<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 22, 1998
REGISTRATION NO. 333-42101
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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RADNOR HOLDINGS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 6719 23-2674715
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
WINCUP HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 3086 86-0699193
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
RADNOR CHEMICAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 6719 75-2524524
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
STYROCHEM U.S., INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
3086
TEXAS 52-1592452
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
RADNOR MANAGEMENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 8741 23-2869197
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
RADNOR HOLDINGS CORPORATION
THREE RADNOR CORPORATE CENTER, SUITE 300
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
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 LLP
ONE LIBERTY PLACE, 42ND FLOOR
PHILADELPHIA, PENNSYLVANIA 19103-7396
(215) 979-1000
(continued on next page)
<PAGE>
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: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
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
THE 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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<PAGE>
PROSPECTUS SUBJECT TO COMPLETION, DATED JANUARY 22, 1998
OFFER FOR ALL OUTSTANDING 10% SERIES B SENIOR NOTES DUE 2003
IN EXCHANGE FOR 10% SERIES B 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 , 1998 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 $60 million of 10% Series B 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% Series B Senior Notes due 2003 (the "Old Notes") of
the Company from the registered holders thereof. 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 , 1998 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 October 15, 1997, the Company issued $60 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 is payable semiannually on June 1 and December 1 of
each year, with interest on the Old Notes having been paid on December 1,
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 $21.0 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 $39.0
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 15 OF THIS PROSPECTUS FOR A DESCRIPTION OF
CERTAIN RISKS TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE
EXCHANGE OFFER.
---------------
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.
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THE DATE OF THIS PROSPECTUS IS , 1998.
<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 and the $100 million of 10% Senior Notes due 2003 previously
issued by the Company (the "Prior 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 Domestic Subsidiaries (as defined)
(collectively, the "Guarantors"). The New Guarantees (as defined) 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. Under the terms of the Indenture, the Company is
permitted, upon the satisfaction of certain conditions, to incur additional
secured indebtedness. On a pro forma basis after giving effect to the Offering
and the application of the net proceeds therefrom, as of September 26, 1997,
the Company and its subsidiaries would have had no outstanding long-term
indebtedness other than the Old Notes, the Prior Notes and approximately $32.4
million outstanding under the Credit Agreements. In addition, the Company
would have had $5.7 million of additional borrowings available under the
Credit Agreements. See "Pro Forma Consolidated Financial Data" and
"Description of Other Company Indebtedness."
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. 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) at the time of the consummation of the Exchange Offer, it has no
arrangement or understanding with any person to participate in the
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 any of 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. 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 or any other
2
<PAGE>
(Continued from previous page)
person subject to the prospectus delivery requirements of the Securities Act
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."
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 held in certificated form will be issued in
the form of registered definitive certificates.
3
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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 and
"StyroChem Europe" refers to the polystyrene production and conversion
operations acquired (the "StyroChem Europe Acquisition") by Radnor from Neste
Oy. See "The Company -- The Acquisitions."
THE COMPANY
The Company manufactures and distributes worldwide a variety of disposable
foam packaging products for the foodservice industry and is a leading producer
of expandable polystyrene ("EPS") for the foodservice, insulation and packaging
industries. The Company is the second largest manufacturer of disposable foam
packaging products for the foodservice industry, with an estimated 35% share of
the U.S. foam cup and container market segment. In 1996, the Company's 14
highly automated manufacturing facilities produced 13 billion foam cups for hot
and cold drinks, foam bowls and containers and thermoformed lids and 130
million pounds of EPS. 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. EPS is consumed internally as well as
sold to third party manufacturers of foam containers, insulation products and
packaging products. For the nine months ended September 26, 1997, the Company
had net sales and income from continuing operations before interest, income tax
expense, depreciation and amortization of $170.5 million and $18.5 million,
respectively.
Through the StyroChem Europe Acquisition, the Company has become a leading
EPS producer in Northern Europe. StyroChem Europe manufactured approximately 83
million pounds of EPS and 24 million pounds of general purpose polystyrene and
high impact polystyrene ("HIPS") in 1996. Approximately one-third of the EPS
produced by StyroChem Europe is consumed internally to manufacture foam
insulation panels sold primarily in Finland and the Scandinavian countries of
Denmark, Sweden and Norway. The Company believes the StyroChem Europe
Acquisition will provide a strategic international platform for expanding
product sales into Eastern and Western Europe and will also provide enhanced
manufacturing technologies for the Company's operations. For the nine months
ended September 26, 1997, pro forma for the StyroChem Europe Acquisition, the
Company had net sales and income from continuing operations before interest,
income tax expense, depreciation and amortization of $234.1 million and $27.8
million, respectively.
Within the foodservice industry, the Company competes primarily in the
disposable cup and container market. An independent industry survey estimated
that the U.S. market had more than $2.0 billion of revenues in 1994. The use of
disposable foam cups and containers in the domestic market 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 disposable foam packaging products 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
4
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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 Company also sells
foam products for the consumer market through supermarket chains, discount
clubs and chains and other retailers. In addition, the Company sells EPS
through a dedicated sales force to manufacturers of foam packaging and
insulation products.
StyroChem Europe sells EPS, general purpose polystyrene and HIPS to more than
200 primarily mid-sized manufacturers of insulation products and packaging
products throughout Europe. Approximately two-thirds of the EPS produced by
StyroChem Europe is sold to third parties for conversion into foam insulation
products, such as roof, wall and floor panels for the building industry.
StyroChem Europe markets EPS and other polystyrene products in Europe through a
combination of its own sales force, sales agency arrangements with sales
offices and personnel of affiliates of Neste Oy and manufacturers'
representatives. The remaining one-third of StyroChem Europe's annual EPS
production is consumed internally by its foam insulation converter operations
located in Finland, Sweden and Denmark. These foam insulation products are sold
through StyroChem Europe's own direct sales force to more than 2,000 customers,
including large building supply wholesalers, such as Kesko Oy in Finland and
Utec AB in Sweden, and to residential and commercial construction companies and
distributors.
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 "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, auto-
case packaging machines and customized EPS formulations that further enhance
manufacturing efficiencies and specific product features. The Company believes
that it will be able to enhance StyroChem Europe's one-step manufacturing
process to improve production efficiency for its North American EPS facilities
and the StyroChem Europe facilities.
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.
5
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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.
The acquisition of StyroChem Europe, a manufacturer of EPS since 1972, has
improved the Company's competitive position in the EPS market. Over the years,
StyroChem Europe has focused on improving its EPS technologies through internal
process development as well as closely working with recognized industry
experts. This, combined with a polystyrene products sales force that is well-
educated and technically oriented, has enhanced customer relationships by
providing consistent improvements in product quality, service and reliability.
As a leading supplier of foam insulation products in Finland and Sweden since
the mid-1980's, StyroChem Europe's converter operations have had success
attracting and maintaining customers. New and specialized foam insulation
products, such as metal and foam sandwich building panels and ship insulation
panels, have been well-received by customers.
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. 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.
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 existing 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 existing suppliers and customers regarding further expansion
in these markets.
Integrated manufacturing process. By manufacturing its own EPS, the Company
has integrated its manufacturing process, thereby reducing the Company's cost
of raw materials and mitigating the impact of raw material price fluctuations.
Control over EPS manufacturing provides more reliable, consistently high-
quality EPS, improving the Company's overall manufacturing efficiencies. The
Company obtains substantially all of its EPS requirements internally.
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 domestic and international
strategic acquisitions, joint ventures and alliances that may broaden the
Company's product lines.
6
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THE ACQUISITIONS
In October 1997, the Company acquired StyroChem Europe, which is a leading
EPS producer in Northern Europe and has produced EPS since 1972. In addition,
StyroChem Europe converts approximately one-third of the EPS that it produces
into foam insulation materials, for which it controls a significant market
share in Finland and Scandinavia. StyroChem Europe operates two EPS production
facilities in Finland and six conversion facilities located in Finland, Denmark
and Sweden. The Company believes that the StyroChem Europe Acquisition provides
a strategic international platform for expanding product sales into Eastern and
Western Europe and also provides enhanced manufacturing technologies for the
Company's operations. On a pro forma basis, StyroChem Europe represented 26.4%
and 27.1% of the Company's consolidated sales for the year ended December 27,
1996 and for the nine months ended September 26, 1997, respectively. See "The
Company--The Acquisitions" and "Pro Forma Consolidated Financial Data."
In December 1996, the Company acquired (the "StyroChem Acquisition") Radnor
Chemical Corporation, formerly known as SP Acquisition Co., and its
subsidiaries ("StyroChem"), one of the five largest producers of EPS in the
U.S. In November 1995, the Company sold its cutlery, straws and plastic cup
operations to James River Paper Company, Inc. ("James River"). Following this
divestiture, effective in January 1996, the Company acquired (the "J.R. Cup
Acquisition") the U.S. foam cup and container operations of James River ("J.R.
Cup"). See "Pro Forma Consolidated Financial Data." The J.R. Cup Acquisition,
the StyroChem Acquisition and the StyroChem Europe Acquisition are collectively
referred to herein as the "Acquisitions."
7
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THE EXCHANGE OFFER
On October 15, 1997, the Company issued $60 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. Bear, Stearns & Co. Inc., NatWest Capital
Markets Limited and BT Alex. Brown Incorporated (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 $60 million aggregate principal amount of
the Company's 10% Series B 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
October 15, 1997, among the Company, the
Guarantors 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 , 1998 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.
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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 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 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) at the time of the consummation of the
Exchange Offer, it has no arrangement or understanding with any person to
participate in the 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 any of 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
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." In addition, to comply
with the securities laws of certain jurisdictions, it may be necessary to
qualify for offer or 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."
9
<PAGE>
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 March 14, 1998, 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. 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. 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.
SUMMARY DESCRIPTION OF THE NEW NOTES
SECURITIES OFFERED.......... $60 million aggregate principal amount of 10%
Series B Senior Notes due 2003.
MATURITY.................... December 1, 2003.
INTEREST.................... The New Notes will bear interest at the rate of
10% per annum, payable semi-annually in arrears
on June 1 and December 1 of each year, commencing
on June 1, 1998.
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 Domestic Subsidiaries. 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."
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 and the Prior 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 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, the Company will be
permitted, upon the satisfaction of certain
conditions, to incur additional secured
indebtedness. On a pro forma basis after giving
effect to the Offering and the application of the
net proceeds therefrom, as of September 26, 1997,
the Company and its subsidiaries would have had
no outstanding long-term indebtedness other than
the Old Notes, the Prior Notes and approximately
$5.7 million outstanding under
10
<PAGE>
the Credit Agreements. In addition, the Company
would have had $32.4 million of additional
borrowings available under the Credit Agreements.
See "Capitalization," "Pro Forma Consolidated
Financial Data" and "Description of Other Company
Indebtedness."
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 $21.0
million aggregate principal amount of the New
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 $39.0 million in aggregate
principal amount of the New 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.
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 lease back
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
and requirements are subject to a number of
important qualifications and exceptions. See
"Description of the Notes--Certain Covenants."
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 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
11
<PAGE>
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 period 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."
RISK FACTORS
Prospective purchasers of New Notes should carefully consider the matters set
forth under "Risk Factors," as well as the other information and financial
statements and data included in this Prospectus, prior to making an investment
in the New Notes.
12
<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"), and the StyroChem Europe Financial
Statements (as defined), 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 Prior Notes and the Notes as if they had occurred on December 30,
1995. The pro forma consolidated balance sheet data reflect the StyroChem
Europe Acquisition and the sale of the Notes as if they had occurred on
September 26, 1997. The pro forma consolidated financial data are based on the
assumptions and adjustments described in the accompanying notes and do not
purport to present the results of operations and financial position of the
Company as if the Acquisitions and the sale of the Prior Notes and the Notes
had actually occurred on such dates, nor are they necessarily indicative of the
results of operations that may be achieved in the future. 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 in this Prospectus.
<TABLE>
<CAPTION>
HISTORICAL(1) PRO FORMA
-------------------------------------------------- -------------------
NINE
YEAR ENDED NINE MONTHS ENDED YEAR MONTHS
---------------------------- -------------------- ENDED ENDED
DEC. 30, DEC. 29, DEC. 27, SEPT. 27, SEPT. 26, DEC. 27, SEPT. 26,
1994 1995 1996 1996(2) 1997(2) 1996 1997
-------- -------- -------- --------- --------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net sales............... $80,850 $ 86,239 $177,395 $128,052 $170,545 $317,125 $234,072
Cost of goods sold...... 64,078 75,690 135,982 98,660 127,730 233,083 167,268
------- -------- -------- -------- -------- -------- --------
Gross profit............ 16,772 10,549 41,413 29,392 42,815 84,042 66,804
Distribution expense.... 5,584 6,027 14,099 10,223 12,569 22,402 17,282
Selling, general and
administrative
expenses............... 8,209 9,051 18,676 13,538 17,747 40,145 30,400
Restructuring charges... -- -- 910 855 -- 910 --
------- -------- -------- -------- -------- -------- --------
Income (loss) from
operations............. 2,979 (4,529) 7,728 4,776 12,499 20,585 19,122
Interest(3)............. 3,001 2,822 4,496 3,346 8,781 16,240 12,758
Other (income) expense,
net.................... 290 526 374 153 (94) 93 (201)
------- -------- -------- -------- -------- -------- --------
Income (loss) from
continuing operations
before taxes and
minority interest...... (312) (7,877) 2,858 1,277 3,812 4,252 6,565
Income tax expense(4)... -- -- 121 -- 323 646 422
------- -------- -------- -------- -------- -------- --------
Income (loss) from
continuing operations
before minority
interest............... (312) (7,877) 2,737 1,277 3,489 3,606 6,143
Minority interest in
income................. -- -- 1,348 731 -- -- --
------- -------- -------- -------- -------- -------- --------
Income (loss) from
continuing operations.. $ (312) $ (7,877) $ 1,389 $ 546 $ 3,489 $ 3,606 $ 6,143
======= ======== ======== ======== ======== ======== ========
OTHER FINANCIAL AND
OPERATING DATA:
Ratio of earnings to
fixed charges(5)....... 1.49x 1.30x 1.38x 1.24x 1.46x
Deficiency of earnings
available to cover
fixed
charges(5)............. $ (312) $ (7,877)
Capital expenditures.... $ 1,645 $ 5,491 $ 4,944 $ 2,629 $ 10,312 $ 8,439 $ 11,362
Depreciation and
amortization........... $ 1,303 $ 2,380 $ 4,844 $ 3,350 $ 5,907 $ 12,485 $ 8,514
M Units shipped (in
thousands)(6).......... 12,959 9,899
EPS, pounds produced (in
millions).............. 212 161
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPT. 26, 1997
----------------------
ACTUAL(2) PRO FORMA
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital......................................... $ 14,947 $ 24,695
Total assets............................................ 181,908 245,541
Total debt (including current portion).................. 115,867 168,172
Stockholders' equity.................................... 14,788 14,788
</TABLE>
13
<PAGE>
- --------
(1) The historical financial data include Radnor and its consolidated
subsidiaries, excluding discontinued operations, for each of the three
years in the period ended December 27, 1996 and as of and for the nine
months ended September 27, 1996 and September 26, 1997. 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, respectively, which were acquired on
those respective dates.
(2) The historical financial data as of September 26, 1997 and for the nine
months ended September 27, 1996 and September 26, 1997 are unaudited but in
the opinion of the Company reflect all adjustments (which include only
normal recurring adjustments) required for a fair statement of financial
position, results of operations and cash flows for such periods.
(3) Interest includes amortization of debt issuance costs related to the Credit
Agreements, the Prior Notes and the Notes and amortization of premium
related to the Notes of $232 and $817 for the historical and pro forma
years ended December 27, 1996, respectively, and $464 and $498 for the
historical and pro forma nine months ended September 26, 1997,
respectively. The interest rate on the Notes and the Prior Notes is 10%.
The assumed interest rate on the Credit Agreements for the pro forma year
ended December 27, 1996 and the pro forma nine months ended September 26,
1997 is approximately 7.5%. The premium on the Notes of 3.67% is amortized
over the life of the Notes.
(4) The Company recorded no federal income tax expense during the periods prior
to the StyroChem Acquisition due to the incurrence of operating losses or
the utilization of net operating loss carryforwards during those periods.
As of December 27, 1996, the Company had approximately $14.0 million of net
operating loss carryforwards for federal income tax purposes, which expire
through 2010. Since 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, a valuation allowance was provided for
substantially all of the loss carryforward tax benefit at December 27,
1996. In 1997 a portion of the valuation allowance has been eliminated and
a tax benefit reflected in the 1997 financial statements.
(5) 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.
(6) Each M Unit consists of 1,000 foam cups, containers or lids.
14
<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)
at the time of the consummation of the Exchange Offer, it has no arrangement
or understanding with any person to participate in the 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
any of 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.
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 or any other person subject to the prospectus delivery requirements of
the Securities Act 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 offer or 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 specified
15
<PAGE>
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
On a pro forma basis after giving effect to the sale of the Notes and the
application of the net proceeds therefrom, the Company's total debt would have
been $168.2 million as of September 26, 1997, the Company's pro forma ratio of
earnings to fixed charges would have been 1.46 to 1 for the nine months ended
September 26, 1997 and the Company and the Guarantors would have had, subject
to certain restrictions (including borrowing base limitations), the ability to
draw up to $32.4 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 will be limited by covenants contained in the Indenture
governing the Prior Notes (the "Prior Indenture" and, collectively with the
Indenture, the "Indentures"), the Indenture and the Credit Agreements. Among
other things, these covenants will 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 Other Company Indebtedness" 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, which is 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 for its
own consumption. Prices for styrene monomer will fluctuate, principally due to
fluctuations in petrochemical feedstock prices, but also because of supply and
demand in the styrene monomer market.
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 its long-term supply
agreement with Chevron Chemical Company ("Chevron") for the purchase of
styrene monomer have mitigated, and the Chevron agreement and the StyroChem
Europe Acquisition and its long-term supply agreement with Elf Atochem SA
16
<PAGE>
("Elf Atochem") for the purchase of styrene monomer will continue to mitigate,
the Company's exposure to fluctuations in styrene monomer prices through a
guaranteed supply of styrene monomer at or below market prices. However, the
Company will still be exposed to fluctuations in styrene monomer prices to the
extent that its supply agreements do not satisfy its needs for styrene
monomer. See "Business--Raw Materials."
OPERATING LOSSES
The Company had income from continuing operations for the year ended
December 27, 1996 and the nine months ended September 26, 1997 of $1.4 million
and $3.5 million, respectively. 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 $0.3 million
and $7.9 million for 1994 and 1995, respectively. The losses in 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 for the Acquisitions, the Company would have had income from
continuing operations of $3.6 million and $6.1 million for the year ended
December 27, 1996 and the nine months ended September 26, 1997, respectively.
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. StyroChem Europe operates
primarily in the more fragmented European EPS market, where it competes with
numerous other suppliers, many of which are larger and have significantly
greater resources than StyroChem Europe and the Company. 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 6.3% of the Company's net sales for 1996. In
addition, the five largest accounts represented approximately 21.6% of the
Company's pro forma net sales for 1996. Although the Company has not lost
sales from its key customers in 1995, 1996, 1997 or 1998 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. The Company will face significant challenges in
integrating the StyroChem Europe Acquisition because it is the Company's first
overseas acquisition. 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. The Company
intends to incur capital expenditures in connection with introducing its
products into the European market, for which there can be no assurance of
market acceptance.
17
<PAGE>
INTERNATIONAL OPERATIONS
As a result of the StyroChem Europe Acquisition, a significant portion of
the Company's operations are now conducted in foreign countries, and are
subject to risks that are inherent in operating abroad, including governmental
regulation, changes in import duties, trade restrictions, work stoppages,
currency restrictions and other restraints and burdensome taxes.
The Company's international operations and the products it sells are subject
to numerous governmental regulations and inspections. Although the Company
believes it is able to substantially comply with such regulations, changes in
legislation or regulations and actions by regulators, including changes in
administration and enforcement policies, may from time to time require
operational improvements or modifications at various locations or the payment
of fines and penalties, or both.
The Company is subject to a variety of governmental regulations in the
countries where it markets its products, including import quotas, tariffs and
taxes. For example, distributions of earnings and other payments (including
interest) received from the Company's foreign subsidiaries may be subject to
withholding taxes imposed by the jurisdiction in which such entities are
formed or operating, which will reduce the amount of after-tax cash the
Company can receive. In general, a U.S. corporation may claim a foreign tax
credit against its federal income tax expense for such foreign withholding
taxes and for foreign income taxes paid directly by foreign corporate entities
in which the Company owns 10% or more of the voting stock. The ability to
claim such foreign tax credits and to utilize net foreign losses is, however,
subject to numerous limitations, and the Company may incur incremental tax
costs as a result of these limitations or because the Company is not in a tax-
paying position in the United States. The Company may also be required to
include in its income for U.S. federal income tax purposes its proportionate
share of certain earnings of those foreign subsidiaries that are classified as
"controlled foreign corporations" without regard to whether distributions have
been actually received from such subsidiaries.
The Company's financial results will depend on the economies of the markets
in which it has operations and other interests. These markets are in countries
with economies in various stages of development or structural reform, some of
which are subject to rapid fluctuations in terms of consumer prices,
employment levels, gross domestic product and interest and foreign exchange
rates. The Company is subject to such fluctuation in the local economies in
which it has significant operations.
The Company's international operations involve transactions in a variety of
currencies. The Company's financial results may be significantly affected by
fluctuations of currency exchange rates. Such fluctuations are significant to
the Company's international operations because many of the costs related to
those operations are incurred in currencies different from those that are
received from the sale of its products in foreign markets, and there is
normally a time lag between the incurrence of such costs and collection of the
related sales proceeds. Although it does not currently do so, the Company
plans to engage from time to time in various currency hedging activities to
minimize potential losses on cash flows originating in foreign currencies. To
the extent that foreign subsidiaries distribute dividends in local currencies
in the future, the amount of cash to be received by the Company and,
consequently, the amount of cash available to make payments for principal of
and interest on the Notes, will be affected by fluctuations in exchange rates,
and there can be no assurance that shifts in the currency exchange rates will
not have a material adverse effect on the Company.
A number of the Company's agreements are governed by the laws of, and
subject to dispute resolution in the courts of, or through arbitration
proceedings in, the country or region in which the operations are located. The
Company cannot accurately predict whether such forum will provide it with an
effective and efficient means of resolving disputes that may arise in the
future. Even if the Company is able to obtain a satisfactory decision through
arbitration or a court proceeding, it could have difficulty enforcing any
award or judgment on a timely basis. The Company's ability to obtain or
enforce relief in the United States is uncertain.
18
<PAGE>
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. The Company is also dependent on the management experience
of the key StyroChem Europe employees who have joined the Company as part of
the StyroChem Europe Acquisition. 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 a director of
the Company, beneficially owns 80.0% 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 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 was placed in
escrow and may be used by the Company to offset certain costs associated with
specified environmental matters relating to the Company's Texas and Quebec
facilities. However, there can be no assurance that the escrowed funds will be
sufficient to offset all costs 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, both domestic and
international, and other risks that may be described from time to time in the
reports that the Company files with the SEC. 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, as well as
holders of Prior Notes, may require the Company to repurchase all or a portion
of such holder's Notes or Prior Notes, as applicable. 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 and Prior 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
19
<PAGE>
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 Other Company Indebtedness." 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 and
Prior 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 and Prior
Notes. In such case, the Company's failure to purchase tendered Notes or Prior
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, including the Prior Indenture, 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."
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 and the Prior 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 to the Company and certain of
its U.S. subsidiaries 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 such U.S. subsidiaries, and loans
to the Company's European subsidiaries under a supplement to the Amended
Credit Agreement dated October 15, 1997, as amended to date, are secured by
similar assets of certain of its European subsidiaries and are guaranteed by
the Company and certain of 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 Prior Indenture and the Indenture,
the Company is permitted, in each case upon the satisfaction of certain
conditions, to incur additional secured indebtedness. See "Description of
Other Company Indebtedness," "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 distributions from its subsidiaries.
20
<PAGE>
The Company's obligations on the New Notes will be, and the Company's
obligations on the Olds 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 of 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 StyroChem Europe Acquisition, 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 New Guarantees or the Old 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 StyroChem
Europe Acquisition, 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
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 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 will 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 October 15, 1997 to qualified institutional buyers and
are eligible for trading in the National Association of Securities Dealers'
Private Offering, Resales and Trading through Automated Linkages ("PORTAL")
market, 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
21
<PAGE>
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. The Initial Purchasers have
advised the Company that they currently intend to make a market in the New
Notes. The Initial Purchasers are not obliged 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 also be no assurance that the markets 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.
22
<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 KCTC. In November 1995, the Company sold its cutlery, straws
and plastic cup operations to James River. 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 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.
StyroChem Europe is a leading EPS producer in Northern Europe and has
produced EPS since 1972. StyroChem Europe converts approximately one-third of
the EPS that it produces into foam insulation materials, for which it controls
a significant market share in Finland and Scandinavia. StyroChem Europe
operates two EPS production facilities in Finland and six conversion
facilities located in Finland, Denmark and Sweden.
THE ACQUISITIONS
The StyroChem Europe Acquisition
In October 1997, the Company and Neste Oy consummated the transactions
contemplated under a September 1997 agreement (the "Acquisition Agreement")
whereby certain newly-formed foreign subsidiaries of the Company (StyroChem
Finland Oy, ThermiSol Finland Oy, ThermiSol Sweden AB and ThermiSol Denmark
ApS) agreed to acquire substantially all of the tangible and intangible assets
and long-term investments of StyroChem Europe. The purchase price for
StyroChem Europe was 213.0 million Finnish markkas (approximately $40.8
million as of the date of closing) plus the value of the net working capital,
which includes accounts receivable, inventory, trade accounts payable and
accrued liabilities. The net working capital was estimated to be 60.0 million
Finnish markkas (approximately $11.5 million as of the date of closing), of
which 16.5 million Finnish markkas was placed in an escrow account at closing.
The purchase price will be adjusted following an audit of net working capital.
The Company also obtained an option to acquire the StyroChem Europe assets
located in Russia for a price of 2.0 million Finnish markkas, which the
Company declined to exercise. The Company believes that the StyroChem Europe
Acquisition provides a strategic international platform for expanding product
sales into Eastern and Western Europe and also provides enhanced manufacturing
technologies for the Company's operations.
In connection with the closing of the StyroChem Europe Acquisition, the
Company entered into certain other arrangements with Neste Oy, including: (i)
a Land Lease Agreement; (ii) a Utilities Supply Agreement; (iii) a Neste
Service Agreement; (iv) a Sales and Marketing Agreement and (v) a Personnel
Agreement. The Land Lease Agreement relates to the land on which StyroChem
Europe's principal EPS manufacturing facility in Porvoo, Finland is located
and extends for a period of 30 years for a nominal rent, with an option for
the Company to extend the lease or acquire the leased property following the
initial term of the lease under certain limited conditions. Through the
Utilities Supply Agreement, which extends for a ten-year term and thereafter
continues for five-year periods unless 24 months' prior written notice of
termination is provided by one of the parties in which event the agreement
terminates at the end of such initial or renewal term, the Company purchases
electricity, nitrogen, steam, drinking water and salt-free water from Neste
Oy. Pursuant to the Neste Service Agreements, Neste Oy provides certain site
services at the Porvoo industrial complex to the Company. The agreement
initially extends for a period of one year and thereafter continues for
additional one-year periods, with specific services subject to termination
upon written notice provided by either party in accordance with the
23
<PAGE>
agreement. The Sales and Marketing Agreement pertains to the employment by the
Company of certain polystyrene products sales persons and brokerage services
to be provided by affiliates of Neste Oy in certain European countries. This
agreement also grants the Company an option to maintain offices and utilize
certain office services at five sales offices of affiliates of Neste Oy
throughout Europe and Russia. The Personnel Agreement separately relates to
the transfer of certain of StyroChem Europe's employees to the Company. The
Company also entered into a Styrene Monomer Supply Agreement and certain
services agreements with Norlatex pursuant to which the Company supplies
styrene monomer and other site services to Norlatex at cost. This agreement
initially extends for a period of ten years and thereafter continues for
additional one-year periods, subject to termination at the end of any term
upon written notice provided by either party at least six months prior to the
end of the term.
The 1996 Acquisitions
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 was 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. The adjustment resulted in a reduction in
the purchase price of approximately $1.5 million. In addition, approximately
$1.4 million of the purchase price was placed in a separate escrow account,
and may be used by the Company to offset costs associated with specified
environmental matters relating to StyroChem's Texas and Quebec facilities. See
"Business--Environmental Matters." As part of the acquisition, StyroChem's
former 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.
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. ("WinCup
L.P."). The Company used a portion of the proceeds of the sale of the Prior
Notes 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 the minority interest, 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."
GENERAL
The Company's executive offices are located at Three Radnor Corporate
Center, Suite 300, Radnor, Pennsylvania 19087, and its telephone number is
(610) 341-9600.
24
<PAGE>
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as
of September 26, 1997 and the pro forma capitalization of the Company on such
date after giving effect to the StyroChem Europe Acquisition, and the issuance
and sale by the Company of the Old Notes and the application of the net
proceeds of the Offering.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 26, 1997
---------------------------
ACTUAL PRO FORMA
------------ -------------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, including current portion
Credit Agreements(1)........................... $ 15,573 $ 5,675
Term Notes..................................... 294 294
Senior Notes due 2003.......................... 100,000 100,000
Series B Senior Notes due 2003................. -- 62,203(2)
------------ ------------
Total long-term debt........................... 115,867 168,172
------------ ------------
Stockholders' equity
Common stock and additional paid-in capital.... 17,721 17,721
Cumulative translation adjustment.............. (2) (2)
Accumulated deficit............................ (2,931) (2,931)
------------ ------------
Total stockholders' equity................... 14,788 14,788
------------ ------------
Total capitalization....................... $ 130,655 $ 182,960
============ ============
</TABLE>
- --------
(1) At September 26, 1997, on a pro forma basis after giving effect to the
StyroChem Europe Acquisition and the issuance and sale of the Old Notes,
the Company would have been able to borrow an additional $32.4 million of
revolving credit under the Credit Agreements, net of outstanding letters
of credit of $2.0 million, and would have had no outstanding long-term
indebtedness other than the Old Notes, the Prior Notes and approximately
$5.7 million outstanding under the Credit Agreements.
(2) The amount shown reflects a premium of approximately $2.2 million
associated with the issuance of the Notes.
25
<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"), the consolidated financial statements of StyroChem,
including the notes thereto (the "StyroChem Financial Statements") and the
financial statements of the Neste Oy Polystyrene Upstream Business in Porvoo
and Kokemaki, Isora Oy, Neste Cellplast AB, and Neste Thermisol A/S, including
the notes thereto (collectively, the "StyroChem Europe Financial Statements"),
all of which are included elsewhere herein. The Radnor Financial Statements,
the J.R. Cup Financial Statements, the StyroChem Financial Statements and the
StyroChem Europe Financial Statements are referred to collectively as the
"Financial Statements." The pro forma consolidated statements of operations
reflect the Acquisitions and the sale of the Prior Notes and the Notes as if
they had occurred on December 30, 1995. The pro forma consolidated balance
sheet reflects the StyroChem Europe Acquisition and the sale of the Notes as
if they had occurred on September 26, 1997. The pro forma consolidated
financial data are based on the assumptions and adjustments described in the
accompanying notes and do not purport to present the results of operations and
financial position of the Company as if the Acquisitions and the sale of the
Prior Notes and the Notes had actually occurred on such dates, nor are they
necessarily indicative of the results of operations that may be achieved in
the future. See "The Company--The Acquisitions," "Capitalization," "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
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 27, 1996
--------------------------------------------------------------------
1996
RADNOR ACQUISITION RADNOR STYROCHEM PRO FORMA PRO
ACTUAL ADJUSTMENTS(1) PRO FORMA EUROPE(2) ADJUSTMENTS FORMA
-------- -------------- --------- --------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net sales............... $177,395 $56,112 $233,507 $83,618 $ -- $317,125
Cost of goods sold...... 135,982 44,915 180,897 53,648 (1,462)(/3/) 233,083
-------- ------- -------- ------- ------- --------
Gross profit............ 41,413 11,197 52,610 29,970 1,462 84,042
Distribution expense.... 14,099 2,461 16,560 5,842 22,402
Selling, general and
administrative
expenses............... 18,676 4,311 22,987 18,807 (1,649)(/4/) 40,145
Restructuring charges... 910 -- 910 -- -- 910
-------- ------- -------- ------- ------- --------
Income (loss) from
operations............. 7,728 4,425 12,153 5,321 3,111 20,585
Interest................ 4,496 6,443 10,939 142 5,159 (/5/) 16,240
Other (income) expense,
net.................... 374 (89) 285 (192) -- 93
-------- ------- -------- ------- ------- --------
Income (loss) from
continuing operations
before income taxes and
minority interest...... 2,858 (1,929) 929 5,371 (2,048) 4,252
Income tax expense
(benefit).............. 121 178 299 1,043 (696)(/6/) 646
-------- ------- -------- ------- ------- --------
Income from continuing
operations before
minority interest...... 2,737 (2,107) 630 4,328 (1,352) 3,606
Minority interest in
income................. 1,348 (1,348) -- -- -- --
-------- ------- -------- ------- ------- --------
Income (loss) from
continuing operations.. $ 1,389 $ (759) $ 630 $ 4,328 $(1,352) $ 3,606
======== ======= ======== ======= ======= ========
</TABLE>
26
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 27, 1996
(UNAUDITED)
(IN THOUSANDS)
(1) Reflects the historical results of operations and purchase price and pro
forma adjustments of the J.R. Cup Acquisition and StyroChem Acquisition
as if they had occurred on December 30, 1995 until their respective dates
of acquisition.
(2) These amounts have been derived from the StyroChem Europe Combining
Statement of Operations for the year ended December 31, 1996 on page F-
85.
(3) Reflects savings (cost) of $1,462 related to the StyroChem Europe
Acquisition as follows:
<TABLE>
<S> <C>
Reduction of cost of goods sold to reflect provisions of new raw
material purchase contract to be entered into as a condition of
the Acquisition Agreement........................................ $ 2,126
Elimination of sick leave and disability payments made to
employees who are not part of StyroChem Europe; liability is
retained by the seller........................................... 100
Additional depreciation as a result of the step-up in StyroChem
Europe asset value............................................... (764)
-------
$ 1,462
=======
(4) Reflects savings of $1,649 related to the Acquisitions as follows:
Reduction of specific administrative cost allocations from parent
company pursuant to the new Neste Service Agreement entered into
as part of Acquisition Agreement, including training, personnel
services, environmental and security, accounting, procurement,
and other administrative services (see "The Company--The
Acquisitions")................................................... $ 1,297
Reduction of insurance expense as a result of terminating Neste Oy
captive insurance arrangement pursuant to the Acquisition
Agreement and instituting a stand-alone coverage program......... 352
-------
$ 1,649
=======
(5)Adjustment for interest is comprised of the following:
Interest on the Notes............................................. $ 6,000
Amortization of premium on the Notes.............................. (290)
Elimination of interest on debt repaid............................ (884)
Amortization of deferred financing costs related to the offering
of the Notes..................................................... 333
-------
$ 5,159
=======
</TABLE>
The interest rate on the Notes is 10%. The premium on the Notes is
calculated at 3.67% of the principal of the Notes and is amortized using
the effective interest rate method. The assumed interest rate on the Credit
Agreements is approximately 7.5%.
(6) Reduction of income tax provision due to reduction in taxable income from
pro forma adjustments.
27
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 26, 1997
--------------------------------------------
RADNOR STYROCHEM PRO FORMA PRO
ACTUAL EUROPE(1) ADJUSTMENTS FORMA
-------- --------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net sales....................... $170,545 $63,527 $ -- $234,072
Cost of goods sold.............. 127,730 40,823 (1,285)(/2/) 167,268
-------- ------- ------- --------
Gross profit.................... 42,815 22,704 1,285 66,804
Distribution expense............ 12,569 4,713 17,282
Selling, general and
administrative expenses........ 17,747 13,546 (893)(/3/) 30,400
-------- ------- ------- --------
Income (loss) from operations... 12,499 4,445 2,178 19,122
Interest........................ 8,781 76 3,901 (/4/) 12,758
Other (income) expense, net..... (94) (107) (201)
-------- ------- ------- --------
Income (loss) from continuing
operations before income
taxes.......................... 3,812 4,476 (1,723) 6,565
Income tax expense (benefit).... 323 685 (586)(/5/) 422
-------- ------- ------- --------
Income (loss) from continuing
operations..................... $ 3,489 $ 3,791 $(1,137) $ 6,143
======== ======= ======= ========
</TABLE>
28
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 26, 1997
(UNAUDITED)
(IN THOUSANDS)
(1) These amounts have been derived from the StyroChem Europe Combining
Statement of Operations for the nine months ended September 30, 1997 on
page F-86.
(2) Reflects savings (cost) of $1,285 related to the StyroChem Europe
Acquisition as follows:
<TABLE>
<S> <C>
Reduction of cost of goods sold to reflect provisions of new raw
material purchase contract to be entered into as a condition of
the Acquisition Agreement......................................... $1,782
Elimination of sick leave and disability payments made to employees
who are not part of StyroChem Europe; liability is retained by the
seller............................................................ 76
Additional depreciation as a result of a step-up in StyroChem
Europe asset value................................................ (573)
------
$1,285
======
(3) Reflects savings of $893 related to the Acquisitions as follows:
Reduction of specific administrative cost allocations from parent
company pursuant to the new Neste Service Agreement entered into
as part of Acquisition Agreement, including training, personnel
services, environmental and security, accounting, procurement, and
other administrative services (see "The Company--The
Acquisitions").................................................... $ 480
Reduction of insurance expense as a result of terminating Neste Oy
captive insurance arrangement pursuant to the Acquisition
Agreement and instituting a stand-alone coverage program.......... 213
Elimination of payments made to former owners of Radnor Chemical
Corporation in connection with the acquisition of StyroChem....... 200
------
$ 893
======
</TABLE>
(4) Adjustment for interest is comprised of the following:
<TABLE>
<S> <C>
Interest on the Notes.............................................. $4,500
Amortization of premium on the Notes............................... (216)
Elimination of interest on debt repaid............................. (633)
Amortization of deferred financing fees related to the offering of
the Notes......................................................... 250
------
$3,901
======
</TABLE>
The interest rate on the Notes is 10%. The premium on the Notes is
calculated at 3.67% of the Notes and is amortized using the effective interest
rate method. The assumed interest rate on the Credit Agreements is
approximately 7.5%.
(5) Elimination of income tax provision due to reduction in taxable income
from pro forma adjustments.
29
<PAGE>
PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
AS OF SEPTEMBER 26, 1997
---------------------------------------------
STYROCHEM PRO FORMA
RADNOR EUROPE(1) ADJUSTMENTS(2) PRO FORMA
-------- --------- -------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash............................ $ 1,303 $ 6,597 $(6,597)(3) $ 1,303
Accounts receivable, net........ 20,194 11,693 31,887
Inventory....................... 25,386 7,866 (600)(3) 32,652
Deferred tax asset.............. 2,378 -- 2,378
Prepaid expenses and other...... 5,438 2,117 7,555
-------- ------- --------
Total current assets.......... 54,699 28,273 75,775
Property, plant and equipment,
net.............................. 116,889 29,100 11,457 (3) 157,446
Other assets...................... 10,320 518 1,482 (4) 12,320
-------- ------- --------
Total assets.................. $181,908 $57,891 $245,541
======== ======= ========
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Current liabilities
Accounts payable................ $ 25,681 $ 5,442 $ 31,123
Accrued liabilities............. 13,836 4,865 800 (3) 19,501
Other current liabilities....... -- 221 221
Current portion of long-term
debt........................... 235 -- 235
-------- ------- --------
Total current liabilities..... 39,752 10,528 51,080
Credit Agreements................. 15,573 -- (9,898)(5) 5,675
Term Notes........................ 59 -- 59
Series B Senior Notes due 2003.... -- -- 62,203 (6) 62,203
Senior Notes due 2003............. 100,000 -- 100,000
-------- ------- --------
Total long-term debt.......... 115,632 -- 167,937
Deferred income taxes............. 11,286 36 (36)(3) 11,286
Other noncurrent liabilities...... 450 2,300 (2,300)(3) 450
Commitments and contingencies
Stockholders' equity
Common stock.................... 1 6,635 (6,635)(3) 1
Additional paid-in capital...... 17,720 -- 17,720
Division equity................. -- 32,950 (32,950)(3) --
Foreign currency translation
adjustment..................... (2) (922) 922 (3) (2)
Retained earnings (deficit)..... (2,931) 6,364 (6,364)(3) (2,931)
-------- ------- --------
Total stockholders' equity.... 14,788 45,027 14,788
-------- ------- --------
Total liabilities and
stockholders' equity....... $181,908 $57,891 $245,541
======== ======= ========
</TABLE>
- --------
(1) These amounts have been derived from the StyroChem Europe Combining
Balance Sheet as of September 30, 1997 on page F-87.
(2) A final valuation of StyroChem Europe's assets and liabilities has not
been completed. Upon completion of such valuation, the purchase price will
be allocated to StyroChem Europe's assets and liabilities, both tangible
and intangible. Management expects that, based on such allocation,
additional purchase accounting adjustments will be made to assets and
liabilities and, among other adjustments, property, plant and equipment
will increase.
(3) Purchase accounting adjustments related to the acquisition of StyroChem
Europe.
(4) Transaction costs of $2.0 million, net of purchase accounting adjustments
of $0.5 million related to assets not being acquired in connection with
the acquisition of StyroChem Europe.
(5) Repayment of debt outstanding under the Credit Agreements.
(6) Gross proceeds from the issuance of the Notes. The proceeds include the
premium on the Notes, which is calculated at 3.67% of the principal of the
Notes.
30
<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 31, 1993 and 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 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 data as
of and for the nine months ended September 27, 1996 and September 26, 1997
have been derived from the unaudited Radnor Financial Statements 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. The results of
operations for interim periods are not necessarily indicative of the results
to be expected for the full year. 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. Financial results for the nine months ended
September 26, 1997 are not fully comparable to the nine months ended September
27, 1996 because of the December 1996 StyroChem Acquisition and the January
1996 J.R. Cup 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 NINE MONTHS ENDED
------------------------------------- -------------------
DEC. 29, 1991- FEB. 29, 1992- DEC.31, DEC. 30, DEC. 29, DEC. 27, SEPT. 27, SEPT. 26,
FEB. 28, 1992 JAN. 1, 1993 1993 1994 1995 1996(2) 1996 1997(2)
-------------- -------------- ------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net sales............... $12,883 $67,904 $83,569 $80,850 $ 86,239 $177,395 $128,052 $170,545
Cost of goods sold...... 12,878 57,231 68,454 64,078 75,690 135,982 98,660 127,730
------- ------- ------- ------- -------- -------- -------- --------
Gross profit............ 5 10,673 15,115 16,772 10,549 41,413 29,392 42,815
Distribution expense.... 1,018 4,427 6,599 5,584 6,027 14,099 10,223 12,569
Selling, general and
administrative
expenses............... 3,245 8,298 10,330 8,209 9,051 18,676 13,538 17,747
Restructuring charges... -- -- -- -- -- 910 855 --
------- ------- ------- ------- -------- -------- -------- --------
Income (loss) from
operations............. (4,258) (2,052) (1,814) 2,979 (4,529) 7,728 4,776 12,499
Interest................ -- 1,562 2,518 3,001 2,822 4,496 3,346 8,781
Other (income) expense,
net.................... 222 386 290 526 374 153 (94)
------- ------- ------- ------- -------- -------- -------- --------
Income (loss) from
continuing operations
before income taxes and
minority interest...... (4,258) (3,836) (4,718) (312) (7,877) 2,858 1,277 3,812
Income tax expense(3)... -- -- -- -- -- 121 -- 323
------- ------- ------- ------- -------- -------- -------- --------
Income (loss) from
continuing operations
before minority
interest............... (4,258) (3,836) (4,718) (312) (7,877) 2,737 1,277 3,489
Minority interest in
income................. -- -- -- -- -- 1,348 731 --
------- ------- ------- ------- -------- -------- -------- --------
Income (loss) from
continuing operations.. $(4,258) $(3,836) $(4,718) $ (312) $ (7,877) $ 1,389 $ 546 $ 3,489
======= ======= ======= ======= ======== ======== ======== ========
Ratio of earnings to
fixed charges(4)....... 1.49x 1.30x 1.38x
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 $ 4,023 $ 14,947
Total assets............ 48,851 36,650 43,033 46,588 172,369 106,023 181,908
Total debt (including
current portion)....... 26,446 31,531 35,410 16,252 104,599 54,484 115,867
Stockholders' equity
(deficit).............. 5,751 (6,575) (11,969) 6,554 14,329 4,810 14,788
</TABLE>
31
<PAGE>
- --------
(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 and as of and for the nine months ended September
26, 1997. 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.
(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. As of December 27, 1996, the Company had approximately
$14.0 million of net operating loss carryforwards for federal income tax
purposes, which expire through 2010. Since 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, a valuation
allowance was provided for substantially all of the loss carryforward tax
benefit at December 27, 1996. In 1997 a portion of the valuation
allowance has been eliminated and a tax benefit reflected in the 1997
financial statements.
(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.
32
<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
used in its manufacture of foam products. In October 1997, the Company
acquired StyroChem Europe through certain foreign subsidiaries. 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 or decline
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%, 1.3% and 1.7% in 1994, 1995, and 1996 and
for the nine months ended September 26, 1997, 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.
33
<PAGE>
Net operating loss carryforwards
As of December 27, 1996, the Company had approximately $14.0 million of net
operating loss carryforwards for federal income tax purposes, which expire
through 2010. Since 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, a valuation allowance was provided for substantially
all of the loss carryforward tax benefit at December 27, 1996. In 1997, a
portion of the valuation allowance has been eliminated and a tax benefit
reflected in the 1997 financial statements.
Pending accounting changes
In July 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income," and Statement No. 131, "Disclosures About Segments of an Enterprise
and Related Information." Statement No. 130 establishes standards for
reporting comprehensive income in financial statements. Statement No. 131
expands certain reporting and disclosure requirements for segments from
current requirements. The Company is not required to adopt these Statements
until 1998 and does not expect the adoption of these new standards to result
in material changes to previously reported amounts or disclosures.
COMPARABILITY OF PERIODS
Financial results for 1996 and for the nine months ended September 26, 1997
are not fully comparable to 1992, 1993, 1994, 1995 and the nine months ended
September 27, 1996 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. The nine months ended September 27,
1996 includes adjustments for the period from January 20, 1996 through
September 27, 1996 to reflect the J.R. Cup Acquisition but does not include
any such adjustments to reflect the StyroChem Acquisition.
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 NINE MONTHS ENDED
---------------------------- -------------------
DEC. 30, DEC. 29, DEC. 27, SEPT. 27, SEPT. 26,
1994 1995 1996 1996 1997
-------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales.................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold........... 79.3 87.8 76.6 77.0 74.9
----- ----- ----- ----- -----
Gross profit................. 20.7 12.2 23.4 23.0 25.1
Distribution expense......... 6.9 7.0 8.0 8.0 7.4
Selling, general and
administrative expenses..... 10.1 10.5 10.5 10.6 10.4
Restructuring charges........ -- -- 0.5 0.7 --
----- ----- ----- ----- -----
Income (loss) from
operations.................. 3.7 (5.3) 4.4 3.7 7.3
Interest..................... 3.7 3.3 2.5 2.6 5.1
Minority interest in income.. -- -- 0.8 0.6 --
Income (loss) from continuing
operations.................. (0.4)% (9.1)% 0.8% 0.4% 2.0%
===== ===== ===== ===== =====
</TABLE>
34
<PAGE>
NINE MONTHS ENDED SEPTEMBER 26, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER
27, 1996
Net sales increased to $170.5 million for the nine months ended September
26, 1997 from $128.1 million for the same period in 1996, an increase of $42.4
million or 33.1%. The increase was due primarily to the J.R. Cup Acquisition
on January 20, 1996 and the StyroChem Acquisition on December 5, 1996 as well
as overall growth in the foam packaging market.
Cost of goods sold as a percentage of net sales decreased to 74.9% for the
nine months ended September 26, 1997, from 77.0% for the same period in 1996.
This decrease was due to a decline in raw material prices resulting from
improved market conditions and reductions in manufacturing overhead as a
percentage of net sales resulting from the J.R. Cup Acquisition and the
StyroChem Acquisition.
Gross profit increased to $42.8 million or 25.1% of net sales for the nine
months ended September 26, 1997, from $29.4 million or 23.0% of net sales for
the same period in 1996.
Distribution expense as a percentage of net sales decreased to 7.4% for the
nine months ended September 26, 1997, from 8.0% of net sales for the same
period in 1996. This decline in distribution expense as a percentage of net
sales was due primarily to the StyroChem Acquisition, because StyroChem's
distribution expense was 3.4% of net sales.
Selling, general and administrative expenses as a percentage of net sales
decreased marginally to 10.4% for the nine months ended September 26, 1997,
from 10.6% of net sales for the same period in 1996.
Income from operations increased to $12.5 million or 7.3% of net sales for
the nine months ended September 26, 1997, from $4.8 million or 3.7% of net
sales for the same period in 1996.
Interest increased to $8.8 million for the nine months ended September 26,
1997, from $3.3 million for the same period in 1996. This increase was due
primarily to an increase in borrowings related to the J.R. Cup Acquisition and
the StyroChem Acquisition, including the issuance of the Prior Notes.
Net income increased to $3.5 million or 2.0% of net sales for the nine
months ended September 26, 1997, from $1.3 million or 1.0% of net sales for
the same period in 1996 due to the reasons described above.
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.
35
<PAGE>
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.
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 sale of the Prior Notes.
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.
36
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
During fiscal years 1994, 1995 and 1996 and the nine months ended September
26, 1997, the Company's principal sources of funds consisted of cash from
operations and financing sources. During the nine months ended September 26,
1997, after tax cash flow increased to $10.0 million offset by cash used for
working capital of $5.8 million. Additional borrowings under the credit
facilities of $11.3 million, offset by an increase in cash of $0.4 million,
were used to fund capital expenditures of $10.3 million and a dividend payment
of $3.0 million. 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.
Approximately $8.7 million of the net proceeds of the Offering were used to
repay indebtedness under the Amended Credit Agreement. The weighted average
interest rate of the repaid indebtedness was 7.4% as of September 26, 1997.
The Company used approximately $51.1 million of the net proceeds of the
Offering to pay the cash portion of the StyroChem Europe Acquisition purchase
price.
Concurrently with the consummation of the Offering, the Company entered into
certain amendments to the Amended Credit Agreement, including a modification
to incorporate performance-based pricing. In addition, under the Amended
Credit Agreement there is a $10.0 million sublimit for the Company's European
subsidiaries, with borrowings under the sublimit based on a "borrowing base"
formula. The Company obligations under the sublimit are secured by assets of
certain of its European subsidiaries. These amendments have increased the
aggregate commitment amount of the existing revolving credit facility under
the Amended Credit Agreement to $40.0 million. As of September 26, 1997, on a
pro forma basis, after giving effect to the StyroChem Europe Acquisition and
the use of net proceeds of the Offering, there was $5.7 million outstanding
under the Amended Credit Agreement. See "Description of Other Company
Indebtedness--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 $0.4
million Canadian and a revolving credit facility of up to $2.5 million
Canadian. As of September 26, 1997, there was $0.8 million outstanding under
the Canadian Credit Agreement. At September 26, 1997, availability under the
Credit Agreements was approximately $12.4 million, net of outstanding letters
of credit of approximately $2.0 million. See "Description of Other Company
Indebtedness--The Canadian Credit Agreement."
The Company's principal uses of cash for the next several years will be
working capital requirements and capital expenditures. The Company's capital
expenditures for fiscal years 1994, 1995 and 1996 and the nine months ended
September 26, 1997 were $1.6 million, $5.5 million, $4.9 million and $10.3
million, respectively. Total capital expenditures increased beginning in 1995
due to the implementation of the engineering initiatives which began in 1994.
By completing the Offering, the offering of the Prior Notes, and entering into
the Credit Agreements, 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 to approximately $17.0 million
over the next twelve months, in addition to approximately $3.8 million of non-
discretionary capital expenditures anticipated during such period.
Following consummation of the Offering, the Company has had an increase in
annual debt service requirements from historical levels, due primarily to the
StyroChem Europe Acquisition. 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.
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BUSINESS
GENERAL
The Company manufactures and distributes worldwide a variety of disposable
foam packaging products for the foodservice industry and is a leading producer
of EPS for the foodservice, insulation and packaging industries. The Company
is the second largest manufacturer of disposable foam packaging products for
the foodservice industry, with an estimated 35% share of the U.S. foam cup and
container market segment. In 1996, the Company's 14 highly automated
manufacturing facilities produced 13 billion foam cups for hot and cold
drinks, foam bowls and containers and thermoformed lids and 130 million pounds
of EPS. EPS is consumed internally as well as sold to third party
manufacturers of foam containers, insulation products and packaging products.
The Company believes the StyroChem Europe Acquisition provides a strategic
international platform for expanding product sales into Eastern and Western
Europe and also provides enhanced manufacturing technologies for the Company's
operations. For the nine months ended September 26, 1997, pro forma for the
StyroChem Europe Acquisition, the Company had net sales and income from
continuing operations before interest, income tax expense, depreciation,
amortization and restructuring charges of $234.1 million and $27.8 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 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. StyroChem Europe is a leading EPS producer in Northern Europe
and has produced EPS since 1972.
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 in the U.S. 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% of the market. 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 in the
domestic market 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.
In addition to being used in the manufacture of foam cups and containers,
EPS is 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.
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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 "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, auto-case packaging machines and customized EPS formulations that
further enhance manufacturing efficiencies and specific product features. The
Company believes that it will be able to enhance StyroChem Europe's one-step
manufacturing process to improve production efficiency for its current EPS
facilities and the StyroChem Europe facilities.
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.
The acquisition of StyroChem Europe, a manufacturer of EPS since 1972, has
improved the Company's competitive position in the EPS market. Over the years,
StyroChem Europe has focused on improving its EPS technologies through
internal process development as well as closely working with recognized
industry experts. This, combined with a polystyrene products sales force that
is well-educated and technically oriented, has enhanced customer relationships
by providing consistent improvements in product quality, service and
reliability. As a leading supplier of foam insulation products in Finland and
Sweden since the mid-1980's, StyroChem Europe's converter operations have had
success attracting and maintaining customers. New and specialized foam
insulation products, such as metal and foam sandwich building panels and ship
insulation panels, have been well-received by customers.
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
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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.
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 existing 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 existing suppliers and customers regarding further expansion
in these markets.
Integrated manufacturing process. By manufacturing its own EPS, the Company
has integrated its manufacturing process, thereby reducing the Company's cost
of raw materials and mitigating the impact of raw material price fluctuations.
Control over EPS manufacturing provides more reliable, consistently high-
quality EPS, improving the Company's overall manufacturing efficiencies. The
Company obtains substantially all of its EPS requirements internally.
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 domestic and
international 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 "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.
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The Company also manufactures EPS for its internal consumption, in addition
to selling directly to third party manufacturers of foam containers,
insulation products and packaging products. Prior to its acquisition by the
Company, StyroChem had been a long-term supplier of EPS to the Company. EPS is
categorized by grade, with the highest grade, or cup-grade, used to
manufacture foam cups and containers. Block-grade and shape-grade are sold to
manufacturers of insulation and packaging products, respectively.
StyroChem Europe manufactures EPS, general purpose polystyrene and HIPS, and
also converts a significant portion of its EPS production into a variety of
standard and specialized insulation products. StyroChem Europe's EPS is made
primarily for the insulation and packaging industries and includes a range of
bead sizes (0.4 to 2.5mm) and densities for conversion by customers into light
and heavy insulation boards as well as various shape products, such as
insulated fish packaging boxes. StyroChem Europe works closely with its
customers to incorporate special product features into its EPS such as fire
retardancy, specialty coatings and higher thermal insulation qualities.
StyroChem Europe's foam insulation operations directly convert internally
produced EPS into a full range of building insulation panels as well as
specialized foam insulation products, such as combined metal and foam sandwich
building panels, ship insulation panels and cold room storage modules. These
specialized products are modified to conform to different building and
construction requirements in different countries. StyroChem Europe frequently
works directly with contractor customers in situations where enhanced
technical support is needed, such as the installation of roof insulation.
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. In
addition, the Company sells EPS through a dedicated sales force to
manufacturers of foam packaging and insulation products.
StyroChem Europe markets its EPS and other polystyrene products throughout
Europe through a combination of its own sales force, sales agency arrangements
with sales offices and personnel of affiliates of Neste Oy and manufacturers'
representatives. In support of these sales and marketing efforts, StyroChem
Europe employs people who are knowledgeable of chemical engineering and
manufacturing processes in order to provide technical assistance to its
customers. StyroChem Europe maintains its own direct sales force for its foam
insulation products. A portion of this foam insulation products sales force is
decentralized, allowing StyroChem Europe to separately market specialized
products in addition to its standard product offerings.
The Company sells disposable foam packaging products 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 10.7% 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. and Dunkin' Donuts Incorporated.
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
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institutions, airlines, movie theaters and similar leisure time
concessionaires, such as sports stadiums. These customers, representing
approximately 36.6% 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 9.4% 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.
StyroChem Europe sells EPS, general purpose polystyrene and HIPS to 200
primarily mid-sized companies throughout Europe. StyroChem Europe has actively
pursued these customers because they provide potential for higher margins and
because of their increased reliance on the Company's technical support, which
results in a greater ability to foster long-term customer relationships.
StyroChem Europe also consumes internally a portion of its annual EPS
production. In 1996, approximately one-third of its total annual EPS
production volume was consumed internally by the foam insulation converter
operations. StyroChem Europe sells its foam insulation products to more than
2,000 customers, including large building supply wholesalers, such as Kesko Oy
in Finland and Utec AB in Sweden, and residential and commercial construction
companies and distributors.
Pro forma for the Acquisitions, no customer represented more than 6.3% of
the Company's net sales for 1996. In addition, the five largest accounts
represented approximately 21.6% 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 prices. Substantially all of the Company's other foam product
sales and substantially all of StyroChem Europe's 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.
MANUFACTURING
The Company's highly automated manufacturing facilities produced 13 billion
foam cups, containers and lids and 130 million pounds of EPS, 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. The Company
also operates four plants located in the U.S. and Canada that manufacture EPS
from styrene monomer. StyroChem Europe operates two plants located in Finland
that manufacture EPS, general purpose polystyrene and HIPS from styrene
monomer. These plants generally operate 24 hours a day, seven days a week.
StyroChem Europe also operates six plants located in Finland, Sweden and
Denmark that manufacture foam insulation panels from EPS. These plants
generally operate for 8 or 16 hours a day, five days a week.
Manufacturing Process
The manufacture of EPS, 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, including general
purpose polystyrene. To produce EPS, the crystal is impregnated with a high-
purity pentane gas.
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The Company manufactures its foam cups and containers utilizing a custom
molding process. First, the cup-grade EPS is blended with a lubricating agent
and then pre-expanded so that the EPS is of the appropriate density. This pre-
expanded EPS is then fed through special screeners to remove undersized and
oversized beads. The pre-expanded EPS is then injected into machine molds and
fused by injecting steam into the mold cavity. After the EPS is 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 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. If necessary to further
reduce costs, the Company will examine whether it can also produce HIPS in
certain of its U.S. and Canadian facilities.
StyroChem Europe manufacturers HIPS through a polymerization process in
which rubber bales are granulated and the granules are dissolved in styrene
monomer. After additional styrene monomer is added to the resulting rubber
solution and initial polymerization occurs without water, the resulting
solution is then suspended in water and treated with chemicals and catalysts
to produce HIPS beads.
StyroChem Europe's foam insulation panels are manufactured through a block
molding cutting process or a continuous foam extrusion cutting process. The
block-grade EPS is pre-expanded to the proper density, aged and then injected
into extra large block molding machines or continuous extrusion machines. In
the block machine, the pre-expanded EPS is fused by injecting steam into the
block mold cavity. The blocks are then cooled, removed from the mold to
storage for proper shrinkage, and then transferred to automated hot wire or
vibrating wire cutting machines. In the continuous extrusion machine, the pre-
expanded EPS is fused into sheets of predetermined thickness, which are
automatically cut to various sizes.
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.
The Company's EPS quality control laboratory includes infrared spectrograph
and atomic absorption units. The Company's 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 production. This gives the Company the ability to customize EPS
formulas to meet any special customer requirements. The EPS quality control
program includes testing every production batch of EPS to ensure it meets
specific customer requirements. Each batch is tested for particle sizes,
pentane gas volume and, if the EPS is to be used for insulation, their fire
retardation capability.
StyroChem Europe's sophisticated quality control laboratory is complemented
by a fully equipped analytical laboratory containing three fully instrumented,
automatically controlled pilot reactors. Testing equipment for analytical and
quality audit work includes electronic balancers, colorimeters,
flexural/compressive strength
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testers, an izod impact tester and lambda value testers. StyroChem Europe
regularly tests its EPS, general purpose polystyrene and HIPS for a range of
key attributes that vary by specific product. Insulation panels are routinely
tested for resistance to heat transfer, lambda value and compressive and
tensile strength.
StyroChem Europe's facilities are all ISO 9002 certified, and the quality
control laboratory is also ISO 14001 certified. StyroChem Europe is
implementing total quality manufacturing and good manufacturing principles
through a series of ongoing initiatives.
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, Fort Worth and Montreal 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.
The managing director of StyroChem Europe is an engineer as are each of the
managers of the two EPS production facilities located in Finland. StyroChem
Europe also employs two full-time engineers who are responsible for process
and production engineering and interact regularly with research and
development personnel based in the analytical laboratory as well as senior
technical support staff responsible for assisting the sales team.
RAW MATERIALS
The Company's foam products are manufactured from EPS, which is 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 and 1998, styrene monomer prices have
ranged from $.28 to $.30 per pound. Styrene monomer purchases during 1996
represented approximately 34% of the Company's cost of goods sold on a pro
forma basis for the Acquisitions.
The StyroChem Acquisition and the StyroChem Europe Acquisition have not
insulated the Company from price fluctuations for styrene monomer, although it
mitigates the impact of such fluctuations by increasing the Company's
flexibility to purchase styrene monomer. The Company 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 extends for seven years. Under the contract, the Company
will be required to purchase at least the first 120 million pounds of its
styrene monomer requirements per year from Chevron and will have certain
rights to purchase additional styrene monomer.
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StyroChem Europe purchases styrene monomer from a number of suppliers. In
1996, StyroChem Europe purchased 60 million pounds of styrene monomer, more
than half of its annual purchases, through a contract with Elf Atochem. In
October 1997, Elf Atochem agreed to provide a long-term supply of styrene
monomer at a reduced price and with volume discounts. The initial term of the
new agreement extends for three years. Under the agreement, StyroChem Europe
has the right to purchase up to 110 million pounds of styrene monomer per
year.
The Company and StyroChem Europe obtain substantially all of their EPS
supply internally.
The Company purchases high-purity pentane, which is used as the expanding
agent in the production of EPS, from South Hampton Refining Co. and Ashland
Chemical Company. StyroChem Europe purchases the majority of its pentane
requirements from Borealis, a joint venture between Neste Oy and Statoil, a
Norwegian oil 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.
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 and StyroChem
Europe holds approximately 15 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 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.
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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.
The U.S. EPS industry is highly concentrated. 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 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.
StyroChem Europe competes within the highly competitive European EPS
industry. Several companies, including BASF Corporation, Shell Oil Company,
Enichem S.P.A. and Huntsman Chemical Corp., are larger and have more
substantial financial resources than StyroChem Europe. Management believes
that competition is based primarily on price, although technical support and
consistently high quality beads are important factors to many of StyroChem
Europe's customers. The Company expects that a significant percentage of
StyroChem Europe's EPS production will continue to be used internally for its
foam insulation product operations. These foam insulation product operations
are located in Finland, Sweden and Denmark, and compete primarily against
other insulation manufacturers located in these countries. Foam insulation
products generally compete with insulation products made from other materials
such as mineral wool and glass wool.
ENVIRONMENTAL MATTERS
The Company's facilities are used for manufacturing or warehousing of foam
container products or the EPS from which such products are manufactured. Many
of these facilities are subject to federal, state, foreign and local 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 the
Company's facilities lack proper air emission permits, that these permits do
not address all regulated emissions and/or that certain of the facilities are
not in full compliance with all permit conditions. Certain of the Company's
Finnish and Scandinavian facilities could be required in the future to reduce
emissions of pentane and styrene. The requirement to reduce such air emissions
is subject to negotiation with Finnish and Scandinavian regulatory authorities
and could require significant capital expenditures. The Company believes,
however, 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. Furthermore, the Company has no knowledge
of any claims regarding air emissions that could be expected to have a
material effect on the Company's financial condition or results of operations.
However, it is possible that the Company could incur significant fines,
penalties or capital costs associated with any confirmed noncompliance. There
can be no assurance that future environmental laws or regulations, or permit
requirements under the 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
46
<PAGE>
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 the Fort Worth, Texas
facility with a municipal wastewater discharge ordinance. All of these
citations, including the Fort Worth citation, have been resolved without a
material adverse effect on the Company's financial condition or results of
operations. Moreover, one of the Company's facilities has failed to report
wastewater pretreatment system upset conditions as required, and 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 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
preliminary estimated to be significantly less than, the StyroChem
environmental 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 Company's domestic EPS 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 Company's domestic EPS 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 three of
its facilities for the storage of liquid pentane. Leak detection or
contaminant systems are in place at all three facilities. One of the tanks,
located at the Fort Worth, Texas facility, was pressure tested in 1996 and no
leaks were detected. USTs are generally subject to federal, state, local and
foreign 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 USTs 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.
47
<PAGE>
As part of the StyroChem Acquisition, approximately $1.4 million of the
purchase price was placed in escrow and may be used by the Company to offset
certain expenses associated with specified environmental matters relating to
the Company'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 the 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.
FACILITIES
The Company leases approximately 8,000 square feet in Radnor, Pennsylvania,
a suburb of Philadelphia, for its executive offices.
48
<PAGE>
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>
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
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
StyroChem Europe Facilities:
Porvoo, Finland (5 facilities)(2)................... O 17,707 M
O 52,831 W
O 22,067 O
O 11,335 MA
O 5,210 U
Kokemaki, Finland (4 facilities).................... L 14,047 M
L 3,843 O
L 3,617 U
L 6,459 W
Nurmijarvi, Finland (4 facilities).................. O 21,701 M
O 13,875 W
O 3,638 W
O 3,789 O
Vammala, Finland.................................... O 122,497 M/W/O
Pietarsaari, Finland (4 facilities)................. L 17,761 M
L 1,292 O
L 10,334 W
L 2,853 W
Norrtalje, Sweden (2 facilities).................... L 61,087 M/O
L 3,200 W
Vargarda, Sweden.................................... O 63,961 M/O/W
Hedensted, Denmark.................................. O 44,306 M/O/W
</TABLE>
- --------
(1)M = Manufacturing; W = Warehouse; O = Office; MA = Machine assembly; U =
Utilities.
(2) In connection with the StyroChem Europe Acquisition, the land on which the
Porvoo, Finland facilities are located has been leased to the Company for
a period of 30 years for a nominal rent, with an option for the Company to
extend the lease or acquire the leased property following the initial term
of the lease under certain circumstances. See "The Company--The
Acquisitions."
49
<PAGE>
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 September 26, 1997, the Company and StyroChem Europe had 1,504 and 252
full-time employees, respectively. Except for StyroChem Europe employees, the
Company's employees are not represented by any union. In Finland, over 90% of
StyroChem Europe's employees are represented by one of five unions and
StyroChem Europe is subject to three collective bargaining agreements with
these unions, each of which was extended on January 1, 1997 and now expires on
January 31, 1998. StyroChem Europe is represented in Finnish collective
bargaining negotiations by Kemiarteollisuus ry (Chemical Industry Federation).
In Sweden, over 90% of StyroChem Europe's employees are represented by one of
four unions and StyroChem Europe is subject to two collective bargaining
agreements with these unions, both of which were extended on May 1, 1997 and
now expire on April 30, 1998. StyroChem Europe is represented in Swedish
collective bargaining negotiations by Byggnadsamnesforbundet (Construction
Materials Federation). In Denmark, StyroChem Europe's employees are not
represented by any union, nor is StyroChem Europe subject to any collective
bargaining agreement. However, all contracts for white collar employees in
Denmark must include provisions that are at least as favorable as those
provided in the Danish Employees Act. In addition, contracts for blue collar
employees in Denmark must fulfill the requirements of applicable European
Union directives regarding employment. The European Union directives are also
applicable to StyroChem Europe in Finland and Sweden; however, the terms of
the collective bargaining agreements will control employment relationships in
these countries to the extent that these agreements address relevant issues in
a more detailed manner and include benefits exceeding the minimum standards
established by the directives. Neither StyroChem Europe nor the Company has
ever experienced a labor strike or other labor-related work stoppage. The
Company considers its relations with its employees to be good.
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, WinCup L.P., 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 the November 1995 sale to James
River: (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 sale, payment to Holdings of the profits received by James River and
WinCup L.P. since the sale and WinCup L.P.'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
$10.0 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 WinCup L.P. and costs of suit. Alternatively,
the suit seeks actual damages in excess of $30.0 million and punitive damages
in excess of $10.0 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.
50
<PAGE>
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. Although
it is not possible to predict with certainty the outcome of any legal
proceeding, 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. Discovery is currently ongoing.
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.
51
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and their ages as of
January 15, 1998 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Michael T. Kennedy...... 43 President, Chief Executive Officer and Director
Michael V. Valenza...... 38 Senior Vice President--Finance
Richard C. Hunsinger.... 49 Senior Vice President--Sales and Marketing
Donald D. Walker........ 56 Senior Vice President--Operations
John P. McNiff.......... 36 Senior Vice President--Corporate Development and Director
R. Radcliffe Hastings... 47 Senior Vice President, Treasurer and Director
Donald C. Rogalski...... 52 Senior Vice President--Administration
John P. McKelvey........ 57 Vice President--Human Resources
Van D. Groenwold........ 65 Vice President--Engineering
Caroline J. Williamson.. 30 Vice President and Corporate Counsel
Thomas J. Hopkins....... 41 Director
Vincent F. Garrity,
Jr..................... 60 Director
</TABLE>
Michael T. Kennedy has served as President, Chief Executive Officer and as a
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. and
Commonwealth Bancorp.
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 and as a director since May
1997. 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 and as a director since May 1997. 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.
52
<PAGE>
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.
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.
Caroline J. Williamson has served as Vice President and Corporate Counsel of
the Company since March 1997. From March 1996 to March 1997, Ms. Williamson
served as counsel for Aetna U.S. Healthcare. Prior to that, Ms. Williamson
worked as an associate for Duane, Morris & Heckscher LLP from September 1992
to March 1996.
Thomas J. Hopkins has served as a director of the Company since May 1997.
Mr. Hopkins has been a Managing Director of Bear, Stearns & Co. Inc. since
March 1997. Mr. Hopkins was employed by Alex. Brown & Sons Incorporated from
August 1991 to February 1997, most recently as a Principal.
Vincent F. Garrity, Jr. has served as a director of the Company since May
1997. Mr. Garrity has been a partner in the law firm of Duane, Morris &
Heckscher LLP since 1970.
53
<PAGE>
DIRECTOR AND EXECUTIVE COMPENSATION
The directors do not receive separate compensation for their service as
directors 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 for the year ended December
26, 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------ ------------
AWARDS
------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#) COMPENSATION
- --------------------------- ---- ---------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Michael T. Kennedy..........
President and Chief 1997 $1,500,000 $875,000 -- $99,214(1)
Executive Officer 1996 863,597 -- -- 3,766(2)
R. Radcliffe Hastings....... 1997
Senior Vice President and 1996 175,000 125,000 -- --
Treasurer 85,755 200,266 -- --
Michael V. Valenza..........
Senior Vice President-- 1997 175,000 125,000 100 4,480(2)
Finance 1996 126,923 100,000 -- 3,359(2)
Richard C. Hunsinger........
Senior Vice President-- 1997 175,000 75,000 50 4,480(2)
Sales and Marketing 1996 146,742 50,000 -- 4,070(2)
Donald D. Walker............
Senior Vice President-- 1997 175,000 75,000 50 4,480(2)
Operations 1996 146,154 50,000 -- 4,073(2)
</TABLE>
- --------
(1) Includes $4,480 of matching contributions by the Company under the 401(k)
Retirement Savings Plan and premiums of $94,734 paid by the Company with
respect to a supplemental life insurance policy for the benefit of Mr.
Kennedy.
(2) Represents a matching contribution by the Company under the 401(k)
Retirement Savings Plan.
The following table sets forth information with respect to options granted
during the fiscal year ended December 26, 1997 to the persons named in the
Summary Compensation Table above.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATE OF
STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ----------------------------------------------------------------- -------------------
% OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED
UNDERLYING TO
OPTIONS EMPLOYEES EXERCISE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#) YEAR ($/SH) DATE 5% ($) 10% ($)
---- ---------- --------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael T. Kennedy...... -- -- -- -- -- --
R. Radcliffe Hastings... -- -- -- -- -- --
Michael V. Valenza...... 100(1) 22.7% $6,985 7/25/07 $439,283 $1,113,229
Richard C. Hunsinger.... 50(1) 11.4% 6,985 7/25/07 219,641 556,615
Donald D. Walker........ 50(1) 11.4% 6,985 7/25/07 219,641 556,615
</TABLE>
- --------
(1) These options vest in five equal cumulative installments on August 1, 1998
and each August 1st thereafter through August 1, 2002. All of these
options become fully vested, at the election of the committee
administering the Company's Equity Incentive Plan upon certain mergers and
consolidations involving the Company or acquisitions by another
corporation of a controlling interest in the Company.
54
<PAGE>
The following table sets forth information with respect to options held at
December 26, 1997 by the persons named in the Summary Compensation Table
above. No options were exercised by such persons during the fiscal year ended
December 26, 1997.
FISCAL YEAR-END OPTIONS VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 26, 1997 AT DECEMBER 26, 1997(1)
------------------------------------ -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
Michael T. Kennedy...... -- -- $ -- --
R. Radcliffe Hastings... -- -- -- --
Michael V. Valenza...... 32 106 116,320 21,810
Richard C. Hunsinger.... 90 60 327,150 36,350
Donald D. Walker........ 85 65 308,975 54,525
</TABLE>
- --------
(1) Based on the estimated fair value of $6,985 per share (as determined by
the Company's Board of Directors) of the underlying securities.
EMPLOYMENT AGREEMENTS
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.
Vincent F. Garrity, Jr., a director of the Company, is a partner of Duane,
Morris & Heckscher LLP, which serves as the Company's primary legal counsel.
Thomas J. Hopkins, a director of the Company, is a Managing Director of Bear,
Stearns & Co. Inc., an investment banking firm that performed services for the
Company in 1997 in addition to being one of the Initial Purchasers in the
offering of the Old Notes.
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.
55
<PAGE>
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information as of January 15, 1998,
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
TITLE OF SHARES
NAME OF INDIVIDUAL OR IDENTITY OF CLASS OF CAPITAL BENEFICIALLY PERCENT
GROUP STOCK OWNED OF CLASS
- --------------------------------- ------------------- ------------ --------
<S> <C> <C> <C>
Michael T. Kennedy.................. Voting Common Stock 480 80.0%
Three Radnor Corporate Center
Suite 300
Radnor, PA 19087
John P. McNiff...................... Voting Common Stock 60 10.0%
Three Radnor Corporate Center
Suite 300
Radnor, PA 19087
R. Radcliffe Hastings............... Voting Common Stock 60 10.0%
Three Radnor Corporate Center
Suite 300
Radnor, PA 19087
</TABLE>
56
<PAGE>
The following table sets forth certain information as of January 15, 1998,
with respect to beneficial ownership of each class of equity securities of the
Company by (a) the directors of the Company, (b) the Named Executive Officers
and (c) the directors and all executive officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT
NAME OF INDIVIDUAL OR TITLE OF BENEFICIALLY OF
IDENTITY OF GROUP CLASS OF CAPITAL STOCK OWNED(1) CLASS(2)
--------------------- ---------------------- ------------ --------
<S> <C> <C> <C>
Michael T. Kennedy....... Voting Common Stock 480 80.0%
Class B Nonvoting Common Stock 3760 69.6%
Nonvoting Common Stock -- --
Michael V. Valenza....... Voting Common Stock -- --
Class B Nonvoting Common Stock -- --
Nonvoting Common Stock 52 18.8%
Richard C. Hunsinger..... Voting Common Stock -- --
Class B Nonvoting Common Stock -- --
Nonvoting Common Stock 140 41.8%
Donald D. Walker......... Voting Common Stock -- --
Class B Nonvoting Common Stock -- --
Nonvoting Common Stock 135 40.9%
R. Radcliffe Hastings.... Voting Common Stock 60 10.0%
Class B Nonvoting Common Stock 540 10.0%
Nonvoting Common Stock -- --
John P. McNiff........... Voting Common Stock 60 10.0%
Class B Nonvoting Common Stock 540 10.0%
Nonvoting Common Stock -- --
Vincent F. Garrity, Jr... Voting Common Stock -- --
Class B Nonvoting Common Stock -- --
Nonvoting Common Stock -- --
Thomas J. Hopkins........ Voting Common Stock -- --
Class B Nonvoting Common Stock -- --
Nonvoting Common Stock -- --
Directors and all
executive officers as a
group................... Voting Common Stock 600 100.0%
(12 persons) Class B Nonvoting Common Stock 4,840 89.6%
Nonvoting Common Stock 535 90.7%
</TABLE>
- --------
(1) Includes shares of Nonvoting Common Stock that certain individuals have
the right to acquire, on or before March 16, 1998, upon the exercise of
stock options granted pursuant to the Company's Equity Incentive Plan, as
follows: Michael V. Valenza--32; Richard C. Hunsinger--90; Donald D.
Walker--85; and the directors and all executive officers as a group--345.
(2) Based upon 600, 245 and 5,400 outstanding shares of Voting Common Stock,
Nonvoting Common Stock and Class B Nonvoting Common Stock, respectively.
