. Ownership
of beneficial interests in the Global Note will be shown on, and the transfer
of that ownership will be effected only through, records maintained by DTC or
its nominee (with respect to interests of participants) and the records of
participants (with respect to interests of Persons other than participants).
QIBs may hold their interests in the Global Note directly through DTC if they
are participants in such system, or indirectly through organizations which are
participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of the
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Notes represented by such Global Note for all
purposes under the Indenture and the Notes. No beneficial owner of an interest
in the Global Note will be able to transfer that interest except in accordance
with DTC's applicable procedures, in addition to those provided for under the
Indenture.
Payments of the principal of, premium (if any) and interest on, the Global
Note will be made to DTC or its nominee, as the case may be, as the registered
owner thereof. Neither the Company, the Trustee nor any Paying Agent will have
any responsibility or liability for any aspect of the record relating to or
payments made on account of beneficial ownership interests in the Global Note
or for maintaining, supervising or reviewing any record relating to such
beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest in respect of the Global Note, will
credit participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note as
shown on the records of DTC or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in such Global Note
held through such participants will be governed by standing instructions and
customary practice, as is now the case with securities held for the accounts
of customers registered in the names of nominees for such customers. Such
payments will be the responsibility of such participants.
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The Company expects that transfers between participants in DTC will be
effected in the ordinary way in accordance with DTC rules and will be settled
in clearinghouse funds. If a holder requires physical delivery of a
Certificated Note for any reason, including to sell Notes to Persons in states
which require physical delivery of such Notes or to pledge such Notes, such
holder must transfer its interest in the Global Note in accordance with the
normal procedures of DTC and the procedures set forth in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange
as described below) only at the direction of one or more participants to whose
account the DTC interests in the Global Note is credited and only in respect
of such portion of the aggregate principal amount of Notes as to which such
participant or participants has or have given such direction. However, if
there is an Event of Default under the Notes or the Indenture, DTC will
exchange the Global Note for Certificated Notes, which it will distribute to
its participants.
To the Company's knowledge, DTC is a limited purpose trust company organized
under the laws of the State of New York, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "Clearing Agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers and dealers
(including the Initial Purchasers), banks, trust companies and clearing
corporations and certain other organizations. Indirect access to the DTC
system is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants").
Although DTC customarily agrees to the foregoing procedures in order to
facilitate transfers of interests in global notes among participants of DTC,
it is under no obligation to perform such procedures, and such procedures may
be discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Securities. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Note and a successor depositary is not
appointed by the Company within 90 days, Certificated Notes will be issued in
exchange for the Global Note.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means, with respect to any specified Person,
Indebtedness of any other Person (the "Acquired Person") existing at the time
the Acquired Person merges with or into, or becomes a Subsidiary of, such
specified Person, including Indebtedness incurred in connection with, or in
contemplation of, the Acquired Person merging with or into, or becoming a
Subsidiary of, such specified Person.
"Affiliate" means, with respect to any party, any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such party including any estate or trust under will of such
party. For purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "controlled by" and "under common control
with"), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities,
by agreement or otherwise; provided, however, that beneficial ownership of 5%
or more of the voting securities of a Person will be deemed to be control.
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"Asset Sale" means, with respect to the Company or any Restricted
Subsidiary, the sale, lease, conveyance or other disposition (including,
without limitation, by way of merger or consolidation, and whether by
operation of law or otherwise) to any Person other than the Company or a
wholly-owned Restricted Subsidiary of any of the Company's or such Restricted
Subsidiary's assets (including, without limitation, (x) any sale or other
disposition of Equity Interests of any Restricted Subsidiary and (y) any sale
or other disposition of any non-cash consideration received by the Company or
such Restricted Subsidiary from any prior transaction or series of related
transactions that constituted an Asset Sale under the Indenture), whether
owned on the Issue Date or subsequently acquired, in one transaction or a
series of related transactions; provided, however, that the following will not
constitute Asset Sales: (i) transactions (other than transactions described in
clause (y) above) in any calendar year with aggregate cash and/or Fair Market
Value of any other consideration received (including, without limitation, the
unconditional assumption of Indebtedness) of less than $500,000; (ii) a
transaction or series of related transactions that results in a Change in
Control; (iii) any sale of assets of the Company and the Restricted
Subsidiaries or merger permitted under the covenant described under "Certain
Covenants--Limitations on Mergers; Sales of Assets"; (iv) any sale or other
disposition of inventory, property (whether real, personal or mixed) or
equipment that has become worn out, obsolete or damaged or otherwise
unsuitable or no longer needed for use in connection with the business of the
Company or any Restricted Subsidiary, as the case may be, in the good faith
determination of the Board of Directors; and (v) any sale of inventory to
customers in the ordinary and customary course of business.
"Attributable Indebtedness" means, with respect to any Sale and Leaseback
Transaction, as at the time of determination, the greater of (i) the Fair
Market Value of the property subject to such transaction and (ii) the present
value (discounted at a rate equivalent to the Company's then current weighted
average cost of funds for borrowed money, compounded on a semi-annual basis)
of the total net obligations of the lessee for rental payments during the
remaining term of the lease included in such arrangement (including any period
for which such lease has been extended). As used in the preceding sentence,
the "total net obligations of the lessee for rental payments" under any lease
for any such period means the sum of rental and other payments required to be
paid with respect to such period by the lessee thereunder excluding any
amounts required to be paid by such lessee on account of maintenance and
repairs, insurance, taxes, assessments, water rates or similar charges. In the
case of any lease which is terminable by the lessee upon payment of a penalty,
such net amount of rent also includes the amount of such penalty, but no rent
will be considered as required to be paid under such lease subsequent to the
first date upon which it may be so terminated.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Borrowing Base" means, as of any date, an amount equal to the sum of (a)
85% of the net book value of the accounts receivable of the Company and its
Restricted Subsidiaries as of such date, and (b) 60% of the net book value of
the inventory owned by the Company and its Restricted Subsidiaries as of such
date, all calculated on a consolidated basis and in accordance with GAAP. To
the extent that information is not available as to the amount of accounts
receivable or inventory as of a specific date, the Company may utilize the
most recent available quarterly or annual financial report for purposes of
calculating the Borrowing Base.
"Capital Stock" means, with respect to any Person, any common stock,
preferred stock and any other capital stock of such Person and shares,
interest, participations or other ownership interest (however designated), of
any Person and any rights (other than debt securities convertible into, or
exchangeable for, capital stock), warrants or options to purchase any of the
foregoing, including (without limitation) each class of common stock and
preferred stock of such Person if such Person is a corporation and each
general and limited partnership interest of such Person if such Person is a
partnership.
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"Capitalized Lease Obligation" means Indebtedness represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP and the amount of such Indebtedness will be
the capitalized amount of such obligations determined in accordance with GAAP.
"Cash Equivalents" mean (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than 90 days from the date of acquisition, (ii) time deposits and certificates
of deposit with maturities of not more than 90 days from the date of
acquisition, of any commercial banking institution that is a member of the
Federal Reserve System having capital and surplus in excess of $500.0 million,
whose debt has a rating at the time of any such investment of at least "A-1"
or the equivalent thereof by Standard & Poor's Ratings Group or at least "P-1"
or the equivalent thereof by Moody's Investors Service, Inc., or any bank or
financial institution party to the Credit Agreements, (iii) fully secured
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) entered into with any bank or
financial institution meeting the qualifications specified in clause (ii)
above, (iv) commercial paper issued by the parent corporation of any
commercial banking institution that is a member of the Federal Reserve System
having capital and surplus in excess of $500.0 million and commercial paper or
master notes of issuers, rated at the time of any such investment at least "A-
1" or the equivalent thereof by Standard & Poor's Ratings Group or at least
"P-1" or the equivalent thereof by Moody's Investors Service, Inc., or any
bank or financial institution party to the Credit Agreements, and in each case
maturing within 270 days after the date of acquisition, and (v) any shares in
an open-end mutual fund organized by a bank or financial institution having
combined capital and surplus of at least $500.0 million investing solely in
investments permitted by the foregoing clauses (i), (ii) and (iv).
"Consolidated Indebtedness" means the Indebtedness of the Company and its
consolidated Restricted Subsidiaries determined on a consolidated basis in
conformity with GAAP.
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, excluding
amortization of any deferred financing fees, plus, to the extent not included
in such interest expense, (i) interest expense attributable to Capitalized
Lease Obligations, (ii) amortization of debt discount and debt issuance cost,
(iii) capitalized interest, (iv) non-cash interest expense, (v) commissions,
discounts and other fees and charges owed with respect to letters of credit
and bankers' acceptance financing, (vi) interest actually paid by the Company
or any such Restricted Subsidiary under any guarantee of Indebtedness or other
obligation of any other Person, (vii) net costs associated with Hedging
Obligations (including fees and amortization of discounts), (viii) Preferred
Stock dividends in respect of all Redeemable Stock of the Company held by
Persons other than the Company or a wholly-owned Restricted Subsidiary and
(ix) the cash contributions to any employee stock ownership plan or similar
trust to the extent such contributions are used by such plan or trust to pay
interest or fees to any Person (other than the Company) in connection with
loans incurred by such plan or trust to purchase newly issued or treasury
shares of the Capital Stock of the Company.
"Consolidated Net Income" means, for any period, and as to any Person, the
aggregate Net Income of such Person and its Subsidiaries (other than, in the
case of the Company, the Unrestricted Subsidiaries of the Company) for such
period determined on a consolidated basis in accordance with GAAP; provided
that (i) the Net Income of any Person which is not a Subsidiary of such Person
but which is consolidated with such Person or is accounted for by such Person
by the equity method of accounting will be included only to the extent of the
amount of cash dividends or cash distributions actually paid to such Person or
a wholly-owned Subsidiary of such Person (other than, in the case of the
Company, the Unrestricted Subsidiaries of the Company), (ii) the Net Income of
any Person acquired by such Person or a Subsidiary of such Person in a pooling
of interests transaction for any period prior to the date of such acquisition
will be excluded, (iii) the Net Income of any Subsidiary of such Person that
is subject to restrictions, direct
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or indirect, on the payment of dividends or the making of distributions to
such Person will be excluded to the extent of such restrictions, (iv) the Net
Income of (A) any Unrestricted Subsidiary and (B) any Subsidiary less than 80%
of whose securities having the right (apart from the right under special
circumstances) to vote in the election of directors are owned by the Company
or its wholly-owned Restricted Subsidiaries will be included only to the
extent of the amount of cash dividends or cash distributions actually paid by
such Subsidiary to the Company or a wholly-owned Restricted Subsidiary of the
Company, and (v) all gains (but not losses) which are extraordinary or are
either unusual or nonrecurring (including any gain realized upon the
termination of any employee pension benefit plan and any gain from the sale or
other disposition of assets other than in the ordinary course of business or
from the issuance or sale of any Equity Interests) will be excluded.
"Consolidated Net Worth" means, for any Person, the total of the amounts
shown on the balance sheet of such Person and its consolidated Subsidiaries,
determined on a consolidated basis without duplication in accordance with
GAAP, as of the end of the most recent fiscal quarter of such Person ending at
least 45 days prior to the taking of any action for the purpose of which the
determination is being made, as (i) the amount of Capital Stock (other than
Redeemable Stock) plus (ii) the amount of surplus and retained earnings (or,
in the case of a surplus or retained earnings deficit, minus the amount of
such deficit).
"EBITDA" for any period means the Consolidated Net Income of the Company and
its Restricted Subsidiaries for such period, plus, without duplication, the
following to the extent included in calculating such Consolidated Net Income:
(i) Consolidated Interest Expense, (ii) consolidated income tax expense and
(iii) consolidated depreciation and amortization expense.
"Equity Interests" means shares, interests, participations or other
equivalents (however designated) of Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security which
is convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer Registration Statement" means the registration statement to
be filed by the Company and the Guarantors with the SEC with respect to an
offer to exchange the Old Notes and Old Guarantees for another series of
senior notes of the Company and guarantees by the Guarantors registered under
the Securities Act with substantially identical terms to the Old Notes and the
Old Guarantees.
"Existing Indebtedness" means all Indebtedness (other than Indebtedness
outstanding pursuant to the Credit Agreements) of the Company or any
Restricted Subsidiary existing on the Issue Date and listed on a schedule to
the Indenture.
"Fair Market Value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length transaction, for cash, between a
willing seller and a willing buyer, neither of whom is under undue pressure or
compulsion to complete the transaction. Fair Market Value will be determined
by a majority of the members of the Board of Directors, and a majority of the
disinterested members of such Board of Directors, if any, acting in good faith
and will be evidenced by a duly and properly adopted resolution of the Board
of Directors.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Hedging Obligations" means the obligations of any Person or entity pursuant
to any swap or cap agreement, exchange agreement, collar agreement, option,
futures or forward hedging contract or other
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similar agreement or arrangement designed to protect such Person or entity
against fluctuations in interest rates or foreign exchange rates or the price
of raw materials and other chemical products used or produced in the Company's
business as the case may be.
"incur" has the meaning ascribed thereto in the covenant described under "--
Certain Covenants--Limitations on Indebtedness"; provided that (a) with
respect to any Indebtedness of any Restricted Subsidiary that is owing to the
Company or another Restricted Subsidiary, any disposition, pledge or transfer
of such Indebtedness to any Person (other than the Company or a wholly-owned
Restricted Subsidiary) will be deemed to be an incurrence of such Indebtedness
and (b) with respect to any Indebtedness of the Company or a Restricted
Subsidiary that is owing to another Restricted Subsidiary, any transaction
pursuant to which a wholly-owned Restricted Subsidiary to which such
Indebtedness is owing ceases to be a wholly-owned Restricted Subsidiary will
be deemed to be an incurrence of such Indebtedness, and provided, further that
any Indebtedness of a Person existing at the time such Person becomes a
Restricted Subsidiary will be deemed to be incurred by such Restricted
Subsidiary at the time it becomes a Restricted Subsidiary. The term
"incurrence" has a corresponding meaning.
"Indebtedness" of any Person means, without duplication, all liabilities
with respect to (i) indebtedness for money borrowed or which is evidenced by a
bond, debenture, note or other similar instrument or agreement, but excluding
trade accounts payable and other accrued liabilities arising in the ordinary
course of business; (ii) reimbursement obligations, letters of credit and
bankers' acceptances; (iii) indebtedness with respect to Hedging Obligations;
(iv) Capitalized Lease Obligations; (v) indebtedness, secured or unsecured,
created or arising in connection with the acquisition or improvement of any
property or asset or the acquisition of any business; (vi) all indebtedness
secured by any Lien upon property owned by such Person and all indebtedness
secured in the manner specified in this clause even if such Person has not
assumed or become liable for the payment thereof; (vii) all indebtedness of
such Person created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person or
otherwise representing the deferred and unpaid balance of the purchase price
of any such property, including all indebtedness created or arising in the
manner specified in this clause even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property; (viii) guarantees, direct or indirect,
of any indebtedness of other Persons referred to in clauses (i) through
(vii) above, or of dividends or leases, taxes or other obligations of other
Persons, excluding any guarantee arising out of the endorsement of negotiable
instruments for collection in the ordinary course of business; (ix) contingent
obligations in respect of, or to purchase or otherwise acquire or be
responsible or liable for, through the purchase of products or services,
irrespective of whether such products are delivered or such services are
rendered, or otherwise, any such indebtedness referred to in clauses (i)
through (vii) above, (x) any obligation, contingent or otherwise, arising
under any surety, performance or maintenance bond; and (xi) Redeemable Stock
of the Company valued at the greater of its voluntary or involuntary maximum
fixed repurchase price plus accrued and unpaid dividends; which indebtedness,
Capitalized Lease Obligation, guarantee or contingent or other obligation such
Person has directly or indirectly created, incurred, assumed, guaranteed or
otherwise become liable or responsible for, whether then outstanding or
thereafter created in the case of (i) through (x) above, to the extent any of
the foregoing indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability on the balance sheet of such Person
in accordance with GAAP. For purposes of the foregoing definition, the
"maximum fixed repurchase price" of any Redeemable Stock which does not have a
fixed repurchase price will be calculated in accordance with the terms of such
Redeemable Stock as if such Redeemable Stock were purchased on any date on
which Indebtedness is required to be determined pursuant to the Indenture. As
used herein, Indebtedness with respect to any Hedging Obligation means, with
respect to any specified Person on any date, the net amount (if any) that
would be payable by such specified Person upon the liquidation, close-out or
early termination on such date of such Hedging Obligation. For purposes of the
foregoing, any settlement amount payable upon the liquidation, close-out or
early termination of a Hedging Obligation will be calculated by the Company in
good faith and in a commercially reasonable
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manner on the basis that such liquidation, close-out or early termination
results from an event of default or other similar event with respect to such
specified Person. Any reference in this definition to indebtedness will be
deemed to include any renewals, extensions and refundings of any such
indebtedness or any indebtedness issued in exchange for such indebtedness.
"Independent Director" means a director of the Company other than a director
(i) who (apart from being a director of the Company or any of its
Subsidiaries) is an employee, insider, associate or Affiliate of the Company
or any of its Subsidiaries or has held any such position during the previous
year or (ii) who is a director, an employee, insider, associate or Affiliate
of another party to the transaction in question.
"Interest Coverage Ratio" as of any date of determination means the ratio of
(i) the aggregate amount of EBITDA for the period of the most recent four
consecutive fiscal quarters for which internal financial statements are
available prior to the date of such determination to (ii) Consolidated
Interest Expense for such four fiscal quarters of the Company and its
Restricted Subsidiaries; provided, however, that (A) if the Company or any
Restricted Subsidiary has incurred any Indebtedness since the beginning of
such period that remains outstanding or if the transaction giving rise to the
need to calculate the Interest Coverage Ratio is an incurrence of
Indebtedness, or both, EBITDA and Consolidated Interest Expense for such
period will be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been issued on the first day of such
period and the discharge of any other Indebtedness repaid, repurchased,
defeased or otherwise discharged with the proceeds of such new Indebtedness as
if such discharge had occurred on the first day of such period, (B) if since
the beginning of such period the Company or any Restricted Subsidiary has made
any Asset Sale, EBITDA for such period will be reduced by an amount equal to
EBITDA (if positive), directly attributable to the assets which are the
subject of such Asset Sale for such period, or increased by an amount equal to
EBITDA (if negative), directly attributable thereto for such period and
Consolidated Interest Expense for such period will be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to the Company and its
continuing Restricted Subsidiaries in connection with any such sale or other
disposition for such period (or, if the Capital Stock of any Subsidiary is
sold, the Consolidated Interest Expense for such period directly attributable
to the Indebtedness of such Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (C) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) has made an Investment in any
Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or
an acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made under the
Indenture, which constitutes all or substantially all of an operating unit of
a business, EBITDA and Consolidated Interest Expense for such period will be
calculated after giving pro forma effect thereto (including the incurrence of
any Indebtedness) as if such Investment or acquisition occurred on the first
day of such period and (D) in making such computation, Consolidated Interest
Expense attributable to any Indebtedness incurred under any revolving credit
facility will be computed based on the average daily balance of such
Indebtedness during such period. For purposes of this definition, whenever pro
forma effect is to be given to an acquisition of assets, the amount of income
or earnings relating thereto, and the amount of Consolidated Interest Expense
associated with any Indebtedness incurred in connection therewith, the pro
forma calculations will be determined in good faith by a responsible financial
or accounting officer of the Company. If any Indebtedness bears a floating
rate of interest and is being given pro forma effect, the interest on such
Indebtedness will be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period.
"Investment" means any direct or indirect advance, loan, other extension of
credit or capital contribution (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others) to, purchase or acquisition of Equity Interests, bonds, notes,
debentures or other securities of, or purchase or other acquisition of all or
a substantial part of the
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business, Equity Interests or other evidence of beneficial ownership of, or
any other investment in or guarantee of any Indebtedness (other than
guarantees of Indebtedness of the Company or any Restricted Subsidiary
permitted by the covenant described under "Limitations on Indebtedness") of,
any Person or any other item that would be classified as an investment on a
balance sheet prepared in accordance with GAAP. Investments do not include
advances to customers and suppliers in the ordinary and customary course of
business and on commercially reasonable terms.
"Issue Date" means the date of first issuance of the Notes under the
Indenture.
"Lien" means any mortgage, pledge, lien, security interest, charge or
encumbrance of any kind (including any conditional sale or other title
retention agreement and any lease in the nature thereof).
"Net Cash Proceeds" means, with respect to any issuance or sale of Equity
Interests or debt securities that have been converted into or exchanged for
Equity Interests, as referred to under "--Certain Covenants--Limitations on
Restricted Payments," the proceeds of such issuance or sale in the form of
cash or cash equivalents, net of attorneys' fees, accountants' fees and
brokerage, consultation, underwriting and other fees and expenses actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Net Income" of any Person, for any period, means the net income (loss) of
such Person and its Subsidiaries (other than, in the case of the Company, its
Unrestricted Subsidiaries) determined in accordance with GAAP.
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, the proceeds of insurance paid on account of the loss of
or damage to any property, or compensation or other proceeds for any property
taken by condemnation, eminent domain or similar proceedings, and any non-cash
consideration received by the Company or any Restricted Subsidiary from any
Asset Sale that is converted into or sold or otherwise disposed of for cash
within 90 days after the relevant Asset Sale), net of (i) the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees and sales commissions), (ii) any taxes paid or
payable as a result thereof, (iii) all amounts required to be applied to the
repayment of, or representing the amount of permanent reductions in the
commitments relating to, Indebtedness secured by a Lien on the asset or assets
the subject of such Asset Sale which Lien is permitted pursuant to the terms
of the Indenture, (iv) any reserve for adjustment in respect of the sale price
of such asset or assets required by GAAP, and (v) all distributions and other
payments required to be made (including any amounts held pending distribution)
to minority interest holders in Subsidiaries or joint ventures as a result of
such Asset Sale. The amount of any Net Proceeds other than cash will be the
Fair Market Value thereof as determined in good faith by the Board of
Directors of the Company. The amount of any taxes required to be accrued as a
liability under GAAP as a consequence of an Asset Sale will be the amount
thereof as determined in good faith by the Board of Directors of the Company.
"Permitted Holders" means (i) Michael T. Kennedy; (ii) the spouse and
children or grandchildren (including children or grandchildren by adoption) of
Michael T. Kennedy; (iii) any controlled Affiliate of any of the foregoing;
(iv) in the event of the incompetence or death of any of the Persons described
in clause (i), such Person's estate, executor, administrator, committee or
other personal representative, in each case who at any particular date will
beneficially own or have the right to acquire, directly or indirectly, Capital
Stock of the Company; or (v) any trusts created for the benefit of the Persons
described in clause (i), (ii), or (iv) or any trust for the benefit of any
such trust.
"Permitted Investment" means (i) any Investment in Cash Equivalents, (ii)
any Investment in the Company, (iii) Investments in existence on the Issue
Date, (iv) intercompany notes permitted under clause (f) of the covenant
described under "--Certain Covenants--Limitations on Indebtedness," (v)
Investments in any wholly-owned Restricted Subsidiary or any Person which, as
a result of such Investment, becomes
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a wholly-owned Restricted Subsidiary, and (vi) Investments that do not at one
time outstanding exceed $3.0 million in joint ventures, corporations, limited
liability companies, partnerships or Unrestricted Subsidiaries.
"Permitted Liens" means as of any particular time, any one or more of the
following:
(a) Liens for taxes, rates and assessments not yet past due or, if past
due, the validity of which is being contested in good faith by the Company
or any Restricted Subsidiary by appropriate proceedings promptly instituted
and diligently conducted and against which the Company has established
appropriate reserves in accordance with GAAP;
(b) the Lien of any judgment rendered which is being contested in good
faith by the Company or any Restricted Subsidiary by appropriate
proceedings promptly instituted and diligently conducted and against which
the Company has established appropriate reserves in accordance with GAAP
and which does not have a material adverse effect on the ability of the
Company and its Restricted Subsidiaries to operate their business or
operations;
(c) other than in connection with Indebtedness, any Lien arising in the
ordinary course of business (i) to secure payments of workers'
compensation, unemployment insurance, pension or other social security or
retirement benefits, or to secure the performance of bids, tenders, leases,
progress payments, contracts (other than for the payment of money) or to
secure public or statutory obligations of the Company, or any Restricted
Subsidiary, or to secure surety or appeal bonds to which the Company or any
Restricted Subsidiary is a party, (ii) imposed by law dealing with
materialmen's, mechanics', workmen's, repairmen's, warehousemen's,
landlords', vendors' or carriers' Liens created by law, or deposits or
pledges which are not yet due or, if due, the validity of which is being
contested in good faith by the Company or any Restricted Subsidiaries by
appropriate proceedings promptly instituted and diligently conducted and
against which the Company has established appropriate reserves in
accordance with GAAP and (iii) rights of financial institutions to setoff
and chargeback arising by operation of law; and (iv) similar Liens;
(d) servitudes, licenses, easements, encumbrances, restrictions, rights-
of-way and rights in the nature of easements or similar charges which will
not in the aggregate materially adversely impair the use of the subject
property by the Company or a Restricted Subsidiary;
(e) zoning and building by-laws and ordinances, municipal bylaws and
regulations, and restrictive covenants, which do not materially interfere
with the use of the subject property by the Company or a Restricted
Subsidiary as such property is used as of the Issue Date; and
(f) any extension, renewal, substitution or replacement (or successive
extensions, renewals, substitutions or replacements), as a whole or in
part, of any of the Liens referred to in clauses (a) through (e) of this
definition or the Indebtedness secured thereby; provided that (i) such
extension, renewal, substitution or replacement Lien is limited to that
portion of the property or assets, now owned or hereafter acquired, that
secured the Lien prior to such extension, renewal, substitution or
replacement Lien and (ii) the Indebtedness secured by such Lien (assuming
all available amounts were borrowed) at such time is not increased.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock," as applied to the Equity Interests of any corporation,
means stock of any class or classes (however designated) which is preferred
over shares of stock of any other class of such corporation as to the
distribution of assets on any voluntary or involuntary liquidation or
dissolution of such corporation or as to dividends.