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<PAGE>
DESCRIPTION OF OTHER COMPANY INDEBTEDNESS
THE AMENDED CREDIT AGREEMENT
On October 15, 1997, the Company entered into a Second Amended and Restated
Revolving Credit and Security Agreement (the "Amended Credit Agreement") with
BNY Financial Corporation and NationsBank, N.A., pursuant to which the Amended
and Restated Revolving Credit and Security Agreement dated as of December 5,
1996 was amended and restated. The Amended Credit Agreement includes the
Company and certain of 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 applicable
margin for domestic rate loans plus a rate equal to the greater of (a) BNY
Financial Corporation's prime rate or (b) the sum of the federal funds rate
plus not more than 0.5% or (ii) the applicable margin for Eurodollar rate
loans plus a rate equal to the LIBOR rate with respect to the period during
which such interest rate shall be applicable. The applicable margin for
domestic rate loans varies from 0% to 0.5%, and the applicable margin for
Eurodollar rate loans varies from 1.25% to 2.0%, depending upon the Company's
ability to achieve certain performance-based pricing criteria. The revolving
loans under the Amended Credit Agreement will mature on October 15, 2002. In
addition, the Amended Credit Agreement provides for a fee which varies from
0.125% to 0.5% per annum on the undrawn amount of the credit facility,
depending on the Company's ability to meet certain performance-based pricing
criteria, 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. As of October 15, 1997, the
applicable margin for domestic rate loans was 0.25%, the applicable margin for
Eurodollar rate loans was 1.75% and the applicable fee on the undrawn amount
of the credit facility was 0.375% per annum. 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.
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 certain of 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.
On October 15, 1997, the Company also entered into a supplement to the
Amended Credit Agreement pursuant to which a $10.0 million credit facility for
the Company's European subsidiaries was created, with
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<PAGE>
borrowings under the sublimit based on a "borrowing base" formula. The
obligations of the Company's European subsidiaries under the supplement, as
amended to date, are secured by assets of certain of the European subsidiaries
and are guaranteed by the Company and certain of its U.S. subsidiaries. This
supplement has increased the aggregate commitment amount of the existing
revolving credit facility to $40.0 million.
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 Canada, Ltd., formerly known as StryoChem International, Ltd.
("StyroChem Canada") 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 $0.4 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 will be 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
Canada'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 Canada'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 Canada under the Canadian Credit Agreement are
secured by a first priority perfected security interest in all of the material
assets of StyroChem Canada. In addition, Radnor Chemical Corporation
guaranteed the obligations of StyroChem Canada under the Canadian Credit
Agreement up to a maximum amount of $3.3 million Canadian. Radnor Chemical
Corporation has pledged all of the issued and outstanding shares of StyroChem
Canada as security for its obligations under its guarantee. Certain long-term
advances payable by StyroChem Canada to Radnor Chemical Corporation and
StyroChem U.S., Inc. will continue to be subordinated to the obligations of
StyroChem Canada under the Canadian Credit Agreement.
The Canadian Credit Agreement contains customary events of default,
including without limitation, the following: StyroChem Canada's failure to pay
principal, interest, fees or other amounts when due; StyroChem Canada's
violation or material breach of any covenants, representations or warranties;
cross-default and cross-acceleration; change of control of StyroChem Canada;
bankruptcy, insolvency or similar events involving StyroChem Canada; cessation
of StyroChem Canada's business and the levy of certain material judgments
against StyroChem Canada.
THE PRIOR NOTES
The Company has previously issued $100.0 million principal amount of the
Prior Notes, which have been registered under the Securities Act. The Prior
Notes bear interest at the rate of 10%, payable semi-annually in arrears on
June 1 and December 1 of each year. The Prior Notes mature on December 1, 2003
and are fully and unconditionally guaranteed on a joint and several basis by
substantially all of the Company's subsidiaries. The Prior Notes are senior
unsecured obligations of the Company and rank pari passu in right of payment
with all
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<PAGE>
other existing and future senior indebtedness of the Company, including the
Notes. The Prior Notes are effectively subordinated in right of payment to all
existing and future secured indebtedness of the Company and its subsidiaries,
including indebtedness under the Credit Agreements.
In the event of a change of control of the Company, each holder of Prior
Notes will have the right to require the Company to repurchase all or a
portion of such holder's Prior 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. The Prior 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 Prior 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
Prior Notes remains outstanding following such redemption. Thereafter, the
Prior Notes will be redeemable at the option of the Company, in whole or in
part, at redemption prices that decrease annually, plus accrued interest to
the date of redemption.
The Prior Notes were issued pursuant to and are entitled to the benefits of
the Prior Indenture. The Prior Indenture contains certain covenants with
respect to the Company and its subsidiaries that 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 Prior Indenture also
restricts 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 and requirements are subject to a number of important
qualifications and exceptions that are set forth in detail in the Prior
Indenture.
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<PAGE>
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 that 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 , 1998; 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, $60 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 , 1998, 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 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
61
<PAGE>
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.
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
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<PAGE>
any such other person (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. See "Plan of
Distribution." 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. 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 March 14, 1998, 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 March 15, 1998 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 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
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<PAGE>
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 having tendered the Old Notes to be withdrawn,
identify the Old Notes to be withdrawn (including 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 that have been
tendered for exchange but that 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-
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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.
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
1525 West W.T. Harris Blvd.
Building 3C3
Charlotte, NC 28262
Attention: Michael Klotz
By Hand or Overnight Courier:
1525 West W.T. Harris Blvd.
Building 3C3
Charlotte, NC 28262
Attention: Michael Klotz
By Facsimile:
(704) 590-7628
Confirm by Telephone:
(704) 590-7408
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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 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)
at the time of the consummation of the Exchange Offer, it has no arrangement
or understanding with any person to participate in the 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.
By so acknowledging and by delivering a prospectus, a broker-dealer will
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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 or any other person subject to the prospectus delivery requirements of
the Securities Act 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 offer or 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 (the "Indenture") among the
Company, as issuer, substantially all of the Company's Domestic 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 "Available 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 $60.0 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 and will be payable semi-annually on
June 1 and December 1 of each year, commencing June 1, 1998, 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 will rank pari passu in right of payment with all other
existing and future senior indebtedness of the Company, including the Prior
Notes. 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 to the Company and certain of its U.S. subsidiaries
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 such U.S. subsidiaries, and loans to the Company's
European subsidiaries under a supplement to the Amended Credit Agreement dated
October 15, 1997, as amended to date, are secured by similar assets of certain
of its European subsidiaries and are guaranteed by the Company and certain of
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
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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. On a pro forma basis after
giving effect to the Offering and the application of the net proceeds
therefrom as of September 26, 1997, the Company and its subsidiaries would
have had no outstanding indebtedness other than the Old Notes, the Prior Notes
and approximately $5.7 million outstanding under the Credit Agreements. In
addition, the Company would have had $32.4 million of additional borrowings
available under the Credit Agreements. See "--Certain Covenants," "Risk
Factors--Ranking of the Notes" and "Description of Other Company
Indebtedness."
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 (as defined
below), 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, jointly and severally, fully
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 will rank pari passu in right of payment with all other existing and
future senior indebtedness of such Guarantor, including the Prior Notes, 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 material Domestic 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."
Each Guarantor will be released from all its obligations under its Guarantee
only in accordance with the terms of the Indenture, as described under "--
Certain Covenants--Subsidiary Guarantees."
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 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>
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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 $21.0 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 $39.0 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 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
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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 shareholders 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. The Prior Indenture provides that upon
the occurrence of a change of control (as defined therein), the Company shall
be required to make an offer to the holders of the Prior Notes to repurchase
any or all of the Prior Notes at a purchase price equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest, if any,
to the date of purchase. 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
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,"
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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 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 Guarantor 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 Notes and Indebtedness
of any Guarantor evidenced by the Guarantees;
(b) Indebtedness of the Company evidenced by the Exchange Notes and
Indebtedness of any Guarantor evidenced by the guarantees with respect to
the Exchange Notes;
(c) Indebtedness of the Company or any Restricted Subsidiary constituting
Existing Indebtedness and any extension, deferral, renewal, refinancing or
refunding thereof;
(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) $40.0 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) Indebtedness of any Restricted Subsidiary which is a Foreign
Subsidiary in an aggregate principal amount at any one time outstanding not
to exceed the greater of (x) $10.0 million (or the equivalent amount
thereof, at the time of incurrence, in other foreign currencies) and (y)
the Foreign Subsidiary Borrowing Base at the time such Indebtedness was
incurred, or any refinancing, refunding, deferral, renewal or extension
thereof not in excess of such amount;
(f) 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
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such Indebtedness of the Company and all of the Restricted Subsidiaries
does not exceed $5.0 million outstanding at any time;
(g) 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);
(h) 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;
(i) 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;
(j) In addition to any Indebtedness otherwise permitted to be incurred
under the Indenture, up to $25.0 million aggregate principal amount of
Indebtedness at any one time outstanding; and
(k) 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 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
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(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) $15.0
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; and (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 $1.0 million 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.
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
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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;
(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 incurred under clause (d) of
the covenant described under "--Limitations on Indebtedness;"
(j) Liens on assets or properties of Restricted Subsidiaries that are
Foreign Subsidiaries securing the obligations incurred under clause (e) of
the covenant described under "--Limitations on Indebtedness;" and
(k) 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
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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, 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.
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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 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 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.
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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 jurisdiction under
which such Subsidiary was organized or under the laws of the United States of
America, any state thereof or the District of Columbia or under the laws of
any jurisdiction within the European Union 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, the Indenture and the Guarantee provided by such Guarantor;
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,
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 Domestic
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, (iii) any Domestic 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 any Senior Indebtedness of the Company, or (iv) any Foreign
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 and is not a Guarantor (x) directly or indirectly guarantees
any Senior Indebtedness of the Company (other than the Prior Notes) or (y)
causes more than two-thirds of its Capital Stock to be pledged to secure 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. The Company may at its option cause any Subsidiary of the
Company which is a Foreign Subsidiary to execute and deliver a Guarantee in
accordance with the provisions of the Indenture.
Upon (i) any sale, exchange, transfer or other disposition (by way of
merger, consolidation or otherwise), to any Person (other than a Guarantor) of
all of the Equity Interests of any Guarantor, or all or substantially all of
the assets of any Guarantor, which is in compliance with the Indenture, or
(ii) the designation by the Company
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of any Guarantor to be an Unrestricted Subsidiary in accordance with the
Indenture, or (iii) the release of the guarantee or other obligation of any
Guarantor with respect to any other Senior Indebtedness of the Company which
caused such Guarantor to guarantee the Company's obligations under the
Indenture and the Notes in accordance with clause (iii) or (iv) of the
preceding paragraph, such Guarantor will be automatically released from all
its obligations under its Guarantee.
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 $1.0 million, 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 $5.0 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
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 $1.0 million 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 or shares required to be held by
foreign nationals, in each case to the extent mandated by applicable law) to
any Person other than to the Company or a Wholly-Owned Restricted Subsidiary.
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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 to comply with the covenant
entitled "Limitations on Mergers; Sales of Assets"; (iv) 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" and "Change of Control"
for a period that continues for 30 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) failure by
the Company or a Guarantor, if applicable, to 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; (vi) the Company denies or disaffirms in writing its
obligations under the Indenture or the Notes; (vii) 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; (viii) 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,
(ix) 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 (x) certain events of bankruptcy or insolvency of the
Company or any of the Restricted Subsidiaries.
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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 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
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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 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
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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 is permitted to engage
in other transactions; however, if it acquires any conflicting interest, it
must eliminate such conflict or resign.
The Company or any Guarantor may have customary banking relationships with
the Trustee in the ordinary course of business.
BOOK-ENTRY; DELIVERY AND FORM
New Notes issued in exchange for Old Notes (i) offered and sold (x) to
"qualified institutional buyers" (as defined in Rule 144A under the Securities
Act) ("QIBs") in reliance on the exemption from the registration requirements
of the Securities Act provided by Rule 144A, and (y) outside the United States
in reliance on Regulation S under the Securities Act or (ii) transferred
subsequent to the consummation of the Offering to institutional "accredited
investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act) ("Accredited Investors") who are not QIBs, will be represented by a
separate note in registered, global form without interest coupons (the "Global
Note"). Upon consummation of the Exchange Offer, the Global Note will be
deposited with, or on behalf of, The Depositary Trust Company (the
"Depositary") and will be registered in the name of Cede & Co., as nominee of
the Depositary (such nominee being referred to herein as the "Global Note
Holder"), in each case for credit to an account of a direct or indirect
participant as described below.
The New Notes that are issued as described below under "--Certificated
Securities" will be issued in the form of registered definitive certificates
(the "Certificated Securities"). Such Certificated Securities may, unless the
Global Note has previously been exchanged for Certificated Securities, be
exchanged for an interest in the Global Note representing the principal amount
of Notes being transferred.
The Depositary has advised the Company as follows: The Depositary is a
limited-purpose trust company that was created to hold securities for its
participating organizations (collectively, the "Participants" or the
"Depositary's Participants") and to facilitate the clearance and settlement of
transactions in such securities between Participants through electronic book-
entry changes in accounts of its Participants. The Depositary's Participants
include securities brokers and dealers (including the Initial Purchasers),
banks and trust companies,
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clearing corporations and certain other organizations. Access to the
Depositary's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect
Participants" or the "Depositary's Indirect Participants") that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
The Company expects that, pursuant to procedures established by the
Depositary, (i) upon deposit of the Global Note, the Depositary will credit
the accounts of Participants initially designated by or on behalf of the
Initial Purchasers with portions of the principal amount of the Global Note
and (ii) ownership of the Notes evidenced by the Global Note will be shown on,
and the transfer of ownership thereof will be effected only through, records
maintained by the Depositary (with respect to the interests of the
Depositary's Participants), the Depositary's Participants and the Depositary's
Indirect Participants. Prospective purchasers are advised that the laws of
some states require that certain persons take physical delivery in definitive
form of securities that they own. Consequently, the ability to transfer Notes
evidenced by the Global Notes will be limited to such extent.
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of
any Notes evidenced by the Global Notes. Beneficial owners of Notes evidenced
by the Global Note will not be considered the owners or Holders thereof under
the Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any
aspect of the records of the Depositary relating to the Notes.
Payments in respect of the principal of and premium, interest and amounts
payable in respect of Registration Defaults, if any, on any Notes registered
in the name of the Global Note Holder on the applicable record date will be
payable by the Trustee to or at the direction of the Global Note Holder in its
capacity as the registered Holder under the Indenture. Under the terms of the
Indenture, the Company and the Trustee may treat the persons in whose names
Notes, including the Global Note, are registered as the owners thereof for the
purpose of receiving such payments. Consequently, neither the Company nor the
Trustee has or will have any responsibility or liability for the payment of
such amounts to beneficial owners of Notes. The Company believes, however,
that it is currently the policy of the Depositary to immediately credit the
accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant security as shown on the records of the Depositary. Payments by the
Depositary's Participants and Depositary's Indirect Participants to the
beneficial owners of Notes will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
Certificated Securities
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Securities. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of, and cause the same to be delivered to, such person or persons (or
the nominee of any thereof). In addition, if (i) the Company notifies the
Trustee in writing that the Depositary is no longer willing or able to act as
a depositary and the Company is unable to locate a qualified successor within
90 days or (ii) the Company, at its option, notifies the Trustee in writing
that it elects to cause the issuance of Notes in the form of Certificated
Securities under the Indenture, then, upon surrender by the Global Note Holder
of the Global Note, New Notes in such form will be issued to each person that
the Global Note Holder and the Depositary identify as being the beneficial
owner of the related New Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
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Same-Day Settlement and Payment
The Indenture requires that payments in respect of the Notes represented by
the Global Note (including principal, premium, interest) be made by wire
transfer of immediately available funds to the accounts specified by the
Global Note Holder. With respect to Certificated Securities, the Company will
make all payments of principal, premium, and amounts payable in respect of a
Registration Default, by wire transfer of immediately available funds to the
accounts specified by the Holders thereof or, if no such account is specified,
by mailing a check to each such Holder's registered address.
The Notes represented by the Global Note are expected to be eligible to
trade in the Depositary's Same-Day Funds Settlement System, and any permitted
secondary market trading activity in such Notes will, therefore, be required
by the Depositary to be settled in immediately available funds. The Company
expects that secondary trading in the Certificated Securities will also be
settled in immediately available funds.
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.
"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
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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.
"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 insurance cost,
(iii) capitalized interest, (iv) non-cash interest expense,
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(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 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).
"Controlled Subsidiary" means a Restricted Subsidiary (i) 80% or more of the
total Equity Interests or other ownership interests of which (other than
directors' qualifying shares or shares required to be held by foreign
nationals, in each case to the extent mandated by applicable law) is at the
time owned by the Company (directly or through one or more Controlled
Subsidiaries of the Company) and (ii) of which the Company possesses, directly
or indirectly, the power to direct or cause the direction of the management or
policies, whether through the ownership of voting securities, by agreement or
otherwise.
"Domestic Subsidiary" means, with respect to any Person, any Subsidiary of
such Person which is not incorporated or organized in any jurisdiction outside
of the United States of America.
"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).
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means senior notes issued pursuant to any Exchange Offer
Registration Statement.
"Exchange Offer Registration Statement" means the registration statement to
be filed by the Company and the Guarantors with the Securities and Exchange
Commission with respect to an offer to exchange the Notes for another series
of senior notes of the Company with substantially identical terms to the
Notes.
"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
thereto.
"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.
"Foreign Subsidiary" means, with respect to any Person, any Subsidiary of
such Person other than a Domestic Subsidiary of such Person.
"Foreign Subsidiary 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
Restricted Subsidiaries of the Company which are Foreign Subsidiaries as of
such date, and (b) 60% of the net book value of the inventory owned by the
Restricted Subsidiaries of the Company which are Foreign 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 statements of such
Subsidiaries for purposes of calculating the Foreign Subsidiary Borrowing
Base.
"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 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.
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"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 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
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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 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
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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 (g) of the covenant
described under "--Certain Covenants--Limitations on Indebtedness," (v)
Investments in any Controlled Subsidiary or any Guarantor or any Person which,
as a result of such Investment, becomes a Controlled Subsidiary or a
Guarantor, and (vi) Investments that do not at one time outstanding exceed
$20.0 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;
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(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.
"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.
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"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 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.
"Wholly-Owned Restricted Subsidiary" means a Restricted Subsidiary all of
the Capital Stock of which (other than Capital Stock constituting directors'
qualifying shares or shares required to be held by foreign nationals, in each
case to the extent mandated by applicable law) is owned by the Company or one
or more Wholly-Owned Restricted Subsidiaries or by the Company and one or more
Wholly-Owned Restricted Subsidiaries.
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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) no later than December 14, 1997, file the Exchange
Offer Registration Statement with the SEC 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 February 12, 1998. 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 at least 20 business days (or longer if required
by applicable law) 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) and other applicable laws, rules and regulations.
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.
Under existing interpretations of the staff of the SEC'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.
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) at the time of the
consummation of the Exchange Offer, it has no arrangement or understanding
with any person to participate in the 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 any of 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 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 March
14, 1998, 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) as promptly as
practicable 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 within a specified time period and (c) use their best efforts to
keep such registration statement current and effective until 24 months
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from the date it becomes effective (subject to extension in certain
circumstances) 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
March 14, 1998, (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 of any additional 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 and has
been filed as an exhibit to the Registration Statement on Form S-4 of which
this Prospectus is a part.
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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 LLP, counsel to the Company, that the material federal income tax
consequences of consummating the Exchange Offer and holding and disposing of
the New Notes are as set forth below, 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.
Interest Income. Interest on the Notes will be includable in the income of a
holder under the holder's regular method of accounting. The Notes will not be
treated as having been issued with original issue discount.
Market Discount. Investors acquiring Notes pursuant to this Prospectus
should note that the resale of the 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 Note (other than a holder who
purchased the 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 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 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 Notes. Each holder of Notes generally
will recognize gain or loss upon the sale, exchange, repurchase, redemption,
retirement or other disposition of those Notes measured by the difference (if
any) between (i) the amount of cash and the fair market value of any property
received (except to the extent that such cash or other property is
attributable to the payment of accrued interest not previously
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included in income, which amount will be taxable as ordinary income) and (ii)
the holder's adjusted tax basis in those 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 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 Note had
been held for more than one year at the time of the sale or exchange, although
a 20% preferential capital gains rate applicable to individuals does not apply
unless the Notes have been held for more than 18 months. An investor's initial
basis in a Note will be the cash price it paid therefor.
Backup Withholding. A holder of 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
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 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 Note. The
term "Foreign Person" means a nonresident alien individual or foreign
corporation, but only if the income or gain on the Note is not "effectively
connected with the conduct of a trade or business within the U.S." If the
income or gain on the 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 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 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 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 Note on behalf of the owner of the 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 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
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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 Note is
redeemed, sold or exchanged, and certain other requirements are met.
Prospective Final Regulations. On October 6, 1997, the IRS released Treasury
Regulations that revise the procedures for withholding tax, and the associated
backup withholding and information reporting rules described above for
payments of interest and gross proceeds made after December 31, 1998. The
regulations modify the requirements imposed on a Foreign Person and certain
intermediaries for establishing the recipient's status as a Foreign Person
eligible for exemption from withholding and backup withholding. Foreign
Persons should consult their tax advisors to determine how the regulations
will affect their particular circumstances.
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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, 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 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) at the time of the
consummation of the Exchange Offer, it has no arrangement or understanding
with any person to participate in the 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 any of 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. 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 or any
other person subject to the prospectus delivery requirements of the Securities
Act 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 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.
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LEGAL MATTERS
Certain legal matters relating to the New Notes being offered hereby will be
passed upon for the Company by Duane, Morris & Heckscher LLP, Philadelphia,
Pennsylvania. Vincent F. Garrity, Jr. a director of the Company, is also a
partner in Duane, Morris & Heckscher LLP.
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 report
of such firm given upon their authority as experts in accounting and auditing.
The audited financial statements of Neste Oy Polystyrene Upstream Business
in Provoo and Kokemaki and Isora Oy included in this Prospectus and elsewhere
in the registration statement have been audited by Arthur Andersen Oy,
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 audited financial statements of Neste Cellplast AB as of and for the
year ended December 31, 1996 included in this Prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen AB, 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 audited financial statements of Neste Thermisol A/S included in this
Prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen, 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.
AVAILABLE INFORMATION
A Registration Statement on Form S-4, including amendments thereto, relating
to the New Notes and New Guarantees offered hereby has been filed by 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
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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,
Radnor, Pennsylvania 19087, Attention: Treasurer (telephone number (610) 341-
9600).
The Company and the Guarantors are required to file periodic reports in
accordance with Section 13 or 15(d) of the Exchange Act with the SEC and will
be required to file periodic reports for such time 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.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
RADNOR HOLDINGS CORPORATION
Report of Independent Public Accountants................................ F-3
Consolidated Balance Sheets as of December 29, 1995 and December 27,
1996................................................................... F-4
Consolidated Statements of Operations for the Fiscal Years Ended
December 30, 1994, December 29, 1995 and December 27, 1996............. F-5
Consolidated Statements of Stockholders' (Deficit) Equity for the Fiscal
Years Ended December 30, 1994, December 29, 1995 and December 27,
1996................................................................... F-6
Consolidated Statements of Cash Flows for the Fiscal Years Ended
December 30, 1994, December 29, 1995 and December 27, 1996............. F-7
Notes to Consolidated Financial Statements.............................. F-8
Condensed Consolidated Balance Sheets as of December 27, 1996 and
September 26, 1997 (unaudited)......................................... F-18
Condensed Consolidated Statements of Income for the Three Months and
Nine Months Ended September 27, 1996 and September 26, 1997
(unaudited)............................................................ F-19
Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended September 27, 1996 and September 26, 1997 (unaudited)............ F-20
Notes to Condensed Consolidated Financial Statements (unaudited)........ F-21
J.R. CUP FOAM CONTAINER OPERATIONS OF JAMES RIVER PAPER COMPANY, INC.
Report of Independent Public Accountants................................ F-23
Balance Sheets as of December 25, 1994 and December 31, 1995............ F-24
Statements of Operations for the Years Ended December 26, 1993, December
25, 1994 and December 31, 1995......................................... F-25
Statements of Changes in Owner's Investment for the Years Ended December
26, 1993, December 25, 1994 and December 31, 1995...................... F-26
Statements of Cash Flows for the Years Ended December 26, 1993, December
25, 1994 and December 31, 1995......................................... F-27
Notes to Financial Statements........................................... F-28
SP ACQUISITION CO. AND SUBSIDIARIES
Report of Independent Public Accountants................................ F-32
Independent Auditors' Report............................................ F-33
Consolidated Balance Sheets as of April 1, 1995, March 30, 1996 and De-
cember 5, 1996......................................................... F-34
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-35
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-36
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-37
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-38
NESTE OY POLYSTYRENE UPSTREAM BUSINESS IN PORVOO AND KOKEMAKI
Report of Independent Public Accountants................................ F-48
Balance Sheets as of December 31, 1995 and 1996 and September 30, 1997
(unaudited)............................................................ F-49
Statements of Operations for the Years ended December 31, 1994, 1995 and
1996 and the Nine Month Periods Ended September 30, 1996 and 1997 (un-
audited)............................................................... F-50
Statements of Changes in Owner's Investment for the Years Ended December
31, 1994, 1995 and 1996 and the Nine Month Period Ended September 30,
1997 (unaudited)....................................................... F-51
Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and
1996 and the Nine Month Periods Ended September 30, 1996 and 1997 (un-
audited)............................................................... F-52
Notes to Financial Statements........................................... F-53
</TABLE>
F-1
<PAGE>
<TABLE>
<S> <C>
ISORA OY
Report of Independent Public Accountants................................ F-57
Balance Sheets as of December 31, 1995 and 1996 and September 30, 1997
(unaudited)............................................................ F-58
Statements of Operations for the Years Ended December 31, 1994, 1995 and
1996 and the Nine Month Periods Ended September 30, 1996 and 1997 (un-
audited)............................................................... F-59
Statements of Changes in Stockholder's Equity for the Years Ended Decem-
ber 31, 1994, 1995 and 1996 and the Nine Month Period Ended September
30, 1997 (unaudited)................................................... F-60
Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and
1996 and the Nine Month Periods Ended September 30, 1996 and 1997 (un-
audited)............................................................... F-61
Notes to Financial Statements........................................... F-62
NESTE CELLPLAST AB
Report of Independent Public Accountants................................ F-66
Auditors' Report on Neste Cellplast AB.................................. F-67
Auditors' Report on Neste Cellplast Aktiebolag.......................... F-68
Balance Sheets as of December 31, 1995 and 1996 and September 30, 1997
(unaudited)............................................................ F-69
Statements of Operations for the Years Ended December 31, 1994, 1995 and
1996 and the Nine Month Periods Ended September 30, 1996 and 1997 (un-
audited)............................................................... F-70
Statements of Changes in Stockholders' Equity for the Years Ended Decem-
ber 31, 1994, 1995 and 1996 and the Nine Month Period Ended September
30, 1997 (unaudited)................................................... F-71
Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and
1996 and the Nine Month Periods Ended September 30, 1996 and 1997 (un-
audited)............................................................... F-72
Notes to Financial Statements........................................... F-73
NESTE THERMISOL A/S
Report of Independent Public Accountants................................ F-77
Balance Sheets as of December 31, 1995 and 1996 and September 30, 1997
(unaudited)............................................................ F-78
Statements of Operations for the Years Ended December 31, 1994, 1995 and
1996 and the Nine Month Periods Ended September 30, 1996 and 1997 (un-
audited)............................................................... F-79
Statements of Changes in Shareholder's Equity for the Years Ended Decem-
ber 31, 1994, 1995 and 1996 and the Nine Month Period Ended September
30, 1997 (unaudited)................................................... F-80
Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and
1996 and the Nine Month Periods Ended September 30, 1996 and 1997 (un-
audited)............................................................... F-81
Notes to Financial Statements........................................... F-82
STYROCHEM EUROPE
Combining Statement of Operations for the Year Ended December 31, 1996
(unaudited)............................................................ F-85
Combining Statement of Operations for the Nine Months Ended September
30, 1997 (unaudited)................................................... F-86
Combining Balance Sheet as of September 30, 1997 (unaudited)............ F-87
</TABLE>
F-2
<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-3
<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-4
<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 BEFORE
INCOME TAXES AND MINORITY INTEREST................ (312) (7,877) 2,858
Provision for income taxes....................... -- -- 121
Minority interest in income...................... -- -- 1,348
------- ------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS........... (312) (7,877) 1,389
------- ------- --------
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............ (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-5
<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-6
<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-7
<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. 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,
F-8
<PAGE>
RADNOR HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(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). At January 20, 1996 the minority interest in the
partnership was reflected in the Company's consolidated balance sheet at
approximately $9.1 million. For the period January 20, 1996 through December
5, 1996 the minority interest (45%) in the income of the partnership was
approximately $1.3 million and this amount has been reflected in the
consolidated statement of operations.
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.
F-9
<PAGE>
RADNOR HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
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. The financial
information of the sole non-guarantor indirect subsidiary is inconsequential.
Separate financial statements of the guarantors are
F-10
<PAGE>
RADNOR HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
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.
F-11
<PAGE>
RADNOR HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
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-12
<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 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,
F-13
<PAGE>
RADNOR HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
(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 $.01. In October 1996, the
Company completed a recapitalization in which each outstanding share of Voting
F-14
<PAGE>
RADNOR HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Common Stock was converted into 0.1 shares of Voting Common Stock and 0.9
shares of Class B Nonvoting Common Stock.
The Series A Convertible Preferred Stock ($.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-15
<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>
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.
F-16
<PAGE>
RADNOR HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(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-17
<PAGE>
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 27, SEPTEMBER 26,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash.............................................. $ 855 $ 1,303
Accounts receivable, net.......................... 24,687 20,194
Inventories, net.................................. 19,078 25,386
Prepaid expenses and other........................ 3,971 5,438
Deferred tax asset................................ 2,380 2,378
-------- --------
Total current assets............................ 50,971 54,699
-------- --------
PROPERTY, PLANT AND EQUIPMENT....................... 115,763 126,269
LESS--ACCUMULATED DEPRECIATION...................... (4,372) (9,380)
-------- --------
NET PROPERTY, PLANT AND EQUIPMENT................... 111,391 116,889
-------- --------
OTHER ASSETS........................................ 10,007 10,320
-------- --------
Total assets.................................... $172,369 $181,908
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.................................. $ 28,884 $ 25,681
Accrued liabilities............................... 13,166 13,836
Current portion of long-term debt................. 237 235
-------- --------
Total current liabilities....................... 42,287 39,752
-------- --------
LONG-TERM DEBT, net of current portion.............. 104,362 115,632
-------- --------
DEFERRED TAX LIABILITY.............................. 11,173 11,286
-------- --------
OTHER NONCURRENT LIABILITIES........................ 218 450
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Voting and nonvoting common stock, 22,700 shares
authorized, 6,245 shares issued and outstanding.. 1 1
Additional paid-in capital........................ 17,720 17,720
Accumulated deficit............................... (3,420) (2,931)
Cumulative translation adjustment................. 28 (2)
-------- --------
Total stockholders' equity...................... 14,329 14,788
-------- --------
Total liabilities and stockholders' equity...... $172,369 $181,908
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-18
<PAGE>
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
--------------------------- ---------------------------
SEPTEMBER 27, SEPTEMBER 26, SEPTEMBER 27, SEPTEMBER 26,
1996 1997 1996 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales............... $43,526 $56,090 $128,052 $170,545
Cost of goods sold...... 33,899 42,299 98,660 127,730
------- ------- -------- --------
Gross profit........ 9,627 13,791 29,392 42,815
Operating expenses:
Distribution.......... 3,490 4,024 10,223 12,569
Selling, general and
administrative....... 4,659 6,307 13,538 17,747
Restructuring
charges.............. 174 -- 855 --
------- ------- -------- --------
Income from
operations......... 1,304 3,460 4,776 12,499
Other (income) expense:
Interest.............. 1,214 2,993 3,346 8,781
Other, net............ (70) 44 153 (94)
------- ------- -------- --------
Income (loss) from
operations before
income taxes and
minority interest...... 160 423 1,277 3,812
Provision for income
taxes
Current............... -- 4 -- 210
Deferred.............. -- -- -- 113
Minority interest in
income................. 70 -- 731 --
------- ------- -------- --------
Income (loss) before
extraordinary item..... 90 419 546 3,489
Extraordinary item-gain
on early extinguishment
of debt................ -- -- 710 --
------- ------- -------- --------
Net income.............. $ 90 $ 419 $ 1,256 $ 3,489
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-19
<PAGE>
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
---------------------------
SEPTEMBER 27, SEPTEMBER 26,
1996 1997
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income....................................... $ 1,256 $ 3,489
Adjustments to reconcile net income to cash
provided by (used in) operating activities--
Depreciation.................................... 3,170 5,008
Amortization.................................... 446 1,363
Deferred income taxes........................... -- 113
Minority interest in income..................... 731 --
Extraordinary gain on early extinguishment of
debt........................................... (710) --
Changes in operating assets and liabilities, net
of acquisition of business--
Accounts receivable, net....................... (6,459) 4,493
Inventories.................................... (47) (6,308)
Prepaid expenses and other..................... (772) (1,689)
Accounts payable............................... 4,087 (3,203)
Accrued liabilities............................ 1,157 902
-------- --------
Net cash provided by continuing operations.... 2,859 4,168
Net cash provided by discontinued operations.. 982 --
-------- --------
Net cash provided by operating activities..... 3,841 4,168
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures............................... (2,629) (10,312)
Acquisition of JR Cup, net of cash acquired...... (21,042) --
Increase in other assets......................... (1,254) (1,676)
-------- --------
Net cash used in investing activities........... (24,925) (11,988)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on bank financed debt and
unsecured notes payable......................... 21,100 11,268
Cash dividends................................... -- (3,000)
-------- --------
Net cash provided by financing activities....... 21,100 8,268
-------- --------
NET INCREASE IN CASH............................... 16 448
CASH, beginning of period.......................... 5 855
-------- --------
CASH, end of period................................ $ 21 $ 1,303
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest Paid.................................... $ 1,488 $ 5,619
======== ========
Income Taxes Paid................................ $ 7 $ 717
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-20
<PAGE>
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The condensed consolidated financial statements included herein have been
prepared by Radnor Holdings Corporation ("Radnor") and subsidiaries
(collectively, the "Company") pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in consolidated financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations. In the opinion of the
Company, the statements include all adjustments (which include only normal
recurring adjustments) required for a fair statement of financial position,
results of operations and cash flows for such periods. The results of
operations for the interim periods are not necessarily indicative of the
results for a full year.
Radnor is a holding company which has no operations or assets separate from
its investment in its subsidiaries. Radnor's $100 million senior notes are
guaranteed by all of its direct and indirect wholly-owned subsidiaries on a
full, unconditional, joint and several basis other than certain non-guarantor
subsidiaries that are individually and in the aggregate inconsequential.
Separate financial statements of the guarantors are not presented because
management has determined that they would not be material.
(2) INVENTORIES
The components of inventories were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 27, SEPTEMBER 26,
1996 1997
------------ -------------
<S> <C> <C>
Raw Materials..................................... $ 4,503 $ 6,869
Work in Process................................... 2,242 1,260
Finished Goods.................................... 12,333 17,257
------- -------
$19,078 $25,386
======= =======
</TABLE>
(3) INTEREST EXPENSE
Included in interest expense is $114,000 and $188,000 of amortization of
deferred financing costs for the three months ended September 27, 1996 and
September 26, 1997, respectively. In addition, included in interest expense is
$266,000 and $464,000 of amortization of deferred financing costs for the nine
months ended September 27, 1996 and September 26, 1997, respectively.
(4) PENDING ACCOUNTING CHANGES
In July 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income," and Statement No. 131, "Disclosures About Segments of an Enterprise
and Related Information." Statement No. 130 establishes standards for
reporting comprehensive income in financial statements. Statement No. 131
expands certain reporting and disclosure requirements for segments from
current requirements. The Company is not required to adopt these Statements
until 1998 and does not expect the adoption of these new standards to result
in material changes to previously reported amounts or disclosures.
(5) SUBSEQUENT EVENTS
StyroChem Europe Acquisition
On October 15, 1997, the Company acquired substantially all of the tangible
and intangible assets and long term investments relating to the polystyrene
production and conversion operations of Neste Oy (the "StyroChem Europe
Acquisition"). The cash consideration for the acquired assets was 213.0
million Finnish markkas ($40.8
F-21
<PAGE>
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
million as of the date of closing) plus 60.0 million Finnish markkas ($11.5
million as of the date of closing) for the net working capital, which included
accounts receivable, inventory, trade accounts payable and accrued
liabilities. Pursuant to the Sale of Assets Agreement, the purchase price will
be adjusted on a markka for markka basis following an audit of the net working
capital to the extent that net working capital is greater or less than 60.0
million Finnish markkas.
Senior Note Offering
On October 15, 1997, the Company issued $60.0 million of 10% Series B Senior
Notes due 2003. The net proceeds to the Company from the offering in the
amount of $60.6 million were used to repay existing indebtedness under the
Company's revolving credit agreement and to finance the StyroChem Europe
Acquisition.
Amended Credit Agreement
On October 15, 1997, the Company amended its current credit facility which
increased the aggregate commitment to $40.0 million and included a $10.0
sublimit for the Company's European subsidiaries.
F-22
<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-23
<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-24
<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-25
<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-26
<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
operating activities:
Depreciation........................ 2,434 2,478 2,580
Changes in operating assets and
liabilities--
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-27
<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.
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:
F-28
<PAGE>
J.R. CUP FOAM CONTAINER OPERATIONS OF
JAMES RIVER PAPER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
<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 $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.
F-29
<PAGE>
J.R. CUP FOAM CONTAINER OPERATIONS OF
JAMES RIVER PAPER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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
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.
F-30
<PAGE>
J.R. CUP FOAM CONTAINER OPERATIONS OF
JAMES RIVER PAPER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(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-31
<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-32
<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-33
<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-34
<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 ADMINISTRA-
TIVE 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-35
<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-36
<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 as-
sets............................. (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-37
<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-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
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.
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
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
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>
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>
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
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-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
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 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.
F-42
<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
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>
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 sub-
sidiary...................................... -- 4.4 --
Other......................................... -- 3.3 3.3
---- ---- ----
37.1% 43.7% 40.0%
==== ==== ====
</TABLE>
F-43
<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
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.
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,
F-44
<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
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.
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> <C>
Convermex............................. $ 138,600 $201,600 $619,760
James River........................... 1,396,305 76,698 122,488
</TABLE>
F-45
<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
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 peri-
od):
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>
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.
F-46
<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
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 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-47
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Neste Oy:
We have audited the accompanying balance sheets of NESTE OY POLYSTYRENE
UPSTREAM BUSINESS IN PORVOO AND KOKEMAKI (an operating unit of the NESTE Oy
Chemicals division) as of December 31, 1995 and 1996, and the related
statements of operations, changes in owner's investment and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NESTE OY POLYSTYRENE
UPSTREAM BUSINESS IN PORVOO AND KOKEMAKI as of December 31, 1995 and 1996, and
the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1996, in conformity with generally accepted
accounting principles (see Note 1).
ARTHUR ANDERSEN OY
Helsinki, Finland
September 5, 1997
(except with respect to the matters discussed in Note 10,
as to which the date is October 15, 1997)
F-48
<PAGE>
NESTE OY POLYSTYRENE UPSTREAM BUSINESS IN PORVOO AND KOKEMAKI
BALANCE SHEETS
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
------
CURRENT ASSETS:
Accounts receivable.................. $ 7,615 $ 6,499 $ 8,659
Inventories, net..................... 10,498 5,149 5,718
Prepaid expenses and other........... 71 735 553
-------- -------- --------
18,184 12,383 14,930
-------- -------- --------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land and improvements................ 483 453 398
Buildings and improvements........... 19,680 18,648 16,531
Machinery and equipment.............. 30,374 28,146 25,519
-------- -------- --------
50,537 47,247 42,448
Less accumulated depreciation........ (23,263) (22,963) (21,240)
-------- -------- --------
27,274 24,284 21,208
Share of common assets allocated by
Neste (Note 5)...................... 2,581 1,735 1,357
-------- -------- --------
Total property, plant, and
equipment......................... 29,855 26,019 22,565
-------- -------- --------
OTHER ASSETS........................... 332 344 323
-------- -------- --------
$ 48,371 $ 38,746 $ 37,818
======== ======== ========
LIABILITIES AND OWNER'S INVESTMENT
----------------------------------
CURRENT LIABILITIES:
Accounts payable..................... $ 3,811 $ 3,657 $ 3,708
Accrued liabilities.................. 1,024 1,353 1,160
-------- -------- --------
4,835 5,010 4,868
COMMITMENTS AND CONTINGENCIES (Note 9)
OWNER'S INVESTMENT..................... 43,536 33,736 32,950
-------- -------- --------
$ 48,371 $ 38,746 $ 37,818
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these finanacial statements.
F-49
<PAGE>
NESTE OY POLYSTYRENE UPSTREAM BUSINESS IN PORVOO AND KOKEMAKI
STATEMENTS OF OPERATIONS
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
FOR THE NINE MONTH PERIOD
FOR THE YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
-------------------------------- ---------------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES............... $ 58,188 $ 63,179 $ 60,805 $ 45,905 $ 46,380
COST OF GOODS SOLD...... 41,060 47,944 40,752 30,635 32,455
---------- ---------- ---------- ------------ ------------
GROSS PROFIT............ 17,128 15,235 20,053 15,270 13,925
OPERATING EXPENSES:
Distribution.......... 2,961 2,471 3,392 2,440 2,632
Selling, general and
administrative....... 7,515 10,652 10,768 7,774 8,781
Allocation from
Neste................ 1,529 2,026 1,610 1,324 --
---------- ---------- ---------- ------------ ------------
INCOME FROM OPERATIONS.. 5,123 86 4,283 3,732 2,512
OTHER INCOME............ 1 1 -- -- --
---------- ---------- ---------- ------------ ------------
INCOME BEFORE INCOME
TAXES.................. 5,124 87 4,283 3,732 2,512
PROVISION FOR INCOME
TAXES.................. 1,434 24 1,199 1,045 703
---------- ---------- ---------- ------------ ------------
NET INCOME.............. $ 3,690 $ 63 $ 3,084 $ 2,687 $ 1,809
========== ========== ========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-50
<PAGE>
NESTE OY POLYSTYRENE UPSTREAM BUSINESS IN PORVOO AND KOKEMAKI
STATEMENTS OF CHANGES IN OWNER'S INVESTMENT
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<S> <C>
BALANCE, January 1, 1994........................................... $ 39,522
Net income....................................................... 3,690
Contributions from Neste......................................... 932
--------
BALANCE, December 31, 1994......................................... $ 44,144
Net income....................................................... 63
Distributions to Neste........................................... (2,107)
Translation adjustment........................................... 1,436
--------
BALANCE, December 31, 1995......................................... 43,536
Net income....................................................... 3,084
Distributions to Neste........................................... (10,170)
Translation adjustment........................................... (2,714)
--------
BALANCE, December 31, 1996......................................... 33,736
Net income (unaudited)........................................... 1,809
Contributions to Neste (unaudited)............................... (2,547)
Translation adjustment (unaudited)............................... (48)
--------
BALANCE, September 30, 1997 (unaudited)............................ $ 32,950
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-51
<PAGE>
NESTE OY POLYSTYRENE UPSTREAM BUSINESS IN PORVOO AND KOKEMAKI
STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
FOR THE NINE MONTH PERIOD
FOR THE YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------------------- ----------------------------
1994 1995 1996 1996 1997
---------- ---------- ----------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERAT-
ING ACTIVITIES:
Net income............ $ 3,690 $ 63 $ 3,084 $ 2,687 $ 1,809
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation.......... 2,141 2,455 1,975 1,506 1,286
Changes in operating
assets and liabili-
ties--
Accounts receivable.. (3,739) 4,016 648 (1,597) (2,160)
Inventories, net..... (1,354) 306 4,704 5,288 (569)
Prepaid expenses and
other............... -- (71) (668) (274) 182
Accounts payable..... 541 (2,605) 80 751 51
Accrued liabilities.. (587) 903 392 285 (193)
---------- ---------- ----------- ------------ ------------
Net cash provided by
operating activi-
ties............... 692 5,067 10,215 8,646 406
---------- ---------- ----------- ------------ ------------
CASH FLOWS FROM INVEST-
ING ACTIVITIES:
Net purchases of
property, plant,
equipment and other
assets............... (1,517) (3,081) (699) 938 1,811
Net (increase)
decrease in share of
common assets
allocated by Neste... (485) 121 695 (156) 378
---------- ---------- ----------- ------------ ------------
Net cash provided by
(used in) investing
activities......... (2,002) (2,960) (4) 782 2,189
---------- ---------- ----------- ------------ ------------
CASH FLOWS FROM FINANC-
ING ACTIVITIES:
Other................. 378 -- (41) 27 (48)
Contributions from
(distributions to)
Neste................ 932 (2,107) (10,170) (9,455) (2,547)
---------- ---------- ----------- ------------ ------------
Net cash provided by
(used in) financing
activities......... 1,310 (2,107) (10,211) (9,428) (2,595)
---------- ---------- ----------- ------------ ------------
CASH, BEGINNING OF PERI-
OD..................... -- -- -- -- --
---------- ---------- ----------- ------------ ------------
CASH, END OF PERIOD..... $ -- $ -- $ -- $ -- $ --
========== ========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-52
<PAGE>
NESTE OY POLYSTYRENE UPSTREAM BUSINESS IN PORVOO AND KOKEMAKI
NOTES TO FINANCIAL STATEMENTS
(INCLUDING NOTES APPLICABLE TO UNAUDITED PERIODS)
(1) ORGANIZATION AND BASIS OF PRESENTATION:
The Business Unit
Neste Oy (Neste) is an international oil, exploration and production, energy
and chemicals company, which is registered in Espoo, Finland and the shares of
which are quoted on the Helsinki stock exchange. The Neste Oy Polystyrene
Upstream Business in Porvoo and Kokemaki (the Company) has been an operating
unit of the Neste Oy Chemicals division.
The production and sales of the Company consist of polystryrene resins
including expandable polystyrene (EPS), general purpose polystyrene (PS) and
high-impact polystyrene (HIPS). EPS is manufactured in the Porvoo and Kokemaki
plants and PS and HIPS are manufactured in the Porvoo plant. EPS is sold
through Neste Oy Chemicals' European sales network mainly to construction
applications and approximately 30% is sold for packaging uses. Approximately
70% of the PS and HIPS grades are sold in Finland through the Company's
salespeople. The remainder of the PS and HIPS is sold by the Neste Oy
Chemicals sales force.
Neste is establishing a production base in St. Petersburg, Russia where
exploratory marketing efforts have been underway since 1994, using products
exported from Finland. The St. Petersburg plant started operations in the
spring of 1997. These financial statements do not include the St. Petersburg
conversion business.
Basis of Presentation
Neste Oy's records are maintained in accordance with Finnish law and
reporting requirements. These financial statements have been converted from
Finnish generally accepted accounting principles (GAAP) to U.S. GAAP.
The financial statements of the Company include certain amounts that have
been allocated to the Company by Neste Oy. These allocations include general
and administrative expenses incurred at the Porvoo site, but do not include
expenses incurred in the Espoo headquarters. The balance sheet includes a
share of common facilities at the Porvoo site. The definition of common
facilities and the method of allocating them has changed during 1997 such that
these costs are invoiced, not allocated, directly to the Company. Management
believes that the allocation methodologies used to allocate these costs and
corresponding assets to the Company represent a reasonable basis for
allocation. The amounts of the allocations have been shown as separate line
items in the balance sheets and statements of operations in 1994, 1995 and
1996 and are included in selling, general and administrative in the nine month
period ended September 30, 1997.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Fiscal year
The fiscal year of the Company presented in the financial statements is the
calendar year.
Foreign Currency Translation
The assets and liabilities of the Company, whose functional currency is
other than the U.S. dollar, are translated into U.S. dollars at year end
exchange rates. Revenues and expense accounts are translated using the
weighted average exchange rate during the periods indicated. The functional
currency of the Company is the Finnish markka and the exchange rates used were
those quoted by the Bank of Finland. Translation gains and losses are not
included in determining net income but are accumulated in a separate component
of owner's investment, as is required by Statement of Financial Accounting
Standards No. 52, "Foreign Currency Translation."
F-53
<PAGE>
NESTE OY POLYSTYRENE UPSTREAM BUSINESS IN PORVOO AND KOKEMAKI
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Cash
The Company is an operating unit of the Neste Oy Chemicals division, and
participates in the cash pool of Neste Oy. All cash requirements of the
Company have been funded out of this cash pool. As a result, the entity has no
cash balances recorded on its books.
Revenue Recognition
Revenue is recognized when goods are shipped. Sales are recorded gross
before cash and other discounts, which are deducted from the value of sales,
when the customer fulfills the terms of trade agreed upon.
Research and Development
Research and development expenses are charged to operations as incurred.
Total research and development expenses were approximately $859,000,
$1,233,000, $1,206,000, $885,000 and $861,000 for the years ended December 31,
1994, 1995 and 1996 and the nine month periods ended September 30, 1996 and
1997, respectively.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of financial statements and the reported amounts of
revenues and expenses during the reported period. Actual results could differ
from those estimates.
Fair Value of Financial Instruments
The fair value of financial instruments, including accounts receivable and
accounts payable, approximate their recorded values due primarily to the
short-term nature of their maturities.
(3) ACCOUNTS RECEIVABLE
Accounts receivable include the following balances due from affiliated
companies:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1995 1996 1997
------ ------ -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Isora Oy......................................... $ 949 $ 756 $ 657
Neste Cellplast AB............................... 691 380 475
Neste Thermisol A/S.............................. 417 175 243
------ ------ ------
Total............................................ $2,057 $1,311 $1,375
====== ====== ======
</TABLE>
(4) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market
and consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1995 1996 1997
------- ------ -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Raw materials................................... $ 5,130 $2,493 $3,734
Work-in-progress................................ 382 187 208
Finished goods.................................. 4,986 2,469 1,776
------- ------ ------
Total......................................... $10,498 $5,149 $5,718
======= ====== ======
</TABLE>
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Expenditures for
improvements that increase the values or extend the useful life are
capitalized and maintenance repair costs are expensed as incurred.
Depreciation is
F-54
<PAGE>
NESTE OY POLYSTYRENE UPSTREAM BUSINESS IN PORVOO AND KOKEMAKI
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
recorded using the straight-line method over the useful lives of the
respective assets, which range from 20 to 40 years for buildings, 5 to 20
years for machinery and equipment and 5 to 10 years for other property and
equipment.
The share of common facilities allocated from Neste has been shown as a
separate line item, net of accumulated depreciation, in the balance sheets. In
addition to an allocated share of common facilities it includes spare parts
stored in a central stores location, but apportioned to the Company in the
Neste Oy stock records. The amount of spare parts at December 31, 1995 was
$565,000, at December 31, 1996 was $502,000, and at September 30, 1997 was
$419,000. Spare parts are expensed in the period they are needed and shipped
to the various manufacturing facilities.
(6) ACCRUED LIABILITIES
Accrued liabilities consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1995 1996 1997
------ ------ -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Accrued holiday................................. $ 764 $ 839 $ 540
Payroll related items........................... 322 318 534
Added value tax................................. (88) 95 --
Other........................................... 26 101 86
------ ------ ------
Total......................................... $1,024 $1,353 $1,160
====== ====== ======
</TABLE>
(7) PENSION COSTS
The pensions of the Company personnel are covered by the Joint Pension
Foundation of Neste Corporation (the Foundation) in accordance with the local
laws and practices. The Foundation has been able to offer pension services at
lower annual fees than the market prices of pension insurance companies. The
compulsory deficit of the foundation is immaterial but has been provided for
in the accounts of Neste Oy. Under Finnish GAAP the future salary increases
have not been taken into account when calculating the pension liability. U.S.
GAAP calculations have been prepared only for that part of pension liability
that exceeds the normal pension liability stipulated by law. The calculations
are at the level of total Neste Corporation only, and show that at December
31, 1996 the local method had resulted in a somewhat higher pension liability
and somewhat higher annual pension cost than the U.S. GAAP method.
(8) INCOME TAXES
The Company, having legally been part of Neste Oy, has been included in the
tax return of Neste Oy. The tax in the statements of operations has been
calculated by applying the general company tax rate of 28% to the income
before income taxes. No possible tax losses, accelerated depreciation or other
similar effects, which usually have been considered at the level of Neste Oy
only, have been reflected in the calculations. Accordingly no deferred tax
assets or liabilities have been recorded. All taxes are paid by the parent
company.
(9) COMMITMENTS AND CONTINGENCIES
The Company is a party to various legal actions arising in the ordinary
course of its business. The liability, if any, associated with these matters
will not have a material adverse effect upon financial condition, results of
operations or cash flows of the Company.
The Company is also subject to environmental regulations, including rules
relating to air and water pollution and the storage and disposal of chemicals
and waste. The Company believes it complies in all material respects with
applicable laws.
It has been Neste Oy's policy to not make use of leased assets except for
minor office equipment.
F-55
<PAGE>
NESTE OY POLYSTYRENE UPSTREAM BUSINESS IN PORVOO AND KOKEMAKI
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(10) SUBSEQUENT EVENT
On October 15, 1997, Neste Oy, Isora Oy, Neste Cellplast AB and Neste
Thermisol A/S sold certain EPS, PS and HIPS assets in Finland, Sweden and
Denmark, which include the assets of the Company, to StyroChem Finland Oy,
ThermiSol Finland Oy, ThermiSol Sweden AB and ThermiSol Denmark ApS and Radnor
Holdings Corporation as parent and guarantor.
F-56
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Isora Oy:
We have audited the accompanying balance sheets of ISORA OY (a Finnish Joint
Stock company) as of December 31, 1995 and 1996, and the related statements of
operations, changes in stockholder's equity and cash flows for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ISORA OY as of December
31, 1995 and 1996, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles (see Note 1).
ARTHUR ANDERSEN OY
Helsinki, Finland
September 5, 1997
(except with respect to the matters discussed in Note 12,
as to which the date is October 15, 1997).
F-57
<PAGE>
ISORA OY
BALANCE SHEETS
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash.................... $ 3,182 $ 4,863 $ 4,241
Accounts receivable..... 1,708 1,311 2,462
Inventories, net........ 1,495 1,383 1,311
Prepaid expenses and
other.................. 378 199 208
Loans to Neste Oy and
affiliates............. 2,960 2,048 1,086
------- ------- -------
9,723 9,804 9,308
------- ------- -------
PROPERTY, PLANT AND
EQUIPMENT, at cost:
Machinery and
equipment.............. 8,470 8,133 7,213
Less accumulated
depreciation........... (3,068) (3,887) (3,758)
------- ------- -------
5,402 4,246 3,455
------- ------- -------
OTHER ASSETS.............. 330 236 195
------- ------- -------
$15,455 $14,286 $12,958
======= ======= =======
LIABILITIES AND
STOCKHOLDER'S EQUITY
--------------------
CURRENT LIABILITIES:
Accounts payable........ $ 1,656 $ 2,220 $ 1,227
Accrued liabilities..... 1,048 1,260 2,337
Loans from credit
institutions........... 23 95 --
------- ------- -------
2,727 3,575 3,564
------- ------- -------
LONG-TERM LIABILITIES..... 3,597 1,818 990
COMMITMENTS AND
CONTINGENCIES (Note 10)
STOCKHOLDER'S EQUITY
Common stock............ 3,858 3,858 3,858
Retained earnings....... 4,531 4,859 5,490
Cumulative translation
adjustment............. 742 176 (944)
------- ------- -------
9,131 8,893 8,404
------- ------- -------
$15,455 $14,286 $12,958
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-58
<PAGE>
ISORA OY
STATEMENTS OF OPERATIONS
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE NINE MONTH PERIOD
DECEMBER 31, ENDED SEPTEMBER 30,
------------------------- ---------------------------
1994 1995 1996 1996 1997
------- ------- ------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES............... $15,823 $20,561 $19,298 $ 14,392 $ 13,759
COST OF GOODS SOLD...... 12,484 16,800 14,960 10,406 9,842
------- ------- ------- ------------ ------------
GROSS PROFIT............ 3,339 3,761 4,338 3,986 3,917
OPERATING EXPENSES:
Distribution.......... 730 841 938 682 664
Selling, general and
administrative....... 3,069 3,567 3,336 2,861 2,692
------- ------- ------- ------------ ------------
INCOME (LOSS) FROM
OPERATIONS............. (460) (647) 64 443 561
OTHER INCOME............ 32 637 112 58 70
------- ------- ------- ------------ ------------
INCOME (LOSS) BEFORE
INCOME TAXES........... (428) (10) 176 501 631
(PROVISION) BENEFIT FOR
INCOME TAXES........... (63) (17) 152 113 --
------- ------- ------- ------------ ------------
NET INCOME (LOSS)....... $ (491) $ (27) $ 328 $ 614 $ 631
======= ======= ======= ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-59
<PAGE>
ISORA OY
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK CUMULATIVE
------------- RETAINED TRANSLATION
SHARES AMOUNT EARNINGS ADJUSTMENT TOTAL
------ ------ -------- ----------- ------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1994............ 18,300 $3,858 $4,744 $ 18 $8,620
Net loss.......................... -- -- (491) --
Group contribution................ -- -- 305 --
Translation adjustment............ -- -- -- (18)
------ ------ ------ -------
BALANCE, December 31, 1994.......... 18,300 3,858 4,558 -- 8,416
Net loss.......................... -- -- (27) --
Translation adjustment............ -- -- -- 742
------ ------ ------ -------
BALANCE, December 31, 1995.......... 18,300 3,858 4,531 742 9,131
Net income........................ -- -- 328 --
Translation adjustment............ -- -- -- (566)
------ ------ ------ -------
BALANCE, December 31, 1996.......... 18,300 3,858 4,859 176 8,893
Net income (unaudited)............ -- -- 631 --
Translation adjustment
(unaudited)...................... -- -- -- (1,120)
------ ------ ------ -------
BALANCE, September 30, 1997
(unaudited)........................ 18,300 $3,858 $5,490 $ (944) $8,404
====== ====== ====== ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-60
<PAGE>
ISORA OY
STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
FOR THE NINE MONTH
FOR THE YEAR ENDED PERIOD ENDED
DECEMBER 31, SEPTEMBER 30,
----------------------- ----------------------
1994 1995 1996 1996 1997
------ ------ ------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income(loss)............ $ (491) $ (27) $ 328 $ 614 $ 631
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation............... 658 575 1,101 828 353
Other...................... 50 1 (19) 1
Changes in operating assets
and liabilities:
Accounts receivable....... (286) 476 293 (1,543) (1,314)
Inventories, net.......... (935) 1,134 20 (20) (100)
Loans, prepaid expenses
and other................ 500 1,325 887 305 674
Accounts payable.......... 677 (934) 665 242 (718)
Loans from credit
institutions and accrued
liabilities.............. (399) (154) 349 505 1,150
Other assets.............. 2 (9) (11) 11
------ ------ ------- ------- -------
Net cash (used in)
provided by operating
activities.............. (224) 2,387 3,624 920 688
------ ------ ------- ------- -------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Net purchases of property,
plant and equipment........ (589) (293) (190) (114) (88)
------ ------ ------- ------- -------
Net cash used in
investing activites..... (589) (293) (190) (114) (88)
------ ------ ------- ------- -------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Group contribution....... 305 -- -- -- --
Long-term liabilities.... (191) (95) (1,557) (33) (603)
------ ------ ------- ------- -------
Net cash provided by
(used in) financing
activities.............. 114 (95) (1,557) (33) (603)
------ ------ ------- ------- -------
Translation effect on cash.... -- 95 (196) (142) (619)
------ ------ ------- ------- -------
CASH, BEGINNING OF PERIOD..... 1,787 1,088 3,182 3,182 4,863
------ ------ ------- ------- -------
CASH, END OF PERIOD........... $1,088 $3,182 $ 4,863 $ 3,813 $ 4,241
====== ====== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-61
<PAGE>
ISORA OY
NOTES TO FINANCIAL STATEMENTS
(INCLUDING NOTES APPLICABLE TO UNAUDITED PERIODS)
(1) ORGANIZATION AND BASIS OF PRESENTATION:
The Business Unit
Isora Oy (the Company) is a Finnish Joint Stock company 100% owned by Neste
Oy.
Isora has three production sites--Nurmijarvi, Vammala and Pietarsaari.
Nurmijarvi is an almost fully automated site for standard insulation products.
Vammala produces standard as well as special products. Pietarsaari, located on
the northwest coast, covers the northern region. In addition to its EPS
conversion business, Isora also produces and markets patented EPS sandwich
elements for a broad range of construction applications. Sales are carried out
through Isora's sales organization located at the three sites.
Neste is establishing a production base in St. Petersburg, Russia where
exploratory marketing efforts have been underway since 1994, using products
exported from Finland. The plant started operations in spring 1997. These
statements do not include any part of the St. Petersburg conversion business.
Basis of Presentation
Isora Oy's records are maintained in accordance with Finnish law and
reporting requirements. These financial statements have been converted from
Finnish generally accepted accounting principles (GAAP) to U.S. GAAP.
The following adjustments have been made to Finnish GAAP amounts to comply
with U.S. GAAP requirements:
. Voluntary provisions (difference between fiscal depreciation and the
planned depreciation) have been transferred to stockholder's equity.
Deferred tax at 28% has been deduced from the difference and added to
long-term liabilities. The change of deferred tax is included in the
statements of operations (provision for income taxes). The Company has
accumulated tax losses from fiscal years 1992 and 1994, which can be
deducted from future taxable profits. Deferred tax on accumulated tax
losses has not been calculated as the effect on income of 1994 is not
material.
. Obligatory provisions have been classified as long term liabilities.
. In 1994 Neste Oy paid a group contribution of $305,000 to Isora Oy. In
these statements the amount has been reflected as a capital contribution,
so that it has no effect on the income of 1994.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Fiscal year
The fiscal year of the Company presented in the financial statements is the
calendar year.
Foreign Currency Translation
The assets and liabilities of the Company, whose functional currency is
other than the U.S. dollar, are translated into U.S. dollars at year end
exchange rates. Revenues and expense accounts are translated using the
weighted average exchange rate during the periods. The functional currency of
the Company is the Finnish markka and the exchange rates used were those
quoted by the Bank of Finland. Translation gains and losses are not included
in determining net income but are accumulated in a separate component of
owner's investment, as is required by Statement of Financial Accounting
Standards No. 52, "Foreign Currency Translation."
F-62
<PAGE>
ISORA OY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Revenue Recognition
Revenue is recognized when goods are shipped. Sales are recorded gross
before cash and other discounts, which are deducted from the value of sales,
when the customer fulfils the terms of trade agreed upon.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of financial statements and the reported amounts of
revenues and expenses during the reported period. Actual results could differ
from those estimates.
Fair Value of Financial Instruments
The fair value of financial instruments, including accounts receivables and
accounts payable, approximate their recorded values due primarily to the
short-term nature of their maturities.
(3) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market
and consist of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------------------------
1995 1996 SEPTEMBER 30, 1997
------ ------ ------------------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials............................... $ 915 $1,086 $ 968
Work-in-progress............................ 247 149 194
Finished goods.............................. 333 148 149
------ ------ ------
Total....................................... $1,495 $1,383 $1,311
====== ====== ======
</TABLE>
(4) PROPERTY PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Expenditures for
improvements that increase the values or extend the useful life are
capitalized and maintenance repair costs are expensed as incurred.
Depreciation is recorded using the straight-line method over the useful lives
of the respective assets, which is 15 years for machinery and equipment and 5
years for other capitalized expenditures.
(5) OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
------------------------------
1995 1996 SEPTEMBER 30, 1997
----- ----- ------------------
(UNAUDITED)
<S> <C> <C> <C>
Intangible rights............................ $ 17 $ 19 $ 17
Other capitalized expenditures............... 155 82 60
Shares in housing and other corporations..... 158 135 118
----- ----- ----
Total........................................ $ 330 $ 236 $195
===== ===== ====
</TABLE>
F-63
<PAGE>
ISORA OY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(6) ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
----------------------------------
1995 1996 SEPTEMBER 30, 1997
------- ------- ------------------
(UNAUDITED)
<S> <C> <C> <C>
Unpaid rent to Neste.................... $ -- $ 672 $ 442
Provision for holiday payment........... 441 377 225
Other accrued liabilities............... 607 211 1,670
------- ------- ------
Total................................... $ 1,048 $ 1,260 $2,337
======= ======= ======
(7) LONG-TERM LIABILITIES
Long-term liabilities consist of the following:
<CAPTION>
(IN THOUSANDS)
----------------------------------
1995 1996 SEPTEMBER 30, 1997
------- ------- ------------------
(UNAUDITED)
<S> <C> <C> <C>
Loans from pension institutions......... $ 2,128 $ 756 $ 38
Other non-current liabilities........... 69 43 121
Difference between fiscal and planned
depreciation........................... 1,032 835 725
Obligatory provisions................... 368 184 106
------- ------- ------
Total................................... $ 3,597 $ 1,818 $ 990
======= ======= ======
</TABLE>
(8) PENSION COSTS
The pensions of the personnel have been covered by the Joint Pension
Foundation of Neste Corporation in line with the local laws and practices. The
foundation has been able to offer pension services at lower annual fees than
the market prices of pension insurance companies. The compulsory deficit of
the foundation, which is immaterial, has been provided for in the accounts of
the company. In Finnish GAAP the future salary increases have not been taken
into account when calculating the pension liability. U.S. GAAP calculations
have been prepared only for that part of pension liability that exceeds the
normal pension liability stipulated by law. The calculations are at the level
of total Neste Corporation only, and show, that at December 31, 1996 the local
method had resulted in a somewhat higher pension liability and somewhat higher
annual pension cost than the U.S. GAAP method.
(9) INCOME TAXES
The tax in the statements of operations has been calculated by applying the
general company tax rate of 28% to the income before taxes (according to
Finnish GAAP). Deferred taxes on the differences between the fiscal and
planned depreciation has been added.
(10) COMMITMENTS AND CONTINGENCIES
The Company is a party to various legal actions arising in the ordinary
course of its business. The liability, if any, associated with these matters
will not have a material adverse effect upon financial condition, results of
operations or cash flows of the Company.
The Company is also subject to environmental regulations, including rules
relating to air and water pollution and the storage and disposal of chemicals
and waste. The Company believes it complies in all material respects with
applicable laws.
F-64
<PAGE>
ISORA OY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The land and buildings in Vammala and Nurmijarvi are owned by Neste Oy and
rented to the Company under two separate rental agreements. The annual rent of
the Vammala agreement is $480,000. The rental payment can be renegotiated
annually in February. The Nurmijarvi agreement is similar to the Vammala
agreement. The annual rent is $144,000. The right to rent the property cannot,
however be transferred to a third party without the consent of the lessor. The
Pietarsaari production facilities have been rented from a third party at an
annual rent of $65,000. The rental period ends 12th of April 2000, but notice
can be given by both parties any time upon six months notice. The contract
includes an option to buy the land and buildings at a price offered by a third
party. The contract cannot be transferred to a third party without the consent
of the lessor.
(11) RELATED PARTY TRANSACTIONS:
The Company had accounts receivable from Neste Oy of $125,000, $81,000 and
$69,000 at December 31, 1995 and 1996 and September 30, 1997, respectively.
Additionally, the Company had accounts payable to Neste Oy and Neste Cellplast
AB of $952,000 and $46,000 at December 31, 1995, $907,000 and $44,000 at
December 31, 1996 and $613,000 and $0 at September 30, 1997.
(12) SUBSEQUENT EVENT:
On October 15, 1997, Neste Oy, Isora Oy, Neste Cellplast AB and Neste
Thermisol A/S sold certain EPS, PS and HIPS assets in Finland, Sweden and
Denmark, which include the assets of the Company, to StyroChem Finland Oy,
ThermiSol Finland Oy, ThermiSol Sweden AB and ThermiSol Denmark ApS and Radnor
Holdings Corporation as parent and guarantor.
F-65
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Neste Cellplast AB:
We have audited the accompanying balance sheet of NESTE CELLPLAST AB (a
Swedish Corporation and subsidiary of Neste Sverige AB) as of December 31,
1996, and the related statements of operations, changes in stockholders'
equity and cash flows for the year ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NESTE CELLPLAST AB as of
December 31, 1996, and the results of its operations and its cash flows for
the year ended December 31, 1996, in conformity with generally accepted
accounting principles (see Note 2).
The financial statements of Neste Cellplast AB for the two years ended
December 31, 1994 and 1995 were audited by other auditors whose reports dated
February 17, 1995 and February 21, 1996, respectively, expressed unqualified
opinions on these statements. The opinion of such auditors, however, does not
cover the restatement of those financial statements as described in Note 2.
We have also audited the adjustments described in Note 2 that were applied
to restate the December 31, 1994 and December 31, 1995 financial statements.
In our opinion, such adjustments are appropriate and have been properly
applied.
ARTHUR ANDERSEN AB
Stockholm, Sweden
September 12, 1997
(except with respect to the matters discussed in Note 10,
as to which the date is October 15, 1997).
F-66
<PAGE>
ORGANISATION NUMBER: 556190-3419
AUDITORS' REPORT ON NESTE CELLPLAST AB
We have examined the annual report, the accounting records and the
administration by the Board of Directors and the Managing Director for the
financial year 1995. The examination was made in accordance with generally
accepted auditing standards.
The accounts have been prepared in conformity with the Swedish Companies Act.
We recommend,
that the Income Statement and the Balance Sheet be adopted,
that the profit be disposed as proposed in the administration report and
that the members of the Board of Directors and the Managing Director be
discharged from personal liability for the fiscal year.
1996-02-21
Ohrlings Coopers & Lybrand AB
F-67
<PAGE>
ORGANISATION NUMBER: 556190-3419
AUDITORS' REPORT ON NESTE CELLPLAST AKTIEBOLAG
We have examined the annual report, the accounting records and the
administration by the Board of Directors and the Managing Director for the
financial year 1994. The examination was made in accordance with generally
accepted auditing standards.
The accounts have been prepared in conformity with the Swedish Companies
Act.
We recommend,
that the Income Statement and the Balance Sheet be adopted,
that the profit be disposed as proposed in the administration report and
that the members of the Board of Directors and the Managing Director be
discharged from personal liability for the fiscal year.
1995-02-17
Ohrlings Reveko AB
F-68
<PAGE>
NESTE CELLPLAST AB
BALANCE SHEETS
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
------
CURRENT ASSETS
Cash................................. $ 1,029 $ 2,631 $ 1,636
Accounts receivable, net............. 1,159 727 1,372
Inventories, net..................... 489 439 505
Prepaid expenses and other current
assets.............................. 651 122 199
------- ------- -------
3,328 3,919 3,712
------- ------- -------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land................................. 11 11 10
Buildings and improvements........... 973 946 856
Machinery and equipment.............. 4,478 4,546 4,202
------- ------- -------
5,462 5,503 5,068
Less--accumulated depreciation....... (4,789) (4,869) (4,557)
------- ------- -------
673 634 511
------- ------- -------
TOTAL ASSETS........................... $ 4,001 $ 4,553 $ 4,223
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENTS LIABILITIES
Accounts payable..................... $ 933 $ 1,748 $ 1,381
Accrued liabilities.................. 383 489 493
Other current liabilities............ 333 60 221
------- ------- -------
1,649 2,297 2,095
------- ------- -------
DEFERRED TAX LIABILITY................. 61 51 36
------- ------- -------
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY
Share capital, 67,000 shares of nom.
SEK 100 each........................ 804 804 804
Retained earnings.................... 1,130 1,131 1,228
Cumulative translation adjustment.... 357 270 60
------- ------- -------
Total stockholders' equity......... 2,291 2,205 2,092
------- ------- -------
TOTAL STOCKHOLDERS' EQUITY AND LIABILI-
TIES.................................. $ 4,001 $ 4,553 $ 4,223
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-69
<PAGE>
NESTE CELLPLAST AB
STATEMENTS OF OPERATIONS
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
FOR THE NINE MONTH
FOR THE YEAR ENDED PERIOD ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------- -----------------------
1994 1995 1996 1996 1997
------- ------- ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES.................. $ 8,961 $10,072 $10,319 $ 7,715 $ 7,275
COST OF GOODS SOLD......... (6,251) (7,810) (6,904) (5,013) (4,685)
------- ------- ------- ------- -------
GROSS PROFIT............... 2,710 2,262 3,415 2,702 2,590
OPERATING EXPENSES:
Distribution............. (736) (766) (870) (705) (801)
Selling, general and ad-
ministrative............ (1,236) (1,253) (1,725) (1,104) (1,108)
------- ------- ------- ------- -------
(1,972) (2,019) (2,595) (1,809) (1,909)
------- ------- ------- ------- -------
INCOME FROM OPERATIONS..... 738 243 820 893 681
OTHER INCOME:
Interest income, net..... 23 74 80 61 37
------- ------- ------- ------- -------
INCOME FROM CONTINUING OP-
ERATIONS BEFORE INCOME
TAXES..................... 761 317 900 954 718
Current income tax provi-
sion.................... (2) (6) (4) (4) 8
Deferred income tax bene-
fit..................... 39 2 8 6 10
------- ------- ------- ------- -------
NET INCOME................. $ 798 $ 313 $ 904 $ 956 $ 736
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-70
<PAGE>
NESTE CELLPLAST AB
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK CUMULATIVE
------------- RETAINED TRANSLATION
SHARES AMOUNT EARNINGS ADJUSTMENT TOTAL
------ ------ -------- ----------- ------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1994............ 67,000 $804 $1,244 $(127) $1,921
Net income........................ -- -- 798 --
Group contribution................ -- -- (895) --
Translation Adjustment............ -- -- -- 221
------ ---- ------ -----
BALANCE, December 31, 1994.......... 67,000 804 1,147 94 2,045
Net income........................ -- -- 313 --
Group contribution................ -- -- (330) --
Translation Adjustment............ -- -- -- 263
------ ---- ------ -----
BALANCE, December 31, 1995.......... 67,000 804 1,130 357 2,291
Net income........................ 904
Group contribution................ (903)
Translation Adjustment............ -- -- -- (87)
------ ---- ------ -----
BALANCE, December 31, 1996.......... 67,000 804 1,131 270 2,205
Net income (unaudited)............ 736
Group contribution (unaudited).... (639)
Translation Adjustment (unau-
dited)........................... -- -- -- (210)
------ ---- ------ -----
BALANCE, September 30, 1997 (unau-
dited)............................. 67,000 $804 $1,228 $ 60 $2,092
====== ==== ====== ===== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-71
<PAGE>
NESTE CELLPLAST AB
STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
FOR THE NINE
FOR THE YEAR MONTH PERIOD
ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------ -----------------------
1994 1995 1996 1996 1997
------- ------ ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income................. $ 798 $ 313 $ 904 $ 956 $ 736
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depreciation.............. 336 205 233 167 164
Changes in operating
assets and liabilities
Accounts receivable...... (246) (296) 432 (440) (645)
Inventories.............. (255) 112 50 (107) (67)
Prepaid expense and
other................... 673 204 529 441 (76)
Accounts payable......... 423 (275) 815 325 (367)
Accrued liabilities and
other liabilities....... 22 270 (177) 203 150
------- ------ ------- ------ ------
Net cash provided by
(used in) operating
activities............. 1,751 533 2,786 1,545 (105)
------- ------ ------- ------ ------
CASH FLOWS FROM INVESTING
ACTIVITIES
Capital expenditures....... (110) (331) (212) (97) (115)
Group contribution......... (895) (330) (903) (716) (639)
------- ------ ------- ------ ------
Net cash used in
investing activities... (1,005) (661) (1,115) (813) (754)
------- ------ ------- ------ ------
CASH FLOWS FROM FINANCING
ACTIVITIES
Payments of bank loans..... (127) (142) -- -- --
------- ------ ------- ------ ------
Net cash used in
financing activities... (127) (142) -- -- --
------- ------ ------- ------ ------
Translation effect on
cash...................... 153 198 (69) (21) (136)
------- ------ ------- ------ ------
NET INCREASE (DECREASE) IN
CASH........................ 772 (72) 1,602 711 (995)
CASH, beginning of period.... 329 1,101 1,029 1,029 2,631
------- ------ ------- ------ ------
CASH, end of period.......... $ 1,101 $1,029 $ 2,631 $1,740 $1,636
======= ====== ======= ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-72
<PAGE>
NESTE CELLPLAST AB
NOTES TO FINANCIAL STATEMENTS
(INCLUDING NOTES APPLICABLE TO UNAUDITED PERIODS)
(1) ORGANIZATION
The Company
Neste Cellplast AB (the Company), a Swedish company, is owned by Neste
Sverige AB (91%) and Gullfiber AB (9%). Neste Sverige AB is a wholly owned
subsidiary of the Finnish oil-chemistry and energy company, Neste Oy. The
Company carries on thermisol manufacturing for insulation purposes in the
building and packaging industry. The Company has two manufacturing plants, one
in Norrtalje, and one in Vargarda. The Company's headquarters are located in
Norrtalje.
Intercompany transaction
For 1995 and 1996 91% and 89%, respectively, of total purchases were made
from other group companies, and 1% and 0%, respectively, of total sales were
made to group companies.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The Company's records are maintained in accordance with Swedish laws and
reporting requirements. These financial statements have been prepared in
accordance with United States generally accepted accounting principles ("U.S.
GAAP") and have been translated into U.S. dollars.
For Swedish statutory reporting purposes, operating expenses in the
statement of operations include cost of goods sold, distribution cost and
selling, general and administration costs. For U.S. GAAP purposes these costs
have been separated.
Foreign currency translation
The functional currency for the Company's operations is Swedish krona. The
translation from Swedish krona to U.S. dollars is performed for the balance
sheet accounts using the exchange rates in effect at the balance sheet date
and for revenue and expense accounts using a weighted average exchange rate
during the period. Translation gains and losses are not included in
determining net income but are accumulated in a separate component of
stockholders' equity, as is required by Statement of Financial Accounting
Standards No. 52, "Foreign Currency Translation."
Contributions to Neste Sverige AB
The Company has given group contribution to Neste Sverige AB during each of
the three years ended December 31, 1994, 1995 and 1996. Group contributions
are principally made to transfer taxable income from one group entity with the
objective of reducing the group's total current tax expenses. These
contributions lead to a taxable income for the recipient and a taxable expense
for the donor. The Company's annual current tax expense has therefore been
impacted by the group contributions. Since the contributions are permanent
differences for tax purposes, no deferred tax accounting related to group
contribution has been made.
For Swedish statutory reporting purposes, group contributions are accounted
for as an appropriation in the statement of operations. This accounting
methodology is utilized primarily to obtain an agreement between a company's
financial statement income and taxable income. Group contributions are thus
not related to a company's operations. For U.S. GAAP purposes, group
contributions provided have been treated as a transfer from stockholders'
equity.
F-73
<PAGE>
NESTE CELLPLAST AB
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Cash
Cash is deposited on a group account held by the Swedish parent company
Neste Sverige AB. The Company has access to these accounts. For Swedish
statutory purposes these liquid funds are disclosed as a short-term receivable
from the parent company. For U.S. GAAP purposes the item is restated to cash.
Revenue Recognition
Revenue is recognized when goods are shipped.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of financial statements and the reported amounts of
revenues and expenses during the reported period. Actual results could differ
from those estimates.
Fair Value of Financial Instruments
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques, as appropriate. Unless
otherwise disclosed, the fair value of financial instruments, including
accounts receivable and accounts payable, approximate their recorded values
due primarily to the short-term nature of their maturities.
(3) INVENTORY
Inventories are valued at the lower of cost (first-in, first-out) or market.
Provision for obsolescence has been calculated based on review of individual
items. Inventories at December 31, 1995 and 1996, and for the nine month
period ended September 30, 1997 consist of the following items:
<TABLE>
<CAPTION>
(IN THOUSANDS)
-----------------------
SEPTEMBER 30,
1995 1996 1997
---- ---- -------------
(UNAUDITED)
<S> <C> <C> <C>
Raw material............................................ $199 $171 $201
Work in progress........................................ 87 72 86
Finished goods.......................................... 203 196 218
---- ---- ----
Total................................................. $489 $439 $505
==== ==== ====
</TABLE>
The Company purchases most of its raw material from Neste Oy in Finland. The
prices are based on market prices of polystyrene, the primal component of
thermisol products.
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost and depreciated using the
straight-line method with estimated lives ranging as follows:
<TABLE>
<S> <C>
Land................................................................ None
Land improvements................................................... 27 years
Buildings........................................................... 20 years
Equipment........................................................... 5 years
</TABLE>
F-74
<PAGE>
NESTE CELLPLAST AB
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(5) PROVISION FOR PENSION LIABILITIES
Providing for future pension liabilities, two main systems are used in
Sweden. One where actuarially computed premiums are currently paid to an
independent pension insurance company, and the other where an independent body
computes the actuarial liability for unfunded pensions which a company has to
include among long-term liabilities (the book reserve method).
When a company uses the method by paying premiums to an insurance company
there is no remaining risk or cost to the company for benefits earned to date
once the premium is paid. It is only benefits financed by the book reserve
method that has to be actuarially valued according to FAS 87.
The Company is paying a fixed premium to a Swedish independent insurance
company, SPP. The Company has therefore no pension liability to provide for
and no restatement is to be made according to FAS 87.
(6) INCOME TAXES
Deferred income taxes are provided under the asset and liability method.
This method requires recognition of deferred tax liabilities and assets for
the expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this period, deferred income taxes
are determined based on the difference between the financial statement and tax
basis of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts
expected to be realized. Income tax expense consists of the Company's current
liability for income taxes and the change in the Company's deferred tax assets
and liabilities.
The provision for income taxes varies from the amount of income tax
determined by applying the applicable domestic statutory tax rate to pre-tax
income as a result of the following:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Statutory tax rate........................................ 28% 28% 28%
Group contribution........................................ (26)% (27)% (27)%
Other..................................................... -- (1)% (1)%
--- --- ---
Effective tax rate........................................ 2% 0% 0%
=== === ===
</TABLE>
(7) COMMITMENTS AND CONTINGENCIES
Patent dispute with Sundolitt AB
The Company is involved in a patent dispute with Sundolitt AB, a Swedish
competitor. In 1991, Sundolitt commenced a patent infringement for the product
"Makribbdack". In 1995, the Swedish Patent and Registration Office accorded
another patent for the product to Sundolitt AB. In November 1995, Sundolitt AB
claimed damages of $110,000. The Company filed an objection towards the patent
to the Swedish Patent and Registration Office in June 1997. The dispute is
expected to be settled in 1997. If the Company loses the dispute, they are to
pay $110,000 in damages to Sundolitt AB.
The Company is a party to various legal actions arising in the ordinary
course of its business. The liability, if any, associated with these matters
will not have a material adverse effect upon financial condition, results of
operations or cash flows of the Company.
F-75
<PAGE>
NESTE CELLPLAST AB
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company is also subject to environmental regulations, including rules
relating to air and water pollution and the storage and disposal of chemicals
and waste. The Company believes it complies in all material respects with
applicable laws.
(8) EMPLOYEE BENEFIT PLAN:
The Company has a profit sharing plan, which covers all employees. The
Company will pay the employees a total annual bonus amounting to 10% of income
after depreciation. The profit sharing plan exists on a voluntary basis and
the management is free to abolish the plan from one year to another. The board
of directors has decided that a bonus will be paid to the employees according
to the plan in 1997. The bonus amounted to $82,000, $29,000 and $38,000 in
1996, 1995 and 1994, respectively. The amount for 1997 has not yet been
decided upon.
(9) RESTRICTIONS ON RETAINED EARNINGS
Retained earnings available for dividends are based upon statutory financial
statements. Under the provisions of the Swedish Companies Act a legal reserve
must be established in an amount equal to 20% of the share capital. This
reserve is established by appropriating 10% of the statutory net income each
year until the prescribed amount has been appropriated. The legal reserve may
be used to absorb deficit, but usually may not be distributed as dividends.
Retained earnings available for dividends were $905,000 at December 31,
1996.
(10) SUBSEQUENT EVENTS:
On October 15, 1997, Neste Oy, Isora Oy, Neste Cellplast AB and Neste
Thermisol A/S sold certain EPS, PS and HIPS assets in Finland, Sweden and
Denmark, which include the assets of the Company, to StyroChem Finland Oy,
ThermiSol Finland Oy, ThermiSol Sweden AB and ThermiSol Denmark ApS and Radnor
Holdings Corporation as parent and guarantor.
On October 15, 1997, the minority interest of Gullfiber AB was acquired by
Neste Sverige AB.
F-76
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Neste Thermisol A/S:
We have audited the accompanying balance sheets of NESTE THERMISOL A/S as of
December 31, 1995 and 1996, and the related statements of operations, changes
in shareholder's equity and cash flows for each of the three years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NESTE Thermisol A/S as of
December 31, 1995 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles (see Note 1).
ARTHUR ANDERSEN
Arhus, Denmark
August 29, 1997
(except with respect to the matters discussed in Note 8,
as to which the date is October 15, 1997).
F-77
<PAGE>
NESTE THERMISOL A/S
BALANCE SHEETS
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents................. $ 787 $ 872 $ 720
Accounts receivable.................. 403 327 575
Inventories, net..................... 481 242 332
Prepaid expenses and other........... 174 32 71
------- ------- -------
1,845 1,473 1,698
------- ------- -------
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements................ 207 193 170
Buildings and improvements........... 2,076 1,979 1,747
Machinery and equipment.............. 2,920 2,864 2,452
------- ------- -------
5,203 5,036 4,369
Less accumulated depreciation........ (1,758) (1,936) (1,800)
------- ------- -------
Total fixed assets................. 3,445 3,100 2,569
------- ------- -------
$ 5,290 $ 4,573 $ 4,267
======= ======= =======
LIABILITIES AND OWNER'S INVESTMENT
CURRENT LIABILITIES:
Accounts payable..................... $ 652 $ 439 $ 501
Accrued liabilities.................. 1,248 1,280 875
------- ------- -------
1,900 1,719 1,376
OTHER LONG-TERM LIABILITIES............ 2,073 1,710 1,310
COMMITMENTS AND CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY:
Share capital........................ 2,398 2,237 1,973
Accumulated deficit.................. (1,074) (1,096) (354)
Translation adjustment............... (7) 3 (38)
------- ------- -------
1,317 1,144 1,581
------- ------- -------
$ 5,290 $ 4,573 $ 4,267
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-78
<PAGE>
NESTE THERMISOL A/S
STATEMENTS OF OPERATIONS
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
FOR THE NINE MONTH
PERIOD ENDED
FOR THE YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- -----------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES............... $ 4,538 $ 5,675 $ 5,470 $4,074 $5,083
COST OF GOODS SOLD...... 3,105 3,800 3,405 2,617 2,816
---------- ---------- ---------- ------ ------
GROSS PROFIT............ 1,433 1,875 2,065 1,457 2,267
OPERATING EXPENSES
Distribution.......... 561 624 642 473 616
Selling, general and
administrative....... 1,094 1,241 1,368 1,002 965
---------- ---------- ---------- ------ ------
INCOME (LOSS) FROM OPER-
ATIONS................. (222) 10 55 (18) 686
FINANCIAL EXPENSES...... 186 151 142 114 76
---------- ---------- ---------- ------ ------
NET INCOME (LOSS)....... $ (408) $ (141) $ (87) $ (132) $ 610
========== ========== ========== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-79
<PAGE>
NESTE THERMISOL A/S
STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<S> <C>
BALANCE, January 1, 1994................................................ $1,070
Increase to share capital............................................. 575
Reduction of share capital............................................ (575)
Share capital transferred to cover the loss........................... 575
Net loss.............................................................. (408)
Translation adjustment................................................ 98
------
BALANCE, December 31, 1994.............................................. 1,335
Net loss.............................................................. (141)
Translation adjustment................................................ 123
------
BALANCE, December 31, 1995.............................................. 1,317
Net loss.............................................................. (87)
Translation adjustment................................................ (86)
------
BALANCE, December 31, 1996.............................................. 1,144
Net income (unaudited)................................................ 610
Translation adjustment (unaudited).................................... (173)
------
BALANCE, September 30, 1997 (unaudited)................................. $1,581
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-80
<PAGE>
NESTE THERMISOL A/S
STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
FOR THE NINE MONTH
FOR THE YEAR ENDED PERIOD ENDED
DECEMBER 31, SEPTEMBER 30,
---------------------- -----------------------
1994 1995 1996 1996 1997
------ ------ ------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIV-
ITIES:
Net income (loss)............ $ (408) $ (141) $ (87) $(132) $ 610
Adjustments to reconcile net
income (loss) to net cash
provided by operating activ-
ities:
Depreciation................. 372 413 320 239 231
Changes in operating assets
and liabilities:
Accounts receivable.......... (17) (145) 76 37 (247)
Inventories, net............. (76) (77) 238 184 (89)
Prepaid expenses and other... (41) (107) 142 39 (39)
Accounts payable............. 357 39 (212) (214) 61
Accrued liabilities.......... 362 83 50 (228) (383)
------ ------ ------ ----- -----
Net cash provided (used) by
operating activities...... 549 65 527 (75) 144
------ ------ ------ ----- -----
CASH FLOWS FROM INVESTING AC-
TIVITIES:
Net purchases of property,
plant & equipment........... (121) (134) (201) (116) (57)
------ ------ ------ ----- -----
Net cash used in investing
activities................ (121) (134) (201) (116) (57)
------ ------ ------ ----- -----
CASH FLOWS FROM FINANCING AC-
TIVITIES:
Increase of share capital.... 575
Installment on bank debt..... (133) (7) -- -- --
Installment on loan.......... -- (29) (232) (234) (211)
------ ------ ------ ----- -----
Net cash (provided by) used
in financing activites.... 442 (36) (232) (234) (211)
------ ------ ------ ----- -----
Increase (decrease) in cash.... 870 (105) 94 (425) (124)
CASH, beginning of period...... 46 878 787 787 872
Translation effect on cash... (38) 14 (9) (6) (28)
------ ------ ------ ----- -----
CASH, end of period............ $ 878 $ 787 $ 872 $ 356 $ 720
====== ====== ====== ===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-81
<PAGE>
NESTE THERMISOL A/S
NOTES TO FINANCIAL STATEMENTS
(INCLUDING NOTES APPLICABLE TO UNAUDITED PERIODS)
(1) ORGANIZATION AND BASIS OF PRESENTATION:
The Business Unit
Neste Thermisol A/S (the Company) is owned by the Finnish concern Neste Oy,
who has activities within chemistry, gas and natural gas. The company is
registered in Denmark.
The Company produces and markets insulation material made of polystyrene for
the Danish and German construction activities, and has considerable market
shares within floor and roof insulation.
Basis of Presentation
The Company's records are maintained in accordance with Danish law and
reporting requirements. These financial statements have been converted from
Danish GAAP to U.S. GAAP.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Fiscal year
The fiscal year of the Company presented in the financial statements is the
calendar year.
Foreign Currency Translation
The assets and liabilities of the Company, whose functional currency is
other than the U.S. dollar, are translated into U.S. dollars at year end
exchange rates. Revenues and expense accounts are translated using the
weighted average exchange rate during the periods. Translation gains and
losses are not included in determining net income but are accumulated in a
separate component of owner's investment, as is required by Statement of
Financial Accounting Standards No. 52, "Foreign Currency Translation."
Cash
The Company is an operating unit of Neste Oy, and participates in the cash
pool of Neste Oy. All cash requirements of the Company have been funded out of
this cash pool.
Revenue Recognition
Revenue is recognized when goods are shipped. Sales are recorded gross
before cash and other discounts, which are deducted from the value of sales,
when the customer fulfills the terms of trade agreed upon.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of financial statements and the reported amounts of
revenues and expenses during the reported period. Actual results could differ
from those estimates.
Fair Value of Financial Instruments
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques, as appropriate. Unless
otherwise disclosed, the fair value of financial instruments, including
accounts
F-82
<PAGE>
NESTE THERMISOL A/S
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
receivables and accounts payable, approximate their recorded values due
primarily to the short-term nature of their maturities.
(3) INVENTORIES
Inventories are stated at acquisition cost or production cost--determined on
the basis of FIFO (first-in, first-out) method and include the cost of
materials, labor and manufacturing overhead.
<TABLE>
<CAPTION>
(IN THOUSANDS)
----------------------------
1995 1996 SEPTEMBER 30, 1997
---- ---- ------------------
(UNAUDITED)
<S> <C> <C> <C>
Raw material and supplies................... $204 $ 69 $ 135
Work in progress............................ 213 104 137
Finished goods.............................. 64 69 60
---- ---- -----
$481 $242 $ 332
==== ==== =====
</TABLE>
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost, less accumulated
depreciation. Expenditures for improvements that increase the values or extend
the useful life are capitalized and maintenance repair costs are expensed as
incurred. For financial reporting purposes, depreciation is computed using the
straight-line method over the useful lives of the respective assets, which
range from 10 to 25 years for buildings and 3 to 15 years for machinery and
equipment. The depreciation time for the production plant has from 1996 been
changed from 10 to 15 years.
(5) ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
----------------------------------
1995 1996 SEPTEMBER 30, 1997
------- ------- ------------------
(UNAUDITED)
<S> <C> <C> <C>
Bonus due to customers................... $ 510 $ 591 $ 454
A-Tax, vacation pay, etc................. 178 185 159
Other accrued liabilities................ 320 280 64
Current part of long term liabilities.... 240 224 198
------- ------- ------
$ 1,248 $ 1,280 $ 875
======= ======= ======
(6) LONG-TERM LIABILITIES
Long-term liabilities consist of the following:
<CAPTION>
(IN THOUSANDS)
----------------------------------
1995 1996 SEPTEMBER 30, 1997
------- ------- ------------------
(UNAUDITED)
<S> <C> <C> <C>
Due 1-5 years............................ $ 1,322 $ 1,065 $ 791
Due after 5 years........................ 751 645 519
------- ------- ------
$ 2,073 $ 1,710 $1,310
======= ======= ======
</TABLE>
F-83
<PAGE>
NESTE THERMISOL A/S
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(7) COMMITMENTS AND CONTINGENCIES
The Company is a party to various legal actions arising in the ordinary
course of its business. The liability if any, associated with these matters
will not have a material adverse effect upon financial condition, results of
operations or cash flows of the Company.
The Company is also subject to environmental regulations, including rules
relating to air and water pollution and the storage and disposal of chemicals
and waste. The Company believes it complies in all material respects with
applicable laws.
The company has no contracts of guarantee or pension provisions.
(8) SUBSEQUENT EVENT:
On October 15, 1997, Neste Oy, Isora Oy, Neste Cellplast AB and Neste
Thermisol A/S sold certain EPS, PS and HIPS assets in Finland, Sweden and
Denmark, which include the assets of the Company, to StyroChem Finland Oy,
ThermiSol Finland Oy, ThermiSol Sweden AB and ThermiSol Denmark ApS and Radnor
Holdings Corporation as parent and guarantor.
F-84
<PAGE>
STYROCHEM EUROPE
COMBINING STATEMENT OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------------------------------
NESTE OY
POLYSTYRENE
BUSINESS COMBINING STYROCHEM
IN PORVOO NESTE NESTE & ELIMINATING EUROPE
AND KOKEMAKI ISORA OY CELLPLAST AB THERMISOL A/S ADJUSTMENTS COMBINED
------------ -------- ------------ ------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $60,805 $19,298 $10,319 $5,470 $(12,274)(2) $83,618
Cost of goods sold...... 40,752 14,960 6,904 3,405 (12,373)(3) 53,648
------- ------- ------- ------ -------- -------
Gross profit............ 20,053 4,338 3,415 2,065 99 29,970
Distribution expense.... 3,392 938 870 642 5,842
Selling, general and
administrative
expenses............... 12,378(1) 3,336 1,725 1,368 18,807
Restructuring charges... -- -- -- -- --
------- ------- ------- ------ -------- -------
Income (loss) from
operations............. 4,283 64 820 55 99 5,321
Interest................ -- -- -- 142 142
Other income............ -- 112 80 -- 192
------- ------- ------- ------ -------- -------
Income (loss) from
continuing operations
before income taxes and
minority interest...... 4,283 176 900 (87) 99 5,371
Income tax expense
(benefit).............. 1,199 (152) (4) -- 1,043
------- ------- ------- ------ -------- -------
Income (loss) from
continuing operations
before minority
interest............... 3,084 328 904 (87) 99 4,328
Minority interest in
income................. --
------- ------- ------- ------ -------- -------
Income (loss) from
continuing operations.. $ 3,084 $ 328 $ 904 $ (87) $ 99 $ 4,328
======= ======= ======= ====== ======== =======
</TABLE>
- --------
(1) Includes allocation of selling, general and administrative costs from
Neste Oy of $1.8 million.
(2) Reflects elimination of intercompany sales.
(3) Reflects elimination of cost of goods sold related to intercompany sales
of $12.3 million plus the elimination of the change in intercompany profit
in inventory of $0.1 million.
F-85
<PAGE>
STYROCHEM EUROPE
COMBINING STATEMENT OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
----------------------------------------------------------------------------------
NESTE OY
POLYSTYRENE BUSINESS COMBINING STYROCHEM
IN PORVOO NESTE NESTE & ELIMINATING EUROPE
AND KOKEMAKI ISORA OY CELLPLAST AB THERMISOL A/S ADJUSTMENTS COMBINED
-------------------- -------- ------------ ------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $46,380 $13,759 $7,275 $5,083 $(8,970)(1) $63,527
Cost of goods sold...... 32,455 9,842 4,685 2,816 (8,975)(2) $40,823
------- ------- ------ ------ ------- -------
Gross profit............ 13,925 3,917 2,590 2,267 5 22,704
Distribution expense.... 2,632 664 801 616 4,713
Selling, general and
administrative
expenses............... 8,781 2,692 1,108 965 13,546
Restructuring charges... -- -- -- -- --
------- ------- ------ ------ ------- -------
Income (loss) from
operations............. 2,512 561 681 686 5 4,445
Interest................ -- -- -- 76 76
Other income............ -- (70) (37) -- (107)
------- ------- ------ ------ ------- -------
Income (loss) from
continuing operations
before income taxes and
minority interest...... 2,512 631 718 610 5 4,476
Income tax expense
(benefit).............. 703 -- (18) -- 685
------- ------- ------ ------ ------- -------
Income (loss) from
continuing operations
before minority
interest............... 1,809 631 736 610 5 3,791
Minority interest in
income................. --
------- ------- ------ ------ ------- -------
Income (loss) from
continuing operations.. $ 1,809 $ 631 $ 736 $ 610 $ 5 $ 3,791
======= ======= ====== ====== ======= =======
</TABLE>
- --------
(1) Reflects elimination of intercompany sales.
(2) Reflects elimination of cost of goods sold related to intercompany sales
of $9.0 million, net of the elimination of the change in intercompany
profit.
F-86
<PAGE>
STYROCHEM EUROPE
COMBINING BALANCE SHEET
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------------------------------------------------------------
NESTE OY
POLYSTYRENE BUSINESS COMBINING STYROCHEM
IN PORVOO NESTE NESTE & ELIMINATING EUROPE
AND KOKEMAKI ISORA OY CELLPLAST AB THERMISOL A/S ADJUSTMENT COMBINED
-------------------- -------- ------------ ------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash.................. $ -- $ 4,241 $1,636 $ 720 $ 6,597
Accounts receivable,
net.................. 8,659 2,462 1,372 575 $(1,375) 11,693
Inventory............. 5,718 1,311 505 332 7,866
Deferred tax asset.... -- -- -- -- --
Prepaid expenses and
other................ 553 1,294 199 71 2,117
------- ------- ------ ------ -------
Total current assets.. 14,930 9,308 3,712 1,698 28,273
Property, plant and
equipment, net......... 22,565 3,455 511 2,569 29,100
Other assets............ 323 195 -- -- 518
------- ------- ------ ------ -------
Total assets........ $37,818 $12,958 $4,223 $4,267 $57,891
======= ======= ====== ====== =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...... $ 3,708 $ 1,227 $1,381 $ 501 $(1,375) $ 5,442
Accrued liabilities... 1,160 2,337 493 875 4,865
Other current
liabilities.......... -- -- 221 -- 221
------- ------- ------ ------ -------
Total current
liabilities........ 4,868 3,564 2,095 1,376 10,528
------- ------- ------ ------ -------
Long-term debt.......... -- -- -- -- --
------- ------- ------ ------ -------
Deferred income taxes... -- -- 36 -- 36
------- ------- ------ ------ -------
Other non-current
liabilities............ -- 990 -- 1,310 2,300
------- ------- ------ ------ -------
Commitment and
contingencies:
Stockholders' equity
Common stock.......... -- 3,858 804 1,973 6,635
Division equity....... 32,950 -- -- -- 32,950
Foreign currency
translation
adjustment........... -- (944) 60 (38) (922)
Retained earnings
(deficit)............ -- 5,490 1,228 (354) 6,364
------- ------- ------ ------ -------
Total stockholders'
equity............. 32,950 8,404 2,092 1,581 45,027
------- ------- ------ ------ -------
Total liabilities
and stockholders'
equity............. $37,818 $12,958 $4,223 $4,767 $57,891
======= ======= ====== ====== =======
</TABLE>
F-87
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT ANY
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 4
Risk Factors............................................................. 15
The Company.............................................................. 23
Capitalization........................................................... 25
Pro Forma Consolidated Financial Data.................................... 26
Selected Consolidated Financial Data..................................... 31
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 33
Business................................................................. 38
Management............................................................... 52
Security Ownership by Certain Beneficial Owners and Management........... 56
Description of Other Company Indebtedness................................ 58
The Exchange Offer....................................................... 61
Description of the Notes................................................. 68
Registration Rights...................................................... 94
Certain U.S Federal Income Tax Considerations............................ 96
Plan of Distribution..................................................... 99
Legal Matters............................................................ 100
Experts.................................................................. 100
Available Information.................................................... 100
Index to Financial Statements............................................ F-1
</TABLE>
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING 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 UNDER
WRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[LOGO OF RADNOR HOLDINGS CORPORATION APPEARS HERE]
OFFER FOR ALL OUTSTANDING 10% SERIES B SENIOR NOTES DUE 2003 IN EXCHANGE FOR
10% SERIES B 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:
(704) 590-7628
Confirmation by Telephone:
(704) 590-7408
By Mail/Hand/Overnight Courier:
FIRST UNION NATIONAL BANK
1525 WEST W.T. HARRIS BLVD.
BUILDING 3C3
CHARLOTTE, NC 28262
ATTENTION: MICHAEL KLOTZ
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S> <C>
3.1 Restated Certificate of Incorporation of Radnor Holdings
Corporation (Incorporated by reference to Exhibit 3.1 filed
with Form S-4 Registration Statement, filed by Registrants and
certain other entities, Commission File No. 333-19495 (the
"Prior S-4"))
3.2 Bylaws of Radnor Holdings Corporation (Incorporated by
reference to Exhibit 3.2 filed with the Prior S-4)
3.3 Certificate of Incorporation of WinCup Holdings, Inc.
(Incorporated by reference to Exhibit 3.3 filed with the Prior
S-4)
3.4 Bylaws of WinCup Holdings, Inc. (Incorporated by reference to
Exhibit No. 3.4 filed with the
Prior S-4)
3.5 Certificate of Incorporation of Radnor Management, Inc.
(Incorporated by reference to Exhibit No. 3.5 filed with the
Prior S-4)
3.6 Bylaws of Radnor Management, Inc. (Incorporated by reference to
Exhibit No. 3.6 filed with the Prior S-4)
3.7 Certificate of Incorporation of Radnor Chemical Corporation
(incorporated by reference to same-numbered exhibit filed with
Form S-4 Registration, filed by Registrants, Commission File
No. 333-42101 (the "Current S-4"))
3.8 Bylaws of Radnor Chemical Corporation (Incorporated by
reference to Exhibit No. 3.10 filed with the Prior S-4)
3.9 Articles of Incorporation of StyroChem U.S., Inc. (Incorporated
by reference to same-numbered exhibit filed with the Current
S-4)
3.10 Bylaws of StyroChem U.S., Inc. (Incorporated by reference to
Exhibit No. 3.12 filed with the Prior S-4)
4.1 Indenture, dated as of October 15, 1997 among Radnor Holdings
Corporation, WinCup Holdings, Inc., SP Acquisition Co.,
StyroChem International, Inc., Radnor Management, Inc., and
First Union National Bank, including form of Notes and
Guarantees (Incorporated by reference to same-numbered exhibit
filed with the Current S-4)
4.2 Exchange and Registration Rights Agreement, dated as of October
15, 1997, among Radnor Holdings Corporation, WinCup Holdings,
Inc., SP Acquisition Co., StyroChem International, Inc.,
Radnor Management, Inc., Bear, Stearns & Co. Inc., NatWest
Capital Markets Limited and BT Alex. Brown Incorporated
(Incorporated by reference to same-numbered exhibit filed with
the Current S-4)
4.3 Form of Letter of Transmittal (Incorporated by reference to
same-numbered exhibit filed with the Current S-4)
4.4 Form of Notice of Guaranteed Delivery (Incorporated by
reference to same-numbered exhibit filed with the Current S-4)
4.5 Form of Letter to Noteholders (Incorporated by reference to
same-numbered exhibit filed with the Current S-4)
4.6 Form of Letter to Record Holders (Incorporated by reference to
same-numbered exhibit filed with the Current S-4)
5.1 Opinion of Duane, Morris & Heckscher LLP regarding the legality
of the securities registered
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S> <C>
8.1 Opinion of Duane, Morris & Heckscher LLP 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, SA. de
C.V., and the Rosenthal Group, dated October 30, 1996
(Incorporated by reference to Exhibit No. 10.1 filed with the
Prior S-4)
10.2 Asset Purchase Agreement among Benchmark Holdings, Inc., WinCup
Holdings, Inc. and James River Paper Company, Inc., dated
October 31, 1995 (Incorporated by reference to Exhibit No.
10.2 filed with Amendment No.1 to the Prior S-4)
10.3 JR Capital Contribution Agreement by and between James River
Paper Company, Inc. and WinCup Holdings, L.P., dated January
20, 1996 (Incorporated by reference to Exhibit No. 10.3 filed
with the Prior S-4)
10.4 WinCup Capital Contribution Agreement by and between WinCup
Holdings, Inc. and WinCup Holdings, L.P., dated January 20,
1996 (Incorporated by reference to Exhibit No. 10.4 filed with
the Prior S-4)
10.5 Working Capital Escrow Agreement, dated as of December 5, 1996,
among Radnor Holdings Corporation, Richard Davidovich and
Duane, Morris & Heckscher (Incorporated by reference to
Exhibit No. 10.5 filed with the Prior S-4)
10.6 Environmental Escrow Agreement, dated as of December 5, 1996,
among Radnor Holdings Corporation, Richard Davidovich and
Duane, Morris & Heckscher (Incorporated by reference to
Exhibit No. 10.6 filed with the Prior S-4)
*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 (Incorporated by reference to Exhibit
No. 10.7 filed with Amendment No.1 the Prior S-4)
*10.8 Equipment Use Agreement, dated January 20, 1996, as amended by
an Equipment Use Extension and Modification Agreement dated
December 5, 1996 (Incorporated by reference to Exhibit No.
10.8 filed with Amendment No.1 to the Prior S-4)
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 (Incorporated by
reference to Exhibit No. 10.9 filed with Amendment No.1 to the
Prior S-4)
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 (Incorporated
by reference to Exhibit No. 10.10 filed with Amendment No.1 to
the Prior S-4)
*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. (Incorporated by
reference to Exhibit No. 10.11 filed with Amendment No.1 to
the Prior S-4)
*10.12 Contract between ARCO Chemical Company and WinCup Holdings,
L.P., dated April 1, 1996, as amended on September, 1996
(Incorporated by reference to Exhibit No. 10.12 filed with
Amendment No.1 to the Prior S-4)
10.13 Product Sales Agreement by and between Huntsman Chemical
Corporation and WinCup Holdings, Inc., dated January 1, 1996
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S> <C>
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. and WinCup
Holdings, Inc., dated February 28, 1992, as amended on
February 25, 1994, assigned to WinCup Holdings, L.P. on
January 20, 1996 (Incorporated by reference to Exhibit No.
10.16 filed with Amendment No. 1 to the Prior S-4)
*10.17 Supply Agreement by and between SP Acquisition Co. and James
River Canada, Inc., dated March, 1996 (Incorporated by
reference to Exhibit No. 10.17 filed with Amendment No. 1 to
the Prior S-4)
10.18 Noncompetition Agreement by and between Radnor Holdings
Corporation and Richard Davidovich, dated December 5, 1996
(Incorporated by reference to Exhibit No. 10.18 filed with the
Prior S-4)
10.19 Consulting Agreement by and between Radnor Holdings Corporation
and Richard Davidovich, dated December 5, 1996 (Incorporated
by reference to Exhibit No. 10.19 filed with the Prior S-4)
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) (Incorporated by
reference to Exhibit No. 10.20 filed with the Prior S-4)
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) (Incorporated by
reference to Exhibit No. 10.21 filed with the Prior S-4)
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) (Incorporated by
reference to Exhibit No. 10.22 filed with the Prior S-4)
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) (Incorporated by
reference to Exhibit No. 10.23 filed with the Prior S-4)
10.24 Letter Agreement, dated December 5, 1996, between WinCup
Holdings, L.P. and James River Paper Company, Inc., regarding
Corte Madera subleases (Incorporated by reference to Exhibit
No. 10.24 filed with the Prior S-4)
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 (Incorporated by
reference to Exhibit No. 10.25 filed with Amendment No. 1 to
the Prior S-4)
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 (Incorporated by reference to Exhibit No. 10.26 filed
with Amendment No. 1 to the Prior S-4)
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 (Incorporated by reference to Exhibit
No. 10.27 filed with Amendment No. 1 to the Prior S-4)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S> <C>
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 (Incorporated by
reference to Exhibit No. 10.28 filed with Amendment No. 1 to
the Prior S-4)
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
(Incorporated by reference to Exhibit No. 10.29 filed with
Amendment No. 1 to the Prior S-4)
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 (Incorporated by reference to Exhibit No. 10.30 filed
with Amendment No. 1 to the Prior S-4)
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 (Incorporated by reference
to Exhibit No. 10.31 filed with Amendment No. 1 to the Prior
S-4)
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
(Incorporated by reference to Exhibit No. 10.32 filed with
Amendment No. 1 to the Prior S-4)
10.33 Industrial Building Lease between Centerpoint Properties
Corporation and WinCup Holdings, L.P. dated May 1996
(Incorporated by reference to same-numbered exhibit filed
with the Current S-4)
10.34 Radnor Corporate Center Office Lease by and between Radnor
Center Associates and WinCup Holdings, L.P., dated May 31,
1996 (Incorporated by reference to Exhibit No. 10.34 filed
with Amendment No. 1 to the Prior S-4)
10.35 Standard Commercial Lease by and between Bradford Management
Company of Dallas, Inc. and Scott Polymers, Inc., dated June
22, 1994, as amended on April 5, 1996, and as renewed on
October 22, 1996 (Incorporated by reference to Exhibit No.
10.35 filed with Amendment No. 1 to the Prior S-4)
10.36 Sublease between Cargologan Inc. and StyroChem International,
Ltd., dated August 2, 1996 (Incorporated by reference to
Exhibit No. 10.36 filed with Amendment No. 1 to the Prior S-
4)
10.37 Employment Agreement by and between WinCup Holdings, L.P. and
Michael T. Kennedy, dated January 20, 1996 (Incorporated by
reference to Exhibit No. 10.37 filed with the Prior S-4)
10.38 Executive Employment Agreement by and between Benchmark
Corporation of Delaware and Richard Hunsinger, dated May 1,
1993, as amended in October, 1995 (Incorporated by reference
to Exhibit No. 10.38 filed with the Prior S-4)
10.39 Benchmark Corporation of Delaware Equity Incentive Plan, dated
April 24, 1992, as amended on November 1, 1993 (Incorporated
by reference to Exhibit No. 10.39 filed with Amendment No. 1
to the Prior S-4)
10.40 Benchmark Corporation of Delaware Management Equity
Participation Plan, dated March 10, 1993, as amended on
November 1, 1993 (Incorporated by reference to Exhibit No.
10.40 filed with Amendment No. 1 to the Prior S-4)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S> <C>
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. (Incorporated by
reference to Exhibit No. 10.41 filed with Amendment No. 1 to
the Prior S-4), as amended by Second Amended and Restated
Revolving Credit and Security Agreement among BNY Financial
Corporation, The Bank of New York Commercial Corporation,
NationsBank, N.A., WinCup Holdings, Inc., SP Acquisition Co.,
StyroChem International, Inc. and Radnor Holdings Corporation,
dated October 15, 1997 (Incorporated by reference to same-
numbered exhibit filed with the Current S-4)
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 (Incorporated by reference to Exhibit
No. 10.42 filed with Amendment No. 1 to the Prior S-4)
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.
(Incorporated by reference to Exhibit No. 10.43 filed with
Amendment No. 1 to the Prior S-4)
10.44 Trademark Collateral Security Agreement, dated December 5,
1996, between StyroChem International, Inc. and The Bank of
New York Commercial Corporation (Incorporated by reference to
Exhibit No. 10.44 filed with Amendment No. 1 to the Prior S-4)
10.45 Trademark Assignment of Security, dated December 5, 1996,
between StyroChem International, Inc. and The Bank of New York
Commercial Corporation (Incorporated by reference to Exhibit
No. 10.45 filed with Amendment No. 1 to the Prior S-4)
10.46 Trademark Collateral Security Agreement, dated December 5,
1996, between WinCup Holdings, Inc. and The Bank of New York
Commercial Corporation (Incorporated by reference to Exhibit
No. 10.46 filed with Amendment No. 1 to the Prior S-4)
10.47 Trademark Assignment of Security, dated December 5, 1996,
between WinCup Holdings, Inc. and The Bank of New York
Commercial Corporation (Incorporated by reference to Exhibit
No. 10.47 filed with Amendment No. 1 to the Prior S-4)
10.48 Patent Collateral Security Agreement, dated December 5, 1996,
between StyroChem International, Inc. and The Bank of New York
Commercial Corporation (Incorporated by reference to Exhibit
No. 10.48 filed with Amendment No. 1 to the Prior S-4)
10.49 Patent Assignment of Security, dated December 5, 1996, between
StyroChem International, Inc. and The Bank of New York
Commercial Corporation (Incorporated by reference to Exhibit
No. 10.49 filed with Amendment No. 1 to the Prior S-4)
10.50 Collateral Assignment, dated as of December 5, 1996, among
Radnor Holdings Corporation and The Bank of New York
Commercial Corporation (Incorporated by reference to Exhibit
No. 10.50 filed with Amendment No. 1 to the Prior S-4)
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) (Incorporated by reference to Exhibit No.
10.51 filed with the Prior S-4)
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) (Incorporated by reference to Exhibit No.
10.52 filed with the Prior S-4)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S> <C>
10.53 Subordinated Promissory Note, dated January 20, 1996, made by
WinCup Holdings, L.P. in favor of Scott Paper Company ($2.7
million) (Incorporated by reference to Exhibit No. 10.53 filed
with the Prior S-4)
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) (Incorporated by reference to Exhibit No.
10.54 filed with the Prior S-4)
10.55 Subordinated Promissory Note, dated January 20, 1996, made by
WinCup Holdings, L.P. in favor of Scott Paper Company
($300,000) (Incorporated by reference to Exhibit No. 10.55
filed with the Prior S-4)
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) (Incorporated by reference to
Exhibit No. 10.56 filed with the Prior S-4)
10.57 Subordinated Promissory Note, dated January 20, 1996, made by
WinCup Holdings, L.P. in favor of WinCup Holdings, Inc. ($1.8
million) (Incorporated by reference to Exhibit No. 10.57 filed
with the Prior S-4)
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) (Incorporated by reference to Exhibit No. 10.58 filed
with the Prior S-4)
10.59 Subordinated Promissory Note, dated January 20, 1996, made by
WinCup Holdings, L.P. in favor of James River Paper Company,
Inc. (Incorporated by reference to Exhibit No. 10.59 filed
with the Prior S-4)
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. (Incorporated by reference to Exhibit No. 10.60 filed
with the Prior S-4)
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
(Incorporated by reference to Exhibit No. 10.61 filed with the
Prior S-4)
10.62 Assumption and Modification Agreement, dated as of January 20,
1996, among Scott Paper Company, WinCup Holdings, Inc. and
WinCup Holdings, L.P. (Incorporated by reference to Exhibit
No. 10.62 filed with the Prior S-4)
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 (Incorporated by
reference to Exhibit No. 10.63 filed with Amendment No. 1 to
the Prior S-4)
10.64 Letter of Undertaking, dated December 5, 1996, made by
StyroChem International, Ltd. and Radnor Holdings Corporation
in favor of Bank of Montreal (Incorporated by reference to
Exhibit No. 10.64 filed with the Prior S-4)
10.65 Guaranty, dated February 25, 1994, made by SP Acquisition Co.
in favor of Bank of Montreal (Incorporated by reference to
Exhibit No. 10.65 filed with Amendment No. 1 to the Prior S-4)
10.66 Employment Agreement, dated April 5, 1996, between WinCup
Holdings, Inc. and R. Radcliffe Hastings (Incorporated by
reference to Exhibit No. 10.66 filed with the Prior S-4)
10.67 Sale of Assets Agreement between Neste Oy, Isora Oy, Neste
Cellplast AB, Neste Thermisol A/S and StyroChem Finland Oy,
ThermiSol Finland Oy, ThermiSol Sweden AB, ThermiSol Denmark
ApS and Radnor Holdings Corporation dated as of September 17,
1997 (Incorporated by reference to Exhibit No. 2.1 filed with
the Form 8-K filed by Radnor Holdings Corporation dated
October 15, 1997)
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S> <C>
10.68 Neste Service Agreement by and between Neste Oy and StyroChem
Finland Oy and Radnor Holdings Corporation dated as of October
15, 1997 (Incorporated by reference to same-numbered exhibit
filed with the Current S-4)
10.69 Land Lease Agreement by and between Neste Oy and StyroChem
Finland Oy and Radnor Holdings Corporation dated as of October
15, 1997 (Incorporated by reference to same-numbered exhibit
filed with the Current S-4)
10.70 Plant Lease--195 Tamal Vista Boulevard, Corte Madera,
California, between Hunt Brothers Leasing, L.L.C. and WinCup
Holdings, L.P., dated May 1, 1997 (Incorporated by reference
to same-numbered exhibit filed with the Current S-4)
10.71 Engineering Lease--201 Tamal Vista Boulevard, Corte Madera,
California, between Hunt Brothers Leasing, L.L.C. and WinCup
Holdings, L.P., dated May 1, 1997 (Incorporated by reference
to same-numbered exhibit filed with the Current S-4)
10.72 Warehouse Lease--205 Tamal Vista Boulevard, Corte Madera,
California, between Hunt Brothers Leasing, L.L.C. and WinCup
Holdings, L.P., dated May 1, 1997 (Incorporated by reference
to same-numbered exhibit filed with the Current S-4)
10.73 Supplement Revolving Multicurrency Credit Agreement among BNY
Financial Limited, NationsBank, N.A., StyroChem Europe (The
Netherlands) B.V., StyroChem Finland Oy, ThermiSol Finland Oy,
ThermiSol Denmark ApS and ThermiSol Sweden AB Guaranteed by
Inter Alia WinCup Holdings, Inc., Radnor Chemical Corporation,
StyroChem U.S., Inc. and Radnor Holdings Corporation dated
October 15, 1997 as amended by Supplement Revolving
Multicurrency Credit Agreement among BNY Financial Limited,
NationsBank, N.A., StyroChem Europe (The Netherlands) B.V.,
StyroChem Finland Oy, ThermiSol Finland Oy, ThermiSol Denmark
ApS and ThermiSol Sweden AB Guaranteed by Inter Alia WinCup
Holdings, Inc., Radnor Chemical Corporation, StyroChem U.S.,
Inc. and Radnor Holdings Corporation dated November 21, 1997
10.74 Lease Agreement between Oy KWH Plast Ab, Jakobstad and Isora Oy
dated January 24, 1995 (Incorporated by reference to same-
numbered exhibit filed with the Current S-4)
10.75 Lease and Cooperation Agreement between Suomen Polystyreeni
Tehdas Oy/Finska Polystyren Fabriken Ab and Borough of
Kokemaki dated February 27, 1971, as amended by Subcontract
dated October 13, 1976, Subcontract II dated February 26,
1981, Subcontract III dated August 13, 1985, Transfer of Lease
Agreement between City of Kokemaki and Neste Oy dated December
29, 1987, Lease dated April 15, 1994 and Lease Agreement II
dated September 26, 1996 (Incorporated by reference to same-
numbered exhibit filed with the Current S-4)
10.76 Lease Agreement between Avena Siilot Oy and Neste Oy
Polystyreeni dated March 13, 1997 (Incorporated by reference
to same-numbered exhibit filed with the Current S-4)
10.77 Office Lease Agreement between Keharakenpajat Oy and Neste Oy
Polystyreeni dated July 1, 1995
10.78 Lease Contract between Lokalo Fastighetsforvaltning and Neste
Cellplast AB dated August 16, 1996
10.79 Lease Contract between Norrtalje Industri- och Hantverkshus AB
(NIHAB) and Neste Cellplast AB dated June 26, 1996
*10.80 Styrene Monomer Supply Agreement dated as of October 15, 1997
between StyroChem Finland Oy and Elf Atochem SA
10.81 Employment Agreement dated February 21, 1997 between Radnor
Holdings Corporation and Caroline J. Williamson
12.1 Computation of ratios (Incorporated by reference to same-
numbered exhibit filed with the Current S-4)
21.1 List of Subsidiaries of the Registrant (Incorporated by
reference to same-numbered exhibit filed with the Current S-4)
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S> <C>
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Arthur Andersen Oy
23.3 Consent of Arthur Andersen AB
23.4 Consent of Arthur Andersen
23.5 Consent of Deloitte & Touche LLP
23.6 Consent of Ohrlings Coopers & Lybrand AB
23.7 Consent of Duane, Morris & Heckscher LLP (included in Exhibits
5.1 and 8.1 to this Registration Statement)
24.1 Power of Attorney (Incorporated by reference to same-numbered
exhibit filed with the Current S-4)
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 (Incorporated
by reference to same-numbered exhibit filed with the Current
S-4)
27.1 Financial Data Schedule (Radnor Holdings Corporation)
27.2 Financial Data Schedule (SP Acquisition Co. and Subsidiaries)
27.3 Financial Data Schedule (Neste Oy Polystyrene Upstream Business
in Porvoo and Kokemaki)
27.4 Financial Data Schedule (Isora Oy)
27.5 Financial Data Schedule (Neste Cellplast AB)
27.6 Financial Data Schedule (Neste Thermisol A/S)
</TABLE>
- --------
* Portions of this Exhibit have been deleted pursuant to the Company's
Requests for Confidential Treatment pursuant to Rule 406 promulgated under
the Securities Act.
No financial statement schedules are required as all material required
information is disclosed in the notes to the respective financial statements.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Radnor Holdings
Corporation has duly caused this Amendment No. 1 to this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Radnor, Pennsylvania, on January 22, 1998.
RADNOR HOLDINGS CORPORATION
/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. 1 to this Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
Chief Executive
* Officer, President January 22, 1998
- ------------------------------------- and Director
MICHAEL T. KENNEDY (principal
executive officer)
/s/ Michael V. Valenza Senior Vice
- ------------------------------------- President--Finance January 22, 1998
MICHAEL V. VALENZA (principal
financial and
accounting officer)
Director
* January 22, 1998
- -------------------------------------
R. RADCLIFFE HASTINGS
Director
- ------------------------------------- January , 1998
THOMAS J. HOPKINS
Director
* January 22, 1998
- -------------------------------------
VINCENT F. GARRITY, JR
Director
* January 22, 1998
- -------------------------------------
JOHN P. MCNIFF
*By: /s/ Michael V. Valenza
___________________________
MICHAEL V. VALENZA Attorney-in-
Fact
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, WinCup Holdings,
Inc. has duly caused this Amendment No. 1 to this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in Radnor,
Pennsylvania, on January 22 , 1998 .
WINCUP HOLDINGS, INC.
/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. 1 to this Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
President and Sole
* Director (principal January 22, 1998
- ------------------------------------- executive officer)
MICHAEL T. KENNEDY
/s/ Michael V. Valenza Senior Vice
- ------------------------------------- President-- Finance January 22, 1998
MICHAEL V. VALENZA (principal
financial and
accounting officer)
*By: /s/ Michael V. Valenza
--------------------------
MICHAEL V. VALENZA
Attorney-in-Fact
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Radnor Chemical
Corporation has duly caused this Amendment No. 1 to this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
Radnor, Pennsylvania, on January 22, 1998.
Radnor Chemical Corporation
/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. 1 to this Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
President and Sole
* Director (principal January 22, 1998
- ------------------------------------- executive officer)
MICHAEL T. KENNEDY
/s/ Michael V. Valenza Senior Vice
- ------------------------------------- President--Finance January 22, 1998
MICHAEL V. VALENZA (principal
financial and
accounting officer)
*By: /s/ Michael V. Valenza
---------------------------------
MICHAEL V. VALENZA
Attorney-in-Fact
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, StyroChem U.S.,
Inc. has duly caused this Amendment No. 1 to this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in Radnor,
Pennsylvania, on January 22, 1998.
StyroChem U.S., Inc.
/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. 1 to this Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
President and Sole
* Director (principal January 22, 1998
- ------------------------------------- executive officer)
MICHAEL T. KENNEDY
/s/ Michael V. Valenza Senior Vice
- ------------------------------------- President- Finance January 22, 1998
MICHAEL V. VALENZA (principal
financial and
accounting officer)
*By: /s/ Michael V. Valenza
---------------------------------
MICHAEL V. VALENZA
Attorney-in-Fact
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Radnor
Management, Inc. has duly caused this Amendment No. 1 to this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Radnor, Pennsylvania, on January 22, 1998.
Radnor Management, Inc.
/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. 1 to this Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
President and Sole
* Director (principal January 22, 1998
- ------------------------------------- executive officer)
MICHAEL T. KENNEDY
/s/ Michael V. Valenza Senior Vice
- ------------------------------------- President-- Finance January 22, 1998
MICHAEL V. VALENZA (principal
financial and
accounting officer)
*By: /s/ Michael V. Valenza
---------------------------------
MICHAEL V. VALENZA
Attorney-in-Fact
II-13
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S> <C>
3.1 Restated Certificate of Incorporation of Radnor Holdings
Corporation (Incorporated by reference to Exhibit 3.1 filed
with Form S-4 Registration Statement, filed by Registrants and
certain other entities, Commission File No. 333-19495 (the
"Prior S-4"))
3.2 Bylaws of Radnor Holdings Corporation (Incorporated by reference
to Exhibit 3.2 filed with the Prior S-4)
3.3 Certificate of Incorporation of WinCup Holdings, Inc.
(Incorporated by reference to Exhibit 3.3 filed with the Prior
S-4)
3.4 Bylaws of WinCup Holdings, Inc. (Incorporated by reference to
Exhibit No. 3.4 filed with the
Prior S-4)
3.5 Certificate of Incorporation of Radnor Management, Inc.
(Incorporated by reference to Exhibit No. 3.5 filed with the
Prior S-4)
3.6 Bylaws of Radnor Management, Inc. (Incorporated by reference to
Exhibit No. 3.6 filed with the Prior S-4)
3.7 Certificate of Incorporation of Radnor Chemical Corporation
(Incorporated by reference to same-numbered exhibit filed with
Form S-4 Registration Statement, filed by Registrants,
Commission No. File 333-42101 (the "Current S-4"))
3.8 Bylaws of Radnor Chemical Corporation (Incorporated by reference
to Exhibit No. 3.10 filed with the Prior S-4)
3.9 Articles of Incorporation of StyroChem U.S., Inc. (Incorporated
by reference to same-numbered exhibit filed with the Current S-
4)
3.10 Bylaws of StyroChem U.S., Inc. (Incorporated by reference to
Exhibit No. 3.12 filed with the
Prior S-4)
4.1 Indenture, dated as of October 15, 1997 among Radnor Holdings
Corporation, WinCup Holdings, Inc., SP Acquisition Co.,
StyroChem International, Inc., Radnor Management, Inc., and
First Union National Bank, including form of Notes and
Guarantees (Incorporated by reference to same-numbered exhibit
filed with the Current S-4)
4.2 Exchange and Registration Rights Agreement, dated as of October
15, 1997, among Radnor Holdings Corporation, WinCup Holdings,
Inc., SP Acquisition Co., StyroChem International, Inc., Radnor
Management, Inc., Bear, Stearns & Co. Inc., NatWest Capital
Markets Limited and BT Alex. Brown Incorporated (Incorporated
by reference to same-numbered exhibit filed with the Current S-
4)
4.3 Form of Letter of Transmittal (Incorporated by reference to
same-numbered exhibit filed with the Current S-4)
4.4 Form of Notice of Guaranteed Delivery (Incorporated by reference
to same-numbered exhibit filed with the Current S-4)
4.5 Form of Letter to Noteholders (Incorporated by reference to
same-numbered exhibit filed with the Current S-4)
4.6 Form of Letter to Record Holders (Incorporated by reference to
same-numbered exhibit filed with the Current S-4)
5.1 Opinion of Duane, Morris & Heckscher LLP regarding the legality
of the securities registered
8.1 Opinion of Duane, Morris & Heckscher LLP 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, SA. de
C.V., and the Rosenthal Group, dated October 30, 1996
(Incorporated by reference to Exhibit No. 10.1 filed with the
Prior S-4)
10.2 Asset Purchase Agreement among Benchmark Holdings, Inc., WinCup
Holdings, Inc. and James River Paper Company, Inc., dated
October 31, 1995 (Incorporated by reference to Exhibit No. 10.2
filed with Amendment No.1 to the Prior S-4)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S> <C>
10.3 JR Capital Contribution Agreement by and between James River
Paper Company, Inc. and WinCup Holdings, L.P., dated January
20, 1996 (Incorporated by reference to Exhibit No. 10.3 filed
with the Prior S-4)
10.4 WinCup Capital Contribution Agreement by and between WinCup
Holdings, Inc. and WinCup Holdings, L.P., dated January 20,
1996 (Incorporated by reference to Exhibit No. 10.4 filed with
the Prior S-4)
10.5 Working Capital Escrow Agreement, dated as of December 5, 1996,
among Radnor Holdings Corporation, Richard Davidovich and
Duane, Morris & Heckscher (Incorporated by reference to Exhibit
No. 10.5 filed with the Prior S-4)
10.6 Environmental Escrow Agreement, dated as of December 5, 1996,
among Radnor Holdings Corporation, Richard Davidovich and
Duane, Morris & Heckscher (Incorporated by reference to Exhibit
No. 10.6 filed with the Prior S-4)
*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 (Incorporated by reference to Exhibit No. 10.7
filed with Amendment No.1 the Prior S-4)
*10.8 Equipment Use Agreement, dated January 20, 1996, as amended by
an Equipment Use Extension and Modification Agreement dated
December 5, 1996 (Incorporated by reference to Exhibit No. 10.8
filed with Amendment No.1 to the Prior S-4)
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 (Incorporated by
reference to Exhibit No. 10.9 filed with Amendment No.1 to the
Prior S-4)
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 (Incorporated by
reference to Exhibit No. 10.10 filed with Amendment No.1 to the
Prior S-4)
*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. (Incorporated by
reference to Exhibit No. 10.11 filed with Amendment No.1 to the
Prior S-4)
*10.12 Contract between ARCO Chemical Company and WinCup Holdings,
L.P., dated April 1, 1996, as amended on September, 1996
(Incorporated by reference to Exhibit No. 10.12 filed with
Amendment No.1 to the Prior S-4)
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. and WinCup
Holdings, Inc., dated February 28, 1992, as amended on February
25, 1994, assigned to WinCup Holdings, L.P. on January 20, 1996
(Incorporated by reference to Exhibit No. 10.16 filed with
Amendment No. 1 to the Prior S-4)
*10.17 Supply Agreement by and between SP Acquisition Co. and James
River Canada, Inc., dated March, 1996 (Incorporated by
reference to Exhibit No. 10.17 filed with Amendment No. 1 to
the Prior S-4)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S> <C>
10.18 Noncompetition Agreement by and between Radnor Holdings
Corporation and Richard Davidovich, dated December 5, 1996
(Incorporated by reference to Exhibit No. 10.18 filed with the
Prior S-4)
10.19 Consulting Agreement by and between Radnor Holdings Corporation
and Richard Davidovich, dated December 5, 1996 (Incorporated by
reference to Exhibit No. 10.19 filed with the Prior S-4)
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) (Incorporated by reference
to Exhibit No. 10.20 filed with the Prior S-4)
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) (Incorporated by reference
to Exhibit No. 10.21 filed with the Prior S-4)
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) (Incorporated by reference
to Exhibit No. 10.22 filed with the Prior S-4)
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) (Incorporated by reference
to Exhibit No. 10.23 filed with the Prior S-4)
10.24 Letter Agreement, dated December 5, 1996, between WinCup
Holdings, L.P. and James River Paper Company, Inc., regarding
Corte Madera subleases (Incorporated by reference to Exhibit
No. 10.24 filed with the Prior S-4)
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 (Incorporated by
reference to Exhibit No. 10.25 filed with Amendment No. 1 to
the Prior S-4)
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 (Incorporated by reference to Exhibit No. 10.26 filed
with Amendment No. 1 to the Prior S-4)
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 (Incorporated by reference to Exhibit No.
10.27 filed with Amendment No. 1 to the Prior S-4)
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 (Incorporated by reference
to Exhibit No. 10.28 filed with Amendment No. 1 to the Prior S-
4)
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
(Incorporated by reference to Exhibit No. 10.29 filed with
Amendment No. 1 to the Prior S-4)
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 (Incorporated by reference to Exhibit No. 10.30 filed with
Amendment No. 1 to the Prior S-4)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
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<C> <S> <C>
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 (Incorporated by reference
to Exhibit No. 10.31 filed with Amendment No. 1 to the Prior S-
4)
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
(Incorporated by reference to Exhibit No. 10.32 filed with
Amendment No. 1 to the Prior S-4)
10.33 Industrial Building Lease between Centerpoint Properties
Corporation and WinCup Holdings, L.P. dated May 1996
(Incorporated by reference to same-numbered exhibit filed with
the Current S-4)
10.34 Radnor Corporate Center Office Lease by and between Radnor
Center Associates and WinCup Holdings, L.P., dated May 31, 1996
(Incorporated by reference to Exhibit No. 10.34 filed with
Amendment No. 1 to the Prior S-4)
10.35 Standard Commercial Lease by and between Bradford Management
Company of Dallas, Inc. and Scott Polymers, Inc., dated June
22, 1994, as amended on April 5, 1996, and as renewed on
October 22, 1996 (Incorporated by reference to Exhibit No.
10.35 filed with Amendment No. 1 to the Prior S-4)
10.36 Sublease between Cargologan Inc. and StyroChem International,
Ltd., dated August 2, 1996 (Incorporated by reference to
Exhibit No. 10.36 filed with Amendment No. 1 to the Prior S-4)
10.37 Employment Agreement by and between WinCup Holdings, L.P. and
Michael T. Kennedy, dated January 20, 1996 (Incorporated by
reference to Exhibit No. 10.37 filed with the Prior S-4)
10.38 Executive Employment Agreement by and between Benchmark
Corporation of Delaware and Richard Hunsinger, dated May 1,
1993, as amended in October, 1995 (Incorporated by reference to
Exhibit No. 10.38 filed with the Prior S-4)
10.39 Benchmark Corporation of Delaware Equity Incentive Plan, dated
April 24, 1992, as amended on November 1, 1993 (Incorporated by
reference to Exhibit No. 10.39 filed with Amendment No. 1 to
the Prior S-4)
10.40 Benchmark Corporation of Delaware Management Equity
Participation Plan, dated March 10, 1993, as amended on
November 1, 1993 (Incorporated by reference to Exhibit No.
10.40 filed with Amendment No. 1 to the Prior S-4)
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. (Incorporated by
reference to Exhibit No. 10.41 filed with Amendment No. 1 to
the Prior S-4), as amended by Second Amended and Restated
Revolving Credit and Security Agreement among BNY Financial
Corporation, The Bank of New York Commercial Corporation,
NationsBank, N.A., WinCup Holdings, Inc., SP Acquisition Co.,
StyroChem International, Inc. and Radnor Holdings Corporation,
dated October 15, 1997 (Incorporated by reference to same-
numbered exhibit filed with the Current S-4)
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 (Incorporated by reference to Exhibit
No. 10.42 filed with Amendment No. 1 to the Prior S-4)
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.
(Incorporated by reference to Exhibit No. 10.43 filed with
Amendment No. 1 to the Prior S-4)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S> <C>
10.44 Trademark Collateral Security Agreement, dated December 5, 1996,
between StyroChem International, Inc. and The Bank of New York
Commercial Corporation (Incorporated by reference to Exhibit
No. 10.44 filed with Amendment No. 1 to the Prior S-4)
10.45 Trademark Assignment of Security, dated December 5, 1996,
between StyroChem International, Inc. and The Bank of New York
Commercial Corporation (Incorporated by reference to Exhibit
No. 10.45 filed with Amendment No. 1 to the Prior S-4)
10.46 Trademark Collateral Security Agreement, dated December 5, 1996,
between WinCup Holdings, Inc. and The Bank of New York
Commercial Corporation (Incorporated by reference to Exhibit
No. 10.46 filed with Amendment No. 1 to the Prior S-4)
10.47 Trademark Assignment of Security, dated December 5, 1996,
between WinCup Holdings, Inc. and The Bank of New York
Commercial Corporation (Incorporated by reference to Exhibit
No. 10.47 filed with Amendment No. 1 to the Prior S-4)
10.48 Patent Collateral Security Agreement, dated December 5, 1996,
between StyroChem International, Inc. and The Bank of New York
Commercial Corporation (Incorporated by reference to Exhibit
No. 10.48 filed with Amendment No. 1 to the Prior S-4)
10.49 Patent Assignment of Security, dated December 5, 1996, between
StyroChem International, Inc. and The Bank of New York
Commercial Corporation (Incorporated by reference to Exhibit
No. 10.49 filed with Amendment No. 1 to the Prior S-4)
10.50 Collateral Assignment, dated as of December 5, 1996, among
Radnor Holdings Corporation and The Bank of New York Commercial
Corporation (Incorporated by reference to Exhibit No. 10.50
filed with Amendment No. 1 to the Prior S-4)
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) (Incorporated by reference to Exhibit No. 10.51
filed with the Prior S-4)
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) (Incorporated by reference to Exhibit No. 10.52
filed with the Prior S-4)
10.53 Subordinated Promissory Note, dated January 20, 1996, made by
WinCup Holdings, L.P. in favor of Scott Paper Company ($2.7
million) (Incorporated by reference to Exhibit No. 10.53 filed
with the Prior S-4)
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) (Incorporated by reference to Exhibit No.
10.54 filed with the Prior S-4)
10.55 Subordinated Promissory Note, dated January 20, 1996, made by
WinCup Holdings, L.P. in favor of Scott Paper Company
($300,000) (Incorporated by reference to Exhibit No. 10.55
filed with the Prior S-4)
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) (Incorporated by reference to
Exhibit No. 10.56 filed with the Prior S-4)
10.57 Subordinated Promissory Note, dated January 20, 1996, made by
WinCup Holdings, L.P. in favor of WinCup Holdings, Inc. ($1.8
million) (Incorporated by reference to Exhibit No. 10.57 filed
with the Prior S-4)
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) (Incorporated by reference to Exhibit No. 10.58 filed
with the Prior S-4)
10.59 Subordinated Promissory Note, dated January 20, 1996, made by
WinCup Holdings, L.P. in favor of James River Paper Company,
Inc. (Incorporated by reference to Exhibit No. 10.59 filed with
the Prior S-4)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S> <C>
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.
(Incorporated by reference to Exhibit No. 10.60 filed with the
Prior S-4)
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
(Incorporated by reference to Exhibit No. 10.61 filed with the
Prior S-4)
10.62 Assumption and Modification Agreement, dated as of January 20,
1996, among Scott Paper Company, WinCup Holdings, Inc. and
WinCup Holdings, L.P. (Incorporated by reference to Exhibit No.
10.62 filed with the Prior S-4)
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 (Incorporated by reference to
Exhibit No. 10.63 filed with Amendment No. 1 to the Prior S-4)
10.64 Letter of Undertaking, dated December 5, 1996, made by StyroChem
International, Ltd. and Radnor Holdings Corporation in favor of
Bank of Montreal (Incorporated by reference to Exhibit No.
10.64 filed with the Prior S-4)
10.65 Guaranty, dated February 25, 1994, made by SP Acquisition Co. in
favor of Bank of Montreal (Incorporated by reference to Exhibit
No. 10.65 filed with Amendment No. 1 to the Prior S-4)
10.66 Employment Agreement, dated April 5, 1996, between WinCup
Holdings, Inc. and R. Radcliffe Hastings (Incorporated by
reference to Exhibit No. 10.66 filed with the Prior S-4)
10.67 Sale of Assets Agreement between Neste Oy, Isora Oy, Neste
Cellplast AB, Neste Thermisol A/S and StyroChem Finland Oy,
ThermiSol Finland Oy, ThermiSol Sweden AB, ThermiSol Denmark
ApS and Radnor Holdings Corporation dated as of September 17,
1997 (Incorporated by reference to Exhibit No. 2.1 filed with
the Form 8-K filed by Radnor Holdings Corporation dated October
15, 1997)
10.68 Neste Service Agreement by and between Neste Oy and StyroChem
Finland Oy and Radnor Holdings Corporation dated as of October
15, 1997 (Incorporated by reference to same-numbered exhibit
filed with the Current S-4)
10.69 Land Lease Agreement by and between Neste Oy and StyroChem
Finland Oy and Radnor Holdings Corporation dated as of October
15, 1997 (Incorporated by reference to same-numbered exhibit
filed with the Current S-4)
10.70 Plant Lease--195 Tamal Vista Boulevard, Corte Madera,
California, between Hunt Brothers Leasing, L.L.C. and WinCup
Holdings, L.P., dated May 1, 1997 (Incorporated by reference to
same-numbered exhibit filed with the Current S-4)
10.71 Engineering Lease--201 Tamal Vista Boulevard, Corte Madera,
California, between Hunt Brothers Leasing, L.L.C. and WinCup
Holdings, L.P., dated May 1, 1997 (Incorporated by reference to
same-numbered exhibit filed with the Current S-4)
10.72 Warehouse Lease--205 Tamal Vista Boulevard, Corte Madera,
California, between Hunt Brothers Leasing, L.L.C. and WinCup
Holdings, L.P., dated May 1, 1997 (Incorporated by reference to
same-numbered exhibit filed with the Current S-4)
10.73 Supplement Revolving Multicurrency Credit Agreement among BNY
Financial Limited, NationsBank, N.A., StyroChem Europe (The
Netherlands) B.V., StyroChem Finland Oy, ThermiSol Finland Oy,
ThermiSol Denmark ApS and ThermiSol Sweden AB Guaranteed by
Inter Alia WinCup Holdings, Inc., Radnor Chemical Corporation,
StyroChem U.S., Inc. and Radnor Holdings Corporation dated
October 15, 1997 as amended by Supplement Revolving
Multicurrency Credit Agreement among BNY Financial Limited,
NationsBank, N.A., StyroChem Europe (The Netherlands) B.V.,
StyroChem Finland Oy, ThermiSol Finland Oy, ThermiSol Denmark
ApS and ThermiSol Sweden AB Guaranteed by Inter Alia WinCup
Holdings, Inc., Radnor Chemical Corporation, StyroChem U.S.,
Inc. and Radnor Holdings Corporation dated November 21, 1997
10.74 Lease Agreement between Oy KWH Plast Ab, Jakobstad and Isora Oy
dated January 24, 1995 (Incorporated by reference to same-
numbered exhibit filed with the Current S-4)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S> <C>
10.75 Lease and Cooperation Agreement between Suomen Polystyreeni
Tehdas Oy/Finska Polystyren Fabriken Ab and Borough of Kokemaki
dated February 27, 1971, as amended by Subcontract dated
October 13, 1976, Subcontract II dated February 26, 1981,
Subcontract III dated August 13, 1985, Transfer of Lease
Agreement between City of Kokemaki and Neste Oy dated December
29, 1987, Lease dated April 15, 1994 and Lease Agreement II
dated September 26, 1996 (Incorporated by reference to same-
numbered exhibit filed with the Current S-4)
10.76 Lease Agreement between Avena Siilot Oy and Neste Oy
Polystyreeni dated March 13, 1997 (Incorporated by reference to
same-numbered exhibit filed with the Current S-4)
10.77 Office Lease Agreement between Keharakenpajat Oy and Neste Oy
Polystyreeni dated July 1, 1995
10.78 Lease Contract between Lokalo Fastighetsforvaltning and Neste
Cellplast AB dated August 16, 1996
10.79 Lease Contract between Norrtalje Industri- och Hantverkshus AB
(NIHAB) and Neste Cellplast AB dated June 26, 1996
*10.80 Styrene Monomer Supply Agreement dated as of October 15, 1997
between StyroChem Finland Oy and Elf Atochem SA
10.81 Employment Agreement dated February 21, 1997 between Radnor
Holdings Corporation and Caroline J. Williamson
12.1 Computation of ratios (Incorporated by reference to same-
numbered exhibit filed with the Current S-4)
21.1 List of Subsidiaries of the Registrant (Incorporated by
reference to same-numbered exhibit filed with the Current S-4)
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Arthur Andersen Oy
23.3 Consent of Arthur Andersen AB
23.4 Consent of Arthur Andersen
23.5 Consent of Deloitte & Touche LLP
23.6 Consent of Ohrlings Coopers & Lybrand AB
23.7 Consent of Duane, Morris & Heckscher LLP (included in Exhibits
5.1 and 8.1 to this Registration Statement)
24.1 Power of Attorney (Incorporated by reference to same-numbered
exhibit filed with the Current S-4)
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 (Incorporated
by reference to same-numbered exhibit filed with the Current S-
4)
27.1 Financial Data Schedule (Radnor Holdings Corporation)
27.2 Financial Data Schedule (SP Acquisition Co. and Subsidiaries)
27.3 Financial Data Schedule (Neste Oy Polystyrene Upstream Business
in Porvoo and Kokemaki)
27.4 Financial Data Schedule (Isora Oy)
27.5 Financial Data Schedule (Neste Cellplast AB)
27.6 Financial Data Schedule (Neste Thermisol A/S)
</TABLE>
- --------
* Portions of this Exhibit have been deleted pursuant to the Company's Requests
for Confidential Treatment pursuant to Rule 406 promulgated under the
Securities Act.
<PAGE>
Exhibit 5.1
[LETTERHEAD OF DUANE, MORRIS & HECKSCHER LLP APPEARS HERE]
January 22, 1998
Radnor Holdings Corporation
WinCup Holdings, Inc.
Radnor Chemical Corporation
StyroChem U.S., Inc.
Radnor Management, Inc.
Three Radnor Corporate Center
Suite 300
Radnor, PA 19087
Gentlemen:
We have acted as counsel to Radnor Holdings Corporation, a Delaware
corporation (the "Company"), and WinCup Holdings, Inc., a Delaware corporation,
Radnor Chemical Corporation, a Delaware corporation, StyroChem U.S., Inc., a
Texas corporation, and Radnor Management, Inc., a Delaware corporation (the
entities other than the Company, collectively, the "Guarantors") in connection
with the preparation and filing with the Securities and Exchange Commission of
the Company's Registration Statement on Form S-4, File No. 333-42101 (as
amended, the "Registration Statement"), under the Securities Act of 1933, as
amended, relating to $60,000,000 principal amount of the Company's 10% Series B
Senior Notes due 2003 (the "Notes") and the guarantees of the Guarantors
relating to the Notes (the "Guarantees").
As counsel to the Company and the Guarantors, we have examined such
documents and records as we have deemed appropriate, including the following:
the Registration Statement; the Indenture dated as of October 15, 1997 (the
"Indenture") among the Company, the Guarantors and First Union National Bank, as
trustee (the "Trustee"), pursuant to which the Notes and the Guarantees will be
issued; and the form of the Notes and the form of the Guarantees included as
part of the Indenture. We have also reviewed all corporate proceedings of the
Company and the Guarantors in connection with the issuance of the Notes and the
Guarantees, including the charter and bylaws, each as amended to date, of the
Company and each of the Guarantors; written consents of the Board of Directors
of the Company and each Guarantor, as made available to us by officers of the
Company and the
<PAGE>
Radnor Holdings Corporation
WinCup Holdings, Inc.
Radnor Chemical Corporation
StyroChem U.S., Inc.
Radnor Management, Inc.
January 22, 1998
Page 2
Guarantors; and other proceedings and records relating to the Company, the
Guarantors and the authorization and issuance of the Notes and the Guarantees as
we deemed appropriate. As to certain matters of fact material to the opinions
expressed herein, we have relied solely and exclusively upon factual statements
and representations of officers and employees of the Company and the Guarantors.
In the course of such examination, we have assumed the genuineness of all
signatures on original documents and all documents submitted to us as certified
copies of original documents and the conformity to original and certified
documents of all copies submitted to us as conformed or photostatic copies.
Based on the foregoing, and subject to the qualifications stated herein, we
are of the opinion that the Notes and the Guarantees are duly authorized and,
when the Notes are duly executed on behalf of the Company, authenticated by the
Trustee and delivered in accordance with the terms of the Indenture and as
contemplated by the Registration Statement with the Guarantees endorsed thereon,
will be validly issued, fully paid and non-assessable and will constitute legal,
valid and binding obligations of the Company and each Guarantor, entitled to the
benefits of, and subject to the provisions of, the Indenture.
We express no opinion as to the laws of any jurisdiction other than the
laws of the State of New York, the laws of the Commonwealth of Pennsylvania, the
General Corporation Law of the State of Delaware, and the federal laws of the
United States.
This opinion is rendered solely for your benefit in connection with the
transactions described above. This opinion may not be used or relied upon by
any other person and may not be disclosed, quoted, filed with a governmental
agency or otherwise referred to without our prior written consent, except that
we hereby consent to the use of this opinion as an exhibit to the Registration
Statement. We further consent to the reference to our name under the caption
"Legal Matters" in the prospectus which is a part of the Registration Statement.
Sincerely,
/s/ Duane, Morris & Heckscher LLP
<PAGE>
Exhibit 8.1
[LETTERHEAD OF DUANE, MORRIS & HECKSCHER LLP APPEARS HERE]
January 22, 1998
Radnor Holdings Corporation
Three Radnor Corporate Center
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% Series B
Senior Notes due 2003 that are being registered under the Securities Act of
1933, as amended to the date hereof (the "New Notes") for its 10% Series B
Senior Notes due 2003 (the "Old Notes") and (ii) the ownership, sale and
redemption of the New Notes.
As counsel to the Company, we have examined such documents as we have
deemed appropriate, including the Registration Statement of the Company on Form
S-4 (Registration No. 333-42101), 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
<PAGE>
Radnor Holdings Corporation
January 22, 1998
Page 2
forth in the Registration Statement, it is our opinion that the material United
States federal income tax consequences of consummating the Exchange Offer and
holding and disposing of the New Notes are as set forth under the heading
"Certain U.S. Federal Income Tax Considerations" in the Registration Statement.
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 LLP
<PAGE>
EXHIBIT 10.13
--------
HUNTSMAN
--------
PRODUCT SALES AGREEMENT
THIS AGREEMENT, is made and entered into as of the 1st day of January, 1996,
by and between HUNTSMAN CHEMICAL CORPORATION, a Utah corporation having a
mailing address at 500 Huntsman Way, Salt Lake City, Utah 84108 (hereinafter
"Seller"), and WinCup, having a mailing address at 7980 W. Buckeye Road,
Phoenix, AZ 85043 (hereinafter "Buyer").
1. PRODUCTS. Seller agrees to sell to Buyer, and Buyer agrees to purchase
from Seller, on the terms and conditions herein contained, the following
Product(s):
<TABLE>
<CAPTION>
MINIMUM INITIAL
ANNUAL SHIPMENT PRICE
PRODUCTS QUANTITY F.O.B. POINT QUANTITY (PER UNIT)
<S> <C> <C> <C> <C>
730-J1N-9100 8,000,000 pounds Seller's Shipping Point 45,000 pounds Market Price at Time of
I300-J1N-9100 Freight Prepaid Shipment
</TABLE>
2. QUANTITY LIMITATION. During each year of this Agreement, Buyer will
purchase the specified Annual Quantity of Products(s) or, if Buyer's
requirements are reduced, an annual quantity that bears the same ratio to
Buyer's reduced requirements as the specified Annual Quantity bore to Buyer's
estimated total requirements as of the date hereof. Seller may, at its option,
limit the quantity of any product to be supplied hereunder in any calendar
month to the lesser of one-twelfth (1/12) of the specified Annual Quantity or,
after the initial three (3) months of each contract year, the average of the
monthly quantities delivered during the expired months of that contract year.
3. TERM. The term of this Agreement shall be for a period commencing on
January 1, 1996, and ending on December 31, 1996. The term "contract year" shall
mean each respective twelve month period beginning with the commencement of the
term hereof.
4. PRICE. The price of Product(s) hereunder is subject to change by Seller
from time to time on at least thirty (30) days notice to Buyer. In the event of
any government action substantially affecting Seller's right to maintain or
change the price of any Product or terms of payment and at any time such
governmental action is in effect, Seller shall have the right, at its option,
to (i) terminate this Agreement on thirty (30) days notice to Buyer, or (ii)
postpone, by notice to Buyer, the effective date of any price change or change
of other terms to the extent so prevented until such date or dates as it is not
so prevented. By its election to postpone rather than terminate, Seller shall
not waive its right to terminate thereafter. Seller's grant or withdrawal of
Seller's Temporary Voluntary Allowance (TVA) will not be considered a price
change under this contract.
5. COMPETITIVE PRICES. If Buyer provides satisfactory evidence that it can
purchase a product of like quantity and quality, produced in the United States
(including its territories or possessions), at a lower price and on terms and
conditions substantially the same as those contained herein and if Seller elects
not to meet such lower price, then all quantities thereof actually purchased by
buyer at a lower price will be deducted from the applicable remaining quantity
obligation for such like Product hereunder. If Seller elects to meet such lower
price, then Seller may withdraw its lower price at any time on at least thirty
(30) days notice thereof to Buyer or immediately upon termination of the
competitive lower price.
6. PAYMENT TERMS. Buyer shall pay Seller for all Product(s) purchased
hereunder in accordance with the following terms: Net thirty (30) days from date
of Invoice. If Buyer shall fail to pay Seller in accordance with said terms,
Seller shall have the right, at its option and in addition to all other remedies
available under applicable law, to either (i) terminate this Agreement (other
than Buyer's obligation to pay for Product(s) delivered hereunder) immediately
upon notice to Buyer, or (ii) suspend deliveries until all Indebtedness is paid
in full, or (iii) place Buyer on a cash-on-delivery basis. If in the sole
opinion of Seller the financial responsibility of Buyer is impaired or
unsatisfactory to Seller, deliveries may be suspended or Buyer may be placed on
a cash-on-delivery basis until arrangements are made for security satisfactory
to Seller.
<PAGE>
7. CREDIT LIMIT. Seller may establish a credit limit for Buyer's account.
Seller reserves the right to refuse to make shipments to Buyer if such shipments
would cause Buyer to exceed such credit limit. Seller may increase or decrease
such credit limit from time to time, in its sole discretion. Seller's failure
to enforce the credit limit in any instance shall not constitute a waiver of
Seller's right to subsequently enforce the credit limit. Seller shall be under
no obligation to store Products for Buyer beyond the scheduled shipment date if,
on such date, Buyer's account would exceed the established credit limit if
shipments were made. Products so affected may, at Seller's option and after ten
(10) days notice to Buyer, be shipped to another customer, or treated by Seller
as cancelled, subject to cancellation charges to cover Seller's costs in
relation to such cancellation. In lieu of extending credit, Seller is entitled
to request from the Buyer a cash-in-advance deposit or a letter of credit prior
to the supply of the Products.
8. TAXES. Any tax (other than an income tax), duty or other governmental
charge now or hereafter imposed on any Product or an any raw material used in
manufacturing any Product (or on Seller, or required to be paid or collected by
Seller, by reason of the manufacture, transportation, sale, or use of such
Product or raw material) shall be paid by Buyer in addition to the price of the
Product.
9. DELIVERIES. Seller will select the origin of shipment and the carrier.
The quantity of all bulk rail and truck deliveries will be determined by Seller
by outage tables with corrections for temperature or by weightmaster's
certificate, as appropriate, and Seller's quantity determination shall govern.
Buyer will promptly unload each delivery at its own risk and expense, including
any demurrage or detention charges.