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"Public Equity Offering" means an underwritten public offering of newly
issued shares of common stock of the Company pursuant to an effective
registration statement under the Securities Act, on a primary basis (whether
alone or in conjunction with any secondary public offering).
"Redeemable Stock" means any Equity Interest that by its terms or otherwise
(i) is required to be redeemed prior to the maturity of the Notes, (ii)
matures or is redeemable, in whole or in part, at the option of the Company,
any Subsidiary or the holder thereof or pursuant to a mandatory sinking fund
at any time prior to the maturity of the Notes, or (iii) is convertible into
or exchangeable for debt securities which provide for any scheduled payment of
principal prior to the maturity of the Notes at the option of the issuer at
any time prior to the maturity of the Notes, until the right to so convert or
exchange is irrevocably relinquished.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Subsidiary" means (i) any Guarantor, (ii) any Subsidiary of the
Company in existence on the date hereof to which any line of business or
division (and the assets associated therewith) of any Guarantor are
transferred after the Issue Date, (iii) any Subsidiary of the Company
organized or acquired after the Issue Date, unless such Subsidiary has been
designated as an Unrestricted Subsidiary by a resolution of the Board of
Directors as provided in the definition of "Unrestricted Subsidiary" and (iv)
any Unrestricted Subsidiary which is designated as a Restricted Subsidiary by
the Board of Directors; provided, that immediately after giving effect to any
such designation (A) no Default or Event of Default has occurred and is
continuing and (B) in the case of any designation referred to in clause (iii)
or (iv) hereof, the Company could incur at least $1.00 of Indebtedness
pursuant to the covenant described in the initial paragraph under "--Certain
Covenants--Limitations on Indebtedness," on a pro forma basis taking into
account such designation. The Company will evidence any such designation to
the Trustee by promptly filing with the Trustee an officers' certificate
certifying that such designation has been made and complies with the
requirements of the immediately preceding sentence. Notwithstanding any
provision of the Indenture to the contrary, each Guarantor will be a
Restricted Subsidiary.
"Sale and Leaseback Transaction" with respect to any Person, means any
arrangement with another Person for the leasing of any real or tangible
personal property, which property has been or is to be sold or transferred by
such Person to such other Person in contemplation of such leasing.
"Senior Indebtedness" means Indebtedness of any Person which is not
Subordinated Indebtedness.
"Subordinated Indebtedness" means Indebtedness of the Company, any Guarantor
or any other Person which expressly provides that such Indebtedness is junior
or subordinated in right of payment to the Notes or any Guarantee, as the case
may be.
"Subsidiary" means, with respect to the Company, (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors, under ordinary
circumstances, is at the time owned, directly or indirectly, by the Company,
by the Company and one or more of its Subsidiaries or by one or more of the
Company's Subsidiaries or (ii) any other Person or entity of which at least a
majority of voting interest, under ordinary circumstances, is at the time
owned, directly or indirectly, by the Company, by the Company and one or more
of its Subsidiaries or by one or more of the Company's Subsidiaries.
"Unrestricted Subsidiary" means, until such time at it may be designated as
a Restricted Subsidiary by the Board of Directors as provided in and in
compliance with the definition of "Restricted Subsidiary," (i) any Subsidiary
of the Company organized or acquired after the Issue Date designated as an
Unrestricted Subsidiary by the Board of Directors in which all investments by
the Company or any Restricted Subsidiary are made only from funds available
for the making of Restricted Payments as described under "--Certain
Covenants--Limitations on Restricted Payments" and (ii) any Subsidiary of an
Unrestricted Subsidiary. The
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Board of Directors may designate any Subsidiary of the Company (including any
newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary owns any Equity Interests of, or owns, or holds any
Lien upon, any property of, any Subsidiary of the Company which is not a
Subsidiary of such Subsidiary to be so designated; provided that each
Subsidiary to be so designated and each of its Subsidiaries has not, at the
time of designation, and does not thereafter, directly or indirectly, incur
any Indebtedness pursuant to which the lender has recourse to any of the
assets of the Company or any of its Restricted Subsidiaries. The Company will
evidence any such designation by promptly filing with the Trustee an officers'
certificate certifying that such designation has been made and complies with
the requirements of the immediately preceding sentence.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in either case
under clause (i) or (ii) above, are not callable or redeemable at the option
of the issuer thereof.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or Persons
performing similar functions) of such Person, whether at all times or only so
long as no senior class of securities has such voting power by reason of any
contingency.
REGISTRATION RIGHTS
Pursuant to the Registration Rights Agreement, the Company and the
Guarantors agreed, for the benefit of holders of the Old Notes, that they
would, at their expense (i) on or prior to February 3, 1997, file the Exchange
Offer Registration Statement with the Commission with respect to the New
Notes, which will have terms identical to the Old Notes and will be guaranteed
by the Guarantors on the same terms as the Old Guarantees (except that the New
Notes will not contain terms with respect to the transfer restrictions or any
provision relating to this paragraph) and (ii) use their best efforts to cause
the Exchange Offer Registration Statement to be declared effective under the
Securities Act by April 4, 1997. The Registration Statement of which this
Prospectus is a part constitutes the Exchange Offer Registration Statement.
Upon effectiveness of the Exchange Offer Registration Statement, the Company
and the Guarantors agreed that they would offer to all holders of the Old
Notes an opportunity to exchange their securities for a like principal amount
of the New Notes. The Company and the Guarantors agreed to keep the Exchange
Offer open for acceptance for not less than 20 business days after the date of
this Prospectus, and will comply with Regulation 14E and Rule 13e-4 under the
Exchange Act (other than the filing requirements of Rule 13e-4). For each Old
Note surrendered to the Company for exchange pursuant to the Exchange Offer,
the holder of such Note will receive a New Note having a principal amount at
maturity equal to that of the surrendered Old Note. Interest on each New Note
will accrue from the last interest payment date on which interest was paid on
the Old Note surrendered in exchange therefor or if no interest has been paid
on such Old Note, from December 5, 1996.
Under existing interpretations of the staff of the Commission's Division of
Corporation Finance (the "Staff"), the New Notes will generally be freely
transferable after the Exchange Offer without further registration under the
Securities Act; provided that broker-dealers ("Participating Broker-Dealers")
receiving New Notes in the Exchange Offer will be subject to a prospectus
delivery requirement with respect to resales of such New Notes. To date, the
Staff has taken the position that Participating Broker-Dealers may fulfill
their prospectus delivery requirements with respect to transactions involving
an exchange of securities such as the exchange pursuant to the Exchange Offer
(other than a resale of an unsold allotment from the sale of the Old Notes to
the Initial Purchasers) with this Prospectus. Pursuant to the Registration
Rights Agreement, the Company has agreed to permit Participating Broker-
Dealers and other persons, if any, subject to similar prospectus delivery
requirements to use this Prospectus in connection with the resale of such New
Notes.
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Each holder of the Old Notes who wishes to exchange its Old Notes for New
Notes in the Exchange Offer will be required to make certain representations
to the Company, including that (i) any New Notes to be received by it will be
acquired in the ordinary course of its business, (ii) it has no arrangement or
understanding with any person to participate in a public distribution (within
the meaning of the Securities Act) of the New Notes and (iii) it is not an
"affiliate," as defined in Rule 405 of the Securities Act, of the Company or
the Guarantors, or if it is such an affiliate, that it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable to it.
In addition, each holder who is not a broker-dealer will be required to
represent that it is not engaged in, and does not intend to engage in, a
public distribution of the New Notes. Each holder who is a broker-dealer and
who receives New Notes for its own account in exchange for Old Notes will be
required to acknowledge that such Old Notes were acquired by it as a result of
market-making activities or other trading activities and that it will deliver
a prospectus in connection with any resale by it of such New Notes.
In the event for any reason the Exchange Offer is not consummated by May 4,
1997, or if the Initial Purchasers so request with respect to the Old Notes
not eligible to be exchanged for New Notes in the Exchange Offer or if any
holder of Old Notes is not eligible to participate in the Exchange Offer or
does not receive freely tradeable New Notes in the Exchange Offer, the Company
and the Guarantors will, at their expense, (a) promptly file a shelf
registration statement (a "Shelf Registration Statement" and together with the
Exchange Offer Registration Statement, the "Registration Statements")
permitting resales from time to time of the Notes, (b) use their best efforts
to cause such registration statement to become effective and (c) use their
best efforts to keep such registration statement current and effective until
three years from the date it becomes effective or such shorter period that
will terminate when all the Notes covered by such registration statement have
been sold pursuant thereto. The Company and the Guarantors, at their expense,
will provide to each holder of the Notes copies of the prospectus, which is a
part of the Shelf Registration Statement, notify each such holder when the
Shelf Registration Statement has become effective and take certain other
actions as are required to permit unrestricted resales of the Notes from time
to time. A holder of Notes who sells such Notes pursuant to the Shelf
Registration Statement generally will be required to be named as a selling
securityholder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement which are applicable to such
holder (including certain indemnification obligations).
In the event that (i) the Exchange Offer is not consummated on or prior to
May 4, 1997, (ii) the Shelf Registration Statement is not filed or declared
effective within the required time periods or (iii) any of the Registration
Statements required by the Registration Rights Agreement is declared effective
but thereafter ceases to be effective (except as specifically permitted
therein) for a period of 15 consecutive days without being succeeded
immediately by any additional Registration Statement filed and declared
effective (each such event, a "Registration Default"), the interest rate borne
by the Notes shall be increased by 25 basis points per annum for the 90-day
period following such Registration Default. Such interest rate will increase
by an additional 25 basis points per annum at the beginning of each subsequent
90-day period following such Registration Default, up to a maximum aggregate
increase of 100 basis points per annum. Upon (x) the consummation of the
Exchange Offer or (y) the filing or the effectiveness of the Shelf
Registration Statement, as the case may be, the interest rate borne by the
Notes will be reduced from and including the date on which any of the events
specified in clauses (x) or (y) above occur by the amount of the related
increase in the interest rate.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is available upon request to the Company.
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CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following general discussion summarizes certain of the material U.S.
federal income tax aspects of the acquisition, ownership and disposition of
the New Notes. The Company has obtained an opinion from Duane, Morris &
Heckscher, counsel to the Company, that the discussion set forth below
accurately describes the material federal income tax consequences of
consummating the Exchange Offer and holding and disposing of the New Notes,
provided that no opinion was expressed with respect to the calculation and
accrual of original issue discount, if any, on the New Notes. Such counsel's
opinion and this discussion are based upon the Internal Revenue Code of 1986,
as amended (the "Code"), Treasury Regulations, Internal Revenue Service
("IRS") rulings and judicial decisions now in effect, all of which are subject
to change (possibly with retroactive effect) or different interpretations.
Such counsel's opinion is not binding on the IRS, and there can be no
assurance that the IRS will have a similar view with respect to the tax
consequences described below. No ruling has been or will be requested by the
Company from the IRS on any matters relating to the New Notes. This discussion
is generally limited to the tax consequences to initial holders and does not
purport to deal with all aspects of federal income taxation that may be
relevant to a particular investor's decision to purchase the New Notes. This
discussion is not intended to be wholly applicable to all categories of
investors, some of which, such as dealers in securities, banks, insurance
companies and tax-exempt organizations, may be subject to special rules. In
addition, this discussion is limited to persons that will hold the New Notes
represented thereby as a "capital asset" within the meaning of section 1221 of
the Code.
ALL PROSPECTIVE PURCHASERS OF THE NEW NOTES ARE ADVISED TO CONSULT THEIR OWN
TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES
OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NEW NOTES.
Exchange Offer. The exchange of the New Notes for the Old Notes pursuant to
the Exchange Offer will not be treated as an "exchange" for U.S. federal
income tax purposes because the New Notes will not be considered to differ
materially in kind or extent from the Old Notes. Rather, the New Notes
received by a holder will be treated as a continuation of the Old Notes in the
hands of such holder. As a result, there will be no U.S. federal income tax
consequences to holders exchanging the Old Notes for the New Notes pursuant to
the Exchange Offer. The holder must continue to include stated interest in
income as if the exchange had not occurred. Similarly, there would be no U.S.
federal income tax consequences to a holder of Old Notes that does not
participate in the Exchange Offer.
Market Discount. Investors acquiring New Notes pursuant to this Prospectus
should note that the resale of the New Notes may be adversely affected by the
market discount provisions of sections 1276 through 1278 of the Code. Under
the market discount rules, if a holder of a New Note (other than a holder who
purchased the New Note upon original issuance) purchases it at a market
discount (i.e., at a price below its stated redemption price at maturity) in
excess of a statutorily-defined de minimis amount and thereafter recognizes
gain upon a disposition or retirement of the New Note, then the lesser of the
gain recognized or the portion of the market discount that accrued on a
ratable basis (or, if elected, on a constant interest rate basis) generally
will be treated as ordinary income at the time of the disposition. Moreover,
any market discount in a New Note may be taxable to an investor to the extent
of appreciation at the time of certain otherwise non-taxable transactions
(e.g., gifts). Absent an election to include market discount in income as it
accrues, a holder of a market discount debt instrument may be required to
defer a portion of any interest expense that otherwise may be deductible on
any indebtedness incurred or maintained to purchase or carry such debt
instrument until the holder disposes of the debt instrument in a taxable
transaction.
Sale, Exchange or Retirement of the New Notes. Each holder of New Notes
generally will recognize gain or loss upon the sale, exchange, repurchase,
redemption, retirement or other disposition of those New Notes measured by the
difference (if any) between (i) the amount of cash and the fair market value
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of any property received (except to the extent that such cash or other
property is attributable to the payment of accrued interest not previously
included in income, which amount will be taxable as ordinary income) and (ii)
the holder's adjusted tax basis in those New Notes (including any market
discount previously included in income by the holder). Any such gain or loss
recognized on the sale, exchange, repurchase, redemption, retirement or other
disposition of a New Note should be capital gain or loss (except as discussed
under "Market Discount" above), and would be long-term capital gain or loss if
the New Note had been held for more than one year at the time of the sale or
exchange. An investor's initial basis in a New Note will be the same as such
investor's basis in the Old Note at the time of the Exchange Offer.
Backup Withholding. A holder of New Notes may be subject to "backup
withholding" at a rate of 31% with respect to certain "reportable payments,"
including interest payments and, under certain circumstances, principal
payments on the New Notes. These backup withholding rules apply if the holder,
among other things, (i) fails to furnish a social security number or other
taxpayer identification number ("TIN") certified under penalties of perjury
within a reasonable time after the request therefor, (ii) furnishes an
incorrect TIN, (iii) fails to report properly interest, or (iv) under certain
circumstances, fails to provide a certified statement, signed under penalties
of perjury, that the TIN furnished is the correct number and that such holder
is not subject to backup withholding. A holder who does not provide the
Company with its correct TIN also may be subject to penalties imposed by the
IRS. Any amount withheld from a payment to a holder under the backup
withholding rules is creditable against the holder's federal income tax
liability, provided that the required information is furnished to the IRS.
Backup withholding will not apply, however, with respect to payments made to
certain holders, including corporations, tax-exempt organizations and certain
foreign persons ("exempt recipients"), provided their exemptions from backup
withholding are properly established.
The amount of any "reportable payments" including interest made to the
holders of New Notes (other than to holders which are exempt recipients) and
the amount of tax withheld, if any, with respect to such payments will be
reported to such holders and to the IRS for each calendar year.
Foreign Holders. The following discussion is a summary of certain U.S.
federal income tax consequences to a Foreign Person that holds a New Note. The
term "Foreign Person" means a nonresident alien individual or foreign
corporation, but only if the income or gain on the New Note is not
"effectively connected with the conduct of a trade or business within the
U.S." If the income or gain on the New Note is "effectively connected with the
conduct of a trade or business within the U.S.," then the nonresident alien
individual or foreign corporation will be subject to tax on such income or
gain in essentially the same manner as a U.S. citizen or resident or a
domestic corporation, as discussed above, and in the case of a foreign
corporation, may also be subject to the branch profits tax.
Under the portfolio interest exception to the general rules for the
withholding of tax on interest paid to a Foreign Person, a Foreign Person will
not be subject to U.S. federal income tax (or to withholding) on interest
payments on a New Note, provided that (i) the Foreign Person does not actually
or constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote and is not a controlled
foreign corporation with respect to the U.S. that is related to the Company
through stock ownership, and (ii) the Company, its paying agent or the person
who would otherwise be required to withhold tax receives either (A) a
statement (an "Owner's Statement") signed under penalties of perjury by the
beneficial owner of the New Note in which the owner certifies that the owner
is not a U.S. person and which provides the owner's name and address, or (B) a
statement signed under penalties of perjury by the Financial Institution
holding the New Note on behalf of the beneficial owner, together with a copy
of the Owner's Statement. The term "Financial Institution" means a securities
clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business and that
holds a New Note on behalf
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of the owner of the New Note. A Foreign Person who does not qualify for the
"portfolio interest" exception, would, under current law, generally be subject
to U.S. federal withholding tax at a flat rate of 30% (or lower applicable
treaty rate) on interest payments.
In general, gain recognized by a Foreign Person upon the redemption, sale or
exchange of a New Note (including any gain representing accrued market
discount) will not be subject to U.S. federal income tax. However, a Foreign
Person may be subject to U.S. federal income tax at a flat rate of 30% (unless
exempt by an applicable treaty) on any such gain if the Foreign Person is an
individual present in the U.S. for 183 days or more during the taxable year in
which the New Note is redeemed, sold or exchanged, and certain other
requirements are met.
84
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account in exchange
for Old Notes pursuant to the Exchange Offer must acknowledge that such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities and that it will deliver a prospectus
in connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes. Based
on interpretations by the staff of the SEC, as set forth in no-action letters
issued to third parties, the Company believes that New Notes issued pursuant
to the Exchange Offer in exchange for Old Notes may be offered for resale,
resold or otherwise transferred by holders thereof (other than any such holder
which is an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such holders' business and such holders,
other than broker-dealers, have no arrangement or understanding with any
person to participate in the distribution of such New Notes. However, the SEC
has not considered the Exchange Offer in the content of a no-action letter and
there can be no assurance that the staff of the SEC would make a similar
determination with respect to the Exchange Offer as in such other
circumstances. Each holder of the Old Notes who wishes to exchange its Old
Notes for New Notes in the Exchange Offer will be required to make certain
representations to the Company, including that (i) any New Notes to be
received by it will be acquired in the ordinary course of its business, (ii)
it has no arrangement or understanding with any person to participate in a
public distribution (within the meaning of the Securities Act) of the New
Notes and (iii) it is not an "affiliate," as defined in Rule 405 of the
Securities Act, of the Company or the Guarantors, or if it is such an
affiliate, that it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable to it. If any
Holder is an affiliate of the Company or in engaged in or intends to engage in
or has any arrangement or understanding with respect to the distribution of
the New Notes to be acquired pursuant to the Exchange Offer, such Holder (i)
may not rely on the applicable interpretations of the staff of the SEC and
(ii) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each broker-
dealer that receives New Notes for its own account in exchange for Old Notes
pursuant to the Exchange Offer must acknowledge that such Old Notes were
acquired by such broker-dealer as a result of market-making activities or
other trading activities and that it will deliver a prospectus in connection
with any resale of such New Notes. The Company has agreed that, for a period
of 150 days after the date of this Prospectus, it will make this prospectus,
as amended or supplemented, available to any broker-dealer for use in
connection with any such resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such broker-dealer or the purchasers of any such New Notes. Any broker-
dealer that resells New Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such New Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit on any such resale of New Notes
and any commission or concessions received by any such persons may be deemed
to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
The Company has agreed, pursuant to the Registration Rights Agreement, to
pay all expenses incident to the Exchange Offer (including the expenses of one
counsel for all the holders of the Notes as a single
85
<PAGE>
class) other than commissions or concessions of any brokers or dealers and
will indemnify the holders of the Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters relating to the New Notes offered hereby will be
passed upon for the Company by Duane, Morris & Heckscher, Philadelphia,
Pennsylvania.
EXPERTS
The audited consolidated financial statements of the Company and J.R. Cup
included in this Prospectus and elsewhere in the registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
The audited consolidated financial statements of StyroChem as of and for the
eight month period ended December 5, 1996 included in this Prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm
as experts in giving said report.
The consolidated financial statements of StyroChem as of and for the years
ended March 30, 1996 and April 1, 1995 included in this Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein, and have been so included in reliance upon the
opinion of such firm given upon their authority as experts in accounting and
auditing.
86
<PAGE>
ADDITIONAL INFORMATION
A Registration Statement on Form S-4, including amendments thereto, relating
to the New Notes and New Guarantees offered hereby has been filed with the
Company and the Guarantors with the SEC. This Prospectus does not contain all
the information set forth in the Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus as to the contents
of any contract or any other document referred to are not necessarily complete
and in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement. For further
information with respect to the Company and the New Notes offered hereby,
reference is hereby made to the Registration Statement, exhibits and
schedules. A copy of the Registration Statement may be inspected by anyone
without charge and may be obtained at rates prescribed by the SEC at the
public reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, or at its regional offices located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois, 60661
and Seven World Trade Center, Suite 1300, New York, New York 10048. In
addition, copies of such material may be accessed electronically by means of
the SEC's home page on the Internet at http://www.sec.gov. Copies of such
material can be obtained from the Company upon request. Any such request
should be addressed to the Company's principal office at Three Radnor
Corporate Center, Suite 300, 100 Matsonford Road, Radnor, Pennsylvania 19087,
Attention: Treasurer (telephone number (610) 341-9600).
The Company and the Guarantors will be required to file periodic reports in
accordance with Section 13 or 15(d) of the Exchange Act with the SEC from and
after the effective date of the Registration Statement with respect to the
fiscal year in which the Registration Statement is declared effective and for
such time thereafter as the Exchange Act and the rules and regulations of the
SEC promulgated thereunder so require. The Company has agreed that, whether or
not it is then subject to Section 13 or 15(d) of the Exchange Act, it will
file with the SEC the annual reports, quarterly reports and other periodic
reports which the Company would have been required to file with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act if the Company were
subject to such Sections. Such periodic reports and other information may be
inspected by anyone without charge and may be obtained at rates prescribed by
the SEC at the SEC offices referenced above. In addition, the Company will
furnish, upon the request of any holder of a Note, such information as is
specified in paragraph (d)(4) of Rule 144A, to such holder or to a prospective
purchaser of such Note which such holder informs the Company that such holder
reasonably believes is a QIB within the meaning of Rule 144A, in order to
permit compliance by such holder with Rule 144A in connection with the resale
of such Note by such holder unless, at the time of such request, the Company
is subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act.
87
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
RADNOR HOLDINGS CORPORATION
Report of Independent Public Accountants................................ F-2
Consolidated Balance Sheets as of December 29, 1995 and December 27,
1996................................................................... F-3
Consolidated Statements of Operations for the Fiscal Years Ended
December 30, 1994, December 29, 1995 and December 27, 1996............. F-4
Consolidated Statements of Stockholders' (Deficit) Equity for the Fiscal
Years Ended December 30, 1994, December 29, 1995 and December 27, 1996. F-5
Consolidated Statements of Cash Flows for the Fiscal Years Ended
December 30, 1994, December 29, 1995 and December 27, 1996............. F-6
Notes to Consolidated Financial Statements.............................. F-7
J.R. CUP FOAM CONTAINER OPERATIONS OF JAMES RIVER PAPER COMPANY, INC.