10. EXCUSES FOR NONPERFORMANCE. Neither party shall be responsible for any loss
or damage resulting from any delay in performing or failure to perform any
provisions of this Agreement (other than Buyer's obligation to make payments for
any Products delivered hereunder), so long as any such failure or delay arises
from fires, explosions, plant shutdowns, floods, storms, earthquakes, tidal
waves, wars, military operations, national emergencies, civil commotions,
strikes or other differences with workers or unions or from any delay or failure
in delivery when the supplies of either party or the facilities of production,
manufacture, transportation or distribution which otherwise would be available
to either party are impaired by mechanical breakdowns or causes beyond its
control or by the order, requisition, request, or recommendation of any
governmental agency or acting governmental authority, or either party's
compliance therewith, or from governmental protection, regulation, or priority,
or from the inability of Seller to obtain from its usual sources, at prices and
on terms deemed by Seller to be practicable, any feedstock or other raw material
(including energy sources) necessary for manufacturing any Product, or from any
other delay or failure due to any cause beyond either party's reasonable
control, similar or dissimilar to any such causes. Seller's obligation to sell
Product(s) hereunder is subject to modification and reduction in accordance with
any present or future allocation program of Seller or any governmental
authority.
11. PRODUCT HAZARDS. Buyer assumes all risk and responsibility for handling the
Product(s), for results obtained by use of the Product(s) in manufacturing
processes or otherwise, and for results obtained by use of the Product(s) in
combination with other substances, irrespective of the fact that such use or any
handling of the Product(s) is in accordance with any description, advice, or
suggestion of Seller. If any description, advice, or suggestion is given by
Seller, it is given and accepted at Buyer's risk, and Seller shall not be
responsible or liable therefor or for the results thereof. Buyer will indemnify
Seller against all claims, loss, liability and expense on account of any injury
or death of persons (including Buyer's property) arising out of Buyer's
unloading, storage, handling or use of the Product(s) (except to the extent
caused by Seller's negligence), and such indemnity obligation of Buyer shall
survive termination of this Agreement.
12. WARRANTIES. Seller warrants that each Product will meet specifications
designated as such in this Agreement or in Seller's current applicable
publications and that each Product will be delivered free of the rightful claim
of any third person by way of United States patent infringement. EXCEPT AS
STATED IN THIS AGREEMENT, SELLER MAKES NO EXPRESS WARRANTIES CONCERNING ANY
PRODUCT. NO WARRANTIES OF MERCHANTABILITY, OR WARRANTIES AS TO QUALITY OR
CORRESPONDENCE WITH DESCRIPTION OR SAMPLE, SHALL BE IMPLIED. SELLER DOES NOT
WARRANT AGAINST UNITED STATES PATENT INFRINGEMENT BY WAY OF THE USE OF ANY
PRODUCT IN COMBINATION WITH OTHER MATERIALS OR IN THE OPERATION OF ANY PROCESS.
13. CLAIMS. Any claim of Buyer with respect to the quality or quantity of
Product(s) sold and delivered hereunder shall be deemed waived and forever
barred unless Buyer notifies Seller in writing of the nature and details of the
claim within sixty (60) days after receipt of the shipment by Buyer. Any such
claim of which Seller is notified but which is not asserted as a claim,
counterclaim, defense, or set-off in a judicial proceeding instituted within one
(1) year after Seller's denial thereof shall be forever waived, barred and
released.
14. PRODUCT CONTAINER REUSE OR RESALE. Buyer agrees that any reuse by Buyer of
product containers bearing Seller's logo and name will occur only after such
logo and name have been removed or obliterated from and are no longer visible on
the containers. Buyer further agrees that any resale of Seller's product
containers will occur only after relabeling or otherwise removing or
obliterating Seller's logo therefrom.
15. DEFAULT. Except as otherwise specifically provided herein, if either party
fails to perform any of the terms of this Agreement, then the other party may
treat such default as a breach of this Agreement and, if such default is not
cured within thirty (30) days after written notice thereof to the defaulting
party, may immediately terminate this Agreement by giving written notice thereof
to the defaulting party, provided, however, that (i) such termination shall not
relieve Buyer from the obligation to pay for all Product(s) delivered prior to
such termination and (ii) if Buyer is terminating, before exercising such
option, Buyer must first make payment for all Product(s) theretofore delivered.
16. DAMAGES LIMITED. BUYER'S EXCLUSIVE REMEDY FOR ANY AND ALL LOSSES OR DAMAGES
RESULTING FROM THE SALE OF PRODUCT(S) UNDER THIS AGREEMENT, INCLUDING WITHOUT
LIMITATION ANY CLAIM OF BREACH OF WARRANTY, BREACH OF CONTRACT, NEGLIGENCE, OR
STRICT LIABILITY, SHALL BE LIMITED TO, AT SELLER'S OPTION, EITHER (i) RETURN OF
THE PURCHASE PRICE OR (ii) REPLACEMENT OF THE PARTICULAR PRODUCT(S) FOR WHICH A
CLAIM IS MADE AND PROVED. IN NO EVENT SHALL SELLER BE LIABLE FOR ANY SPECIAL,
CONSEQUENTIAL, INCIDENTAL OR INDIRECT LOSSES OR DAMAGES FOR THE SALE OF
PRODUCT(S) UNDER THIS AGREEMENT.
2
<PAGE>
17. NOTICE. Any notice under this Agreement shall be in writing and shall be
deemed to have been given and received and shall be effective when personally
delivered or when deposited in the U.S. mail (certified or registered mail,
return receipt requested) or with the telegraph company, postage or telegraph
charges prepaid, and addressed to the respective party at the address set forth
in the first paragraph of this Agreement or at such other address as such party
may hereafter designate by notice to the other party.
18. ASSIGNMENT. Neither the Buyer nor the Seller shall have the right to assign
or transfer this Agreement or any rights hereunder (other than the right to
receive payment for Products delivered) without the prior written consent of the
other party.
19. GENERAL PROVISIONS. This Agreement shall be governed by and construed in
accordance with the laws of the State of Utah. This Agreement, including any
addenda identified herein, contains the entire agreement between the parties
hereto, and there are no other oral representations, stipulations, warranties,
agreements or understandings between the parties with respect to the subject
matter hereof. Any prior negotiations, correspondence, understandings or
agreements with respect to the subject matter hereof shall be deemed to be
merged into and shall be superseded by this Agreement and shall be of no further
force and effect. Neither this Agreement nor any addition to, amendment,
modification, alteration or waiver of all or any part hereof shall be binding
or effective unless and until signed by both Buyer and Seller, and performance
prior to such execution shall not constitute a waiver of this requirement. If
the provisions of this Agreement and the provisions of any purchase order or
order acknowledgment written in connection herewith conflict, then the
provisions of this Agreement shall prevail. Failure of either party to require
performance of any provision of this Agreement shall not affect either party's
right to require full performance thereof at any time thereafter, and waiver by
either party of a breach of any provision hereof shall not constitute a waiver
of a similar breach in the future or of any other breach or nullify the
effectiveness of such provision.
20. OTHER PROVISIONS. (Identify and attach additional pages or addenda as
necessary)
IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement as
of the day and year first above written.
SELLER:
HUNTSMAN CHEMICAL CORPORATION,
a Utah Corporation
By: /s/ Pete Fantozzi
-----------------------------------------------
Pete Fantozzi
Title: Vice President, Sales & Marketing
--------------------------------------------
BUYER:
WINCUP
a Delaware Corporation
By: /s/ Thomas L. Springer
-----------------------------------------------
Title: Director, Purchasing
--------------------------------------------
3
<PAGE>
20.1 Pricing: In addition to the thirty (30) day notification, Buyer's price
will not increase until thirty (30) days after the announced date.
21.1 Performance Incentive:
A volume incentive of $0.03 per pound will be issued at the end of each
calendar quarter for all pounds purchased during the quarter.
If Buyer purchases a minimum of 5,000,000 pounds during the contract
period an additional $0.01 per pound incentive will be issued on all
pounds purchased.
21.2 MINIMUM SHIPMENT AND INITIAL PRICE
----------------------------------
Minimum shipment quantity shall not be limited to any amount, but will
be subject to the differential in 20.2.
Initial price described in Article 1. Products is for Hopper Car
deliveries. All other deliveries are subject to the following
differentials:
Truckload Deliveries (40,000 pound shipments)
---------------------------------------------
Delivery Mode Differential(CPP)
------------- -----------------
Hopper Truck to California Plant +1.5
Truckload Bags +3.0
Truckload Boxes +4.5
There will be no upcharge for deliveries to the California plant for the
additional freight incurred by the Seller for a maximum amount of
2,000,000 pounds per year. On any shipments about this above, Seller
will invoice Buyer for the additional freight incurred over and above
the freight average to the Buyer's plants in Ohio and Illinois.
Less Than Truckload Deliveries (add to 40,000 pound Truckload Bag Price)
------------------------------------------------------------------------
Quantity (Pounds) Differential(CPP)
----------------- -----------------
30,000-34,999 + 3.0
20,000-29,999 + 6.0
10,000-19,999 + 8.0
6,000- 9,999 +10.0
4
<PAGE>
EXHIBIT 10.14
BASF Corporation
BASF
March 27, 1996
Polystyrene
Thomas Springer
Wincup Holdings LP
7980 West Buckeye Road
Phoenix, Arizona 85013
Dear Mr. Springer:
The following agreement pertains to the sale of BASF polystyrene to Wincup
Holdings LP ("Buyer"). All prior agreements between the parties are terminated
as of December 31, 1995.
Agreement Period
- ----------------
January 1, 1996 through December 31, 1996, subject to extension as may be
mutually agreed upon by the parties. This agreement may be cancelled by either
party should the other party materially default in its performance and fail to
cure such default within 30 days following its receipt of a notice describing
such default. In addition, either party may terminate this agreement without
cause upon at least 90 days prior written notice to the other party.
BASF Products
- -------------
. PS 4600
. PS 5600 or equivalent super high impact polystyrene
. Other BASF polystyrene resins, subject to mutual agreement
BASF represents and warrants that such Products shall meet BASF's published
specifications, and that BASF shall have the right to transfer good title to the
Products, free from any encumbrances. BASF makes no other warranty of any kind,
either express or implied, including any warranty of fitness for a particular
purpose or of merchantability except as expressly stated herein.
Page 1
<PAGE>
BASF's liability and buyer's exclusive remedy for any cause of action arising
out of this agreement is expressly limited to replacement of non-conforming
products or payment in an amount not to exceed the purchase price of the
specific products for which damages are claimed, at BASF's option. In no event
shall BASF be liable for any other damages, including incidental, special or
consequential damages.
Buyer shall inspect Products supplied hereunder immediately after delivery.
Buyer's failure to give notice to BASF of any claim within ninety (90) days
after the date of delivery shall constitute unqualified acceptance of such
Products and a waiver by Buyer of all claims with respect thereto.
Estimated Annual Volumes
- ------------------------
The total volume estimate for the term is between 1,500,000 and 2,500,000 lbs.
The estimated purchase levels have been established as target levels only; it is
understood and agreed that Buyer is not obligated to purchase a minimum quantity
on a take or pay basis. BASF will not be obligated to deliver in any month in
excess of 1/12 of the estimated maximum volume specified above.
Method of Delivery
- ------------------
. Truck load box delivered (42,000 Lbs. 1,000Lb. cartons)
. Bulk hopper truck (40,000 lbs minimum)
If BASF requests that Buyer accept a shipment in a form and/or quantity
different than ordered, the parties will negotiate the amount of the upcharge
that will apply to that particular shipment.
. Buyer will provide to BASF, on a monthly basis, a 60 day rolling forecast
of anticipated deliveries.
FOB Terms
- ---------
Delivery shall be FOB shipping point, freight prepaid to, Corte Madera by
carrier of BASF's choice. Requests for deliveries to other Buyer locations
within the continental U.S. will be subject to negotiation of appropriate
incremental freight charges.
Page 2
<PAGE>
Pricing
- -------
BASF reserves the right to increase prices on any or all Products, upon Thirty
(30) days notice to Buyer prior to the effective date of any price increase.
The purchase price does not include any government taxes or similar charges that
BASF may be required to pay with respect to the transportation, delivery or sale
of Products delivered hereunder, and Buyer shall pay such taxes or charges upon
request, or provide BASF with properly completed exemption certificates for any
taxes or charges from which Buyer claims exemption.
Payment Terms
- -------------
Net 60 days from date of invoice.
Each delivery of Products hereunder shall constitute a separate sale. If Buyer
shall fail to pay for a particular shipment or otherwise by in default of any of
the terms and conditions of this agreement, BASF may defer further shipments
until such defaults are remedied.
If at any time the financial responsibility of Buyer shall, in the reasonable
judgment of BASF, become unsatisfactory, BASF may require cash or satisfactory
security upon subsequent shipments or deliveries.
Confidentiality
- ---------------
BASF and Buyer hereby agree that the existence and terms of this Agreement are
confidential and shall not be disclosed to any third party (exclusive of
affiliates) without the written consent of both BASF and Buyer.
Force Majeure: Allocation
- -------------------------
Failure of BASF to make, or Buyer to take, any one or more deliveries of
Products when due, if caused by fire, storms, floods, strikes, lockouts,
accidents, war, riots or civil commotions, inability to access transportation or
obtain raw materials on reasonable commercial terms (including unexpectedly
large price increases), embargoes, any State or Federal regulation, law or
restriction, governmental seizure or requisition, or any other cause or
contingency beyond the reasonable control of such party (whether or not of the
same kind or nature as the causes or contingencies above listed) shall not
subject the party so failing to any liability to the other.
Page 3
<PAGE>
In the event of BASF's inability, for any reason, to supply the quantities of
Products specified herein, BASF may allocate its available supply among its
purchasers, including departments, divisions and affiliates of BASF, on such
basis as BASF may deem fair and practical.
Assignment
- ----------
This agreement may not be assigned without the prior written consent of the
non-assigning party.
Exclusive Terms
- ---------------
This letter contains the entire agreement between the parties regarding the sale
and purchase of Products. Any provisions or conditions (including those
contained in any purchase order or acknowledgement) which are in any way
inconsistent with or in addition to the terms set forth in this letter (except
additional shipping instructions specifying quantity and character of the items
ordered) shall not be binding on either party. No waiver, alteration, or
modification of the foregoing conditions shall be valid unless made in writing
and signed by an authorized representative of each party.
Please sign both copies, and return them to my attention. I will have the copies
signed by BASF and one fully executed copy will be returned to you for your
file. If I do not receive a signed copy by April 15, 1996 subject to extension
by mutual agreement, I will assume that you have decided not to accept our
proposal and this letter shall be null and void. Thank you for the opportunity
to of service.
Very truly yours,
/s/ Frank Flaschentrager
Frank Flaschentrager
Senior Sales Representative
Page 4
<PAGE>
TERMS OF THIS AGREEMENT ARE UNDERSTOOD AND AGREED TO:
WINCUP LP , BASF CORPORATION,
- -------------
BUYER SELLER
By: [SIGNATURE APPEARS HERE] By: [SIGNATURE APPEARS HERE]
--------------------------------- --------------------------------
Title: Director, Purchasing Title: DIR. SALES & MKT.
------------------------------ -----------------------------
Date: April 30th, 1996 Date: 5-20-96
------------------------------- ------------------------------
Page 5
<PAGE>
[LETTERHEAD OF BASF CORPORATION APPEARS HERE]
April 25, 1996 Polystyrene
Thomas Springer
WINCUP
7980 W. Buckeye Road
Phoenix, Az 85043
Dear Thomas,
This document will serve as clarification of the agreement between BASF
Corporation and WINCUP Holdings, Inc. to supply 100% of the Polystyrene needs
for the Corte Madera, California manufacturing location. BASF Corporation will
supply Hopper Truck (40,000 LB Minimum) of PS 4600, as well as Truck Load
(42,000 LB Minimum) Boxes of PS 5600 until a suitable replacement can be found.
In response to industry competitive volume allowances or rebates please
deduct 5.5 cents per pound from the invoice price, subject to change at the
sole discretion of BASF. These invoices will reflect a thirty (30) day delay
in the implementation of all market price changes and are to be paid by WINCUP
within sixty (60) days.
The current invoice price for material delivered in April, 1996 is 47
cents per pound for PS 4600 and 50.5 cents per pound for PS 5600. These
prices are subject to market conditions and should be held confidential to
WINCUP Holdings, Inc. and BASF Corporation employees.
I hope that this shows our commitment to further this relationship and work
towards a multi-year formal agreement to be put in place by January 1, 1997.
Sincerely,
/s/ Frank Flaschentrager
Frank Flaschentrager
Senior Sales Representative
CC: Dave Mattair
Steve Yakimec
Brenda Cornelison
Janice Martz
<PAGE>
EXHIBIT 10.15
SALES AGREEMENT
Contract Number PS96017 - A
Between
Fina Oil and Chemical Company (Seller)
and
Wincup Corporation, LP (Buyer)
Buyer agrees to purchase from Seller, and Seller agrees to sell to Buyer, upon
the following terms and conditions recited herein and in Addendum A, attached:
TERM: January 1, 1996 through December 31, 1996
PRODUCTS: 740, 825E, 825EX or other mutually agreeable FINA Polystyrene
products.
QUALITY: Per attached data sheets.
QUANTITY:
Minimum Pounds - 5,000,000 lbs. per year
Maximum Pounds - 10,000,000 lbs. per year
Buyer agrees to provide reasonable notice on shipment dates.
Seller will not be required to deliver to Buyer in any month a
volume exceeding one twelfth (1/12) of the annual contract
maximum.
PRICE: Seller's Market Price at the time of shipment as specified in
price announcements to Buyer, FOB origin, minimum freight
prepaid, for use in Buyer's facilities at West Chicago, IL;
Corte Madera, CA.; Stone Mountain, GA; or other mutually agreed
to site(s). The current price to Buyer as of 2/1/96 is $0.45 per
pound for hopper cars or bulk trucks of 740, 825E, or 825EX to
West Chicago, IL or hopper cars to Stone Mountain, GA. West
Coast shipments will receive an upcharge of $0.01 per pound for
bulk trucks.
The above price is for delivery in hopper cars of approximately
190,000 pounds each and bulk trucks of approximately 47,000
pounds each.
During the term of this Agreement, if the cumulative increase of
Gulf Coast producer's contract price for Styrene Monomer exceeds
the cumulative increase of Seller's Polystyrene price during any
period of sixty (60) days, Seller reserves the right to
renegotiate any and all of the terms and conditions of this
Agreement.
PRICE
PROTECTION: In the event of a Polystyrene market increase, Seller will allow
a thirty (30) day price protection period, or a thirty (30) day
pre-buy period at Seller's option, from the effective date of
the increase for a volume not to exceed 1/12 of the Buyer's
previous twelve (12) months purchases.
<PAGE>
PAYMENT
TERMS: Net sixty (60) days from SHIPPING/INVOICE DATE. All payments
are due and payable at Seller's offices, 8350 North Central
Expressway, Dallas, Dallas County, Texas 75206 or as
otherwise directed by Seller. Any invoices not paid within
seven (7) days of contract terms will exclude the pounds
covered by that invoice from calculating any competitive
volume incentive. The parties agree that all payments still
owing ten (10) days after the due date of invoice will bear
interest at the rate of one (1.0) percent per month, but in
no event shall interest in excess of the amount allowed by
law be charged.
COMPETITIVE
OFFERS: If, during the term of this Agreement, Buyer receives a bona
fide offer allowing Buyer to purchase materials of similar
quantity and quality, and at similar terms and conditions
for the same time period, at a lower net price, upon
submission of a letter from Buyer to Seller stating the
competitor offered price, quantity, quality, and terms and
conditions of purchase, Seller will, at its option, (i) meet
the lower price or (ii) permit the Buyer to purchase from
the competition and exclude the pounds purchased from the
contract quantity.
COMPETITIVE
INCENTIVE: Because of the competitive situation that exists in Buyer's
market, the following incentives will apply as indicated,
provided Buyer's annualized purchases meet or exceed the
minimum annual quantities specified in this Agreement.
Level 1, "Off-Invoice Incentive": Fina will deduct an "off-
-------------------------------
invoice incentive" of $.025 per pound on the invoice on all
prime pounds of FINA Polystyrene purchased during the
contract period.
Level 2, "Quarterly Incentive": At the end of each calendar
-----------------------------
quarter, FINA will pay an incentive to Wincup of $.01 per
pound for all pounds of prime FINA Polystyrene purchased by
Buyer during the quarter. FINA will pay this rebate within
thirty (30) days after all invoices for the quarter have
been paid.
Level 3, "Annual Incentive": At the termination of this
--------------------------
Agreement, FINA will pay a rebate to Wincup of $.005 per
pound for all prime pounds of FINA Polystyrene purchased by
Wincup during the contract term, provided that a minimum of
5,000,000 pounds of prime FINA Polystyrene is purchased
during the term of the Agreement. FINA will pay this
incentive within thirty (30) days after all invoices for the
contract year have been paid.
ADDENDUM: Addendum "A" is attached hereto and incorporated herein.
This Agreement not valid unless signed by an authorized
representative of both Buyer and Seller.
Buyer's Acceptance: Seller's Acceptance:
By: /s/ Thomas L. Springer By: /s/ Gary C. Reed
-------------------------- ---------------------------
Title: Director Purchasing Title: General Manager, Styrenics
----------------------- ------------------------
Date: 5/15/96 Date: 5/21/96
------------------------ -------------------------
This offer expires if not signed by Buyer and returned to Seller by March 31,
1996.
<PAGE>
ADDENDUM "A"
1. SAFETY AND HEALTH COMMUNICATIONS
--------------------------------
A. SELLER will furnish to BUYER Material Safety Data Sheets which contain
health, safety and other hazard communication information on the
Materials consistent with the Occupational Safety and Health
Administration's Hazard Communications Standard. SELLER will also
furnish other health or safety information as available. BUYER will
disseminate appropriate health and safety information to all persons
that may be exposed to the Materials supplied hereunder (including
without limitation, BUYER'S employees, contractors or customers),
whether such Material is in its present state or subsequently processed,
mixed or incorporated into another Material.
B. BUYER agrees to instruct its employees and agents in the proper and safe
handling and disposal of the Materials.
2. LIABILITY AND INDEMNITY
-----------------------
A. Risk of loss and title passes from SELLER to BUYER when shipment is
delivered to carrier. BUYER assumes all responsibility and liability of
SELLER for injury, loss or damage resulting from handling, resale, use
or misuse of the Materials after delivery to carrier. SELLER'S liability
and BUYER'S exclusive remedy for any claims arising out of this
Agreement are expressly limited at BUYER'S option to replacement of
nonconforming goods or payment not to exceed the purchase price plus
transportation charges thereon with respect to any Materials for which
damages are claimed. Claims on the gross weight of bulk shipments will
not be allowed.
B. BUYER agrees to hold harmless and indemnify SELLER from all persons
against any claims on any theory of legal liability (whether strict or
otherwise), including negligence, for any claim, loss or expense on
account of any injury, disease or death of persons (including BUYER'S
employees), loss or damage to property (including BUYER'S) arising out
of failure by BUYER to properly handle, sell or use the Material or to
disseminate safety and health information as provided in paragraph 1.
C. SELLER agrees to defend at its expense and to hold BUYER harmless
against any suit founded on a claim that the Materials delivered
hereunder infringe any U.S. Letters Patent, and SELLER agrees to
indemnify BUYER from any such judgments and costs resulting from any
such suit. SELLER does not agree to defend or to hold BUYER harmless
against suit founded on a claim of infringement of any U.S. Letters
Patent covering the use of the Materials delivered hereunder in
combinations with another material or in the practice of any process.
D. EXCEPT FOR OBLIGATIONS COVERED BY PARAGRAPH 2.C, SELLER'S ENTIRE
LIABILITY FOR DAMAGES FOR ANY CAUSE WHATSOEVER, REGARDLESS OF THE FORM
OF ACTION, SHALL BE LIMITED TO BUYER'S ACTUAL DIRECT DAMAGES NOT TO
EXCEED THE AMOUNT PAID TO SELLER HEREUNDER FOR THE MATERIAL RELATED TO
THE CAUSE OF ACTION. IN NO EVENT SHALL SELLER, ITS OFFICERS, AGENTS OR
EMPLOYEES BE LIABLE UNDER OR IN CONNECTION WITH THIS AGREEMENT UNDER ANY
LEGAL OR EQUITABLE THEORY, INCLUDING WHETHER BASED UPON NEGLIGENCE OR
STRICT LIABILITY, FOR LOST PROFITS, SPECIAL, INCIDENTAL, CONSEQUENTIAL
OR PUNITIVE DAMAGES.
3. WARRANTY
--------
SELLER makes no warranty, express or implied, concerning the Materials
furnished hereunder other than that they shall be of the quality and
specifications stated herein. SELLER MAKES NO OTHER WARRANTIES OF ANY KIND,
INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE. Any recommendations made by SELLER concerning uses or
applications of said Materials are believed reliable but SELLER makes no
warranty of results to be obtained. BUYER ASSUMES ALL RESPONSIBILITY AND
LIABILITY FOR INJURY, LOSS OR DAMAGE RESULTING AFTER DELIVERY OF MATERIAL.
4. FORCE MAJEURE
-------------
Except as to payments hereunder, a party shall be relieved from liability
for delay in performance or nonperformance caused by circumstances beyond
its control, including without limitation, strike, fire, riot, war, acts of
God, governmental laws, regulations or requests, failure or shortage of or
inability to obtain materials, equipment or transportation normally
available from the source of supply. The affected party may omit purchases
or deliveries during the period of continuance of such circumstances and the
contract quantities shall be reduced by the quantities so omitted. In no
event shall SELLER be required to purchase products or materials from others
in order to deliver Material to BUYER.
5. OTHER
-----
This instrument constitutes the entire Agreement between the parties and
supersedes any prior or contemporanous Agreements and understandings,
whether oral or written. This Agreement may not be amended except by written
instrument executed by each of the parties hereto. Waiver by either party of
any breach or failure to enforce any of the provisions of this Agreement at
any time shall not in any way affect, limit or waive the right of the party
thereafter to enforce the Agreement and compel strict compliance with each
and every provision. Any action against SELLER under this Agreement or
related to its subject matter must be brought within one (1) year after the
cause of action accrues. This Agreement may not be transferred or assigned
without SELLER'S written consent. This Agreement shall be governed and
construed in accordance with the internal laws of the State of Texas,
including the Texas Business and Commerce Code, Uniform Commercial Code.
<PAGE>
EXHIBIT 10.73
15th October 1997
SUPPLEMENT REVOLVING MULTICURRENCY CREDIT AGREEMENT
BNY FINANCIAL LIMITED
NATIONSBANK N.A.
(AS LENDERS)
WITH
STYROCHEM EUROPE (THE NETHERLANDS) B.V.
STYROCHEM FINLAND OY
THERMISOL DENMARK APS
THERMISOL SWEDEN AB
THERMISOL FINLAND OY
(AS BORROWER AND GUARANTORS)
WINCUP HOLDINGS, INC.
SP ACQUISITION CO.
STYROCHEM INTERNATIONAL, INC.
RADNOR HOLDINGS CORPORATION
(AS GUARANTORS)
WITH
BNY FINANCIAL LIMITED
(AS AGENT)
ALLEN & OVERY
London
<PAGE>
Index
<TABLE>
<CAPTION>
<C> <S> <C>
1. Definitions....................................1
2. Advances, Payments............................13
3. Interest and Fees.............................23
4. Cross-Guarantee...............................27
5. Representations and Warranties................30
6. Affirmative Covenants.........................36
7. Negative Covenants............................40
8. Conditions Precedent..........................45
9. Information...................................51
10. Events of Default.............................57
11. Lenders' Rights and Remedies after Default....60
12. Waivers and Judicial Proceedings..............61
13. Effective Date and Termination................61
14. Regarding Agent...............................62
15. Miscellaneous.................................66
16. Borrowing Agency..............................74
Exhibit 8.1(j) - Form of Officer's Certificate.....79
Exhibit 15.3 - Commitment Transfer Supplement......80
Schedule I to Commitment Transfer Supplement.......87
Schedule II to Commitment Transfer Supplement......88
Schedule 5.2(b) - Subsidiaries.....................89
</TABLE>
<PAGE>
THIS AGREEMENT is dated 15th October, 1997 between:
(1) STYROCHEM EUROPE (THE NETHERLANDS), B.V., STYROCHEM FINLAND OY, THERMISOL
DENMARK APS, THERMISOL FINLAND OY and THERMISOL SWEDEN AB (in this capacity
each a "Borrower" and together the "Borrowers");
(2) WINCUP HOLDINGS, INC., SP ACQUISITION CO., STYROCHEM INTERNATIONAL, INC.,
RADNOR HOLDINGS CORPORATION, STYROCHEM EUROPE (THE NETHERLANDS) B.V.,
STYROCHEM FINLAND OY, THERMISOL DENMARK APS, THERMISOL FINLAND OY and
THERMISOL SWEDEN AB as guarantors (in this capacity each a "Guarantor" and
together the "Guarantors", and sometimes referred to herein each as an
"Obligor" and collectively the "Obligors");
(3) BNY FINANCIAL LIMITED and NATIONSBANK N.A. as lenders (in this capacity
each a "Lender" and together the "Lender"); and
(4) BNY FINANCIAL LIMITED as administrative agent (in this capacity the
"Agent")
WHEREAS Wincup, Acquisition, StyroChem and Radnor have entered into the U.S.
Credit Facility (as defined below) and pursuant to which it is stipulated that
the parties hereto will enter into this Agreement which shall constitute a
supplement to the U.S. Credit Facility.
IT IS AGREED that the U.S. Credit Facility be supplemented as follows:
1. DEFINITIONS
1.1 Accounting Terms
As used in this Agreement or any certificate, report, note or other
document made or delivered pursuant to this Agreement, accounting terms not
defined in Section 1.2 or elsewhere in this Agreement and accounting terms
partly defined in Section 1.2 to the extent not defined, shall have the
respective meanings given to them under GAAP; provided, however, whenever
such accounting terms are used for the purposes of determining compliance
with financial covenants in this Agreement, such accounting terms shall be
defined in accordance with GAAP applied in preparation of the audited
financial statements of Radnor on a Consolidated Basis for the fiscal
period ended 30th June, 1997.
1.2 General Terms
For purposes of this Agreement terms defined in the U.S. Credit Facility
shall have the same meaning herein as therein and the following terms shall
have the following meanings:
"Acquisition" shall mean SP Acquisition Co., a corporation organised and
existing under the laws of the State of Delaware.
<PAGE>
"Advances" shall mean the principal amount of each borrowing by a Borrower
under this Agreement or the principal amount outstanding of that borrowing.
"Advance Rates" shall have the meaning set forth in Section 2.1(a) hereof.
"Agent's Spot Rate of Exchange" shall mean the Agent's spot rate of
exchange for the purchase of the relevant Optional Currency in the London
foreign exchange market with Dollars (as supplied to it at its request by
the Reference Bank) at or about 11:00 a.m. (London time) or a particular
day.
"Applicable Margin" for any period shall be determined by the ratio of
Funded Indebtedness to EBITDA calculated for the most recent fiscal quarter
with respect to the four fiscal quarters then ended which shall be subject
to adjustment from time to time as set forth in Section 3.1. The
Applicable Margin with respect to each Advance provided in Section 3.1 and
in respect of the Facility Fee provided for in Section 3.3 hereof, as the
case may be, shall be the percentage set forth below as corresponds to the
applicable ratio set forth below:
<TABLE>
<CAPTION>
Funded Indebtedness to EBITDA Advance Facility Fee
---------------------------------------- ------- ------------
<S> <C> <C>
Greater than 5.0 to 1.0 2.00% .50%
Greater than 4.1 to 1.0 1.75% .375%
But equal to or less than 5.0 to 1.0
Greater than 3.1 to 1.0 1.50% .25%
But equal to or less than 4.1 to 1.0
Greater than 2.1 to 1.0 1.25% .125%
But equal to or less than 3.1 to 1.0
Equal to or less than 2.1 to 1.0 1.00% .125%
</TABLE>
"Authority" shall have the meaning set forth in Section 6(m).
"Borrower" or "Borrowers" shall have the meaning set forth in the preamble
to this Agreement and shall include all permitted successors and assigns of
such Persons.
"Borrowing Agent" shall mean StyroChem Europe.
"Business Day" shall mean a day (other than a Saturday or a Sunday) on
which banks are open for business in (a) London and New York and (b) in
relation to a transaction involving an Optional Currency, the principal
financial center of the country of the
2
<PAGE>
Optional Currency or if more than one country, the country or countries
designated by the Agent..
"Change of Control" shall mean (a) the occurrence of any event (whether in
one or more transactions) which results in a transfer of control of any
Obligor to a Person who is not an Original Owner or an Affiliate of an
Original Owner or (b) any merger or consolidation of or with any Obligor or
sale or transfer of all or substantially all of the property or assets of
any Obligor with or to a Person that is not an Obligor hereunder. For
purposes of this definition, "control of Obligor" shall mean the power,
direct or indirect, (x) to vote 50% or more of the securities having
ordinary voting power for the election of directors of any Obligor or (y)
to direct or cause the direction of the management and policies of an
Obligor, by contract or otherwise.
"Change of Ownership" shall mean (a) any transfer (whether in one or more
transactions) of ownership of 50% or more of the common stock of any
Obligor (including for the purposes of the calculation of percentage
ownership, any shares of common stock into which any capital stock of any
Obligor held by any Original Owner is convertible or for which any such
shares of the capital stock of any Obligor or of any other Person may be
exchanged and any shares of common stock issuable to its Parent upon
exercise of any warrants, options or similar rights which may at the time
of calculation be held by such Original Owners) to a Person who is neither
(at the time of such transfer) an Original Owner nor an Affiliate of an
Original Owner or (b) any merger, consolidation or sale of substantially
all of the property or assets of any Obligor with or to a Person that is
not an Obligor hereunder.
"Charges" shall mean all taxes, charges, fees, imports, levies or other
assessments, including, without limitation, all net income, gross income,
gross receipts, sales, use, ad valorem, value added, transfer, franchise,
profits, inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp,
occupation and property taxes, custom duties, fees, assessments, liens,
claims and charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts, imposed by any
taxing or other authority, domestic or foreign, upon the Security Assets,
any Obligor or any of its Affiliates.
"Commitment Percentage" of any Lender shall mean the percentage set forth
below such Lender's name on the signature page hereof as same may be
adjusted upon any assignment by a Lender pursuant to Section 15.3(b)
hereof.
"Commitment Transfer Supplement" shall mean a document in the form of
Exhibit 15.3 hereto, properly completed and otherwise in form and substance
satisfactory to Agent by which the Purchasing Lender purchases and assumes
a portion of the obligation of Lenders to make Advances under this
Agreement.
3
<PAGE>
"Consents" shall mean all filings and all licenses, permits, consents,
approvals, authorisations, qualifications and orders of governmental
authorities and other third parties, domestic or foreign, necessary to
carry on Obligor's business, including, without limitation, any Consents
required under all applicable federal, state or other applicable law.
"Contract Rate" shall mean, as applicable, the Revolving Interest Rate or
the Default Rate.
"Customer" shall mean and include the account debtor with respect to any
Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into
or proposes to enter into any contract or other arrangement with any
Obligor, pursuant to which any Obligor is to deliver any personal property
or perform any services.
"Danish Krona" shall mean the lawful currency for the time being of
Denmark.
"Default" shall mean an event which, with the giving of notice or passage
of time or both, would constitute an Event of Default.
"Default Rate" shall have the meaning set forth in Section 3.1 hereof.
"Deutschmarks" shall mean the lawful currency for the time being of
Germany.
"Documents" shall have the meaning set forth in Section 8.1(c) hereof.
"Dollars" and the sign "$" shall mean lawful money of the United States of
America.
"Effective Date" shall mean 15th October, 1997 or such other date as may be
agreed to by the parties hereto.
"Eligible Inventory" shall mean and include Inventory excluding work in
process, with respect to each Borrower, valued at the lower of cost or
market value, determined on a first-in-first-out basis, which is not, in
Agent's opinion, obsolete, slow moving or unmerchantable and which Agent,
in its sole discretion, shall not deem ineligible Inventory, based on such
considerations as Agent may from time to time deem appropriate including,
without limitation, whether the Inventory is subject to a perfected, first
priority security interest in favour of Agent for the rateable benefit of
the Lenders and whether the Inventory conforms to all standards imposed by
any governmental agency, division or department thereof which has
regulatory authority over such goods or the use or sale thereof.
"Eligible Receivables" shall mean and include, with respect to each
Borrower, each Receivable arising in the ordinary course of such Borrower's
business and which Agent,
4
<PAGE>
in its sole credit judgment, shall deem to be an Eligible Receivable, based
on such considerations as Agent may from time to time deem appropriate. A
Receivable shall not be deemed eligible unless such Receivable is subject
to Agent's first priority perfected security interest for the rateable
benefit of the Lenders and no other Lien other than Permitted Encumbrances,
and is evidenced by an invoice, bill of lading or other documentary
evidence satisfactory to Agent. In addition, no Receivable shall be an
Eligible Receivable if:
(a) it arises out of a sale made by any Borrower to an Affiliate of any
Borrower or to a Person controlled by an Affiliate of any Borrower;
(b) it is due or unpaid more than ninety (90) days after the original
invoice date;
(c) twenty-five per cent. (25%) or more of the Receivables from the
Customer are not deemed Eligible Receivables hereunder. Such
percentage may, in Agent's sole discretion, be increased or decreased
from time to time;
(d) any covenant, representation or warranty contained in this Agreement
with respect to such Receivable has been breached;
(e) the Customer shall (i) apply for, suffer, or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its
property or call a meeting of its creditors, (ii) admit in writing its
inability, or be generally unable, to pay its debts as they become due
or cease operations of its present business, (iii) make a general
assignment for the benefit of creditors, (iv) commence a voluntary
case under any state, federal or other applicable bankruptcy laws (as
now or hereafter in effect), (v) be adjudicated a bankrupt or
insolvent, (vi) file a petition seeking to take advantage of any other
law providing for the relief of debtors, (vii) acquiesce to, or fail
to have dismissed, any petition which is filed against it in any
involuntary case under such bankruptcy laws, or (viii) take any action
for the purpose of effecting any of the foregoing;
(f) the sale to the Customer is on a bill-and-hold, guaranteed sale, sale-
and-return, sale on approval, consignment or any other repurchase or
return basis or is evidenced by chattel paper;
(g) Agent believes, in its sole judgment, that collection of such
Receivable is insecure or that such Receivable may not be paid by
reason of the Customer's financial inability to pay;
(h) the Customer is the United States of America or any government or
nation other than the United States of America, any state or any
department, agency or instrumentality of any of them, unless the
applicable Borrower effectuates an
5
<PAGE>
assignment of its right to payment of such Receivable to Agent
pursuant to the Assignment of Claims Act of 1940, as amended (31
U.S.C. Sub-Section 3727 et seq. and 41 U.S.C. Sub-Section 15 et seq.)
or has otherwise complied with other applicable statutes or
ordinances;
(i) the goods giving rise to such Receivable have not been shipped and
delivered to and accepted by the Customer or the services giving rise
to such Receivable have not been performed by the applicable Borrower
and accepted by the Customer or the Receivable otherwise does not
represent a final sale;
(j) the Receivables of the Customer exceed a credit limit determined by
Agent, in its sole discretion, to the extent such Receivable exceeds
such limit;
(k) the Receivable is subject to any offset, deduction, defence, dispute,
or counterclaim to the extent of such offset, deduction, defence,
dispute or counterclaim, the Customer is also a creditor or supplier
of a Borrower or the Receivable is contingent in any respect or for
any reason;
(l) the applicable Borrower has made any agreement with a Customer for any
deduction therefrom, except for discounts or allowances made in the
ordinary course of business for prompt payment, all of which discounts
or allowances are reflected in the calculation of the face value of
each respective invoice related thereto;
(m) shipment of the merchandise or the rendition of services has not been
completed;
(n) any return, rejection or repossession of the merchandise has occurred;
(o) such Receivable is not payable to a Borrower; or
(p) such Receivable is not otherwise satisfactory to Agent as determined
in good faith by Agent in the exercise of its discretion in a
reasonable manner.
"Equipment" shall mean and include as to each Obligor all of such Obligor's
goods (excluding Inventory) whether now owned or hereafter acquired and
wherever located including, without limitation, all equipment, machinery,
apparatus, motor vehicles, fittings, furniture, furnishings, fixtures,
parts, accessories and all replacements and substitutions therefor or
accessions thereto.
"Event of Default" shall mean the occurrence and continuance of any of the
events set forth in Article X hereof.
"Finnish Markka" shall mean the lawful currency for the time being of
Finland.
6
<PAGE>
"Fixed Charge Coverage" for any period shall mean the ratio for any period
of (1) such period of EBITDA to (2) all Debt Payments plus (a) the
aggregate amount of capital expenditures actually made plus (b) the
aggregate amount of cash payments of taxes made.
"Formula Amount" shall have the meaning set forth in Section 2.1(a) hereof.
"Funded Indebtedness" shall mean Person and its Subsidiaries on a
consolidated basis at the option of the Obligor for a period ending more
than one year after that date, including current maturities of long-term
Indebtedness for Borrowed Money (as determined in accordance with GAAP),
less (ii) the aggregate amount of all cash balances and cash equivalents of
such Persons and/or any of its Subsidiaries.
"General Intangibles" shall mean and include as to each Borrower all of
such Borrower's general intangibles, whether now owned or hereafter
acquired including, without limitation, all choses in action, causes of
action, corporate or other business records, inventions, designs, patents,
patent applications, equipment formulations, manufacturing procedures,
quality control procedures, trademarks, service marks, trade secrets,
goodwill, copyrights, design rights, registrations, licences, franchises,
customer lists, tax refunds, tax refund claims, computer programs, all
claims under guaranties, security interests or other security held by or
granted to such Borrower to secure payment of any of the Receivables by a
Customer, all rights of indemnification and all other intangible property
of every kind and nature (other than Receivables).
"Indebtedness for Borrowed Money" of a person means at any time the sum at
such time of (a) Indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services, (b) any obligation of such
Person in respect of letters of credit, banker's or other acceptances or
similar obligations issued or created for the account of such Person, (c)
lease, obligations of such Person with respect to capital leases, (d) all
liabilities secured by any Lien on any property owned by such Person, to
the extent attached to such Person's interest in such property, even though
such Person has not assumed or become personally liable for the payment
thereof, (e) obligations of third parties which are being guarantied or
indemnified against by such Person or which are secured by the property of
such Person; (f) any obligation of such Person or a member of Controlled
Group to a Multiemployer Plan; and (h) any obligations, liabilities or
indebtedness, contingent or otherwise, under or in connection with, any
interest rate or currency swap agreements, cap, floor, and collar
agreements, currency spot, foreign exchange and forward contracts and other
similar agreements and arrangements; but excluding trade and other accounts
payable in the ordinary course of business in accordance with customary
trade terms and which are not more than thirty (30) days past due (as
determined in accordance with customary trade practices) or which are being
disputed in good faith by such Person and for which adequate reserves are
being provided on the books of such Person in accordance with GAAP.
7
<PAGE>
"Interest Period" shall mean the period provided for any Advance pursuant
to Section 2.2(b).
"Inventory" shall mean and include as to each Obligor all of such Obligor's
now owned or hereafter acquired goods, merchandise and other personal
property, wherever located, to be furnished under any contract of service
or held for sale or lease, all raw materials, work in process, finished
goods and materials and supplies of any kind, nature or description which
are or might be used or consumed in such Obligor's business or used in
selling or furnishing such goods, merchandise and other personal property,
and all documents of title or other documents representing them.
"Inventory Advance Rate" shall mean such term as defined in Section 2.1.
"Lender" and "Lenders" shall have the meaning ascribed to such term in the
Preamble, each Purchasing Lender and shall include each person which is a
transferee, successor or assign of any Lender or any Purchasing Lender.
"LIBOR" shall mean for any Advance for the then current Interest Period
relating thereto, the rate per annum supplied to the Agent, at its request,
quoted by the Reference Bank at or about 11:00 a.m. two (2) Business Days
prior to the first day of such Interest Period for the offering by the
Reference Bank to prime commercial banks in the London interbank Euromarket
of deposits in the currency of the relevant Advance in immediately
available funds for a period equal to such Interest Period and in an amount
equal to the amount of such Advance.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien (whether statutory or otherwise),
Charge, claim or encumbrance, or preference, priority or other security
agreement or preferential arrangement held or asserted in respect of any
asset of any kind or nature whatsoever including, without limitation, any
conditional sale or other title retention agreement, any lease having
substantially the same economic effect as any of the foregoing, and the
filing of, or agreement to give, any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction.
"Material Adverse Effect" shall mean a material adverse effect on (a) the
condition, operations, assets, business or prospects of the applicable
Person or Persons, (b) any Obligor's ability to pay the Obligations in
accordance with the terms thereof, (c) the value of the Security Assets,
the Liens on the Security Assets or the priority of any such Lien, or (d)
the practical realisation of the benefits of Agent and Lenders' rights and
remedies under this Agreement and the Other Documents, all as determined by
the Required Lenders in the good faith exercise of their sole and absolute
discretion.
"Maximum Loan Amount" shall mean $10,000,000.
8
<PAGE>
"Monthly Advances" shall have the meaning set forth in Section 3.1 hereof.
"Norwegian Krone" shall mean the lawful currency for the time being of
Norway.
"Obligations" shall mean and include any and all of each Obligor's
Indebtedness and/or liabilities to Agent or any of the Lender or any
corporation that directly or indirectly controls or is controlled by or is
under common control with any Lender of every kind, nature and description,
direct or indirect, secured or unsecured, joint, several, joint and
several, absolute or contingent, due or to become due, now existing or
hereafter arising, contractual or tortious, liquidated or unliquidated
under this Agreement or under any Other Document and all obligations of any
Obligor to Agent or the Lenders to perform acts or refrain from taking any
action under this Agreement or any Other Document.
"Optional Currencies" shall mean German Deutschmarks, Danish Krona, Finnish
Markka, Norwegian Krone or Swedish Krona.
"Original Dollar Amount" in relation to an Advance, means (a) if that
Advance is denominated in Dollars, the amount of that Advance, or (b) if
the Advance is denominated in an Optional Currency, the equivalent in
Dollars of the amount of that Advance at the Agent's Spot Rate of Exchange
two Business Days prior to its proposed day of borrowing.
"Other Documents" shall mean the Security Documents and any and all other
agreements, instruments and documents, including, without limitation,
guaranties, pledges, powers of attorney, consents, and all other writings
heretofore, now or hereafter executed and/or delivered by any Obligor to
Agent or any Lender in respect of the transactions contemplated by this
Agreement.
"Payment Office" shall mean the office or bank in the principal financial
centre of the country of the relevant currency or, such other office of
Agent, if any, which it may designate by notice to Borrowing Agent and each
Lender to be the Payment Office.
"Permitted Encumbrances" shall mean (a) Liens in favour of Agent for the
rateable benefit of the Lenders; (b) Liens for taxes, assessments or other
governmental charges not delinquent or being contested in good faith and by
appropriate proceedings and with respect to which proper reserves have been
taken by Obligors; provided, that, the Lien shall have no effect on the
priority of the Liens in favour of Agent for the rateable benefit of the
Lenders or the value of the assets in which Agent has such a Lien and a
stay of enforcement of any such Lien for the benefit of the Lenders shall
be in effect; (c) Liens disclosed in the financial statements referred to
in Section 5.5; (d) deposits or pledges to secure obligations under
worker's compensation, social security or similar laws, or under
unemployment insurance; (e) deposits or pledges to secure bids, tenders,
contracts (other than contracts for the payment of money), leases,
statutory obligations, surety and appeal bonds and other obligations of
like nature arising in the ordinary course of any Obligor's
9
<PAGE>
business; (f) judgment Liens that have been stayed or bonded and
mechanics', worker's, materialmen's or other like Liens arising in the
ordinary course of any Obligor's business with respect to obligations which
are not due or which are being contested in good faith by the applicable
Obligor; (g) Liens placed upon fixed assets hereafter acquired to secure a
portion of the purchase price thereof, provided that (x) any such lien
shall not encumber any other property of any Obligor and (y) the aggregate
amount of Indebtedness secured by such Liens incurred as a result of such
purchases during any fiscal year shall not exceed the amount provided for
in Section 7.6; and (h) Liens disclosed on Schedule 1.2 of the U.S. Credit
Facility (copy of which is attached hereto).
"Pound Sterling" shall mean the lawful currency for the time being of Great
Britain.
"Prepayment Date" shall have the meaning set forth in Section 13.1 hereof.
"Pro Forma Balance Sheet" shall have the meaning set forth in Section
5(e)(i) hereof.
"Pro Forma Financial Statements" shall have the meaning set forth in
Section 5(e)(ii) hereof.
"Projections" shall have the meaning set forth in Section 5(e)(ii) hereof.
"Purchasing Lender" shall have the meaning set forth in Section 15.3
hereof.
"Radnor" shall mean Radnor Holdings Corporation, a corporation organised
and existing under the laws of the State of Delaware.
"Radnor on a Consolidated Basis" shall mean the consolidation in accordance
with GAAP of the accounts or other items of Radnor and its Subsidiaries.
"Receivables" shall mean and include as to each Obligor all of such
Obligor's accounts, contract rights, instruments (including those
evidencing indebtedness among Obligors and its Affiliates), documents,
chattel paper, general intangibles relating to accounts, drafts and
acceptances, and all other forms of obligations owing to such Obligor
arising out of or in connection with the sale or lease of Inventory or the
rendition of services, all guarantees and other security therefor, whether
secured or unsecured, now existing or hereafter created, and whether or not
specifically sold or assigned to the Agent for the rateable benefit of the
Lenders hereunder.
"Receivables Advance Rate" shall have the meaning set forth in Section
2.1(a) hereof.
"Reference Bank" shall mean The Bank of New York.
"Release" shall have the meaning set forth in Section 5.7(g)(iii) hereof.
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<PAGE>
"Reportable Event" shall mean a reportable event described in Section
4043(b) of ERISA or the regulations promulgated thereunder.
"Required Lenders" shall mean Lenders holding at least fifty one per cent.
(51%) of the Advances or if no Advances are outstanding, fifty one per
cent. (51%) of the Commitment Percentages.
"Revolving Interest Rate" shall mean an interest rate per annum equal to
(a) LIBOR plus (b) Applicable Margin.
"Security Assets" shall mean all the assets secured in favour of the Agent
and Lenders under the Security Documents.
"Security Documents" shall mean (a) the StyroChem Finland Security
Agreement, (b) the Thermisol Finland Security Agreement, (c) the U.S.
Security Agreement and (d) any other document designated as such by the
Agent and the Borrowing Agent.
"Second Indenture" shall mean the Indenture dated as of 15th October, 1997
between Radnor, as Issuer, Wincup, Acquisition and StyroChem and Radnor
Management, Inc. as guarantors and First Union National Bank, as trustee.
"Settlement Date" shall mean the Effective Date and thereafter Wednesday of
each week unless such day is not a Business Day in which case it shall be
the next succeeding Business Day.
"StyroChem" shall mean StyroChem International, Inc., a corporation
organised and existing under the laws of the State of Texas.
"StyroChem Europe" shall mean StyroChem Europe and its Subsidiaries, (the
Netherlands) B.V., a Netherlands corporation.
"StyroChem Europe Acquisition Agreement" shall mean the Sale of Assets
Agreement among Radnor, StyroChem Finland, Thermisol Finland, Thermisol
Sweden, Thermisol Denmark, Neste Oy, Isora Oy, Neste Cellplast AB, and
Neste Thermisol A/S pursuant to which Radnor acquired, through StyroChem
Europe, all of the polystyrene and conversion operations of Neste Oy.
"StyroChem Finland" shall mean StyroChem Finland Oy, a corporation
organised under the laws of Finland.
"StyroChem Finland Security Agreement" shall mean the security agreement
entered or to be entered into by StyroChem Finland in favour of the Agent
pursuant to this Agreement.
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<PAGE>
"Swedish Krona" shall mean the lawful currency for the time being of Sweden
"Term" shall mean the Effective Date through 15th October, 2002 or such
earlier date on which the Agent terminates this Agreement in accordance
with its terms.
"Thermisol Denmark" shall mean Thermisol Denmark ApS, a corporation
organised under the laws of Denmark.
"Thermisol Finland" shall mean Thermisol Finland Oy, a corporation
organised under the laws of Finland.
"Thermisol Finland Security Agreement" shall mean the security Agreement
entered or to be entered into by Thermisol Finland in favour of the Agent
pursuant to this Agreement.
"Thermisol Sweden" shall mean Gigantissimo 2080 Aktiebolag, in the process
of being renamed Thermisol Sweden AB (subject to the acceptance of the
Swedish Company Registry), a corporation organised under the laws of
Sweden.
"Total Interest" for any period shall mean the accrued and unpaid interest
obligations of Radnor on a Consolidated Basis with respect to its
outstanding Indebtedness during such period.
"Transferee" shall have the meaning set forth in Section 15.3(b) hereof.
"Transactions" shall have the meaning set forth in Section 5.5 hereof.
"Undrawn Availability" at a particular date shall mean an amount equal to
(a) the lesser of (i) the Formula Amount or (ii) the Maximum Loan Amount,
minus (b) the sum of (i) the outstanding amount of Advances plus (ii) all
amounts due and owing to Obligors' trade creditors which are outstanding
more than sixty (60) days past the due date therefor.
"U.S. Credit Facility" means the Second Amended and Restated Revolving
Credit and Security Agreement entered into between BNY Financial
Corporation as Agent or Lender and the U.S. Guarantors and others pursuant
to which the U.S. Lenders agree to fund loans to the U.S. Guarantors up to
an aggregate principal amount of U.S. $30,000,000.
"U.S. Guarantors" shall mean each of Wincup, Acquisition, StyroChem and
Radnor, together known as the "U.S. Guarantors".
"U.S. Lenders" means the Lenders as defined in the U.S. Credit Facility.
"U.S. Security Agreement" shall mean the security agreement entered or to
be entered into by each of the U.S. Guarantors in favour of the Agent
pursuant to this Agreement.
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"Week" shall mean the time period commencing with a Wednesday and ending on
the following Tuesday.
"Wincup" shall mean Wincup Holdings, Inc., a corporation organised under
the laws of the State of Delaware.
"Wincup L.P." shall mean Wincup Holdings, L.P., a limited partnership
organised under the laws of the State of Delaware which was dissolved
effective 7th July, 1997 pursuant to that certain Certificate of
Dissolution dated 25th August, 1997.
"Working Capital" at a particular date, shall mean the excess, if any, of
Current Assets over Current Liabilities at such date.
1.3 Certain Matters of Construction
The terms "herein", "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular
section, paragraph or subdivision. Any pronoun used shall be deemed to
cover all genders. Wherever appropriate in the context, terms used herein
in the singular also include the plural and vice versa. All references to
statutes and related regulations shall include any amendments of same and
any successor statutes and regulations. All references to any instruments
or agreements to which Agent is a party, including, without limitation,
references to any of the Other Documents or the US Credit Facility shall
include any and all modifications or amendments thereto and any and all
extensions or renewals thereof.
2. ADVANCES, PAYMENTS
2.1 (a) Borrowing Base
Subject to the terms and conditions set forth in this Agreement, each
Lender, severally and not jointly, agrees to make Advances to the
Borrowers in accordance with the procedures provided for herein in an
aggregate amount outstanding at any time not greater than such
Lender's Commitment Per cent of the lesser of (x) the Maximum Loan
Amount or (y) the sum of:
(i) up to 85%, subject to the provisions of Section 2.1(b) hereof
("Receivables Advance Rate"), of Eligible Receivables of
Borrowers, plus
(ii) the lesser of (x) $5,000,000 or (y) up to 60%, subject to the
provisions of Section 2.1(b) hereof ("Inventory Advance Rate"),
of Eligible Inventory of Borrowers (the Receivables Advance Rate
and the Inventory Advance Rate shall be referred to,
collectively, as the "Advance Rates"), minus
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(iii) such reserves as Agent may, in a commercially reasonable
manner, reasonably deem proper and necessary.
The sum of the amounts (taken at their Original Dollar Amount) derived
from (x) the sum of Sections 2.1(a)(y)(i) plus 2.1(a)(y)(ii) minus (y)
the amount of Section 2.1(a)(y)(iii) at any time and from time to time
shall be referred to as the "Formula Amount".
(b) Discretionary Rights
The Advance Rates may be increased or with the consent of the Required
Lenders, decreased by Agent at any time and from time to time in the
exercise of its reasonable discretion. The Borrowers consent to any
such increases or decreases and acknowledge that decreasing the
Advance Rates or increasing the reserves may limit or restrict
Advances requested by any Borrower.
2.2 Procedure for Borrowing
(a) Borrowing Agent on behalf of any Borrower may notify Agent prior to 11:00
a.m. on a Business Day of a Borrower's request to incur, on that day, an
Advance hereunder. Should any amount required to be paid as interest
hereunder, or as fees or other charges under this Agreement or any other
agreement with Agent or any Lender, or with respect to any other
Obligation, become due, same shall be deemed a request for an Advance as of
the date such payment is due, in the amount required to pay in full such
interest, fee, charge or Obligation under this Agreement or any other
agreement with Agent or any Lender, and such request shall be irrevocable.
Any request for an Advance shall be deemed reduced automatically and
without notice so as not to be in excess of, after giving effect to the
requested Advance, an amount which would cause the aggregate Original
Dollar Amount of all Advances to be greater than the lesser of the Maximum
Loan Amount or the Formula Amount.
(b) Notwithstanding the provisions of (a) above, in the event any Borrower
desires to obtain an Advance, it shall give Agent, through the Borrowing
Agent, at least three (3) Business Days' prior written notice; specifying
(i) the date of the proposed borrowing (which shall be a Business Day),
(ii) the Original Dollar Amount on the date of such Advance to be borrowed,
which amount shall be in a minimum of $1,000,000, and (iii) the duration of
the Interest Period therefor. Interest Periods shall be for one (1), two
(2), three (3) or six (6) months. There shall not be outstanding more than
five (5) Advances, in the aggregate.
(c) Each Interest Period of an Advance shall commence on the date such Advance
is made and shall end on such date as a Borrower may elect as in each
notice of borrowing referred to in (b) above provided that:
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(i) any Interest Period which would otherwise end on a day which is not a
Business Day shall be the next preceding or succeeding Business Day
as is the Reference Bank's custom in the market to which such Advance
relates;
(ii) no Interest Period shall end after the last day of the Term; and
(iii) any Interest Period which begins on a day for which there is no
numerically corresponding day in the calendar month during which such
Interest Period is to end, shall (subject to clause (i) above) end on
the last day of such calendar month.
The Borrowing Agent shall elect each Interest Period applicable to an
Advance by its notice of borrowing given to Agent pursuant to Section
2.2(b).
(d) In the event that any prepayment of an Advance is required or permitted on
a date other than the last Business Day of the Interest Period with respect
thereto such Borrower shall indemnify Agent and Lenders therefor in
accordance with Section 2.2(e) hereof.
(e) Each Borrower shall indemnify Agent and Lenders and hold Agent and Lenders
harmless from and against any and all losses or expenses that Agent and any
Lender may sustain or incur as a consequence of any prepayment or any
default by any Borrower in the payment of the principal of or interest on
any Advance or failure by any Borrower to complete a borrowing of, a
prepayment of after notice thereof has been given, including (but not
limited to) any interest payable by Agent or any Lender to lenders of funds
obtained by it in order to make or maintain its Advances hereunder.
(f) Notwithstanding any other provisions hereof, if any applicable law, treaty,
regulation or directive, or any change therein or in the interpretation or
application thereof, shall make it unlawful for any Lender (for purposes of
this subsection (f), the term "Lender" shall include any Lender and the
office or branch where any Lender or any corporation or bank controlling
such Lender makes or maintains any Advance) to make or maintain its
Advance, the obligation of any Lender to make an Advance hereunder shall
forthwith be canceled and the relevant Borrower shall, if any affected
Advance are then outstanding, promptly upon request from Agent, pay all
such affected Advance. If any such payment of any Advance is made on a day
that is not the last day of an Interest Period relative to such Advance,
the relevant Borrower shall pay such Lender, upon such Lender's request,
such amount or amounts as may be necessary to compensate such Lender for
any loss or expense sustained or incurred by such Lender in respect of such
Advance as a result of such payment, including (but not limited to) any
interest or other amounts payable by such Lender to lenders of funds
obtained by such Lender in order to make or maintain such Advance. A
certificate as to any additional amounts payable pursuant to the foregoing
sentence submitted by Agent to Borrower shall be conclusive absent manifest
error; provided, each Lender shall use its best efforts to minimise or
avoid any such additional payment.
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2.3 Disbursement of Advance Proceeds
All Advances shall be disbursed from whichever office or other place Agent
may designate from time to time and, together with any and all other
Obligations of Borrowers to Agent or any of the Lenders, shall be charged
to the applicable Borrower's account on Agent's books. During the Term,
Borrowers may use the Advances by borrowing, prepaying and reborrowing, all
in accordance with the terms and conditions hereof. The proceeds of each
Advance requested on behalf of any Borrower or deemed to have been
requested by such Borrower under Section 2.2(a) hereof shall, with respect
to requested Advances to the extent the Lenders make such Advances, be made
available to such Borrower on the day so requested by way of credit to such
Borrower's operating account at the Bank, or such other bank as the
Borrowing Agent may designate following notification to Agent, in federal
funds or other immediately available funds or, with respect to Advances
deemed to have been requested, be disbursed to Agent to be applied to the
outstanding Obligations giving rise to such deemed request.
2.4 Optional Currencies
(a) Selection
(i) A Borrower shall, through the Borrowing Agent, select the currency of
an Advance in the relevant notice for borrowing.
(ii) The currency of each Advance must be Dollars or an Optional Currency.
(iii) No Borrower may choose a currency if as a result the Advances would
be denominated at any one time in more than five currencies.
(iv) The Agent shall notify each Lender of the currency and the Original
Dollar Amount of each Advance and the applicable Agent's Spot Rate of
Exchange promptly after they are ascertained.
(b) Revocation of currency
If before 9:30 a.m. on any day falling between Business Days prior to the
commencement of an Interest Period relates to an Advance, the Agent
receives notice from a Lender that:
(i) it is impracticable for the Lender to fund its participation in the
relevant Advance in the relevant Optional Currency during its
Interest Period in the ordinary course of business in the London
interbank market; and/or
(ii) the use of the proposed Optional Currency might contravene any law or
regulation,
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the Agent shall give notice to the relevant Borrower and to the Lenders to
that effect before 11:00 a.m. on that day. In this event:
(i) the relevant Borrower and the Lender may agree that the drawdown will
not be made; or
(ii) in the absence of agreement;
(1) the Lender's participation in the Advance (or, if more than one
Lender is similarly affected, those Lender's participations in
the Advance) shall be treated as a separate Advance denominated
in Dollars during the relevant Interest Period;
(2) in the definition of "LIBOR" (insofar as it applies to that
Advance) in Section 1.1 (Definitions) there shall be substituted
for the time "11:00 a.m." the time "1:00 p.m.".
(c) Amount of Optional Currencies
(i) Drawdowns
If an Advance is to be drawn down in an Optional Currency, the amount
of each Lender's participation is that Advance will be determined by
converting into that Optional Currency the Lender's participation in
the Original Dollar Amount of that Advance on the basis of the Agent's
Spot Rate of Exchange two Business Days before its date of borrowing.
(ii) Notification
The Agent shall notify the Lenders and the Borrower of Optional
Currency amounts (and the applicable Agent's Spot Rate of Exchange)
promptly after they are ascertained.
(d) Change of Currency
(i) If more than one currency or currency unit are at the same time
recognised by the central bank of any country as the lawful currency
of that country, then:
(1) any reference in this Agreement or any other Agreement to, and
any obligations arising under this Agreement or any other
Agreement in, the currency of that country shall be translated
into, or paid in, the currency or currency unit of that country
designated by the Agent; and
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(2) any translation from one currency or currency unit to another
shall be at the official rate of exchange recognised by the
central bank for the conversion of that currency or currency
unit into the other, rounded up or down by the Agent acting
reasonably.
(ii) If a change in any currency of a country occurs, this Agreement will
and each other Agreement shall be deemed to be amended to the extent
the Agent (having consulted with the Lenders) specifies to be
necessary to reflect the change in currency and to put the Lenders in
the same position, so far as possible, that they would have been in
if no change in currency had occurred.
2.5 Maximum Advances; Repayment of Excess Advances
The aggregate Original Dollar Amount balance of Advances outstanding at any
time to Borrowers shall not exceed the lesser of (a) Maximum Loan Amount or
(b) the Formula Amount.
2.6 Repayment of Advances
(a) Each Advance shall be due and payable in full on the last day of each
Interest Period relative thereto subject to earlier prepayment as herein
provided. Amount[s] repaid hereunder may be reborrowed subject to the
terms of this Agreement.
(b) Where the last date of an Interest Period for an outstanding Advance
coincides with the date on which a new Advance denominated in the same
currency is to be made, the Agent shall apply the new Advance in or toward
repayment of the outstanding Advance so that:
(i) where the amount of the outstanding Advance exceeds the amount of the
new Advance, such Borrower shall be required to repay only the
excess;
(ii) where the amount of the outstanding Advance is exactly the same as
the amount of the new Advance, such Borrower shall not be required to
make any payment; and
(iii) where the amount of the new Advance exceeds the outstanding Advance,
the excess shall be advanced to such Borrower,
PROVIDED ALWAYS THAT nothing in this paragraph (b) shall have the effect,
or be deemed to have the effect, of converting part or all of any Advance
into a term loan and PROVIDED FURTHER THAT the other provisions of this
Agreement (including, without limitation, the provisions of Section 8 are
complied with).
(c) Each Borrower shall repay the aggregate principal amount of all outstanding
Advances in any event by no later than the end of Term.
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(d) Borrowers recognise that the amounts evidenced by checks, notes, drafts or
any other items of payment relating to and/or proceeds of Security Assets
may not be collectible by Agent on the date received. In consideration of
Agent's agreement to conditionally credit a Borrower's account as of the
Business Day on which Agent receives those items of payment, each Borrower
agrees that, in computing the charges under this Agreement, all items of
payment shall be deemed applied by Agent on account of the Obligations one
(1) Business Day after receipt by Agent of good funds with respect to such
items of payment. Agent is not, however, required to credit any Borrower's
account for the amount of any item of payment which is unsatisfactory to
Agent and Agent may charge such Borrower's account for the amount of any
item of payment which is returned to Agent unpaid.
(e) All payments of principal, interest and other amounts payable hereunder, or
under any of the related agreements shall be made to Agent at the Payment
Office in the principal financial centre of the country of the relevant
currency on the due date therefor in lawful money of the country of the
relevant currency in immediately available funds to Agent. Agent shall have
the right to effectuate payment on any and all Obligations due and owing
hereunder by charging the applicable Borrower's account or by making
Advances as provided in Section 2.2 hereof.
(f) Obligors shall pay principal, interest, and all other amounts payable
hereunder, or under any related agreement, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or
counterclaim.
2.7 Currency
(i) A repayment or prepayment of an Advance or any part of an Advance is
payable in the currency in which such Advance is denominated on its
due date.
(ii) Interest is payable in the currency in which the relevant amount in
respect of which it is payable is denominated.
(iii) Amounts payable in respect of costs, expenses and taxes and the like
are payable in the currency in which they are incurred.
(iv) Any other amount payable under this Agreement is, except as
otherwise provided in this Agreement, payable in Dollars.
2.8 Statement of Account
Agent shall maintain, in accordance with its customary procedures, a loan
account in the name of each Borrower in which shall be recorded the date
and amount of each Advance made by Lenders and the date and amount of each
payment in respect thereof; provided, however, the failure by Agent to
record the date and amount of any Advance shall not adversely affect Agent
or any Lender. Each month, Agent shall send to Borrowing Agent
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a statement showing the accounting for the Advances made, payments made or
credited in respect thereof, and other transactions between Lenders and
each Borrower, during such month. The monthly statements shall be deemed
correct and binding upon Borrowers in the absence of manifest error and
shall constitute an account stated between Lenders and Borrowers unless
Agent receives a written statement of a Borrower's specific exceptions
thereto within thirty (30) days after such statement is received by
Borrowing Agent. The records of Agent with respect to the loan account
shall be prima facie evidence of the amounts of Advances and other charges
thereto and of payments applicable thereto, absent manifest error.
2.9 Additional Payments
Any sums expended by Agent or any Lender due to any Borrower's failure to
perform or comply with its obligations under this Agreement or any Other
Document including, without limitation, any Borrower's obligations under
Section 6.1 hereof, may be charged to such Borrower's account as a Advance
and added to the Obligations, provided Agent shall promptly thereafter
provide to Borrowing Agent a copy of documentation supporting such charges.
2.10 Manner of Borrowing and Payment
(a) Each borrowing of Advances shall be advanced according to the Commitment
Percentages of the Lenders.
(b) (i) Each payment (including each prepayment) by Borrowers on account of
the principal of and interest on the Advances, shall be applied to
the Advances pro rata according to the applicable Commitment
Percentages of the Lenders.
(c) (i) Notwithstanding anything to the contrary contained in Sections
2.13(a) and (b) hereof, commencing with the first Business Day
following the Effective Date, each borrowing of Advances shall be
advanced by Agent and each payment by Borrowers on account of
Advances shall be applied first to those Advances made by Agent. On
or before 1:00 p.m., London time, on each Settlement Date commencing
with the first Settlement Date following the Effective Date, Agent
and the Lenders shall make certain payments as follows: (I) if the
aggregate amount of new Advances made by Agent during the preceding
Week exceeds the aggregate amount of repayments applied to
outstanding Advances during such preceding Week (if any), then each
Lender shall provide Agent with funds in an amount equal to its
Commitment Percentage of the difference between (w) such Advances and
(x) such repayments and (II) if the aggregate amount of repayments
applied to outstanding Advances during such Week exceeds the
aggregate amount of new Advances made during such Week, then Agent
shall provide each Lender with funds in an amount equal to its
Commitment Percentage of the difference between (y) such repayments
and (z) such Advances.
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(ii) Each Lender shall be entitled to earn interest at the applicable
Contract Rate on outstanding Advances which it has funded.
(iii) Promptly following each Settlement Date, Agent shall submit to each
Lender a certificate with respect to payments received and Advances
made during the Week immediately preceding such Settlement date. Such
certificate of Agent shall be conclusive in the absence of manifest
error.
(d) If any Lender or any Transferee (a "benefited Lender") shall at any time
receive any payment of all or part of its Advances, or interest thereon, or
receive any Security Assets in respect thereof (whether voluntarily or
involuntarily or by set-off) in a greater proportion than any such payment
to and Security Assets received by any other Lender, if any, in respect of
such other Lender's Advances, or interest thereon, and such greater
proportionate payment or receipt of any Security Asset is not expressly
permitted hereunder, such benefited Lender shall purchase for cash from the
other Lenders such portion of each such other Lender's Advances, or shall
provide such other Lender with the benefits of any such Security Asset, or
the proceeds thereof, as shall be necessary to cause such benefited Lender
to share the excess payment or benefits of such Security Asset or proceeds
rateably with each of the Lenders; provided, however, that if all or any
portion of such excess payment or benefits is thereafter recovered from
such benefited Lender, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest. Each Lender so purchasing a portion of another Lender's Advances
may exercise all rights of payment (including, without limitation, rights
of set-off) with respect to such portion as fully as if such Lender were
the direct holder of such portion.
(e) Unless Agent shall have been notified by telephone, confirmed in writing,
by any Lender that such Lender will not make the amount which would
constitute its applicable Commitment Percentage of the Advances available
to Agent, Agent may (but shall not be obligated to) assume that such Lender
shall make such amount available to Agent and, in reliance upon such
assumption, make available to Borrowers a corresponding amount. Agent will
promptly notify Borrowing Agent of its receipt of any such notice from a
Lender. If such amount is made available to Agent on a date after a
Settlement Date, such Lender shall pay to Agent on demand an amount equal
to its cost of funds and any other transactional costs associated with
movement of such fund from and including such Settlement Date to the date
on which such amount becomes immediately available to Agent. A certificate
of Agent submitted to any Lender with respect to any amounts owing under
this paragraph (e) shall be conclusive, in the absence of manifest error.
if such amount is not in fact made available to Agent by such Lender within
three (3) Business Days after such Settlement Date, Agent shall be entitled
to recover such an amount, with interest thereon at the domestic rate per
annum then applicable to Advances hereunder, on demand from Borrowers;
provided, however, that Agent's right to such recovery shall not prejudice
or otherwise adversely affect any Borrower's rights (if any) against such
Lender.
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(f) Notwithstanding anything to the contrary contained herein, in the event any
Lender (x) has refused (which refusal constitutes a breach by such Lender
of its obligations under this Agreement) to make available its Commitment
Percentage of any Advance or (y) notifies either Agent or Borrowers that it
does not intend to make available its Commitment Percentage of any Advance
(if the actual refusal would constitute a breach by such Lender of its
obligations under this Agreement) (each, a "Lender Default"), all rights
and obligations hereunder of such Lender (a "Defaulting Lender") as to
which a Lender Default is in effect and of the other parties hereto shall
be modified to the extent of the express provisions of this Section 2.13(f)
while such Lender Default remains in effect.
(i) Advances shall be allocated pro rata among Lenders (the "Non-
Defaulting Lenders") which are not Defaulting Lenders in accordance
with their respective Commitment Percentages, and no Commitment
Percentage of any Lender or any pro rata share of any Advances
required to be advanced by any Lender shall be increased as a result
of such Lender Default. Amounts received in respect of principal of
Advances shall be applied to reduce Advances of each Lender pro rata
based on the aggregate of the outstanding Advances of all Lenders at
the time of such application; provided that, such amount shall not
be applied to any Advances of a Defaulting Lender at any time when,
and to the extent that, the aggregate amount of Advances of any
Lender that is not a Defaulting Lender exceeds such Lender's
Commitment Percentage of all Advances then outstanding.
(ii) A Defaulting Lender shall not be entitled to give instructions to
Agent or to approve, disapprove, consent to or vote on any matters
relating to this Agreement or the Other Documents. All amendments,
waivers and other modifications of this Agreement and the Other
Documents may be made without regard to a Defaulting Lender and,
solely for purposes of the definition of "Required Lenders", a
Defaulting Lender shall be deemed not to be a Lender and not to have
Advances outstanding.
(iii) Other than as expressly set forth in this Section 2.10(f), the
rights and obligations of a Defaulting Lender (including the
obligation to indemnify Agent) and the other parties hereto shall
remain unchanged. Nothing in this Section 2.10(f) shall be deemed to
release any Defaulting Lender from its obligations under this
Agreement or the Other Documents, shall alter such obligations,
shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which any Borrower, Agent
or any Lender may have against any Defaulting Lender as a result of
any default by such Defaulting Lender hereunder.
(iv) In the event a Defaulting Lender retroactively cures, to the
satisfaction of Agent, the breach which caused such Lender to become
a Defaulting Lender, such Defaulting Lender shall no longer be a
Defaulting Lender and shall be treated as a Lender under this
Agreement.
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3. INTEREST AND FEES
3.1 Interest
(i) Interest on Advances shall be payable in arrears on the last day of
each Interest Period relating thereto and in the case of an Interest
Period in excess of three months' duration also on the date following
three months from the commencement of the Interest Period. Interest
charges shall be computed on the actual principal of Advances
outstanding during the month (the "Monthly Advances") at a rate per
annum equal to the applicable Contract Rate.
(ii) Default Interest
(1) If an Obligor fails to pay an amount payable by it under this
Agreement, it shall forthwith on demand by the Agent pay interest
on the overdue amount from the due date up to the date of actual
payment, as well after as before judgment, at a rate (the
"Default Rate") determined by the Agent to be 2 per cent. per
annum above the higher of:
(i) the rate on the overdue amount under Section 3.1
immediately before the due date (if of principal); and
(ii) the rate which would have been payable if the overdue
amount had, during the period of non-payment, constituted
an Advance in the currency of the overdue amount for such
successive Interest Periods of such duration as the Agent
may determine (each a "Designated Interest Period").
(2) The Default Rate will be determined by the Agent on each Business
Day or the first day of, or two Business Days before the first
day of, the relevant Designated Interest Period, as appropriate.
(3) If the Agent determines that deposits in the currency of the
overdue amount are not at the relevant time being made available
by the Reference Bank to leading banks in the London interbank
market, the default rate will be determined by reference to the
cost of funds to the Agent from whatever sources it may select.
(4) Default interest will be compounded at the end of each Designated
Interest Period.
(iii) So long as no Default or Event of Default shall have occurred and be
continuing, the Applicable Margin shall be increased or decreased, as
the case may be, as of the first day of each month following the
fiscal quarter reported upon in the
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financial statements delivered pursuant to Sections 9(g) and (h)
hereof, commencing with fiscal quarter ending 30th June, 1998, based
upon the ratio of Funded Indebtedness to EBITDA with respect to the
four (4) fiscal quarters then ended as reported upon in the
applicable financial statements.
3.2 Facility Fee
If, for any month during the Term, the average daily unpaid balance of the
Advances for each day of such month does not equal the Maximum Loan Amount,
then Borrower shall pay to Agent for the rateable benefit of the Lenders a
fee at the rate of the Applicable Margin per annum multiplied by the amount
by which the Maximum Loan Amount exceeds such average daily unpaid balance.
Such fee shall be payable to Agent in arrears on the last day of each month
and on the last day of the Term. So long as no Default or Event of Default
shall have occurred and be continuing, the Applicable Margin with respect
to this facility fee shall be increased or decreased, as the case may be,
as of the first day of each month following the fiscal quarter reported
upon in the financial statements delivered pursuant to Sections 9(g) and
(h) hereof, commencing with fiscal quarter ending 30th June; 1998 based
upon the ratio of Funded Indebtedness to EBITA with respect to the four (4)
fiscal quarters then ended as reported upon in the applicable financial
statement.
3.3 Security Monitoring Fee
Borrower shall pay to Agent (for the sole benefit of Agent) on the first
day of each month following any month in which Agent performs any security
monitoring - namely any field examination, security analysis or other
business analysis, the need for which is to be determined by Agent and
which monitoring is undertaken by Agent or for Agent's benefit - a security
monitoring fee in an amount equal to 500 Pound Sterling per day for each
person performing such monitoring, plus all costs and disbursements
incurred by Agent in the performance of such examination or analysis. In
addition, Borrowers agree to pay to NationsBank, N.A. (for so long as it is
a Lender hereunder) such security monitoring fee on the same terms and
conditions set forth above with respect to one security monitoring field
examination per year.
3.4 Computation of Interest and Fees
Interest and fees hereunder shall be computed on the basis of a year of 360
days and for the actual number of days elapsed. If any payment to be made
hereunder becomes due and payable on a day other than a Business Day, the
due date thereof shall be extended to the next succeeding Business Day and
interest thereon shall be payable at the applicable Contract Rate during
such extension.
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3.5 Maximum Charges
In no event whatsoever shall interest and other charges charged hereunder
exceed the highest rate permissible under law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. In
the event that a court determines that Agent or any Lender has received
interest and other charges hereunder in excess of the highest rate
permissible hereto, such excess amount shall be first applied to any unpaid
principal balance owned by Borrowers, and if the then remaining excess
amount is greater than the previously unpaid principal balance, the Lenders
shall promptly refund such excess amount to Borrowers and the provisions
hereof shall be deemed amended to provide for such permissible rate.
3.6 Increased Costs
In the event that any applicable law, treaty or governmental regulation, or
any change therein or in the interpretation or application thereof, or
compliance by any Lender (for purposes of this Section 3.7, the term
"Lender" shall include Agent or any Lender and any corporation or bank
controlling Agent or any Lender) and the office or branch where Agent or
any Lender (as so defined) makes or maintains any Advance with any request
or directive (whether or not having the force of law) from any central bank
or other financial, monetary or other authority, shall:
(i) subject to Agent or any Lender to any tax of any kind whatsoever with
respect to this Agreement or any Advance or change the basis of
taxation of payments to Agent or any Lender of principal, fees,
interest or any other amount payable hereunder or under any Other
Documents (except for changes in the rate of tax on the overall net
income of Agent or any Lender by the jurisdiction in which it
maintains its principal office);
(ii) change the currency of a country, impose, modify or hold applicable
any reserve, special deposit, assessment or similar requirement
against assets held by, or deposits in or for the account of,
advances of loans by, or other credit extended by, any office of
Agent or any Lender, including (without limitation) pursuant to
Regulation D of the Board of Governors of the Federal Reserve System;
or
(iii) impose on Agent or any Lender or the London interbank currency market
any other condition with respect to this Agreement, any Other
Documents or any Advance;
and the result of any of the foregoing is to increase the cost to Agent or
Lender of making, renewing or maintaining its Advances hereunder by any
amount that Agent or such Lender deems to be material or to reduce the
amount of any payment (whether of principal, interest or otherwise) in
respect of any of the Advances by an amount that Agent or such Lender deems
to be material, then, in any case Borrowers shall promptly
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pay Agent or such Lender, upon its demand, such additional amount as will
compensate Agent or such Lender for such additional cost or such reduction,
as the case may be, provided that the foregoing shall not apply to
increased costs which are reflected in the Interest Rate for any Interest
Period. Agent or such Lender shall certify the amount of such additional
cost or reduced amount to Borrowing Agent, and such certification shall be
conclusive absent manifest error.
3.7 Basis for Determining Interest Rate Inadequate or Unfair
In the event that Agent or any Lender shall have determined that:
(i) reasonable means do not exist for ascertaining the Interest Rate for
any Interest Period; or
(ii) deposits in the relevant currency and amount and for the relevant
maturity are not available in the London interbank Eurocurrency
market, with respect to an outstanding Advance or a proposed Advance
Loan;
then the Agent shall promptly notify the Borrowing Agent of the fact that
this Section 3.7 is in operation. After any notification under Section 3.7
the relevant Advance shall not be made. However, within five Business Days
of receipt of the notification, the Borrowing Agent and the Agent shall
enter into negotiations for a period of not more than 30 days with a view
to agreeing a substitute basis for determining the rate of interest and/or
funding applicable to that and (to the extent required) any future Advance.
Any substitute basis agreed shall be, with the prior consent of all the
Lenders, binding on all the parties hereto.
3.8 Capital Adequacy
(i) In the event that Agent or any Lender shall have determined that any
applicable law, rule, regulation or guideline regarding capital
adequacy, or any change therein, or any change in the interpretation
or administration thereof by any governmental authority, central bank
or comparable agency charged with the interpretation or
administration thereof, or compliance by Agent or any Lender (for
purposes of this Section 3.8, the term "Lender" shall include Agent
or any Lender and any corporation or bank controlling Agent or any
Lender) and the office or branch where Agent or any Lender (as so
defined) makes or maintains any Advance with any request or directive
regarding capital adequacy (whether or not having the force of law)
of any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on Agent or any
Lender's capital as a consequence of its obligations hereunder to a
level below that which Agent or such Lender could have achieved but
for such adoption, change or compliance (taking into consideration
Agent's and each Lender's policies with respect to capital adequacy)
by an amount deemed by
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Agent or any Lender to be material, then, from time to time,
Borrowers shall pay upon demand to Agent or such Lender such
additional amount or amounts as will compensate Agent or such Lender
for such reduction. In determining such amount or amounts, Agent or
such Lender may use any reasonable averaging or attribution methods.
The protection of this Section 3.8 shall be available to Agent and
each Lender regardless of any possible contention of invalidity or
inapplicability with respect to the applicable law, regulation or
condition.
(ii) A certificate of Agent or such Lender setting forth such amount or
amounts as shall be necessary to compensate Agent or such Lender with
respect to Section 3.8(a) hereof when delivered to Borrowers shall be
conclusive absent manifest error.
4. CROSS-GUARANTEE
4.1 Cross Guarantee
Each Guarantor irrevocably and unconditionally, jointly and severally:
(a) as principal obligor guarantees to each of the Agent and each Lender
prompt performance by each Obligor of all its obligations under this
Agreement and the Other Documents;
(b) undertakes with each of the Agent and the Lender that whenever a
Borrower does not pay any amount when due under or in connection with
this Agreement and any Other Documents, that Guarantor shall
forthwith on demand by the Agent pay that amount as if the Guarantor
instead of the Obligor were expressed to be the principal obligor;
and
(c) indemnifies each of the Agent and the Lender on demand against any
loss or liability suffered by it if any obligation guaranteed by that
Guarantor is or becomes unenforceable, invalid or illegal.
4.2 Continuing guarantee
This guarantee is a continuing guarantee and will extend to the ultimate
balance of all sums payable by the Obligors under this Agreement and any
Other Documents regardless of any intermediate payment or discharge in
whole or in part.
4.3 Reinstatement
(a) Where any discharge (whether in respect of the obligations of any Obligor
or any security for those obligations or otherwise) is made in whole or in
part on any arrangement is made on the faith of any payment, security or
other disposition which is avoided or must
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<PAGE>
be restored on insolvency, liquidation or otherwise without limitation, the
liability of each Guarantor under this Section 4 shall continue as if the
discharge or arrangement had not occurred.
(b) Each of the Agent and the Lenders may concede or compromise any claim that
any payment, security or other disposition is liable to avoidance or
restoration.
4.4 Waiver of defenses
The obligations of each Guarantor under this Section 4 will not be affected
by an act omission, matter or thing which, but for this provision, would
reduce, release or prejudice any of its obligations under this Section 4 or
prejudice or diminish those obligations in whole or in part, including
(whether or not know to it or any of the Agent or the Lenders):
(a) any time or waiver granted to, or composition with, any Obligor or
any other person;
(b) the taking, variation, compromise, exchange, renewal or release of,
or refusal or neglect to perfect, take up or enforce, any rights
against, or security over assets of, any Obligor or any other person
or any non-presentation or non-observance of any formality or other
requirement in respect of any instrument or any failure to realise
the full value of any security;
(c) any incapacity or lack of powers, authority or legal personality of
or dissolution or change in the members or status of any Obligor or
any other person;
(d) any variation (however fundamental) or replacement of this Agreement
or any Other Documents or security so that references to this Agent
and any other Agreement in this Section 4 shall include each
variation or replacement.
(e) any unenforceability, illegality or invalidity of any obligation of
any person under this Agreement and any Other Documents or security,
to the intent that the Guarantor's obligations under this Section 4
shall remain in full force and its guarantee be construed
accordingly, as if there were no unenforceability, illegality or
invalidity; or
(f) any postponement, discharge, reduction, non-probability or other
similar circumstance affecting any obligation of any Obligor under
this Agreement and any Other Documents resulting from any insolvency,
liquidation or dissolution proceedings or from any law, regulation or
order so that each obligation shall for the purposes of each
Guarantor's obligations under this Section 4 to construed as if there
were no such circumstance.
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4.5 Immediate recourse
Each Guarantor waives any right it may have of first requiring any of the
Agent and the Lenders (or any trustee or agent on its behalf) to proceed
against or enforce any other rights or security or claim payment from any
person before claiming from that Guarantor under this Section 4.
4.6 Appropriations
Until all amounts which may be or become payable by the Obligors under or
in connection with this Agreement and any Other Documents have been
irrevocably paid in full, each of the Agent and the Lenders (or any trustee
or agent on its behalf) may:
(a) refrain from applying or enforcing any other moneys, security or
rights held or received by the Agent or any Lender (or any trustee or
agent on its behalf) in respect of those amounts, or apply and enforce
the same in such manner and order as it sees fit (whether against
those amounts or otherwise) and no Guarantor shall be entitled to the
benefit of the same; and
(b) hold in a suspense account any moneys received from any Guarantor or
on account of the Guarantor's liability under this Section 4, without
liability to pay interest on those moneys.
4.7 Non-competition
Until all amounts which may be or become payable by the Obligors under or
in connection with this Agreement and any Other Documents have been
irrevocably paid in full, no Guarantor shall, after a claim has been made
or by virtue of any payment or performance by it under this Section 4:
(a) be subrogated to any rights, security or moneys held, received or
receivable by the Agent or the Lender (or any trustee or agent on its
behalf) or be entitled to any right of contribution or indemnity in
respect of any payment made or moneys received on account of that
Guarantor's liability under this Section 4;
(b) claim, ranking, prove or vote as a creditor of any Obligor or its
estate in competition with the Agent or the Lender (or any trustee or
agent on its behalf); or
(c) receive, claim or have the benefit of any payment, distribution or
security from or on account of any Obligor, or exercise any right of
set-off as against any Obligor.
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Each Guarantor shall hold in trust for and forthwith pay or transfer to the
Agent for the Agent and the Lenders any payment or distribution or benefit
of security received by it contrary to this Section 4 as directed by the
Agent.
4.8 Additional security
This guarantee is in addition to and is not in any way prejudiced by any
other security now or subsequently held by the Agent and the Lenders.
4.9 Thermisol Sweden
Thermisol Sweden shall not, where the distribution restrictions in the
provisions of Chapter 12 Section 2 of the Swedish Companies Act
(Aktiebolagslagen (1975:1385) apply in relation to the guarantee given by
it hereunder, in each case taking into account the extent to which any
commercial benefit is derived by it in giving such guarantee, assume any
liability as Guarantor in respect of any indebtedness of any Obligor owed
or owing by such Obligor under or in connection with this Agreement or the
Other Agreements to the extent that the obligations and liabilities of
Thermisol Sweden in respect thereof would exceed an amount equal to the
lesser of:
(a) the amount of distributable reserves according to its last audited and
adopted balance sheet as at the date hereof; and
(b) an amount being available for distribution by it under Chapter 12
Section 2 second paragraph of the aforementioned Swedish Companies
Act.
5. REPRESENTATIONS AND WARRANTIES
Each Obligor represents and warrants to the Agent and the Lenders as
follows:
(a) Authority
It has full power, authority and legal right to enter into this
Agreement and the Other Documents and perform its respective
Obligations hereunder and thereunder. The execution, delivery and
performance hereof and of the Other Documents (a) are within its
respective corporate powers, have been duly authorised, are not in
contravention of law or the terms of any Obligor's by-laws,
certificate of incorporation or other applicable documents relating to
the formation or conduct of its respective business or of any material
agreement or undertaking to which it is a party or by which it is
bound, and (b) will not conflict with nor result in any breach in any
of the provisions of or constitute a default under or result in the
creation of any Lien except Permitted Encumbrances upon any of its
respective assets under the provisions of any agreement, charter
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<PAGE>
document, instrument, by-law, or other instrument to which it or its
property is a party or by which it may be bound.
(b) Formation and Qualification
(i) Each is duly formed and in good standing under the laws of its
state of incorporation or formation and (in the case of each U.S.
Guarantor) is qualified to do business and is in good standing in
the states listed on Schedule 5.2(a) of the U.S. Credit Facility
(copy of which is attached hereto) which constitute all states in
which qualification and good standing are necessary for each to
conduct its business and own its property and where the failure
to so qualify could have a Material Adverse Effect. Each Obligor
has delivered to Agent true and complete copies of its
certificate of incorporation and/or by-laws and each will
promptly notify Agent of any amendment or changes thereto.
(ii The only Subsidiaries of Obligors are listed on Schedule
5(b)(ii).
(c) Survival of Representations and Warranties
All representations and warranties of each Obligor contained in this
Agreement and the Other Documents shall be true at the time of the
execution of this Agreement and the Other Documents, and shall survive
the execution, delivery and acceptance thereof by the parties thereto
and the closing of the transactions described therein or related
thereto.
(d) Tax Returns
Each U.S. Guarantor's federal tax identification number is set forth
on Schedule 5.4 of the U.S. Credit Facility (copy of which is attached
hereto). Each Obligors have each filed all applicable federal, state
and local tax returns and other reports it is required by law to file
and has paid all taxes, assessments, fees and other governmental
charges that are due and payable. The provision for taxes on the
books of Obligors are adequate for all years not closed by applicable
statutes, and for its current fiscal year, and no Obligor has any
knowledge of any deficiency or additional assessment in connection
therewith not provided for on its books.
(e) Financial Statements
(i) The pro forma balance sheet of Radnor on a Consolidated Basis
(the "Pro Forma Balance Sheet") furnished to Agent and the
Lenders on the Effective Date reflects the consummation of the
transactions contemplated by the StyroChem Europe Acquisition
Agreement, the Second Indenture and under this Agreement (the
"Transactions") and are accurate, complete
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and correct and fairly reflect in all material respects the
financial condition of the Obligors on a consolidated basis as
of the Effective Date after giving effect to the Transactions,
and have been prepared in accordance with GAAP, consistently
applied. The Pro Forma Balance Sheet has been certified as
accurate, complete and correct in all material respects by the
Chief Financial Officer of Radnor. All financial statements
referred to in this subsection 5(e)(i), including the related
schedules and notes thereto, have been prepared, in accordance
with GAAP, except as may be disclosed in such financial
statements.
(ii) The twelve-month cash flow projections of Radnor on a
Consolidated Basis and their projected balance sheets as of the
Effective Date, copies of which have been previously submitted
to Agent and the Lenders ("the Projections") were prepared by
the Chief Financial Officer of each Obligor, are based on
underlying assumptions which provide a reasonable basis for the
projections contained therein and reflect such Obligor's
judgment based on present circumstances of the most likely set
of conditions and course of action for the projected period. The
Projections, together with the Pro Forma Balance Sheet of the
Obligors on a consolidated basis, are referred to as the "Pro
Forma Financial Statements".
(iii) The balance sheets of each Obligor as of 30th June, 1997, and
the related statements of income, changes in stockholder's
equity, and changes in cash flow for the period ended on such
date, which have been delivered to Agent, have been prepared in
accordance with GAAP, consistently applied and present fairly
the financial position of each Obligor at such date and the
results of their operations for such period. Since 30th June,
1997 there has been no change in the condition, financial or
otherwise, of any Obligor as shown on the balance sheets as of
such date, except changes in the ordinary course of business,
none of which individually or in the aggregate has caused a
Material Adverse Effect.
(f) Corporate Name
No Obligor has been known by any other corporate name in the past five
years and does not sell Inventory under any other name except as set
forth on Schedule 5.6 of the U.S. Credit Facility (copy of which is
attached hereto), nor has any Obligor been the surviving entity of a
merger or consolidation or acquired all or substantially all of the
assets of any Person during the preceding five (5) years, except for
(i) the dissolution of Wincup L.P., (ii) the acquisition of certain
assets of Wincup from James River and Wincup L.P., (iii) the
acquisition of stock of Acquisition pursuant to the Acquisition
Agreement and (iv) the acquisition by Radnor of the limited
partnership interest of James River in Wincup L.P.
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(g) Solvency; No Litigation, Violation, Indebtedness or Default
(i) After giving effect to the Transactions, each Obligor will be
solvent, able to pay its respective debts as they mature, have
capital sufficient to carry on its respective business and all
businesses in which it its about to engage, and (i) as of the
Effective Date, the fair present saleable value of its assets,
calculated on a going concern basis, is in excess of the amount
of its liabilities and (ii) subsequent to the Effective Date,
the fair saleable value of its assets (calculated on a going
concern basis) will be in excess of the amount of its
liabilities.
(ii) Except as disclosed in Schedule 5.8(b) of the U.S. Credit
Facility (a copy of which is attached hereto) or the Pro Forma
Financial Statements, no Obligor has (i) any pending or
threatened litigation, arbitration, actions or proceedings which
involve the possibility of having a Material Adverse Effect on
such Obligor or on its ability to perform this Agreement, and
(ii) any liabilities nor indebtedness other than the
Obligations.
(iii) No Obligor is in violation of any applicable statute, regulation
or ordinance in any respect which could have a Material Adverse
Effect on such Obligor and no Obligor is in violation of any
order of any court, governmental authority or arbitration board
or tribunal which could have a Material Adverse Effect on such
Obligor.
(h) Patents, Trademarks, Copyrights and Licenses
All patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, copyrights, copyright
applications, design rights, tradenames, assumed names, trade secrets
and licenses owned or utilised by any Obligor are set forth on
Schedule 5.9 of the U.S. Credit Facility (copy of which is attached
hereto), are valid and have been duly registered or filed with all
appropriate governmental authorities and constitute all of the
intellectual property rights which are necessary for the operation of
its business; there is no objection to or pending challenge to the
validity of any such material patent, trademark, copyright, design
rights tradename, trade secret or license and no Obligor is aware of
any grounds for any challenge, except as set forth in Schedule 5.9 of
the U.S. Credit Facility (copy of which is attached hereto). Each
patent, patent application, patent license, trademark, trademark
application, trademark license, service mark, service mark
application, service mark license, copyright, copyright application
and copyright license owned or held by any Obligor and all trade
secrets used by any Obligor consist of original material or property
developed by such Obligor or was lawfully acquired by such Obligor
from the proper and lawful owner thereof. Each of such items has been
maintained so as to preserve the value thereof from the date of
creation or acquisition thereof. With respect to
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all software used by any Obligor, such Obligor is in possession of all
source and object codes related to each piece of software or is the
beneficiary of a source code escrow agreement, each such source code
escrow agreement being listed on Schedule 5.9 of the U.S. Credit
Facility (copy of which is attached hereto).
(i) Licenses and Permits
Except as set forth in Schedule 5.10 of the U.S. Credit Facility (copy
of which is attached hereto), each Obligor (a) is in compliance with
and (b) has procured and is now in possession of, all material
licenses or permits required by any applicable federal, state or local
law or regulation for the operation of its business in each
jurisdiction wherein it is now conducting or proposes to conduct
business and where the failure to procure such licenses or permits
could have a Material Adverse Effect.
(j) Default of Indebtedness
No Obligor is in default in the payment of the principal of or
interest on any Indebtedness or under any instrument or agreement
under or subject to which any Indebtedness has been issued and no
event has occurred under the provisions of any such instrument or
agreement which with or without the lapse of time or the giving of
notice, or both, constitutes or would constitute an event of default
thereunder.
(k) No Default
No Obligor is in default in the payment or performance of any of its
material contractual obligations and no Default has occurred.
(l) No Burdensome Restrictions
No Obligor is party to any contract or agreement the performance of
which could have a Material Adverse Effect. No Obligor has agreed or
consented to cause or permit in the future (upon the happening of a
contingency or otherwise) any of its property, whether now owned or
hereafter acquired, to be subject to a Lien which is not a Permitted
Encumbrance.
(m) No Labour Disputes
No Obligor is involved in any labour dispute; there are no strikes or
walkouts or union organisation of any Obligor's employees threatened
or in existence and no labour contract is scheduled to expire during
the Term other than as set forth on Schedule 5.14 of the U.S. Credit
Facility (copy of which is attached hereto).
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(n) Margin Regulations
No Obligor is engaged, nor will either of them engage, principally or
as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms
under Regulation U or Regulation G of the Board of Governors of the
Federal Reserve System as now and from time to time hereafter in
effect. No part of the proceeds of any Advance will be used for
"purchasing" or "carrying" "margin stock" as defined in Regulation U
of such Board of Governors.
(o) Investment Company Act
No Obligor is an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended, nor
is either entity controlled by such a company.
(p) Disclosure
No representation or warranty made by any Obligor in this Agreement or
in any financial statement, report, certificate or any other document
furnished in connection herewith or therewith contains any untrue
statement of a material fact or omits to state any material fact
necessary to make the statements herein or therein not misleading.
There is no fact known to any Obligor or which reasonably should be
known to any Obligor which such Obligor has not disclosed to Agent in
writing with respect to the transactions contemplated by the StyroChem
Europe Acquisition Agreement or this Agreement which could reasonably
be expected to have a Material Adverse Effect.
(q) Delivery of StyroChem Europe Acquisition Agreement
Agent and Lenders have received complete copies of the StyroChem
Europe Acquisition Agreement and the Second Indenture (including all
exhibits, schedules and disclosure letters referred to therein or
delivered pursuant thereto, if any) and all amendments thereto,
waivers relating thereto and other side letters or agreements
affecting the terms thereof. None of such documents and agreements
has been amended or supplemented, nor have any of the provisions
thereof been waived, except pursuant to a written agreement or
instrument which has therefore been delivered to Agent and Lenders.
(r) Swaps
No Obligor is a party to, nor will it be a party to, any swap
agreement whereby such Obligor has agreed or will agree to swap
interest rates or currencies unless
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same provides that damages upon termination following an event of
default thereunder are payable on an unlimited "two-way basis" without
regard to fault on the part of either party.
(s) Conflicting Agreements
No provision of any mortgage, indenture, contract, agreement,
judgment, decree or order binding on any Obligor or affecting any
Security Assets conflicts with, or requires any Consent which has not
already been obtained to, or would in any way prevent the execution,
delivery or performance of, the terms of this Agreement or the Other
Documents.
(t) Applications of Certain Laws and Regulations
No Obligor nor any Affiliate of any Obligor is subject to any statute,
rule or regulation which regulates the incurrence of any Indebtedness,
including without limitation, statutes or regulations relative to
common or interstate carriers or to the sale of electricity, gas,
steam, water, telephone, telegraph or other public utility services.
(u) Business and Property of the Obligor
Upon and after the Effective Date, the Obligors propose to engage
substantially in the business of manufacturing and/or distributing
polystyrene beads and disposable products sold to or through the food
service industry and activities necessary to conduct the foregoing.
On the Effective Date, each Obligor will own all the property and
possess all of the rights and Consents necessary for the conduct of
its business.
(v) Acquisition
Each Obligor has acquired all of its assets and property in accordance
with all applicable statutes and laws, such property is free and clear
of all Liens other than Permitted Encumbrances.
6. AFFIRMATIVE COVENANTS
Each Obligor shall, until payment in full of the Obligations and
termination of this Agreement:
(a) Payment of Fees
Pay to Agent on demand all usual and customary fees and expenses which
Agent incurs in connection with the forwarding of Advance proceeds.
Agent may,
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<PAGE>
without making demand, charge the accounts of the Obligors for all
such fees and expenses, provided Agent shall promptly thereafter
provide Borrowing Agent with copies of supporting documentation.
(b) Conduct of Business and Maintenance of Existence and Assets
(i) Conduct continuously and operate actively its business according
to good business practices and maintain all of its properties
useful or necessary in its business in good working order and
condition (reasonable wear and tear excepted and except as may
be disposed of in accordance with the terms of this Agreement),
including, without limitation, all licenses, patents,
copyrights, design rights, tradenames, trade secrets and
trademarks and in the case of StyroChem Finland and Thermisol
Finland take all actions necessary to enforce and protect the
validity of any intellectual property right or other right
included in the Security Assets;
(ii) keep in full force and effect its existence and comply in all
material respects with the laws and regulations governing the
conduct of its business; and
(iii) make all such reports and pay all such franchise and other taxes
and license fees and do all such other acts and things as may be
lawfully required to maintain its rights, licenses, leases,
powers and franchises under the laws of the state or the country
of its incorporation or any political subdivision thereof.
(c) Violations
Promptly notify Agent in writing of any violation of any law, statute,
regulation or ordinance of any Governmental Body, or of any agency
thereof, applicable to any Obligor which may have a Material Adverse
Effect on any Obligor.
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(d) Net Worth
Cause to be maintained Net Worth of Radnor on a Consolidated Basis in
an amount not less than the amounts set forth below as of the dates
set forth below:
<TABLE>
<CAPTION>
Date Amount
------
<S> <C>
12-31-97 $ 7,000,000
12-31-98 $ 8,000,000
12-31-99 $ 9,000,000
12-31-00 $10,000,000
12-31-01 $10,000,000
12-31-02 $10,000,000
</TABLE>
(e) Current Ratio
Cause to be maintained a ratio of Current Assets to Current
Liabilities for Radnor on a Consolidated Basis of not less than 1.00
to 1.00 at the end of each fiscal quarter.
(f) Fixed Charge Coverage
Cause to be maintained for each fiscal quarter of Radnor on a
Consolidated Basis a Fixed Charge Coverage equal to or greater than
1.00 to 1.00 at the end of each fiscal quarter for the most recent
four fiscal quarters then ended.
(g) Interest Coverage
Cause to be maintained for each fiscal quarter of Radnor on a
Consolidated Basis an Interest Coverage equal to or greater than 1.25
to 1.00 at the end of each fiscal quarter for the most recent four
fiscal quarters then ended.
(h) Net Income
Achieve net income for Radnor on a Consolidated Basis (excluding non-
cash extraordinary items) of at least $1 in each fiscal year.
(i) Execution of Supplemental Instruments
Execute and deliver to Agent from time to time, upon demand, such
supplemental agreements, statements, assignments and transfers, or
instructions or documents and such other instruments as Agent may
request, in order that the full intent of this Agreement or the
Security Documents or Other Documents may be carried into effect.
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(j) Payment of Indebtedness
Pay, discharge or otherwise satisfy at or before maturity (subject,
where applicable, to specified grace periods and, in the case of the
trade payables, to normal payment practices) all its material
obligations and liabilities of whatever nature, except when the amount
or validity thereof is currently being contested in good faith by
appropriate proceedings and each Obligor shall have provided for such
reserves as Agent may reasonably deem proper and necessary, subject at
all times to any applicable subordination arrangement in favour of
Agent and the Lenders.
(k) Standards of Financial Statements
Cause all financial statements referred to in Sections 9.7, 9.8, 9.9,
9.10, 9.11, 9.12, 9.13 and 9.14 as to those to which GAAP is
applicable to be complete and correct in all material respects
(subject, in the case of interim financial statements, to normal year-
end audit adjustments) and to be prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods
reflected therein (except as concurred in by such reporting
accountants or officer, as the case may be, and disclosed there).
(l) Exercise of Rights
Enforce all of its rights under the StyroChem Europe Acquisition
Agreement and all documents executed in connection therewith
including, but not limited to, all indemnification rights and pursue
all remedies available to it with diligence and in good faith in
connection with the enforcement of any such rights.
(m) Environmental Matters
(i) The Obligors will ensure that all real property owned or
occupied by Obligors remains in compliance in all material
respects with all Environmental Laws and they will not place
or permit to be placed any Hazardous Substances on any such
property except as not prohibited by applicable law or
appropriate governmental authorities.
(ii) Obligors will establish and maintain a system to assure and
monitor continued compliance with all applicable Environmental
Laws which system shall include periodic reviews of such
compliance.
(iii) Promptly upon the written request of Agent from time to time,
each Obligor shall provide Agent, at Obligors' expense, with
an environmental site assessment or environmental audit report
prepared by an environmental engineering firm acceptable in
the reasonable opinion of
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Agent, to assess with a reasonable degree of certainty the
existence of a Hazardous Discharge and the potential costs in
connection with abatement, cleanup and removal of any
Hazardous Substances found on, under, at or within any real
property owned or occupied by an Obligor. Any report or
investigation of such Hazardous Discharge proposed and
acceptable to an appropriate Authority that is charged to
oversee the clean-up of such Hazardous Discharge shall be
acceptable to Agent. If such estimates, individually or in the
aggregate, exceed $100,000, Agent shall have the right to
require the Obligors to post a bond, letter of credit or other
security reasonably satisfactory to Agent to secure payment of
these costs and expenses.
(iv) Each Obligor shall defend and indemnify Agent and the Lenders
and hold Agent, the Lenders and their respective employees,
agents, directors and officers harmless from and against all
loss, liability, damage and expense, claims, costs, fines and
penalties, including attorney's fees, suffered or incurred by
Agent or the Lenders under or on account of any Environmental
Laws, including, without limitation, the assertion of any lien
thereunder, with respect to any Hazardous Discharge, the
presence of any Hazardous Substances, whether or not the same
originates or emerges from any real property owned or occupied
by an Obligor or any contiguous real estate, except to the
extent such loss, liability, damage and expense is
attributable to any Hazardous Discharge resulting from actions
on the part of Agent or any Lender. Obligors' obligations
under this Section 6(m) shall arise upon the discovery of the
presence of any Hazardous Substances at any real property
owned or occupied by an Obligor, whether or not any federal,
state, or local environmental agency has taken or threatened
any action in connection with the presence of any Hazardous
Substances. Obligors' obligations and the indemnification
hereunder shall survive the termination of this Agreement.
7. NEGATIVE COVENANTS
No Obligor shall, until satisfaction in full of the Obligations and
termination of this Agreement with the Other Agreements:
(a) Merger, Consolidation, Acquisition and Sale of Assets
(i) Enter into any merger, consolidation or other reorganisation
with or into any other Person (other than another Obligor) or
acquire all or substantial portion of the assets or stock of
any Person (other than another Obligor) or permit any other
Person (other than another Obligor) to consolidate with or
merge with it.
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(ii) Sell, lease, transfer or otherwise dispose of all or any
material part of its properties or assets, except in the
ordinary course of its business.
(b) Creation of Liens
Create or suffer to exist any Lien or transfer upon or against any of
its property or assets not owned or hereafter acquired, except
Permitted Encumbrances.
(c) Guarantees
Become liable upon the obligations of any Person by assumption,
endorsement or guaranty thereof or otherwise (other than to Lenders or
to any Affiliates of Lenders) except (a) as disclosed on Schedule 7.3
of the U.S. Credit Facility (copy of which is attached hereto), and
(b) the endorsement of checks in the ordinary course of business.
(d) Investments
Purchase or acquire obligations or stock of, or any other interest in,
any Person, except (a) obligations issued or guaranteed by the United
States of America or any agency thereof; (b) commercial paper with
maturities of not more than 180 days and a published rating of not
less than A-1 or P-1 (or the equivalent rating); (c) certificates of
time deposit and bankers' acceptances having maturities of not more
than 180 days and repurchase agreements backed by United States
government securities of a commercial bank if (i) such bank has a
combined capital and surplus of at least $500,000,000, or (ii) its
debt obligations, or those of a holding company of which it is a
Subsidiary, are rated not less than A (or the equivalent rating) by a
nationally recognised investment rating agency; (d) U.S. money market
funds that invest solely in obligations issued or guaranteed by the
United States of America or an agency thereof; and (e) investments in
one or more Subsidiaries, joint ventures or other Affiliates in an
aggregate sum not to exceed the sum of (i) 50% of the cumulative net
income of Radnor on a Consolidated Basis plus (ii) $3,000,000;
provided, at the time of such investment (x) no Event of Default has
occurred or would occur after giving effect to such payment and (y)
and after giving effect to such investment the Undrawn Availability is
more than $2,000,000.
(e) Loans
Make advances, loans or extensions of credit to any Person, including
without limitation, any Parent, Subsidiary or Affiliate except with
respect to (a) the extension of commercial trade credit in connection
with the sale of Inventory in the ordinary course of its business, (b)
loans to its employees in the ordinary course of business not to
exceed the aggregate amount of $100,000 at any time
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outstanding provided, the provisions of this subclause (b) shall not
prohibit any loans to an irrevocable life insurance trust established
by Michael T. Kennedy ("Insurance Trust") for the purposes of paying
annual premiums on the life insurance policies owned by the Insurance
Trust on the life of Michael T. Kennedy in an aggregate amount not to
exceed $700,000 outstanding at any one time, (c) loans to another
Obligor so long as (i) such loan or advance is evidenced by a
promissory note and such note is assigned to Agent as collateral
security for the Obligations and (ii) at the time of such loan no
Event of Default has occurred or would occur after giving effect to
such loan or advance, (d) loans to StyroChem International, Ltd. in an
aggregate amount not to exceed $4,000,000 at any time outstanding so
long as (i) after giving effect to any such loan or advance the
Undrawn Availability is more than $2,000,000 and (ii) at the time of
such loan no Event of Default has occurred or would occur after giving
effect to such loan or advance and (f) loans to Affiliates of the
Obligors not to exceed $5,000,000 in the aggregate.
(f) Capital Expenditures
Contract for, purchase or make any expenditure or commitments for
fixed or capital assets (including capitalised leases) in an amount in
excess of the amounts set forth below for the fiscal years set forth
below with respect to Radnor on a Consolidated Basis:
<TABLE>
<CAPTION>
Fiscal Year Ended Amount
<S> <C>
31-12-97 $15,000,000
31-12-98 21,100,000
31-12-99 17,100,000
31-12-00 14,000,000
31-12-01 9,900,000
31-12-02 7,400,000
</TABLE>
(g) Dividends: Distributions
Declare, pay or make any dividend or distribution to any of its
shareholders or apply any of its funds, property or assets to the
purchase, redemption or other retirement of any of its capital stock
except, so long as (a) a notice of termination with regard to this
Agreement shall not be outstanding and (b) if Undrawn Availability is
less than $5,000,000 the purpose for such distribution shall be as
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<PAGE>
set forth in writing to Lenders at least ten (10) days prior to such
distribution and such distribution shall in fact be used for such
purpose: (i) any Obligor shall be permitted to make distributions to
any of its shareholders who are Obligors hereunder to enable Radnor to
make its regularly scheduled payments of interest on the Senior Notes
and the Second Senior Notes if (x) the aggregate amount of such
distributions do not exceed the interest payments then required to be
paid by Radnor on the Senior Notes or the Second Senior Notes, as the
case may be, and (y) at the time of and after giving effect to any
such distribution no Event of Default has occurred or would occur; and
(iii) any Obligor shall be permitted to make distributions to any of
its shareholders for any purpose if at the time of and after giving
effect to such distribution no Event of Default has occurred or would
occur, (y) in the event that Borrowers have Advances outstanding
hereunder in excess of $2,000,000 at the time of such distribution,
after giving effect to such distribution the difference between (1)
Undrawn Availability is more than $2,000,000 and (z) in the event such
distribution is made by Radnor, after giving effect to such
distribution, the aggregate amount of all payments or distributions
made by Radnor during such fiscal year does not exceed 50% of the net
income of Radnor on a Consolidated Basis for the immediately preceding
fiscal year.
(h) Indebtedness
Create, incur, assume or suffer to exist any Indebtedness (exclusive
of trade debt) except in respect of (i) Indebtedness to Lenders; (ii)
Indebtedness incurred for capital expenditures permitted under Section
7.6 hereof; (iii) Indebtedness due under the Senior Notes and the
Second Senior Notes; and (iv) Indebtedness in a maximum aggregate
amount outstanding not greater than $10,000,000 (when added to the
amount of Indebtedness incurred by all other Borrowers).
Notwithstanding the foregoing, the Obligors may incur Indebtedness in
excess of the foregoing amounts if, after giving pro forma effect to
the incurrence of such Indebtedness, Interest Coverage Ratio for each
of the four fiscal quarters most recently ended would equal or exceed
2.0 or 1.0 if calculated as if such Indebtedness was outstanding for
the entire four quarter period.
(i) Nature of Business
Substantially change the nature of the business in which it is
presently engaged, nor except as specifically permitted hereby
purchase or invest, directly or indirectly, in any assets or property
other than in the ordinary course of business for assets or property
which are useful in, necessary for and are to be used in its business
as presently conducted.
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(j) Transactions with Affiliates
Directly or indirectly, purchase, acquire or lease any property from,
or sell, transfer or lease any property to, or otherwise deal with,
any Affiliate, except transactions disclosed in the ordinary course of
business, on an arm's length basis on terms no less favourable than
terms which would have been obtainable from a Person other than an
Affiliate provided the provisions of this Section 7(j) shall not
prohibit any payments to Radnor Management, Inc. ("Management") in
accordance with the provisions of the Management Services Agreement
dated as of 18th December, 1996 among Management, Borrowers, StyroChem
International, Ltd. and StyroChem FSC, Limited. ("Management
Agreement") in an aggregate amount not to exceed the actual Expenses
under and as defined in the Management Agreement.
(k) Leases
Enter as lessee into any lease arrangement for real or personal
property (unless capitalised and permitted under Section 7.6 hereof)
if after giving effect thereto, aggregate annual rental payments for
all leased property would exceed $6,000,000 in any one fiscal year.
(l) Subsidiaries
(i) Form any Subsidiary unless (A) (i) such Subsidiary expressly
joins in this Agreement as a Obligor and becomes jointly and
severally liable for the obligations of Obligors hereunder and
under any other agreement between Obligors, Agent and Lenders
and (ii) Agent shall have received all documents, including
legal opinions, it may reasonably require to establish
compliance with each of the foregoing condition or (B) such
Subsidiary is formed pursuant to the provisions of Section 7.4
hereof.
(ii) Enter into any partnership, joint venture or similar
arrangement unless the amount invested therein is less than
$5,000,000 per year in the aggregate.
(m) Fiscal Year and Accounting Changes
Change its fiscal year from December 31 or make any change (i) in
accounting treatment and reporting practices except as required by
GAAP or (ii) in tax reporting treatment except as required by law.
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(n) Pledge of Credit
Now or hereafter pledge any Lender's credit on any purchases or for
any purposes whatsoever or use any portion of any Advance in or for
any business other than Obligor's business as conducted on the date of
this Agreement.
(o) Amendment of Certificate of Incorporation
Amend, modify or waive any material term or material provision of its
constitutional documents, the Senior Notes or the Second Senior Notes.
(p) Senior Notes
At any time, directly or indirectly, pay, prepay, repurchase, redeem,
retire or otherwise acquire, or make any payment on account of any
principal of, interest on or premium payable in connection with the
repayment or redemption of the Senior Notes, except that Radnor may
(i) pay all regularly scheduled payments of interest on the Senior
Notes so long as no Event of Default has occurred or would occur after
giving effect to such payment and (ii) repurchase Senior Notes so long
as after giving effect to such repurchase Undrawn Availability of
Radnor under the U.S. Credit Facility is not less than $15,000,000.
(q) Second Senior Notes
At any time, directly or indirectly, pay, prepay, repurchase, redeem,
retire or otherwise acquire, or make any payment on account of any
principal of, interest on or premium payable in connection with the
repayment or redemption of the Second Senior Notes, except that Radnor
may (i) pay all regularly scheduled payments of interest on the Second
Senior Notes so long as no Event of Default has occurred or would
occur after giving effect to such payment and (ii) repurchase Second
Senior Notes so long as after giving effect to such repurchase Undrawn
Availability of Radnor under the U.S. Credit Facility is not less than
$15,000,000.
(r) Prepayment of Indebtedness
At any time, directly or indirectly, prepay any Indebtedness (other
than to Agent and the Lenders), or repurchase, redeem, retire or
otherwise acquire any Indebtedness of Obligor, except Senior Notes and
Second Senior Notes in accordance with Section 7(q) and 7(p).
8. CONDITIONS PRECEDENT
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8.1 Conditions to Initial Advances
The agreement of Agent and each Lender hereunder is subject to the
satisfaction, or waiver by Required Lenders, immediately prior to or
concurrently with the making of the first Advance hereunder, of the
following conditions precedent:
(a) Security Documents
The Agent shall have received the Security Documents duly executed and
delivered by an authorised officer of each of StyroChem Finland and
Thermisol Finland and the U.S. Guarantors, respectively;
(b) Filings, Registrations and Recordings
Each document (including, without limitation, any Uniform Commercial
Code financing statement) required by this Agreement, the Security
Documents, any related agreement or under law or reasonably requested
by the Agent to be filed, registered or recorded in order to create,
in favour of Agent for its benefit and for the rateable benefit of the
Lenders, a perfected security interest in or lien upon the Security
Assets shall have been properly filed, registered or recorded in each
jurisdiction in which the filing, registration or recordation thereof
is so required or requested, and Agent shall have received an
acknowledgment copy, or other evidence satisfactory to it, of each
such filing, registration or recordation and satisfactory evidence of
the payment of any necessary fee, tax or expense relating thereto;
(c) Thermisol Sweden
Agent shall have received a certified copy of a notification from the
Swedish tax authorities exempting the Guarantee to be given by
Thermisol Sweden hereunder from any Swedish company law financial
assistance prohibitions.
(d) Proceedings of Obligors
Agent shall have received a copy of the resolutions in form and
substance reasonably satisfactory to Agent, of the Board of Directors
of Obligors, authorising (i) the execution, delivery and performance
of this Agreement, and in the case of StyroChem Finland, Thermisol
Finland and the U.S. Guarantors the Security Agreements, each Obligor,
any related agreements, the StyroChem Europe Acquisition Agreement,
and in the case of Obligor party thereof, the Senior Notes, the Second
Senior Notes and all documents executed in connection therewith
(collectively the "Documents") and (ii) the granting by the relevant
Obligor of the security interests in and liens upon the Security
Assets in each case certified by the President or a duly authorised
officer of such Obligor on a date
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<PAGE>
not earlier than the Effective Date; and, such certificate shall state
that the resolutions thereby certified have not been amended,
modified, revoked or rescinded as of the date of such certificate;
(e) Incumbency Certificates of Obligors
Agent shall have received a certificate of the Secretary of each
Obligor, dated not earlier than the Effective Date, as to the
incumbency and signature of the officers of each Obligor executing
this Agreement, and in the case of StyroChem Finland and Thermisol
Finland and each U.S. Guarantor, the Security Documents, and
certificate or other documents to be delivered by it pursuant hereto,
together with evidence of the incumbency of such officer;
(f) Certificates
Agent shall have received a copy of the Articles or Certificate of
Incorporation or other constitutional documents, and all amendments to
the foregoing, certified by the Secretary of State (where applicable)
or by an authorised officer of each Obligor together with copies of
the by-laws and shareholders agreements of each Obligor, as
applicable, certified as accurate and complete by the general partner
if applicable, or an authorised officer of each Obligor or secretary
of each Obligor;
(g) Good Standing Certificates
In respect of each U.S. Guarantor, Agent shall have received good
standing certificates for such U.S. Guarantor dated not more than ten
(10) days prior to the Effective Date, issued by the Secretary of
State (where applicable) or by an appropriate officer of such U.S.
Guarantor or other appropriate official of such U.S. Guarantor's
jurisdiction of formation and each jurisdiction where the conduct of
such U.S. Guarantor's business activities or the ownership of its
properties necessitates qualification;
(h) Legal Opinions
Agent shall have received the executed legal opinions of Duane, Morris
& Heckscher in respect of each U.S. Guarantor and such other counsel
as may be required by the Lenders in form and substance satisfactory
to the Lenders which shall cover such matters incident to the
transactions contemplated by this Agreement, the StyroChem Europe
Acquisition Agreement, the Security Documents and related agreements
as Agent may reasonably require and the Obligors hereby authorise and
direct such counsel to deliver such opinions to Agent and the Lender;
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<PAGE>
(i) No Litigation
(A) No litigation, investigation or proceeding before or by any
arbitrator or Governmental Body shall be continuing or threatened
against any Obligor or against the officers or directors of any
Obligor (A) in connection with the Documents or any of the
transactions contemplated thereby and which, in the reasonable
opinion of the Agent, is deemed material or (B) which if
adversely determined, could, in the reasonable opinion of the
Agent, have a Material Adverse Effect on any Obligor; and
(B) no injunction, writ, restraining order or other order of any
nature materially adverse to any Obligor or the conduct of its
business or inconsistent with the due consummation of the
Transactions shall have been issued by any Governmental Body;
(j) Financial Condition Opinions
Agent shall have received, in respect of each U.S. Guarantor, an
executed Officers' Certificate in the form of Exhibit 8.1(j).
(k) Security Assets Examination
Agent shall have completed Security Assets examinations and received
appraisals as shall be required by the Lenders with respect to the
Receivables, Inventory and General Intangibles subject to the Security
Documents the results of which shall be satisfactory in form and
substance to the Agent;
(l) Pro Forma Financial Statements
Agent and Lenders shall have received a copy of the Pro Forma
Financial Statements which shall be satisfactory in all respects to
Lenders;
(m) Other Documents
Agent and Lenders shall have received final executed copies of the
StyroChem Europe Acquisition Agreement, the Second Senior Notes and
the Second Indenture and all related agreements, documents and
instruments as in effect on the Effective Date all of which shall be
in form and substance satisfactory to Agent and Lenders and shall
provide, among other things, for such indemnifications and consents as
Agent or any Lender deems reasonably necessary and the transactions
contemplated by such documentation shall be consummated concurrently
with the making of the initial Advance hereunder;
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<PAGE>
(n) Consents
Agent shall have received any and all Consents necessary to permit the
effectuation of the transactions contemplated by this Agreement and
the Other Documents; and, Agent shall have received such Consents and
waivers of such third parties as might assert claims with respect to
the Security Assets, as Agent and its counsel shall deem necessary;
(o) No Material Adverse Change
(i) since 30th June, 1997 (a) no material adverse change shall have
occurred in the condition, financial or otherwise, operations,
properties or prospects of any Obligor, (b) no material damage or
destruction shall have occurred to any of the Security Assets and no
material depreciation in the value thereof, (c) no material adverse
deviation shall have occurred from the forecasts and projections
previously delivered to Agent and (d) no event, condition or state of
facts which could reasonably be expected to have a Material Adverse
Effect on any Obligor shall have occurred and (ii) no representations
made or information supplied to Agent or the Lenders shall have been
proven to be inaccurate or misleading in any material respect;
(p) Contract Review
Agent shall have reviewed all material contracts of each Obligor
including, without limitation, leases, union contracts, labour
contracts, vendor supply contracts, license agreements and
distributorship agreements and such contracts and agreements shall be
satisfactory in all respect to Agent;
(q) Closing Certificate
Agent shall have received closing certificate signed by the Chief
Financial Officer of each Obligor dated as of the date hereof, stating
that (i) all representations and warranties made by each as set forth
in this Agreement and the Other Documents are true and correct on and
as of such date, (ii) the Obligors are on such date in compliance with
all the terms and provisions set forth in this Agreement and the Other
Documents and (iii) on such date no Default or Event of Default has
occurred or is continuing;
(r) Borrowing Base
Agent and Lenders shall have received evidence from the Obligors that
the aggregate amount of Eligible Receivables and Eligible Inventory is
sufficient in value and amount to support Advances in the amount
requested by an Obligor on
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<PAGE>
the Effective Date and, so that after giving effect to the initial
Advances hereunder, the Obligors shall have Undrawn Availability of at
least $5,000,000;
(s) Agreements
Agent and Lenders shall have received copies of all agreements
evidencing the obligations of any Obligor with respect to its
Indebtedness for borrowed money, which agreements shall be in form and
substance satisfactory to Agent and shall set forth the conditions on
which (i) such Obligor may make and the holder(s) of such indebtedness
may receive payments with respect thereto and (ii) the holder(s) of
such indebtedness may accelerate such obligations, commence any action
against or otherwise exercise any rights or enforce any remedies
against such Obligor, which conditions shall be satisfactory in form
and substance to Agent in its discretion.
(t) StyroChem Europe Acquisition Agreement
Agent and Lenders shall have received evidence satisfactory to them
that Borrowers (other than StyroChem Europe) have acquired all of the
assets pursuant to the StyroChem Europe Acquisition Agreement in
accordance with all applicable laws and that such assets are free and
clear of all Liens other than Permitted Encumbrances.
(u) U.S. Credit Facility
Evidence satisfactory to Agent that the U.S. Credit Facility has been
duly authorised, executed and delivered to BNY Financial Corporation
and BNY Financial Corporation shall have advised Agent that it has
received all conditions preceding to closing.
(v) Other Documents
Agent shall have received the executed Other Documents (other than
those already delivered under (a) and (u) above, each in form and
substance satisfactory to Lenders.
(w) Insurance
Agent shall have received in form and substance satisfactory to Agent,
certified copies of each Obligor's casualty insurance policies
evidencing coverage on all Security Assets in such amounts, with such
carriers and covering such risks as is acceptable to Agent, together
with loss payable endorsements on Agent's standard form of loss payee
endorsement naming Agent as loss payee, and certified copies
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<PAGE>
of each Obligor's liability insurance policies, together with
endorsements naming Agent as an additional or co-insured.
8.2 Conditions to Each Advance
The agreement of Lenders to make any Advance requested to be made on any
date (including, without limitation, the initial Advance), is subject to
the satisfaction of the following conditions precedent as of the date such
Advance is made:
(a) Representations and Warranties. Each of the representations and
warranties made by Obligor in or pursuant to this Agreement, the Other
Documents and any related agreements to which it is a party, and each
of the representations and warranties contained in any certificate,
document or financial or other statement furnished at any time under
or in connection with this Agreement, the Other Documents or any
related agreement shall be true and correct in all material respects
on and as of such date as if made on and as of such date except as
such representations and warranties are modified in a manner
consistent with this Agreement and the Other Documents;
(b) No Default. No Event of Default or Default shall have occurred and be
continuing on such date, or would exist after giving effect to the
Advances requested to be made, on such date and, in the case of the
initial Advance, after giving effect to the consummation of the
transactions contemplated by the StyroChem Europe Acquisition
Agreement and the Senior Notes; provided, however that Lenders in
their sole discretion, may continue to make Advances notwithstanding
the existence of an Event of Default or Default and that any Advances
so made shall not be deemed a waiver of any such Event of Default or
Default; and
(c) Maximum Advances. In the case of any Advances requested to be made
after giving effect thereto, the aggregate Advances shall not exceed
the maximum Advances permitted under Section 2.1 hereof.
Each request for an Advance by any Borrower hereunder shall constitute a
representation and warranty by each Obligor as of the date of such Advance
that the conditions contained in this subsection shall have been satisfied.
9. INFORMATION
Each Obligor shall, until satisfaction in full of the Obligations and the
termination of this Agreement:
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(a) Disclosure of Material Matters
Immediately upon learning thereof, report to Agent all matters
materially affecting the value, enforceability or collectability of
any portion of the Security Assets including, without limitation, any
Obligor's reclamation or repossession of, or the return to any Obligor
of, a material amount of goods or claims or disputes asserted by any
Customer or other obligor.
(b) Schedules
Deliver to Agent, and if requested, the Lenders, on or before the
fifteenth (15th) day of each month as and for the prior month (a)
accounts receivable ageings, (b) accounts payable schedules and (c)
Inventory reports for each Borrower; provided, if Undrawn Availability
is less than $4,000,000 with respect to all Borrowers, Borrowers shall
provide Agent with daily reports of sales, collections, credits
issued, debits or other adjustments made by any Borrower with respect
to Receivables. In addition, each Borrower will deliver to Agent at
such intervals as Agent may require: (i) confirmatory assignment
schedules, (ii) copies of Customer's invoices, (iii) evidence of
shipment or delivery, and (iv) such further schedules, documents
and/or information regarding the Security Assets as Agent may required
including, without limitation, trial balances and test verifications.
Agent shall have the right to confirm and verify all Receivables by
any manner and through any medium it considers advisable and do
whatever it may deem reasonably necessary to protect its interests
hereunder. The items to be provided under this Section are to be in
form satisfactory to Agent and executed by each Borrower and delivered
to Agent from time to time solely for Agent's convenience in
maintaining records of the Security Assets, and any Borrower's failure
to deliver any of such items to Agent shall not affect, terminate,
modify or otherwise limit Agent's Lien with respect to the Security
Assets.
(c) Litigation
Promptly notify Agent and Lenders in writing of any litigation, suit
or administrative proceeding affecting any Obligor, whether or not the
claim is covered by insurance, and of any suit or administrative
proceeding, which may have a Material Adverse Effect on any Obligor.
(d) Material Occurrences
Promptly notify Agent and Lenders in writing upon the occurrence of
(a) any Event of Default or Default; (b) any event of default or (c)
any event which with the giving of notice or lapse of time, or both,
would constitute an event of default under the Senior Notes; (d) any
event, development or circumstance whereby any financial statements or
other reports furnished to Agent or any Lender fail in any
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material respect to present daily, in accordance with GAAP
consistently applied, the financial condition or operating results of
any Obligor as of the date of such statements; (e) and in respect of
each U.S. Guarantor any accumulated retirement plan funding deficiency
which, if such deficiency continued for two plan years and was not
corrected as provided in Section 4971 of the Internal Revenue Code
applicable to it, could subject any Obligor to a tax imposed by
Section 4971 of the Internal Revenue Code and in respect of any
Borrower, any similar deficiency with respect to such Borrower under
applicable law; (f) each and every default by any Obligor which might
result in the acceleration of the maturity of any Indebtedness,
including the names and addresses of the holders of such Indebtedness
with respect to which there is a default existing or with respect to
which the maturity has been or could be accelerated, and the amount of
such Indebtedness; and (g) any other development in the business or
affairs of any Obligor which might reasonably be expected to be
materially adverse; in each case describing the nature thereof and the
action such Obligor proposes to take with respect thereto.
(e) Government Receivables
Notify Agent immediately if any of the Receivables arise out of
contracts between any Obligor and the United States or any other
government or nation other than the United States, any state, or any
department, agency or instrumentality of any of them.
(f) Annual Financial Statements
Furnish Agent and the Lenders within ninety (90) days after the end of
each fiscal year of each Obligors, financial statements of Radnor on a
Consolidated Basis as well as a consolidating basis including, but not
limited to, statements of income and stockholders' equity and cash
flow from the beginning of the current fiscal year to the end of such
fiscal year and the balance sheet as at the end of such fiscal year,
all prepared in accordance with GAAP applied on a basis consistent
with prior practices, and in reasonable detail and reported upon
without qualification by an independent certified public accounting
firm selected by Radnor and satisfactory to Agent (the "Accountants").
The report of such accounting firm shall be accompanied by a statement
of such accounting firm certifying that (i) they have caused this
Agreement to be reviewed, (ii) in making the examination upon which
such report was based either no information came to their attention
which to their knowledge constituted an Event of Default or a Default
under this Agreement or any related agreement or, if such information
came to their attention, specifying any such Default or Event of
Default, its nature, when it occurred and whether it is continuing,
and such report shall contain or have appended thereto calculations
which set forth Obligors' compliance with the requirements or
restrictions imposed by Sections 6.5, 6.6,
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6.7, 6.8, 6.9, 7.6 and 7.11 hereof. In addition, the reports shall be
accompanied by a certificate of each Obligor's Chief Financial Officer
which shall state that, based on an examination sufficient to permit
him to make an informed statement, no Default or Event of Default
exists, or, if such is not the case, specifying such Default or Event
of Default, its nature, when it occurred, whether it is continuing and
the steps being taken by such Obligor with respect to such event and,
such certificate shall have appended thereto calculations which set
forth Radnor's compliance with the requirements or restrictions
imposed by Section 6.5, 6.6, 6.7, 6.8, 6.9, 7.6 and 7.11 hereof.
(g) Quarterly Financial Statements
Furnish Agent and Lenders within 30 days after the end of each fiscal
quarter, an unaudited balance sheet of Radnor on a Consolidated Basis
and unaudited statements of income and stockholders' equity and cash
flow reflecting results of operations from the beginning of the fiscal
year to the end of such quarter and for such quarter, prepared on a
basis consistent with prior practices and complete and correct in all
material respects, subject to normal year end adjustments. The
reports shall be accompanied by a certificate of Radnor's Chief
Financial Officer which will state that, based on an examination
sufficient to permit him to make an informed statement, no Default or
Event of Default exists, or, if such is not the case, specifying such
Default or Event of Default, its nature, when it occurred, whether it
is continuing and the steps being taken by such Obligor with respect
to such event and, such certificate shall have appended thereto
calculations which set forth Radnor's compliance with the requirements
or restrictions imposed by Sections 6.5, 6.6, 6.7, 6.8, 6.9, 7.6 and
7.11 hereof.
(h) Monthly Financial Statements
Furnish agent and Lenders within thirty (30) days after the end of
each month, an unaudited balance sheet of Radnor on a Consolidated
Basis as well as a consolidating basis and unaudited statements of
income and stockholders' equity and cash flow reflecting results of
operations from the beginning of the fiscal year to the end of such
month and for such month, prepared on a basis consistent with prior
practices and complete and correct in all material respects, subject
to normal year end adjustments. The reports shall be accompanied by a
certificate of Radnor's Chief Financial Officer which shall state
that, based on an examination sufficient to permit him to make an
informed statement, no Default or Event of Default exists, or, if such
is not the case, specifying such Default or Event of Default, its
nature, when it occurred, whether it is continuing and the steps being
taken by Radnor with respect to such event and, such certificate shall
have appended thereto calculations which set forth Radnor's compliance
with the requirements or restrictions imposed by Sections 6.5, 6.6,
6.7, 6.8, 6.9, 7.6 and 7.11 hereof.
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(i) Other Reports
Furnish Agent and Lenders as soon as possible, but in any event within
ten (10) days after the issuance thereof, (i) with copies of such
financial statements, reports and returns as Radnor shall send to its
shareholders and (ii) copies of all notices sent pursuant to the
Senior Notes.
(j) Additional Information
Furnish Agent and Lenders with such additional information as Agent
and Lenders shall reasonably request in order to enable Agent and
Lenders to determine whether the terms, covenants, provisions and
conditions of this Agreement have been complied with by the Obligors
including, without limitation and without the necessity of any request
by Agent or any Lender, (a) copies of all environmental audits and
reviews, (b) at least thirty (30) days prior thereto, notice of any
Obligor's opening of any new office or place of business or any
Obligor's closing of any existing office or place of business, and (c)
promptly upon learning thereof, notice of any labour dispute to which
any Obligor may become a party, any strikes or walkouts relating to
any of its plants or other facilities, and the expiration of any
labour contract to which any Obligor is a party or by which any
Obligor is bound.
(k) Projected Operating Budget
Furnish Agent and Lenders, no later than (x) ninety (90) days
following the Effective Date and (y) thirty (30) days prior to the
beginning of each fiscal year commencing with fiscal year 1998, a
month by month projected operating budget and cash flow of Radnor on a
Consolidated Basis for such fiscal year (including an income statement
for each month and a balance sheet as at the end of the last month in
each fiscal quarter), such projections to be accompanied by a
certificate signed by Radnor's Chief Financial Officer to the effect
that such projections have been prepared on the basis of sound
financial planning practice consistent with past budgets and financial
statements and that such officer has no reason to question the
reasonableness of any material assumptions on which such projections
were prepared.
(l) Notice of Suits, Adverse Events
Furnish Agent and Lenders with prompt notice of (i) any lapse or other
termination of any Consent issued to any Obligors by any Governmental
Body or any other Person that is material to the operation of any
Obligor's business, (ii) any refusal by any Governmental Body or any
other Person to renew or extend any such Consent; and (iii) copies of
any periodic or special reports filed by any Obligor with any
Governmental Body or Person, if such reports indicate any
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material change in the business, operations, affairs or condition of
any Obligor, or if copies thereof are requested by Agent or any
Lender, and (iv) copies of any material notices and other
communications from any Governmental Body or Person which specifically
relate to any Obligor.
(m) ERISA Notices and Requests
Furnish Agent and Lenders with immediate written notice in the event
that (i) any Obligor or any member of the Controlled Group knows or
has reason to know that a Termination Event has occurred, together
with a written statement describing such Termination Event and the
action, if any, which Obligor or member of the Controlled Group has
taken, is taking, or proposes to take with respect thereto and, when
known, any action taken or threatened by the Internal Revenue Service,
Department of Labour or PBGC with respect thereto, (ii) Obligor, or
any member of the Controlled Group knows or has reason to know that a
prohibited transaction (as defined in Sections 406 of ERISA and 4975
of the Internal Revenue Code) has occurred together with a written
statement describing such transaction and the action which such
Obligor or any member of the Controlled Group has taken, is taking or
proposes to take with respect thereto, (iii) a funding waiver request
has been filed with respect to any Plan together with all
communications received by any Obligor, or any member of the
Controlled Group with respect to such request, (iv) any increase in
the benefits of any existing Plan or the establishment of any new Plan
or the commencement of contributions to any Plan to which such Obligor
or any member of the Controlled Group was not previously contributing
shall occur, (v) any Obligor or any member of the Controlled Group
shall receive from the PBGC a notice of intention to terminate a Plan
or to have a trustee appointed to administer a Plan, together with
copies of each such notice, (vi) any Obligor or any member of the
Controlled Group shall receive any favourable or unfavourable
determination letter from the Internal Revenue Service regarding the
qualification of a Plan under Section 401(a) of the Internal Revenue
Code, together with copies of such letter; (vii) any Obligor or any
member of the Controlled Group shall receive a notice regarding the
imposition of withdrawal liability, together with copies of each such
notice; (viii) any Obligor or any member of the Controlled Group shall
fail to make a required instalment or any other required payment under
Section 412 of the Internal Revenue Code on or before the due date for
such instalment or payment; (ix) any Obligor or any member of the
Controlled Group knows that (a) a Multiemployer Plan has been
terminated, (b) the administrator or plan sponsor of a Multiemployer
Plan intends to terminate a Multiemployer Plan, or (c) the PBGC has
instituted or will institute proceedings under Section 4042 of ERISA
to terminate a Multiemployer Plan.
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(n) Additional Documents
Execute and deliver to Agent, upon request, such documents and
agreements as Agent may, from time to time, reasonably request to
carry out the purposes, terms or conditions of this Agreement.
10. EVENTS OF DEFAULT
The occurrence of any one or more of the following events shall constitute
an "Event of Default":
(a) failure by any Obligor to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration
pursuant to the terms of this Agreement or any Other Document or by
notice of intention to prepay, or by required prepayment or failure to
pay any other liabilities or make any other payment, fee or charge
provided for herein or any Other Document when due;
(b) any representation or warranty made or deemed made by any Obligor in
this Agreement or any Other Documents or any related agreement or in
any certificate, document or financial or other statement furnished at
any time in connection herewith or therewith shall prove to have been
misleading in any material respect on the date when made or deemed to
have been made;
(c) failure by any Obligor to (i) furnish financial information when due
or when requested, or (ii) permit the inspection of its books or
records;
(d) issuance of a notice of Lien, levy, assessment, injunction or
attachment against a material portion of any Obligor's property;
(e) (i) a failure or neglect of any Obligor to perform, keep or observe
any term, provision, condition or covenant, contained in Sections
6.1., 6.2, 6.3 and 6.9 hereof which is not cured within thirty (30)
days from the occurrence of such failure or neglect; or (ii) failure
or neglect of any Obligor to perform, keep or observe any other term,
provision, condition, covenant herein contained, or contained in any
other agreement or arrangement, now or hereafter entered into between
any Obligor, Agent and the Lenders after expiration of all applicable
grace periods;
(f) any judgment in excess of $300,000 is rendered against any Obligor or
judgment liens filed against any Obligor of judgments in excess of
$1,000,000 in the aggregate are rendered against all Obligors for an
amount which within thirty (30) days of such rendering or filing is
not either satisfied, stayed or discharged of record;
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(g) any Obligor shall (i) apply for, consent to or suffer the appointment
of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial
part of its property, (ii) make a general assignment for the benefit
of creditors, (iii) commence a voluntary case under any state or
federal bankruptcy laws (as now or hereafter in effect); (iv) be
adjudicated a bankrupt or insolvent, (v) file a petition seeking to
take advantage of any other law providing for the relief of debtors,
(vi) acquiesce to, or fail to have dismissed, within forty five (45)
days, any petition filed against it in any involuntary case under such
bankruptcy laws, or (vii) take any action for the purpose of effecting
any of the foregoing;
(h) any Obligor shall admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its
present business;
(i) any Subsidiary of any Obligor, shall (i) apply for, consent to or
suffer the appointment of, or the taking of possession by, a receiver,
custodian, trustee, liquidator or similar fiduciary of itself or of
all or a substantial part of its property, (ii) admit in writing its
inability, or be generally unable, to pay its debts as they become due
or cease operations of its present business, (iii) make a general
assignment for the benefit of creditors, (iv) commence a voluntary
case under any state or federal bankruptcy laws (as now or hereafter
in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a
petition seeking to take advantage of any other law providing for the
relief of debtors, (vii) acquiesce to, or fail to have dismissed,
within forty five (45) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (viii) take any action
for the purpose of effecting any of the foregoing;
(j) any change in the condition or affairs (financial or otherwise) of any
Obligor which in Agent's opinion impairs the Security Assets or the
ability of any Obligor to perform its Obligations under this
Agreement;
(k) any Lien created hereunder or provided for hereby or under any related
agreement for any reason ceases to be or is not a valid and perfected
Lien having a first priority interest;
(l) an event of default has occurred and been declared under the Senior
Notes which default shall not have been cured or waived within any
applicable grace period;
(m) a default of the obligations of any Obligor under any other agreement
to which it is a party shall occur which materially adversely affects
its condition, affairs or prospects (financial or otherwise) which
default is not cured within any applicable grace period;
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(n) termination or breach of any guarantee or similar agreement executed
and delivered to Agent in connection with the Obligations of any
Obligor, or if any Guarantor attempts to terminate, challenges the
validity of, or its liability under, any such guarantee or similar
agreement;
(o) any Change of Ownership or Change of Control shall have occurred;
(p) any material provision of this Agreement shall, for any reason, cease
to be valid and binding on any Obligor, or Obligor shall so claim in
writing to Agent;
(q) (i) any Governmental Body shall (A) revoke, terminate, suspend or
adversely modify any license, permit, patent, trademark or tradename of
any Obligor, the continuation of which is material to the continuation
of any Obligor's business, or (B) commence proceedings to suspend,
revoke, terminate or adversely modify any such license, permit,
trademark, tradename or patent and such proceedings shall not be
dismissed or discharged within sixty (60) days, or (C) schedule or
conduct a hearing on the renewal of any license, permit, trademark,
tradename or patent necessary for the continuation of any Obligor's
business and the staff of such Governmental Body issues a report
recommending the termination, revocation, suspension or material,
adverse modification of such license, permit, trademark, tradename or
patent; (ii) any agreement which is necessary or material to the
operation of any Obligor's business shall be revoked or terminated and
not replaced by a substitute acceptable to Agent within thirty (30)
days after the date of such revocation or termination, and such
revocation or termination and non-replacement could reasonably be
expected to have a Material Adverse Effect on any Obligor;
(r) any portion of the Security Assets shall be seized or taken by a
Governmental Body or the title and rights of any Obligor shall have
become the subject matter of litigation which might, in the opinion of
Agent, upon final determination, result in impairment or loss of the
security provided by this Agreement or the Other Documents;
(s) the operations of any Obligor's manufacturing facilities are
interrupted at any time for more than fourteen (14) consecutive days,
or if any Obligor's manufacturing capacity is reduced by 25% as a
result of such an interruption of operations (other than permanent
interruptions resulting from planned closing of up to three (3) plants)
unless such Obligor shall (i) be entitled to receive for such period of
interruption, proceeds of business interruption insurance sufficient to
assure that its per diem cash needs during such period is at least
equal to its average per diem cash needs for the consecutive twelve
(12) month period immediately preceding the initial date of
interruption and (ii) receive such proceeds in the amount described in
clause (i) preceding not later than thirty (30) days following the
initial date of any such interruption; provided, however, that
notwithstanding the
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provisions of clauses (i) and (ii) of this section, an Event of Default
shall be deemed to have occurred if any Obligor shall be receiving the
proceeds of business interruption insurance for a period of thirty (30)
consecutive days.
(t) an event or condition specified in Section 7.16 or 9.15 hereof shall
occur or exist with respect to any Plan and, as a result of such event
or condition, together with all other such events or conditions, any
Obligor or any member of the Controlled Group shall incur, or in the
opinion of Lender be reasonably likely to incur, a liability to a Plan
or the PBGC (or both) which, in the reasonable judgment of the Required
Lenders, could have a Material Adverse Effect on any Obligor; or
(u) there shall occur any Event of Default (as defined under the U.S.
Credit Facility) under such Facility or the U.S. Credit Facility is
terminated for any reason by any party thereto or an event of default
howsoever described has occurred and been declared under any Security
Document which default shall not have been cured or waived within any
applicable grace period.
11. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT
11.1 Rights and Remedies
Upon the occurrence of (i) an Event of Default pursuant to Section 10.7 all
Obligations shall be immediately due and payable and this Agreement and the
obligation of Lenders to make Advances shall be deemed terminated; and,
(ii) any of the other Events of Default and at any time thereafter (such
default not having previously been cured), at the option of Required
Lenders all Obligations shall be immediately due and payable and the
Lenders shall have the right to terminate this Agreement and to terminate
the obligation of Lenders to make Advances. Upon the occurrence of any
Event of Default, Agent may, and at the direction of the Required Lenders
shall, exercise any and all other rights and remedies provided for herein,
including under the Uniform Commercial Code and at law or equity generally.
11.2 Agent's Discretion
Agent shall have the right in its sole discretion, but with the consent of
the Required Lenders to determine which rights, Liens, security interest or
remedies Agent may at any time pursue, relinquish, subordinate, or modify
or to take any other action with respect thereto and such determination
will not in any way modify or affect any of Agent's or Lenders' rights
hereunder.
11.3 Set-Off
In addition to any other rights which Agent or any Lender may have under
applicable law, upon the occurrence of an Event of Default hereunder, Agent
and such Lender shall
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have a right to apply any of Obligors' property held by Agent and such
Lender (including any cash deposit in any currency) to reduce the
Obligations.
11.4 Rights and Remedies not Exclusive
The enumeration of the foregoing rights and remedies is not intended to be
exhaustive and the exercise of any right or remedy shall not preclude the
exercise of any other right or remedies provided for herein or otherwise
provided by law, all of which shall be cumulative and not alternative.
11.5 Actions in Concert
Anything in this Agreement to the contrary notwithstanding, each Lender
hereby agrees with each other Lender that no Lender shall take any action
to protect or enforce its rights arising out of this Agreement (including,
without limitation, exercising any right of set-off) without first
obtaining the prior written consent of Agent and Required Lenders, it being
the intent of Lenders that any such action to protect or enforce rights
under this Agreement shall be taken in concert and at the direction or with
the consent of the Agent and the Required Lenders.
12. WAIVERS AND JUDICIAL PROCEEDINGS
12.1 Waiver of Notice
Each Obligor each hereby waives notice of non-payment of any of the
Receivables, demand, presentment, protest and notice thereof with respect
to any and all instruments, notice of acceptance hereof, notice of loans or
advances made, credit extended, Security Assets received or delivered, or
any other action taken in reliance hereon, and all other demands and
notices of any description, except such as are expressly provided for
herein.
12.2 Delay
No delay or omission on Agent's or any Lender's part in exercising any
right, remedy or option shall operate as a waiver of such or any other
right, remedy or option or of any default.
13. EFFECTIVE DATE AND TERMINATION
13.1 Term
This Agreement, which shall inure to the benefit of and shall be binding
upon the respective successors and permitted assigns of each Obligor, Agent
and each Lender, shall become effective on the date hereof and shall
continue in full force and effect until the last day of the Term unless
sooner terminated as herein provided.
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13.2 Termination
The termination of the Agreement shall not affect any of Obligor's, Agent's
or any Lender's rights, or any of the Obligations having their inception
prior to the effective date of such termination, and the provisions hereof
shall continue to be fully operative until all transactions entered into,
rights or interests created or Obligations have been fully disposed of,
concluded or liquidated. The security interests, Liens and rights granted
to Agent and the Lenders hereunder or under the Security Documents and the
financing statements filed hereunder shall continue in full force and
effect, notwithstanding the termination of this Agreement or the fact that
Obligor's account may from time to time be temporarily in a zero or credit
position, until all of the Obligations of the Obligors have been paid or
performed in full after the termination of this Agreement or the Obligors
have furnished Agent and the Lenders with an indemnification satisfactory
to Agent and the Lenders with respect thereto. Accordingly, each Obligor
where applicable waives any rights which it may have under Section 9-404(1)
of the Uniform Commercial Code to demand the filing of termination
statements with respect to the Security Assets, and Agent shall not be
required to send such UCC termination statements to the Obligors, or to
file them with any filing office, unless and until this Agreement shall
have been terminated in accordance with its terms and all Obligations paid
in full in immediately available funds.
14. REGARDING AGENT
14.1 Appointment
Each Lender hereby designates BNY Financial Limited to act as Agent for
such Lender under this Agreement and the Other Documents. Each Lender
hereby irrevocably authorises Agent to take such action on its behalf under
the provisions of this Agreement and the Other Documents and to exercise
such powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of Agent by the terms hereof and
thereof and such other powers as are reasonably incidental thereto and
Agent shall hold all Security Assets, payments of principal and interests,
fees (except the fees set forth in Sections 3.3(a)) and 3.4(b) charges and
collections (without giving effect to any collection days) received
pursuant to this Agreement, for the rateable benefit of Lenders. Agent may
perform any of its duties hereunder by or through its agents or employees.
As to any matters not expressly provided for by this Agreement Agent shall
not be required to exercise any discretion or take any action, but shall be
required to act or to refrain from acting (and shall be fully protected in
so acting or refraining from acting) upon the instructions of the Required
Lenders, and such instructions shall be binding; provided, however, that
Agent shall not be required to take any action which exposes Agent to
liability or which is contrary to this Agreement or the Other Documents or
applicable law unless Agent is furnished with an indemnification reasonably
satisfactory to Agent with respect thereto.
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14.2 Nature of Duties
Agent shall have no duties or responsibilities except those expressly set
forth in this Agreement and the Other Documents. Neither Agent nor any of
its officers, directors, employees or agents shall be (i) liable for any
action taken or omitted by them as such hereunder or in connection
herewith, unless caused by their gross negligence (but not mere negligence)
or wilful misconduct, or (ii) responsible in any manner for any recitals,
statements, representations or warranties made by any Obligor or any
officer thereof contained in this Agreement, or in any of the Other
Documents or in any certificate, report, statement or other document
referred to or provided for in, or received by Agent under or in connection
with, this Agreement or any of the Other Documents or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement, or any of the Other Documents or for any failure of any Obligor
to perform its respective obligations hereunder. Agent shall not be under
any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any of the Other Documents, or to inspect
the properties, books or records of any Obligor or, if applicable, general
partner of any Obligor. The duties of Agent as respects the Advances to
any Obligor shall be mechanical and administrative in nature; Agent shall
not have by reason of this Agreement a fiduciary relationship in respect of
any Lender; and nothing in this Agreement, expressed or implied, is
intended to or shall be construed as to impose upon Agent any obligations
in respect of this Agreement except as expressly set forth herein.
14.3 Lack of Reliance
Independently and without reliance upon Agent or any other Lender, each
Lender has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of each Obligor in
connection with the making and the continuance of the Advances hereunder
and the taking or not taking of any action in connection herewith, and (ii)
its own appraisal of the creditworthiness of the Obligors. Agent shall
have no duty or responsibility, either initially or on a continuing basis,
to provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before making of the Advances
or at any time or times thereafter except as shall be provided by an
Obligor pursuant to the terms hereof. Agent shall not be responsible to
any Lender for any recitals, statements, information, representations or
warranties herein or in any agreement, document, certificate or a statement
delivered in connection with or for the execution, effectiveness,
genuineness, validity, enforceability, collectability or sufficiency of
this Agreement or any Other Document, or of the financial condition of each
Obligor, or be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of
this Agreement, the Other Documents or the financial condition of each
Obligor, or the existence of any Event of Default or any Default.
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Agent may resign on sixty (60) days' written notice to each of Lenders and
the Obligors and upon such resignation, the Required Lenders will promptly
designate a successor Agent reasonably satisfactory to the Obligors.
Any such successor Agent shall succeed to the rights, powers and duties of
Agent, and the term "Agent" shall mean such successor agent effective upon
its appointment, and the former Agent's rights, powers and duties as Agent
shall be terminated, without any other or further act or deed on the part
of such former Agent. After any Agent's resignation as Agent, the
provisions of this Article XIV shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
14.4 Certain Rights of Agent
If Agent shall request instructions from Lenders with respect to any act or
action (including failure to act) in connection with this Agreement or any
Other Document, Agent shall be entitled to refrain from such act or taking
such action unless and until Agent shall have received instructions from
the Required Lenders; and Agent shall not incur liability to any Person by
reason of so refraining. Without limiting the foregoing, Lenders shall not
have any right of action whatsoever against Agent as a result of its acting
or refraining from acting hereunder in accordance with the instructions of
the Required Lenders.
14.5 Reliance
Agent shall be entitled to rely, and shall be fully protected in relying,
upon any note, writing, resolution, notice, statement, certificate, telex,
teletype or telecopier message, cablegram, order or other document or
telephone message believed by it to be genuine and correct and to have been
signed, sent or made by the proper person or entity, and, with respect to
all legal matters pertaining to this Agreement and the Other Documents and
its duties hereunder, upon advice of counsel selected by it. Agent may
employ agents and attorneys-in-fact and shall not be liable for the default
or misconduct of any such agents or attorneys-in-fact selected by Agent
with reasonable care.
14.6 Notice of Default
Agent shall not be deemed to have knowledge or notice of the occurrence of
any Default or Event of Default hereunder or under the Other Documents,
unless Agent has received notice from a Lender or any Obligor referring to
this Agreement or the Other Documents, describing such Default or Event of
Default and stating that such notice is a "notice of default." In the
event that Agent receives such a notice, Agent shall give notice thereof to
Lenders. Agent shall take such action with respect to such Default or
Event of Default as shall be directed by the Required Lenders; provided,
that, unless and until Agent shall have received such directions, Agent may
(but shall not be obligated to) take such action,
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or refrain from taking such action, with respect to such Default or Event
of Default as it shall deem advisable in the best interests of Lenders.
14.7 Indemnification
To the extent Agent is not reimbursed and indemnified by the Obligors,
each Lender will reimburse and indemnify Agent in proportion to its
respective portion of the Advances (or, if no Advances are outstanding,
according to its Commitment Percentage), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever
which may be imposed on, incurred by or asserted against Agent in
performing its duties hereunder, or in any way relating to or arising out
of this Agreement or any Other Document; provided that, Lenders shall not
be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from Agent's wilful misconduct or gross (not mere)
negligence.