Report of Independent Public Accountants................................ F-17
Balance Sheets as of December 25, 1994 and December 31, 1995............ F-18
Statements of Operations for the Years Ended December 26, 1993, December
25, 1994 and December 31, 1995......................................... F-19
Statements of Changes in Owner's Investment for the Years Ended December
26, 1993, December 25, 1994 and December 31, 1995...................... F-20
Statements of Cash Flows for the Years Ended December 26, 1993, December
25, 1994 and December 31, 1995......................................... F-21
Notes to Financial Statements........................................... F-22
SP ACQUISITION CO. AND SUBSIDIARIES
Report of Independent Public Accountants................................ F-26
Independent Auditors' Report............................................ F-27
Consolidated Balance Sheets as of April 1, 1995, March 30, 1996 and De-
cember 5, 1996......................................................... F-28
Consolidated Statements of Income for the Years Ended April 1, 1995 and
March 30, 1996 and the Eight Month Period Ended December 5, 1996....... F-29
Consolidated Statements of Changes in Stockholders' Equity for the Years
Ended April 1, 1995 and March 30, 1996 and the Eight Month Period Ended
December 5, 1996....................................................... F-30
Consolidated Statements of Cash Flows for the Years Ended April 1, 1995
and March 30, 1996 and the Eight Month Period Ended December 5, 1996... F-31
Notes to Consolidated Financial Statements for the Years Ended April 1,
1995 and March 30, 1996 and the Eight Month Period Ended December 5,
1996................................................................... F-32
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Radnor Holdings Corporation:
We have audited the accompanying consolidated balance sheets of RADNOR
HOLDINGS CORPORATION (a Delaware corporation) (formerly Benchmark Corporation
of Delaware) and subsidiaries as of December 29, 1995 and December 27, 1996,
and the related consolidated statements of operations, stockholders' (deficit)
equity and cash flows for each of the three years in the period ended December
27, 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Radnor Holdings Corporation and subsidiaries as of December 29, 1995 and
December 27, 1996, and the results of their operations and cash flows for each
of the three years in the period ended December 27, 1996, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania,
March 18, 1997
F-2
<PAGE>
RADNOR HOLDINGS CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 29, 1995 AND DECEMBER 27, 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
ASSETS 1995 1996
------ ------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash...................................................... $ 5 $ 855
Accounts receivable, net.................................. 8,402 24,687
Inventories, net.......................................... 6,494 19,078
Prepaid expenses and other................................ 1,777 3,971
Deferred tax asset........................................ -- 2,380
Net current assets of discontinued operations............. 982 --
------- --------
17,660 50,971
------- --------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land...................................................... 401 3,747
Supplies and spare mold parts............................. 1,964 2,529
Buildings and improvements................................ 7,000 18,050
Machinery and equipment................................... 23,699 91,437
------- --------
33,064 115,763
Less accumulated depreciation............................. (4,690) (4,372)
------- --------
28,374 111,391
------- --------
OTHER ASSETS................................................ 554 10,007
------- --------
$46,588 $172,369
======= ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable.......................................... $12,369 $ 28,884
Accrued liabilities....................................... 6,653 13,166
Current portion of long-term debt......................... 9,000 237
------- --------
28,022 42,287
------- --------
LONG-TERM DEBT, net of current portion...................... 7,252 104,362
------- --------
DEFERRED TAX LIABILITY...................................... 4,760 11,173
------- --------
OTHER NONCURRENT LIABILITIES................................ -- 218
------- --------
COMMITMENTS AND CONTINGENCIES (Note 4)
STOCKHOLDERS' EQUITY:
Voting and nonvoting common stock, 22,700 shares
authorized, 6,245 shares issued and outstanding.......... 1 1
Series A Convertible Preferred Stock, 2,000 shares
authorized, 2,000 shares issued and outstanding at
December 29, 1995 retired in 1996........................ 8,575 --
Additional paid-in capital................................ 3,497 17,720
Accumulated deficit....................................... (5,519) (3,420)
Cumulative translation adjustment......................... -- 28
------- --------
Total stockholders' equity.............................. 6,554 14,329
------- --------
$46,588 $172,369
======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-3
<PAGE>
RADNOR HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FISCAL YEARS ENDED DECEMBER 30, 1994, DECEMBER 29, 1995 AND DECEMBER
27, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- --------
<S> <C> <C> <C>
NET SALES........................................... $80,850 $86,239 $177,395
COST OF GOODS SOLD.................................. 64,078 75,690 135,982
------- ------- --------
GROSS PROFIT........................................ 16,772 10,549 41,413
------- ------- --------
OPERATING EXPENSES:
Distribution...................................... 5,584 6,027 14,099
Selling, general and administrative............... 8,209 9,051 18,676
Restructuring charges ............................ -- -- 910
------- ------- --------
13,793 15,078 33,685
------- ------- --------
INCOME (LOSS) FROM OPERATIONS....................... 2,979 (4,529) 7,728
------- ------- --------
OTHER (INCOME) EXPENSE:
Interest.......................................... 3,001 2,822 4,496
Other, net........................................ 290 526 374
------- ------- --------
3,291 3,348 4,870
------- ------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS............ (312) (7,877) 2,858
------- ------- --------
DISCONTINUED OPERATIONS:
Income (loss) from operations..................... (5,082) 534 --
Gain on disposal.................................. -- 2,038 --
------- ------- --------
INCOME (LOSS) FROM DISCONTINUED OPERATIONS.......... (5,082) 2,572 --
------- ------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM, INCOME
TAXES AND MINORITY INTEREST........................ (5,394) (5,305) 2,858
------- ------- --------
Provision for income taxes........................ -- -- 121
------- ------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM AND MINORITY
INTEREST........................................... (5,394) (5,305) 2,737
------- ------- --------
Minority interest in income....................... -- -- 1,348
------- ------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM............. (5,394) (5,305) 1,389
------- ------- --------
Extraordinary Item-Gain on Early Extinguishment of
Debt............................................. -- 23,828 710
------- ------- --------
NET INCOME (LOSS)................................... $(5,394) $18,523 $ 2,099
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
RADNOR HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
FOR THE FISCAL YEARS ENDED DECEMBER 30, 1994, DECEMBER 29, 1995 AND DECEMBER
27, 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
VOTING AND
NONVOTING
COMMON STOCK SERIES A ADDITIONAL CUMULATIVE
------------- CONVERTIBLE PAID-IN ACCUMULATED TRANSLATION
SHARES AMOUNT PREFERRED STOCK CAPITAL DEFICIT ADJUSTMENT TOTAL
------ ------ --------------- ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31,
1993................... 6,245 $ 1 $7,490 $ 3,497 $(17,563) $-- $ (6,575)
Net loss.............. -- -- -- -- (5,394) -- (5,394)
Accretion of preferred
stock redemption
value................ -- -- 524 -- (524) -- --
----- --- ------ ------- -------- --- --------
BALANCE, December 30,
1994................... 6,245 1 8,014 3,497 (23,481) -- (11,969)
Net income............ -- -- -- -- 18,523 -- 18,523
Accretion of preferred
stock redemption
value................ -- -- 561 -- (561) -- --
----- --- ------ ------- -------- --- --------
BALANCE, December 29,
1995................... 6,245 1 8,575 3,497 (5,519) -- 6,554
Net income............ -- -- -- -- 2,099 -- 2,099
Effect of partnership
equity transaction
(Note 1)............. -- -- -- 8,648 -- -- 8,648
Redemption of
preferred stock...... -- -- (8,575) 5,575 -- -- (3,000)
Cumulative translation
adjustment........... -- -- -- -- -- 28 28
----- --- ------ ------- -------- --- --------
BALANCE, December 27,
1996................... 6,245 $ 1 $ -- $17,720 $ (3,420) $28 $ 14,329
===== === ====== ======= ======== === ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
RADNOR HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED DECEMBER 30, 1994, DECEMBER 29, 1995 AND DECEMBER
27, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................ $(5,394) $ 18,523 $ 2,099
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating
activities--
Depreciation................................... 1,190 2,057 4,451
Amortization................................... 113 323 625
Minority interest in income.................... -- -- 1,348
Extraordinary gain on early extinguishment of
debt.......................................... -- (23,828) (710)
Discontinued operations ....................... 4,411 (2,572) --
Changes in operating assets and liabilities,
net of effects of acquisition and disposition
of businesses--
Accounts receivable, net..................... (353) (135) (4,703)
Inventories.................................. (2,052) 1,508 2,906
Prepaid expenses and other................... 119 (1,465) (1,314)
Accounts payable............................. 2,902 (573) 260
Accrued liabilities.......................... (147) 3 263
------- -------- --------
Net cash provided by (used in) continuing
operations................................ 789 (6,159) 5,225
Net cash provided by (used in) discontinued
operations................................ (6,079) 5,978 982
------- -------- --------
Net cash provided by (used in) operating
activities................................ (5,290) (181) 6,207
------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................. (1,645) (5,491) (4,944)
Disposal of building and land.................... 835 -- --
Acquisition of J.R. Cup, net of cash acquired ... -- -- (21,592)
Acquisition of StyroChem, net of cash acquired .. -- -- (26,168)
Proceeds from sale of discontinued operations ... -- 50,995 --
(Increase) decrease in other assets.............. 39 (2) (4,635)
------- -------- --------
Net cash provided by (used in) investing
activities.................................... (771) 45,502 (57,339)
------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) on revolving credit
lines and unsecured notes payable............... 6,562 (15,802) (5,006)
Borrowings on mortgage note...................... -- -- 364
Payments on mortgage note........................ (500) -- (4,616)
Borrowings on bank term loans.................... -- -- 19,426
Payments of bank term loans...................... -- (29,518) (19,426)
Issuance of senior notes......................... -- -- 100,000
Payments of acquisition notes ................... -- -- (35,760)
Retirement of preferred stock.................... -- -- (3,000)
------- -------- --------
Net cash provided by (used in) financing
activities.................................... 6,062 (45,320) 51,982
------- -------- --------
NET INCREASE IN CASH............................... 1 1 850
CASH, beginning of period.......................... 3 4 5
------- -------- --------
CASH, end of period................................ $ 4 $ 5 $ 855
======= ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest,
including discontinued operations............... $ 2,990 $ 4,702 $ 3,626
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
RADNOR HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION, ACQUISITIONS AND DISCONTINUED OPERATIONS:
The Company
Radnor Holdings Corporation (Radnor) (formerly Benchmark Corporation of
Delaware) was incorporated in Delaware on November 6, 1991 to acquire the
outstanding stock of Benchmark Holdings, Inc. (Benchmark) and WinCup Holdings,
Inc. (WinCup). Radnor and subsidiaries (collectively the Company) manufacture
and distribute foam cups and containers, thermoformed lids and various other
products used by the foodservice industry. The Company's products are
primarily sold to national, institutional and retail customers throughout the
U.S., in Mexico and in other countries. The Company and its subsidiaries
market their products under a variety of brand and trade names, including
"WinCup" and "Handi-Kup."
The Company has a number of large national accounts and supplies products to
a number of large foodservice distributors. The five largest accounts
represented approximately 35% and 37% of the Company's net sales for fiscal
years 1995 and 1996, respectively. Although the Company has not lost sales
from its key customers in fiscal years 1995 or 1996, if any of such customers
substantially reduces its level of purchases from the Company, the Company's
profitability could be adversely affected. Moreover, continued consolidation
among distributors in the foodservice industry could result in an increasingly
concentrated customer base or the loss of certain customers.
As further discussed below, the Company sold substantially all of the assets
of Benchmark's cutlery and straws business as well as the assets of WinCup's
thermoformed cup business pursuant to an Asset Purchase Agreement dated
October 31, 1995.
StyroChem Acquisition
On December 5, 1996, the Company acquired all of the issued and outstanding
capital stock of and other equity interests in SP Acquisition Co. (StyroChem),
a Delaware corporation. The acquisition was accounted for as a purchase and,
accordingly, the purchased assets and assumed liabilities of StyroChem were
recorded at their estimated fair values at the date of acquisition.
The purchase price consisted of approximately $23.5 million of cash plus
$0.9 million of assumed indebtedness and consulting payments. Approximately
$1.4 million of the purchase price has been placed in a separate escrow
account, and may be used by the Company to satisfy obligations associated with
specified environmental matters relating to StyroChem's Texas and Quebec
facilities. In addition, the former owner was paid $4.8 million in connection
with a five year agreement not to compete.
J.R. Cup Acquisition
On January 20, 1996, WinCup entered into an agreement with James River,
whereby both parties contributed their fixed assets, leasehold improvements,
technology, patents, trademarks, real property and other noncurrent assets
associated with their foam cup and container and thermoformed lid
manufacturing operations and all inventory, spare parts and other current
assets, excluding cash and accounts receivable to WinCup Holdings, L.P. This
new entity was structured as a Delaware limited partnership with WinCup as the
sole general partner and James River as the sole limited partner. Ownership
interests were allocated 55% to WinCup and 45% to James River.
The above transaction has been accounted for as a business combination in
accordance with Accounting Principles Board Opinion No. 16 (APB No. 16),
Business Combinations. The contribution of its assets and liabilities was
accounted for at WinCup's historical cost basis in such assets and
liabilities.
F-7
<PAGE>
RADNOR HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The acquisition of assets and liabilities from James River has been accounted
for as a purchase by the partnership in accordance with APB No. 16 and,
accordingly, the assets and liabilities of James River have been recorded at
their estimated fair values at the date of the purchase. The purchase price
consisted of approximately (i) $19.1 million of cash, (ii) $16.8 million of
promissory notes (Note 3), (iii) the assumption of $1.0 million of liabilities
and (iv) the 45% equity interest in the partnership valued at $17.7 million.
This partnership equity transaction resulted in an increase in WinCup's pro
rata share (55%) of the underlying equity in the partnership which has been
recorded as an addition to paid-in capital. The purchase price was allocated
to inventories ($8,200) and property, plant and equipment ($46,400).
Pursuant to the Agreement, the Company had the option to acquire James
River's partnership interest at the times and for the applicable prices set
forth in the Agreement, ranging from $15.0 million at January 20, 1996, to
$37.3 million at January 20, 2001. Furthermore, James River could at any time
beginning on the fifth anniversary of the Agreement have required the Company
to acquire its interest for $37.3 million. On December 5, 1996, Radnor
exercised the option and acquired the 45% partnership interest from James
River. The price paid by Radnor to acquire the 45% interest exceeded the
carrying value of the minority interest by approximately $7.3 million, and
this amount has been allocated to fixed assets in the consolidated balance
sheet as of December 27, 1996.
Operating results of the acquired businesses are included in consolidated
results only from the date of acquisition. Unaudited pro forma data reflecting
results as if the acquisitions were effective at the beginning of 1995 follow:
<TABLE>
<CAPTION>
1995 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Net sales............................................. $237,061 $233,507
Income from operations................................ 1,036 12,113
Income (loss) from continuing operations.............. (9,350) 590
</TABLE>
Pro forma results are unaudited and are based on historical results,
adjusted for the impact of certain acquisition related adjustments, such as:
increased depreciation of property, plant and equipment, increased interest
expense on acquisition debt, and the related income tax effects. Pro forma
results do not reflect any synergies that might be achieved from combined
operations and, therefore, in management's opinion, are not indicative of what
actual results would have been if the acquisitions had occurred at the
beginning of 1995. In addition, they are not intended to be a projection of
future results.
Discontinued Operations
Pursuant to an Asset Purchase Agreement among Benchmark, WinCup and James
River dated as of October 31, 1995, Benchmark and WinCup agreed to sell to
James River all of the assets of Benchmark's cutlery and straws business and
all of the assets of WinCup's thermoformed cup business, except for cash,
accounts receivable and prepaid assets. The only liabilities of Benchmark and
WinCup assumed by James River were obligations arising after the closing under
the assumed leases and assumed material contracts and vacation pay, holiday
pay and sick pay earned or accrued during 1995. The sales price was $51.0
million. The gain on the sale was approximately $2.0 million.
The operations of Benchmark's cutlery and straws business and WinCup's
thermoformed cup business have been accounted for as discontinued operations
in the accompanying consolidated financial statements.
F-8
<PAGE>
RADNOR HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Summary operating results for the operations sold, excluding the gain on
sale, are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Net sales............................................... $59,953 $58,472
Cost of goods sold...................................... 50,668 45,016
------- -------
Gross profit............................................ 9,285 13,456
Operating expenses...................................... 10,276 9,306
Other expense........................................... (4,091) (3,616)
------- -------
Income (loss) from operations........................... $(5,082) $ 534
======= =======
</TABLE>
The components of net current and net noncurrent assets of discontinued
operations as of December 30, 1994 and December 29, 1995, are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
-------- ------
<S> <C> <C>
Cash and accounts receivable............................ $ 6,157 $ 653
Inventories............................................. 10,372 --
Prepaid expenses and other.............................. 168 1,284
Accounts payable and accrued liabilities................ (11,736) (955)
-------- ------
Net current assets of discontinued operations......... 4,961 982
-------- ------
Property, plant and equipment, net...................... 29,812 --
Goodwill and other noncurrent assets.................... 10,338 --
Long-term debt.......................................... (39,678) --
-------- ------
Net long-term assets of discontinued operations....... 472 --
-------- ------
Total net assets of discontinued operations........... $ 5,433 $ 982
======== ======
</TABLE>
The Company used a portion of the proceeds from the sale to retire certain
outstanding debt totaling approximately $48.0 million. An additional $23.8
million of principal and accrued interest was forgiven by the bank lender as
part of this transaction. As a result, at the closing of this transaction, the
total amount of debt outstanding to the Company's primary bank was reduced to
$9.0 million. During 1996, the bank was paid $8.25 million in full
satisfaction of this obligation. The extinguishment gains resulting from these
transactions have been presented as extraordinary items in the accompanying
financial statements.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Fiscal Year
The Company's fiscal year is the fifty-two or fifty-three week period which
ends on the last Friday of December of each year. The fiscal years ended
December 30, 1994, December 29, 1995 and December 27, 1996 are fifty-two week
periods.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and all of its subsidiaries. All material intercompany balances
and transactions have been eliminated in consolidation.
Radnor Holdings Corporation is a holding company which has no operations or
assets separate from its investments in subsidiaries. The $100 million senior
notes are guaranteed by all direct and all but one indirect wholly-owned
subsidiaries on a full, unconditional, joint and several basis. Separate
financial statements of the guarantor subsidiaries have not been presented
herein since the financial information of the sole non-guarantor indirect
subsidiary is inconsequential. Separate financial statements of the guarantors
are not presented because management has determined that they would not be
material to investors. The guarantees will continue subsequent to the exchange
offer contemplated by this registration statement.
F-9
<PAGE>
RADNOR HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Accounts Receivable, Net
Included in accounts receivable are allowances for doubtful accounts of
$496,000 and $713,000 at December 29, 1995 and December 27, 1996,
respectively.
Inventories
Inventories are recorded at the lower of cost (first-in, first-out) or
market. Inventories at December 29, 1995 and December 27, 1996 consist of the
following (in thousands):
<TABLE>
<CAPTION>
1995 1996
------ -------
<S> <C> <C>
Raw materials.......................................... $1,860 $ 4,503
Work in process........................................ -- 2,242
Finished goods......................................... 4,634 12,333
------ -------
$6,494 $19,078
====== =======
</TABLE>
Property, Plant and Equipment
Property, plant and equipment are recorded at cost and depreciated using the
straight-line method over estimated useful lives which range from 5 to 40
years. Leasehold improvements are amortized over the lesser of their estimated
useful lives or the term of the lease using the straight-line method. Repair
and maintenance costs are expensed as incurred.
Supplies and Spare Mold Parts
Supplies and spare mold parts include maintenance parts maintained in a
central stores location. When parts are needed at the various manufacturing
facilities, the parts are shipped and expensed in that current period.
Other Assets
Other assets include deferred financing costs ($4,826) related to the
financing arrangements and notes offering executed in 1996. Such costs are
being amortized over the terms of the related debt instruments. Amortization
of deferred financing costs of $232 is included in interest expense for the
year ended December 27, 1996. In addition, the noncompete agreement payment
($4,760) resulting from the StyroChem Acquisition, which is being amortized
over five years, is included in this caption.
Accounts Payable
Included in accounts payable are amounts relating to outstanding checks of
$1.5 million and $6.1 million at December 29, 1995 and December 27, 1996,
respectively.
Revenue Recognition
Revenue is recognized when goods are shipped. Sales are recorded gross of
any cash discounts. Any discounts subsequently taken by the customer are
recorded as a reduction to sales revenue.
Currency Translation
Adjustments resulting from the translation of the Canadian subsidiary
financial statements are reflected as a currency translation adjustment in
stockholders' equity. Currency transaction gains and losses that are included
in operating results were not significant.
F-10
<PAGE>
RADNOR HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Research and Development
Research and development expenses are charged to expense as incurred.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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 the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The estimated fair value of financial instruments has been determined by the
Company using the available market information and valuation methodologies.
The carrying values of cash, accounts receivable, accounts payable and
accrued liabilities approximate fair value due to the short-term nature of
these items.
The carrying amounts of the Company's bank term loans and line of credit
approximate fair value because they have variable interest rates based on
either prime rate or LIBOR. Additionally, the carrying amount of the $100
million senior notes approximates fair value.
Recently Issued Accounting Standards
Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of, which was adopted by the Company in 1996, did not have a material effect
on the Company's financial position or its results of operations upon
adoption. SFAS No. 123, Accounting for Stock-Based Compensation, was adopted
by the Company in 1996, and the Company elected to continue to account for
transactions with its employees pursuant to Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees. There were no
transactions requiring disclosure in 1995 or 1996.
F-11
<PAGE>
RADNOR HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3) LONG-TERM DEBT:
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
1995 1996
------- --------
<S> <C> <C>
Outstanding balance under the $30 million Amended Credit
Agreement bearing interest at the Company's option at a
rate not greater than (i) the sum of 0.25% plus a rate
equal to the greater of (a) prime rate, or (b) the sum of
the federal funds rate plus 0.5% or (ii) the sum of 1.75%
plus a rate equal to LIBOR with respect to the period
during which such interest shall be applicable. The
revolving loans under the Amended Credit Agreement will
mature on January 22, 2001. All the obligations of the
Company under the Amended Credit Agreement are secured by
a lien on all of the Company's U.S. inventory and
receivables............................................... $ -- $ 3,773
Borrowings under the Canadian Revolving Credit Facility
(borrowing capacity of $2.5 million Canadian), bearing
interest at Canadian prime rate (4.75% at December 27,
1996) plus 1.0%, payable on demand and secured by
substantially all the assets of the Canadian subsidiary... -- 352
Canadian term loan (borrowing capacity of $0.7 million
Canadian), bearing interest at Canadian prime rate (4.75%
at December 27, 1996) plus 1.50%, collateralized by
substantially all assets of the Canadian subsidiary,
payable in quarterly principal payments of $81,250
Canadian plus interest, with final payment due November
1998...................................................... -- 474
Mortgage note payable, interest at 6% in 1994 and 1995,
interest same as Term Note plus 1% in 1996, payable
quarterly, due January 2001, secured by certain buildings
and improvements.......................................... 4,252 --
Outstanding balance under $24,737,500, revolving lines of
credit bearing interest ranging from 1 to 2% over the
bank's reference rate, due February 28, 1995,
collateralized by inventories, accounts receivable and the
common stock of the Company............................... 9,000 --
Senior notes bearing interest at 10%, interest payable
semi-annually, due December 1, 2003....................... -- 100,000
Other...................................................... 3,000 --
------- --------
16,252 104,599
Less current portion....................................... (9,000) (237)
------- --------
$ 7,252 $104,362
======= ========
</TABLE>
On December 5, 1996, the Company completed a $100 million senior note
offering. The proceeds to the Company from the offering were used to (i) repay
existing indebtedness, including amounts outstanding under the Term Note,
Revolver, the various subordinated notes and mortgage note payable, (ii) repay
certain J.R. Cup acquisition obligations, (iii) redeem the outstanding
redeemable convertible preferred stock and warrants, (iv) finance the
StyroChem Acquisition and (v) provide working capital.
In addition, on December 5, 1996, the Company entered into an Amended and
Restated Revolving Credit and Security Agreement (the Amended Credit
Agreement) with a bank, as agent and lender, pursuant to which the former
revolving credit, term loan and security agreements were amended and restated.
The Amended Credit Agreement includes the Company and its U.S. subsidiaries as
borrowers. The Amended Credit Agreement provides for a fee of 0.375% per annum
on the undrawn amount of the credit facility and letter of credit fees of
1.75% or 1.5% of the aggregate face amounts of standby letters of
F-12
<PAGE>
RADNOR HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
credit and documentary letters of credit, respectively. There is a $5 million
sublimit on standby letters of credit and a $1 million sublimit on documentary
letters of credit. At December 27, 1996, the Company had outstanding $1.7
million of letters of credit.
The Amended Credit Agreement and the Canadian Revolver and Term Note
agreements contain certain restrictive covenants which include, among other
things, restrictions on the declaration or payment of dividends, incurrence of
additional debt, the amount of capital expenditures and sale or disposition of
assets. The agreements also require the Company to maintain required net worth
and debt to equity, current, debt coverage and earnings to interest expense
ratios. The Company is currently in compliance with all financial covenants.