14.8 Agent in its Individual Capacity
With respect to the obligation of Agent to lend under this Agreement, the
Advances made by it shall have the same rights and powers hereunder as any
other Lender and as if it were not performing the duties as Agent
specified herein; and the term "Lender" or any similar term shall, unless
the context clearly otherwise indicates, include Agent in its individual
capacity as a Lender. Agent may engage in business with Obligors as if it
were not performing the duties specified herein, and may accept fees and
other consideration from any the Obligor for services in connection with
this Agreement or otherwise without having to account for the same to
Lenders.
14.9 Delivery of Documents
To the extent Agent receives documents and information from any Obligor
pursuant to the terms of this Agreement, Agent will promptly furnish such
documents and information to Lenders.
14.10 Obligors' Undertaking to Agent
Without prejudice to their respective obligations to the Lenders under the
provisions of this Agreement, each Obligor hereby undertakes with Agent to
pay to Agent from time to time on demand all amounts from time to time due
and payable by it for the account of Agent or the Lenders or any of them
pursuant to this Agreement to the extent not already paid. Any payment
made pursuant to any such demand shall pro tanto satisfy the Obligors'
obligations to make payments for the account of the Lenders or the
relevant one or more of them pursuant to this Agreement.
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15. MISCELLANEOUS
15.1 Jurisdiction
(a) Submission
For the benefit of each of the Agent and the Lender, each Obligor
agrees that the courts of England have jurisdiction to settle any
disputes in connection with this Agreement and accordingly submits to
the jurisdiction of the English courts.
(b) Service of process
(i) Each Obligor undertakes to appoint an agent for service of
process relating to any proceedings before the English courts in
connection with this Agreement within 30 days from the date
hereof.
(ii) Without prejudice to any other mode of service, each Obligor:
(a) agrees that failure by a process agent to notify the Obligor
of the process will not invalidate the proceedings concerned;
and
(b) consents to the service of process relating to any such
proceedings by prepaid posting of a copy of this process to
its address for the time being applying under Section 15.6.
(c) Forum convenience and enforcement abroad
Each Obligor:
(i) waives objection to the English courts on grounds of inconvenient
forum or otherwise as regards proceedings in connection with this
Agreement.
(ii) agrees that a judgment or order of any English court in
connection with this Agreement is conclusive and binding on it
and may be enforced against it in the courts of any other
jurisdiction.
(d) Non-exclusivity
Nothing in this Section 15.1 limits the right of the Agent or any
Lender to bring proceedings against an Obligor in connection with this
Agreement:
(i) in any other court of competent jurisdiction; or
(ii) concurrently in more than one jurisdiction.
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(e) Governing Law
This Agreement is governed by English law.
15.2 Entire Understanding
(a) This Agreement and the documents executed concurrently herewith contain the
entire understanding between Obligors, Agent and each Lender and supersedes
all prior agreements and understandings, if any, relating to the subject
matter hereof. Any promises, representations, warranties or guarantees not
herein contained and hereinafter made shall have no force and effect unless
in writing, signed by each Obligor's, Agent's and each Lender's respective
officers. Neither this Agreement nor any portion or provisions hereof may
be changed, modified, amended, waived, supplemented, discharged, cancelled
or terminated orally or by any course of dealing, or in any manner other
than by an agreement in writing, signed by the party to be charged. Each
Obligor acknowledges that it has been advised by counsel in connection with
the execution of this Agreement and Other Documents and is not relying upon
oral representations or statements inconsistent with the terms and
provisions of this Agreement.
(b) The Required Lenders, Agent with the consent in writing of the Required
Lenders, and each Obligor may, subject to the provisions of this Section
15.2(b), from time to time enter into written supplemental agreements to
this Agreement or the Other Documents executed by Obligors, for the purpose
of adding or deleting any provisions or otherwise changing, varying or
waiving in any manner the rights of the Lenders, Agent or any Obligor
thereunder or the conditions, provisions or terms thereof or waiving any
Event of Default thereunder, but only to the extent specified in such
written agreements; provided, however, that no such supplemental agreement
shall, (x) amend Sections 6.5, 6.6, 6.7, 6.8 and 7.6 without the consent of
67% of the Lenders or (y) without the consent of all the Lenders:
(i) increase or decrease the Commitment Percentage of any Lender or the
Maximum Loan Amount or the Advance Rates.
(ii) extend the due date for any amount payable hereunder, or decrease the
rate of interest or reduce any fee payable by Obligors to Agent or
Lenders pursuant to this Agreement.
(iii) alter the definition of the term Required Lenders or alter, amend
or modify this Section 15.2(b).
(iv) release any Security Asset during any calendar year having an
aggregate value in excess of $100,000.
(v) change the rights and duties of Agent.
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Any such supplemental agreement shall apply equally to each of the Lenders
and shall be binding upon the Obligors, the Lenders and Agent and all
future holders of the Obligations. In the case of any waiver, the
Obligors, Agent and the Lenders shall be restored to their former positions
and rights, and any Event of Default waived shall be deemed to be cured and
not continuing, but no waiver of a specific Event of Default shall extend
to any subsequent Event of Default (whether or not the subsequent Event of
Default is the same as the Event of Default which was waived), or impair
any right consequent thereon.
15.3 Successors and Assigns; Participations; New Lenders
(a) This Agreement shall be binding upon and inure to the benefit of the
Obligors, Agent, each Lender and their respective successors and assigns,
except that no Obligor may assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of Agent
and Required Lenders.
(b) Each Obligor acknowledges that in the regular course of commercial banking
business one or more Lenders may at any time and from time to time sell
participating interests in the Advances to other financial institutions
(each such transferee or purchaser of a participating interest, a
"Transferee"). Each Transferee may exercise all rights of payment
(including without limitation rights of set-off) with respect to the
portion of such Advances held by it or other Obligations payable hereunder
as fully as if such Transferee were the direct holder thereof provided that
the Obligors shall not be required to pay to any Transferee more than the
amount which it would have been required to pay to the Lender which granted
an interest in its Advances or other Obligations payable hereunder to such
Transferee had such Lender retained such interest in the Advance hereunder
or other Obligations payable hereunder and in no event shall the Obligors
be required to pay any such amount arising from the same circumstances and
with respect to the same Advances or other Obligations payable hereunder to
both such Lender and such Transferee. Each Obligor hereby grants to any
Transferee a continuing security interest in any deposits, moneys or other
property actually or constructively held by such Transferee as security for
the Transferee's interest in the Advances.
(c) Any Lender may with the consent of Agent which shall not be unreasonably
withheld or delayed sell, assign or transfer all or any part of its rights
under this Agreement and the Other Documents to one or more additional
banks or financial institutions and one or more additional banks or
financial institutions may commit to make Advances hereunder (each a
"Purchasing Lender"), pursuant to a Commitment Transfer Supplement,
executed by a Purchasing Lender, the transferor Lender, and Agent and
delivered to Agent for recording provided no Purchasing Lender shall be
sold an aggregate commitment of less than $5,000,000. Upon such execution,
delivery, acceptance and recording, from and after the transfer effective
date determined pursuant to such Commitment Transfer Supplement, (i)
Purchasing Lender thereunder shall be a party hereto and, to the extent
provided in such Commitment Transfer Supplement, have the rights and
obligations of a
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Lender thereunder with a Commitment Percentage as set forth therein, and
(ii) the transferor Lender thereunder shall, to the extent provided in such
Commitment Transfer Supplement, be released from its obligations under this
Agreement, the Commitment Transfer Supplement creating a novation for that
purpose. Such Commitment Transfer Supplement shall be deemed to amend this
Agreement to the extent, and only to the extent, necessary to reflect the
addition of such Purchasing Lender and the resulting adjustment of the
Commitment Percentages arising from the purchase by such Purchasing Lender
of all or a portion of the rights and obligations of such transferor Lender
under this Agreement and the Other Documents. Each Obligor hereby consent
to the addition of such Purchasing Lender and the resulting adjustment of
the Commitment Percentages arising from the purchase by such Purchasing
Lender of all or a portion of the rights and obligations of such transferor
Lender under this Agreement and the Other Documents. Each Obligor shall
execute and deliver such further documents and do such further acts and
things in order to effectuate the foregoing.
(d) Agent shall maintain at its address a copy of each Commitment Transfer
Supplement delivered to it and a register (the "Register") for the
recordation of the names and addresses of the Advances owing to each Lender
from time to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and each Obligor, Agent and Lenders may treat
each Person whose name is recorded in the Register as the owner of the
Advance recorded therein for the purposes of this Agreement. The Register
shall be available for inspection by the Obligors, or any Lender at any
reasonable time and from time to time upon reasonable prior notice. Agent
shall receive a fee in the amount of $2500 payable by the applicable
Purchasing Lender upon the effective date of each transfer or assignment to
such Purchasing Lender.
(e) Each Obligor authorises each Lender to disclose to any Transferee or
Purchasing Lender and any prospective Transferee or Purchasing Lender any
and all financial information in such Lender's possession concerning the
Obligors which has been delivered to such Lender by or on behalf of any
Obligor pursuant to this Agreement or in connection with such Lender's
credit evaluation of Obligors.
15.4 Application of Payments
Agent shall have the continuing and exclusive right to apply or reverse and
re-apply any payment and any and all proceeds of Security Assets to any
portion of the Obligations. To the extent that any Obligor makes a payment
or Agent or any Lender receives any payment or proceeds of the Security
Assets for any Obligor's benefit, which are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be
repaid to a trustee, debtor in possession, receiver, custodian or any other
party under any bankruptcy law, common law or equitable cause, then, to
such extent, the Obligations or part thereof intended to be satisfied shall
be revived and continue as if such payment or proceeds had not been
received by Agent or such Lender.
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15.5 Indemnity
Each Obligor shall indemnify Agent and each Lender and their officers,
employees and agents from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind or nature whatsoever (including, without
limitation, fees and disbursements of counsel) which may be imposed on,
incurred by, or asserted against Agent or any Lender in any litigation,
proceeding or investigation instituted or conducted by any governmental
agency or instrumentality or any other Person with respect to any aspect
of, or any transaction contemplated by, or referred to in, or any matter
related to, this Agreement, whether or not Agent or any Lender is a party
thereto, except to the extent that any of the foregoing arises out of the
wilful misconduct or gross (not mere) misconduct of the party being
indemnified.
15.6 Notice
Any notice or request hereunder may be given to any Obligor or to Agent or
any Lender at their respective addresses set forth below or at such other
address as may hereafter be specified in a notice designated as a notice of
change of address under this Section. Any notice or request hereunder
shall be given by (a) hand delivery, (b) overnight courier, (c) registered
or certified mail, return receipt requested, (d) telex or telegram,
subsequently confirmed by registered or certified mail, or (e) telecopy to
the number set out below (or such other number as may hereafter be
specified in a notice designated as a notice of change of address) with
telephone communication to a duly authorised officer of the recipient
confirming its receipt as subsequently confirmed by registered or certified
mail. Any notice or other communication required or permitted pursuant to
this Agreement shall be deemed given (a) when personally delivered to any
officer of the party to whom it is addressed, (b) on the earlier of actual
receipt thereof or three (3) days following posting thereof by certified or
registered mail, postage prepaid, or (c) upon actual receipt thereof when
sent by a recognised overnight delivery service or (d) upon actual receipt
thereof when sent by telecopier to the number set forth below with
telephone communication confirming receipt and subsequently confirmed by
registered, certified or overnight mail to the address set forth below, in
each case addressed to each party at its address set forth below or at such
other address as has been furnished in writing by a party to the other by
like notice:
(i) If to Agent BNY Financial Limited
at: 2nd Floor,
Leo House,
Railway Approach
Wallington,
Surrey SM6 0DY
Attention: []
Telephone: 0181 240 5806
Telecopier: 0181 240 5801
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with a copy to: Allen & Overy
One New Change
London EC4M9QQ
Telephone: 44 171 330 3000
Telecopier: 44 171 330 9999
and
Hahn & Hessen LLP
350 Fifth Avenue
New York, New York 10118
Attention: Steven J. Seif, Esq.
Telephone: (212) 736-1000
Telecopier: (212) 594-7167
(ii) If to a Lender other than Agent, as specified on the signature
pages hereof;
(iii) If to an Obligor: c/o Radnor Holdings Corporation
Three Radnor Corporate Center
Suite 300
100 Matsonford Road
Radnor, Pennsylvania 19087
Attention: Michael T. Kennedy
Telephone: (610) 995-2568
Telecopier: (610) 995-2697
with a copies to Duane Morris & Heckscher
One Liberty Place
Philadelphia, Pennsylvania 19103
Attention: Stephen Teaford, Esq.
Telephone: (215) 979-1220
Telecopier: (215) 979-1020
15.7 Survival
The obligations of Obligors under Sections 2.2(e), 3.6, 3.7, 3.8, 14.7 and
15.5 shall survive termination of this Agreement and the Other Documents
and payment in full of the Obligations.
15.8 Severability
If any part of this Agreement is contrary to, prohibited by, or deemed
invalid under applicable laws or regulations, such provision shall be
inapplicable and deemed omitted
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to the extent so contrary, prohibited or invalid, but the remainder hereof
shall not be invalidated thereby and shall be given effect so far as
possible.
15.9 Expenses
All costs and expenses including, without limitation, reasonable
attorneys' fees and disbursements incurred by Agent, any Lender and Agent
on behalf of the Lenders (a) in all efforts made to enforce payment of any
Obligation or effect collection of any Security Asset, or (b) in
connection with the entering into, modification, amendment, administration
and enforcement of this Agreement or any consents or waivers hereunder and
all related agreements, documents and instruments or any change in the
currency of a country or the operation of Section 2.4(d), or (c) in
instituting, maintaining, preserving, enforcing and foreclosing on Agent's
security interest in or Lien on any of the Security Assets, whether
through judicial proceedings or otherwise, or (d) in defending or
prosecuting any actions or proceedings arising out of or relating to
Agent's or any Lender's transactions with any Obligor, or (e) in
connection with any advice given to Agent or any Lender with respect to
its rights and obligations under this Agreement and all related
agreements, may be charged to Obligors' accounts and shall be part of the
Obligations.
15.10 Injunctive Relief
Each Obligor recognises that, in the event any Obligor fails to perform,
observe or discharge any of its obligations or liabilities under this
Agreement, any remedy at law may prove to be inadequate relief to Agent
and the Lenders; therefore, Agent and each Lender, if Agent or such Lender
so requests, shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving that actual
damages are not an adequate remedy.
15.11 Consequential Damages
Neither Agent nor Lenders nor any agent or attorney for any of them shall
be liable to any Obligor for consequential damages arising from any breach
of contract, tort or other wrong relating to the establishment,
administration or collection of the Obligations.
15.12 Captions
The captions at various places in this Agreement are intended for
convenience only and do not constitute and shall not be interpreted as
part of this Agreement.
15.13 Counterparts; Telecopied Signatures
This Agreement may be executed in any number of and by different parties
hereto on separate counterparts, all of which, when so executed, shall be
deemed an original, but all
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such counterparts shall constitute one and the same agreement. Any
signature delivered by a party by facsimile transmission shall be deemed
to be an original signature hereto.
15.14 Construction
The parties acknowledge that each party and its counsel have reviewed this
Agreement and that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
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16. BORROWING AGENCY
16.1 Borrowing Agency Provisions
(a) Each Obligor hereby irrevocably designates Borrowing Agent to be its
attorney and agent and in such capacity to borrow, sign and endorse notes,
and execute and deliver all instruments, documents, writings and further
assurances now or hereafter required hereunder, on behalf of such Obligor
or Obligors, and hereby authorises Agent to pay over or credit all loan
proceeds hereunder in accordance with the request of Borrowing Agent.
(b) The handling of this credit facility as a co-borrowing facility with a
borrowing agent in the manner set forth in this Agreement is solely as an
accommodation to Obligors and at their request. Neither Agent nor any
Lender shall incur liability to Obligors as a result thereof. To induce
Agent and Lenders to do so in consideration thereof, each Obligor hereby
indemnifies Agent and each Lender and holds Agent and each Lender harmless
from and against any and all liabilities, expenses, losses, damages and
claims of damage or injury asserted against Agent or any Lender by any
Person arising from or incurred by reason of the handling of the financing
arrangements of Obligors as provided herein, reliance by Agent or any
Lender on any request or instruction from Borrowing Agent or any other
action taken by Agent or any Lender with respect to this Section 15.1
except due to wilful misconduct or gross (not mere) negligence by the
indemnified party.
(c) All Obligations shall be joint and several, and each Obligor shall make
payment upon the maturity of the Obligations by acceleration or otherwise,
and such obligation and liability on the part of each Obligor shall in no
way be affected by an extensions, renewals and forbearance granted to Agent
or any Lender to any Obligor, failure of Agent or any Lender to give any
Obligor notice of borrowing or any other notice, any failure of Agent or
any Lender to pursue or preserve its rights against any Obligor, the
release by Agent or any Lender of any Security Asset now or thereafter
acquired from any Obligor, and such agreement by each Obligor to pay upon
any notice issued pursuant thereto is unconditional and unaffected by prior
recourse by Agent or any Lender to the other Obligors or any Security Asset
for such Obligor's Obligations or the lack thereof.
16.2 Waiver of Subrogation
Each Obligor expressly waives any and all rights of subrogation,
reimbursement, indemnity, exoneration, contribution of any other claim
which such Obligor may now or hereafter have against the other Obligors or
other Person directly or contingently liable for the Obligations hereunder,
or against or with respect to the other Obligor's property (including,
without limitation, any property which is Security Asset for the
Obligations), arising from the existence or performance of this Agreement,
until termination of this Agreement and repayment in full of the
Obligations.
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Each of the parties has signed this Agreement as of the day and year first
above written.
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Signatories
As Borrowers and Guarantors
STYROCHEM EUROPE (NETHERLAND) B.V.
By: /s/ Michael T. Kennedy
Its:
Address
STYROCHEM FINLAND OY
By: /s/ Michael T. Kennedy
Its:
Address
THERMISOL DENMARK APS
By: /s/ Michael T. Kennedy
Its:
Address
THERMISOL FINLAND OY
By: /s/ Michael T. Kennedy
Its:
Address
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THERMISOL SWEDEN AB
By: /s/ Michael T. Kennedy
Its: President
Address
WINCUP HOLDINGS, INC.
By: /s/ Michael T. Kennedy
Its: President
Address
SP ACQUISITION CO.
By: /s/ Michael T. Kennedy
Its: President
Address
STYROCHEM INTERNATIONAL, INC.
By: /s/ Michael T. Kennedy
Its: President
Address
RADNOR HOLDINGS, INC.
By: /s/ Michael T. Kennedy
Its: President
Address
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As Lender and Agent
BNY FINANCIAL LIMITED
By: /s/ A.T.G. Hooper
Its: Credit Director
2nd Floor,
Leo House,
Railway Approach
Wallington,
Surrey M6 0DY
England
Commitment Percentage: 50%
As Lender
NATIONSBANK, N.A., as Lender
By: [SIGNATURE APPEARS HERE]
Its: Vice President
New Broad St. House
35 New Broad St.
London EC2MINH
Loans Administration Contact:
Nick Garrett
0171 282 6836 telephone
0171 282 6831 fax
Commitment Percentage: 50%
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Exhibit 8.1(j) Form of Officer's Certificate
OFFICER'S CERTIFICATE
The undersigned, Michael T. Kennedy, in his capacity as President of each of
WinCup Holdings, Inc. ("Holdings"), Radnor Holdings Corporation ("Radnor"), SP
Acquisition Co. ("SP"), and StyroChem International, Inc. ("StyroChem"), as
President of Holdings, the general partner of WinCup Holdings, L.P. ("LP"),
(Holdings, Radnor, SP, StyroChem and LP collectively "Borrowers") hereby gives
this Certificate to induce the Lenders and Agent (as such terms are hereafter
defined) to provide certain financial accommodations to Borrowers pursuant to
the terms of a Revolving Credit Agreement dated as of this date (as amended or
supplemented, the "Loan Agreement") by and among the Borrowers, BNY Financial
Limited ("BNY"), the financial institutions named therein and which hereafter
become a party thereto (BNY and such other financial institutions, collectively,
"Lenders") and BNY, as administrative agent for Lenders (BNY in such capacity,
"Agent"). All capitalized terms used herein which are not otherwise defined
hereunder shall have the meanings given to them in the Loan Agreement. The
undersigned hereby certifies to Agent and Lender that:
1. The representations and warranties contained in the Loan Agreement and the
Other Documents are true and correct on and as of this day.
2. Borrowers are in compliance with all of the terms and provisions set forth
in the Loan Agreement and the Other Documents.
3. No Default or Event of Default has occurred and is continuing.
IN WITNESS WHEREOF, the undersigned has executed and delivered this Certificate
the [ ] day of October, 1997.
-------------------------------
MICHAEL T. KENNEDY
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Exhibit 15.3
COMMITMENT TRANSFER SUPPLEMENT
COMMITMENT TRANSFER SUPPLEMENT, dated as of 16th October, 1997, among [ ]
(the "Transferor Lender"), [ ] ("Purchasing Lender"), and BNY
FINANCIAL LIMITED, as agent for the Lenders under the Revolving Credit Agreement
described below (in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, this Commitment Transfer Supplement is being executed and delivered in
accordance with Section 15.3 of the Revolving Credit Agreement dated as of 16th
October, 1997 between STYROCHEM EUROPE (THE NETHERLANDS) B.V. ("StyroChem
Europe"), STYROCHEM FINLAND OY ("StyroChem Finland"), THERMISOL DENMARK APS
("Thermisol Finland"), WINCUP HOLDINGS, L.P. ("WINCUP"), WINCUP HOLDINGS, INC.
("Holdings"), SP ACQUISITION CO. ("Acquisition"), STYROCHEM INTERNATIONAL, INC.
("StyroChem") and RADNOR HOLDINGS CORPORATION ("Radnor") (StryoChem Europe,
StyroChem Finland, Thermisol Denmark, Thermisol Sweden, Thermisol Finland,
WINCUP, Holdings, Acquisition, StyroChem and Radnor each an "Obligor" and
jointly and severally, the "Obligors"), BNY FINANCIAL LIMITED ("BNY"), each of
the other financial institutions, the "Lenders") and the Agent (as same may be
amended, supplemental or otherwise modified in accordance with the terms hereof,
the "Loan Agreement");
WHEREAS, Purchasing Lender wishes to become Lender party to the Loan Agreement;
and
WHEREAS, the Transferor Lender is selling and assigning to Purchasing Lender
rights, obligations and commitments under the Loan Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. All capitalised terms used herein which are not defined shall have the
meanings given to them in the Loan Agreement.
2. Upon receipt by the Agent of four counterparts of this Commitment Transfer
Supplement, to each of which is attached a fully completed Schedule I, and
each of which has been executed by the Transferor Lender and Agent, Agent
will transmit to Transferor Lender and Purchasing Lender a Transfer
Effective Notice, substantially in the form of Schedule II to this
Commitment Transfer Supplement (a "Transfer Effective Notice"). Such
Transfer Effective Notice shall set forth, inter alia, the date on which
the transfer effected by this Commitment Transfer Supplement shall become
effective (the "Transfer Effective Date"), which date shall not be earlier
than the first Business Day following the
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date such Transfer Effective Notice is received. From and after the
Transfer Effective Date, Purchasing Lender shall be a Lender party to the
Loan Agreement for all purposes thereof.
3. At or before 12:00 Noon (New York City time) on the Transfer Effective Date
Purchasing Lender shall pay to Transferor Lender, in immediately available
funds, an amount equal to the purchase price, as agreed between Transferor
Lender and such Purchasing Lender (the "Purchase Price"), of the portion of
the Advances being purchased by such Purchasing Lender (such Purchasing
Lender's "Purchased Percentage") of the outstanding Advances and other
amounts owing to the Transferor Lender of the Purchase Price from a
Purchasing Lender, Transferor Lender hereby irrevocably sells, assigns and
transfers to such Purchasing Lender, without recourse, representation or
warranty, and Purchasing Lender hereby irrevocably purchases, takes and
assumes from Transferor Lender, such Purchasing Lender's Purchased
Percentage of the Advances and other amounts owing to the Transferor Lender
under the Loan Agreement together with all instruments, documents and
collateral security pertaining thereto.
4. Transferor Lender has made arrangement with Purchasing Lender with respect
to (i) the portion, if any, to be paid, and the date or dates for payment,
by Transferor Lender to such Purchasing Lender of any fees heretofore
received by Transferor Lender pursuant to the Loan Agreement prior to the
Transfer Effective Date and (ii) the portion, if any, to be paid, and the
date or dates for payment, by such Purchasing Lender to Transferor Lender
of fees or interest received by such Purchasing Lender pursuant to the Loan
Agreement from and after the Transfer Effective Date.
5. (a) All principal payments that would otherwise be payable from and after
the Transfer Effective Date to or for the account of Transferor Lender
pursuant to the Loan Agreement shall, instead, be payable to or for
the account of Transferor Lender and Purchasing Lender, as the case
may be, in accordance with their respective interests a reflected in
this Commitment Transfer Supplement.
(b) All interest, fees and other amounts that would otherwise accrue for
the account of Transferor Lender from and after the Transfer Effective
Date pursuant to the Loan Agreement shall, instead, accrue for the
account of, and be payable to, Transferor Lender and Purchasing
Lender, as the case may be, in accordance with their respective
interests as reflected in this Commitment Transfer Supplement. In the
event that any amount of interest, fees or other amounts accruing
prior to the Transferor Lender and Purchasing Lender will make
appropriate arrangement for payment by Transferor Lender to such
Purchasing Lender of such amount upon receipt thereof from Borrowers.
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6. Concurrently with the execution and delivery hereof, Transferor Lender will
provide to Purchasing Lender conformed copies of the Loan Agreement and all
related documents delivered to Transferor Lender.
7. Each of the parties to this Commitment Transfer Supplement agrees that at
any time and from time to time upon the written request of any other party,
it will execute and deliver such further documents and do such further acts
and things as such other party may reasonably request in order to effect
the purposes of this Commitment Transfer Supplement.
8. By executing and delivering this Commitment Transfer Supplement, Transferor
Lender and Purchasing Lender confirm to and agree with each other and Agent
and Lenders as follows:
(i) other than the representation and warranty that it is the legal and
beneficial owner of the interest being assigned hereby free and
clear of any adverse claim, Transferor Lender makes no
representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or
in connection with the Loan Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the
Loan Agreement or any other instrument or document furnished
pursuant thereto;
(ii) Transferor Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Borrowers
or the performance or observance by Borrowers of any of their
Obligations under the Loan Agreement or any other instrument or
document furnished pursuant hereto;
(iii) Purchasing Lender confirms that is has received a copy of the Loan
Agreement, together with copies of such financial statements and
such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into this
Commitment Transfer Supplement;
(iv) Purchasing Lender will, independently and without reliance upon
Agent, Transferor Lender or any other Lenders and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking
action under the Loan Agreement;
(v) Purchasing Lender appoints and authorizes Agent to take such action
as agent on it behalf and to exercise such powers under the Loan
Agreement as are delegated to the Agent by the terms thereof;
(vi) Purchasing Lender agrees that it will perform all of its respective
obligations as set forth in the Loan Agreement to be performed by
each as a Lender; and
82
<PAGE>
(vii) Purchasing Lender represents and warrants to Transferor Lender,
Lenders, Agent and Borrower that it is either (x) entitled to the
benefits of an income tax treaty with the United States of America
that provides for an exemption from the United States withholding
tax on interest and other payments made by Borrowers under the Loan
Agreement and the Other Documents or (y) is engaged in trade or
business within the United States of America.
9. Schedule I hereto sets forth the revised Commitment Percentages of
Transferor Lender and the Commitment Percentage of Purchasing Lender as
well as administrative information with respect to Purchasing Lender.
10. This Commitment Transfer Supplement shall be governed by, and construed in
accordance with, the laws of the State of New York.
83
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Commitment Transfer
Supplement to be executed by their respective duly authorized officers on the
date set forth above.
-----------------------------------
as Transferor Lender
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
-----------------------------------
as Purchasing Lender
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
BNY FINANCIAL LIMITED
as Agent
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Consented to:
WINCUP HOLDINGS L.P.
By:
------------------------------------
Name:
Its:
WINCUP HOLDINGS, INC.
By:
------------------------------------
Name:
Its:
84
<PAGE>
SP ACQUISITION
By:
------------------------------------
Name:
Its:
STYROCHEM INTERNATIONAL, INC.
By:
------------------------------------
Name:
Its:
RADNOR HOLDINGS CORPORATION
By:
------------------------------------
Name:
Its:
STYROCHEM EUROPE (THE NETHERLANDS) B.V.
By:
------------------------------------
Name:
Its:
STYROCHEM FINLAND OY
By:
------------------------------------
Name:
Its:
THERMISOL DENMARK APS
By:
------------------------------------
Name:
Its:
85
<PAGE>
THERMISOL FINLAND OY
By:
------------------------------------
Name:
Its:
THERMISOL SWEDEN AB
By:
------------------------------------
Name:
Its:
86
<PAGE>
SCHEDULE I TO COMMITMENT TRANSFER SUPPLEMENT
LIST OF OFFICES, ADDRESSES FOR NOTICES AND COMMITMENT AMOUNTS
<TABLE>
<S> <C> <C>
[Transferor Lender] Revised Commitment Amount $
Revised Commitment Percentage:
[Purchasing Lender] Commitment Amount $
Commitment Percentage:
</TABLE>
Addresses for Notices
Attention:
Telephone:
Telecopier:
87
<PAGE>
SCHEDULE II TO COMMITMENT TRANSFER SUPPLEMENT
[Form of Transfer Effective Notice]
To: [ ], as Transferor Lender and
[ ], as Purchasing Lender:
The undersigned, as Agent under the Revolving Credit Agreement dated as of 16th
October, 1997 between each of the Obligors therein defined, BNY FINANCIAL
LIMITED ("BNY"), each of the other financial institutions named in or which
hereafter become a party to the Loan Agreement (BNY and such other hereafter
become a party to the Loan Agreement (BNY and such other financial institutions,
the "Lenders") and BNY as agent for the Lenders, acknowledges receipt of four
(4) executed counterparts of a completed Commitment Transfer Supplement in the
form attached hereto. [Note: Attach copy of Commitment Transfer Supplement.]
Terms defined in such Commitment Transfer Supplement are used herein as therein
defined.
Pursuant to such Commitment Transfer Supplement, you are advised that the
Transfer Effective Date will be [Insert date of Transfer Effective Notice].
BNY FINANCIAL LIMITED,
as Agent
By:
-----------------------------------
Title:
--------------------------------
ACCEPTED FOR RECORDATION
IN REGISTER:
88
<PAGE>
Schedule 5.2(b)
Subsidiaries
<TABLE>
<S> <C>
Name of Obligor: Radnor Holdings Corporation
Subsidiaries: WinCup Holdings, Inc., Benchmark Holdings, Inc., SP
Acquisition Co., Radnor Management, Inc., Radnor
Asset Management, Inc., Radnor Investments, Inc.,
Radnor Investment Advisors, Inc.
The sole subsidiary of Radnor Investments, Inc. is
Radnor Investments II, Inc.
Radnor Investment Advisors, Inc. is the general partner
of Radnor Investment Advisors, L.P., a Delaware limited
partnership.
Radnor Investment Advisors, L.P. is the general partner
of Radnor Investments, L.P. a Delaware limited
partnership.
Name of Obligor: WinCup Holdings, Inc.
Subsidiaries: WinCup Holdings, L.P. was dissolved and merged into
WinCup Holdings, Inc. in July 1997.
Name of Obligor: SP Acquisition Co.
Subsidiaries: StyroChem International, Inc., StyroChem International,
Ltd. (Quebec corporation), StyroChem Europe (the
Netherlands) B.V. (Netherlands corporation). The
subsidiaries of StyroChem Europe (the Netherlands)
B.V. are: StyroChem Finland Oy (Finnish Corporation),
Thermisol Denmark Aps (Netherlands Corporation),
Thermisol Finland Oy (Finnish Corporation), and
Thermisol Sweden AB (Swedish Corporation).
Name of Obligor: StyroChem International, Inc.
Subsidiaries: StyroChem FSC, Ltd. (Barbados corporation)
Name of Obligor: StyroChem Europe (the Netherlands) B.V.
Subsidiaries:
Name of Obligor: StyroChem Finland Oy
Subsidiaries: None
Name of Obligor: Thermisol Denmark Aps
Subsidiaries: None
</TABLE>
89
<PAGE>
<TABLE>
<S> <C>
Name of Obligor: Thermisol Sweden AB
Subsidiaries: None
Name of Obligor: Thermisol Finland Oy
Subsidiaries: None
</TABLE>
90
<PAGE>
CONFORMED COPY
12th December, 1997
SUPPLEMENT REVOLVING MULTICURRENCY CREDIT AGREEMENT
BNY FINANCIAL LIMITED
NATIONSBANK N.A.
AS LENDERS
WITH
STYROCHEM EUROPE (THE NETHERLANDS) B.V.
STYROCHEM FINLAND OY
THERMISOL DENMARK APS
THERMISOL SWEDEN AB
THERMISOL FINLAND OY
AS BORROWERS
GUARANTEED BY INTER ALIA
WINCUP HOLDINGS, INC.
RADNOR CHEMICAL CORPORATION
STYROCHEM U.S., INC.
RADNOR HOLDINGS CORPORATION
WITH
BNY FINANCIAL LIMITED
AS AGENT
ALLEN & OVERY
London
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
Clause Page
<S> <C>
1. Definitions...........................................................
2. Advances, Payments..................................................11
3. Interest And Fees...................................................19
4. Cross-Guarantee.....................................................22
5. Representations And Warranties......................................26
6. Affirmative Covenants...............................................30
7. Negative Covenants..................................................34
8. Conditions Precedent................................................37
9. Information.........................................................42
10. Events Of Default...................................................44
11. Lenders' Rights And Remedies After Default..........................47
12. Waivers And Judicial Proceedings....................................48
13. Effective Date And Termination......................................48
14. Regarding Agent.....................................................49
15. Miscellaneous.......................................................52
16. Borrowing Agency....................................................59
AError! Bookmark not defined.
Annex 1 Commitment Transfer Supplement..................................63
Schedule I to Commitment Transfer Supplement.......................69
Schedule II to Commitment Transfer Supplement......................70
Annex 2 Subsidiaries....................................................71
</TABLE>
<PAGE>
B3:112290.1
- --------------------------------------------------------------------------------
THIS AGREEMENT is dated as of 12th December, 1997 between:
(1) STYROCHEM EUROPE (THE NETHERLANDS), B.V., STYROCHEM FINLAND OY, THERMISOL
DENMARK APS, THERMISOL FINLAND OY and THERMISOL SWEDEN AB(in this capacity
each a "Borrower" and together the "Borrowers");
(2) WINCUP HOLDINGS, INC., RADNOR CHEMICAL CORPORATION, STYROCHEM U.S. INC.,
RADNOR HOLDINGS CORPORATION, (each a "U.S. Guarantor" and together the
"U.S. Guarantors") STYROCHEM EUROPE (THE NETHERLANDS) B.V., STYROCHEM
FINLAND OY, THERMISOL FINLAND OY and THERMISOL SWEDEN AB each a "European
Guarantor" and together the "European Guarantors");
(3) BNY FINANCIAL LIMITED and NATIONSBANK N.A. as lenders (in this capacity
each a "Lender" and together the "Lenders"); and
(4) BNY FINANCIAL LIMITED as administrative agent (in this capacity the
"Agent")
WHEREAS Wincup, Acquisition, StyroChem and Radnor have entered into the U.S.
Credit Facility (as defined below) and pursuant to which it is stipulated that
the parties hereto will enter into this Agreement which shall constitute a
supplement to the U.S. Credit Facility.
WHEREAS the parties hereto wish to terminate the credit agreements entered into
between them on 15th October, 1997 and 21st November, 1997 and replace the same
with this Agreement.
IT IS AGREED that the U.S. Credit Facility be supplemented as follows:
1. DEFINITIONS
1.1 Accounting Terms
As used in this Agreement or any certificate, report, note or other
document made or delivered pursuant to this Agreement, accounting terms
not defined in Section 1.2 or elsewhere in this Agreement and accounting
terms partly defined in Section 1.2 to the extent not defined, shall have
the respective meanings given to them under GAAP; provided, however,
whenever such accounting terms are used for the purposes of determining
compliance with financial covenants in this Agreement, such accounting
terms shall be defined in accordance with GAAP applied in preparation of
the audited financial statements of Radnor on a Consolidated Basis for
the fiscal period ended 31st December, 1996.
1.2 General Terms
For purposes of this Agreement terms defined in the U.S. Credit Facility
and exhibits and schedules referred to in the same shall have the same
meaning herein as therein and the following terms shall have the
following meanings:
"Acquisition" shall mean Radnor Chemical Corporation, a corporation
organised and existing under the laws of the State of Delaware.
"Advances" shall mean the principal amount of each borrowing by a
Borrower under this Agreement or the principal amount outstanding of that
borrowing.
<PAGE>
2
B3:112290.1
- --------------------------------------------------------------------------------
"Advance Rates" shall have the meaning set forth in Section 2.1(a)
hereof.
"Agent's Spot Rate of Exchange" shall mean the Agent's spot rate of
exchange for the purchase of the relevant Optional Currency in the London
foreign exchange market with Dollars (as supplied to it at its request by
the Reference Banks) at or about 11.00 a.m. (London time) on a particular
day.
"Applicable Margin" for any period shall be determined by the ratio of
Funded Indebtedness to EBITDA calculated for the most recent fiscal
quarter with respect to the four fiscal quarters then ended which shall
be subject to adjustment from time to time as set forth in Section 3.1.
The Applicable Margin with respect to each Advance provided in Section
3.1 and in respect of the Facility Fee provided for in Section 3.3
hereof, as the case may be, shall be the percentage set forth below as
corresponds to the applicable ratio set forth below:
<TABLE>
<CAPTION>
Funded Indebtedness to EBITDA Advance Facility Fee
<S> <C> <C>
Greater than 5.0 to 1.0 2.00% .50%
Greater than 4.1 to 1.0 1.75% .375%
But equal to or less than 5.0 to 1.0
Greater than 3.1 to 1.0 1.50% .25%
But equal to or less than 4.1 to 1.0
Greater than 2.1 to 1.0 1.25% .125%
But equal to or less than 3.1 to 1.0
Equal to or less than 2.1 to 1.0 1.00% .125%
</TABLE>
"Borrower" or "Borrowers" shall have the meaning set forth in the
preamble to this Agreement and shall include all permitted successors and
assigns of such Persons.
"Borrowing Agent" shall mean StyroChem Europe.
"Business Day" shall mean a day (other than a Saturday or a Sunday) on
which banks are open for business in (a) London and New York and (b) in
relation to a transaction involving an Optional Currency, the principal
financial centre of the country of the Optional Currency or if more than
one country, the country or countries designated by the Agent.
"Change of Control" shall mean (a) the occurrence of any event (whether
in one or more transactions) which results in a transfer of control of
any Borrower or U.S. Guarantor to a Person who is not an Original Owner
or an Affiliate of an Original Owner or (b) any merger or consolidation
of or with any Borrower or U.S. Guarantor or sale or transfer of all or
substantially all of the property or assets of any Borrower or U.S.
Guarantor with or to a Person that is not a Borrower or U.S. Guarantor
hereunder. For purposes of this definition, "control of Borrower or U.S.
Guarantor" shall mean the power, direct or indirect, (x) to vote 50% or
more of the securities having ordinary voting power for the election of
directors of any
<PAGE>
3
B3:112290.1
- -------------------------------------------------------------------------------
Borrower or U.S. Guarantor or (y) to direct or cause the direction of the
management and policies of a Borrower or U.S. Guarantor, by contract or
otherwise.
"Change of Ownership" shall mean (a) any transfer (whether in one or more
transactions) of ownership of 50% or more of the common stock of any
Borrower or U.S. Guarantor (including for the purposes of the calculation
of percentage ownership, any shares of common stock into which any
capital stock of any Borrower or U.S. Guarantor held by any Original
Owner is convertible or for which any such shares of the capital stock of
any Borrower or U.S. Guarantor or of any other Person may be exchanged
and any shares of common stock issuable to its Parent upon exercise of
any warrants, options or similar rights which may at the time of
calculation be held by such Original Owners) to a Person who is neither
(at the time of such transfer) an Original Owner nor an Affiliate of an
Original Owner or (b) any merger, consolidation or sale of substantially
all of the property or assets of any Borrower or U.S. Guarantor with or
to a Person that is not a Borrower or U.S. Guarantor hereunder.
"Charges" shall mean all taxes, charges, fees, imposts, levies or other
assessments, including, without limitation, all net income, gross income,
gross receipts, sales, use, ad valorem, value added, transfer, franchise,
profits, inventory, capital stock, licence, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp,
occupation and property taxes, custom duties, fees, assessments, liens,
claims and charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts, imposed by any
taxing or other authority, domestic or foreign, upon the Security Assets,
any Borrower.
"Commitment Percentage" of any Lender shall mean the percentage set forth
below such Lender's name on the signature page hereof as same may be
adjusted upon any assignment by a Lender pursuant to Section 15.3(b)
hereof.
"Commitment Transfer Supplement" shall mean a document in the form of
Annex 1 hereto, properly completed and otherwise in form and substance
satisfactory to Agent by which the Purchasing Lender purchases and
assumes a portion of the obligation of Lenders to make Advances under
this Agreement.
"Consents" shall mean all filings and all licenses, permits, consents,
approvals, authorisations, qualifications and orders of governmental
authorities and other third parties, domestic or foreign, necessary to
carry on Borrower or U.S. Guarantor's business, including, without
limitation, any Consents required under all applicable federal, state or
other applicable law.
"Contract Rate" shall mean, as applicable, the Revolving Interest Rate or
the Default Rate.
"Customer" shall mean and include the account debtor with respect to any
Receivable and/or the prospective purchaser of goods, services or both
with respect to any contract or contract right, and/or any party who
enters into or proposes to enter into any contract or other arrangement
with any Borrower, pursuant to which any Borrower is to deliver any
personal property or perform any services.
"Danish Krona" shall mean the lawful currency for the time being of
Denmark.
"Default" shall mean an event which, with the giving of notice or passage
of time or both, would constitute an Event of Default.
<PAGE>
4
B3:112290.1
- --------------------------------------------------------------------------------
"Default Rate" shall have the meaning set forth in Section 3.1 hereof.
"Deutschmarks" shall mean the lawful currency for the time being of
Germany.
"Documents" shall have the meaning set forth in Section 8.1(c) hereof.
"Dollars" and the sign "$" shall mean lawful currency of the United
States of America.
"Effective Date" shall mean the date hereof or such other date as may be
agreed to by the parties hereto.
"Eligible Inventory" shall mean and include Inventory excluding work in
process, with respect to each Borrower, valued at the lower of cost or
market value, determined on a first-in-first-out basis, which is not, in
Agent's opinion, obsolete, slow moving or unmerchantable and which Agent,
in its sole discretion, shall not deem ineligible Inventory, based on
such considerations as Agent may from time to time deem appropriate
including, without limitation, whether the Inventory is subject to a
perfected, first priority security interest in favour of Agent for the
rateable benefit of the Lenders and whether the Inventory conforms to all
standards imposed by any governmental agency, division or department
thereof which has regulatory authority over such goods or the use or sale
thereof.
"Eligible Receivables" shall mean and include, with respect to each
Borrower, each Receivable arising in the ordinary course of such
Borrower's business and which Agent, in its sole credit judgment, shall
deem to be an Eligible Receivable, based on such considerations as Agent
may from time to time deem appropriate. A Receivable shall not be deemed
eligible unless such Receivable is subject to Agent's first priority
perfected security interest for the rateable benefit of the Lenders and
no other Lien other than Permitted Encumbrances, and is evidenced by an
invoice, bill of lading or other documentary evidence satisfactory to
Agent. In addition, no Receivable shall be an Eligible Receivable if:
(a) it arises out of a sale made by any Borrower to an Affiliate of any
Borrower or to a Person controlled by an Affiliate of any Borrower;
(b) it is due or unpaid more than ninety (90) days after the original
invoice date;
(c) twenty-five per cent. (25%) or more of the Receivables from the
Customer are not deemed Eligible Receivables hereunder. Such
percentage may, in Agent's sole discretion, be increased or
decreased from time to time;
(d) any covenant, representation or warranty contained in this Agreement
with respect to such Receivable has been breached;
(e) the Customer shall (i) apply for, suffer, or consent to the
appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a
substantial part of its property or call a meeting of its creditors,
(ii) admit in writing its inability, or be generally unable, to pay
its debts as they become due or cease operations of its present
business, (iii) make a general assignment for the benefit of
creditors, (iv) commence a voluntary case under any state, federal
or other applicable
<PAGE>
5
B3:112290.1
- --------------------------------------------------------------------------------
bankruptcy laws (as now or hereafter in effect), (v) be adjudicated
a bankrupt or insolvent, (vi) file a petition seeking to take
advantage of any other law providing for the relief of debtors,
(vii) acquiesce to, or fail to have dismissed, any petition which is
filed against it in any involuntary case under such bankruptcy laws,
or (viii) take any action for the purpose of effecting any of the
foregoing;
(f) the sale to the Customer is on a bill-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment or any other
repurchase or return basis or is evidenced by chattel paper;
(g) Agent believes, in its sole judgment, that collection of such
Receivable is insecure or that such Receivable may not be paid by
reason of the Customer's financial inability to pay;
(h) the Customer is the United States of America or any government or
nation other than the United States of America, any state or any
department, agency or instrumentality of any of them, unless the
applicable Borrower effectuates an assignment of its right to
payment of such Receivable to Agent pursuant to the Assignment of
Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727 et seq.
and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise complied with
other applicable statutes or ordinances;
(i) the goods giving rise to such Receivable have not been shipped and
delivered to and accepted by the Customer or the services giving
rise to such Receivable have not been performed by the applicable
Borrower and accepted by the Customer or the Receivable otherwise
does not represent a final sale;
(j) the Receivables of the Customer exceed a credit limit determined by
Agent, in its sole discretion, to the extent such Receivable exceeds
such limit;
(k) the Receivable is subject to any offset, deduction, defence,
dispute, or counterclaim to the extent of such offset, deduction,
defence, dispute or counterclaim, the Customer is also a creditor or
supplier of a Borrower or the Receivable is contingent in any
respect or for any reason;
(l) the applicable Borrower has made any agreement with a Customer for
any deduction therefrom, except for discounts or allowances made in
the ordinary course of business for prompt payment, all of which
discounts or allowances are reflected in the calculation of the face
value of each respective invoice related thereto;
(m) shipment of the merchandise or the rendition of services has not
been completed;
(n) any return, rejection or repossession of the merchandise has
occurred;
(o) such Receivable is not payable to a Borrower; or
(p) such Receivable is not otherwise satisfactory to Agent as determined
in good faith by Agent in the exercise of its discretion in a
reasonable manner.
<PAGE>
6
B3:112290.1
- --------------------------------------------------------------------------------
"Equipment" shall mean and include as to each Borrower all of such
Borrower's goods (excluding Inventory) whether now owned or hereafter
acquired and wherever located including, without limitation, all
equipment, machinery, apparatus, motor vehicles, fittings,
furniture, furnishings, fixtures, parts, accessories and all replacements
and substitutions therefor or accessions thereto.
"Event of Default" shall mean the occurrence and continuance of any of
the events set forth in Article 10 hereof.
"Finnish Markka" shall mean the lawful currency for the time being of
Finland.
"Fixed Charge Coverage" for any period shall mean the ratio for any
period of (1) such period of EBITDA to (2) all Debt Payments plus (a) the
aggregate amount of capital expenditures actually made plus (b) the
aggregate amount of cash payments of taxes made.
"Formula Amount" shall have the meaning set forth in Section 2.1(a)
hereof.
"General Intangibles" shall mean and include as to each Borrower all of
such Borrower's general intangibles, whether now owned or hereafter
acquired including, without limitation, all choses in action, causes of
action, corporate or other business records, inventions, designs,
patents, patent applications, equipment formulations, manufacturing
procedures, quality control procedures, trademarks, service marks, trade
secrets, goodwill, copyrights, design rights, registrations, licences,
franchises, customer lists, tax refunds, tax refund claims, computer
programs, all claims under guaranties, security interests or other
security held by or granted to such Borrower to secure payment of any of
the Receivables by a Customer, all rights of indemnification and all
other intangible property of every kind and nature (other than
Receivables).
"Interest Period" shall mean the period provided for any Advance pursuant
to Section 2.2(b) or in the case of overdue interest pursuant to Section
3.1.
"Inventory" shall mean and include as to each Borrower all of such
Borrower's now owned or hereafter acquired goods, merchandise and other
personal property, wherever located, to be furnished under any contract
of service or held for sale or lease, all raw materials, work in process,
finished goods and materials and supplies of any kind, nature or
description which are or might be used or consumed in such Borrower's
business or used in selling or furnishing such goods, merchandise and
other personal property, and all documents of title or other documents
representing them.
"Inventory Advance Rate" shall mean such term as defined in Section 2.1.
"Lender" and "Lenders" shall have the meaning ascribed to such term in
the Preamble, each Purchasing Lender and shall include each person which
is a transferee, successor or assign of any Lender or any Purchasing
Lender.
"LIBOR" shall mean for any Advance for the then current Interest Period
relating thereto, the arithmetic mean rounded upwards if necessary to the
nearest one-sixteenth of one per cent. (1/16%) of rates per annum
supplied to the Agent, at its request, quoted by the Reference Banks at
or about 11.00 a.m. two (2) Business Days prior to the first day of such
Interest
<PAGE>
7
B3:112290.1
- --------------------------------------------------------------------------------
Period for the offering by the Reference Banks to prime commercial banks
in the London Interbank Euromarket of deposits in the currency of the
relevant Advance in immediately available funds for a period equal to
such Interest Period and in an amount equal to the amount of such
Advance.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien (whether statutory or otherwise),
Charge, claim or encumbrance, or preference, priority or other security
agreement or preferential arrangement held or asserted in respect of any
asset of any kind or nature whatsoever including, without limitation, any
conditional sale or other title retention agreement, any lease having
substantially the same economic effect as any of the foregoing, and the
filing of, or agreement to give, any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction.
"Material Adverse Effect" shall mean a material adverse effect on (a) the
condition, operations, assets, business or prospects of the applicable
Person or Persons, (b) the ability of any Borrower, European or U.S.
Guarantor to pay the Obligations in accordance with the terms thereof,
(c) the value of the Security Assets, the Liens on the Security Assets or
the priority of any such Lien, or (d) the practical realisation of the
benefits of Agent and Lenders' rights and remedies under this Agreement
and the Security Documents, all as determined by the Required Lenders in
the good faith exercise of their sole and absolute discretion.
"Maximum Loan Amount" shall mean $10,000,000.
"Norwegian Krone" shall mean the lawful currency for the time being of
Norway.
"Obligations" shall mean and include, with respect to each Borrower,
European and U.S. Guarantor, any and all of each such Borrower's,
European and U.S. Guarantor's Indebtedness and/or liabilities to Agent or
any of the Lenders or any corporation that directly or indirectly
controls or is controlled by or is under common control with any Lender
of every kind, nature and description, direct or indirect, secured or
unsecured, joint, several, joint and several, absolute or contingent, due
or to become due, now existing or hereafter arising, contractual or
tortious, liquidated or unliquidated under this Agreement or under any
Security Document and all obligations of each such Borrower, European and
U.S. Guarantors to Agent or the Lenders to perform acts or refrain from
taking any action under this Agreement or any Security Document.
"Optional Currencies" shall mean German Deutschmarks, Danish Krona,
Finnish Markka, Norwegian Krone or Swedish Krona.
"Original Dollar Amount" in relation to an Advance, means (a) if that
Advance is denominated in Dollars, the amount of that Advance, or (b) if
the Advance is denominated in an Optional Currency, the equivalent in
Dollars of the amount of that Advance at the Agent's Spot Rate of
Exchange two Business Days prior to its proposed day of borrowing.
"Payment Office" shall mean the office or bank in the principal financial
centre of the country of the relevant currency or, such other office of
Agent, if any, which it may designate by notice to Borrowing Agent and
each Lender to be the Payment Office.
<PAGE>
8
B3:112290.1
- --------------------------------------------------------------------------------
"Permitted Encumbrances" shall mean (a) Liens in favour of Agent for the
rateable benefit of the Lenders; (b) Liens for taxes, assessments or
other governmental charges not delinquent or being contested in good
faith and by appropriate proceedings and with respect to which proper
reserves have been taken by the Borrowers; provided, that, the Lien shall
have no effect on the priority of the Liens in favour of Agent for the
rateable benefit of the Lenders or the value of the assets in which Agent
has such a Lien and a stay of enforcement of any such Lien for the
rateable benefit of the Lenders shall be in effect; (c) Liens disclosed
in the financial statements referred to in Section 5(e); (d) deposits or
pledges to secure obligations under worker's compensation, social
security or similar laws, or under unemployment insurance; (e) deposits
or pledges to secure bids, tenders, contracts (other than contracts for
the payment of money), leases, statutory obligations, surety and appeal
bonds and other obligations of like nature arising in the ordinary course
of any Borrower's business; (f) judgment Liens that have been stayed or
bonded and mechanics', worker's, materialmen's or other like Liens
arising in the ordinary course of any Borrower's business with respect to
obligations which are not due or which are being contested in good faith
by the applicable Borrower; (g) Liens placed upon fixed assets hereafter
acquired to secure a portion of the purchase price thereof, provided that
(x) any such lien shall not encumber any other property of any Borrower
and (y) the aggregate amount of Indebtedness secured by such Liens
incurred as a result of such purchases during any fiscal year shall not
exceed the amount provided for in Section 7(f); and (h) Liens disclosed
on Schedule 1.2 of the U.S. Credit Facility.
"Pound Sterling" shall mean the lawful currency for the time being of
Great Britain.
"Pro Forma Balance Sheet" shall have the meaning set forth in Section
5(e)(i) hereof.
"Pro Forma Financial Statements" shall have the meaning set forth in
Section 5(e)(ii) hereof.
"Projections" shall have the meaning set forth in Section 5(e)(ii)
hereof.
"Purchasing Lender" shall have the meaning set forth in Section 15.3
hereof.
"Radnor" shall mean Radnor Holdings Corporation, a corporation organised
and existing under the laws of the State of Delaware.
"Radnor on a Consolidated Basis" shall mean the consolidation in
accordance with GAAP of the accounts or other items of Radnor and its
Subsidiaries.
"Receivables" shall mean and include as to each Borrower all of such
Borrower's accounts, contract rights, instruments (including those
evidencing indebtedness among Borrowers and its Affiliates), documents,
chattel paper, general intangibles relating to accounts, drafts and
acceptances, and all other forms of obligations owing to such Borrower
arising out of or in connection with the sale or lease of Inventory or
the rendition of services, all guarantees and other security therefor,
whether secured or unsecured, now existing or hereafter created, and
whether or not specifically sold or assigned to the Agent for the
rateable benefit of the Lenders hereunder.
"Receivables Advance Rate" shall have the meaning set forth in Section
2.1(a) hereof.
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"Reference Bank" shall mean the London offices of The Bank of New York,
Nationbank N.A. and Lloyds Bank PLC or such other bank as the Agent and
the Borrowing Agent may agree.
"Release" shall have the meaning set forth in Section 5.7(g)(iii) hereof.
"Reportable Event" shall mean a reportable event described in Section
4043(b) of ERISA or the regulations promulgated thereunder.
"Required Lenders" shall mean Lenders holding at least fifty one per
cent. (51%) of the Advances or if no Advances are outstanding, fifty one
per cent. (51%) of the Commitment Percentages.
"Revolving Interest Rate" shall mean an interest rate per annum equal to
(a) LIBOR plus (b) Applicable Margin.
"Security Assets" shall mean all the assets secured in favour of the
Agent and Lenders under the Security Documents.
"Security Documents" shall mean (a) the StyroChem Finland Security
Agreement and the Collateral Documents as defined therein and related
thereto, (b) the Thermisol Finland Security Agreement and the Collateral
Documents as defined therein and related thereto, and (c) any other
document designated as such by the Agent and the Borrowing Agent.
"StyroChem" shall mean StyroChem U.S., Inc., a corporation organised and
existing under the laws of the State of Texas.
"StyroChem Europe" shall mean StyroChem Europe and its Subsidiaries, (the
Netherlands) B.V., a Netherlands corporation.
"StyroChem Europe Acquisition Agreement" shall mean the Sale of Assets
Agreement among Radnor, StyroChem Finland, Thermisol Finland, Thermisol
Sweden, Thermisol Denmark, Neste Oy, Isora Oy, Neste Cellplast AB, and
Neste Thermisol A/S pursuant to which Radnor acquired, through StyroChem
Europe, all of the polystyrene and conversion operations of Neste Oy in
Finland, Sweden and Denmark.
"StyroChem Finland" shall mean StyroChem Finland Oy a corporation
organised under the laws of Finland.
"StyroChem Finland Security Agreement" shall mean the security agreement
entered or to be entered into by StyroChem Finland in favour of the Agent
pursuant to this Agreement.
"Swedish Krona" shall mean the lawful currency for the time being of
Sweden
"Term" shall mean the Effective Date through 15th October, 2002 or such
earlier date on which the Agent terminates this Agreement in accordance
with its terms.
"Thermisol Denmark" shall mean Thermisol Denmark ApS, a corporation
organised under the laws of Denmark.
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"Thermisol Finland" shall mean Thermisol Finland Oy a corporation
organised under the laws of Finland.
"Thermisol Finland Security Agreement" shall mean the security Agreement
entered or to be entered into by Thermisol Finland in favour of the Agent
pursuant to this Agreement.
"Thermisol Sweden" shall mean Thermisol Sweden AB, a corporation
organised under the laws of Sweden.
"Total Interest" for any period shall mean the accrued and unpaid
interest obligations of Radnor on a Consolidated Basis with respect to
its outstanding Indebtedness during such period.
"Transferee" shall have the meaning set forth in Section 15.3(b) hereof.
"Transactions" shall have the meaning set forth in Section 5(e) hereof.
"Undrawn Availability" at a particular date shall mean an amount equal to
(a) the lesser of (i) the Formula Amount or (ii) the Maximum Loan Amount,
minus (b) the sum of (i) the outstanding amount of Advances plus (ii) all
amounts due and owing to Borrowers' trade creditors which are outstanding
more than sixty (60) days past the due date therefor.
"U.S. Credit Facility" means the Second Amended and Restated Revolving
Credit and Security Agreement entered into between BNY Financial
Corporation as Agent or Lender and the U.S. Guarantors and others
pursuant to which the U.S. Lenders agree to fund loans to the U.S.
Guarantors up to an aggregate principal amount of U.S.$30,000,000.
"U.S. Guarantors" shall mean each of Wincup, Acquisition, StyroChem and
Radnor, together known as the "U.S. Guarantors".
"U.S. Lenders" means the Lenders as defined in the U.S. Credit Facility.
"Wincup" shall mean Wincup Holdings, Inc., a corporation organised under
the laws of the State of Delaware.
"Working Capital" at a particular date, shall mean the excess, if any, of
Current Assets over Current Liabilities at such date.
1.3 Certain Matters of Construction
The terms "herein", "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular
section, paragraph or subdivision. Any pronoun used shall be deemed to
cover all genders. Wherever appropriate in the context, terms used herein
in the singular also include the plural and vice versa. All references to
statutes and related regulations shall include any amendments of same and
any successor statutes and regulations. All references to any instruments
or agreements to which Agent is a party, including, without limitation,
references to any of the Security Documents or the US Credit Facility
shall include any and all modifications or amendments thereto and any and
all extensions or renewals thereof.
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2. ADVANCES, PAYMENTS
2.1 (a) Borrowing Base
Subject to the terms and conditions set forth in this Agreement, each
Lender, severally and not jointly, agrees to make Advances to the
Borrowers in accordance with the procedures provided for herein in an
aggregate amount outstanding at any time not greater than such
Lender's Commitment per cent of the lesser of (x) the Maximum Loan
Amount or (y) the sum of:
(i) up to 85%, subject to the provisions of Section 2.1(b) hereof
("Receivables Advance Rate"), of Eligible Receivables of
Borrowers determined by the Agent on the basis of the most
recent report provided to the Agent pursuant to Section
9(b)(a) hereunder on the date the Agent receives a notice of
borrowing under Section 2.2(a) hereunder, plus
(ii) the lesser of (x) $5,000,000 or (y) up to 60%, subject to the
provisions of Section 2.1(b) hereof ("Inventory Advance
Rate"), of Eligible Inventory of Borrowers determined by the
Agent on the basis of the most recent report provided to the
Agent pursuant to Section 9(b)(c) hereunder on the date the
Agent receives a notice of borrowing under Section 2.2(a)
hereunder (the Receivables Advance Rate and the Inventory
Advance Rate shall be referred to, collectively, as the
"Advance Rates"), minus
(iii) such reserves as Agent may, in a commercially reasonable
manner, reasonably deem proper and necessary.
The sum of the amounts (taken at their Original Dollar Amount) derived
from (x) the sum of Sections 2.1(a)(y)(i) plus 2.1(a)(y)(ii) minus (y)
the amount of Section 2.1(a)(y)(iii) at any time and from time to time
shall be referred to as the "Formula Amount".
(b) Discretionary Rights
The Advance Rates may be increased or with the consent of the Required
Lenders, decreased by Agent at any time and from time to time in the
exercise of its reasonable discretion. The Borrowers consent to any
such increases or decreases and acknowledge that decreasing the
Advance Rates or increasing the reserves may limit or restrict
Advances requested by any Borrower.
2.2 Procedure for Borrowing
(a) In the event any Borrower desires to obtain an Advance, it shall give
Agent, through the Borrowing Agent, at least three (3) Business Days' prior
written notice; specifying (i) the date of the proposed borrowing (which
shall be a Business Day), (ii) the Original Dollar Amount on the date of
such Advance to be borrowed, which amount shall be in a minimum of
$1,000,000 in the case of an Advance to be denominated in Finnish Markka
and $500,000 in the case of an Advance to be denominated in any other
currency, and (iii) the duration of the Interest Period
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therefor. Interest Periods shall be for one (1), two (2), three (3) or six
(6) months. There shall not be outstanding more than ten (10) Advances, in
the aggregate.
(b) Each Interest Period of an Advance shall commence on the date such Advance
is made and shall end on such date as a Borrower may elect in each notice
of borrowing referred to in (a) above provided that:
(i) any Interest Period which would otherwise end on a day which is
not a Business Day shall be the next preceding or succeeding
Business Day as is the Reference Bank's custom in the market to
which such Advance relates;
(ii) no Interest Period shall end after the last day of the Term; and
(iii) any Interest Period which begins on a day for which there is no
numerically corresponding day in the calendar month during which
such Interest Period is to end, shall (subject to Section
2.2(b)(i) above) end on the last day of such calendar month.
The Borrowing Agent shall elect each Interest Period applicable to an
Advance by its notice of borrowing given to Agent pursuant to Section
2.2(a).
(c) In the event that any prepayment of an Advance is required or permitted on
a date other than the last Business Day of the Interest Period with respect
thereto such Borrower shall indemnify Agent and Lenders therefor in
accordance with Section 2.2(d) hereof.
(d) Each Borrower shall indemnify Agent and Lenders and hold Agent and Lenders
harmless from and against any and all losses or expenses that Agent and any
Lender may sustain or incur as a consequence of any prepayment or any
default by any Borrower in the payment of the principal of or interest on
any Advance or failure by such Borrower to complete a borrowing of, a
prepayment of any Advance after notice thereof has been given, including
(but not limited to) any interest payable by Agent or any Lender to lenders
of funds obtained by it in order to make or maintain its Advances
hereunder.
(e) Notwithstanding any other provision hereof, if any applicable law, treaty,
regulation or directive, or any change therein or in the interpretation or
application thereof, shall make it unlawful for any Lender (for purposes of
this subsection (f), the term "Lender" shall include any Lender and the
office or branch where any Lender makes or maintains any Advance or any
corporation or bank controlling such Lender) to make or maintain its
participation in any Advance, the obligation of any Lender to participate
in such Advance hereunder shall forthwith be cancelled and the relevant
Borrower shall, if any affected Advance are then outstanding, promptly upon
request from Agent, repay all such affected Advance. If any such repayment
of any Advance is made on a day that is not the last day of an Interest
Period relative to such Advance , the relevant Borrower shall pay such
Lender, upon such Lender's request, such amount or amounts as may be
necessary to compensate such Lender for any loss or expense sustained or
incurred by such Lender in respect of such Advance as a result of such
repayment, including (but not limited to) any interest or other amounts
payable by such Lender to lenders of funds obtained by such Lender in order
to make or maintain such Advance. A certificate as to any additional
amounts payable pursuant to the foregoing sentence submitted by Agent to
Borrower shall be conclusive absent manifest error; provided, each Lender
shall use its reasonable efforts to minimise or avoid any such additional
payment.
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2.3 Disbursement of Advance Proceeds
All Advances shall be disbursed from whichever office or other place Agent
may designate from time to time and, together with any and all other
Obligations of Borrowers to Agent or any of the Lenders, shall be charged
to the applicable Borrower's account on Agent's books. During the Term,
Borrowers may use the Advances by borrowing, prepaying and reborrowing, all
in accordance with the terms and conditions hereof. The proceeds of each
Advance requested on behalf of any Borrower shall, with respect to
requested Advances to the extent the Lenders make such Advances, be made
available to such Borrower on the day so requested by way of credit to such
Borrower's operating account at the Bank, or such other bank as the
Borrowing Agent may designate following notification to Agent, in federal
funds or other immediately available funds or, with respect to Advances
deemed to have been requested, be disbursed to Agent to be applied to the
outstanding Obligations giving rise to such deemed request.
2.4 Optional Currencies
(a) Selection
(i) A Borrower shall, through the Borrowing Agent, select the currency
of an Advance in the relevant notice for borrowing.
(ii) The currency of each Advance must be Dollars or an Optional
Currency.
(iii) No Borrower may choose a currency if as a result the Advances
would be denominated at any one time in more than five currencies.
(iv) The Agent shall notify each Lender of the currency and the
Original Dollar Amount of each Advance and the applicable Agent's
Spot Rate of Exchange promptly after they are ascertained.
(b) Revocation of currency
If before 9.30 a.m. on any day falling two Business Days prior to the
commencement of an Interest Period relating to an Advance, the Agent
receives notice from a Lender that:
(i) it is impracticable for the Lender to fund its participation in
the relevant Advance in the relevant Optional Currency during its
Interest Period in the ordinary course of business in the London
interbank market; and/or
(ii) the use of the proposed Optional Currency might contravene any law
or regulation,
the Agent shall give notice to the relevant Borrower and to the
Lenders to that effect before 11.00 a.m. on that day. In this
event:
(i) the relevant Borrower and the Lender may agree that the drawdown
will not be made; or
(ii) in the absence of agreement:
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(1) that Lender's participation in the Advance (or, if more than
one Lender is similarly affected, those Lender's
participations in the Advance) shall be treated as a separate
Advance denominated in Dollars during the relevant Interest
Period;
(2) in the definition of "LIBOR" (insofar as it applies to that
Advance) in Section 1.1 (Definitions) there shall be
substituted for the time "11.00 a.m." the time "1.00 p.m.".
(c) Amount of Optional Currencies
(i) Drawdowns
If an Advance is to be drawn down in an Optional Currency, the
amount of each Lender's participation in that Advance will be
determined by converting into that Optional Currency the Lender's
participation in the Original Dollar Amount of that Advance on the
basis of the Agent's Spot Rate of Exchange two Business Days
before its date of borrowing.
(ii) Notification
The Agent shall notify the Lenders and the Borrower of Optional
Currency amounts (and the applicable Agent's Spot Rate of
Exchange) promptly after they are ascertained.
(d) Change of Currency
(i) If more than one currency or currency unit are at the same time
recognised by the central bank of any country as the lawful
currency of that country, then:
(1) any reference in this Agreement or any other Agreement to,
and any obligations arising under this Agreement or any other
Agreement in, the currency of that county shall be translated
into, or paid in, the currency or currency unit of that
country designated by the Agent; and
(2) any translation from one currency or currency unit to another
shall be at the official rate of exchange recognised by the
central bank for the conversion of that currency or currency
unit into the other, rounded up or down by the Agent acting
reasonably.
(ii) If a change in any currency of a country occurs, this Agreement
will and each other Agreement shall be deemed to be amended to the
extent the Agent (having consulted with the Lenders) specifies to
be necessary to reflect the change in currency and to put the
Lenders in the same position, so far as possible, that they would
have been in if no change in currency had occurred.
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2.5 Maximum Advances; Repayment of Excess Advances
The aggregate Original Dollar Amount balance of Advances outstanding at any
time to Borrowers shall not exceed the lesser of (a) Maximum Loan Amount or
(b) the Formula Amount.
2.6 Repayment of Advances
(a) Each Advance shall be due and payable in full on the last day of each
Interest Period relative thereto subject to earlier prepayment as herein
provided. Amounts repaid hereunder may be reborrowed subject to the terms
of this Agreement.
(b) Where the last date of an Interest Period for an outstanding Advance
coincides with the date on which a new Advance denominated in the same
currency is to be made, the Agent shall apply the new Advance in or towards
repayment of the outstanding Advance so that:
(i) where the amount of the outstanding Advance exceeds the amount of
the new Advance, such Borrower shall be required to repay only the
excess;
(ii) where the amount of the outstanding Advance is exactly the same as
the amount of the new Advance, such Borrower shall not be required
to make any payment; and
(iii) where the amount of the new Advance exceeds the outstanding
Advance, the excess shall be advanced to such Borrower,
PROVIDED ALWAYS THAT nothing in this paragraph (b) shall have the effect,
or be deemed to have the effect, of converting part or all of any Advance
into a term loan and PROVIDED FURTHER THAT the other provisions of this
Agreement (including, without limitation, the provisions of Section 8 are
complied with).
(c) Each Borrower shall repay the aggregate principal amount of all outstanding
Advances in any event by no later than the end of Term.
(d) All payments of principal, interest and other amounts payable hereunder, or
under any of the related agreements shall be made to Agent at the Payment
Office in the principal financial centre of the country of the relevant
currency on the due date therefor in lawful money of the country of the
relevant currency in immediately available funds to Agent.
(e) Borrowers shall pay principal, interest, and all other amounts payable
hereunder, or under any related agreement, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or
counterclaim.
2.7 Currency
(i) A repayment or prepayment of an Advance or any part of an Advance
is payable in the currency in which such Advance is denominated on
its due date.
(ii) Interest is payable in the currency in which the relevant amount
in respect of which it is payable is denominated.
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(iii) Amounts payable in respect of costs, expenses and taxes and the
like are payable in the currency in which they are incurred.
(iv) Any other amount payable under this Agreement is, except as
otherwise provided in this Agreement, payable in Dollars.
2.8 Statement of Account
Agent shall maintain, in accordance with its customary procedures, a loan
account in the name of each Borrower in which shall be recorded the date
and amount of each Advance made by Lenders and the date and amount of each
payment in respect thereof; provided, however, the failure by Agent to
record the date and amount of any Advance shall not adversely affect Agent
or any Lender. Each month, Agent shall send to Borrowing Agent a statement
showing the accounting for the Advances made, payments made or credited in
respect thereof, and other transactions between Lenders and each Borrower,
during such month. The monthly statements shall be deemed correct and
binding upon Borrowers in the absence of manifest error and shall
constitute an account stated between Lenders and Borrowers unless Agent
receives a written statement of a Borrower's specific exceptions thereto
within thirty (30) days after such statement is received by Borrowing
Agent. The records of Agent with respect to the loan account shall be
prima facie evidence of the amounts of Advances and other charges thereto
and of payments applicable thereto, absent manifest error.
2.9 Additional Payments
Any sums expended by Agent or any Lender due to any Borrower's failure to
perform or comply with its obligations under this Agreement or any Security
Document including, without limitation, any Borrower's obligations under
Section 6(a) hereof, may be charged to such Borrower's account as an
Advance and added to the Obligations, provided Agent shall promptly
thereafter provide to Borrowing Agent a copy of documentation supporting
such charges.
2.10 Manner of Borrowing and Payment
(a) Each borrowing of Advances shall be advanced according to the Commitment
Percentages of the Lenders.
(b) (i) Each payment (including each prepayment) by Borrowers on account
of the principal of and interest on the Advances, shall be applied
to the Advances pro rata according to the applicable Commitment
Percentages of the Lenders.
(c) If any amount owing by a Borrower, a European or U.S. Guarantor hereunder
to the Agent or any Lender (the "recovering Finance Party") is discharged
by payment, set-off or any other manner other than through the Agent in
accordance with Section 2.10 (a "recovery"), then:
(i) the recovering Finance Party shall, within three Business Days,
notify details of the recovery to the Agent;
(ii) the Agent shall determine whether the recovery is in excess of the
amount which the recovering Finance Party would have received had
the recovery been received by the Agent and distributed in
accordance with section 2.10(b);
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(iii) subject to Section 2.10(e), the recovering Finance Party shall
within three Business Days of demand by the Agent pay to the Agent
an amount (the "redistribution") equal to the excess;
(iv) the Agent shall treat the redistribution as if it were a payment
by the Borrower, European or U.S. Guarantor concerned under
Section 2 and shall pay the redistribution to the Lenders (other
than the recovering Finance Party) in accordance with section
2.10(b);
(v) after payment of the full redistribution, the recovering Finance
Party will be subrogated to the portion of the claims paid under
paragraph (iv) above and that Borrower, European or U.S. Guarantor
will owe the recovering Finance Party a debt which is equal to the
redistribution immediately payable and of the type originally
discharged.
(d) If under Section 2.10(c):
(i) a recovering Finance Party must subsequently return a recovery, or
an amount measured by reference to a recovery, to a Borrower,
European or U.S. Guarantor; and
(ii) the recovering Finance Party has paid a redistribution in relation
to that recovery,
each Lender shall, within three Business Days of demand by the recovering
Finance Party through the Agent, reimburse the recovering Finance Party all
or the appropriate portion of the redistribution paid to that Lender.
Thereupon, the subrogation in Section 2.6(c)(v) will operate in reverse to
the extent of the reimbursement.
(e) Notwithstanding Section 2.10(d) above:
(i) A recovering Finance Party need not pay a redistribution to the
extent that it would not, after the payment, have a valid claim
against the Borrower, European or U.S. Guarantor concerned in the
amount of the redistribution pursuant to Section 2.10(c)(v).
(ii) Where a recovering Finance Party has recovered an excess amount as
a consequence of the satisfaction or enforcement of a judgment
obtained in any legal action or proceedings to which it is a
party, Section 2.10(c) shall not apply so as to benefit any other
Lender which (being entitled so to do) did not join with the
recovering Finance Party in such action or proceedings unless the
recovering Finance Party did not give prior notice of its
involvement in such action or proceedings to the Agent for
disclosure to the other Lenders.
(f) Unless Agent shall have been notified by telephone, confirmed in writing,
by any Lender that such Lender will not make the amount which would
constitute its applicable Commitment Percentage of the Advances available
to Agent, Agent may (but shall not be obligated to) assume that such Lender
shall make such amount available to Agent and, in reliance upon such
assumption, make available to Borrowers a corresponding amount. Agent will
promptly notify Borrowing Agent of its receipt of any such notice from a
Lender. If such amount is made available to Agent on a date after the
relevant date of borrowing relative to such Advances,
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such Lender shall pay to Agent on demand an amount equal to its cost of
funds and any other transactional costs associated with movement of such
fund from and including such drawdown date to the date on which such amount
becomes immediately available to Agent. A certificate of Agent submitted to
any Lender with respect to any amounts owing under this paragraph (e) shall
be conclusive, in the absence of manifest error. If such amount is not in
fact made available to Agent by such Lender within three (3) Business Days
after the relevant date of borrowing, Agent shall be entitled to recover
such an amount, with interest thereon at the rate per annum reflecting the
Agent's cost of funds, on demand from Borrowers; provided, however, that
Agent's right to such recovery shall not prejudice or otherwise adversely
affect any Borrower's rights (if any) against such Lender.
(g) Notwithstanding anything to the contrary contained herein, in the event any
Lender (x) has refused (which refusal constitutes a breach by such Lender
of its obligations under this Agreement) to make available its Commitment
Percentage of any Advance or (y) notifies either Agent or Borrowers that it
does not intend to make available its Commitment Percentage of any Advance
(if the actual refusal would constitute a breach by such Lender of its
obligations under this Agreement) (each, a "Lender Default"), all rights
and obligations hereunder of such Lender (a "Defaulting Lender") as to
which a Lender Default is in effect and of the other parties hereto shall
be modified to the extent of the express provisions of this Section 2.10(g)
while such Lender Default remains in effect.
(i) Advances shall be allocated pro rata among Lenders (the "Non-
Defaulting Lenders") which are not Defaulting Lenders in
accordance with their respective Commitment Percentages, and no
Commitment Percentage of any Lender or any pro rata share of any
Advances required to be advanced by any Lender shall be increased
as a result of such Lender Default. Amounts received in respect of
principal of Advances shall be applied to reduce Advances of each
Lender pro rata based on the aggregate of the outstanding Advances
of all Lenders at the time of such application; provided that,
such amount shall not be applied to any Advances of a Defaulting
Lender at any time when, and to the extent that, the aggregate
amount of Advances of any Lender that is not a Defaulting Lender
exceeds such Lender's Commitment Percentage of all Advances then
outstanding.
(ii) A Defaulting Lender shall not be entitled to give instructions to
Agent or to approve, disapprove, consent to or vote on any matters
relating to this Agreement or the Security Documents. All
amendments, waivers and other modifications of this Agreement and
the Security Documents may be made without regard to a Defaulting
Lender and, solely for purposes of the definition of "Required
Lenders", a Defaulting Lender shall be deemed not to be a Lender
and not to have a participation in the Advances outstanding.
(iii) Other than as expressly set forth in this Section 2.10(f), the
rights and obligations of a Defaulting Lender (including the
obligation to indemnify Agent) and the other parties hereto shall
remain unchanged. Nothing in this Section 2.10(f) shall be deemed
to release any Defaulting Lender from its obligations under this
Agreement or the Security Documents, shall alter such obligations,
shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which any Borrower, Agent
or any Lender may have against any Defaulting Lender as a result
of any default by such Defaulting Lender hereunder.