Future debt maturities are as follows:
<TABLE>
<S> <C>
1997............................................................. $ 237
1998............................................................. 237
1999............................................................. --
2000............................................................. --
2001............................................................. 4,125
2002 and thereafter.............................................. 100,000
--------
$104,599
========
</TABLE>
(4) COMMITMENTS AND CONTINGENCIES:
Leases
The Company leases certain of its manufacturing and warehouse facilities
under noncancelable operating lease arrangements. The future minimum payments
under these leases are as follows:
<TABLE>
<S> <C>
1997.............................................................. $ 4,389
1998.............................................................. 3,497
1999.............................................................. 1,300
2000.............................................................. 683
2001.............................................................. 507
2002 and thereafter............................................... 994
-------
$11,370
=======
</TABLE>
Litigation
The Company is involved in various legal actions arising in the normal
course of business. After taking into consideration legal counsel's evaluation
of such actions, management believes that these actions will not have a
material effect on the Company's financial position or results of operations.
Supply Agreement
In December 1996, in connection with the StyroChem Acquisition, the Company
renegotiated its contract with Chevron to provide a long-term supply of
styrene monomer with volume discounts. The initial term of the new contract
will extend for seven years. Under the contract, the Company will be required
to purchase the first 120 million pounds of its styrene monomer requirements
per year from Chevron and will have certain rights to purchase additional
styrene monomer.
F-13
<PAGE>
RADNOR HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5) STOCKHOLDERS' EQUITY:
The Company is currently authorized to issue up to 11,650 shares of Voting
Common Stock, 5,400 shares of Class B Nonvoting Common Stock, 5,650 shares of
Nonvoting Common Stock and 2,000 shares of series preferred stock. At December
27, 1996, there are issued and outstanding 600 shares of Voting Common Stock,
5,400 shares of Class B Nonvoting Common Stock and 245 shares of Nonvoting
Common Stock. All shares have a par value of $.10 except for shares of Class B
Nonvoting Common Stock, which have a par value of $.01. In October 1996, the
Company completed a recapitalization in which each outstanding share of Voting
Common Stock was converted into 0.1 shares of Voting Common Stock and 0.9
shares of Class B Nonvoting Common Stock.
The Series A Convertible Preferred Stock ($.10 par value) was redeemable at
the option of the holder under certain circumstances, however, the Company at
its discretion had the right to satisfy the redemption obligation solely
through the issuance of Nonvoting Common Stock. Based upon the Company's
ability and intent to satisfy any redemption obligation solely through the
issuance of Nonvoting Common Stock and holder's obligation to accept Nonvoting
Common Stock, the preferred stock was classified within stockholders' equity
through December 29, 1995.
During 1996, the Company and the holders of the preferred stock renegotiated
the optional and mandatory redemption provisions. As a result of such
negotiations the redemption obligation was substantially reduced and the
Company's right to satisfy such obligation through the issuance of Nonvoting
Common Stock was eliminated. On December 5, 1996 the Company redeemed the
preferred stock.
On March 10, 1993, the Board of Directors, pursuant to a plan, granted
certain members of management the right to purchase up to 620 shares of the
Company's Nonvoting Common Stock. Under the terms of the grants, the
participants could purchase stock for a period of 60 days from the date of
grant at $800 per share, the fair value on that date, for cash or through a
note to be repaid through payroll deductions. During 1993, 245 shares were
purchased under the plan for $180,000 in cash and $15,000 in notes. No grants
were made or shares purchased under the plan in 1994, 1995 or 1996.
(6) RESTRUCTURING CHARGES:
In connection with the J.R. Cup Acquisition, the Company incurred certain
restructuring costs related principally to plant closures and severance
payments. These costs were incurred and paid during the year ended December
27, 1996.
(7) INCOME TAXES:
The Company accounts for income taxes under SFAS No. 109, Accounting for
Income Taxes. Under SFAS No. 109, deferred tax assets and liabilities are
recorded based on the differences between the financial statement and tax
bases of assets and liabilities at the tax rates in effect when these
differences are expected to reverse. There is no provision for taxes for the
years ended December 30, 1994, and December 29, 1995, as the Company generated
net operating losses for the years then ended.
The provision for income taxes for each of the three years in the period
ended December 27, 1996 is as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
------ ------- ------
<S> <C> <C> <C>
Current:
Federal............................................. $ -- $ -- $ 168
State............................................... -- -- 10
Deferred.............................................. (999) 30 (57)
(Generation) utilization of net operating loss
carryforwards........................................ (741) 2,274 1,324
Change in valuation allowance......................... 1,740 (2,304) (1,324)
------ ------- ------
$ -- $ -- $ 121
====== ======= ======
</TABLE>
F-14
<PAGE>
RADNOR HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of deferred taxes at December 29, 1995 and December 27, 1996
are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards........................... $ 6,081 $ 4,757
Vacation pay and compensation accruals..................... -- 528
Bad debt, inventory and returns and allowances............. -- 829
Other accruals............................................. 288 1,261
------- -------
6,369 7,375
Deferred tax liabilities:
Accelerated tax depreciation............................... 5,048 10,475
Other...................................................... 67 936
------- -------
Net deferred tax liability................................... 1,254 (4,036)
Valuation allowance.......................................... (6,014) (4,757)
------- -------
Deferred tax liability....................................... $(4,760) $(8,793)
======= =======
</TABLE>
The Company has recorded a valuation allowance with respect to the net
operating loss carryforwards reflected as deferred tax assets due to the
uncertainty of their ultimate realization.
The Company had net operating loss carryforwards of approximately $14.0
million at December 27, 1996. Net operating loss carryforwards expire through
2010.
(8) STOCK OPTION PLAN:
The Company adopted the 1992 Stock Option Plan (the Plan), which provides
for the grant of non-qualified options to purchase shares of the Nonvoting
Common Stock subject to certain limitations. Non-qualified stock options are
issuable only to eligible officers and employees of the Company. The Company
has reserved 1,249 shares of its Nonvoting Common Stock for issuance under the
Plan.
The per share exercise price of a stock option may not be less than 75% of
the fair market value of the Nonvoting Common Stock, as determined by the
board of directors, on the date the option is granted. Such options may be
exercised only if the option holder remains continuously associated with the
Company from the date of grant to a date not less than three months prior to
the date of exercise. The exercise date of an option granted under the plan
cannot be later than ten years from the date of the grant. Any options that
expire unexercised or that terminate upon an optionee's ceasing to be employed
by the Company become available once again for issuance.
The following summarizes the stock option activity under the Plan:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Options outstanding at beginning of period.................... 752 738 710
Granted..................................................... -- -- --
Exercised................................................... -- -- --
Canceled.................................................... (14) (28) (10)
--- --- ---
Options outstanding at end of period.......................... 738 710 700
=== === ===
Options available for grant................................... 511 539 549
=== === ===
Exercisable at end of period.................................. 196 327 362
=== === ===
</TABLE>
F-15
<PAGE>
RADNOR HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The exercise price for all options granted to date is $3,350 per share,
which was the fair market value as determined by the board of directors on the
grant dates.
(9) EMPLOYEE BENEFIT PLAN:
The Company sponsors a 401(k) savings and profit-sharing plan, which covers
all employees who have had at least 1,000 hours of service during any year.
The Company will match employee contributions up to 2.8% of an employee's
annual salary. The Company may also, at the discretion of the board of
directors, elect to make a profit-sharing contribution. There have been no
profit-sharing contributions for the three years in the period ended December
27, 1996. Employer matching contributions to the plan amounted to
approximately $111,000, $99,000 and $441,000 for each of the three years in
the period ended December 27, 1996, respectively.
F-16
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To James River Paper Company, Inc.
and Radnor Holdings Corporation:
We have audited the accompanying balance sheets of J.R. CUP FOAM CONTAINER
OPERATIONS OF JAMES RIVER PAPER COMPANY, INC. (a Virginia corporation)
(formerly Handi-Kup Foam Container Operations of James River Paper Company,
Inc.), as of December 25, 1994 and December 31, 1995, 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, 1995. 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 audit 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 the J.R. Cup Foam
Container Operations of James River Paper Company, Inc. as of December 25,
1994 and December 31, 1995, and the results of its operations for each of the
three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Phoenix, Arizona,
October 14, 1996
F-17
<PAGE>
J.R. CUP FOAM CONTAINER OPERATIONS OF
JAMES RIVER PAPER COMPANY, INC.
BALANCE SHEETS
(NOTE 1)
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 25, DECEMBER 31,
ASSETS 1994 1995
------ ------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Accounts receivable................................. $ 5,309 $ 4,901
Inventories, net.................................... 7,591 7,543
Prepaid expenses and other.......................... 221 224
-------- --------
Total current assets.............................. 13,121 12,668
-------- --------
PROPERTY, PLANT AND EQUIPMENT (Note 2):
Land and improvements............................... 1,196 1,064
Buildings and improvements.......................... 8,758 7,943
Machinery and equipment............................. 37,870 37,316
Supplies and spare mold parts....................... 1,609 1,376
-------- --------
49,433 47,699
Less accumulated depreciation....................... (30,011) (30,717)
-------- --------
19,422 16,982
-------- --------
OTHER ASSETS.......................................... 123 70
-------- --------
$ 32,666 $ 29,720
======== ========
<CAPTION>
LIABILITIES AND OWNER'S INVESTMENT
----------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable.................................... $ 4,477 $ 5,571
Accrued liabilities (Note 2)........................ 5,182 6,194
-------- --------
9,659 11,765
OTHER LONG-TERM LIABILITIES........................... 716 781
COMMITMENTS AND CONTINGENCIES (Note 3)
OWNER'S INVESTMENT.................................... 22,291 17,174
-------- --------
$ 32,666 $ 29,720
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-18
<PAGE>
J.R. CUP FOAM CONTAINER OPERATIONS OF
JAMES RIVER PAPER COMPANY, INC.
STATEMENTS OF OPERATIONS
(NOTE 1)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
--------------------------------------
DECEMBER 26, DECEMBER 25, DECEMBER 31,
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES................................ $90,819 $94,644 $98,680
COST OF GOODS SOLD....................... 69,246 76,053 80,359
------- ------- -------
GROSS PROFIT............................. 21,573 18,591 18,321
OPERATING EXPENSES:
Distribution........................... 8,336 9,812 8,354
Selling, general and administrative.... 4,164 4,061 3,672
Allocation from James River (Note 1)... 3,880 4,725 10,101
------- ------- -------
INCOME (LOSS) FROM OPERATIONS............ 5,193 (7) (3,806)
OTHER (INCOME) EXPENSE .................. 144 253 (225)
------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES........ 5,049 (260) (3,581)
PROVISION FOR INCOME TAXES (Note 5)...... -- -- --
------- ------- -------
NET INCOME (LOSS)........................ $ 5,049 $ (260) $(3,581)
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-19
<PAGE>
J.R. CUP FOAM CONTAINER OPERATIONS OF
JAMES RIVER PAPER COMPANY, INC.
STATEMENTS OF CHANGES IN OWNER'S INVESTMENT
(NOTE 1)
(IN THOUSANDS)
<TABLE>
<S> <C>
BALANCE, January 1, 1993............................................... $25,086
Net income........................................................... 5,049
Net payments to James River.......................................... (6,373)
-------
BALANCE, December 26, 1993............................................. 23,762
Net loss............................................................. (260)
Net payments to James River.......................................... (1,211)
-------
BALANCE, December 25, 1994............................................. 22,291
Net loss............................................................. (3,581)
Net payments to James River.......................................... (1,536)
-------
BALANCE, December 31, 1995............................................. $17,174
=======
</TABLE>
The accompanying notes are an integral part of these statements.
F-20
<PAGE>
J.R. CUP FOAM CONTAINER OPERATIONS OF
JAMES RIVER PAPER COMPANY, INC.
STATEMENTS OF CASH FLOWS
(NOTE 1)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
--------------------------------------
DECEMBER 26, DECEMBER 25, DECEMBER 31,
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)..................... $ 5,049 $ (260) $(3,581)
Adjustments to reconcile net income
(loss) to net cash provided by oper-
ating activities:
Depreciation........................ 2,434 2,478 2,580
Changes in operating assets and lia-
bilities--
Accounts receivable............... 866 503 408
Inventories, net.................. 20 551 48
Prepaid expenses and other........ (21) (64) (3)
Accounts payable.................. 559 (411) 1,094
Accrued liabilities............... (1,061) 387 1,012
Other assets...................... 202 16 53
Other long-term liabilities....... -- 6 65
------- ------- -------
Net cash provided by operating
activities..................... 8,048 3,206 1,676
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchases of property, plant and
equipment............................ (1,675) (1,995) (140)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments to James River........... (6,373) (1,211) (1,536)
------- ------- -------
CASH, beginning of period (Note 2)...... -- -- --
------- ------- -------
CASH, end of period (Note 2)............ $ -- $ -- $ --
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-21
<PAGE>
J.R. CUP FOAM CONTAINER OPERATIONS OF
JAMES RIVER PAPER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION AND BASIS OF PRESENTATION:
The Company
As of the dates and for the periods presented, J.R. Cup Foam Container
Operations (the Company) (formerly Handi-Kup Foam Container Operations of
James River Paper Company, Inc.) was an operating unit of James River Paper
Company, Inc. (James River). The Company manufactures and distributes foam
cups, containers and thermoformed lids primarily to national, institutional
and retail customers throughout the U.S.
Basis of Presentation
On January 20, 1996, James River entered into a Joint Venture with WinCup
Holdings, Inc. (WinCup), another foam cup manufacturer, whereby both parties
contributed their fixed assets, leasehold improvements, technology, patents,
trademarks, real property and other noncurrent assets associated with their
foam cup and container and thermoformed lid manufacturing operations and all
inventory, spare parts and other current assets, excluding cash and accounts
receivable, to the Joint Venture.
The Joint Venture is structured as a Delaware limited partnership with
WinCup as the sole general partner and James River as the sole limited
partner. Ownership interests are allocated 55% to WinCup and 45% to James
River.
The financial statements include certain amounts that have been allocated to
the Company by James River. Specifically, these allocations include general
and administrative expenses and accruals for advertising, market survey,
promotion, legal fees and customer performance allowances. Management believes
that the allocation methodologies used to allocate these corporate centrally
managed costs to the Company represent a reasonable basis for allocation.
Included in selling, general and administrative expenses are $3.0 million,
$2.6 million and $2.7 million in customer performance allowances allocated to
the Company by James River for the periods ended December 26, 1993, December
25, 1994 and December 31, 1995, respectively. All other expenses allocated
from James River are included in allocation from James River in the
accompanying statements of operations.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Fiscal Year
The Company's fiscal year includes the 52 or 53 weeks ending on the last
Sunday in December. The year ended December 31, 1995 included 53 weeks while
the years ended December 25, 1994 and December 26, 1993 each included 52
weeks.
Cash
Prior to the date of its acquisition by WinCup, the Company was a
participant in the cash pool of James River. All of the cash of the James
River subsidiaries was deposited into a single account. All cash requirements
of James River and its subsidiaries were then funded out of this cash pool. As
a result, the Company had no cash balances recorded on its books prior to its
acquisition by WinCup.
F-22
<PAGE>
J.R. CUP FOAM CONTAINER OPERATIONS OF
JAMES RIVER PAPER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Inventories, Net
Inventories are stated at the lower of cost (first-in, first-out) or market
and include the cost of materials, labor and manufacturing overhead.
Inventories consist of the following at December 25, 1994 and December 31,
1995:
<TABLE>
<CAPTION>
1994 1995
------ ------
(IN
THOUSANDS)
<S> <C> <C>
Raw materials............................................... $ 897 $1,035
Finished goods.............................................. 6,908 6,508
------ ------
$7,805 $7,543
====== ======
</TABLE>
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 20 to 45 years for buildings and 5 to 20 years for machinery and
equipment. Leasehold improvements are amortized over the lesser of their
estimated useful lives or the term of the lease using the straight-line
method.
Supplies and Spare Mold Parts
Supplies and spare mold parts include maintenance parts maintained in a
central stores location. When parts are needed at the various manufacturing
facilities, the parts are shipped and expensed in that period.
Accrued Liabilities
The components of accrued liabilities are as follows at December 25, 1994
and December 31, 1995:
<TABLE>
<CAPTION>
1994 1995
------ ------
(IN
THOUSANDS)
<S> <C> <C>
Workers' compensation reserves............................. $1,630 $2,257
Payroll and employee related items......................... 1,443 1,431
Sales rebates.............................................. 700 890
Accrued utilities.......................................... 458 320
Other accrued liabilities.................................. 951 1,296
------ ------
$5,182 $6,194
====== ======
</TABLE>
Pension Assets and Post Retirement Benefits Other than Pensions
James River sponsors various contributory and noncontributory pension plans.
Benefits under the plans are primarily based on years of service and
compensation. An allocation of the total James River net pension asset
exclusive of the net minimum liabilities of $123,000 and $70,000 at December
25, 1994 and December 31, 1995, respectively, has been included in other
assets in the accompanying financial statements of the Company.
James River provides certain medical and life insurance benefits to eligible
employees upon retirement. An allocation of the amounts attributable to the
Company's employees of $716,000 and
F-23
<PAGE>
J.R. CUP FOAM CONTAINER OPERATIONS OF
JAMES RIVER PAPER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
$781,000 at December 25, 1994 and December 31, 1995, respectively, has been
included in other long-term liabilities in the accompanying financial
statements.
Revenue Recognition
Revenue is recognized when goods are shipped. Sales are recorded net of
expected cash discounts.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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 the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The estimated fair value of financial instruments has been determined by the
Company using the available market information and valuation methodologies.
Considerable judgment is required in estimating fair values. Accordingly, the
estimates may not be indicative of the amounts the Company could realize in a
current market exchange.
The carrying values of accounts receivable, accounts payable and accrued
liabilities approximate fair values due to the short-term maturities of these
financial instruments.
(3) COMMITMENTS AND CONTINGENCIES:
The Company leases certain facilities, vehicles and equipment over varying
periods. None of the agreements contain unusual renewal or purchase options.
As of December 31, 1995, future minimum rental payments under noncancelable
operating leases were as follows (in thousands):
<TABLE>
<S> <C>
1996............................................................... $1,537
1997............................................................... 1,374
1998............................................................... 845
1999............................................................... 338
------
$4,094
======
</TABLE>
Rent expense totaled $2.2 million, $2.4 million and $2.4 million in 1993,
1994 and 1995, respectively.
Litigation
The Company is involved in various legal actions arising in the normal
course of business. After taking into consideration legal counsel's evaluation
of such actions, management believes that these actions will not have a
significant effect on the Company's financial position or results of
operations.
In July 1996, StyroChem, the Company's primary supplier of expandable
polystyrene beads (EPS) filed suit in the United States District Court for the
Northern District of Texas against James River for breach of a supply contract
between StyroChem and James River. The contract in question required James
F-24
<PAGE>
J.R. CUP FOAM CONTAINER OPERATIONS OF
JAMES RIVER PAPER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
River to purchase from StyroChem all of the EPS requirements for its foam
operations through February 1999, provided that the material satisfied certain
product specifications. Because the product supplied by StyroChem did not meet
such specifications, James River ceased purchasing EPS from StyroChem and did
not assign the contract to the Joint Venture in connection with its formation.
The Joint Venture agreed to indemnify James River for certain liabilities
relating to the failure of James River to assign the contract in question to
the Joint Venture and the Joint Venture has assumed the defense of such
litigation, subject to certain reservations of rights. The lawsuit has been
stayed pending the outcome of a proposed acquisition of StyroChem by WinCup,
and management expects the lawsuit will be dismissed with prejudice following
the consummation of the acquisition. Management does not believe the ultimate
outcome of the lawsuit will have a material effect on the Company's financial
position or results of operations.
(4) RELATED PARTY TRANSACTIONS:
Transactions with other James River locations are reflected as though they
were settled immediately as an addition to or a reduction of James River's
investment and there are no amounts due to or from James River at the end of
any period.
(5) INCOME TAXES:
The Company has historically been included in the consolidated federal
income tax return and combined/unitary state income tax returns of James
River. No provision for income taxes has been reflected in the accompanying
financial statements as the Company has historically generated tax losses on a
standalone basis. Deferred income tax assets and liabilities have been
determined at the corporate level and have not been allocated on a standalone
basis. Because the Company is included in the James River consolidated federal
income tax return, net operating loss carryforwards, investment and other tax
credit carryforwards, if any, were utilized by James River. Accordingly, the
Company has no reportable net operating loss or tax credit carryforwards on a
standalone basis.
F-25
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To SP Acquisition Co.:
We have audited the accompanying consolidated balance sheet of SP
Acquisition Co. (a Delaware Corporation) and subsidiaries as of December 5,
1996 and the related consolidated statements of income, stockholders' equity
and cash flows for the eight month period then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of SP
Acquisition Co. and subsidiaries as of December 5, 1996, and the results of
their operations and cash flows for the eight month period then ended in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
March 18, 1997
F-26
<PAGE>
INDEPENDENT AUDITORS' REPORT
SP Acquisition Co.
Fort Worth, Texas
We have audited the accompanying consolidated balance sheets of SP
Acquisition Co. and subsidiaries (the Company), as of April 1, 1995 and March
30, 1996 and the related consolidated statements of income, stockholders'
equity and cash flows for the years then ended. The consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the consolidated 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 audit 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, such consolidated financial statements present fairly, in
all material respects, the financial position of SP Acquisition Co. and
subsidiaries as of April 1, 1995 and March 30, 1996 and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
On October 30, 1996, as discussed in Note 16, the Company's shareholders
entered into a definitive agreement with Radnor Holdings Corporation (Radnor)
whereby Radnor agreed to acquire all the issued and outstanding capital stock
of and equity interests in the Company, subject to certain conditions.
DELOITTE & TOUCHE LLP
Fort Worth, Texas
October 18, 1996
(October 30, 1996 as to Note 16)
F-27
<PAGE>
SP ACQUISITION CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 1, 1995, MARCH 30, 1996 AND DECEMBER 5, 1996
<TABLE>
<CAPTION>
APRIL 1, MARCH 30, DECEMBER 5,
ASSETS 1995 1996 1996
------ ----------- ----------- -----------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents............. $ 117,696 $ 73,342 $ 2,413,575
Accounts receivable................... 15,933,813 11,697,236 12,066,644
Refundable income taxes............... -- 391,340 436,629
Inventory............................. 7,839,053 6,794,310 7,411,516
Prepaid expenses...................... 313,636 436,823 443,336
Deferred income taxes................. 923,687 858,920 946,191
----------- ----------- -----------
Total current assets................ 25,127,885 20,251,971 23,717,891
PROPERTY, PLANT AND EQUIPMENT, NET...... 3,878,920 7,391,878 6,826,068
PROPERTY HELD FOR SALE.................. 1,600,000 1,771,176 --
DEFERRED INCOME TAXES................... 1,990,557 1,380,264 1,065,103
OTHER ASSETS............................ 253,113 171,248 60,018
----------- ----------- -----------
TOTAL................................... $32,850,475 $30,966,537 $31,669,080
=========== =========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
CURRENT LIABILITIES:
Notes payable......................... $ 1,609,954 $ 1,832,581 $ 133,781
Accounts payable...................... 17,131,719 14,464,013 17,242,167
Accrued liabilities................... 1,509,801 1,207,789 2,979,653
Income taxes payable.................. 683,908 252,963 568,195
Current portion of long-term debt..... 1,219,135 1,242,556 1,320,179
----------- ----------- -----------
Total current liabilities........... 22,154,517 18,999,902 22,243,975
----------- ----------- -----------
LONG-TERM DEBT.......................... 6,235,010 6,318,873 2,859,264
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value,
100,000 shares authorized; 22,315
shares issued and outstanding
(liquidation preference of $500,000)
..................................... 223 223 223
Common stock, $.01 par value, 400,000
shares authorized; 65,184 shares
issued and outstanding............... 652 652 652
Additional paid-in capital............ 999,125 999,125 999,125
Retained earnings..................... 3,492,533 4,723,461 5,658,568
Cumulative translation adjustments.... (31,585) (75,699) (92,727)
----------- ----------- -----------
Total stockholders' equity.......... 4,460,948 5,647,762 6,565,841
----------- ----------- -----------
TOTAL................................... $32,850,475 $30,966,537 $31,669,080
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-28
<PAGE>
SP ACQUISITION CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED APRIL 1, 1995 AND MARCH 30, 1996 AND THE EIGHT MONTH PERIOD
ENDED DECEMBER 5, 1996
<TABLE>
<CAPTION>
YEAR ENDED EIGHT MONTH
--------------------------- PERIOD ENDED
APRIL 1, DECEMBER 5,
1995 MARCH 30, 1996 1996
----------- -------------- -----------
<S> <C> <C> <C>
NET SALES........................ $72,106,153 $76,221,366 $52,375,480
COST OF GOODS SOLD............... 61,472,165 68,121,794 44,534,090
----------- ----------- -----------
GROSS PROFIT..................... 10,633,988 8,099,572 7,841,390
DISTRIBUTION EXPENSE............. 2,011,000 2,604,026 1,316,131
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSE.......... 2,980,743 3,069,379 4,106,890
----------- ----------- -----------
INCOME FROM OPERATIONS........... 5,642,245 2,426,167 2,418,369
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense............... (924,033) (830,966) (684,129)
Other income (expense), net.... 254,996 589,820 (175,633)
----------- ----------- -----------
TOTAL OTHER INCOME (EXPENSE)..... (669,037) (241,146) (859,762)
----------- ----------- -----------
INCOME BEFORE INCOME TAXES....... 4,973,208 2,185,021 1,558,607
INCOME TAXES..................... 1,845,675 954,093 623,500
----------- ----------- -----------
NET INCOME....................... $ 3,127,533 $ 1,230,928 $ 935,107
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-29
<PAGE>
SP ACQUISITION CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED APRIL 1, 1995 AND MARCH 30, 1996 AND THE EIGHT MONTH PERIOD
ENDED DECEMBER 5, 1996
<TABLE>
<CAPTION>
ADDITIONAL
PREFERRED COMMON PAID-IN RETAINED TRANSLATION
STOCK STOCK CAPITAL EARNINGS ADJUSTMENTS
--------- ------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, APRIL 3, 1994....... $223 $652 $999,125 $ 365,000 $ --
Net income................. -- -- -- 3,127,533 --
Translation adjustments.... -- -- -- -- (31,585)
---- ---- -------- ---------- --------
BALANCE, APRIL 1, 1995....... 223 652 999,125 3,492,533 (31,585)
Net income................. -- -- -- 1,230,928 --
Translation adjustments.... -- -- -- -- (44,114)
---- ---- -------- ---------- --------
BALANCE, MARCH 30, 1996...... 223 652 999,125 4,723,461 (75,699)
Net income................. -- -- -- 935,107 --
Translation adjustments.... -- -- -- -- (17,028)
---- ---- -------- ---------- --------
BALANCE, DECEMBER 5, 1996.... $223 $652 $999,125 $5,658,568 $(92,727)
==== ==== ======== ========== ========
</TABLE>
See notes to consolidated financial statements.