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(iv) In the event a Defaulting Lender retroactively cures, to the
satisfaction of Agent, the breach which caused such Lender to
become a Defaulting Lender, such Defaulting Lender shall no longer
be a Defaulting Lender and shall be treated as a Lender under this
Agreement.
3. INTEREST AND FEES
3.1 Interest
(i) Interest on Advances shall be payable in arrears on the last day
of each Interest Period relating thereto and in the case of an
Interest Period in excess of three months' duration also on the
date following three months from the commencement of the Interest
Period. Interest charges shall be computed on the actual principal
of Advances outstanding during each Interest Period at a rate per
annum equal to the applicable Contract Rate.
(ii) Default Interest
(1) If a Borrower fails to pay an amount payable by it under this
Agreement, it shall forthwith on demand by the Agent pay
interest on the overdue amount from the due date up to the
date of actual payment, as well after as before judgment, at
a rate (the "Default Rate") determined by the Agent to be 2
per cent. per annum above the higher of:
(i) the rate on the overdue amount under Section 3.1
immediately before the due date (if of principal); and
(ii) the rate which would have been payable if the overdue
amount had, during the period of non-payment,
constituted an Advance in the currency of the overdue
amount for such successive Interest Periods of such
duration as the Agent may determine (each a "Designated
Interest Period").
(2) The Default Rate will be determined by the Agent on each
Business Day or the first day of, or two Business Days before
the first day of, the relevant Designated Interest Period, as
appropriate.
(3) If the Agent determines that deposits in the currency of the
overdue amount are not at the relevant time being made
available by the Reference Bank to leading banks in the
London interbank market, the default rate will be determined
by reference to the cost of funds to the Agent from whatever
sources it may select.
(4) Default interest will be compounded at the end of each
Designated Interest Period.
(iii) So long as no Default or Event of Default shall have occurred and
be continuing, the Applicable Margin shall be increased or
decreased, as the case may be, as of the first day of each month
following the fiscal quarter reported upon in the financial
statements delivered pursuant to Sections 9(g) and (h) hereof,
commencing with fiscal quarter ending 30th June, 1998, based upon
the ratio of Funded Indebtedness to EBITDA with
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B3:112290.1
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respect to the four (4) fiscal quarters then ended as reported
upon in the applicable financial statements.
3.2 Facility Fee
If, for any month during the Term, the average daily unpaid balance of the
Advances for each day of such month does not equal the Maximum Loan Amount,
then Borrowers shall pay to Agent for the rateable benefit of the Lenders a
fee at the rate of the Applicable Margin per annum multiplied by the amount
by which the Maximum Loan Amount exceeds such average daily unpaid balance.
Such fee shall be payable to Agent in arrears on the last day of each month
and on the last day of the Term. So long as no Default or Event of Default
shall have occurred and be continuing, the Applicable Margin with respect
to this facility fee shall be increased or decreased, as the case may be,
as of the first day of each month following the fiscal quarter reported
upon in the financial statements delivered pursuant to Sections 9(g) and
(h) hereof, commencing with fiscal quarter ending 30th June; 1998 based
upon the ratio of Funded Indebtedness to EBITA with respect to the four (4)
fiscal quarters then ended as reported upon in the applicable financial
statement.
3.3 Security Monitoring Fee
Borrowers shall pay to Agent (for the sole benefit of Agent) on the first
day of each month following any month in which Agent performs any security
monitoring - namely any field examination, security analysis or other
business analysis, the need for which is to be determined by Agent and
which monitoring is undertaken by Agent or for Agent's benefit - a security
monitoring fee in an amount equal to 500 Pound Sterling per day for each
person performing such monitoring, plus all costs and disbursements
incurred by Agent in the performance of such examination or analysis. In
addition, Borrowers agree to pay to Nations Bank, N.A. (for so long as it
is a Lender hereunder) such security monitoring fee on the same terms and
conditions set forth above with respect to one security monitoring field
examination per year.
3.4 Computation of Interest and Fees
Interest and fees hereunder shall be computed on the basis of a year of 360
days and for the actual number of days elapsed. If any payment to be made
hereunder becomes due and payable on a day other than a Business Day, the
due date thereof shall be extended to the next succeeding Business Day and
interest thereon shall be payable at the applicable Contract Rate during
such extension.
3.5 Maximum Charges
In no event whatsoever shall interest and other charges charged hereunder
exceed the highest rate permissible under law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. In
the event that a court determines that Agent or any Lender has received
interest and other charges hereunder in excess of the highest rate
permissible hereto, such excess amount shall be first applied to any unpaid
principal balance owed by Borrowers, and if the then remaining excess
amount is greater than the previously unpaid principal balance, the Lenders
shall promptly refund such excess amount to Borrowers and the provisions
hereof shall be deemed amended to provide for such permissible rate.
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21 B3:112290.1
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3.6 Increased Costs
In the event that any applicable law, treaty or governmental regulation, or
any change therein or in the interpretation or application thereof, or
compliance by any Lender (for purposes of this Section 3.6, the term
"Lender" shall include Agent or any Lender and any corporation or bank
controlling Agent or any Lender) and the office or branch where Agent or
any Lender (as so defined) makes or maintains any Advance with any request
or directive (whether or not having the force of law) from any central bank
or other financial, monetary or other authority, shall:
(i) subject Agent or any Lender to any tax of any kind whatsoever with
respect to this Agreement or any Advance or change the basis of
taxation of payments to Agent or any Lender of principal, fees,
interest or any other amount payable hereunder or under any Security
Documents (except for changes in the rate of tax on the overall net
income of Agent or any Lender by the jurisdiction in which it
maintains its principal office);
(ii) change the currency of a country, impose, modify or hold applicable
any reserve, special deposit, assessment or similar requirement
against assets held by, or deposits in or for the account of,
advances or loans by, or other credit extended by, any office of
Agent or any Lender, including (without limitation) pursuant to
Regulation D of the Board of Governors of the Federal Reserve
System; or
(iii) impose on Agent or any Lender or the London interbank currency
market any other condition with respect to this Agreement, any
Security Documents or any Advance;
and the result of any of the foregoing is to increase the cost to Agent or
Lender of making, renewing or maintaining its Advances hereunder by an
amount that Agent or such Lender deems to be material or to reduce the
amount of any payment (whether of principal, interest or otherwise) in
respect of any of the Advances by an amount that Agent or such Lender deems
to be material, then, in any case Borrowers shall promptly pay Agent or
such Lender, upon its demand, such additional amount as will compensate
Agent or such Lender for such additional cost or such reduction, as the
case may be, provided that the foregoing shall not apply to increased costs
which are reflected in the Interest Rate for any Interest Period. Agent or
such Lender shall certify the amount of such additional cost or reduced
amount to Borrowing Agent, and such certification shall be conclusive
absent manifest error.
3.7 Basis for Determining Interest Rate Inadequate or Unfair
In the event that Agent or any Lender shall have determined that:
(i) reasonable means do not exist for ascertaining the Interest Rate for
any Interest Period; or
(ii) deposits in the relevant currency and amount and for the relevant
maturity are not available in the London interbank Eurocurrency
market, with respect to an outstanding Advance or a proposed Advance
Loan;
then the Agent shall promptly notify the Borrowing Agent of the fact that
this Section 3.7 is in operation. After any notification under Section 3.7
the relevant Advance shall not be made.
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22 B3:112290.1
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However, within five Business Days of receipt of the notification, the
Borrowing Agent and the Agent shall enter into negotiations for a period of
not more than 30 days with a view to agreeing a substitute basis for
determining the rate of interest and/or funding applicable to that and (to
the extent required) any future Advance. Any substitute basis agreed shall
be, with the prior consent of all the Lenders, binding on all the parties
hereto.
3.8 Capital Adequacy
(i) In the event that Agent or any Lender shall have determined that any
applicable law, rule, regulation or guideline regarding capital adequacy,
or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or compliance by Agent or any Lender (for purposes of this Section
3.8, the term "Lender" shall include Agent or any Lender and any
corporation or bank controlling Agent or any Lender) and the office or
branch where Agent or any Lender (as so defined) makes or maintains any
Advance with any request or directive regarding capital adequacy (whether
or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of
return on Agent or any Lender's capital as a consequence of its obligations
hereunder to a level below that which Agent or such Lender could have
achieved but for such adoption, change or compliance (taking into
consideration Agent's and each Lender's policies with respect to capital
adequacy) by an amount deemed by Agent or any Lender to be material, then,
from time to time, Borrowers shall pay upon demand to Agent or such Lender
such additional amount or amounts as will compensate Agent or such Lender
for such reduction. In determining such amount or amounts, Agent or such
Lender may use any reasonable averaging or attribution methods. The
protection of this Section 3.8 shall be available to Agent and each Lender
regardless of any possible contention of invalidity or inapplicability with
respect to the applicable law, regulation or condition.
(ii) A certificate of Agent or such Lender setting forth such amount or amounts
as shall be necessary to compensate Agent or such Lender with respect to
Section 3.8(i) hereof when delivered to Borrowers shall be conclusive
absent manifest error.
4. CROSS-GUARANTEE
4.1 Cross Guarantee
(i) Each European Guarantor irrevocably and unconditionally, jointly and
severally:-
(a) as principal obligor guarantees to each of the Agent and each Lender
prompt performance by each Borrower of all its obligations under this
Agreement and the Security Documents;
(b) undertakes with each of the Agent and the Lender that whenever a
Borrower does not pay any amount when due under or in connection with
this Agreement and any Security Documents, that Guarantor shall
forthwith on demand by the Agent pay that amount as if that Guarantor
instead of the Borrower were expressed to be the principal obligor;
and
<PAGE>
23 B3:112290.1
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(c) indemnifies each of the Agent and the Lender on demand against any
loss or liability suffered by it if any obligation guaranteed by that
Guarantor is or becomes unenforceable, invalid or illegal.
(ii) Each U.S. Guarantor irrevocably and unconditionally, jointly and
severally:-
(a) as principal obligor guarantees, to each of the Agent and each Lender
prompt performance by each Borrower of all its obligations under this
Agreement and the Security Documents;
(b) undertakes with each of the Agent and the Lender that whenever a
Borrower does not pay any amount when due under or in connection with
this Agreement and any Security Documents, that Guarantor shall
forthwith on demand by the Agent pay that amount as if that Guarantor
instead of that Borrower were expressed to be the principal obligor;
and
(c) indemnifies each of the Agent and the Lender on demand against any
loss or liability suffered by it if any obligation guaranteed by that
U.S. Guarantor is or becomes unenforceable, invalid or illegal.
4.2 Continuing guarantee
This guarantee is a continuing guarantee and will extend to the ultimate
balance of all sums payable by the Borrowers under this Agreement and any
Security Documents regardless of any intermediate payment or discharge in
whole or in part.
4.3 Reinstatement
(a) Where any discharge (whether in respect of the obligations of any
Borrower or European or U.S. Guarantor or any security for those
obligations or otherwise) is made in whole or in part or any
arrangement is made on the faith of any payment, security or other
disposition which is avoided or must be restored on insolvency,
liquidation or otherwise without limitation, the liability of each
European and U.S. Guarantor under this Section 4 shall continue as if
the discharge or arrangement had not occurred.
(b) Each of the Agent and the Lenders may concede or compromise any claim
that any payment, security or other disposition is liable to avoidance
or restoration.
4.4 Waiver of defences
The obligations of each European and U.S. Guarantor under this Section 4
will not be affected by an act omission, matter or thing which, but for
this provision, would reduce, release or prejudice any of its obligations
under this Section 4 or prejudice or diminish those obligations in whole or
in part, including (whether or not known to it or any of the Agent or the
Lenders):
(a) any time or waiver granted to, or composition with, any Borrower,
European or U.S. Guarantor or any other person;
(b) the taking, variation, compromise, exchange, renewal or release of, or
refusal or neglect to perfect, take up or enforce, any rights against,
or security over assets of, any
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24 B3:112290.1
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Borrower, European or U.S. Guarantor or any other person or any non-
presentation or non-observance of any formality or other requirement
in respect of any instrument or any failure to realise the full value
of any security;
(c) any incapacity or lack of powers, authority or legal personality of or
dissolution or change in the members or status of any Borrower,
European or U.S. Guarantor or any other person;
(d) any variation (however fundamental) or replacement of this Agreement
or any Security Documents or security so that references to this
Agreement and any other Agreement in this Section 4 shall include each
variation or replacement;
(e) any unenforceability, illegality or invalidity of any obligation of
any person under this Agreement and any Security Documents or
security, to the intent that each European or U.S. Guarantor's
obligations under this Section 4 shall remain in full force and its
guarantee be construed accordingly, as if there were no
unenforceability, illegality or invalidity; or
(f) any postponement, discharge, reduction, non-probability or other
similar circumstance affecting any obligation of any Borrower,
European or US Guarantor under this Agreement and any Security
Documents resulting from any insolvency, liquidation or dissolution
proceedings or from any law, regulation or order so that each
obligation shall for the purposes of each European or U.S. Guarantor's
obligations under this Section 4 be construed as if there were no such
circumstance.
4.5 Immediate recourse
Each European and U.S. Guarantor waives any right it may have of first
requiring any of the Agent and the Lenders (or any trustee or agent on its
behalf) to proceed against or enforce any other rights or security or claim
payment from any person before claiming from that Guarantor under this
Section 4.
4.6 Appropriations
Until all amounts which may be or become payable by the Borrowers, European
and U.S. Guarantors under or in connection with this Agreement and any
Security Documents have been irrevocably paid in full, each of the Agent
and the Lenders (or any trustee or agent on its behalf) may:-
(a) refrain from applying or enforcing any other moneys, security or
rights held or received by the Agent or any Lender (or any trustee or
agent on its behalf) in respect of those amounts, or apply and enforce
the same in such manner and order as it sees fit (whether against
those amounts or otherwise) and no European or U.S. Guarantor shall be
entitled to the benefit of the same; and
(b) hold in a suspense account any moneys received from any European or
U.S. Guarantor or on account of a European or U.S. Guarantor's
liability under this Section 4, without liability to pay interest on
those moneys.
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25 B3:112290.1
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4.7 Non-competition
Until all amounts which may be or become payable by the Borrowers, European
and U.S. Guarantors under or in connection with this Agreement and any
Security Documents have been irrevocably paid in full, no European or U.S.
Guarantor shall, after a claim has been made or by virtue of any payment or
performance by it under this Section 4;
(a) be subrogated to any rights, security or moneys held, received or
receivable by the Agent or any Lender (or any trustee or agent on its
behalf) or be entitled to any right of contribution or indemnity in
respect of any payment made or moneys received on account of that
Guarantor's liability under this Section 4;
(b) claim, ranking, prove or vote as a creditor of any Borrower, European
or U.S. Guarantor or its estate in competition with the Agent or any
Lender (or any trustee or agent on its behalf); or
(c) receive, claim or have the benefit of any payment, distribution or
security from or on account of any Borrower, European or U.S.
Guarantor, or exercise any right of set-off as against any Borrower,
European or U.S. Guarantor.
Each European and U.S. Guarantor shall hold in trust for and forthwith pay
or transfer to the Agent for the Agent and the Lenders any payment or
distribution or benefit of security received by it contrary to this Section
4 as directed by the Agent.
4.8 Additional security
This guarantee is in addition to and is not in any way prejudiced by any
other security now or subsequently held by the Agent and the Lenders.
4.9 Thermisol Sweden
(a) Thermisol Sweden shall not, where the distribution restrictions in the
provisions of Chapter 12 Section 2 of the Swedish Companies Act
(Aktiebolagslagen (1975:1385) apply in relation to the guarantee given by
it hereunder, in each case taking into account the extent to which any
commercial benefit is derived by it in giving such guarantee, assume any
liability as a European Guarantor in respect of any indebtedness of any
Borrower owed or owing by such Borrower under or in connection with this
Agreement or the Security Documents to the extent that the obligations and
liabilities of Thermisol Sweden in respect thereof would exceed an amount
equal to the lesser of:
(i) the amount of distributable reserves according to its last audited and
adopted balance sheet as at the date hereof; and
(ii) an amount being available for distribution by it under Chapter 12
Section 2 second paragraph of the aforementioned Swedish Companies
Act.
(b) The provision of Section 4.9 (a) also applies to:
(i) any undertaking by Thermisol Sweden that is stated to be joint and
several in nature;
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26 B3:112290.1
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(ii) any indemnity given by Thermisol Sweden for the benefit of any other
Borrower or European Guarantor; and
(iii) any undertaking as a primary obligor of obligations not
corresponding to the benefit derived by the company.
5. REPRESENTATIONS AND WARRANTIES
Each Borrower, European and U.S. Guarantor represents and warrants to the
Agent and the Lenders as follows:
(a) Authority
It has full power, authority and legal right to enter into this
Agreement and, where relevant, the Security Documents and perform its
respective Obligations hereunder and thereunder. The execution,
delivery and performance hereof and of the Security Documents (a) are
within its respective corporate powers, have been duly authorised,
provided that with respect to Thermisol Sweden, it has complied with
its undertaking under Section 6 (n), are not in contravention of law
or the terms of any of it's by-laws, certificate of incorporation or
other applicable documents relating to the formation or conduct of its
respective business or of any material agreement or undertaking to
which it is a party or by which it is bound, and (b) will not conflict
with nor result in any breach in any of the provisions of or
constitute a default under or result in the creation of any Lien
except Permitted Encumbrances upon any of its respective assets under
the provisions of any agreement, charter document, instrument, by-law,
or other instrument to which it or its property is a party or by which
it may be bound.
(b) Formation and Qualification
(i) It is duly formed and in good standing under the laws of its
state of incorporation or formation. It has delivered to Agent
true and complete copies of its certificate of incorporation
and/or by-laws and each will promptly notify Agent of any
amendment or changes thereto.
(ii) The only Subsidiaries of Borrowers are listed on Annex 2.
(c) Survival of Representations and Warranties
All representations and warranties by it contained in this Agreement
and, where applicable, the Security Documents shall be true at the
time of the execution of this Agreement and where applicable the
Security Documents, and shall survive the execution, delivery and
acceptance thereof by the parties thereto and the closing of the
transactions described therein or related thereto.
(d) Tax Returns
Each Borrower has filed all applicable tax returns and other reports
it is required by law to file and has paid all taxes, assessments,
fees and other governmental charges that are due and payable. The
provision for taxes on the books of Borrowers are adequate for all
years not closed by applicable statutes, and for its current fiscal
year,
<PAGE>
27 B3:112290.1
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and no Borrower has any knowledge of any deficiency or additional
assessment in connection therewith not provided for on its books.
(e) Financial Statements
(i) The pro forma balance sheet of Radnor on a Consolidated Basis
(the "Pro Forma Balance Sheet") furnished to Agent and the
Lenders on the Effective Date reflects the consummation of the
transactions contemplated by the StyroChem Europe Acquisition
Agreement, the Second Indenture and under this Agreement (the
"Transactions") and are accurate, complete and correct and fairly
reflect in all material respects the financial condition of the
Radnor on a Consolidated Basis as of the Effective Date after
giving effect to the Transactions, and have been prepared in
accordance with GAAP, consistently applied. The Pro Forma
Balance Sheet has been certified as accurate, complete and
correct in all material respects by the Chief Financial Officer
of Radnor. All financial statements referred to in this Section
5(e)(i), including the related schedules and notes thereto, have
been prepared, in accordance with GAAP, except as may be
disclosed in such financial statements.
(ii) The twelve-month cash flow projections of Radnor on a
Consolidated Basis and their projected balance sheets as of the
Effective Date, copies of which have been previously submitted to
Agent and the Lenders (the "Projections") were prepared by the
Chief Financial Officer of Radnor, are based on underlying
assumptions which provide a reasonable basis for the projections
contained therein and reflect Radnor's judgment based on present
circumstances of the most likely set of conditions and course of
action for the projected period. The Projections together with
the Pro Forma Balance Sheet of Radnor on a Consolidated Basis,
are referred to as the "Pro Forma Financial Statements".
(f) Corporate Name
No Borrower has been known by any other corporate name in the past
five years and does not sell Inventory under any other name nor has
any Obligor been the surviving entity of a merger or consolidation or
acquired all or substantially all of the assets of any Person during
the preceding five (5) years, except for (i) the name of Foriplus Oy,
has been renamed StyroChem Finland, (ii) the name of Redifasti Oy,
which has been renamed Thermisol Finland Oy, (iii) the name of
Gigantissimo 2080 Aktiebolag, which has been renamed Thermisol Sweden
AB, (iv) ApSKBIL 17 nr. 1053, which has been renamed Thermisol Denmark
ApS, and will subsequently (subject to approval) be renamed Thermisol
Denmark A/S.
(g) Solvency; No Litigation, Violation, Indebtedness or Default
(i) After giving effect to the Transactions, it will be solvent, able
to pay its respective debts as they mature, have capital
sufficient to carry on its respective business and all businesses
in which it is about to engage, and (i) as of the Effective Date,
the fair present saleable value of its assets, calculated on a
going concern basis, is in excess of the amount of its
liabilities and (ii)
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28 B3:112290.1
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subsequent to the Effective Date, the fair saleable value of
its assets (calculated on a going concern basis) will be in
excess of the amount of its liabilities.
(ii) Except as disclosed in Schedule 5.8(b) of the U.S. Credit
Facility or the Pro Forma Financial Statements, it has no
pending or threatened litigation, arbitration, actions or
proceedings which involve the possibility of having a Material
Adverse Effect on it or on its ability to perform this
Agreement.
(iii) It is not in violation of any applicable statute, regulation or
ordinance in any respect which could have a Material Adverse
Effect on it and it is not in violation of any order of any
court, governmental authority or arbitration board or tribunal
which could have a Material Adverse Effect on it.
(h) Patents, Trademarks, Copyrights and Licenses
All patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, copyrights, copyright
applications, design rights, tradenames, assumed names, trade secrets
and licenses owned or utilised by any Borrower are set forth on
Schedule 5.9 of the U.S. Credit Facility, are valid and have been duly
registered or filed with all appropriate governmental authorities and
constitute all of the intellectual property rights which are necessary
for the operation of its business; there is no objection to or pending
challenge to the validity of any such material patent, trademark,
copyright, design rights tradename, trade secret or license and no
Borrower is aware of any grounds for any challenge. Each patent,
patent application, patent license, trademark, trademark application,
trademark license, service mark, service mark application, service
mark license, copyright, copyright application and copyright license
owned or held by any Borrower and all trade secrets used by any
Borrower consist of original material or property developed by such
Borrower or was lawfully acquired by such Borrower from the proper and
lawful owner thereof. Each of such items has been maintained so as to
preserve the value thereof from the date of creation or acquisition
thereof. With respect to all software used by any Borrower, such
Borrower is in possession of all source and object codes related to
each piece of software or is the beneficiary of a source code escrow
agreement, each such source code escrow agreement being listed on
Schedule 5.9 of the U.S. Credit Facility.
(i) Licences and Permits
Each Borrower (a) is in compliance with and (b) has procured and is
now in possession of, all material licenses or permits required by any
applicable law or regulation for the operation of its business in each
jurisdiction wherein it is now conducting or proposes to conduct
business and where the failure to procure such licenses or permits
could have a Material Adverse Effect.
(j) Default of Indebtedness
It is not in default in the payment of the principal of or interest on
any Indebtedness or under any instrument or agreement under or subject
to which any Indebtedness has
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29 B3:112290.1
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been issued and no event has occurred under the provisions of any such
instrument or agreement which with or without the lapse of time or the
giving of notice, or both, constitutes or would constitute an event of
default thereunder.
(k) No Default
It is not in default in the payment or performance of any of its
material contractual obligations and no Default has occurred.
(l) No Burdensome Restrictions
It is not a party to any contract or agreement the performance of
which could have a Material Adverse Effect. It has not agreed or
consented to cause or permit in the future (upon the happening of a
contingency or otherwise) any of its property, whether now owned or
hereafter acquired, to be subject to a Lien which is not a Permitted
Encumbrance.
(m) No Labour Disputes
It is not involved in any labour dispute; there are no strikes or
walkouts or union organisation of any Borrower's employees threatened
or in existence and no labour contract is scheduled to expire during
the Term other than as set forth on Schedule 5.14 of the U.S. Credit
Facility.
(n) Disclosure
No representation or warranty made by it this Agreement or in any
financial statement, report, certificate or any other document
furnished in connection herewith or therewith contains any untrue
statement of a material fact or omits to state any material fact
necessary to make the statements herein or therein not misleading.
There is no fact known to it or which reasonably should be known to it
which it has not disclosed to Agent in writing with respect to the
transactions contemplated by the StyroChem Europe Acquisition
Agreement or this Agreement which could reasonably be expected to have
a Material Adverse Effect.
(o) Delivery of StyroChem Europe Acquisition Agreement
Agent and Lenders have received complete copies of the StyroChem
Europe Acquisition Agreement and the Second Indenture (including all
exhibits, schedules and disclosure letters referred to therein or
delivered pursuant thereto, if any) and all amendments thereto,
waivers relating thereto and other side letters or agreements
affecting the terms thereof. None of such documents and agreements
has been amended or supplemented, nor have any of the provisions
thereof been waived, except pursuant to a written agreement or
instrument which has heretofore been delivered to Agent and Lenders.
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30 B3:112290.1
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(p) Swaps
If it is a Borrower, it is not a party to, nor will it be a party to,
any swap agreement whereby it has agreed or will agree to swap
interest rates or currencies unless same provides that damages upon
termination following an event of default thereunder are payable on an
unlimited "two-way basis" without regard to fault on the part of
either party.
(q) Conflicting Agreements
No provision of any mortgage, indenture, contract, agreement,
judgment, decree or order binding on it if it is a Borrower or
affecting any Security Assets conflicts with, or requires any Consent
which has not already been obtained to, or would in any way prevent
the execution, delivery or performance of, the terms of this Agreement
or, where applicable, the Security Documents.
(r) Applications of Certain Laws and Regulations
If it is a Borrower, neither it nor any of its Affiliate is subject to
any statute, rule or regulation which regulates the incurrence of any
Indebtedness except as disclosed in the opinion of counsel delivered
to Agent in connection with this Agreement.
(s) Business and Property of the Borrower
Upon and after the Effective Date, the Borrowers propose to engage
substantially in the business of manufacturing and/or distributing
polystyrene beads and disposable products sold to or through the food
service industry or the insulation industry and activities necessary
to conduct the foregoing. On the date of the first borrowing
hereunder, each Borrower will own all the property and possess all of
the rights and Consents necessary for the conduct of its business.
(t) Acquisition
Each Borrower has acquired all of its assets and property in
accordance with all applicable statutes and laws, such property is
free and clear of all Liens other than Permitted Encumbrances.
6. AFFIRMATIVE COVENANTS
Each Borrower shall, until payment in full of the Obligations and
termination of this Agreement:
(a) Payment of Fees
Pay to Agent on demand all usual and customary fees and expenses which
Agent incurs in connection with the forwarding of Advance proceeds to
the relevant Borrower. Agent may, without making demand, charge the
accounts of each Borrower for all such fees and expenses applicable to
such Borrower provided Agent shall promptly thereafter provide
Borrowing Agent with copies of supporting documentation.
<PAGE>
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(b) Conduct of Business and Maintenance of Existence and Assets
(i) Conduct continuously and operate actively its business
according to good business practices and maintain all of its
properties useful or necessary in its business in good working
order and condition (reasonable wear and tear excepted and
except as may be disposed of in accordance with the terms of
this Agreement), including, without limitation, all licenses,
patents, copyrights, design rights, tradenames, trade secrets
and trademarks and in the case of StyroChem Finland and
Thermisol Finland take all actions necessary to enforce and
protect the validity of any intellectual property right or
other right included in the Security Assets;
(ii) keep in full force and effect its existence and comply in all
material respects with the laws and regulations governing the
conduct of its business; and
(iii) make all such reports and pay all such franchise and other
taxes and license fees and do all such other acts and things as
may be lawfully required to maintain its rights, licenses,
leases, powers and franchises under the laws of the state or
the country of its incorporation or any political subdivision
thereof.
(c) Violations
Promptly notify Agent in writing of any violation of any law, statute,
regulation or ordinance of any Governmental Body, or of any agency
thereof, applicable to any Borrower which may have a Material Adverse
Effect on any Borrower.
(d) Net Worth
Cause to be maintained Net Worth of Radnor on a Consolidated Basis in
an amount not less than the amounts set forth below as of the dates
set forth below:
<TABLE>
<CAPTION>
Date Amount
======
<S> <C>
12-31-97 $ 7,000,000
12-31-98 $ 8,000,000
12-31-99 $ 9,000,000
12-31-00 $10,000,000
12-31-01 $10,000,000
12-31-02 $10,000,000
</TABLE>
(e) Current Ratio
Cause to be maintained a ratio of Current Assets to Current
Liabilities for Radnor on a Consolidated Basis of not less than 1.00
to 1.00 at the end of each fiscal quarter.
<PAGE>
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(f) Fixed Charge Coverage
Cause to be maintained for each fiscal quarter of Radnor on a
Consolidated Basis a Fixed Charge Coverage equal to or greater than
1.00 to 1.00 at the end of each fiscal quarter for the most recent
four fiscal quarters then ended.
(g) Interest Coverage
Cause to be maintained for each fiscal quarter of Radnor on a
Consolidated Basis an Interest Coverage equal to or greater than 1.25
to 1.00 at the end of each fiscal quarter for the most recent four
fiscal quarters then ended.
(h) Net Income
Cause to be achieved net income for Radnor on a Consolidated Basis
(excluding non-cash extraordinary items) of at least $1 in each fiscal
year.
(i) Execution of Supplemental Instruments
Execute and deliver to Agent from time to time, upon demand, Styrochem
Finland Security Agreement and Thermisol Finland Security Agreement
and such supplemental agreements, statements, assignments and
transfers, or instructions or documents and such other instruments as
Agent may request, in order that the full intent of this Agreement or
the Security Documents may be carried into effect.
(j) Payment of Indebtedness
Pay, discharge or otherwise satisfy at or before maturity (subject,
where applicable, to specified grace periods and, in the case of the
trade payables, to normal payment practices) all its material
obligations and liabilities of whatever nature, except when the amount
or validity thereof is currently being contested in good faith by
appropriate proceedings and each Borrower shall have provided for such
reserves as Agent may reasonably deem proper and necessary, subject at
all times to any applicable subordination arrangement in favour of
Agent and the Lenders.
(k) Standards of Financial Statements
Cause all financial statements referred to in Section 9(f) as to which
GAAP is applicable to be complete and correct in all material respects
(subject, in the case of interim financial statements, to normal year-
end audit adjustments) and to be prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods
reflected therein (except as concurred in by such reporting
accountants or officer, as the case may be, and disclosed therein).
(l) Exercise of Rights
Enforce all of its rights under the StyroChem Europe Acquisition
Agreement and all documents executed in connection therewith
including, but not limited to, all
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B3:112290.1
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indemnification rights and pursue all remedies available to it with
diligence and in good faith in connection with the enforcement of any
such rights.
(m) Environmental Matters
(i) Each Borrower will ensure that all real property owned or
occupied by such Borrower remains in compliance in all material
respects with all Environmental Laws and they will not place or
permit to be placed any Hazardous Substances on any such
property except as not prohibited by applicable law or
appropriate governmental authorities.
(ii) Each Borrower will establish and maintain a system to assure and
monitor continued compliance with all applicable Environmental
Laws which system shall include periodic reviews of such
compliance.
(iii) Promptly upon the written request of Agent from time to time,
each Borrower shall provide Agent, at such Borrowers expense,
with an environmental site assessment or environmental audit
report prepared by an environmental engineering firm acceptable
in the reasonable opinion of Agent, to assess with a reasonable
degree of certainty the existence of a Hazardous Discharge and
the potential costs in connection with abatement, cleanup and
removal of any Hazardous Substances found on, under, at or
within any real property owned or occupied by such Borrower. Any
report or investigation of such Hazardous Discharge proposed and
acceptable to an appropriate authority that is charged to
oversee the clean-up of such Hazardous Discharge shall be
acceptable to Agent. If such estimates, individually or in the
aggregate, exceed $100,000, Agent shall have the right to
require such Borrower to post a bond, letter of credit or other
security reasonably satisfactory to Agent to secure payment of
these costs and expenses.
(iv) Each Borrower shall defend and indemnify Agent and the Lenders
and hold Agent, the Lenders and their respective employees,
agents, directors and officers harmless from and against all
loss, liability, damage and expense, claims, costs, fines and
penalties, including attorney's fees, suffered or incurred by
Agent or the Lenders under or on account of any Environmental
Laws, including, without limitation, the assertion of any lien
thereunder, with respect to any Hazardous Discharge, the
presence of any Hazardous Substances, whether or not the same
originates or emerges from any real property owned or occupied
by such Borrower or any contiguous real estate, except to the
extent such loss, liability, damage and expense is attributable
to any Hazardous Discharge resulting from actions on the part of
Agent or any Lender. Each Borrower's obligations under this
Section 6(m) shall arise upon the discovery of the presence of
any Hazardous Substances at any real property owned or occupied
by such Borrower whether or not any federal, state, or local
environmental agency has taken or threatened any action in
connection with the presence of any Hazardous Substances. Each
Borrower's obligations and the indemnifications hereunder shall
survive the termination of this Agreement.
<PAGE>
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B3:112290.1
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(n) Thermisol Sweden
Thermisol Sweden shall deliver to the Agent, as soon as available a
certified copy of a notification from the Swedish tax authorities
exempting the guarantee to be given by Thermisol Sweden hereunder from
any Swedish company law financial assistance prohibitions.
7. NEGATIVE COVENANTS
No Borrower shall, until satisfaction in full of the Obligations and
termination of this Agreement:
(a) Merger, Consolidation, Acquisition and Sale of Assets
(i) Enter into any merger, consolidation or other reorganisation
with or into any other Person (other than another Borrower) or
acquire all or a substantial portion of the assets or stock of
any Person (other than another Borrower) or permit any other
Person (other than another Borrower) to consolidate with or
merge with it.
(ii) Sell, lease, transfer or otherwise dispose of all or any
material part of its properties or assets, except in the
ordinary course of its business.
(b) Creation of Liens
Create or suffer to exist any Lien or transfer upon or against any of
its property or assets now owned or hereafter acquired, except
Permitted Encumbrances.
(c) Guarantees
Become liable upon the obligations of any Person by assumption,
endorsement or guaranty thereof or otherwise (other than to Lenders or
to any Affiliates of Lenders) except (a) as disclosed on Schedule 7.3
of the U.S. Credit Facility; (b) the endorsement of checks in the
ordinary course of business; and (c) guarantees not to exceed a
liability of $5,000,000 for Radnor on a Consolidated Basis in the
aggregate at any time.
(d) Investments
Purchase or acquire obligations or stock of, or any other interest in,
any Person, except (a) obligations issued or guaranteed by the United
States of America or any agency thereof; (b) commercial paper with
maturities of not more than 180 days and a published rating of not
less than A-1 or P-1 (or the equivalent rating); (c) certificates of
time deposit and bankers' acceptances having maturities of not more
than 180 days and repurchase agreements backed by United States
government securities of a commercial bank if (i) such bank has a
combined capital and surplus of at least $500,000,000, or (ii) its
debt obligations, or those of a holding company of which it is a
Subsidiary, are rated not less than A (or the equivalent rating) by a
nationally recognised investment rating agency; (d) U.S. money market
funds that invest solely in obligations issued or guaranteed by the
United States of America or an agency thereof;
<PAGE>
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B3:112290.1
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and (e) investments in one or more Subsidiaries, joint ventures or
other Affiliates in an aggregate sum not to exceed the sum of (i) 50%
of the cumulative net income of Radnor on a Consolidated Basis plus
(ii) $3,000,000; provided, at the time of such investment (x) no Event
of Default has occurred or would occur after giving effect to such
payment and (y) and after giving effect to such investment the Undrawn
Availability (as defined in the U.S. Credit Facility) is more than
$2,000,000.
(e) Loans
Make advances, loans or extensions of credit to any Person, including
without limitation, any Parent, Subsidiary or Affiliate except with
respect to (a) the extension of commercial trade credit in connection
with the sale of Inventory in the ordinary course of its business, (b)
loans to its employees in the ordinary course of business not to
exceed the aggregate amount of $100,000 at any time outstanding (c)
loans to another Borrower or U.S. Guarantor so long as (i) such loan
or advance is evidenced by a promissory note and such note is
assigned to Agent as collateral security for the Obligations and (ii)
at the time of such loan no Event of Default has occurred or would
occur after giving effect to such loan or advance, and (d) loans to
Affiliates of the Borrowers not to exceed $5,000,000 for Radnor on a
Consolidated Basis in the aggregate.
(f) Capital Expenditures
Contract for, purchase or make any expenditure or commitments for
fixed or capital assets (including capitalised leases) in an amount in
excess of the amounts set forth below for the fiscal years set forth
below with respect to Radnor on a Consolidated Basis:
<TABLE>
<CAPTION>
Fiscal Year Ended Amount
<S> <C>
31-12-97 $15,000,000
31-12-98 21,100,000
31-12-99 17,100,000
31-12-00 14,000,000
31-12-01 9,900,000
31-12-02 7,400,000
</TABLE>
(g) Indebtedness
Create, incur, assume or suffer to exist any Indebtedness (exclusive
of trade debt) except in respect of (i) Indebtedness to Lenders; (ii)
Indebtedness incurred for capital expenditures permitted under Section
7(f) hereof; (iii) Indebtedness due under and guarantees issued in
respect of the Senior Notes; (iv) Indebtedness in a maximum aggregate
amount outstanding not greater than $10,000,000 for Radnor on a
Consolidated Basis (when added to the amount of Indebtedness for
Radnor on a Consolidated Basis incurred by all Borrowers and U.S.
Guarantors); and (iv) a
<PAGE>
36
B3:112290.1
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subordinated debt instrument which may be issued by each of StyroChem
Finland, Thermisol Denmark, Thermisol Finland and Thermisol Sweden
(each an "Acquirer" and together the "Acquirers") to StyroChem Europe
in order to evidence a loan by StyroChem Europe to any of the
Acquirers in order to finance the portion of the purchase price
payable by such Acquirer under the StyroChem Europe Acquisition
Agreement PROVIDED THAT the Agent shall have received on or prior to
the issuance of such subordinated debt instrument evidence
satisfactory to it from the legal advisers in the jurisdiction of the
place of incorporation of each relevant Acquirer confirming the
effectiveness of the subordination of such debt instrument to the
rights of the Agent and the Lenders hereunder. Notwithstanding the
foregoing, the Borrowers may incur Indebtedness in excess of the
foregoing amounts if, after giving pro forma effect to the incurrence
of such Indebtedness, Interest Coverage Ratio for each of the four
fiscal quarters most recently ended would equal or exceed 2.0 to 1.0
if calculated as if such Indebtedness was outstanding for the entire
four quarter period.
(h) Nature of Business
Substantially change the nature of the business in which it is
presently engaged, nor except as specifically permitted hereby
purchase or invest, directly or indirectly, in any assets or property
other than in the ordinary course of business for assets or property
which are useful in, necessary for and are to be used in its business
as presently conducted.
(i) Transactions with Affiliates
Directly or indirectly, purchase, acquire or lease any property from,
or sell, transfer or lease any property to, or otherwise deal with,
any Affiliate, except transactions disclosed in the ordinary course of
business, on an arm's-length basis on terms no less favourable than
terms which would have been obtainable from a Person other than an
Affiliate provided the provisions of this Section 7(j) shall not
prohibit any payments to Radnor Management, Inc. ("Management") in
accordance with the provisions of the Management Services Agreement
dated as of 18th December, 1996 among Management, Borrowers, StyroChem
International, Ltd. and StyroChem FSC, Limited. ("Management
Agreement") in an aggregate amount not to exceed the actual Expenses
under and as defined in the Management Agreement.
(j) Leases
Enter as lessee into any lease arrangement for real or personal
property (unless capitalised and permitted under Section 7.6 hereof)
if after giving effect thereto, aggregate annual rental payments for
all leased property for Radnor on a Consolidated Basis would exceed
$6,000,000 in any one fiscal year.
(k) Subsidiaries
(i) Form any Subsidiary unless (A) (i) such Subsidiary expressly
joins in this Agreement as either European or U.S. Guarantor and
becomes jointly and severally liable for the obligations of
Borrowers and the European Guarantor and/or as the case may be of
the U.S. Guarantors hereunder and under any
<PAGE>
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B3:112290.1
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other agreement between the European and U.S. Guarantors, Agent
and Lenders and (ii) Agent shall have received all documents,
including legal opinions, it may reasonably require to establish
compliance with each of the foregoing conditions or (B) such
Subsidiary is formed pursuant to the provisions of Section 7(d)
hereof.
(ii) Enter into any partnership, joint venture or similar arrangement
unless the amount invested therein is less than $5,000,000 per
year in the aggregate.
(l) Fiscal Year and Accounting Changes
Change its fiscal year from December 31 or make any change (i) in
accounting treatment and reporting practices except as required by
GAAP or (ii) in tax reporting treatment except as required by law.
(m) Pledge of Credit
Now or hereafter pledge any Lender's credit on any purchases or for
any purpose whatsoever or use any portion of any Advance in or for any
business other than Borrower's business as conducted on the date of
this Agreement.
(n) Amendment of Certificate of Incorporation
Amend, modify or waive any material term or material provision of its
constitutional documents.
(o) Prepayment of Indebtedness
At any time, directly or indirectly, prepay any Indebtedness (other
than to Agent and the Lenders), or repurchase, redeem, retire or
otherwise acquire any Indebtedness of the Borrowers
8. CONDITIONS PRECEDENT
8.1 Conditions to Initial Advance
The agreement of Agent and each Lender hereunder is subject to the
satisfaction, or waiver by Required Lenders, immediately prior to or
concurrently with the making of the first Advance hereunder, of the
following conditions precedent:
(a) Security Documents
The Agent shall have received the Security Documents duly executed and
delivered by an authorised officer of each of StyroChem Finland and
Thermisol Finland respectively;
(b) Filings, Registrations and Recordings
Each document (including, without limitation, any Uniform Commercial
Code financing statement) required by this Agreement, the Security
Documents any related
<PAGE>
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B3:112290.1
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agreement or under law or reasonably requested by the Agent to be
filed, registered or recorded in order to create, in favour of Agent
for its benefit and for the rateable benefit of the Lenders, a
perfected security interest in or lien upon the Security Assets shall
have been properly filed, registered or recorded in each jurisdiction
in which the filing, registration or recordation thereof is so
required or requested, and Agent shall have received an
acknowledgement copy, or other evidence satisfactory to it, of each
such filing, registration or recordation and satisfactory evidence of
the payment of any necessary fee, tax or expense relating thereto;
(c) Proceedings of Borrowers
Agent shall have received a copy of the resolutions in form and
substance reasonably satisfactory to Agent, of the Board of Directors
of each Borrower, European and U.S. Guarantor authorising (i) the
execution, delivery and performance of this Agreement, and in the case
of StyroChem Finland and Thermisol Finland the Security Documents, any
related agreements, the StyroChem Europe Acquisition Agreement, and
all documents executed in connection therewith (collectively the
"Documents") and (ii) the granting by the relevant Borrower of the
security interests in and liens upon the Security Assets in each case
certified by the President or a duly authorised officer of such
Borrower, European and U.S. Guarantor on a date not earlier than the
Effective Date; and, such certificate shall state that the resolutions
thereby certified have not been amended, modified, revoked or
rescinded as of the date of such certificate;
(d) Incumbency Certificates of Borrower and U.S. Guarantors
Agent shall have received a certificate of the Secretary of each
Borrower and U.S. Guarantor, dated not earlier than the Effective
Date, as to the incumbency and signature of the officers of each such
company executing this Agreement, and in the case of StyroChem Finland
and Thermisol Finland, the Security Documents, any certificate or
other documents to be delivered by it pursuant hereto, together with
evidence of the incumbency of such officer;
(e) Certificates
Agent shall have received a copy of the Articles or Certificate of
Incorporation or other constitutional documents, and all amendments to
the foregoing, certified by the Secretary of State (where applicable)
or by an authorised officer of each Borrower and U.S. Guarantor
together with copies of the by-laws and shareholders agreements of
each Borrower and U.S. Guarantor, as applicable, certified as accurate
and complete by the general partner if applicable, or an authorised
officer of each Borrower and U.S. Guarantor or secretary of each
Borrower and U.S. Guarantor;
(f) Good Standing Certificates
In respect of each U.S. Guarantor, Agent shall have received good
standing certificates for such U.S. Guarantor dated not more than [ten
(10)] days prior to the Effective Date, issued by the Secretary of
State (where applicable) or by an appropriate officer
- --------------------------------------------------------------------------------
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B3:112290.1
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of such U.S. Guarantor or other appropriate official of such U.S.
Guarantor's jurisdiction of formation and each jurisdiction where the
conduct of such U.S. Guarantor's business activities or the ownership
of its properties necessitates qualification;
(g) Legal Opinions
Agent shall have received the executed legal opinions of Duane Morris
& Heckscher in respect of each U.S. Guarantor and such other counsel
as may be required by the Lenders in form and substance satisfactory
to the Lenders which shall cover such matters incident to the
transactions contemplated by this Agreement, the StyroChem Europe
Acquisition Agreement, the Security Documents and related agreements
as Agent may reasonably require and the Borrowers hereby authorise and
direct such counsel to deliver such opinions to Agent and the Lender;
(h) No Litigation.
(A) No litigation, investigation or proceeding before or by any
arbitrator or Governmental Body shall be continuing or threatened
against any Borrower or against the officers or directors of any
Borrower (A) in connection with the Documents or any of the
transactions contemplated thereby and which, in the reasonable
opinion of the Agent, is deemed material or (B) which if
adversely determined, could, in the reasonable opinion of the
Agent, have a Material Adverse Effect on any Borrower; and
(B) no injunction, writ, restraining order or other order of any
nature materially adverse to any Borrower or the conduct of its
business or inconsistent with the due consummation of the
Transactions shall have been issued by any Governmental Body;
(i) Security Assets Examination
Agent shall have completed Security Assets examinations and received
appraisals as shall be required by the Lenders with respect to the
Receivables, Inventory and General Intangibles subject to the Security
Documents the results of which shall be satisfactory in form and
substance to the Agent;
(j) Pro Forma Financial Statements
Agent and Lenders shall have received a copy of the Pro Forma
Financial Statements which shall be satisfactory in all respects to
Lenders;
(k) Other Documents
Agent and Lenders shall have received final executed copies of the
StyroChem Europe Acquisition Agreement, and all related agreements,
documents and instruments as in effect on the Effective Date all of
which shall be in form and substance satisfactory to Agent;
<PAGE>
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B3:112290.1
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(l) Consents
Agent shall have received any and all Consents necessary to permit the
effectuation of the transactions contemplated by this Agreement and in
the Security Documents; and, Agent shall have received such Consents
and waivers of such third parties as might assert claims with respect
to the Security Assets, as Agent and its counsel shall deem necessary;
(m) No Material Adverse Change
(i) since 30th June, 1997 (a) no material adverse change shall have
occurred in the condition, financial or otherwise, operations,
properties or prospects of any Borrower or U.S. Guarantor, (b) no
material damage or destruction shall have occurred to any of the
Security Assets and no material depreciation in the value thereof, (c)
no material adverse deviation shall have occurred from the forecasts
and projections previously delivered to Agent and (d) no event,
condition or state of facts which could reasonably be expected to have
a Material Adverse Effect on any Borrower or U.S. Guarantor shall have
occurred and (ii) no representations made or information supplied to
Agent or the Lenders shall have been proven to be inaccurate or
misleading in any material respect;
(n) Contract Review
Agent shall have reviewed all material contracts of each Borrower
including, without limitation, leases, union contracts, labour
contracts, vendor supply contracts, license agreements and
distributorship agreements and such contracts and agreements shall be
satisfactory in all respects to Agent;
(o) Closing Certificate
Agent shall have received closing certificate signed by the Chief
Financial Officer of each Borrower dated as of the date hereof,
stating that (i) all representations and warranties made by such
Borrower as set forth in this Agreement and the Security Documents are
true and correct on and as of such date, (ii) such Borrower is on such
date in compliance with all the terms and provisions set forth in this
Agreement and where applicable the Security Documents and (iii) on
such date no Default or Event of Default has occurred or is
continuing;
(p) Borrowing Base
Agent and Lenders shall have received evidence from the Borrowers that
the aggregate amount of Eligible Receivables and Eligible Inventory is
sufficient in value and amount to support Advances in the amount
requested by any Borrower on the date of first borrowing hereunder
and, so that after giving effect to the initial Advances hereunder,
the Borrowers shall have Undrawn Availability of at least $1,000,000;
<PAGE>
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B3:112290.1
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(q) Agreements
Agent and Lenders shall have received copies of all agreements
evidencing the obligations of any Borrower with respect to its
Indebtedness for borrowed money, which agreements shall be in form
and substance satisfactory to Agent and shall set forth the
conditions on which (i) such Borrower may make and the holder(s) of
such indebtedness may receive payments with respect thereto and (ii)
the holder(s) of such indebtedness may accelerate such obligations,
commence any action against or otherwise exercise any rights or
enforce any remedies against such Borrower, which conditions shall be
satisfactory in form and substance to Agent in its discretion.
(r) StyroChem Europe Acquisition Agreement
Agent and Lenders shall have received evidence satisfactory to them
that Borrowers (other than StyroChem Europe) have acquired all of the
assets pursuant to the StyroChem Europe Acquisition Agreement in
accordance with all applicable laws and that such assets are free and
clear of all Liens other than Permitted Encumbrances.
(s) Insurance
Agent shall have received in form and substance satisfactory to
Agent, certified copies of the casualty insurance policies of
StyroChem Finland and Thermisol Finland evidencing coverage on all
Security Assets in such amounts, with such carriers and covering such
risks as is acceptable to Agent, together with loss payable
endorsements on Agent's standard form of loss payee endorsement
naming Agent as loss payee, and certified copies of each Borrower's
liability insurance policies, together with endorsements naming Agent
as an additional or co-insured.
8.2 Conditions to Each Advance
The agreement of Lenders to make any Advance requested to be made on any
date (including, without limitation, the initial Advance), is subject to
the satisfaction of the following conditions precedent as of the date such
Advance is made:
(a) Representations and Warranties. Each of the representations and
warranties made by a Borrower, European or U.S. Guarantor in or
pursuant to this Agreement, the Security Documents and any related
agreements to which it is a party, and each of the representations
and warranties contained in any certificate, document or financial or
other statement furnished at any time under or in connection with
this Agreement, the Security Documents or any related agreement shall
be true and correct in all material respects on and as of such date
as if made on and as of such date except as such representations and
warranties are modified in a manner consistent with this Agreement
and the Security Documents;
(b) No Default. No Event of Default or Default shall have occurred and be
continuing on such date, or would exist after giving effect to the
Advances requested to be made, on such date and, in the case of the
initial Advance, after giving effect to the consummation of the
transactions contemplated by the StyroChem Europe Acquisition
Agreement and the Senior Notes; provided, however that Lenders in
their sole discretion, may continue to make Advances notwithstanding
the existence of an Event
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B3:112290.1
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of Default or Default and that any Advances so made shall not be
deemed a waiver of any such Event of Default or Default; and
(c) Maximum Advances. In the case of any Advances requested to be made
after giving effect thereto, the aggregate Advances shall not exceed
the maximum Advances permitted under Section 2.1 hereof.
Each request for an Advance by any Borrower hereunder shall constitute a
representation and warranty by each Borrower, European and U.S. Guarantor
as of the date of such Advance that the conditions contained in this
subsection shall have been satisfied.
9. INFORMATION
Each Borrower shall, until satisfaction in full of the Obligations and the
termination of this Agreement:
(a) Disclosure of Material Matters
Immediately upon learning thereof, report to Agent all matters
materially affecting the value, enforceability or collectability of
any portion of the Security Assets including, without limitation, any
Borrower reclamation or repossession of, or the return to any
Borrower of, a material amount of goods or claims or disputes
asserted by any Customer or other obligor.
(b) Schedules
Deliver to Agent on or before the fifteenth (15th) day of each month
as and for the prior month (a) a report of all Receivables which is
subject to a perfected first priority security interest in favour of
the Agent outstanding and containing such information in respect
thereof as the Agent may from time to time require, (b) accounts
payable schedules and (c) a report of all Inventories which is
subject to a perfected first priority security interest in favour of
the Agent outstanding and containing such information in respect
thereof as the Agent may from time to time require; provided, if
Undrawn Availability is less than $1,000,000 with respect to all
Borrowers, Borrowers shall provide Agent with daily reports of sales,
collections, credits issued, debits or other adjustments made by any
Borrower with respect to Receivables. In addition, each Borrower will
deliver to Agent at such intervals as Agent may require: (i) copies
of Customer's invoices, (ii) evidence of shipment or delivery, and
(iii) such further schedules, documents and/or information regarding
the Security Assets as Agent may require including, without
limitation, trial balances and test verifications. Agent shall have
the right to confirm and verify all Receivables and Inventory by any
manner and through any medium it considers advisable and do whatever
it may deem reasonably necessary to protect its interests hereunder.
The items to be provided under this Section are to be in form
satisfactory to Agent and executed by each Borrower and delivered to
Agent from time to time solely for Agent's convenience in maintaining
records of the Security Assets, and any Borrower's failure to deliver
any of such items to Agent shall not affect, terminate, modify or
otherwise limit Agent's Lien with respect to the Security Assets.
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(c) Litigation
Promptly notify Agent and Lenders in writing of any litigation, suit
or administrative proceeding affecting any Borrower, whether or not
the claim is covered by insurance, and of any suit or administrative
proceeding, which may have a Material Adverse Effect on any Borrower.
(d) Material Occurrences
Promptly notify Agent and Lenders in writing upon the occurrence of
(a) any Event of Default or Default; (b) any event of default or (c)
any event which with the giving of notice or lapse of time, or both,
would constitute an event of default under the Senior Notes; (d) any
event, development or circumstance whereby any financial statements
or other reports furnished to Agent or any Lender fail in any
material respect to present fairly, in accordance with GAAP
consistently applied, the financial condition or operating results of
any Borrower as of the date of such statements; (e) and in respect of
each U.S. Guarantor any accumulated retirement plan funding
deficiency which, if such deficiency continued for two plan years and
was not corrected as provided in Section 4971 of the Internal Revenue
Code applicable to it, could subject any Borrower to a tax imposed by
Section 4971 of the Internal Revenue Code and in respect of any
Borrower, any similar deficiency with respect to such Borrower under
applicable law; (f) each and every default by any Borrower which
might result in the acceleration of the maturity of any Indebtedness,
including the names and addresses of the holders of such Indebtedness
with respect to which there is a default existing or with respect to
which the maturity has been or could be accelerated, and the amount
of such Indebtedness; and (g) any other development in the business
or affairs of any Borrower which might reasonably be expected to be
materially adverse; in each case describing the nature thereof and
the action such Borrower proposes to take with respect thereto.
(e) Government Receivables
Notify Agent immediately if any of the Receivables arise out of
contracts between any Borrower and the United States or any other
government or nation other than the United States, any state, or any
department, agency or instrumentality of any of them.
(f) Annual Financial Statements
Procure that Radnor will furnish to the Agent under the U.S. Credit
Facility all financial statements, reports, budgets and other
information required by the U.S. Credit Agreement.
(g) Additional Information
Furnish Agent and Lenders with such additional information as Agent
and Lenders shall reasonably request in order to enable Agent and
Lenders to determine whether the terms, covenants, provisions and
conditions of this Agreement have been complied with by the Borrowers
including, without limitation and without the necessity of any
request by Agent or any Lender, (a) copies of all environmental
audits and reviews, (b) at least
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thirty (30) days prior thereto, notice of any Borrower opening of any
new office or place of business or any Borrower closing of any
existing office or place of business, and (c) promptly upon learning
thereof, notice of any labour dispute to which any Borrower may
become a party, any strikes or walkouts relating to any of its plants
or other facilities, and the expiration of any labour contract to
which any Borrower is a party or by which any Borrower is bound.
(h) Notice of Suits, Adverse Events
Furnish Agent and Lenders with prompt notice of (i) any lapse or
other termination of any Consent issued to any Borrowers by any
Governmental Body or any other Person that is material to the
operation of any Borrower business, (ii) any refusal by any
Governmental Body or any other Person to renew or extend any such
Consent; and (iii) copies of any periodic or special reports filed by
any Borrower with any Governmental Body or Person, if such reports
indicate any material change in the business, operations, affairs or
condition of any Borrower, or if copies thereof are requested by
Agent or any Lender, and (iv) copies of any material notices and
other communications from any Governmental Body or Person which
specifically relate to any Borrower.
(i) Additional Documents
Execute and deliver to Agent, upon request, such documents and
agreements as Agent may, from time to time, reasonably request to
carry out the purposes, terms or conditions of this Agreement.
10. EVENTS OF DEFAULT
The occurrence of any one or more of the following events shall constitute
an "Event of Default":
(a) failure by any Borrower or European Guarantor to pay any principal or
interest on the Obligations when due, whether at maturity or by
reason of acceleration pursuant to the terms of this Agreement or any
Security Document or by notice of intention to prepay, or by required
prepayment or failure to pay any other liabilities or make any other
payment, fee or charge provided for herein or any Security Document
when due;
(b) any representation or warranty made or deemed made by any Borrower
or European Guarantor in this Agreement or any Security Documents or
any related agreement or in any certificate, document or financial
or other statement furnished at any time in connection herewith or
therewith shall prove to have been misleading in any material
respect on the date when made or deemed to have been made;
(c) failure by any Borrower or European Guarantor to (i) furnish
financial information when due or when requested, or (ii) permit the
inspection of its books or records;
(d) issuance of a notice of Lien, levy, assessment, injunction or
attachment against a material portion of any Borrower or European
Guarantor property;
(e) (i) a failure or neglect of any Borrower or European Guarantor to
perform, keep or observe any term, provision, condition or covenant,
contained in Sections 6(a), 6(b),
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6(c) and 6(i) hereof which is not cured within thirty (30) days from
the occurrence of such failure or neglect; or (ii) failure or
neglect of any Borrower or European Guarantor to perform, keep or
observe any other term, provision, condition, covenant herein
contained, or contained in any other agreement or arrangement, now
or hereafter entered into between any Borrower or European
Guarantor, Agent and the Lenders after expiration of all applicable
grace periods;
(f) any judgment in excess of $300,000 is rendered against any Borrower
or European Guarantor or judgment liens filed against any Borrower
or European Guarantor of judgments in excess of $1,000,000 in the
aggregate are rendered against all Borrower or European Guarantor
for an amount which within thirty (30) days of such rendering or
filing is not either satisfied, stayed or discharged of record;
(g) any Borrower or European Guarantor shall (i) apply for, consent to
or suffer the appointment of, or the taking of possession by, a
receiver, custodian, trustee, liquidator or similar fiduciary of
itself or of all or a substantial part of its property, (ii) make a
general assignment for the benefit of creditors, (iii) commence a
voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (iv) be adjudicated a bankrupt or insolvent,
(v) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vi) acquiesce to, or fail to
have dismissed, within forty five (45) days, any petition filed
against it in any involuntary case under such bankruptcy laws, or
(vii) take any action for the purpose of effecting any of the
foregoing;
(h) any Borrower or European Guarantor shall admit in writing its
inability, or be generally unable, to pay its debts as they become
due or cease operations of its present business;
(i) any Subsidiary of any Borrower or European Guarantor, shall (i) apply
for, consent to or suffer the appointment of, or the taking of
possession by, a receiver, custodian, trustee, liquidator or similar
fiduciary of itself or of all or a substantial part of its property,
(ii) admit in writing its inability, or be generally unable, to pay
its debts as they become due or cease operations of its present
business, (iii) make a general assignment for the benefit of
creditors, (iv) commence a voluntary case under any state or federal
bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a
bankrupt or insolvent, (vi) file a petition seeking to take advantage
of any other law providing for the relief of debtors, (vii) acquiesce
to, or fail to have dismissed, within forty five (45) days, any
petition filed against it in any involuntary case under such
bankruptcy laws, or (viii) take any action for the purpose of
effecting any of the foregoing;
(j) any change in the condition or affairs (financial or otherwise) of
any Borrower or European Guarantor which in Agent's opinion impairs
the Security Assets or the ability of any Borrower or European
Guarantor to perform its Obligations under this Agreement;
(k) any Lien created hereunder or provided for hereby or under any
related agreement for any reason ceases to be or is not a valid and
perfected Lien having a first priority interest;
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(l) an event of default has occurred and been declared under the Senior
Notes which default shall not have been cured or waived within any
applicable grace period;
(m) a default of the obligations of any Borrower or European Guarantor
under any other agreement to which it is a party shall occur which
materially adversely affects its condition, affairs or prospects
(financial or otherwise) which default is not cured within any
applicable grace period;
(n) termination or breach of any guarantee or similar agreement executed
and delivered to Agent in connection with the Obligations of any
Borrower, European or U.S. Guarantor, or if any European or U.S.
Guarantor attempts to terminate, challenges the validity of, or its
liability under, any such guarantee or similar agreement;
(o) any Change of Ownership or Change of Control shall have occurred;
(p) any material provision of this Agreement shall, for any reason, cease
to be valid and binding on any Borrower, or Borrower shall so claim
in writing to Agent;
(q) (i) any Governmental Body shall (A) revoke, terminate, suspend or
adversely modify any license, permit, patent, trademark or tradename
of any Borrower, the continuation of which is material to the
continuation of any Borrower's business, or (B) commence proceedings
to suspend, revoke, terminate or adversely modify any such license,
permit, trademark, tradename or patent and such proceedings shall not
be dismissed or discharged within sixty (60) days, or (c) schedule or
conduct a hearing on the renewal of any license, permit, trademark,
tradename or patent necessary for the continuation of any Borrower's
business and the staff of such Governmental Body issues a report
recommending the termination, revocation, suspension or material,
adverse modification of such license, permit, trademark, tradename or
patent; (ii) any agreement which is necessary or material to the
operation of any Borrower's business shall be revoked or terminated
and not replaced by a substitute acceptable to Agent within thirty
(30) days after the date of such revocation or termination, and such
revocation or termination and non-replacement could reasonably be
expected to have a Material Adverse Effect on any Borrower;
(r) any portion of the Security Assets shall be seized or taken by a
Governmental Body or the title and rights of any Borrower shall have
become the subject matter of litigation which might, in the opinion
of Agent, upon final determination, result in impairment or loss of
the security provided by the Security Documents;
(s) the operations of any Borrower's manufacturing facilities are
interrupted at any time for more than fourteen (14) consecutive days,
or if any Borrower's manufacturing capacity is reduced by 25% as a
result of such an interruption of operations (other than permanent
interruptions resulting from planned closing of up to three (3)
plants) unless such Borrower shall (i) be entitled to receive for
such period of interruption, proceeds of business interruption
insurance sufficient to assure that its per diem cash needs during
such period is at least equal to its average per diem cash needs for
the consecutive twelve (12) month period immediately preceding the
initial date of interruption and (ii) receive such proceeds in the
amount described in Sub-section (i)
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preceding not later than thirty (30) days following the initial date
of any such interruption; provided, however, that notwithstanding the
provisions of Sub-section (i) and (ii) of this Section, an Event of
Default shall be deemed to have occurred if any Borrower shall be
receiving the proceeds of business interruption insurance for a
period of thirty (30) consecutive days;
(t) there shall occur any Event of Default (as defined under the U.S.
Credit Facility) under such Facility or the U.S. Credit Facility is
terminated for any reason by any party thereto or an event of default
howsoever described has occurred and been declared under any Security
Document which default shall not have been cured or waived within any
applicable grace period; or
(u) the Agent determines that all Advances outstanding hereunder exceed
the Formula Amount on the basis of information delivered to the Agent
pursuant to Section 9.
11. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT
11.1 Rights and Remedies
Upon the occurrence of (i) an Event of Default pursuant to Section 10(g)
all Obligations shall be immediately due and payable and this Agreement
and the obligation of Lenders to make Advances shall be deemed terminated;
and, (ii) any of the other Events of Default and at any time thereafter
(such default not having previously been cured), at the option of
Required Lenders all Obligations shall be immediately due and payable and
the Lenders shall have the right to terminate this Agreement and to
terminate the obligation of Lenders to make Advances. Upon the occurrence
of any Event of Default, Agent may, and at the direction of the Required
Lenders shall, exercise any and all other rights and remedies provided
for herein, including under law or equity generally.
11.2 Agent's Discretion
Agent shall have the right in its sole discretion, but with the consent
of the Required Lenders to determine which rights, Liens, security
interests or remedies Agent may at any time pursue, relinquish,
subordinate, or modify or to take any other action with respect thereto
and such determination will not in any way modify or affect any of
Agent's or Lenders' rights hereunder.
11.3 Set-Off
In addition to any other rights which Agent or any Lender may have under
applicable law, upon the occurrence of an Event of Default hereunder,
Agent and such Lender shall have a right to apply any of Borrower's
property held by Agent and such Lender (including any cash deposit in any
currency) to reduce the Obligations.
11.4 Rights and Remedies not Exclusive
The enumeration of the foregoing rights and remedies is not intended to be
exhaustive and the exercise of any right or remedy shall not preclude the
exercise of any other right or remedies provided for herein or otherwise
provided by law, all of which shall be cumulative and not alternative.
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11.5 Actions in Concert
Anything in this Agreement to the contrary notwithstanding, each Lender
hereby agrees with each other Lender that no Lender shall take any action
to protect or enforce its rights arising out of this Agreement (including,
without limitation, exercising any right of set-off) without first
obtaining the prior written consent of Agent and Required Lenders, it
being the intent of Lenders that any such action to protect or enforce
rights under this Agreement shall be taken in concert and at the direction
or with the consent of the Agent and the Required Lenders.
12. WAIVERS AND JUDICIAL PROCEEDINGS
12.1 Waiver of Notice
Each Borrower, European and U.S. Guarantor each hereby waives notice of
non-payment of any of the Receivables, demand, presentment, protest and
notice thereof with respect to any and all instruments, notice of
acceptance hereof, notice of loans or advances made, credit extended,
Security Assets received or delivered, or any other action taken in
reliance hereon, and all other demands and notices of any description,
except such as are expressly provided for herein.
12.2 Delay
No delay or omission on Agent's or any Lender's part in exercising any
right, remedy or option shall operate as a waiver of such or any other
right, remedy or option or of any default.
13. EFFECTIVE DATE AND TERMINATION
13.1. Term
This Agreement, which shall inure to the benefit of and shall be binding
upon the respective successors and permitted assigns of each Borrower,
European and U.S. Guarantor, Agent and each Lender, shall become effective
on the date hereof and shall continue in full force and effect until the
last day of the Term unless sooner terminated as herein provided.
13.2 Termination
The termination of the Agreement shall not affect any Borrower's, European
or U.S. Guarantor's Agent's or any Lender's rights, or any of the
Obligations having their inception prior to the effective date of such
termination, and the provisions hereof shall continue to be fully
operative until all transactions entered into, rights or interests created
or Obligations have been fully disposed of, concluded or liquidated. The
security interests, Liens and rights granted to Agent and the Lenders
hereunder or under the Security Documents and the financing statements
filed hereunder shall continue in full force and effect, notwithstanding
the termination of this Agreement or the fact that Borrower's, account may
from time to time be temporarily in a zero or credit position, until all
of the Obligations of the Borrowers have been paid or performed in full
after the termination of this Agreement or the Borrowers, European and
U.S. Guarantors have furnished Agent and the Lenders with an
indemnification satisfactory to Agent and the Lenders with respect
thereto.
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14. REGARDING AGENT
14.1 Appointment
Each Lender hereby designates BNY Financial Limited to act as Agent for
such Lender under this Agreement and the Security Documents. Each Lender
hereby irrevocably authorises Agent to take such action on its behalf
under the provisions of this Agreement and the Security Documents and to
exercise such powers and to perform such duties hereunder and thereunder
as are specifically delegated to or required of Agent by the terms hereof
and thereof and such other powers as are reasonably incidental thereto and
Agent shall hold all Security Assets, payments of principal and interest,
fees (except the fees set forth in Sections 3.3)and charges and
collections (without giving effect to any collection days) received
pursuant to this Agreement, for the rateable benefit of Lenders. Agent may
perform any of its duties hereunder by or through its agents or employees.
As to any matters not expressly provided for by this Agreement Agent shall
not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected
in so acting or refraining from acting) upon the instructions of the
Required Lenders, and such instructions shall be binding; provided,
however, that Agent shall not be required to take any action which exposes
Agent to liability or which is contrary to this Agreement or the Security
Documents or applicable law unless Agent is furnished with an
indemnification reasonably satisfactory to Agent with respect thereto.
14.2 Nature of Duties
Agent shall have no duties or responsibilities except those expressly set
forth in this Agreement and the Security Documents. Neither Agent nor any
of its officers, directors, employees or agents shall be (i) liable for
any action taken or omitted by them as such hereunder or in connection
herewith, unless caused by their gross negligence (but not mere
negligence) or wilful misconduct, or (ii) responsible in any manner for
any recitals, statements, representations or warranties made by any
Borrower, European or U.S. Guarantor or any officer thereof contained in
this Agreement, or in any of the Security Documents or in any certificate,
report, statement or other document referred to or provided for in, or
received by Agent under or in connection with, this Agreement or any of
the Security Documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement, or any of
the Security Documents or for any failure of any Borrower, European or
U.S. Guarantor to perform its respective obligations hereunder. Agent
shall not be under any obligation to any Lender to ascertain or to inquire
as to the observance or performance of any of the agreements contained in,
or conditions of, this Agreement or any of the Security Documents, or to
inspect the properties, books or records of any Borrower, European or U.S.
Guarantor or, if applicable, general partner of any Borrower, European or
U.S. Guarantor. The duties of Agent as respects the Advances to any
Borrower, European or U.S. Guarantor shall be mechanical and
administrative in nature; Agent shall not have by reason of this Agreement
a fiduciary relationship in respect of any Lender; and nothing in this
Agreement, expressed or implied, is intended to or shall be so construed
as to impose upon Agent any obligations in respect of this Agreement
except as expressly set forth herein.
14.3 Lack of Reliance
Independently and without reliance upon Agent or any other Lender, each
Lender has made and shall continue to make (i) its own independent
investigation of the financial condition and
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affairs of each Borrower, European and U.S. Guarantor in connection with
the making and the continuance of the Advances hereunder and the taking or
not taking of any action in connection herewith, and (ii) its own
appraisal of the creditworthiness of any Borrower, European and U.S.
Guarantor. Agent shall have no duty or responsibility, either initially or
on a continuing basis, to provide any Lender with any credit or other
information with respect thereto, whether coming into its possession
before making of the Advances or at any time or times thereafter except as
shall be provided by an Borrower, European and U.S. Guarantor pursuant to
the terms hereof. Agent shall not be responsible to any Lender for any
recitals, statements, information, representations or warranties herein or
in any agreement, document, certificate or a statement delivered in
connection with or for the execution, effectiveness, genuineness,
validity, enforceability, collectability or sufficiency of this Agreement
or any Security Document, or of the financial condition of each Borrower,
European and U.S. Guarantor, or be required to make any inquiry concerning
either the performance or observance of any of the terms, provisions or
conditions of this Agreement, the Security Documents or the financial
condition of each Borrower, European and U.S. Guarantor, or the existence
of any Event of Default or any Default.
Agent may resign on sixty (60) days' written notice to each of Lenders and
the Borrowing Agent and upon such resignation, the Required Lenders will
promptly designate a successor Agent reasonably satisfactory to the
Borrowing Agent.
Any such successor Agent shall succeed to the rights, powers and duties of
Agent, and the term "Agent" shall mean such successor agent effective upon
its appointment, and the former Agent's rights, powers and duties as Agent
shall be terminated, without any other or further act or deed on the part
of such former Agent. After any Agent's resignation as Agent, the
provisions of this Section 14 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this
Agreement.
14.4 Certain Rights of Agent
If Agent shall request instructions from Lenders with respect to any act
or action (including failure to act) in connection with this Agreement or
any Security Document, Agent shall be entitled to refrain from such act or
taking such action unless and until Agent shall have received instructions
from the Required Lenders; and Agent shall not incur liability to any
Person by reason of so refraining. Without limiting the foregoing, Lenders
shall not have any right of action whatsoever against Agent as a result of
its acting or refraining from acting hereunder in accordance with the
instructions of the Required Lenders.
14.5. Reliance
Agent shall be entitled to rely, and shall be fully protected in relying,
upon any note, writing, resolution, notice, statement, certificate, telex,
teletype or telecopier message, cablegram, order or other document or
telephone message believed by it to be genuine and correct and to have
been signed, sent or made by the proper person or entity, and, with
respect to all legal matters pertaining to this Agreement and the Security
Documents and its duties hereunder, upon advice of counsel selected by it.
Agent may employ agents and attorneys-in-fact and shall not be liable for
the default or misconduct of any such agents or attorneys-in-fact selected
by Agent with reasonable care.
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14.6 Notice of Default
Agent shall not be deemed to have knowledge or notice of the occurrence
of any Default or Event of Default hereunder or under the Security
Documents, unless Agent has received notice from a Lender or any
Borrower, European and U.S. Guarantor referring to this Agreement or the
Security Documents, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the event that
Agent receives such a notice, Agent shall give notice thereof to Lenders.
Agent shall take such action with respect to such Default or Event of
Default as shall be directed by the Required Lenders; provided, that,
unless and until Agent shall have received such directions, Agent may
(but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of Lenders.
14.7 Indemnification
To the extent Agent is not reimbursed and indemnified by the Borrowers,
European or U.S. Guarantors, each Lender will reimburse and indemnify
Agent in proportion to its respective portion of the Advances (or, if no
Advances are outstanding, according to its Commitment Percentage), from
and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of
any kind or nature whatsoever which may be imposed on, incurred by or
asserted against Agent in performing its duties hereunder, or in any way
relating to or arising out of this Agreement or any Security Document;
provided that, Lenders shall not be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from Agent's wilful
misconduct or gross (not mere) negligence.
14.8 Agent in its Individual Capacity
With respect to the obligation of Agent to lend under this Agreement, the
Advances made by it shall have the same rights and powers hereunder as
any other Lender and as if it were not performing the duties as Agent
specified herein; and the term "Lender" or any similar term shall, unless
the context clearly otherwise indicates, include Agent in its individual
capacity as a Lender. Agent may engage in business with any Borrower,
European and U.S. Guarantor as if it were not performing the duties
specified herein, and may accept fees and other consideration from any
Borrower, European and U.S. Guarantor for services in connection with
this Agreement or otherwise without having to account for the same to
Lenders.
14.9 Delivery of Documents
To the extent Agent receives documents and information from any Borrower,
European and U.S. Guarantor pursuant to the terms of this Agreement,
Agent will promptly furnish such documents and information to Lenders.
14.10 Borrowers Undertaking to Agent
Without prejudice to their respective obligations to the Lenders under
the other provisions of this Agreement, each Borrower hereby undertakes
with Agent to pay to Agent from time to time on demand all amounts from
time to time due and payable by it for the account of Agent or the
Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall pro
tanto satisfy the Borrowers' obligations
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to make payments for the account of the Lenders or the relevant
one or more of them pursuant to this Agreement.
15 MISCELLANEOUS
15.1 Jurisdiction
(a) Submission
For the benefit of each of the Agent and the Lender, each Borrower,
European and U.S. Guarantor agrees that the courts of England have
jurisdiction to settle any disputes in connection with this
Agreement and accordingly submits to the jurisdiction of the English
courts.
(b) Service of process
(i) Each Borrower, European and U.S. Guarantor undertakes to
appoint an agent for service of process relating to any
proceedings before the English courts in connection with this
Agreement within 30 days from the date hereof
(ii) Without prejudice to any other mode of service, each Borrowers,
European and U.S. Guarantor:-
(a) agrees that failure by a process agent to notify the
relevant Borrower, European and U.S. Guarantor of the
process will not invalidate the proceedings concerned; and
(b) consents to the service of process relating to any such
proceedings by prepaid posting of a copy of this process
to its address for the time being applying under Section
15.5.
(c) Forum convenience and enforcement abroad
Each Borrower, European and U.S. Guarantor:-
(i) waives objection to the English courts on grounds of
inconvenient forum or otherwise as regards proceedings in
connection with this Agreement.
(ii) agrees that a judgment or order of an English court in
connection with this Agreement is conclusive and binding on it
and may be enforced against it in the courts of any other
jurisdiction.
(d) Non-exclusivity
Nothing in this Section 15.1 limits the right of the Agent or any
Lender to bring proceedings against a Borrower, European and U.S.
Guarantor in connection with this Agreement:-
(i) in any other court of competent jurisdiction; or
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(ii) concurrently in more than one jurisdiction.
(e) Governing Law
This Agreement is governed by English law.
15.2 Entire Understanding
(a) This Agreement and the documents executed concurrently herewith contain the
entire understanding between the Borrowers, European and U.S. Guarantors,
Agent and each Lender and supersedes all prior agreements and
understandings, if any, relating to the subject matter hereof. Any
promises, representations, warranties or guarantees not herein contained
and hereinafter made shall have no force and effect unless in writing,
signed by each Borrower, European and U.S. Guarantor, Agent's and each
Lender's respective officers. Neither this Agreement nor any portion or
provisions hereof may be changed, modified, amended, waived, supplemented,
discharged, cancelled or terminated orally or by any course of dealing, or
in any manner other than by an agreement in writing, signed by the party to
be charged. Each Borrower, European and U.S. Guarantor acknowledges that
it has been advised by counsel in connection with the execution of this
Agreement and Security Documents and is not relying upon oral
representations or statements inconsistent with the terms and provisions of
this Agreement.
(b) The Required Lenders, Agent with the consent in writing of the Required
Lenders, and each Borrower, European and U.S. Guarantor may, subject to the
provisions of this Section 15.2 (b), from time to time enter into written
supplemental agreements to this Agreement or the Security Documents
executed by the relevant Borrowers, European and U.S. Guarantors, for the
purpose of adding or deleting any provisions or otherwise changing, varying
or waiving in any manner the rights of the Lenders, Agent or any Borrower,
European and U.S. Guarantor thereunder or the conditions, provisions or
terms thereof or waiving any Event of Default thereunder, but only to the
extent specified in such written agreements; provided, however, that no
such supplemental agreement shall, ((x)) amend Sections 6(e), 6(f), 6(g),
6(h) and 7(f) without the consent of 67% of the Lenders or (y) without the
consent of all the Lenders:
(i) increase or decrease the Commitment Percentage of any Lender or the
Maximum Loan Amount or the Advance Rates.