F-30
<PAGE>
SP ACQUISITION CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 1, 1995 AND MARCH 30, 1996 AND THE EIGHT MONTH PERIOD
ENDED DECEMBER 5, 1996
<TABLE>
<CAPTION>
YEAR ENDED
------------------------
EIGHT MONTH
PERIOD ENDED
APRIL 1, MARCH 30, DECEMBER 5,
1995 1996 1996
----------- ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................ $ 3,127,533 $ 1,230,928 $ 935,107
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization....... 357,984 490,759 1,202,778
Deferred income taxes............... 245,756 675,060 228,118
Loss on sale of property............ -- -- 712,069
Changes in operating assets and lia-
bilities:
Accounts receivable............... (2,833,745) 4,236,577 (369,408)
Inventory......................... (3,497,510) 1,044,743 (617,206)
Prepaid expenses and other assets. (300,042) (117,473) (6,513)
Accounts payable.................. 6,919,397 (2,667,706) 2,778,154
Accrued liabilities............... 60,096 (302,012) 1,771,635
Income taxes refundable and
payable.......................... 583,861 (822,285) 269,943
----------- ----------- ----------
Net cash provided by operating
activities..................... 4,663,330 3,768,591 6,904,677
----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment.... (3,241,588) (3,916,806) (1,046,646)
Additions to property held for sale... -- (226,049) --
Disposal of property and equipment.... -- -- 1,562,988
----------- ----------- ----------
Net cash provided by (used in)
investing activities........... (3,241,588) (4,142,855) 516,342
----------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt..................... (858,877) (1,035,507) (3,381,986)
Net borrowings (repayment) on line of
credit and other..................... (392,519) 1,365,417 (1,698,800)
Payment of financing costs............ (160,192) -- --
----------- ----------- ----------
Net cash provided by (used in)
financing activities........... (1,411,588) 329,910 (5,080,786)
----------- ----------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................ 10,154 (44,354) 2,340,233
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR................................ 107,542 117,696 73,342
----------- ----------- ----------
CASH AND CASH EQUIVALENTS AT END OF
YEAR................................... $ 117,696 $ 73,342 $2,413,575
=========== =========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest............................ $ 800,745 $ 794,009 $ 605,226
Income taxes........................ 1,111,521 1,116,000 422,436
Noncash financing activities:
Note payable for insurance policy... $ 188,393 $ 203,462 $ --
</TABLE>
See notes to consolidated financial statements.
F-31
<PAGE>
SP ACQUISITION CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 1, 1995 AND MARCH 30, 1996 AND THE EIGHT MONTH
PERIOD ENDED DECEMBER 5, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business--SP Acquisition Co. (SPAC) and subsidiaries develop, manufacture
and market a broad line of crystal polystyrene and expandable polystyrene for
sale to manufacturers of foam cups and containers and insulation and packaging
products.
Basis of Consolidation--The accompanying consolidated financial statements
include the accounts of SP Acquisition Co. and its wholly-owned subsidiaries,
StyroChem International, Inc. and StyroChem International, Ltd. (collectively,
the Company). All significant intercompany accounts and transactions have been
eliminated in consolidation.
Acquisition--SPAC was incorporated on January 18, 1994 for the sole purpose
of acquiring certain operations of Kimberly-Clark Tissue Company, formerly
known as Scott Paper Company (KCTC). On February 25, 1994, SPAC acquired all
of the outstanding shares of common stock of StyroChem International, Inc. and
StyroChem International, Ltd. from KCTC for an aggregate cash purchase price,
including costs and expenses of approximately $14.5 million, subject to
adjustment for certain contingent consideration. The acquisition was funded by
the proceeds from the issuance of common and preferred stock of SPAC, along
with borrowings under term loans by SPAC and each of the Company's
subsidiaries.
The acquisition was accounted for using the purchase method of accounting
and, accordingly, the purchase price has been allocated to the assets acquired
and liabilities assumed based on their relative fair market values. As of the
acquisition date, assets acquired and liabilities assumed were as follows (in
thousands):
<TABLE>
<S> <C>
Purchase price................................................. $ 14,456
Fair values of net assets acquired:
Fair value of assets acquired................................ 34,473
Liabilities assumed.......................................... (10,307)
--------
24,166
--------
Excess fair value.............................................. $ (9,710)
========
</TABLE>
The excess of the fair value of the net assets acquired was accounted for as
a reduction in the fair value allocated to property and equipment.
Fiscal Year--The Company's fiscal year ends on the Saturday nearest March 31
of each year.
Unaudited Summary Operating Results--Summary operating results of the
Company for the unaudited three month period ended March 30, 1996 are as
follows:
<TABLE>
<S> <C>
Net sales..................................................... $16,991,252
===========
Gross profit.................................................. $ 1,834,560
===========
Income from operations........................................ $ 268,083
===========
Net income.................................................... $ 88,535
===========
Total depreciation, amortization, interest and income taxes... $ 617,075
===========
</TABLE>
F-32
<PAGE>
SP ACQUISITION CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED APRIL 1, 1995 AND MARCH 30, 1996 AND
THE EIGHT MONTH PERIOD ENDED DECEMBER 5, 1996
Cash and Cash Equivalents--For the purposes of reporting cash flows, cash
and cash equivalents includes investments readily convertible to cash with
remaining maturities at date of purchase of three months or less.
Financial Instruments--The Company's financial instruments under Statement
of Financial Accounting Standards No. 107, "Disclosure About Fair Value of
Financial Instruments," include cash and cash equivalents, accounts
receivable, accounts payable and long-term debt. The Company believes that the
carrying amounts of cash and cash equivalents, accounts receivable, accounts
payable and long-term debt to banks are a reasonable estimate of their fair
value because of the short-term maturities of such instruments or, in the case
of long-term debt to banks, because of the floating interest rates on such
long-term debt.
Inventories--Inventories are valued at the lower of cost or market with cost
determined using the average cost method. Inventories consist of finished
goods, work-in-process and raw materials. Finished goods costs include raw
materials, direct labor and indirect production and overhead costs. The
Company provides an allowance for obsolescence based on management's
evaluation of future usefulness and salability of inventory.
Property, Plant and Equipment--Property, plant and equipment are recorded at
cost. Depreciation is recorded using the straight-line method over the
estimated useful lives of the assets, as follows:
<TABLE>
<CAPTION>
NUMBER OF YEARS
---------------
<S> <C>
Building and improvements................................. 20
Machinery and equipment................................... 3-10
Furniture and fixtures.................................... 5-10
</TABLE>
Expenditures that result in the enhancement of the assets involved are
capitalized and maintenance and repair costs are expensed when incurred. Upon
sale or other disposition, any gain or loss is included in income.
Property Held for Sale--Land and structures currently being offered for sale
are classified separately from property and equipment.
Income Taxes--Federal income taxes have been computed in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," which requires income taxes to be accounted for under the liability
method. Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus deferred
income taxes related primarily to differences between the basis of property,
plant and equipment due to depreciation differences and to the application of
the purchase method of accounting for financial statement purposes but not for
tax purposes, and nondeductible asset and liability reserves for tax purposes.
The deferred tax assets and liabilities represent the future tax return
consequences of those differences, which will either be taxable or deductible
when the assets and liabilities are recovered or settled. Deferred tax assets
are evaluated based on the guidelines for realization and may be reduced by a
valuation allowance.
F-33
<PAGE>
SP ACQUISITION CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED APRIL 1, 1995 AND MARCH 30, 1996 AND
THE EIGHT MONTH PERIOD ENDED DECEMBER 5, 1996
Foreign Currency Translation--The assets and liabilities of the Company's
Canadian subsidiary, StyroChem International, Ltd., whose functional currency
is other than the U.S. dollar are translated at year-end exchange rates.
Revenue 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 stockholders' equity, as is required by Statement of Financial Accounting
Standards No. 52, "Foreign Currency Translation."
Research and Development--Research and development expenses are charged to
income as incurred. Total research and development expenses were approximately
$1.3 million and $1.6 million for the years ended April 1, 1995 and March 30,
1996, respectively, and approximately $1.5 million for the eight month period
ended December 5, 1996.
Accounting Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles 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
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Recently Issued Accounting Pronouncements--Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Impairment is evaluated by
comparing future cash flows (undiscounted and without interest charges)
expected to result from the use of the asset and its eventual disposition to
the carrying amount of the asset. The Company adopted this pronouncement
during the eight month period ended December 5, 1996 and the adoption did not
have a material impact on its consolidated financial position or results of
operations.
2. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
APRIL 1, MARCH 30, DECEMBER 5,
1995 1996 1996
----------- ----------- -----------
<S> <C> <C> <C>
Trade accounts receivable.......... $15,964,399 $11,680,811 $12,120,749
Other receivables.................. 54,414 125,425 29,397
----------- ----------- -----------
16,018,813 11,806,236 12,150,146
Allowance for doubtful accounts.... (85,000) (109,000) (83,502)
----------- ----------- -----------
$15,933,813 $11,697,236 $12,066,644
=========== =========== ===========
</TABLE>
F-34
<PAGE>
SP ACQUISITION CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED APRIL 1, 1995 AND MARCH 30, 1996 AND
THE EIGHT MONTH PERIOD ENDED DECEMBER 5, 1996
3. INVENTORY
Inventory consists of the following:
<TABLE>
<CAPTION>
APRIL 1, MARCH 30, DECEMBER 5,
1995 1996 1996
---------- ---------- -----------
<S> <C> <C> <C>
Finished goods....................... $3,921,857 $3,149,525 $3,455,685
Work-in-process...................... 897,126 1,076,670 1,989,546
Raw materials........................ 3,384,070 3,067,115 2,239,108
---------- ---------- ----------
8,203,053 7,293,310 7,684,339
Allowance for obsolescence........... (364,000) (499,000) (272,823)
---------- ---------- ----------
$7,839,053 $6,794,310 $7,411,516
========== ========== ==========
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
APRIL 1, MARCH 30, DECEMBER 5,
1995 1996 1996
---------- ---------- -----------
<S> <C> <C> <C>
Land................................. $ 138,964 $ 138,964 $ 138,964
Building and improvements............ 118,029 201,761 201,761
Machinery and equipment.............. 3,666,995 5,881,326 6,324,086
Furniture and fixtures............... 111,028 152,448 152,448
Construction in progress............. 167,180 1,744,503 1,830,098
---------- ---------- ----------
4,202,196 8,119,002 8,647,357
Accumulated depreciation............. (323,276) (727,124) (1,821,289)
---------- ---------- ----------
$3,878,920 $7,391,878 $6,826,068
========== ========== ==========
</TABLE>
5. PROPERTY HELD FOR SALE
The Company had property held for sale, which included land and a building
and related improvements. During the eight months ended December 5, 1996, the
Company made net improvements of $222,898 to this property, which were
capitalized. This property was sold on November 21, 1996 at a loss of
approximately $700,000 to a real estate company owned by certain of the
Company's stockholders.
The Company had leased this property to a third party. Rental income related
to this property was approximately $148,200 and $141,300 for the years ended
April 1, 1995 and March 30, 1996, respectively, and approximately $155,564 for
the eight month period ended December 5, 1996.
6. OTHER ASSETS
Other assets include primarily loan origination costs associated with long-
term debt which are being amortized over the term of the related debt.
Accumulated amortization was $34,708, $66,746 and $160,192 as of April 1,
1995, March 30, 1996 and December 5, 1996, respectively.
F-35
<PAGE>
SP ACQUISITION CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED APRIL 1, 1995 AND MARCH 30, 1996 AND
THE EIGHT MONTH PERIOD ENDED DECEMBER 5, 1996
7. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable represent advances from a Canadian bank under a $2.5 million
operating line of credit for the Company's Canadian subsidiary, which is
payable on demand and bears interest at a rate of Canadian prime (4.75% at
December 5, 1996) plus 1.25%. The advances under the line of credit are
secured by substantially all of the assets of the Company's Canadian
subsidiary.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
APRIL 1, MARCH 30, DECEMBER 5,
1995 1996 1996
----------- ----------- -----------
<S> <C> <C> <C>
Bank term note, with interest at
prime (8.25% at December 5, 1996)
plus 1.25%, collateralized by all
assets and outstanding common stock
of the Company, payable in monthly
principal payments of $66,667 plus
interest, with the final payment
due February 1999.................. $ 3,200,000 $ 2,400,000 $ 2,559,482
Note payable to bank under a $6 mil-
lion line of credit which expires
on September 1, 1998, with interest
at prime plus 1%, collateralized by
all assets and outstanding common
stock of the Company. Interest is
due and payable quarterly along
with commitment fees of 0.5% on the
unused balance..................... 2,200,011 3,300,000 860,000
Term loan payable to Canadian bank,
with interest at Canadian prime
plus 1.50%, collateralized by sub-
stantially all assets of the Cana-
dian subsidiary, payable in quar-
terly principal payments of $59,773
plus interest, with the final pay-
ment due November 1998............. 865,282 657,508 478,646
Notes payable to stockholders, with
interest at 17.5% payable quarter-
ly, due February 28, 1999, subject
to prepayment penalties............ 1,000,459 1,000,459 --
Other............................... 188,393 203,462 281,315
----------- ----------- -----------
7,454,145 7,561,429 4,179,443
Less--current maturities............ (1,219,135) (1,242,556) (1,320,179)
----------- ----------- -----------
$ 6,235,010 $ 6,318,873 $ 2,859,264
=========== =========== ===========
</TABLE>
The Company's notes payable and long-term debt agreements contain certain
restrictive covenants. These covenants require that the Company meet certain
requirements such as a minimum current ratio, a minimum trailing twelve-months
operating cash flow, a minimum tangible net worth, a minimum fixed charge
coverage ratio, a maximum ratio of indebtedness to tangible net worth and
maximum dividend distributions. The Company was not in compliance with certain
of these covenants at April 1, 1995 and March 30, 1996, but subsequently
obtained a waiver or an amendment for these instances of noncompliance.
Effective August 31, 1996, the bank term note and line of credit agreement
was amended to revise certain covenants and to extend the final maturities to
September 1, 1998. Under the terms of the loan
F-36
<PAGE>
SP ACQUISITION CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED APRIL 1, 1995 AND MARCH 30, 1996 AND
THE EIGHT MONTH PERIOD ENDED DECEMBER 5, 1996
agreements, the Company has the option to designate the interest rate for
borrowings under the loan agreements using either a prime plus or London
Interbank Offering Rate (LIBOR) option. The interest rate for domestically
designated borrowings under the bank term note and the line of credit was
adjusted to prime plus 0.25% and prime, respectively. LIBOR designated
borrowings under the bank term note and line of credit agreement bear interest
at LIBOR plus 2% and LIBOR plus 1.75%, respectively. In addition, effective
November 1996, the commitment fee was reduced to 0.25% of the unused balance of
the line of credit which is payable quarterly.
The following represents the future annual maturities for the Company's long-
term debt obligations:
<TABLE>
<CAPTION>
DECEMBER 5,
1996
-----------
<S> <C>
1997................................................................ $1,320,179
1998................................................................ 1,899,790
1999................................................................ 959,474
----------
$4,179,443
==========
</TABLE>
In conjunction with the acquisition (see Note 16), the bank term loan and
note payable to bank were paid off in the amounts of $2,559,482 and $860,000,
respectively.
8. INCOME TAXES
Income tax expense included in the consolidated statements of income is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED EIGHT MONTH
-------------------- PERIOD ENDED
APRIL 1, MARCH 30, DECEMBER 5,
1995 1996 1996
---------- --------- ------------
<S> <C> <C> <C>
Current income tax expense:
Federal..................................... $1,362,656 $209,727 $296,440
State....................................... 237,263 69,306 98,942
---------- -------- --------
1,599,919 279,033 395,382
---------- -------- --------
Deferred income tax expense:
Federal..................................... 215,817 592,920 200,361
State....................................... 29,939 82,140 27,757
---------- -------- --------
245,756 675,060 228,118
---------- -------- --------
Income tax expense ........................... $1,845,675 $954,093 $623,500
========== ======== ========
</TABLE>
F-37
<PAGE>
SP ACQUISITION CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED APRIL 1, 1995 AND MARCH 30, 1996 AND
THE EIGHT MONTH PERIOD ENDED DECEMBER 5, 1996
A reconciliation of the Company's effective income tax rate is as follows:
<TABLE>
<CAPTION>
YEAR ENDED EIGHT MONTH
------------------ PERIOD ENDED
APRIL 1, MARCH 30, DECEMBER 5,
1995 1996 1996
-------- --------- ------------
<S> <C> <C> <C>
Federal income taxes computed at the statutory
rate.......................................... 34.0% 34.0% 34.0%
State income taxes, net of federal income tax
benefit....................................... 3.1 2.0 2.7
Net operating (income) loss of Canadian subsid-
iary.......................................... -- 4.4 --
Other.......................................... -- 3.3 3.3
---- ---- ----
37.1% 43.7% 40.0%
==== ==== ====
</TABLE>
The tax effect of the Company's temporary differences giving rise to the net
deferred income tax assets is as follows:
<TABLE>
<CAPTION>
APRIL 1, MARCH 30, DECEMBER 5,
1995 1996 1996
---------- ---------- -----------
<S> <C> <C> <C>
Deferred income tax assets:
Current:
Inventory.............................. $ 285,213 $ 408,331 $ 282,864
Accrued liabilities and reserves....... 607,031 411,771 629,927
Allowance for doubtful accounts........ 31,443 38,818 33,400
---------- ---------- ----------
923,687 858,920 946,191
---------- ---------- ----------
Noncurrent:
Property and equipment................. 2,585,104 2,095,410 1,721,656
Valuation allowance.................... (594,547) (715,146) (656,553)
---------- ---------- ----------
1,990,557 1,380,264 1,065,103
---------- ---------- ----------
Net deferred income tax assets........... $2,914,244 $2,239,184 $2,011,294
========== ========== ==========
</TABLE>
The Company has established a valuation allowance for deferred tax assets of
the Company's Canadian subsidiary. The deferred tax assets represent primarily
the excess of the tax over the book basis of property, plant and equipment.
Because of the past operating losses of this subsidiary, the Company has been
unable to determine that it is more likely than not that the net deferred tax
assets of this subsidiary will be realized.
9. MAJOR SUPPLIER
The Company agreed to purchase a minimum of 67% of its styrene monomer used
in production from one supplier. The agreement was for a five year period
ending February 1999, was renewable for successive annual terms, and provided
for purchases at prevailing market-related prices and for favorable payment
terms.
In connection with this agreement, the Company's majority shareholder
granted this supplier an option to purchase 51,000 shares of common stock held
by the shareholder at the fair market value, as defined, of such shares at the
date of exercise. This option, which is exercisable between March 1, 1997 and
February 28, 1999, also requires this supplier to offer to purchase all the
outstanding shares of the Company's common stock at date of exercise.
F-38
<PAGE>
SP ACQUISITION CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED APRIL 1, 1995 AND MARCH 30, 1996 AND
THE EIGHT MONTH PERIOD ENDED DECEMBER 5, 1996
During the years ended April 1, 1995 and March 30, 1996, the Company's
purchases from this supplier amounted to approximately $41.0 million and $42.8
million, respectively, and the balance payable to this supplier by the Company
as of April 1, 1995 and March 30, 1996 amounted to approximately $8.6 million
and $8.2 million, respectively. During the eight month period ended December
5, 1996, the Company's purchases from this supplier amounted to approximately
$31.3 million. As of December 5, 1996, the balance payable to this supplier
was approximately $13.4 million.
10. CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of accounts receivable. Generally, the
Company does not require collateral to support customer receivables. The
Company follows established credit inquiry and investigation procedures in an
attempt to minimize credit risk associated with customer receivables. The
Company has one related party customer, WinCup Holdings, L.P., a subsidiary of
Radnor Holdings Corporation, which accounted for more than 10% of sales in
both 1995 and 1996. Sales to this customer were approximately $24.0 million
and $23.0 million for the years ended April 1, 1995 and March 30, 1996,
respectively, and approximately $12.8 million for the eight month period ended
December 5, 1996. As of April 1, 1995, March 30, 1996 and December 5, 1996,
outstanding accounts receivable from this customer were approximately $6.5
million, $4.2 million and $2.6 million, respectively.
11. EMPLOYEE BENEFIT PLAN
The Company sponsors a tax-qualified defined contribution plan under Section
401(a) of the Internal Revenue Code covering all full-time employees in the
U.S. who have completed one year of service. This plan includes a 401(k)
arrangement pursuant to which participants may contribute, subject to certain
limitations, a percentage of their salary on a pretax basis. The Company
contributes a matching contribution with respect to the contributions made by
participants at a rate determined by the Board of Directors of the Company
each year. The Company's 401(k) matching contributions were $62,763 and
$64,674 for the years ended April 1, 1995 and March 30, 1996, respectively,
and $66,505 for the eight month period ended December 5, 1996.
F-39
<PAGE>
SP ACQUISITION CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED APRIL 1, 1995 AND MARCH 30, 1996 AND
THE EIGHT MONTH PERIOD ENDED DECEMBER 5, 1996
12. RELATED PARTY TRANSACTIONS
Grupo Industrial Hermes and James River Paper Company, Inc. (James River)
are shareholders of the Company. Sales by the Company for the years ended
April 1, 1995 and March 30, 1996 and for the eight month period ended December
5, 1996 to Convermex, a subsidiary of Grupo Industrial Hermes, and to James
River are as follows:
<TABLE>
<CAPTION>
YEAR ENDED EIGHT MONTH
---------------------- PERIOD ENDED
APRIL 1, MARCH 30, DECEMBER 5,
1995 1996 1996
----------- ---------- -----------
<S> <C> <C> <C>
Convermex.......................... $ 1,262,144 $1,218,230 $2,031,650
James River........................ 12,072,402 4,635,959 2,730,555
</TABLE>
Receivables from the above related parties are as follows:
<TABLE>
<CAPTION>
APRIL 1, MARCH 30, DECEMBER 5,
1995 1996 1996
---------- --------- -----------
<S> <C> <C> <C>
Convermex............................. $ 138,600 $201,600 $619,760
James River........................... 1,396,305 76,698 122,488
</TABLE>
Effective January 20, 1996, James River, one of the Company's shareholders,
acquired an interest in the Company's largest customer, WinCup Holdings, L.P.,
a subsidiary of Radnor Holdings Corporation.
13. GEOGRAPHIC INFORMATION
Information about the Company's operations in different geographic areas for
the years ended April 1, 1995 and March 30, 1996 and for the eight month
period ended December 5, 1996 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED EIGHT MONTH
----------------------- PERIOD ENDED
APRIL 1, MARCH 30, DECEMBER 5,
1995 1996 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net sales:
United States...................... $57,764,433 $61,357,065 $39,294,285
Canada............................. 14,341,720 14,864,301 13,081,195
----------- ----------- -----------
Total............................ $72,106,153 $76,221,366 $52,375,480
=========== =========== ===========
Operating income (loss):
United States...................... $ 5,096,319 $ 2,639,092 $ 1,389,043
Canada............................. 511,218 (244,963) 935,880
----------- ----------- -----------
Total............................ $ 5,607,537 $ 2,394,129 $ 2,324,923
=========== =========== ===========
Identifiable assets (at end of
period):
United States...................... $25,709,341 $24,150,958 $23,684,841
Canada............................. 7,141,134 6,815,579 7,984,239
----------- ----------- -----------
Total............................ $32,850,475 $30,966,537 $31,669,080
=========== =========== ===========
</TABLE>
F-40
<PAGE>
SP ACQUISITION CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED APRIL 1, 1995 AND MARCH 30, 1996 AND
THE EIGHT MONTH PERIOD ENDED DECEMBER 5, 1996
14. STOCKHOLDERS' EQUITY
On February 25, 1994, the Company issued to its preferred stockholders
warrants to allow for the purchase of 25,313 shares (the "Warrant Shares") of
the Company's common stock at an exercise price of $.01 per share. The
warrants are not exercisable until the notes to stockholders (the Notes) are
repaid; however, they become immediately exercisable in full on the Company's
capital reorganization, merger or acquisition of the Company. The Warrant
Shares are subject to adjustment or cancellation upon the occurrence of
certain events; including the repayment of the Notes in advance of their
scheduled maturity. In addition, the terms of the warrants provide for
adjustments to the exercise price as a result of stock splits, dividends or
issuances. During 1995, warrants for 12,500 shares of common stock were
canceled as a result of early repayments or payments of certain of the Notes.
At April 1, 1995, March 30, 1996 and December 5, 1996, warrants for 12,813
shares were outstanding, which expire at March 31, 1999.
15. COMMITMENTS AND CONTINGENCIES
Supply Agreement--The Company is committed under a supply agreement to sell
to WinCup Holdings, L.P. all of WinCup's requirements for expandable
polystyrene for certain of its plants at sales prices based on prevailing
market prices for up to 40 million pounds annually, and no less than 75% of
the requirements for those plants in excess of 40 million pounds annually. The
agreement is for an eight-year period ending February 2000, with options for
annual extensions thereafter.
Operating Leases--The Company leases certain buildings and equipment under
operating leases for periods ranging from one to five years. These leases
generally contain optional renewal provisions for one or more periods. Future
annual minimum lease payments as of December 5, 1996 are as follows:
<TABLE>
<S> <C>
1997............................................................. $211,859
1998............................................................. 197,779
1999............................................................. 169,261
2000............................................................. 83,655
2001............................................................. 6,817
--------
Total............................................................ $669,371
========
</TABLE>
Rental expense under operating leases for the years ended April 1, 1995 and
March 30, 1996 was approximately $170,000 and $329,000, respectively, and
approximately $263,000 for the eight month period ended December 5, 1996.
Other--The Company is involved in various legal proceedings arising in the
normal course of business. Management believes the outcome of these matters
will not materially affect the consolidated financial position or results of
operations of the Company.
Like other chemical manufacturers, the Company's operations are subject to
extensive and rapidly changing federal and state environmental regulations,
including original and renewal permit application proceedings in connection
with its business operations. These environmental laws and regulations may
require the Company to take action in the future to correct the effects of
prior environmental issues at the Company's facilities, if any. In connection
with the Company's acquisition of its business operations
F-41
<PAGE>
SP ACQUISITION CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED APRIL 1, 1995 AND MARCH 30, 1996 AND
THE EIGHT MONTH PERIOD ENDED DECEMBER 5, 1996
from KCTC on February 25, 1994, as discussed in Note 1, the Company was
indemnified by KCTC as to environmental matters existing prior to the
acquisition date. The extent of loss related to environmental matters depends
on a number of factors, including technological developments and changes in
environmental laws, among others. Based on currently known facts, management
believes that any environmental costs the Company may incur would not have a
material adverse effect on the consolidated financial position or results of
operations of the Company.
The Company participates in a self-insurance program that provides for the
payment of employee health claims. The program provides for specific excess
loss reinsurance for aggregate claims greater than a specified amount for any
one claimant. The Company accrues the estimated liabilities for the ultimate
costs of both reported claims and incurred but not reported claims.
16. ACQUISITION BY RADNOR HOLDINGS CORPORATION
On October 30, 1996, the Company's shareholders entered into a definitive
agreement with Radnor Holdings Corporation (Radnor) whereby Radnor agreed to
acquire all the issued and outstanding shares of capital stock of and other
equity interests in the Company for an aggregate purchase price of $31.0
million, subject to satisfactory resolution of environmental matters and
financing and subject to certain adjustments, as defined. The closing of the
acquisition occurred on December 5, 1996.
F-42
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PRO-
SPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIV-
ERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUM-
STANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS COR-
RECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................................................... 1
Risk Factors............................................................... 10
The Company................................................................ 16
Capitalization............................................................. 18
Pro Forma Consolidated Financial Data...................................... 19
Selected Consolidated Financial Data....................................... 21
Management's Discussion and Analysis of
Financial Condition and Results of Operations............................. 23
Business................................................................... 29
Management................................................................. 40
Security Ownership by Certain Beneficial Owners and Management............. 44
Description of the Company's Credit Facilities............................. 45
The Exchange Offer......................................................... 47
Description of the Notes................................................... 54
Registration Rights........................................................ 80
Certain U.S. Federal Income Tax Consequences............................... 82
Plan of Distribution....................................................... 85
Legal Matters.............................................................. 86
Experts.................................................................... 86
Additional Information..................................................... 87
Index to Financial Statements.............................................. F-1
</TABLE>
------------
UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[LOGO OF RADNOR HOLDINGS CORPORATION APPEARS HERE]
OFFER FOR ALL OUTSTANDING 10% SENIOR NOTES DUE 2003 IN EXCHANGE FOR 10% SENIOR
NOTES DUE 2003, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED
------------
PROSPECTUS
------------
The Exchange Agent for the Exchange Offer is:
FIRST UNION NATIONAL BANK
By Facsimile: (215) 985-3428
Confirmation by Telephone: (215) 985-7207
By Mail/Hand/Overnight Courier
FIRST UNION NATIONAL BANK
123 SOUTH BROAD STREET
12TH FLOOR, PA 1249
CORPORATE TRUST ADMINISTRATION PHILADELPHIA, PA 19109
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
*3.1 Restated Certificate of Incorporation of Radnor Holdings Corporation
*3.2 Bylaws of Radnor Holdings Corporation
*3.3 Certificate of Incorporation of WinCup Holdings, Inc.
*3.4 Bylaws of WinCup Holdings, Inc.
*3.5 Certificate of Incorporation of Radnor Management, Inc.
*3.6 Bylaws of Radnor Management, Inc.
*3.7 Certificate of Limited Partnership of WinCup Holdings, L.P.
*3.8 Amended and Restated Limited Partnership Agreement of WinCup Holdings,
L.P. by and between WinCup Holdings, Inc. and Radnor Holdings
Corporation, dated January 1, 1997
*3.9 Certificate of Incorporation of SP Acquisition Co.
*3.10 Bylaws of SP Acquisition Co.
*3.11 Articles of Incorporation of StyroChem International, Inc.
*3.12 Bylaws of StyroChem International, Inc.
*3.13 Certificate of Incorporation of StyroChem International, Ltd.
*3.14 Bylaws of StyroChem International, Ltd.
*4.1 Indenture, dated as of December 5, 1996, among Radnor Holdings
Corporation, WinCup Holdings, Inc., WinCup Holdings, L.P., SP
Acquisition Co., StyroChem International, Inc., StyroChem
International, Ltd., Radnor Management, Inc., and First Union
National Bank, as amended by a First Supplemental Indenture dated as
of December 17, 1996, including form of Notes and Guarantees
*4.2 Exchange and Registration Rights Agreement, dated as of December 5,
1996, among Radnor Holdings Corporation, WinCup Holdings, Inc.,
WinCup Holdings, L.P., SP Acquisition Co., StyroChem International,
Inc., StyroChem International, Ltd., Alex. Brown & Sons Incorporated
and NatWest Capital Markets Limited
*4.3 Purchase Agreement, dated December 2, 1996, among Radnor Holdings
Corporation, WinCup Holdings, Inc., WinCup Holdings, L.P., SP
Acquisition Co., StyroChem International, Inc., StyroChem
International, Ltd., Alex. Brown & Sons Incorporated and NatWest
Capital Markets Limited
4.4 Form of Letter of Transmittal
*4.5 Form of Notice of Guaranteed Delivery
*4.6 Form of Letter to Noteholders
*4.7 Form of Letter to Record Holders
*5.1 Opinion of Duane, Morris & Heckscher regarding the legality of the
securities registered
8.1 Opinion of Duane, Morris & Heckscher regarding certain tax matters
*10.1 Stock Purchase Agreement among Radnor Holdings Corporation, Richard
Davidovich, the Davidovich Charitable Trust, James River Paper
Company, Inc., Grupo Industrial Hermes, S.A. de C.V., and the
Rosenthal Group, dated October 30, 1996
*10.2 Asset Purchase Agreement among Benchmark Holdings, Inc., WinCup
Holdings, Inc. and James River Paper Company, Inc., dated October 31,
1995
*10.3 JR Capital Contribution Agreement by and between James River Paper
Company, Inc. and WinCup Holdings, L.P., dated January 20, 1996
*10.4 WinCup Capital Contribution Agreement by and between WinCup Holdings,
Inc. and WinCup Holdings, L.P., dated January 20, 1996
*10.5 Working Capital Escrow Agreement, dated as of December 5, 1996, among
Radnor Holdings Corporation, Richard Davidovich and Duane, Morris &
Heckscher
*10.6 Environmental Escrow Agreement, dated as of December 5, 1996, among
Radnor Holdings Corporation, Richard Davidovich and Duane, Morris &
Heckscher
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
**10.7 Sales Agent Agreement, dated January 20, 1996, between James River
Paper Company, Inc. and WinCup Holdings, L.P., as amended by a Sales
Agent Extension and Modification Agreement dated December 5, 1996
**10.8 Equipment Use Agreement, dated January 20, 1996, as amended by an
Equipment Use Extension and Modification Agreement dated December 5,
1996
*10.9 License Agreement, dated January 20, 1996, among James River
Corporation of Virginia, James River Paper Company, Inc., and WinCup
Holdings, L.P., as amended by a License Extension and Modification
Agreement dated December 5, 1996
*10.10 Patent License Agreement, dated January 20, 1996, among James River
Corporation of Virginia, James River Paper Company, Inc., and WinCup
Holdings, L.P., as amended by an Amendment to Patent License
Agreement dated December 5, 1996
**10.11 Contract of Sale, dated as of December 5, 1996, among Chevron Chemical
Company, SP Acquisition Co., StyroChem International, Inc. and
StyroChem International, Ltd.
**10.12 Contract between ARCO Chemical Company (now Nova Chemicals, Inc.) and
WinCup Holdings, L.P., dated April 1, 1996, as amended on September ,
1996
**10.13 Product Sales Agreement by and between Huntsman Chemical Corporation
and WinCup Holdings, Inc., dated January 1, 1996
**10.14 Agreement between BASF Corporation and WinCup Holdings, L.P., dated
March 27, 1996, as supplemented by letter agreement dated April 25,
1996
**10.15 Sales Agreement between Fina Oil and Chemical Company and WinCup
Holdings, L.P., dated May 21, 1996
**10.16 Contract of Sale between Scott Polymers, Inc. (now StyroChem
International, Inc.) and WinCup Holdings, Inc., dated February 28,
1992, as amended on February 25, 1994, assigned to WinCup Holdings,
L.P. on January 20, 1996
**10.17 Supply Agreement by and between SP Acquisition Co. and James River
Canada, Inc., dated March, 1996
*10.18 Noncompetition Agreement by and between Radnor Holdings Corporation
and Richard Davidovich, dated December 5, 1996
*10.19 Consulting Agreement by and between Radnor Holdings Corporation and
Richard Davidovich, dated December 5, 1996
*10.20 Sublease Agreement, dated January 20, 1996, between James River Paper
Company, Inc. and WinCup Holdings, L.P. (240 Tamal Vista Boulevard,
Corte Madera, California)
*10.21 Sublease Agreement, dated January 20, 1996, between James River Paper
Company, Inc. and WinCup Holdings, L.P. (205 Tamal Vista Boulevard,
Corte Madera, California)
*10.22 Sublease Agreement, dated January 20, 1996, between James River Paper
Company, Inc. and WinCup Holdings, L.P. (201 Tamal Vista Boulevard,
Corte Madera, California)
*10.23 Sublease Agreement, dated January 20, 1996, between James River Paper
Company, Inc. and WinCup Holdings, L.P. (195 Tamal Vista Boulevard,
Corte Madera, California)
*10.24 Letter Agreement, dated December 5, 1996, between WinCup Holdings,
L.P. and James River Paper Company, Inc., regarding Corte Madera
subleases
*10.25 Warehouse Lease, dated October 27, 1992, between Safeway Inc. and
James River Paper Company, Inc., as amended, assigned to WinCup
Holdings, L.P. on January 20, 1996
*10.26 Amended Lease between Patricia M. Dunnell and James River Paper
Company, Inc., dated September 29, 1989, as amended in September,
1994, assigned to WinCup Holdings, L.P. on January 20, 1996
*10.27 Warehouse Lease between Etzioni Partners and James River Corporation,
dated February 13, 1992, as amended on April 13, 1992 and on December
9, 1992, assigned to WinCup Holdings, L.P. on January 20, 1996
*10.28 Lease between Stone Mountain Industrial Park, Inc. and W.M.F.
Container Corporation, dated October 15, 1984, as amended on
September 20, 1989 and on February 28, 1994, assigned to WinCup
Holdings, L.P. on January 20, 1996
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
*10.29 Lease between Stone Mountain Industrial Park, Inc. and W.M.F.
Container Corporation dated June 16, 1977, as amended on August 7,
1984, and on October 15, 1984, and on February 25, 1994, assigned to
WinCup Holdings, L.P. on January 20, 1996
*10.30 Lease between Stone Mountain Industrial Park, Inc. and Scott Container
Group, Inc., dated December 16, 1991, as amended on February 28,
1994, assigned to WinCup Holdings on January 20, 1996
*10.31 Operating Lease by and between R-K Ventures Unit I Limited Partnership
and WMF Container Corporation, dated August 20, 1987, as amended on
November 30, 1990, assigned to WinCup Holdings, L.P. on January 20,
1996
*10.32 Standard Form Multi-Tenancy Industrial Lease between WinCup Holdings,
Inc. and CK Airpark Associates, dated June 1, 1994, assigned to
WinCup Holdings, L.P. on January 20, 1996
*10.33 Lease between James River Paper Company, Inc. and Central Ink Company,
dated February 17, 1993, as amended, assigned to WinCup Holdings,
L.P. on January 20, 1996
*10.34 Radnor Corporate Center Office Lease by and between Radnor Center
Associates and WinCup Holdings, L.P., dated May 31, 1996
*10.35 Standard Commercial Lease by and between Bradford Management Company
of Dallas, Inc. and Scott Polymers, Inc. (now StyroChem
International, Inc.), dated June 22, 1994, as amended on April 5,
1996, and as renewed on October 22, 1996
*10.36 Sublease between Cargologan Inc. and StyroChem International, Ltd.,
dated August 2, 1996
*10.37 Employment Agreement by and between WinCup Holdings, L.P. and Michael
T. Kennedy, dated January 20, 1996
*10.38 Executive Employment Agreement by and between Benchmark Corporation of
Delaware and Richard Hunsinger, dated May 1, 1993, as amended in
October, 1995
*10.39 Benchmark Corporation of Delaware Equity Incentive Plan, dated April
24, 1992, as amended on November 1, 1993
*10.40 Benchmark Corporation of Delaware Management Equity Participation
Plan, dated March 10, 1993, as amended on November 1, 1993
*10.41 Amended and Restated Revolving Credit and Security Agreement, dated
December 5, 1996, among The Bank of New York Commercial Corporation,
NationsBank, N.A., WinCup Holdings, L.P., Radnor Holdings
Corporation, WinCup Holdings, Inc., SP Acquisition Co., and StyroChem
International, Inc.
*10.42 Amended and Restated Revolving Credit Note, dated December 5, 1996,
made by WinCup Holdings, L.P., Radnor Holdings Corporation, WinCup
Holdings, Inc., SP Acquisition Co., and StyroChem International, Inc.
in favor of The Bank of New York Commercial Corporation
*10.43 Amended and Restated Revolving Credit Note, dated December 5, 1996,
made by WinCup Holdings, L.P., Radnor Holdings Corporation, WinCup
Holdings, Inc., SP Acquisition Co., and StyroChem International, Inc.
in favor of NationsBank, N.A.
*10.44 Trademark Collateral Security Agreement, dated December 5, 1996,
between StyroChem International, Inc. and The Bank of New York
Commercial Corporation
*10.45 Trademark Assignment of Security, dated December 5, 1996, between
StyroChem International, Inc. and The Bank of New York Commercial
Corporation
*10.46 Trademark Collateral Security Agreement, dated December 5, 1996,
between WinCup Holdings, Inc. and The Bank of New York Commercial
Corporation
*10.47 Trademark Assignment of Security, dated December 5, 1996, between
WinCup Holdings, Inc. and The Bank of New York Commercial Corporation
*10.48 Patent Collateral Security Agreement, dated December 5, 1996, between
StyroChem International, Inc. and The Bank of New York Commercial
Corporation
*10.49 Patent Assignment of Security, dated December 5, 1996, between
StyroChem International, Inc. and The Bank of New York Commercial
Corporation
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
*10.50 Collateral Assignment, dated as of December 5, 1996, among Radnor
Holdings Corporation and The Bank of New York Commercial Corporation
*10.51 Junior Subordinated Promissory Note, dated January 20, 1996, made by
WinCup Holdings, Inc. in favor of WinCup Holdings, L.P. ($1.1 million)
*10.52 Subordinated Promissory Note, dated January 20, 1996, made by WinCup
Holdings, L.P. in favor of James River Paper Company, Inc. ($300,000)
*10.53 Subordinated Promissory Note, dated January 20, 1996, made by WinCup
Holdings, L.P. in favor of Scott Paper Company ($2.7 million)
*10.54 Subordinated Promissory Note, dated January 20, 1996, made by WinCup
Holdings, L.P. in favor of James River Paper Company, Inc. ($5.7
million)
*10.55 Subordinated Promissory Note, dated January 20, 1996, made by WinCup
Holdings, L.P. in favor of Scott Paper Company ($300,000)
*10.56 Senior Subordinated Promissory Note, dated January 20, 1996, made by
WinCup Holdings, L.P. in favor of James River Paper Company, Inc.
($4.4 million)
*10.57 Subordinated Promissory Note, dated January 20, 1996, made by WinCup
Holdings, L.P. in favor of WinCup Holdings, Inc. ($1.8 million)
*10.58 Senior Promissory Note, dated January 20, 1996, made by WinCup
Holdings, L.P. in favor of James River Paper Company, Inc. ($7
million)
*10.59 Subordinated Promissory Note, dated January 20, 1996, made by WinCup
Holdings, L.P. in favor of James River Paper Company, Inc.
*10.60 Partnership Interest Purchase Agreement, dated December 5, 1996, among
Radnor Holdings Corporation, WinCup Holdings, Inc., WinCup Holdings,
L.P. and James River Paper Company, Inc.
*10.61 Redemption and Release Agreement by and among Radnor Holdings
Corporation, WinCup Holdings, Inc., WinCup Holdings, L.P. and
Kimberly-Clark Tissue Company, dated December 5, 1996
*10.62 Assumption and Modification Agreement, dated as of January 20, 1996,
among Scott Paper Company, WinCup Holdings, Inc. and WinCup Holdings,
L.P.
*10.63 Agreement Respecting a Term Loan and Other Credit Facilities, dated
February 25, 1994, between Bank of Montreal and StyroChem
International, Ltd., as amended
*10.64 Letter of Undertaking, dated December 5, 1996, made by StyroChem
International, Ltd. and Radnor Holdings Corporation in favor of Bank
of Montreal
*10.65 Guaranty, dated February 25, 1994, made by SP Acquisition Co. in favor
of Bank of Montreal
*10.66 Employment Agreement, dated April 5, 1996, between WinCup Holdings,
Inc. and R. Radcliffe Hastings
12.1 Computation of ratios
*21.1 List of Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Duane, Morris & Heckscher (included in Exhibits 5.1 and 8.1
to this Registration Statement)
*24.1 Power of Attorney
*25.1 Statement of Eligibility and Qualification Under the Trust Indenture
Act of 1939 of a Corporation Designated to Act as a Trustee on Form
T-1 of First Union National Bank
27.1 Financial Data Schedule (Radnor Holdings Corporation)
27.2 Financial Data Schedule (SP Acquisition Co. and Subsidiaries)
*27.3 Financial Data Schedule (J.R. Cup Foam Container Operations of James
River Paper Company, Inc.)
</TABLE>
- --------
* Previously filed.
** Previously filed; portions of this Exhibit have been deleted pursuant to the
Company's Request for Confidential Treatment pursuant to Rule 406
promulgated under the Securities Act.
II-4
<PAGE>
No financial statement schedules are required as all material required
information is disclosed in the notes to the respective financial statements.
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through
the date of responding to the request.
(b) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, RADNOR HOLDINGS
CORPORATION HAS DULY CAUSED THIS AMENDMENT NO. 3 TO REGISTRATION STATEMENT TO
BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
RADNOR, PENNSYLVANIA, ON APRIL 2, 1997.
Radnor Holdings Corporation
By: /s/ Michael V. Valenza
---------------------------------
MICHAEL V. VALENZA
SENIOR VICE PRESIDENT--FINANCE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 3 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<S> <C> <C>
* Chief Executive April 2, 1997
- ------------------------------------- Officer, President
MICHAEL T. KENNEDY and Sole Director
(principal
executive officer)
/s/ Michael V. Valenza Senior Vice April 2, 1997
- ------------------------------------- President-Finance
MICHAEL V. VALENZA (principal
financial and
accounting officer)
*By: /s/ Michael V. Valenza
--------------------------------
MICHAEL V. VALENZA
Attorney-in-Fact
</TABLE>
II-6
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, WINCUP HOLDINGS,
INC. HAS DULY CAUSED THIS AMENDMENT NO. 3 TO REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN RADNOR,
PENNSYLVANIA, ON APRIL 2, 1997.
WinCup Holdings, Inc.
By: /s/ Michael V. Valenza
--------------------------------
MICHAEL V. VALENZA SENIOR VICE
PRESIDENT--FINANCE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 3 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<S> <C>
* President and Sole April 2, 1997
- ------------------------------------- Director (principal
MICHAEL T. KENNEDY executive officer)
/s/ Michael V. Valenza Senior Vice April 2, 1997
- ------------------------------------- President--Finance
MICHAEL V. VALENZA (principal
financial and
accounting officer)
/s/ Michael V. Valenza
* By:
--------------------------------
MICHAEL V. VALENZA
Attorney-in-Fact
</TABLE>
II-7
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, WINCUP HOLDINGS,
L.P. HAS DULY CAUSED THIS AMENDMENT NO. 3 TO REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN RADNOR,
PENNSYLVANIA, ON APRIL 2, 1997.
WinCup Holdings, L.P. By: WinCup
Holdings, Inc., its general partner
/s/ Michael V. Valenza
By:
------------------------------
MICHAEL V. VALENZA
SENIOR VICE-PRESIDENT--FINANCE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 3 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<S> <C> <C>
*
- ------------------------------------- President and Sole April 2, 1997
MICHAEL T. KENNEDY Director of General
Partner (principal
executive officer)
/s/ Michael V. Valenza
- ------------------------------------- Senior Vice April 2, 1997
MICHAEL V. VALENZA President--Finance
of General Partner
(principal
financial and
accounting officer)
*By: /s/ Michael V. Valenza
-------------------------------
MICHAEL V. VALENZA Attorney-in-Fact
</TABLE>
II-8
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, SP ACQUISITION
CO. HAS DULY CAUSED THIS AMENDMENT NO. 3 TO REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN RADNOR,
PENNSYLVANIA, ON APRIL 2, 1997.
SP Acquisition Co.
By: /s/ Michael V. Valenza
------------------------------
MICHAEL V. VALENZA
SENIOR VICE PRESIDENT--FINANCE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 3 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
*
- ------------------------------------- President and Sole April 2, 1997
MICHAEL T. KENNEDY Director (principal
executive officer)
/s/ Michael V. Valenza Senior Vice
- ------------------------------------- President-- Finance April 2, 1997
MICHAEL V. VALENZA (principal
financial and
accounting officer)
*By: /s/ Michael V. Valenza
---------------------------------
MICHAEL V. VALENZA
Attorney-in-Fact
II-9
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, STYROCHEM
INTERNATIONAL, INC. HAS DULY CAUSED THIS AMENDMENT NO. 3 TO REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN RADNOR, PENNSYLVANIA, ON APRIL 2, 1997.
StyroChem International, Inc.
By: /s/ Michael V. Valenza
------------------------------
MICHAEL V. VALENZA
SENIOR VICE PRESIDENT--FINANCE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 3 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
*
- ------------------------------------- President and Sole April 2, 1997
MICHAEL T. KENNEDY Director (principal
executive officer)
/s/ Michael V. Valenza
- ------------------------------------- Senior Vice
MICHAEL V. VALENZA President-- Finance April 2, 1997
(principal
financial and
accounting officer)
*By: /s/ Michael V. Valenza
---------------------------------
MICHAEL V. VALENZA
Attorney-in-Fact
II-10
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, STYROCHEM
INTERNATIONAL, LTD. HAS DULY CAUSED THIS AMENDMENT NO. 3 TO REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN RADNOR, PENNSYLVANIA, ON APRIL 2, 1997.
StyroChem International, Ltd.
By: /s/ Michael V. Valenza
------------------------------
MICHAEL V. VALENZA
SENIOR VICE PRESIDENT--FINANCE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 3 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
* President and Sole
- ------------------------------------- Director (principal April 2, 1997
MICHAEL T. KENNEDY executive officer)
/s/ Michael V. Valenza Senior Vice
- ------------------------------------- President-- Finance April 2, 1997
MICHAEL V. VALENZA (principal
financial and
accounting officer)
/s/ Michael V. Valenza
*By:_________________________________
MICHAEL V. VALENZA
Attorney-in-Fact
II-11
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, RADNOR
MANAGEMENT, INC. HAS DULY CAUSED THIS AMENDMENT NO. 3 TO REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
RADNOR, PENNSYLVANIA, ON APRIL 2, 1997.
Radnor Management, Inc.
By: /s/ Michael V. Valenza
---------------------------------
MICHAEL V. VALENZA SENIOR VICE
PRESIDENT--FINANCE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 3 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
* President and Sole
- ------------------------------------- Director (principal April 2, 1997
MICHAEL T. KENNEDY executive officer)
/s/ Michael V. Valenza Senior Vice
- ------------------------------------- President--Finance April 2, 1997
MICHAEL V. VALENZA (principal
financial and
accounting officer)
/s/ Michael V. Valenza
* By:________________________________
MICHAEL V. VALENZA
Attorney-in-Fact
II-12
<PAGE>
EXHIBIT INDEX
(PURSUANT TO ITEM 601 OF REGULATION S-K)
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
*3.1 Restated Certificate of Incorporation of Radnor Holdings Corporation
*3.2 Bylaws of Radnor Holdings Corporation
*3.3 Certificate of Incorporation of WinCup Holdings, Inc.
*3.4 Bylaws of WinCup Holdings, Inc.
*3.5 Certificate of Incorporation of Radnor Management, Inc.
*3.6 Bylaws of Radnor Management, Inc.
*3.7 Certificate of Limited Partnership of WinCup Holdings, L.P.
*3.8 Amended and Restated Limited Partnership Agreement of WinCup Holdings,
L.P. by and between WinCup Holdings, Inc. and Radnor Holdings
Corporation, dated January 1, 1997
*3.9 Certificate of Incorporation of SP Acquisition Co.
*3.10 Bylaws of SP Acquisition Co.
*3.11 Articles of Incorporation of StyroChem International, Inc.
*3.12 Bylaws of StyroChem International, Inc.
*3.13 Certificate of Incorporation of StyroChem International, Ltd.
*3.14 Bylaws of StyroChem International, Ltd.
*4.1 Indenture, dated as of December 5, 1996, among Radnor Holdings
Corporation, WinCup Holdings, Inc., WinCup Holdings, L.P., SP
Acquisition Co., StyroChem International, Inc., StyroChem
International, Ltd., Radnor Management, Inc., and First Union
National Bank, as amended by a First Supplemental Indenture dated as
of December 17, 1996, including form of Notes and Guarantees
*4.2 Exchange and Registration Rights Agreement, dated as of December 5,
1996, among Radnor Holdings Corporation, WinCup Holdings, Inc.,
WinCup Holdings, L.P., SP Acquisition Co., StyroChem International,
Inc., StyroChem International, Ltd., Alex. Brown & Sons Incorporated
and NatWest Capital Markets Limited
*4.3 Purchase Agreement, dated December 2, 1996, among Radnor Holdings
Corporation, WinCup Holdings, Inc., WinCup Holdings, L.P., SP
Acquisition Co., StyroChem International, Inc., StyroChem
International, Ltd., Alex. Brown & Sons Incorporated and NatWest
Capital Markets Limited
4.4 Form of Letter of Transmittal
*4.5 Form of Notice of Guaranteed Delivery
*4.6 Form of Letter to Noteholders
*4.7 Form of Letter to Record Holders
*5.1 Opinion of Duane, Morris & Heckscher regarding the legality of the
securities registered
8.1 Opinion of Duane, Morris & Heckscher regarding certain tax matters
*10.1 Stock Purchase Agreement among Radnor Holdings Corporation, Richard
Davidovich, the Davidovich Charitable Trust, James River Paper
Company, Inc., Grupo Industrial Hermes, S.A. de C.V., and the
Rosenthal Group, dated October 30, 1996
*10.2 Asset Purchase Agreement among Benchmark Holdings, Inc., WinCup
Holdings, Inc. and James River Paper Company, Inc., dated October 31,
1995
*10.3 JR Capital Contribution Agreement by and between James River Paper
Company, Inc. and WinCup Holdings, L.P., dated January 20, 1996
*10.4 WinCup Capital Contribution Agreement by and between WinCup Holdings,
Inc. and WinCup Holdings, L.P., dated January 20, 1996
*10.5 Working Capital Escrow Agreement, dated as of December 5, 1996, among
Radnor Holdings Corporation, Richard Davidovich and Duane, Morris &
Heckscher
*10.6 Environmental Escrow Agreement, dated as of December 5, 1996, among
Radnor Holdings Corporation, Richard Davidovich and Duane, Morris &
Heckscher
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
**10.7 Sales Agent Agreement, dated January 20, 1996, between James River
Paper Company, Inc. and WinCup Holdings, L.P., as amended by a Sales
Agent Extension and Modification Agreement dated December 5, 1996
**10.8 Equipment Use Agreement, dated January 20, 1996, as amended by an
Equipment Use Extension and Modification Agreement dated December 5,
1996
*10.9 License Agreement, dated January 20, 1996, among James River
Corporation of Virginia, James River Paper Company, Inc., and WinCup
Holdings, L.P., as amended by a License Extension and Modification
Agreement dated December 5, 1996
*10.10 Patent License Agreement, dated January 20, 1996, among James River
Corporation of Virginia, James River Paper Company, Inc., and WinCup
Holdings, L.P., as amended by an Amendment to Patent License
Agreement dated December 5, 1996
**10.11 Contract of Sale, dated as of December 5, 1996, among Chevron Chemical
Company, SP Acquisition Co., StyroChem International, Inc. and
StyroChem International, Ltd.
**10.12 Contract between ARCO Chemical Company (now Nova Chemicals, Inc.) and
WinCup Holdings, L.P., dated April 1, 1996, as amended on September ,
1996
**10.13 Product Sales Agreement by and between Huntsman Chemical Corporation
and WinCup Holdings, Inc., dated January 1, 1996
**10.14 Agreement between BASF Corporation and WinCup Holdings, L.P., dated
March 27, 1996, as supplemented by letter agreement dated April 25,
1996
**10.15 Sales Agreement between Fina Oil and Chemical Company and WinCup
Holdings, L.P., dated May 21, 1996
**10.16 Contract of Sale between Scott Polymers, Inc. (now StyroChem
International, Inc.) and WinCup Holdings, Inc., dated February 28,
1992, as amended on February 25, 1994, assigned to WinCup Holdings,
L.P. on January 20, 1996
**10.17 Supply Agreement by and between SP Acquisition Co. and James River
Canada, Inc., dated March, 1996
*10.18 Noncompetition Agreement by and between Radnor Holdings Corporation
and Richard Davidovich, dated December 5, 1996
*10.19 Consulting Agreement by and between Radnor Holdings Corporation and
Richard Davidovich, dated December 5, 1996
*10.20 Sublease Agreement, dated January 20, 1996, between James River Paper
Company, Inc. and WinCup Holdings, L.P. (240 Tamal Vista Boulevard,
Corte Madera, California)
*10.21 Sublease Agreement, dated January 20, 1996, between James River Paper
Company, Inc. and WinCup Holdings, L.P. (205 Tamal Vista Boulevard,
Corte Madera, California)
*10.22 Sublease Agreement, dated January 20, 1996, between James River Paper
Company, Inc. and WinCup Holdings, L.P. (201 Tamal Vista Boulevard,
Corte Madera, California)
*10.23 Sublease Agreement, dated January 20, 1996, between James River Paper
Company, Inc. and WinCup Holdings, L.P. (195 Tamal Vista Boulevard,
Corte Madera, California)
*10.24 Letter Agreement, dated December 5, 1996, between WinCup Holdings,
L.P. and James River Paper Company, Inc., regarding Corte Madera
subleases
*10.25 Warehouse Lease, dated October 27, 1992, between Safeway Inc. and
James River Paper Company, Inc., as amended, assigned to WinCup
Holdings, L.P. on January 20, 1996
*10.26 Amended Lease between Patricia M. Dunnell and James River Paper
Company, Inc., dated September 29, 1989, as amended in September,
1994, assigned to WinCup Holdings, L.P. on January 20, 1996
*10.27 Warehouse Lease between Etzioni Partners and James River Corporation,
dated February 13, 1992, as amended on April 13, 1992 and on December
9, 1992, assigned to WinCup Holdings, L.P. on January 20, 1996
*10.28 Lease between Stone Mountain Industrial Park, Inc. and W.M.F.
Container Corporation, dated October 15, 1984, as amended on
September 20, 1989 and on February 28, 1994, assigned to WinCup
Holdings, L.P. on January 20, 1996
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
*10.29 Lease between Stone Mountain Industrial Park, Inc. and W.M.F.
Container Corporation dated June 16, 1977, as amended on August 7,
1984, and on October 15, 1984, and on February 25, 1994, assigned to
WinCup Holdings, L.P. on January 20, 1996
*10.30 Lease between Stone Mountain Industrial Park, Inc. and Scott Container
Group, Inc., dated December 16, 1991, as amended on February 28,
1994, assigned to WinCup Holdings on January 20, 1996
*10.31 Operating Lease by and between R-K Ventures Unit I Limited Partnership
and WMF Container Corporation, dated August 20, 1987, as amended on
November 30, 1990, assigned to WinCup Holdings, L.P. on January 20,
1996
*10.32 Standard Form Multi-Tenancy Industrial Lease between WinCup Holdings,
Inc. and CK Airpark Associates, dated June 1, 1994, assigned to
WinCup Holdings, L.P. on January 20, 1996
*10.33 Lease between James River Paper Company, Inc. and Central Ink Company,
dated February 17, 1993, as amended, assigned to WinCup Holdings,
L.P. on January 20, 1996
*10.34 Radnor Corporate Center Office Lease by and between Radnor Center
Associates and WinCup Holdings, L.P., dated May 31, 1996
*10.35 Standard Commercial Lease by and between Bradford Management Company
of Dallas, Inc. and Scott Polymers, Inc. (now StyroChem
International, Inc.), dated June 22, 1994, as amended on April 5,
1996, and as renewed on October 22, 1996
*10.36 Sublease between Cargologan Inc. and StyroChem International, Ltd.,
dated August 2, 1996
*10.37 Employment Agreement by and between WinCup Holdings, L.P. and Michael
T. Kennedy, dated January 20, 1996
*10.38 Executive Employment Agreement by and between Benchmark Corporation of
Delaware and Richard Hunsinger, dated May 1, 1993, as amended in
October, 1995
*10.39 Benchmark Corporation of Delaware Equity Incentive Plan, dated April
24, 1992, as amended on November 1, 1993
*10.40 Benchmark Corporation of Delaware Management Equity Participation
Plan, dated March 10, 1993, as amended on November 1, 1993
*10.41 Amended and Restated Revolving Credit and Security Agreement, dated
December 5, 1996, among The Bank of New York Commercial Corporation,
NationsBank, N.A., WinCup Holdings, L.P., Radnor Holdings
Corporation, WinCup Holdings, Inc., SP Acquisition Co., and StyroChem
International, Inc.
*10.42 Amended and Restated Revolving Credit Note, dated December 5, 1996,
made by WinCup Holdings, L.P., Radnor Holdings Corporation, WinCup
Holdings, Inc., SP Acquisition Co., and StyroChem International, Inc.
in favor of The Bank of New York Commercial Corporation
*10.43 Amended and Restated Revolving Credit Note, dated December 5, 1996,
made by WinCup Holdings, L.P., Radnor Holdings Corporation, WinCup
Holdings, Inc., SP Acquisition Co., and StyroChem International, Inc.
in favor of NationsBank, N.A.
*10.44 Trademark Collateral Security Agreement, dated December 5, 1996,
between StyroChem International, Inc. and The Bank of New York
Commercial Corporation
*10.45 Trademark Assignment of Security, dated December 5, 1996, between
StyroChem International, Inc. and The Bank of New York Commercial
Corporation
*10.46 Trademark Collateral Security Agreement, dated December 5, 1996,
between WinCup Holdings, Inc. and The Bank of New York Commercial
Corporation
*10.47 Trademark Assignment of Security, dated December 5, 1996, between
WinCup Holdings, Inc. and The Bank of New York Commercial Corporation
*10.48 Patent Collateral Security Agreement, dated December 5, 1996, between
StyroChem International, Inc. and The Bank of New York Commercial
Corporation
*10.49 Patent Assignment of Security, dated December 5, 1996, between
StyroChem International, Inc. and The Bank of New York Commercial
Corporation
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
*10.50 Collateral Assignment, dated as of December 5, 1996, among Radnor
Holdings Corporation and The Bank of New York Commercial Corporation
*10.51 Junior Subordinated Promissory Note, dated January 20, 1996, made by
WinCup Holdings, Inc. in favor of WinCup Holdings, L.P. ($1.1 million)
*10.52 Subordinated Promissory Note, dated January 20, 1996, made by WinCup
Holdings, L.P. in favor of James River Paper Company, Inc. ($300,000)
*10.53 Subordinated Promissory Note, dated January 20, 1996, made by WinCup
Holdings, L.P. in favor of Scott Paper Company ($2.7 million)
*10.54 Subordinated Promissory Note, dated January 20, 1996, made by WinCup
Holdings, L.P. in favor of James River Paper Company, Inc. ($5.7
million)
*10.55 Subordinated Promissory Note, dated January 20, 1996, made by WinCup
Holdings, L.P. in favor of Scott Paper Company ($300,000)
*10.56 Senior Subordinated Promissory Note, dated January 20, 1996, made by
WinCup Holdings, L.P. in favor of James River Paper Company, Inc.
($4.4 million)
*10.57 Subordinated Promissory Note, dated January 20, 1996, made by WinCup
Holdings, L.P. in favor of WinCup Holdings, Inc. ($1.8 million)
*10.58 Senior Promissory Note, dated January 20, 1996, made by WinCup
Holdings, L.P. in favor of James River Paper Company, Inc. ($7
million)
*10.59 Subordinated Promissory Note, dated January 20, 1996, made by WinCup
Holdings, L.P. in favor of James River Paper Company, Inc.
*10.60 Partnership Interest Purchase Agreement, dated December 5, 1996, among
Radnor Holdings Corporation, WinCup Holdings, Inc., WinCup Holdings,
L.P. and James River Paper Company, Inc.
*10.61 Redemption and Release Agreement by and among Radnor Holdings
Corporation, WinCup Holdings, Inc., WinCup Holdings, L.P. and
Kimberly-Clark Tissue Company, dated December 5, 1996
*10.62 Assumption and Modification Agreement, dated as of January 20, 1996,
among Scott Paper Company, WinCup Holdings, Inc. and WinCup Holdings,
L.P.
*10.63 Agreement Respecting a Term Loan and Other Credit Facilities, dated
February 25, 1994, between Bank of Montreal and StyroChem
International, Ltd., as amended
*10.64 Letter of Undertaking, dated December 5, 1996, made by StyroChem
International, Ltd. and Radnor Holdings Corporation in favor of Bank
of Montreal
*10.65 Guaranty, dated February 25, 1994, made by SP Acquisition Co. in favor
of Bank of Montreal
*10.66 Employment Agreement, dated April 5, 1996, between WinCup Holdings,
Inc. and R. Radcliffe Hastings
12.1 Computation of ratios
*21.1 List of Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Duane, Morris & Heckscher (included in Exhibits 5.1 and 8.1
to this Registration Statement)
*24.1 Power of Attorney
*25.1 Statement of Eligibility and Qualification Under the Trust Indenture
Act of 1939 of a Corporation Designated to Act as a Trustee on Form
T-1 of First Union National Bank
27.1 Financial Data Schedule (Radnor Holdings Corporation)
27.2 Financial Data Schedule (SP Acquisition Co. and Subsidiaries)
*27.3 Financial Data Schedule (J.R. Cup Foam Container Operations of James
River Paper Company, Inc.)
</TABLE>
- --------
* Previously filed.
** Previously filed; portions of this Exhibit have been deleted pursuant to the
Company's Request for Confidential Treatment pursuant to Rule 406
promulgated under the Securities Act.
4
<PAGE>
EXHIBIT 4.4
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., PHILADELPHIA TIME, ON , 1997,
UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO
5:00 P.M., PHILADELPHIA TIME, ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
RADNOR HOLDINGS CORPORATION
Three Radnor Corporate Center, Suite 300
100 Matsonford Road
Radnor, PA 19087
LETTER OF TRANSMITTAL
To Exchange 10% Senior Notes due 2003
Exchange Agent:
FIRST UNION NATIONAL BANK
To: First Union National Bank
Facsimile Transmission:
(215) 985-3428
Confirm by telephone to:
(215) 985-7207
By Mail/Hand Delivery/Overnight Delivery:
First Union National Bank
123 South Broad Street
12th Floor
PA 1249
Philadelphia, Pennsylvania 19109
Attention: Corporate Trust Administration
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
1
<PAGE>
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING THE INSTRUCTIONS TO
THIS LETTER, CAREFULLY BEFORE CHECKING ANY BOX BELOW
Capitalized terms used in this Letter and not defined herein shall have the
respective meanings ascribed to them in the Prospectus.
List in Box 1 below the Old Notes of which you are the holder. If the space
provided in Box 1 is inadequate, list the certificate numbers and principal
amount of Old Notes on a separate signed schedule and affix that schedule to
this Letter.
BOX 1
TO BE COMPLETED BY ALL TENDERING HOLDERS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT OF
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE PRINCIPAL AMOUNT OLD NOTES
(PLEASE FILL IN IF BLANK) NUMBER(S) (1) OF OLD NOTES TENDERED (2)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Totals:
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) Need not to be completed if Old Notes are being tendered by book-entry
transfer.
(2) Unless otherwise indicated, the entire principal amount of Old Notes
represented by a certificate or Book-Entry Confirmation delivered to the
Exchange Agent will be deemed to have been tendered.
2
<PAGE>
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned tenders to the Issuer the principal amount of Old Notes indicated
above. Subject to, and effective upon, the acceptance for exchange of the Old
Notes tendered with this Letter, the undersigned exchanges, assigns and
transfers to, or upon the order of, the Issuer all right, title and interest
in and to the Old Notes tendered.
The undersigned constitutes and appoints the Exchange Agent as his or her
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Issuer) with respect to the tendered Old Notes, with
full power of substitution, to: (a) deliver certificates for such Old Notes;
(b) deliver Old Notes and all accompanying evidence of transfer and
authenticity to or upon the order of the Issuer upon receipt by the Exchange
Agent, as the undersigned's agent, of the New Notes to which the undersigned
is entitled upon the acceptance by the Issuer of the Old Notes tendered under
the Exchange Offer; and (c) receive all benefits and otherwise exercise all
rights of beneficial ownership of the Old Notes, all in accordance with the
terms of the Exchange Offer. The power of attorney granted in this paragraph
shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full power
and authority to tender, exchange, assign and transfer the Old Notes tendered
hereby and that the Issuer will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Issuer to be necessary or
desirable to complete the assignment and transfer of the Old Notes tendered.
The undersigned agrees that acceptance of any tendered Old Notes by the
Issuer and the issuance of New Notes (together with the New Guarantees of the
Guarantors (as defined in the Prospectus) with respect thereto) in exchange
therefor shall constitute performance in full by the Issuer and the Guarantors
of their obligations under the Registration Rights Agreement (as defined in
the Prospectus) and that, upon the issuance of the New Notes, the Issuer and
the Guarantors will have no further obligations or liabilities thereunder
(except in certain limited circumstances). By tendering Old Notes, the
undersigned certifies (a) that it is not an affiliate of the Issuer, that it
is not a broker-dealer that owns Old Notes acquired directly from the Issuer
or an affiliate of the Issuer, that it is acquiring the New Notes offered
hereby in the ordinary course of the undersigned's business and that the
undersigned has no arrangement or understanding with any person to participate
in the distribution of such New Notes; (b) that it is an affiliate of the
Issuer or of the initial purchaser of the Old Notes in the Offering and that
it will comply with the registration and prospectus delivery requirements of
the Securities Act to the extent applicable to it; (c) that it is a
Participating Broker-dealer (as defined in the Registration Rights Agreement)
and that it will deliver a prospectus in connection with any resale of the New
Notes; or (d) that if it is not a broker-dealer, it is not engaged in and does
not intend to engage in a distribution of the New Notes.
The undersigned acknowledges that, if it is a broker-dealer the Old Notes
were acquired for its own account as a result of market-making activities or
other trading activities, and it will deliver a prospectus in connection with
any resale of New Notes received in respect of such Old Notes pursuant to the
Exchange Offer. By so acknowledging and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
The undersigned understands that the Issuer may accept the undersigned's
tender by delivering written notice of acceptance to the Exchange Agent, at
which time the undersigned's right to withdraw such tender will terminate.
All authority conferred or agreed to be conferred by this Letter shall
survive the death or incapacity of the undersigned, and every obligation of
the undersigned under this Letter shall be binding upon the undersigned's
heirs, personal representatives, successors and assigns. Tenders may be
withdrawn only in accordance with the procedures set forth in the Instructions
contained in this Letter.
Unless otherwise indicated under "Special Delivery Instructions" below, the
Exchange Agent will deliver New Notes (and, if applicable, a certificate for
any Old Notes not tendered but represented by a certificate also encompassing
Old Notes which are tendered) to the undersigned at the address set forth in
Box 1.
3
<PAGE>
The undersigned acknowledges that the Exchange Offer is subject to the more
detailed terms set forth in the Prospectus and, in case of any conflict
between the terms of the terms of the Prospectus and this Letter, the
Prospectus shall prevail.
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
---------------------------------------------
Account Number:
------------------------------------------------------------
Transaction Code Number:
---------------------------------------------------
- -------------------------------------------------------------------------------
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Owner(s):
--------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
------------------------
Window Ticket Number (if available):
---------------------------------------
Name of Institution which Guaranteed Delivery:
-----------------------------
4
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
- --------------------------------------------------------------------------------
BOX 2
PLEASE SIGN HERE
WHETHER OR NOT OLD NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
This box must be signed by registered holder(s) of Old Notes as their
name(s) appear(s) on certificate(s) for Old Notes, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Letter. If signature is by a trustee, executor,
administrator, guardian, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title
below. (See Instruction 3)
X
--------------------------------------------------------------------------
X
--------------------------------------------------------------------------
(SIGNATURE(S) OF OWNER(S) OR AUTHORIZED SIGNATORY)
Date: , 1997
-----------------------
Name(s):
-------------------------------------------------------------------
(PLEASE PRINT)
Capacity:
------------------------------------------------------------------
Address:
-------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone No.:
-----------------------------------------------
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
SIGNATURE GUARANTEE (SEE INSTRUCTIONS 4 BELOW)
CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION
----------------------------------------------------------------------------
(NAME OF ELIGIBLE INSTITUTION GUARANTEEING SIGNATURES)
----------------------------------------------------------------------------
(ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE NUMBER (INCLUDING
AREA CODE) OF FIRM)
----------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
----------------------------------------------------------------------------
(TITLE)
----------------------------------------------------------------------------
(PRINTED NAME)
Date: , 1997
----------------------
5
<PAGE>
BOX 3
TO BE COMPLETED BY ALL TENDERING HOLDERS
PAYOR'S NAME: FIRST UNION NATIONAL BANK
- --------------------------------------------------------------------------------
PART 1 Social Security Number
or Employer
PLEASE PROVIDE YOUR TIN Identification Number
IN THE BOX AT RIGHT AND
CERTIFY BY SIGNING AND ------------------
DATING BELOW
---------------------------------------------------------
SUBSTITUTE PART 2 [_]
FORM W-9 Check the box if you are NOT subject to back-up
withholding under the provisions of Section
DEPARTMENT OF THE 2406(a)(1)(C) of the Internal Revenue Code because
TREASURY, INTERNAL (1) you have not been notified that you are subject
REVENUE SERVICE to back-up withholding as a result of failure to
report all interest or dividends or (2) the Internal
Revenue Service has notified you that you are no
longer subject to back-up withholding.
---------------------------------------------------------
PAYOR'S REQUEST PART 3 [_]
FOR TAXPAYER
IDENTIFICATION
NUMBER (TIN) Check if Awaiting TIN
--------------------------------------------------------
CERTIFICATION. UNDER THE PENALTIES OF PERJURY, I
CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM
IS TRUE, CORRECT AND COMPLETE.
Signature Date
---------------------------- -----------
--------------------------------------
NAME: (PLEASE PRINT)
- --------------------------------------------------------------------------------
6
<PAGE>
- -------------------------------------- --------------------------------------
BOX 4
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certifi-
cates for Old Notes in a princi-
pal amount not exchanged, or New
Notes, are to be issued in the BOX 5
name of someone other than the
person whose signature appears in SPECIAL DELIVERY INSTRUCTIONS
Box 2, or if Old Notes delivered (SEE INSTRUCTIONS 3 AND 4)
by book-entry transfer which are
not accepted for exchange are to
be returned by credit to an ac- To be completed ONLY if certifi-
count maintained in the Book-En- cates for Old Notes in a princi-
try Transfer Facility other than pal amount not exchanged, or New
the account indicated above. Notes, are to be sent to someone
other than the person whose sig-
nature appears in Box 2 or to an
Issue and deliver: address other than that shown in
(CHECK APPROPRIATE BOXES) Box 1.
[_] Old Notes not tendered Deliver:
(CHECK APPROPRIATE BOXES)
[_] New Notes, to:
[_] Old Notes not tendered
(PLEASE PRINT)
[_] New Notes, to:
Name: (PLEASE PRINT)
------------------------------
Address: Name:
--------------------------- ----------------------------
Address:
------------------------------------ -------------------------
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Please complete the Substitute
Form W-9 at Box 3 ----------------------------------
Please complete the Substitute Form
Tax I.D. or Social Security Number: W-9 at Box 3
Tax I.D. or Social Security Number:
----------------------------------
----------------------------------
- -------------------------------------- --------------------------------------
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND CERTIFICATES. Certificates for Old Notes or a
Book-Entry Confirmation, as the case may be, as well as a properly completed
and duly executed copy of this Letter and any other documents required by this
Letter, must be received by the Exchange Agent at its address set forth herein
on or before the Expiration Date. The method of delivery of this Letter,
certificates for Old Notes or a Book-Entry Confirmation, as the case may be,
and any other required documents is at the election and risk of the tendering
holder, but except as otherwise provided below, the delivery will be deemed
made when actually received by the Exchange Agent. If delivery is by mail, the
use of registered mail with return receipt requested, properly insured, is
suggested.
If tendered Old Notes are registered in the name of the signer of the Letter
of Transmittal and the New Notes to be issued in exchange therefore are to be
issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder, the signature of such signer need not be guaranteed. In any
other case, the tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Issuer and duly executed
by the registered holder and the signature on the endorsement or instrument of
transfer must be guaranteed by a bank, broker, dealer, credit union, savings
association, clearing agency or other institution (each an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Exchange Act. If the New
Notes and/or Old Notes not exchanged are to be delivered to an address other
than that of the registered holder appearing on the note register for the Old
Notes, the signature on the Letter of Transmittal must be guaranteed by an
Eligible Institution.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender Old Notes should contact such holder promptly and instruct such holder
to tender Old Notes on such beneficial owner's behalf. If such beneficial
owner wishes to tender such Old Notes himself, such beneficial owner must,
prior to completing and executing the Letter of Transmittal and delivering
such Old Notes, either make appropriate arrangements to register ownership of
the Old Notes in such beneficial owner's name or follow the procedures
described in the immediately preceding paragraph. The transfer of record
ownership may take considerable time.
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes or a Book-Entry Confirmation, as the case may be, and all
other required documents to the Exchange Agent on or before the Expiration
Date may tender their Old Notes pursuant to the guaranteed delivery procedures
set forth in the Prospectus. Pursuant to such procedure: (i) tender must be
made by or through an Eligible Institution; (ii) prior to the Expiration Date,
the Exchange Agent must have received from the Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery (by telegram, telex,
facsimile transmission, mail or hand delivery) (x) setting forth the name and
address of the holder, the description of the Old Notes and the principal
amount of Old Notes tendered, (y) stating that the tender is being made
thereby and (z) guaranteeing that, within five New York Stock Exchange trading
days after the date of execution of such Notice of Guaranteed Delivery, this
Letter together with the certificates representing the Old Notes or a Book-
Entry Confirmation, as the case may be, and any other documents required by
this Letter will be deposited by the Eligible Institution with the Exchange
Agent; and (iii) the certificates for all tendered Old Notes or a Book-Entry
Confirmation, as the case may be, as well as all other documents required by
this Letter, must be received by the Exchange Agent within five New York Stock
Exchange trading days after the date of execution of such Notice of Guaranteed
Delivery, all as provided in the Prospectus under the caption "The Exchange
Offer--Procedures for Tendering Old Notes."
The method of delivery of Old Notes and all other documents is at the
election and risk of the holder. If sent by mail, it is recommended that
registered mail, return receipt requested, be used, proper insurance be
obtained, and the mailing be made sufficiently in advance of the Expiration
Date to permit delivery to the Exchange Agent on or before the Expiration
Date.
8
<PAGE>
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of federal income tax, the Exchange Agent will
be required to withhold, and will withhold, 31% of the gross proceeds
otherwise payable to a holder pursuant to the Exchange Offer if the holder
does not provide his or her taxpayer identification number (social security
number or employer identification number) and certify that such number is
correct. Each tendering holder should complete and sign the main signature
form and the Substitute Form W-9 included as part of the Letter of
Transmittal, so as to provide the information and certification necessary to
avoid backup withholding, unless an applicable exemption exists and is proved
in a manner satisfactory to the Issuer and the Exchange Agent.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date, a tender may be effected if the Exchange Agent has received
at its office listed on the back cover hereof on or prior to the Expiration
Date a letter, telegram or facsimile transmission from an Eligible Institution
setting forth the name and address of the tendering holder, the principal
amount of the Old Notes being tendered, the names in which the Old Notes are
registered and, if possible, the certificate numbers of the Old Notes to be
tendered, and stating that the tender is being made thereby and guaranteeing
that within three New York Stock Exchange trading days after the date of
execution of such letter, telegram or facsimile transmission by the Eligible
Institution, the Old Notes, in proper form for transfer, will be delivered by
such Eligible Institution together with a properly completed and duly executed
Letter of Transmittal (and any other required documents). Unless Old Notes
being tendered by the above-described method (or a timely Book-Entry
Confirmation) are deposited with the Exchange Agent within the time period set
forth above (accompanied or preceded by a properly completed Letter of
Transmittal and any other required documents), the Issuer may, at its option,
reject the tender. Copies of a Notice of Guaranteed Delivery which may be used
by Eligible Institutions for the Purposes described in this paragraph are
available from the Exchange Agent.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a timely Book-Entry Confirmation) is received
by the Exchange Agent. Issuances of New Notes in exchange for Old Notes
tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram or
facsimile transmission to similar effect (as provided above) by an Eligible
Institution will be made only against deposit of the Letter of Transmittal
(and any other required documents) and the tendered Old Notes (or a timely
Book-Entry Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined
by the Issuer in its reasonable judgment, whose determination will be final
and binding. The Issuer reserves the right in its reasonable judgment to
reject any or all tenders that are not in proper form or the acceptance of
which, in the opinion of the Issuer's counsel, would be unlawful. The Issuer
also reserves the right in its reasonable judgment to waive any irregularities
or conditions of tender as to particular Old Notes. All tendering holders, by
execution of this Letter, waive any right to receive notice of acceptance of
their Old Notes. The Issuer's interpretation of the terms and conditions of
the Exchange Offer (including the Letter of Transmittal and the instructions
thereto) will be final and binding.
Neither the Issuer, the Exchange Agent nor any other person shall be
obligated to give notice of defects or irregularities in any tender, nor shall
any of them incur any liability for failure to give any such notice.
2. PARTIAL TENDERS; WITHDRAWALS. If less than the entire principal amount of
any Old Note evidenced by a submitted certificate or by a Book-Entry
Confirmation is tendered, the tendering holder must fill in the principal
amount tendered in the fourth column of Box 1 above. All of the Old Notes
represented by a certificate or by a Book-Entry Confirmation delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise
indicated. A certificate for Old Notes not tendered will be sent to the
holder, unless otherwise provided in Box 5, as soon as practicable after the
Expiration Date, in the event that less than the entire principal amount of
Old Notes represented by a submitted certificate is tendered (or, in the case
of Old Notes tendered by book-entry transfer, such non-exchanged Old Notes
will be credited to an account maintained by the holder with the Book-Entry
Transfer Facility).
9
<PAGE>
If not yet accepted, a tender pursuant to the Exchange Offer may be
withdrawn prior to the Expiration Date. To be effective with respect to the
tender of Old Notes, a notice of withdrawal must: (i) be received by the
Exchange Agent before the Issuer notifies the Exchange Agent that it has
accepted the tender of Old Notes pursuant to the Exchange Offer; (ii) specify
the name of the person who tendered the Old Notes; (iii) contain a description
of the Old Notes to be withdrawn, the certificate numbers shown on the
particular certificates evidencing such Old Notes and the principal amount of
Old Notes represented by such certificates; and (iv) be signed by the holder
in the same manner as the original signature on this Letter (including any
required signature guarantee).
For a withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Exchange Agent at its address set
forth on the back cover of the Prospectus prior to the Expiration Date. Any
such notice of withdrawal must specify the person named in the Letter of
Transmittal as having tendered Old Notes to be withdrawn, the certificate
numbers of Old Notes to be withdrawn, the principal amount of Old Notes to be
withdrawn, a statement that such holder is withdrawing his election to have
such Old Notes exchanged, and the name of the registered holder of such Old
Notes, and must be signed by the holder in the same manner as the original
signature on the Letter of Transmittal (including any required signature
guarantees) or be accompanied by evidence satisfactory to the Issuer that the
person withdrawing the tender has succeeded to the beneficial ownership of the
Old Notes being withdrawn. The Exchange Agent will return the properly
withdrawn Old Notes promptly following receipt of notice of withdrawal. All
questions as to the validity of notices of withdrawals, including time of
receipt, will be determined by the Issuer, in its reasonable judgment, and
such determination will be final and binding on all parties.
3. SIGNATURES ON THIS LETTER; ASSIGNMENT; GUARANTEE OF SIGNATURES. If this
Letter is signed by the holder(s) of Old Notes tendered hereby, the signature
must correspond with the name(s) as written on the face of the certificate(s)
for such Old Notes, without alteration, enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned by two or more joint
owners, all owners must sign this Letter. If any tendered Old Notes are held
in different names on several certificates, it will be necessary to complete,
sign and submit as many separate copies of this Letter as there are names in
which certificates are held.
If this Letter is signed by the holder of record and (i) the entire
principal amount of the holder's Old Notes are tendered; and/or (ii)
untendered Old Notes, if any, are to be issued to the holder of record, then
the holder of record need not endorse any certificates for tendered Old Notes,
nor provide a separate bond power. In any other case, the holder of record
must transmit a separate bond power with this Letter.
If this Letter or any certificate or assignment is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and proper evidence satisfactory to
the Issuer of their authority to so act must be submitted, unless waived by
the Issuer before the Expiration Date.
Signatures on this Letter must be guaranteed by an Eligible Institution,
unless Old Notes are tendered: (i) by a holder who has not completed the Box
entitled "Special Delivery Instructions" on this Letter; or (ii) for the
account of an Eligible Institution. In the event that the signatures in this
Letter or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantees must be by an eligible guarantor institution which
is a member of The Securities Transfer Agents Medallion Program (STAMP), The
New York Stock Exchanges Medallion Signature Program (MSP) or The Stock
Exchanges Medallion Program (SEMP). If Old Notes are registered in the name of
a person other than the signer of this Letter, the Old Notes surrendered for
exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Issuer, in its reasonable judgment, duly executed by the registered holder
with the signature thereon guaranteed by an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in Box 4 or 5, as applicable, the name and address to which the New
Notes or certificates for Old Notes not exchanged are to be issued or sent, if
different from the name and address of the person signing this Letter. In the
case of issuance in a different name, the tax identification number of the
person named must also be indicated. Holders tendering Old
10
<PAGE>
Notes by Book-Entry transfer may request that Old Notes not exchanged be
credited to such account maintained at the Book-Entry Transfer Facility as
such holder may designate.
5. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder
whose tendered Old Notes are accepted for exchange must provide the Exchange
Agent (as payor) with his or her correct taxpayer identification number
("TIN"), which, in the case of a holder who is an individual, is his or her
social security number. If the Exchange Agent is not provided with the correct
TIN, the holder may be subject to a $50 penalty imposed by the Internal
Revenue Service. In addition, delivery to the holder of the New Notes pursuant
to the Exchange Offer may be subject to back-up withholding. (If withholding
results in overpayment of taxes, a refund may be obtained.) Exempt holders
(including, among others, all corporations and certain foreign individuals)
are not subject to these back-up withholding and reporting requirements. See
the enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional instructions.
Under federal income tax laws, payments that may be made by the Issuer on
account of New Notes issued pursuant to the Exchange Offer may be subject to
back-up withholding at a rate of 31%. In order to prevent back-up withholding,
each tendering holder must provide his or her correct TIN by completing the
"Substitute Form W-9" referred to above, certifying that the TIN provided is
correct (or that the holder is awaiting a TIN) and that: (i) the holder has
not been notified by the Internal Revenue Service that he or she is subject to
back-up withholding as a result of failure to report all interest or
dividends; (ii) the Internal Revenue Service has notified the holder that he
or she is no longer subject to back-up withholding; or (iii) in accordance
with the Guidelines, such holder is exempt from back-up withholding. If the
Old Notes are in more than one name or are not in the name of the actual
owner, consult the enclosed Guidelines for information on which TIN to report.
6. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any,
applicable to the transfer of Old Notes to it or its order pursuant to the
Exchange Offer. If, however, the New Notes or certificates for Old Notes not
exchanged are to be delivered to, or are to be issued in the name of, any
person other than the record holder, or if tendered certificates are recorded
in the name of any person other than the person signing this Letter, or if a
transfer tax is imposed by any reason other than the transfer of Old Notes to
the Issuer or its order pursuant to the Exchange Offer, then the amount of
such transfer taxes (whether imposed on the record holder or any other person)
will be payable by the tendering holder. If satisfactory evidence of payment
of taxes or exemption from taxes is not submitted with this Letter, the amount
of transfer taxes will be billed directly to the tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter.
7. WAIVER OF CONDITIONS. The Issuer reserves the right in its reasonable
judgment to amend or waive any of the specified conditions in the Exchange
Offer in the case of any Old Notes tendered.
8. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder whose
certificates for Old Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above, for further
instruction.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus or this Letter, may be directed to the Exchange Agent.
IMPORTANT: THIS LETTER (TOGETHER WITH CERTIFICATES REPRESENTING TENDERED OLD
NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS) MUST BE
RECEIVED BY THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE (AS DEFINED IN
THE PROSPECTUS).
11
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYOR-- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payor.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
GIVE THE
FOR THIS TYPE OF SOCIAL SECURITY
ACCOUNT: NUMBER OF--
- ------------------------------------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, any one of the
individuals(1)
3. Husband and wife (joint account) The actual owner of the
account or, if joint funds,
either person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the minor
is the only contributor,
the minor(1)
6. Account in the name of guardian The ward, minor, or
or committee for a designated incompetent person(3)
ward, minor, or incompetent
person
7.a. The usual revocable savings The grantor-trustee(1)
trust account (grantor is
also trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust under
State law
8. Sole proprietorship account The owner(4)
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF IDENTIFICATION
ACCOUNT: NUMBER OF--
- ------------------------------------------------------------------------------
<S> <C>
9. A valid trust, estate, or The legal entity (Do not
pension trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated
in the account title)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization account
12. Partnership account held in the The partnership
name of the business
13. Association, club, or other tax- The organization
exempt organization
14. A broker or registered nominee The broker or
nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State or
local government, school district,
or prison) that receives
agricultural program payments
- ------------------------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
12
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service and
apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a nonexempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852). Payments described in section 6049(b)(5) to non-resident
aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Exempt Payees described above should file form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYOR, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT
TO THE PAYOR. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payors
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payors must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1998, payors must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payor.
Certain penalties may also apply.
PENALTIES
(1) PENALTIES FOR FAILURE TO FURNISH THE TAXPAYER IDENTIFICATION NUMBER--If
you fail to furnish your taxpayer identification number to a payor, you are
subject to a penalty of $50 for such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and
convincing evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
13
<PAGE>
Exhibit 8.1
[LETTERHEAD OF DUANE, MORRIS & HECKSCHER APPEARS HERE]
April 2, 1997
Radnor Holdings Corporation
Three Radnor Corporate Center
100 Matsonford Road
Suite 300
Radnor, PA 19087
Ladies and Gentlemen:
You have requested our opinion regarding certain United States federal
income tax consequences of (i) the exchange pursuant to the offer (the "Exchange
Offer") by Radnor Holdings Corporation (the "Company") of its 10% Senior Notes
due 2003 (the "New Notes") for its 10% Senior Notes due 2003 (the "Old Notes")
and (ii) the ownership, sale and redemption of the New Notes.
In formulating our opinion as to the matters certified, we have examined
such documents as we have deemed appropriate, including the Registration
Statement of the Company on Form S-4 (Registration No. 333-19495), filed with
the Securities and Exchange Commission pursuant to the Securities Act of 1933,
as amended to the date hereof (such Registration Statement as so amended being
referred to hereinafter as the "Registration Statement"). Also, we have
obtained such additional information as we have deemed relevant and necessary
through consultation with various officers and representatives of the Company.
The terms of the Exchange Offer, of the Old Notes and of the New Notes, in
each case as set forth in the Registration Statement, are incorporated herein by
reference.
Based upon the foregoing and subject to qualifications set forth below,
and based upon the terms of the Exchange Offer and the terms of the Old Notes
and of the New Notes, as set forth in the Registration Statement, it is our
opinion that the discussion set forth under the heading "Certain U.S. Federal
Income Tax Considerations" in the Registration Statement
<PAGE>
Radnor Holdings Corporation
April 2, 1997
Page 2
accurately describes the material United States federal income tax consequences
of consummating the Exchange Offer and holding and disposing of the New Notes.
Our opinion is based on current provisions of the Internal Revenue Code of
1986, as amended, Treasury Regulations promulgated and proposed thereunder,
published pronouncements of the Internal Revenue Service and judicial decisions
now in effect, any of which may be changed at any time with retroactive effect.
As noted above, our opinion is based solely on the documents that we have
examined, the additional information that we have obtained, and the
representations that have been made to us. Our opinion cannot be relied upon if
any of the facts contained in such documents, such additional information, or
any of the representations made to us is, or later becomes inaccurate.
No opinion is expressed on any matters other than those specifically
referred to herein and no opinion is expressed with respect to the calculation
and accrual of original issue discount, if any, on the New Notes. We are
furnishing this opinion to you solely in connection with the Exchange Offer, and
this opinion is not to be relied upon, circulated, quoted, or otherwise referred
to for any other purpose.
We hereby consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to our firm therein.
Very truly yours,
/s/ Duane, Morris & Heckscher
<PAGE>
Exhibit 12.1
Computation of Ratios
(Dollars in Thousands)
<TABLE>
<CAPTION>
Predecessor Radnor
---------------------------- ---------------------------------------------------------
Year Ended January 1,- February 29,- Year Ended Year Ended Year Ended
December 31, February 28, December 31, December 31, December 30, December 29,
------------- ------------- ------------- ------------- ------------- --------------
1991 1992 1992 1993 1994 1995
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Earnings from continuing
operations before income
taxes and extraordinary
gains (16,955) (4,258) (3,836) (4,718) (312) (7,877)
Fixed Charges N/A N/A N/A N/A N/A N/A
------------- ------------- ------------- ------------- ------------- -------------
Earnings (1) N/A N/A N/A N/A N/A N/A
============= ============= ============= ============= ============= =============
Fixed Charges
Interest Expense N/A N/A N/A N/A N/A N/A
Amortization of financing cost N/A N/A N/A N/A N/A N/A
Imputed interest on operating N/A N/A N/A N/A N/A N/A
lease obligations
------------- ------------- ------------- ------------- ------------- -------------
Fixed Charges (2) N/A N/A N/A N/A N/A N/A
============= ============= ============= ============= ============= =============
Ratio of earnings to fixed charges (1)/(2) N/A N/A N/A N/A N/A N/A
============= ============= ============= ============= ============= =============
Deficiency of earnings available to
cover fixed charges (16,955) (4,258) (3,836) (4,718) (312) (7,877)
============= ============= ============= ============= ============= =============
<CAPTION>
Radnor
----------------------------
Year Ended
December 27,
----------------------------
Pro Forma
1996 1996
------------- -------------
<S> <C> <C>
Earnings:
Earnings from continuing
operations before income
taxes and extraordinary
gains 2,858 889
Fixed Charges 5,865 12,386
------------- -------------
Earnings (1) 8,723 14,616
============= =============
Fixed Charges
Interest Expense 4,264 10,165
Amortization of financing cost 232 775
Imputed interest on operating
lease obligations 1,369 1,446
------------- -------------
Fixed Charges (2) 5,865 12,386
============= =============
Ratio of earnings to fixed charges (1)/(2) 1.49x 1.07x
============= =============
Deficiency of earnings available to
cover fixed charges - -
============= =============
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
and to all references to our Firm included in or made part of Registration
Statement File No. 333-19495.
/s/ Arthur Andersen LLP
Philadelphia, Pennsylvania
April 2, 1997
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 3 to Registration Statement 333-
19495 of Radnor Holdings Corporation of our report dated October 18 (October 31,
1996 as to Note 16), on our audits of the consolidated financial statements of
SP Acquisition Co. and subsidiaries as of April 1, 1995 and March 30, 1996 and
the fiscal years then ended appearing in the Prospectus, which is part of such
Registration Statement. We also consent to the reference to us under the heading
"Experts" in the Prospectus.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Fort Worth, Texas
April 2, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM RADNOR
HOLDINGS CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001029893
<NAME> RADNOR HOLDINGS CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-27-1996
<PERIOD-START> DEC-30-1995
<PERIOD-END> DEC-27-1996
<CASH> 855
<SECURITIES> 0
<RECEIVABLES> 23,974
<ALLOWANCES> 713
<INVENTORY> 19,078
<CURRENT-ASSETS> 50,971
<PP&E> 115,763
<DEPRECIATION> 4,372
<TOTAL-ASSETS> 172,369
<CURRENT-LIABILITIES> 42,287
<BONDS> 104,362
0
0
<COMMON> 1
<OTHER-SE> 14,328
<TOTAL-LIABILITY-AND-EQUITY> 172,369
<SALES> 177,395
<TOTAL-REVENUES> 177,395
<CGS> 135,982
<TOTAL-COSTS> 135,982
<OTHER-EXPENSES> 33,685
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,496
<INCOME-PRETAX> 2,858
<INCOME-TAX> 121
<INCOME-CONTINUING> 1,389
<DISCONTINUED> 0
<EXTRAORDINARY> 710
<CHANGES> 0
<NET-INCOME> 2,099
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SP
ACQUISITION CO. AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001030196
<NAME> SP ACQUISITION CO. AND SUBSIDIARIES
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-05-1996
<PERIOD-START> MAR-31-1996
<PERIOD-END> DEC-05-1996
<CASH> 2,413,575
<SECURITIES> 0
<RECEIVABLES> 12,150,146
<ALLOWANCES> 83,502
<INVENTORY> 7,411,516
<CURRENT-ASSETS> 23,717,891
<PP&E> 8,647,357
<DEPRECIATION> 1,821,289
<TOTAL-ASSETS> 31,669,080
<CURRENT-LIABILITIES> 22,243,975
<BONDS> 2,859,264
0
223
<COMMON> 652
<OTHER-SE> 6,564,966
<TOTAL-LIABILITY-AND-EQUITY> 31,669,080
<SALES> 52,375,480
<TOTAL-REVENUES> 52,375,480
<CGS> 44,534,090
<TOTAL-COSTS> 44,534,090
<OTHER-EXPENSES> 5,423,021
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 684,129
<INCOME-PRETAX> 1,558,607
<INCOME-TAX> 623,500
<INCOME-CONTINUING> 935,107
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 935,107
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