(ii) extend the due date for any amount payable hereunder, or decrease the
rate of interest or reduce any fee payable by the Borrowers, European
and U.S. Guarantors to Agent or Lenders pursuant to this Agreement.
(iii) alter the definition of the term Required Lenders or alter, amend or
modify this Section 15.2(b).
(iv) release any Security Asset during any calendar year having an
aggregate value in excess of $100,000.
(v) change the rights and duties of Agent.
Any such supplemental agreement shall apply equally to each of the Lenders
and shall be binding upon the Borrowers, European and U.S. Guarantors, the
Lenders and Agent and all
<PAGE>
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B3:112290.1
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future holders of the Obligations. In the case of any waiver, the
Borrowers, European and U.S. Guarantors, Agent and the Lenders shall be
restored to their former positions and rights, and any Event of Default
waived shall be deemed to be cured and not continuing, but no waiver of a
specific Event of Default shall extend to any subsequent Event of Default
(whether or not the subsequent Event of Default is the same as the Event of
Default which was waived), or impair any right consequent thereon.
15.3 Successors and Assigns; Participations; New Lenders
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrowers, European and U.S. Guarantors, Agent, each Lender and their
respective successors and assigns, except that no Borrowers, European and
U.S. Guarantor may assign or transfer any of its rights or obligations
under this Agreement without the prior written consent of Agent and
Required Lenders.
(b) Each Borrower, European and U.S. Guarantor acknowledges that in the regular
course of commercial banking business one or more Lenders may at any time
and from time to time assign or transfer sell participating interests in
the Advances to other financial institutions (each such transferee or
purchaser of a participating interest, a "Transferee"). Each Transferee
may exercise all rights of payment (including without limitation rights of
set-off) with respect to the portion of such Advances held by it or other
Obligations payable hereunder as fully as if such Transferee were the
direct holder thereof provided that the Borrowers, European and U.S.
Guarantors shall not be required to pay to any Transferee more than the
amount which they would have been required to pay to the Lender which
granted an interest in its Advances or other Obligations payable hereunder
to such Transferee had such Lender retained such interest in the Advances
hereunder or other Obligations payable hereunder and in no event shall the
Borrowers, European and U.S. Guarantors be required to pay any such amount
arising from the same circumstances and with respect to the same Advances
or other Obligations payable hereunder to both such Lender and such
Transferee. Each Borrower, European and U.S. Guarantor hereby grants to
any Transferee a continuing security interest in any deposits, moneys or
other property actually or constructively held by such Transferee as
security for the Transferee's interest in the Advances.
(c) Any Lender may with the consent of Agent which shall not be unreasonably
withheld or delayed sell, assign or transfer all or any part of its rights
under this Agreement and the Security Documents to one or more additional
banks or financial institutions and one or more additional banks or
financial institutions may commit to make Advances hereunder (each a
"Purchasing Lender"), pursuant to a Commitment Transfer Supplement,
executed by a Purchasing Lender, the transferor Lender, and Agent and
delivered to Agent for recording provided no Purchasing Lender shall be
sold an aggregate commitment of less than $5,000,000. Upon such execution,
delivery, acceptance and recording, from and after the transfer effective
date determined pursuant to such Commitment Transfer Supplement, (i)
Purchasing Lender thereunder shall be a party hereto and, to the extent
provided in such Commitment Transfer Supplement, have the rights and
obligations of a Lender thereunder with a Commitment Percentage as set
forth therein, and (ii) the transferor Lender thereunder shall, to the
extent provided in such Commitment Transfer Supplement, be released from
its obligations under this Agreement, the Commitment Transfer Supplement
creating a novation for that purpose. Such Commitment Transfer Supplement
shall be deemed to amend this Agreement to the extent, and only to the
extent, necessary to reflect the addition of such Purchasing Lender and the
resulting adjustment of the Commitment Percentages arising from the
purchase by such Purchasing
<PAGE>
55
B3:1122390.1
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Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement and the Security Documents. Each
Borrower, European and U.S. Guarantor hereby consents to the addition of
such Purchasing Lender and the resulting adjustment of the Commitment
Percentages arising from the purchase by such Purchasing Lender of all or
a portion of the rights and obligations of such transferor Lender under
this Agreement and the Security Documents. Each Borrower, European and
U.S. Guarantor shall execute and deliver such further documents and do
such further acts and things in order to effectuate the foregoing.
(d) Agent shall maintain at its address a copy of each Commitment Transfer
Supplement delivered to it and a register (the "Register") for the
recordation of the names and addresses of the Advances owing to each
Lender from time to time. The entries in the Register shall be
conclusive, in the absence of manifest error, and each Borrowers,
European and U.S. Guarantor, Agent and Lenders may treat each Person
whose name is recorded in the Register as the owner of the Advance
recorded therein for the purposes of this Agreement. The Register shall
be available for inspection by the Borrowers, European and U.S.
Guarantors, or any Lender at any reasonable time and from time to time
upon reasonable prior notice. Agent shall receive a fee in the amount of
$2500 payable by the applicable Purchasing Lender upon the effective date
of each transfer or assignment to such Purchasing Lender.
(e) Each Borrower, European and U.S. Guarantor authorises each Lender to
disclose to any Transferee or Purchasing Lender and any prospective
Transferee or Purchasing Lender any and all financial information in such
Lender's possession concerning the Borrowers, European and U.S.
Guarantors which has been delivered to such Lender by or on behalf of any
Borrower, European and U.S. Guarantor pursuant to this Agreement or in
connection with such Lender's credit evaluation of Borrowers, European
and U.S. Guarantors.
15.4. Indemnity
Each Borrower, European and U.S. Guarantor shall indemnify Agent and each
Lender and their officers, employees and agents from and against any and
all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements of any kind or nature
whatsoever (including, without limitation, fees and disbursements of
counsel) which may be imposed on, incurred by, or asserted against Agent
or any Lender in any litigation, proceeding or investigation instituted
or conducted by any governmental agency or instrumentality or any other
Person with respect to any aspect of, or any transaction contemplated by,
or referred to in, or any matter related to, this Agreement, whether or
not Agent or any Lender is a party thereto, except to the extent that any
of the foregoing arises out of the wilful misconduct or gross (not mere)
negligence of the party being indemnified.
15.5 Notice
Any notice or request hereunder may be given to any Borrower, European
and U.S. Guarantor or to Agent or any Lender at their respective
addresses set forth below or at such other address as may hereafter be
specified in a notice designated as a notice of change of address under
this Section. Any notice or request hereunder shall be given by (a) hand
delivery, (b) overnight courier, (c) registered or certified mail, return
receipt requested, (d) telex or telegram, subsequently confirmed by
registered or certified mail, or (e) telecopy to the number set out below
(or such other number as may hereafter be specified in a notice
designated as a notice of change of address) with telephone communication
to a duly authorised officer of the recipient confirming its receipt as
subsequently confirmed by registered or certified mail. Any notice or
<PAGE>
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B3:112290.1
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other communication required or permitted pursuant to this Agreement shall
be deemed given (a) when personally delivered to any officer of the party
to whom it is addressed, (b) on the earlier of actual receipt thereof or
three (3) days following posting thereof by certified or registered mail,
postage prepaid, or (c) upon actual receipt thereof when sent by a
recognised overnight delivery service or (d) upon actual receipt thereof
when sent by telecopier to the number set forth below with telephone
communication confirming receipt and subsequently confirmed by registered,
certified or overnight mail to the address set forth below, in each case
addressed to each party at its address set forth below or at such other
address as has been furnished in writing by a party to the other by like
notice:
(i) If to Agent BNY Financial Limited
at: 2nd Floor,
Leo House,
Railway Approach
Wallington,
Surrey SM6 0DY
Telephone: 0181 240 5806
Telecopier: 0181 240 5801
with a copy to: Allen & Overy
One New Change
London EC4M 9QQ
Telephone: 44 171 330 3000
Telecopier: 44 171 330 9999
and
Hahn & Hessen LLP
350 Fifth Avenue
New York, New York 10118
Attention: Steven J. Seif, Esq.
Telephone: (212) 736-1000
Telecopier: (212) 594-7167
(ii) If to a Lender other than Agent, as specified on the signature pages
hereof;
(iii) If to Borrowers,
European and U.S.
Guarantors: c/o Radnor Holdings Corporation
Three Radnor Corporate Center
Suite 300
100 Matsonford Road
Radnor, Pennsylvania 19087
Attention: Michael T. Kennedy
Telephone: (610) 995-2568
Telecopier: (610) 995-2697
with a copies to Duane Morris & Heckscher
One Liberty Place
<PAGE>
57
B3:112290.1
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Philadelphia, Pennsylvania 19103
Attention: Stephen Teaford, Esq.
Telephone: (215) 979-1220
Telecopier: (215) 979-1020
15.6 Survival
The obligations of Borrowers, European and U.S. Guarantors under Sections
2.2(d), 3.5, 3.6, 3.7, 14.7 and 15.4 shall survive termination of this
Agreement and the Security Documents and payment in full of the
Obligations.
15.7 Severability
If any part of this Agreement is contrary to, prohibited by, or deemed
invalid under applicable laws or regulations, such provision shall be
inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and
shall be given effect so far as possible.
15.8 Expenses
All costs and expenses including, without limitation, reasonable
attorneys' fees and disbursements incurred by Agent, any Lender and Agent
on behalf of the Lenders (a) in all efforts made to enforce payment of
any Obligation or effect collection of any Security Asset, or (b) in
connection with the entering into, modification, amendment,
administration and enforcement of this Agreement or any consents or
waivers hereunder and all related agreements, documents and instruments
or any change in the currency of a country or the operation of Section
2.4(d), or (c) in instituting, maintaining, preserving, enforcing and
foreclosing on Agent's security interest in or Lien on any of the
Security Assets, whether through judicial proceedings or otherwise, or
(d) in defending or prosecuting any actions or proceedings arising out of
or relating to Agent's or any Lender's transactions with any Borrower,
European and U.S. Guarantor, or (e) in connection with any advice given
to Agent or any Lender with respect to its rights and obligations under
this Agreement and all related agreements, may be charged to Borrowers,
European and U.S. Guarantors' accounts and shall be part of the
Obligations.
15.9 Injunctive Relief
Each Borrower, European and U.S. Guarantor recognises that, in the event
any Borrower, European and U.S. Guarantor fails to perform, observe or
discharge any of its obligations or liabilities under this Agreement, any
remedy at law may prove to be inadequate relief to Agent and the Lenders;
therefore, Agent and each Lender, if Agent or such Lender so requests,
shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving that actual damages are not an
adequate remedy.
15.10 Consequential Damages
Neither Agent nor Lenders nor any agent or attorney for any of them shall
be liable to any Borrower, European and U.S. Guarantor for consequential
damages arising from any breach of contract, tort or other wrong relating
to the establishment, administration or collection of the Obligations.
<PAGE>
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B3:112290.1
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15.11 Captions
The captions at various places in this Agreement are intended for
convenience only and do not constitute and shall not be interpreted as
part of this Agreement.
15.12 Counterparts; Telecopied Signatures
This Agreement may be executed in any number of and by different parties
hereto on separate counterparts, all of which, when so executed, shall be
deemed an original, but all such counterparts shall constitute one and
the same agreement. Any signature delivered by a party by facsimile
transmission shall be deemed to be an original signature hereto.
15.13 Construction
The parties acknowledge that each party and its counsel have reviewed
this Agreement and that the normal rule of construction to the effect
that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement or any
amendments, schedules or exhibits thereto.
15.14 Language
Each notice, document, instrument, certificate and statement referred to
herein or to be delivered hereunder shall be in the English language or
accompanied by an English translation thereof certified as accurate by an
officer of the relevant Borrower, European and U.S. Guarantor. In the
case of conflict and unless the Agent otherwise specifies, the English
language version of any such document shall prevail.
15.15 Currency Indemnity
(a) If:
(i) any amount payable by a Borrower, European and U.S. Guarantor
hereunder or in connection herewith is received by the Agent or any
Lender in a currency (the "Payment Currency") other than that agreed
to be payable hereunder (the "Agreed Currency"), whether as a result
of any judgement or order or the enforcement thereof, the
liquidation of such Borrower, European and U.S. Guarantor or
otherwise howsoever; and
(ii) the amount produced by converting the Payment Currency so received
into the Agreed Currency is less than the relevant amount of the
Agreed Currency.
then such Borrower, European and U.S. Guarantor shall indemnify each of
the Agent and the Lenders for the deficiency and any loss sustained as a
result. Such conversion shall be made at such prevailing rate of
exchange, on such date and in such market as is determined by the Agent,
or the relevant Lender as being most appropriate for such conversion.
Such Borrower, European and U.S. Guarantor shall in addition pay the
costs of such conversion.
(b) The above indemnity shall constitute separate and independent obligations
of each Borrower, European and U.S. Guarantor from its other obligations
hereunder and shall apply irrespective of any indulgence granted by the
Agent or any Lender.
<PAGE>
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B3:112290.1
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16. BORROWING AGENCY
16.1 Borrowing Agency Provisions
(a) Each Borrower hereby irrevocably designates Borrowing Agent to be its
attorney and agent and in such capacity to borrow, sign and endorse
notes, and execute and deliver all instruments, documents, writings and
further assurances now or hereafter required hereunder and to receive any
notice hereunder on behalf of such Borrower, and hereby authorises Agent
to pay over or credit all loan proceeds hereunder in accordance with the
request of Borrowing Agent.
(b) The handling of this credit facility as a co-borrowing facility with a
borrowing agent in the manner set forth in this Agreement is solely as an
accommodation to the Borrowers and at their request. Neither Agent nor
any Lender shall incur liability to the Borrowers as a result thereof. To
induce Agent and Lenders to do so and in consideration thereof, each
Borrower hereby indemnifies Agent and each Lender and holds Agent and
each Lender harmless from and against any and all liabilities, expenses,
losses, damages and claims of damage or injury asserted against Agent or
any Lender by any Person arising from or incurred by reason of the
handling of the financing arrangements of Borrowers as provided herein,
reliance by Agent or any Lender on any request or instruction from
Borrowing Agent or any other action taken by Agent or any Lender with
respect to this Section 16.1 except due to wilful misconduct or gross
(not mere) negligence by the indemnified party.
(c) Each Borrower, European and U.S. Guarantor shall make payment upon the
maturity of its respective Obligations by acceleration or otherwise, and
such obligation and liability on the part of each Borrower, European and
U.S. Guarantor shall in no way be affected by any extensions, renewals
and forbearance granted to Agent or any Lender to any Borrower, European
and U.S. Guarantor, failure of Agent or any Lender to give any Borrower,
European and U.S. Guarantor any notice, any failure of Agent or any
Lender to pursue or preserve its rights against any Borrower, European
and U.S. Guarantor, the release by Agent or any Lender of any Security
Asset now or thereafter acquired from any Borrower, European and U.S.
Guarantor, and such agreement by each Borrower, European and U.S.
Guarantor to pay upon any notice issued pursuant thereto is unconditional
and unaffected by prior recourse by Agent or any Lender to the other
Borrowers, European and U.S. Guarantors or any Security Asset for such
Borrowers, European and U.S. Guarantors Obligations or the lack thereof.
16.2 Waiver of Subrogation
Each Borrower, European and U.S. Guarantor expressly waives any and all
rights of subrogation, reimbursement, indemnity, exoneration,
contribution of any other claim which it may now or hereafter have
against the other Borrowers, European and U.S. Guarantors or other Person
directly or contingently liable for the Obligations hereunder, or against
or with respect to the other Borrowers, European and U.S. Guarantors
property (including, without limitation, any property which is Security
Asset for the Obligations), arising from the existence or performance of
this Agreement, until termination of this Agreement and repayment in full
of the Obligations.
Each of the parties has signed this Agreement as of the day and year
first above written.
<PAGE>
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B3:112290.1
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SIGNATORIES
As Borrowers and Guarantors
STYROCHEM EUROPE (NETHERLAND) B.V.
By: M. KENNEDY
Michael T. Kennedy
Managing Director A
STYROCHEM FINLAND OY
By: M. KENNEDY
Michael T. Kennedy
Director
THERMISOL FINLAND OY
By: M. KENNEDY
Michael T. Kennedy
Director
THERMISOL SWEDEN AB
By: M. KENNEDY
Michael T. Kennedy
Director
As Borrower
THERMISOL DENMARK APS
By: M. KENNEDY
Michael T. Kennedy
Director
<PAGE>
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B3:112290.1
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As Guarantors
WINCUP HOLDINGS, INC.
By: M. KENNEDY
Michael T. Kennedy
President
RADNOR CHEMICAL CORPORATION
By: M. KENNEDY
Michael T. Kennedy
President
STYROCHEM U.S., INC.
By: M. KENNEDY
Michael T. Kennedy
President
RADNOR HOLDINGS CORPORATION
By: M. KENNEDY
Michael T. Kennedy
President
<PAGE>
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B3:112290.1
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As Lender and Agent
BNY FINANCIAL LIMITED
By: A. HOOPER
2nd Floor,
Leo House,
Railway Approach
Wallington,
Surrey SM6 0DY
England
Commitment Percentage: 50%
As Lender
NATIONSBANK, N.A.
By: O. CRANZ III
New Broad Street House
35 New Broad Street
London EC2M 1NH
Loan Administration Contact: Nick Garrett
Tel: 0171 282 6836
Fax: 0171 282 6831
Commitment Percentage: 50%
<PAGE>
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Annex 1
COMMITMENT TRANSFER SUPPLEMENT
COMMITMENT TRANSFER SUPPLEMENT, dated [ ], among [
] (the "Transferor Lender"), [ ]
("Purchasing Lender"), and BNY FINANCIAL LIMITED, as agent for the Lenders under
the Revolving Credit Agreement described below (in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, this Commitment Transfer Supplement is being executed and delivered in
accordance with Section 15.3 of the Supplement Revolving Multicurrency Credit
Agreement dated 10th December, 1997 between STYROCHEM EUROPE (THE NETHERLANDS)
B.V. ("StyroChem Europe"), STYROCHEM FINLAND OY ("StyroChem Finland"), THERMISOL
DENMARK APS ("Thermisol Denmark"), THERMISOL SWEDEN AB ("Thermisol Sweden"), and
THERMISOL FINLAND Oy ("Thermisol Finland"), WINCUP HOLDINGS, L.P. ("WINCUP"),
WINCUP HOLDINGS, INC. ("Holdings"), RADNOR CHEMICAL CORPORATION ("Acquisition"),
STYROCHEM U.S., INC. ("StyroChem") and RADNOR HOLDINGS CORPORATION ("Radnor")
(StyroChem Europe, StyroChem Finland, Thermisol Denmark, Thermisol Sweden,
Thermisol Finland, WINCUP, Holdings, Acquisition, StyroChem and Radnor each an
"Obligor" and jointly and severally, the "Obligors"), BNY FINANCIAL LIMITED
("BNY"), each of the other financial institutions named in or which hereafter
become a party to the Loan Agreement (BNY and such other financial institutions,
the "Lenders") and the Agent (as same may be amended, supplemented or otherwise
modified in accordance with the terms hereof, the "Loan Agreement");
WHEREAS, Purchasing Lender wishes to become Lender party to the Loan Agreement;
and
WHEREAS, the Transferor Lender is selling and assigning to Purchasing Lender
rights, obligations and commitments under the Loan Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. All capitalised terms used herein which are not defined shall have the
meanings given to them in the Loan Agreement.
2. Upon receipt by the Agent of four counterparts of this Commitment Transfer
Supplement, to each of which is attached a fully completed Schedule I, and
each of which has been executed by the Transferor Lender and Agent, Agent
will transmit to Transferor Lender and Purchasing Lender a Transfer
Effective Notice, substantially in the form of Schedule II to this
Commitment Transfer Supplement (a "Transfer Effective Notice"). Such
Transfer Effective Notice shall set forth, inter alia, the date on which
the transfer effected by this Commitment Transfer Supplement shall become
effective (the "Transfer Effective Date"), which date shall not be earlier
than the first Business Day following the date such Transfer Effective
Notice is received. From and after the Transfer Effective Date, Purchasing
Lender shall be a Lender party to the Loan Agreement for all purposes
thereof.
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3. At or before 12:00 Noon (London time) on the Transfer Effective Date
Purchasing Lender shall pay to Transferor Lender, in immediately available
funds, an amount equal to the purchase price, as agreed between Transferor
Lender and such Purchasing Lender (the "Purchase Price"),of the portion of
the Advances being purchased by such Purchasing Lender (such Purchasing
Lender's "Purchased Percentage") of the outstanding Advances and other
amounts owing to the Transferor Lender under the Loan Agreement. Effective
upon receipt by Transferor Lender of the Purchase Price from a Purchasing
Lender, Transferor Lender hereby irrevocably sells, assigns and transfers
to such Purchasing Lender, without recourse, representation or warranty,
and Purchasing Lender hereby irrevocably purchases, takes and assumes from
Transferor Lender, such Purchasing Lender's Purchased Percentage of the
Advances and other amounts owing to the Transferor Lender under the Loan
Agreement together with all instruments, documents and collateral security
pertaining thereto.
4. Transferor Lender has made arrangements with Purchasing Lender with respect
to (i) the portion, if any, to be paid, and the date or dates for payment,
by Transferor Lender to such Purchasing Lender of any fees heretofore
received by Transferor Lender pursuant to the Loan Agreement prior to the
Transfer Effective Date and (ii) the portion, if any, to be paid, and the
date or dates for payment, by such Purchasing Lender to Transferor Lender
of fees or interest received by such Purchasing Lender pursuant to the Loan
Agreement from and after the Transfer Effective Date.
5. (a) All principal payments that would otherwise be payable from and
after the Transfer Effective Date to or for the account of Transferor
Lender pursuant to the Loan Agreement shall, instead, be payable to or
for the account of Transferor Lender and Purchasing Lender, as the
case may be, in accordance with their respective interests as
reflected in this Commitment Transfer Supplement.
(b) All interest, fees and other amounts that would otherwise accrue for
the account of Transferor Lender from and after the Transfer Effective
Date pursuant to the Loan Agreement shall, instead, accrue for the
account of, and be payable to, Transferor Lender and Purchasing
Lender, as the case may be, in accordance with their respective
interests as reflected in this Commitment Transfer Supplement. In the
event that any amount of interest, fees or other amounts accruing
prior to the Transfer Effective Date was included in the Purchase
Price paid by any Purchasing Lender, Transferor Lender and Purchasing
Lender will make appropriate arrangements for payment by Transferor
Lender to such Purchasing Lender of such amount upon receipt thereof
from Borrowers.
6. Concurrently with the execution and delivery hereof, Transferor Lender will
provide to Purchasing Lender conformed copies of the Loan Agreement and all
related documents delivered to Transferor Lender.
7. Each of the parties to this Commitment Transfer Supplement agrees that at
any time and from time to time upon the written request of any other party,
it will execute and deliver such further documents and do such further acts
and things as such other party may reasonably request in order to effect
the purposes of this Commitment Transfer Supplement.
8. By executing and delivering this Commitment Transfer Supplement, Transferor
Lender and Purchasing Lender confirm to and agree with each other and Agent
and Lenders as follows:
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B3:112290.1
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(i) other than the representation and warranty that it is the legal and
beneficial owner of the interest being assigned hereby free and clear
of any adverse claim, Transferor Lender makes no representation or
warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection
with the Loan Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Loan
Agreement or any other instrument or document furnished pursuant
thereto;
(ii) Transferor Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Borrowers
or the performance or observance by Borrowers of any of their
Obligations under the Loan Agreement or any other instrument or
document furnished pursuant hereto;
(iii) Purchasing Lender confirms that it has received a copy of the Loan
Agreement, together with copies of such financial statements and such
other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Commitment
Transfer Supplement;
(iv) Purchasing Lender will, independently and without reliance upon
Agent, Transferor Lender or any other Lenders and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking
action under the Loan Agreement;
(v) Purchasing Lender appoints and authorises Agent to take such action
as agent on its behalf and to exercise such powers under the Loan
Agreement as are delegated to the Agent by the terms thereof;
(vi) Purchasing Lender agrees that it will perform all of its respective
obligations as set forth in the Loan Agreement to be performed by
each as a Lender; and
9. Schedule I hereto sets forth the revised Commitment Percentages of
Transferor Lender and the Commitment Percentage of Purchasing Lender as
well as administrative information with respect to Purchasing Lender.
10. This Commitment Transfer Supplement shall be governed by, and construed in
accordance with, the laws of England.
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IN WITNESS WHEREOF, the parties hereto have caused this Commitment Transfer
Supplement to be executed by their respective duly authorised officers on the
date set forth above.
----------------------------
as Transferor Lender
By:
-------------------------
Name:
-----------------------
Title:
----------------------
----------------------------
as a Purchasing Lender
By:
-------------------------
Name:
-----------------------
Title:
----------------------
BNY FINANCIAL LIMITED
as Agent
By:
-------------------------
Name:
-----------------------
Title:
----------------------
Consented to:
WINCUP HOLDINGS L.P.
By:
-------------------------------
Name:
Its:
WINCUP HOLDINGS, INC.
By:
-------------------------------
Name:
Its:
<PAGE>
67
B3:112290.1
- --------------------------------------------------------------------------------
RADNOR CHEMICAL CORPORATION
By:
---------------------------
Name:
Its:
STYROCHEM U.S., INC.
By:
---------------------------
Name:
Its:
RADNOR HOLDINGS CORPORATION
By:
---------------------------
Name:
Its:
STYROCHEM EUROPE (THE NETHERLANDS) B.V.
By:
---------------------------
Name:
Its:
STYROCHEM FINLAND OY
By:
---------------------------
Name:
Its:
<PAGE>
68
B3:112290.1
- --------------------------------------------------------------------------------
THERMISOL DENMARK APS
By:
-----------------------------
Name:
Its:
THERMISOL FINLAND OY
By:
-----------------------------
Name:
Its:
THERMISOL SWEDEN AB
By:
-----------------------------
Name:
Its:
<PAGE>
69
B3:112290.1
- --------------------------------------------------------------------------------
SCHEDULE I TO COMMITMENT TRANSFER SUPPLEMENT
LIST OF OFFICES, ADDRESSES FOR NOTICES AND COMMITMENT AMOUNTS
[Transferor Lender] Revised Commitment Amount $
Revised Commitment
Percentage:
[Purchasing Lender] Commitment Amount $
Commitment Percentage:
Addresses for Notices
Attention:
Telephone:
Telecopier:
<PAGE>
70
B3:112290.1
- --------------------------------------------------------------------------------
SCHEDULE II TO COMMITMENT TRANSFER SUPPLEMENT
[Form of Transfer Effective Notice]
To: [ ], as Transferor Lender and
[ ], as Purchasing Lender:
The undersigned, as Agent under the Supplement Revolving Multicurrency Credit
Agreement dated 10 December, 1997 between each of the Obligors therein defined,
BNY FINANCIAL LIMITED ("BNY"), each of the other financial institutions named in
or which hereafter become a party to the Loan Agreement (BNY and such other
hereafter become a party to the Loan Agreement (BNY and such other financial
institutions, the "Lenders") and BNY as agent for the Lenders, acknowledges
receipt of four (4) executed counterparts of a completed Commitment Transfer
Supplement in the form attached hereto. [Note: Attach copy of Commitment
Transfer Supplement.] Terms defined in such Commitment Transfer Supplement are
used herein as therein defined.
Pursuant to such Commitment Transfer Supplement, you are advised that the
Transfer Effective Date will be [Insert date of Transfer Effective Notice].
BNY FINANCIAL LIMITED,
as Agent
By:
-----------------------
Title:
--------------------
ACCEPTED FOR RECORDATION
IN REGISTER:
<PAGE>
71
B3:112290.1
- --------------------------------------------------------------------------------
Annex 2
Subsidiaries
Name of Borrower: Styrochem Europe (The Netherlands) B.V.
Subsidiaries: StyroChem Finland Oy (Finnish Corporation), Thermisol Denmark
Aps (Netherlands Corporation), Thermisol Finland Oy (Finnish
Corporation), and Thermisol Sweden AB (Swedish Corporation).
Name of Borrower: StyroChem Finland Oy
Subsidiaries: None
Name of Borrower: Thermisol Denmark Aps
Subsidiaries: None
Name of Borrower: Thermisol Sweden AB
Subsidiaries: None
Name of Borrower: Thermisol Finland Oy
Subsidiaries: None
<PAGE>
Exhibit 10.77
OFFICE LEASE AGREEMENT
1. VUOKRANANTAJA
Nimi+ ja osoite Keha Rakentajat Oy
32800 Kokemaki
Puhelin 949-222 760
Telefax 939-5460188
Pankkiyhteys OP, Vimali - 21870
2. VUOKRALAINEN /VUOKRALASET
Nimi ja osoite Neste Oy Polystyreeni
Puhdistamontie 11
32800 Kokemaki 11
Puhelin 939-5460911
Telefax 939-5460078
Lyhytunnus ja syntymaaika
3. VUOKRAKOHDE
Osoite Tyomaa Toimisto Koppi
Vuokrattavat tilat ja niiden kayttotarkoitus Toimisto
Pita-ala noin m2
Huoneiston kaytosta , kunnosta, kunnossapidosta ja/tai muutostoista on sovittu
liiteessa Liite Viitannee myos
siirrehavyytech
Huoneistosta on laasittu kuntotarkastuslomake
4. Vuokra-aika
1) Maaraaikainen
Alkamispaiva 1.7.1995
Paattymispaiva Toistaisetsi
hallintaoikeuden siirtymispaiva
2) Toistaiseksi viomassa X
Alkamispaiva 1.7-95
<PAGE>
Irtisanopmisaika 3KK
hallintaoikeuden siirtymispaiva 1.7-95
Maaraaikainen sopimus paattyy taman irtisanomasta sovittuna paattymispaivana.
Mikali osapuolet haluavat sopia vuokrasopimuksen jatkamisesta nyt sovitun
vuokrakausen paatyttya, merkitaan rasti viereiseen ruutuun.
Sopimus jatkuu nyt sovitun vuokrakausen paatyttya. Ellei sen paattymisesta
ilmoiteta _ kk ennen vuokrakauden paattymista. Talloin tennen vuokrakauden
paattymista. Talloin taytetaan joko kohta 1a tai 1b
1a) sopimus jatkuu kunkin vuokrakauden paatyttya __ kerrallaan, ellei sen
paattymisesta ilmoiteta __ kk ennen kunkin voukrakauden paattymista.
1b) Sopimus jarkuu nyt sovitun vuokrakauden paatyttya toistaiseksi
irtisanomisaika
5. VUOKRA
Vuokra 1000:-+ALV
Vuokranmaksukuukausi 1kk Muu.mika Erapaiva: X UHVL:n mukaan, X muu, mika 5
- -
Huoneistosta on hakeudettu arvonlisaverovelvolliseksi, jolloin sovittuun
vuokraan lisataan arvonlisavero ulloinkin voimassa olevan verokannan mukaisesti
X
- -
Viivastyskorko korkolain mukainen muu, mika% Erilliskorvaukset ja niiden
---- ----
korottaminen
Vuokralainen maksaa vuokraennakkoa/ennakon maara/ennakon maksupaiva/ennakko
hyvitetaan: ensimmaisesta vuokrasta, viimesesta vuokrasta
-- --
6. VAKUUS
Taman sopmucsers velovitteiden tayttamisen vakuudeksi/vakuuden
arteja/vuikransantajea/vuokraianen/Vakuus ja sen sivo/vilmeinen tosmitusparva
7. VUOKRAN KOROTTAMINEN
Indeksiehto/Vuokra sidotann/Einkustannosindeksun/Muuhun
inek/Perusindek/Pisteluku/Tarkistusajankonta/Muu perusie/Vuokra tarkisvotaan
vuosittain/muu, mika
8. ALLEKIRJOITUKSET
Vakuutamme tutstpemm taman lornakkeen kanropuolella olein ehtohn seka/Muista
ehdorsta on sovittu liiterss/Pakk ja aike/Litteiden numerot/Vuokranataipan
alleknotus ja nimen selvennys
<PAGE>
VUOKRASOPIMUKSEN EHDOT
Ellei sopimuksessa, naissa ehdoissa tai liittessa ole muuta sovittu, sopimukseen
sovelletaan lakia liikehuoneiston vuokrauksesta (LHVL 482/95).
1. Vuokralainen on todennut huoneiston laitteineen olevan siina kunnossa, kuin
paikalliset olosuhteet huomioon ottaen kohtuudella voi vaatia, ja hyvaksyy
sen siina kunnossa kun se nyt on, jollei huoneiston kunnosta ja/tai
kunnossapidosta seka muutostoista ole sovittu erikseen liitteessa.
2. Vuokralainen on velvollinen hoitamaan huoneistoa huolellisesti ja
huolehtimaan siita, etta huoneiston kayttajat noudattavat kiinteston
jarjestysmaarayksia ja muita huoneiston kayttoon sisaltyvia maarayksia seka
mita muutoin terveyden, siisteyden ja jarjestyksen sailymiseksi on saadetty
tai maaratty. Vuokralainen saa ilman vuokranantajan ja taloyhtion lupaa
kiinnittaa kilpia tms. talon seiniin ja muihin paikkoihin.
3. Vuokran maarassa on otettu huomioon, etta vuokralaisella on korjaus- ja
kunnossapitovastuu. Vuokralainen vastaa oman toimitansa huoneistolle
asetttamien vaatimusten tayttamisesta ja sen vuokrahuoneistolle
aiheuttamasta lulutuksesta, rasituksesta ja korjaustarpeesta.
4. Vuokralainen ei saa suorittaa huoneistossa muutos- tai parannustoita ilman
vuokranantajan lupaa.
5. Vuokrasuhteen kestaessa vuoranantaja on oikeutettu tekemaan talossa ja
huoneistossa tavanmukaisia korjaus- ja muutostoita ilmoitettuaan siita
etukateen vuokralaiselle. Olennaista haittaa tai hairiota aiheuttaviin
korjaus- ja muutostoihin vuokranantaja saa ryhtya ilmoitettuaan siita kahta
(2) kuukautta ennen sanottua ajankohtaa. Tallaisessa tapauksessa
vuokralaisella ei ole sopimuksen purkuoikeutta.
6. Vuokralaisella on oikeus saada vapautus vuokran maksamisesta tai vuokra
kohtuullisesti alennetuksi siita ajasta, jona huoneistoa ei ole voitu
kayttaa tai jona huoneisto ei ole ollut vaadittavassa tai sovitussa
kunnossa vain, jos se johtuu vuoranantajan syyksi luettavasta
laiminlyonnista tai muusta seikasta.
7 Vuokralainen ei saa ilman vuokranantajan kirjallista lupaa siirtaa
vuokraoikeuttaan tai luopvuttaa huoneiston tai sen osan hallintaa toiselle
eika ottaa huoneiston alivuokralaisia. Tama koskee myos liikkeen
luovutustilannetta.
8. Julkisen viranomaisen taman sopimuksen tekemisen jalkeen maaraamat
mahdolliset uudet veron ja maksut voidaan vuokranantajan ilmoituksesta
lisata vuokraan. Vuokralaisen osuus kiinteistolle maarattavasta verosta tai
maksusta laketaan saman prosenttiosuuden mukaan, kuin vuokralaisen kaytossa
olevan tilan huoneistoalan suhde on kiinteiston rakennusten koko
huoneistoalasta.
9. Jos vuokranantaja juotuu vuokralaisen toiminpiteiden tai laiminlyontien
vuoksi maksamaan palautuksia tekemistaan arvonlisaverovahennyksista,
vuokralainen on velvolinen korvaamaan vuokranantajalle vastaavan maaran.
10. Tarkistettua vuokraa maksetaan tarkistusajankohdasta lukien.
VUOKRASOPIMUKSEN TAYTTOOHJEET
3. Vuokrauskohde
Vuokrattavat tilat ja niiden kayttotarkoitus
Merkitaan vuokrauskohteen tarkka kayttotarkoitus. Vuokrauskohteen sisaltaessa
erilaisiin kayttotarkoituksiin varattuja tiloja ne mainitaan kaikki.
Yksiloidaan vuokrattavat tilat riittavalla tarkuudella; esim. Huoneistojen
lukumaara. Tarvittaessa voidaan kayttaa erillista piirrosta, jossa tilat on esim
rajattu punakynalla.
Myos vuokrattavien tilojen kaytosta voidaan sopia. Vuokrasopimuksessa voidaan
sopia esim. liikeen aukioloajoista.
<PAGE>
4. Vuokra-aika
Sopimuksen kesto
Kohdat 4,1 ja 4 2 ovat vaihtoehtoiset, vain toinen taytetaan.
Jos vuokrasopimus tehdaan maaraaikaisesti, taytetaan kohta 4.1. Maaraaikainen
vuokrasuhde paattyy ilman irtisanomista sovituna paivana. Mikali osapuolet
haluavat varautua maaraaikaisen vuokrasopimuksen jatkamiseen alkuperaisen
vuokra-ajan paatyttya, taytetaan kohta 1a ja 1b.
Toistaiseksi voimassa oleva vuokrasuhde paattyy irtisanomisen johdosta sovitun
tai lain mukaisen irtisanomisajan kulutua. Irtisanomisaika lasketaan sen
lakenterikuukauden viimeisesta paivasta, jonka aikana irtisanominen on
suoritettava, ellei toisin sovita. Jollei irtisanomisajasta sovita, se on
vuokranantajan puolelta kolme kuukautta ja vuokralaisen puolesta yksi kuukausi.
Tilojen hallintaoikeuden siirtymisaiva
Jos vuokralainen ei saa tiloja valittomasti hallintaansa, merkitaan hallinnan
siirtymispaiva erikseen; esim. rakennuksen valmistuminen, huoneiston
vapautuminen. Hallintaoikeuden viivastymisesta mahdollisesti maksettavasta
sopimussakosta tai muusta korvauksesta sovitaan tarvittaessa liitelomakkessa. Jo
sopimussakkoa on sovittu maksettavaksi, ei vuokralaisella ole oikeutta purkaa
sopimusta hallintaoikeuden viivastyesssa.
5. Vuokra
Vuokranmaksukausi
Vuokranmaksukausi on LHVL:n mukan yksi kuukausi. Jos halutaan sopia muusta
vuokranmaksukaudesta, merkitaan rasti ja vuokranmaksukauden pituus.
Erapaiva
Erapaiva on LHVL:n mukaan toinen arkipaiva vuokranmaksukauden alusta lukien. Jos
halutaan sopia muusta, merkitaan rasti ja sovittu erapaiva.
Viivastyskorko
Korkolain mukaan viivastyskorko in 7 % yli Suomen Pankin vahvistaman viitekoron.
Jos halutaan poiketa lain mukaan maaraytyvasta korosta, tulee sovittu korko
merkita sopimukseen.
Erilliskorvaukset ja niiden korottaminen
Mikali vuokranantajalle maksetaan erilliskorvauksia, merkitaan rasti tahan
kohtaan seka eriliskorvausten peruste, laatu ja mahdollinen korotusjajetelma,
esim. sahko tai vesi kulutuksen mukaan. Mikali erilliskorvauksia on useita,
voidaan ne luetella myos liiteessa.
Ennakkovuokra
Vuokrasopimusta tehtaessa voidaan sopia vuokran perimisesta ennakolta yhdelta
tai useammalta vuokranmaksukaudelta.
6. Vuokran korottaminen
Vuokran muutoksesta voidaan sopia vapaasti vuokralaisen ja vuokranantajan
valilla, jos vuokrasopimus tedaan toistaiseksi voimassaolevaksi tai vahintaan
kolmen vuoden maaraajaksi. Alle kolmen vuoden mittaiseen maaraaikaiseen
sopimukseen ei voi ottaa korotusehtoa.
Indeksiehto
Indeksina voidaan kayttaa elinkustannusindeksia (1951:10 = 100) tai muuta
kustannuskehitysta kuvaavaa indeksia. Tallaisia ovat mm. Kuluttajahinta-,
rakennuskustannus-, tukkuhinta -, ja ansiotasoindeksit tai niiden yhdistelmat.
Voidaan myos sopia, etta vuokraa korotetaan indeksin muutosten mukaisesti,
jolloin indeksin laskiessa peritty vuokra ei laske.
Sopimukseen voidaan indeksiehdon lisaksi ottaa ehto vuokran
vahimmaistarkistuksesta esim tietylla prosenttiyksikolla. Perusindeksina voidaan
kayttaa sopimuksentekohetkella tiedossa olevaa viimeiksi julkaistua pistelukua.
Kunkin kuukauden elinkustannusindeksin pisteluku tulee tietoon seuraavan
kuukauden 15. Paivana.
Tarkistusajankohdasta tulee myos sopia.
<PAGE>
Muu peruste
Toinen vaihtoehto in sopia muusta korotusperusteesta. Vuokran maara voidaan
esim. sopia ennakolta (ns. Porrasvuokra) tai sopia uusi vuokra maaraajoin
sovitun vuokrakauden (esim. kolme vuotta) paattyessa. Toistaiseksi voimassa
oleva sopimus voidaan irtisanoa vuokran tarkistamiseksi kohtuulliselle tasolle.
8.Vuokranantajan ilmoitusvelvollisuus
Vuokranantaja on velvolinen ilmoittamann vuokralaiselleen, mihin hanen
vuokrananto-oikeutensa perustuu seka rajoittaako sita joku seikka; esim.
vuokranantaja voi itse olla vuokralainen. Vuokralleanto-oikeutta voi rajoittaa
esim. vuokranantajan omassa vuokrasopimuksessa oleva ehto.
<TABLE>
<CAPTION>
Laskentamalli
<S> <C> <C>
Perusvuokra 1.5.1993 1000.-
Perusindeksi 1993/III 1360
Tarkistusindeksi 994/III 1365
Vuokra 1.5.1994 1365 = 1,0037 - 1,004 x 1000 = 1004.-
---- 1360
Tarkistusindeksi 1995/III 1388
Vuokra 1.5.1995 1388 = 1,0206 - 1,021 x 1000 = 1021.-
---- 1360
</TABLE>
<PAGE>
Office Lease Agreement
1. LESSOR
- -------------------------------------------------------
Name and address: Keharakentajat Oy
- -------------------------------------------------------
32800 Kokemaki
- -------------------------------------------------------
- -------------------------------------------------------
Phone: 949-222760 Fax: 939-5460188
- -------------------------------------------------------
Bank: OP, Vimali - 21870
- -------------------------------------------------------
2. TENANT/TENANTS
- -------------------------------------------------------
Name and address: Neste Oy Polystyreeni
- -------------------------------------------------------
Puhdistamontie 11
- -------------------------------------------------------
32800 Kokemaki
- -------------------------------------------------------
Phone: 949-5460911 Fax: 939-5460078
- -------------------------------------------------------
Bank:
- -------------------------------------------------------
<TABLE>
<CAPTION>
3. LEASE SUBJECT
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Address: Tyomaa Toimisto Koppi
- ------------------------------------------------------------------------------------------------------------------------
Rental space and intended use: Toimisto
- ------------------------------------------------------------------------------------------------------------------------
Surface area, m/2/ Dwelling use, condition, maintenance, Condition inspection
and/or changes agreed separately in statement made for dwelling
appendix
- ------------------------------------------------------------------------------------------------------------------------
[handwritten:] *Appendix - may also refer to transferability
* 4. LEASE PERIOD
- ------------------------------------------------------------------------------------------------------------------------
1) Fixed term Starting date: Ending date: Occupancy 2) In effect Starting date: Terms of Occupancy
7/1/95 Until further transfer date until further 7/1/95 notice: 3 transfer
notice notice months date 7/1/95
- ------------------------------------------------------------------------------------------------------------------------
Fixed period agreement ends without notice on agreed Agreement continues after the term now agreed to, unless
termination date. If the parties want to continue the notice is given
lease after the term now agreed to, check this box. __ months before end of each term. Fill in either item 1a or
1b.
- ---------------------------------------------------------------------------------------------------------------------
1a) Agreement continues after lease 1b) Agreement continues after the term now agreed to until Term of
period further notice. notice
__ at a time, unless notice is given
months before end of each term.
- ------------------------------------------------------------------------------------------------------------------------
* 5. RENT
- ---------------------------------------------------------------------------------------------------------------------
Rent: 1000.00 + VAT Term of rental payment: 1 month Due date:
According to LHVL: Other, what:
5th
- ---------------------------------------------------------------------------------------------------------------------
Dwelling has been applied for VAT Late interest: Special payments and raising of same:
obligation, which means that the agreed According to interest laws:
rent is added by the current Other, what:
percentage of value added tax.
- ---------------------------------------------------------------------------------------------------------------------
Special payments and raising of same:
- ---------------------------------------------------------------------------------------------------------------------
Tenant prepayment Amount of prepayment Date of prepayment Prepayment credited
from first rents:
last rents:
- ---------------------------------------------------------------------------------------------------------------------
* 6. DEPOSIT
- ---------------------------------------------------------------------------------------------------------------------
To fulfill obligations of this Depositor Deposit and its value Latest transfer date
agreement, a security deposit
is transferred Lessor Tenant
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
* 7 RAISING OF RENT
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Index term Other basis
- --------------------------------------------------------------------------------------------------------------------------
Rent is tied to: Rent is adjusted annually
Cost of living index Other index, what by FM by %
- ---------------------------------------------------------------------------------------------------------------------------
Base index publishing month Points Adjustment Other, what
and year date(s)
- ---------------------------------------------------------------------------------------------------------------------------
Adjustment index is the last published point known at the adjustment date. Adjustment date(s)
However, if the index point is lower, rent will not be lowered.
- ---------------------------------------------------------------------------------------------------------------------------
* 8. SIGNATURES
- ---------------------------------------------------------------------------------------------------------------------------
We attest that we have read the terms on the reverse side of this form and the appendices, and Other terms are agreed upon
we promise to abide by them. Lessor has informed the basis of his right to let, and whether in appendices.
this right is limited by some factors. This agreement and its appendices have been made into
two identical copies.
- ---------------------------------------------------------------------------------------------------------------------------
Place and date: Kokemaki 7-1-95 Appendix numbers
- ---------------------------------------------------------------------------------------------------------------------------
Lessor's signature and printed name [signature] Tenant's signature and printed name [signature]
- ------------------------------------------------------------------------------------------------------------------------
Kiinteist/alan Kustannus Oy *See instructions for filling
Form #400 Both copies signed separately,
reproduction prohibited
</TABLE>
* APPENDIX: CLEANING, HEATING, ELECTRICITY AT TENANT'S COST INCLUDING TRANSPORT
(250.00 + VAT)
<PAGE>
TERMS OF LEASE AGREEMENT
Unless otherwise stated in the agreement, in these terms or in the appendices,
the agreement is subject to the law on leasing of business dwellings (LHVL
482/95)
1. The tenant has found that the dwelling and its equipment are in a condition
that can be reasonably expected in this area, and the tenant accepts it in the
present condition, unless condition and/or maintenance and changes of the
dwelling have been otherwise agreed on in the appendix.
2. The tenant is obligated to maintain the dwelling with care and to oversee
that the dwelling users follow property ordinances and other rules concerning
the use of the dwelling, as well as ordinances concerning health, cleanliness
and general order. The tenant may not without lessor's or property company's
permission attach signs or equivalent on walls or at other locations of the
house.
3. When rent is determined, consideration is given to the fact that the tenant
is responsible for repairs and maintenance. The tenant is responsible for making
the dwelling meet the requirements of the tenant's operations and for the
resulting wear, stress and repair needs.
4. The tenant may not make changes or improvements in the dwelling without the
lessor's permission.
5. During the lease, the lessor has a right to make ordinary repairs and
changes in the property and in the dwelling without having to notify the tenant
in advance. Repairs or changes causing significant hindrance or disturbance are
allowed, provided that the notifies about them two (2) months in advance. In
such cases the tenant does not have the right to terminate the agreement.
6. The tenant has a right to a refund on rent or a reasonable discount while
the dwelling is not usable or while the dwelling is not in the condition agreed,
but only if the condition is caused by neglect or other reason for which the
lessor is responsible.
7. The tenant may not without the lessor's written permission transfer the
--------
tenancy or to sublet the dwelling or part of it to another, or to take
subtenants. This applies also to transfer of business.
8. Possible new taxes or other payments levied by authorities after the date of
this agreement can be added to rent at the lessor's notice. The tenant's share
of property taxes or other payments is calculated at the same percentage as the
tenant-occupied dwelling area represents of the total dwelling area in the
property.
9. If the lessor is obligated to return VAT deductions because of the
tenant's actions or neglect, the tenant owes the lessor the equivalent amount.
10. Adjusted rent is paid from the date of adjustment.
INSTRUCTIONS FOR FILLING THE LEASE AGREEMENT
3. Lease subject
Spaces to rent and their intended use
Write exact intended use of the rental area. If the rental area is comprised of
areas for differing uses, mention all.
Specify the rental area with enough accuracy; e.g. number of rooms. Use a
separate drawing if necessary, outlining the areas with red pencil.
The use of rental area can be agreed on, as well. The rental agreement can,
for example, specify opening hours of a business.
4. Rental period
Length of agreement
Items 4.1 and 4.2 are alternatives; only one is filled in.
If the lease agreement is made for a fixed period, fill in item 4.1. Fixed
period lease ends on agreed date without termination notice. If the parties are
prepared to continue the fixed period agreement after the original term, fill in
either item 1a or item 1b.
4.2 A lease that is in effect until further notice ends after notice of
termination, which is either agreed on or according to law. Termination is
calculated from the end of the calendar month during which the termination
notice must be given, unless otherwise agreed. If the termination period is not
agreed on, the period will be three months on the part of the lessor and one
month on the part of the tenant.
Transfer date for occupation
If the tenant is not given occupancy immediately, write the occupation date
separately; e.g. building completion, vacating of space. Possible fines or other
compensations because of delay of occupancy are agreed in the appendix, if
necessary. If a fine is agreed on, the tenant does not have the right to
terminate the agreement based on delay of occupancy.
5. Rent amount
<PAGE>
Rental period
According to LHVL, the rental period is one month. If you want to agree on
another rental period, mark the box and enter the length of the rental period.
Due date
According to LHVL, the due date falls on the second weekday starting from the
rental period. If you want to agree on something else, mark the box and enter
the agreed due date.
Interest on delayed payment
According to interest law, the delay interest is 7 % above reference interest
confirmed by Finland's bank. If you want to use another interest rate than that
set by law, enter the agreed interest rate in the agreement.
Supplemental payments and raising them
If the lessor is to receive supplementary payments, mark the box here along with
the basis and kind for the supplementary payments together with a possible
system for raises; for example, electricity or water as measured. If there are
several supplementary payments, they can be listed in an appendix.
Rent prepayment
When making the lease agreement, it is possible to agree on rent prepayment for
one month or more.
7. Raising of rent
Rent adjustments can be agreed on freely between the tenant and the lessor, if
the rental agreement is made until further notice or a minimum of three years
fixed term. If the fixed term agreement duration is under three years, a
provision for raising cannot be included.
Index provision
The cost of living index (1951:10 = 100) can be used as index or some other
index describing the cost curve. Some examples are consumer price, wholesale and
earning level indexes and their combinations.
It can be agreed that the rent will be raised in relation to the index
change, where the rent is not lowered if the index drops.
Besides the index provision, the agreement can include a provision of
adjusting the rent by a minimum, for example by a certain percentage point.
As the base index, it is possible to use the latest published point known
when the agreement is signed. The cost of living index point is made known on
the 15th day of the following month.
The adjustment dates should also be agreed on.
Other basis
Another alternative is to agree on other basis for raising. For example, the
rent can be agreed on beforehand (so called step rent) or a new rent can be
agreed on at the end of the fixed term (e.g. three years). An agreement which is
in effect until further notice can be terminated in order to adjust the rent to
a reasonable level.
8. Lessor's obligation to notify
The lessor is obligated to notify the tenant what the lessor's right to lease is
based on, and whether it is limited by some factor; for example, the lessor can
be a tenant. Right to lease may be limited by a provision in lessor's own lease
agreement.
<TABLE>
<CAPTION>
Calculation example
<S> <C>
Base rent 5/1/1993 1000.00
Base index 1993/III 1360
Reference index 1994/III 1365
Rent 5/1/1994 1365 = 1.0037 -- 1.004 x 1000 = 1004.00
----
1360
Reference index 1995/III 1388
Rent 5/1/1995 1388 = 1.0206 -- 1.021 x 1000 = 1021.00
----
1360
</TABLE>
<PAGE>
Exhibit 10.78
SVERIGES FASTIGHETSAGARE HYRESKONTRAKT
FOR LOKAL Nr. 96-09
<TABLE>
<CAPTION>
Undertecknade har denna dag traffat foljande hyresavtal Kryss i ruta innebar att den darefter foljande texten galler
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hyresvard
Lokalo Fastighetsforvaltning
- ------------------------------------------------------------------------------------------------------------------------------------
Hyresgast Personnr./orgnr.
Neste Cellplast AB 556190 - 3491
- ------------------------------------------------------------------------------------------------------------------------------------
Lokalens Kommun Kvarter/stadsaga
adress Helsingborg Orkanen 12
- ------------------------------------------------------------------------------------------------------------------------------------
Gata Trappor Lagenhet nr.
Landskronavagen 16 237-239
- ------------------------------------------------------------------------------------------------------------------------------------
Lokalens skick och Lokalen med tillhorande utrymmen uthyrs, om inteannat
anvandning anges, i befindligt skick att anvandas till:
- ------------------------------------------------------------------------------------------------------------------------------------
Lokalens Butiksarea Kontorsarea Lagerarea Ovriga utrymmen
storlek och plan m2 plan m2 plan m2 plan m2 plan m2
omfattning 2 18
-------------------------------------------------------------------------------------------------------------------
bilaga
[_] Omfattningen av de forhyrda lokalerna har markerats pa bifogade ritning(ar)
-------------------------------------------------------------------------------------------------------------------
parkeringsplats(er) garageplats(er)
tillfart for bil for for
for i- och plats for
[_] urlastning [_] plats for skylt [_] skylskap/automat [_] bil(ar) [_] bil(ar) [_] uthus
- ------------------------------------------------------------------------------------------------------------------------------------
Inredning Lokalen uthyrs Vid hyresforhallandets bilaga
upphorande skall
hyresgasten om inte
annan overens-
kommense traffats,
bortfora honom tillhorig
[_] utan sarskild for verksamheten [_] med sarskild for verksamheten inredning och aterstalla
avsedd inredning avsedd inredning enl. bil. lokalerna i godtagbart skick.
- ------------------------------------------------------------------------------------------------------------------------------------
Kontraktstid Fran och med den Till och med den
1996-10-01 2003-03-31
- ------------------------------------------------------------------------------------------------------------------------------------
fore den avtalade hyrestidens
Uppsagningstid Uppsagning av detta kontrakt utgang i annat fall ar kontraktet
Forlangningstid skall ske skriftligen minst manader forlangt med ar for varje gang
- ------------------------------------------------------------------------------------------------------------------------------------
Hyre Kronor
20.000:- per ar utgorande [X] total [_] hyra exkl. nedan
hyra markerade tillagg
--------------------------------------------------------------------------------------------------------------------------------
Index bilaga
klausul Andring av ovan angiven hyre sker i enlighet 1
[_] med bifogade indexklausul
--------------------------------------------------------------------------------------------------------------------------------
Varme och Erforderlig uppvarmning av lokalen ombesorjas av Varmvatten tillhandahalls
varmvatten
[_] hyresvarden [_] hyresvarden [_] hela aret [_] inte alls
--------------------------------------------------------------------------------------------------------------------------------
Kostnad bilaga
[_] Bransla/Varmetillag utgar i enlighet med bifogade klausul 1
--------------------------------------------------------------------------------------------------------------------------------
Va-kost- bilaga
nad [_] Va-kostnad utgar i enlighet med bifogade klausul 1
--------------------------------------------------------------------------------------------------------------------------------
Kyla bilaga
Ventilation [_] Kostnader for drift av sarskild kyl- och ventilationsanlaggning ersatts i enlighet 1
med bifogade klausul
--------------------------------------------------------------------------------------------------------------------------------
El
[_] Ingar i hyran [_] hyresgasten har eget abonnemang 1
--------------------------------------------------------------------------------------------------------------------------------
Trapp-
stadning [_] Ingar i hyran [_] ombesorjas och bekostas av hyresgasten
--------------------------------------------------------------------------------------------------------------------------------
Emballage-
och sop- ombesorjas och bekostas av hyresgasten
hamtning [_] Ingar i hyran [_] (dock aligger det hyresvarden att tillhandahalla sopkart och erforderligt soputrymme)
--------------------------------------------------------------------------------------------------------------------------------
Snorojning
och [_] Ingar i hyran [_] ombesorjas och bekostas av hyresgasten
sandning ------------------------------------------------------------------------------------------------------------------
Fastighetsskatt bilaga
[_] Ingar i hyran [_] ersattning harfor erlaggs enligt sarskild overenskommelse
--------------------------------------------------------------------------------------------------------------------------------
Oforut- Skulle efter avtalets tecknande - for avtal lopande pa langre tid an tre ar - oforutsedda kostnadsokningar
sedda uppkomma for fastigheten pa grund av
kostnader a) inforande eller hojning av sarskild for fastigheten gallande skatt, avgift eller palaga varom riksdag
regering, kommun eller myndighet
kan komma att besluta
b) generella omkostnadsatgarder eller liknande pa fastigheten som ej enbart avser lokalen och som
hyresvarden alaggs att utfora till foljd av beslut av riksdag, regering, kommun eller myndighet
skall hyresvarden med verkan fran intradd kostnadsokning erlagga ersattning till hyresvarden for pa lokalen
belopande andel av den totala arliga kostnadokningen for fastigheten.
Lokalens andel ar procent (har andelen ej angivits beraknas den i forhallande till i fastigheten utgaende
hyror vid tiden for kostnadsokningen).
Med skatt enligt a) ovan avses ej moms och fastighetsskatt in den man ersattning harfor erlaggs i enlighet
med sarskild overenskommelse ovan.
Ersattning erlaggs enligt nedanstaende regler om hyrans betalning.
- -----------------------------------------------------------------------------------------------------------------------------------
Mervards- [X] Fastighetsagaren/hyresvarden ar skattskyldig till moms for uthyrning av lokalen. Hyresgasten
skatt skall utover hyran erlagga vid varje
(moms) tillfalle gallande moms.
[_] Om fastighetagaren/hyresvarden efter beslut av skattemyndigheter blir skatteskyldig till moms for
uthyrning av lokalen skall hyresgasten utover hyran erlagga vid varje tillfalle gallande moms.
--------------------------------------------------------------------------------------------------------------------
[_] Denna som erlaggs samtidigt med hyran beraknad och angivet hyresbelopp jamte, enligt varje tidpunkt
gallande regler for moms pa hyra, pa i forekommande fall enligt hyreskontraktet utgaende tillagg och andra
ersattningar.
- -----------------------------------------------------------------------------------------------------------------------------------
Sveriges Fastighetsagare
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Kryss i ruta innebar att den darefter foljande texten galler
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Hyrans Hyran erlaggs utan anfordran i forskott senast postgiro nr bankgiro nr
betalning
[x] kalenderkvartals [_] kalendermanads borjan genom Faktura
insattning pa konto
----------------------------------------------------------------------------------------------------------------------------
Ranta Vid forsenad hyresbetalning skall hyresgasten erlagga dels ranta enligt rantelagen, dels ersattning for skriflig
Betalnings- betalnings enligt paminnelse lagen om paminnelse ersattning for paminnelse inkassokostander m.m. Ersattning for
paminnelse paminnelse utgar med belopp som vid varje tillfalle galler enligt forordningen om ersattning for
inkassokostnader m.m.
----------------------------------------------------------------------------------------------------------------------------
Underhall [_] Hyresvarden skall utfora och Dock att hyresgasten svarar for bilaga
m.m. bekosta erforderligt
underhall av lokalerna och av
honom tillhandahallen inredning
----------------------------------------------------------------------------------------------------------------
[x] Hyresgasten skall utgora och bekosta erforderligt inre bilaga
bilaga underhall av ytskikt[?] for golv, vaggar och tak
jamte av inredning tillhandahallen av hyresvarden.
----------------------------------------------------------------------------------------------------------------
[_] Fordelningen av underhallsansvaret framgar av sarskild bilaga bilaga
----------------------------------------------------------------------------------------------------------------
Hyresgasten ager inte erhalla nedsattning i hyran for hinder eller men i nyttjanderatten for tid varunder
hyresvarden latar verkstalla sedvanligt underhall av fastigheten eller de forhyrda lokalerna. Det aligger dock
hyresvarden att i god tid underratta hyresgasten om arbetets art och omfattning samt nar och under vilken tid
arbetet skall utforas.
I det fall forhyrningen galler butikslokal/hantverkslokal med verksamhet beroende av kundtillstromning skall
klausulen aga giltighet endast om sarskild overenskommelse harom traffats.
----------------------------------------------------------------------------------------------------------------
Det aligger att pa eget ansvar och egen bekostnad svara for de atgarder som av forsakringsbolag eller
byggnadensnamnd, mijlo- eller hasloskyddenamnd, brandmyndighet eller annan myndighet kan
komma att kravas for lokalens nyttjande for avsedd anvandning. Hyregasten skall samrada
[_] hyresvarden [x] med hyresvarden innan atgarder vidtas.
---------------------------------------------------------------------------------------------------------------
Om hyresgasten utan erforderlig bygglov vidtar andringar i lokalerna och varden till foljd harav enligt PBL
tvingas utge byggnadsavgift eller tilllaggsavgift skall hyresgasten till varden utge motsvarande belopp.
---------------------------------------------------------------------------------------------------------------
Skylter Hyresgasten ager efter samrad med varden uppsatta for verksamheten sedvanlig skylt, under forutsattning, att
markiset hyresvarden ej har befogad anledning vagra och att hyresgasten inhamtat erforderliga tillstand av berorda
fonster myndigheter. Vid avflyttning aligger det hyresgasten att aterstalla husfasaden i godtagbart skick.
dorrar Vid mera omfattande fastighetsundehall sasom fasadenovering aligger det hyresgasten att pa egen beskostnad och
etc. utan ersattning nedmontera och ater uppmontera skyltar, markiser och antenner.
Hyresvarden forbindar sig att inte uppsatta automater och skylskap a yttervaggarna till de av hyresgasten
forhyrda lokalerna utan hyresgastens medgivande samt medger hyresgasten optionsratt att uppsatta automater och
skylskap a ifragavarande vaggar.
---------------------------------------------------------------------------------------------------------------
[_] Hyresvarden [x] Hyresgasten svarar for skador pa grund av averkan i fonster, entredorrar och skylter.
---------------------------------------------------------------------------------------------------------------
Hyresgasten ar skyldig att teckna och vidmakthalla glasforsakring betraffande samtliga till lokalen horande
[x] skyltfonster och entredorrar.
----------------------------------------------------------------------------------------------------------------------------
Las- Det aligger
anordningar att utrusta lokalerna med sadana las- och
stoldskyddsanordningar som kravs for giltighet av
[x] hyresvarden [_] hyresgasten hyresgastens affars- eller foretagsforsakring.
----------------------------------------------------------------------------------------------------------------------------
Force Hyresvarden fritagar sig fran skyldighet att fullgora sin del av avtalet och fran skyldighet att enlagga
majeure skadestand om hans ataganden inte alls eller endast till onormalt hog kostnad kan fullgoras pa grund av krig
eller upplopp, pa grund av sadan arbetsinstallelse, blockad eldsvada, explosion eller igrepp av offentlig
myndighet som hyresvarden inte rader over och inte heller kunnat forutse.
----------------------------------------------------------------------------------------------------------------------------
Sakerhet Forutsattning for delta avtals giltighet ar att sakerhet stalls i form av bilaga
[_] bankgaranti [_] borgen [_] lamnas senast den
----------------------------------------------------------------------------------------------------------------------------
Sarskilda bilaga
bestammelser For hyresavtalet galler bilaga
----------------------------------------------------------------------------------------------------------------------------
Underskrift Detta kontrakt, som inte utan sarskilt medgivande far inskrivas, har upprattats i tva liktydliga
exemplar, av vilka parterna tagit var sitt.
Tidigare avtal mellan parterna avseende denna lokal upphor att galla fr om detta avtals ikrafttradande.
----------------------------------------------------------------------------------------------------------------
Ort/Datum Helsingborg 1996-08-16 Ort/Datum Norrtalje 1996-
-------------------------------------------------- ------------------------------------------------------------
Hyresvard Hyresgast
Lokalo Fastighetsforvaltning Neste Cellplast AB
Staffan Falkenberg [s.] Stefan Lander [s.]
----------------------------------------------------------------------------------------------------------------------------
Overens- Pa grund av denna dag traffad overenskommelse
kommelse upphor kontraktet att galla fr om
om till vilken dag hyresgasten
avflyttning forbinder sig att avflytta.
---------------------------------------------------------------------------------------------------------------
Ort/Datum Hyresvard Hyresgast
----------------------------------------------------------------------------------------------------------------------------
Overlatelse
Ovanstaende hyreskontrakt galler fr om den
---------------------------------------------------------------------------------------------------------------
pa
---------------------------------------------------------------------------------------------------------------
Frantradande hyresgast Tilltradande hyresgast Pers nr/org nr
---------------------------------------------------------------------------------------------------------------
Ovanstaende Ort/Datum Hyresvard
overlatelse
godkannes
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Bilaga 1 till kontrakt 96-09
NESTE
Cellplast
Norrtalje 1996-06-24
Lokala Fastighetsforvaltning
Staffan Falkengren
Box 63
260 40 Viken
Angaende nytt hyresavtal vart kontor i Akamas hus
- -------------------------------------------------
I enlighet med tidigare diskussioner och dagens telefonsamtal aterkommer jag med
ett reviderat forslag till villkor i nytt hyresavtal.
(S) 1 Hyrestiden ar 1996-07-01tom 2003-03-31. (D v s i anslutning till Borjes
65-arsdag). Hyresgasten har ej for avsikt att forlanga hyrestiden efter detta
datum.
(S) 2 Vid uppsagning under lopande hyrestid ar uppsagningstiden 3 manader fran
nasta kvartalsskifte. Mojlighet till uppsagning av hyresavtalet finns endast om
Borje Anderssons anstallning i Neste Cellplast AB upphor. Hyresavtalet kan
darfor tidigast sagas upp till den dag da Borje Andersson gor sin sista
arbetsdag for Neste Cellplast AB.
(S) 3 Neste Cellplast AB ager ratt att overlata hyresavtalet till ny hyresgast
pa gallande villkor for hyrestiden. (Forutsatter dock att kontoret disponeras av
Borje Andersson).
(S) 4 I Hyran ingar samtidiga kostnader for el, varme, vatten, avlopp,
klimatsystem, parkeringsplats, stadning och avfallshantering.
(S) 5 Hyra utgar kvartalsvis i forskott med 5000 kr, dvs 20000 kr per ar eller
1111 per kvm och ar. Indexjustering tillampas ej.
(S) 6 De tva forsta kvartalen i den nu avtalade hyrestiden ar hyresfria, liksom
det sista.
(S) 7 Om hyresvarden vidtager standardhojande forbattringar, ar parterna ense om
att dessa ej paverkar hyresnivan under avtalstiden. Aven oforutsedda kostnader
och eventuella forandrade skatter paverkar ej heller hyran. Hyresbeloppet ar
exklusive moms.
Med vanlig halsning
Stefan Linder
Ekonomichef
Direkttelefon 0176-174 74
<TABLE>
<S> <C> <C>
Neste Cellplast AB
Huvudkontor
Braxervagen 8 Aleden 13 Landskronavagen 16
761 41 NORRTALJE 447 35 VARGARDA 252 32 HELSINGBORG
Telefon 0176-174 10 Telefon 0322-255 20 Telefon 042-18 52 55
Telefax 0176-230 28 Telefax 0322-257 30 Telefax 042-18 24 76
</TABLE>
<PAGE>
SVERIGES FASTIGHETSAGARE LEASE CONTRACT
FOR COMMERCIAL PREMISES Nr. 96-09
<TABLE>
<CAPTION>
Check in box indicates that
The undersigned has on this day signed the following lease contract. following text applies.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Lessor
Lokalo Lokalo Real Estate Management
- ------------------------------------------------------------------------------------------------------------------------------------
Lessee Organization No.
Neste Cellplast AB 556190 - 3491
- ------------------------------------------------------------------------------------------------------------------------------------
Address Municipality District
of premises Helsingborg Orkanen 12
-------------------------------------------------------------------------------------------------------------
Street Floor Apt. No.
Landskronavagen 16 237-239
- ------------------------------------------------------------------------------------------------------------------------------------
Condition
and use of Premises and outside spaces are leased, if not indicated otherwise,
the premises in their present condition to be used for:
- ------------------------------------------------------------------------------------------------------------------------------------
Size and Sales area Office area Storage area Other spaces
space of the Floor m2 Floor m2 Floor m2 Floor m2 Floor m2
premises 2 18
-------------------------------------------------------------------------------------------------------------
Attachment
[_] Extent of premises is noted on attached drawing(s).
-------------------------------------------------------------------------------------------------------------
Access by car Space for drop- Parking space Garage space
for loading and Space for box or for for
[_] unloading space [_] sign [_] vending machine [_] car(s) [_] car(s) [_] outbuilding
- ------------------------------------------------------------------------------------------------------------------------------------
Fittings and Premises are leased At termination of Attachment
fixtures lease, Lessee shall
remove his
installations and
restore premises to
approved condition
unless otherwise
agreed.
without special with special installations
installations to pursue to pursue activities as per
[_] activities [_] attachment.
- ------------------------------------------------------------------------------------------------------------------------------------
Term of From: To:
contract October 1, 1996 March 31, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Cancellation
period
Extension Contract can be terminated with written notice Otherwise, the contract is renewed
period for 9 months before lapse of lease. a period of 5 years in each case.
- ------------------------------------------------------------------------------------------------------------------------------------
Rent SEK rent excluding
per year charges as
20,000:- constituting [x] total rent [_] noted below.
----------------------------------------------------------------------------------------------------------------------------
Index Changes in rent indicated above shall be in accordance with the Attachment
clause [_] attached Index Clause. 1
----------------------------------------------------------------------------------------------------------------------------
Heating Required heating of the premises shall be provided by Hot water to be provided
and
Hot Water [_] Lessor [_] Lessee [_] year round [_] not at all [_]
-------------------------------------------------------------------------------------------------------------
Cost Attachment
[_] Fuel/heating surcharge to be borne by Lessee. 1
----------------------------------------------------------------------------------------------------------------------------
Cost of Attachment
Water [_] Lessee has own supply contract. 1
----------------------------------------------------------------------------------------------------------------------------
Cooling, Cost for operating of special cooling and ventilation shall be compensated Attachment
Ventilation [_] according to attached clause. 1
----------------------------------------------------------------------------------------------------------------------------
Electricity
[_] at Lessee's cost [_] Lessee has own contract 1
----------------------------------------------------------------------------------------------------------------------------
Stairway
Stairway [_] included in rent [_] at Lessee's expense and initiative
----------------------------------------------------------------------------------------------------------------------------
Trash and at Lessee's expense and initiative.
garbage It is, however, the Lessor's responsibility to provide container and
removal [_] included in rent [_] storage space.
----------------------------------------------------------------------------------------------------------------------------
Snow
removal
and
sanding [_] included in rent [_] at Lessee's expense and initiative
----------------------------------------------------------------------------------------------------------------------------
Real Attachment
estate tax [_] included in rent [_] reimbursement under separate agreement
----------------------------------------------------------------------------------------------------------------------------
Unforseen If, after this contract is signed - for contracts extending for longer than three year -
costs unforeseen costs for the premises should arise owing to:
a) introduction or increase of tax applying particularly to the premises, fee or surcharge as may be
imposed by Parliament, Government, City or Local Authority,
b) general cost items or the like to the premises, not applicable specifically to the premises and which
Lessor is obliged to incur as a result of a decision of Parliament, Government, City or Local
Authority,
Lessee shall, with effect from the start of the cost increase, reimburse Lessor for the share of the total
annual cost increase attributable to the premises.
The share of the premises is ____ percent (if share is not stated, it is calculated relative to the total
rents for the premises at the time of the cost increase).
Taxes under paragraph a) do not include VAT and real-estate taxes for which compensation is made under the
provisions of any separate agreement above.
Compensation will be paid under the rules for payment of rents below.
- ------------------------------------------------------------------------------------------------------------------------------------
Value-added [x] The property owner/Lessor is liable for VAT for renting the premises. Lessee shall pay the
tax applicable VAT in addition to the rent upon each occasion.
[_] If the property owner/Lessor becomes liable for VAT on the rent for the premises by decision of the
taxing authorities, Lessee shall pay the applicable VAT in addition to the rent upon each occasion.
-------------------------------------------------------------------------------------------------------------
[_] The amount to be paid simultaneously with the rent, calculated from said amount of rent plus, as provided
by regulations on VAT on rents applicable at each occasion, from any surcharges or other compensation as
provided at each occasion in this contract.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Sveriges Fasrighetsagare - Form 12A developed in 1981
<PAGE>
<TABLE>
<CAPTION>
Check in box indicates that following text applies.
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rent The rent shall be paid in advance without notice postgiro number bankgiro
payment not later than on the last business day of each number
[X] Calendar quarter [_] beginning of each calendar Invoice
month to account:
- ----------------------------------------------------------------------------------------------------------------------------
Interest, If payment is delayed, Lessee shall pay interest as provided by law plus compensation for written reminder
reminder as provided by law regarding debt collection costs. Compensation for reminder shall in every
case equal the sum provided by law regarding debt collection costs.
- -----------------------------------------------------------------------------------------------------------------------------
Maintenance [_] Lessor shall undertake and pay Lessee shall, however, be responsible for Attachment
etc. for the interior maintenance of
the premises and of fixtures
maintained by him.
------------------------------------------------------------------------------------------------------------------
[X] Lessee shall undertake and pay for required interior maintenance of the surface Attachment
of Attachment floors, wallsand ceilings as well as for maintenance of
Lessee-owned fixtures.
--------------------------------------------------------------------------------------------------------------------
[_] The allocation of maintenance costs is shown in a separate attachment. Attachment
---------------------------------------------------------------------------------------------------------------------
Lessee is not entitled to reduction in rent for let or hinder in use during such time Lessor performs usual
maintenance of the premises, including buildings. Lessor is responsible, however, for informing Lessee in good
time concerning the type and extent of the work and where and when the work will be performed. In the event that
the contract applies to a sales or workshop facility with activity dependent upon customer access, this clause
shall apply only if separate agreement to this effect has been reached.
--------------------------------------------------------------------------------------------------------------------
It is the at his own cost to arrange for such measures as may by required by
responsibility insurers, building authorities, environmental or health authorities,
of fire authorities or other authorities for the use of the premises for
the intended purposes. Lessee shall consult with Lessor before such
measures are taken.
[_] Lessor [X] Lessee
---------------------------------------------------------------------------------------------------------------------
If Lessee undertakes alterations in the premises without the required authorizations and Lessor is
subsequently required under the Buildings Act to pay a building fee or penalty, Lessee shall compensate Lessor
with a corresponding amount.
----------------------------------------------------------------------------------------------------------------------
Signs, Lessee is entitled, after consultation with Lessor, to erect customary signs for the activity with the
awnings, understanding that Lessor has no well-founded reason to refuse and that Lessee has obtained all necessary
windows, permission from the cognizant authorities. When vacating the premises, Lessee is responsible for restoring the facade
doors, etc. of the premises to an acceptable state. During comprehensive maintenance of the premises such as renovation of the
facade, it is the responsibility of Lessee, at his cost and without compensation, to dismantle and to remount signs,
awnings and antennas. Lessor undertakes not to install vending machines and drop-boxes on the outer walls of the
premises leased by Lessee without Lessee's permission and grants Lessee the option of installing vending machines and
drop-boxes on said walls.
----------------------------------------------------------------------------------------------------------------------
[_] Lessor [X] Lessee is responsible for compensation for damage caused to windows, entrance doors and
signs.
----------------------------------------------------------------------------------------------------------------------
[X] Lessee is responsible for obtaining and maintaining insurance coverage on all glass in premises show windows
and entry doors.
- -----------------------------------------------------------------------------------------------------------------------------------
Lock It is the responsibility of
arrangements to equip the premises with such locks and security measures as
are required under Lessee's business and
[X] Lessor [_] Lessee industrial insurance.
- ----------------------------------------------------------------------------------------------------------------------------------
Force Lessor disclaims responsibility from fulfilling his part of the contract and responsibility for compensating
majeure for damage if his efforts cannot at all or only at high cost be exercised because of war
or uprising, because of work stoppage, blockade, catastrophic fire, explosion or intervention by public
authorities over which Lessor has no control and which Lessor could not foresee.
- ----------------------------------------------------------------------------------------------------------------------------------
Surety A precondition for the validity of the contract is that surety be furnished in the form of Attachment
[_] bank guarantee [_] deposit [_] furnished no later than
- ----------------------------------------------------------------------------------------------------------------------------------
Other Attachment applies to lease contract. Attachment
provisions
---------------------------------------------------------------------------------------------------------------------
Signature This contract has been drawn up in two identical copies, of which each party receives its own. Prior
agreements between the parties concerning these premises shall cease to be valid as of the signing of this
contract.
---------------------------------------------------------------------------------------------------------------------
Place/Date Place/Date
Helsingborg 16 August 1996 Norrtalje -- -- -- 1996
---------------------------------------------------------------------------------------------------------------------
Lessor Lessee
Lokalo Real Estate Management Neste Cellplast AB
Staffan Falkenberg Stefan Lander
[s.] [s.]
- ----------------------------------------------------------------------------------------------------------------------------------
Agreement On the basis of an agreement reached on this
on removal date, the contract ceases to apply as of
____________, upon which date Lessee agrees to vacate the
premises.
---------------------------------------------------------------------------------------------------------------------
Place/date Lessor Lessee
- ----------------------------------------------------------------------------------------------------------------------------------
Transfer
The above lease contract has been transferred as of__________
---------------------------------------------------------------------------------------------------------------------
Name
---------------------------------------------------------------------------------------------------------------------
Vacating Lessee Occupying Lessee Personal ID/Org. No.
- ----------------------------------------------------------------------------------------------------------------------------------
Above Place/date Lessor
transfer
approved
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Appendix 1 to Contract 96-09
NESTE
Cellplast
Lokalo Fastighetsforvaltning
Staffan Falkengren
Box 63
260 40 Viken
Re.: New lease agreement for our office in Akamas House
-------------------------------------------------------
According to previous discussions and today telephone
conversation, I have a revised proposal for the conditions of
the new lease agreement.
[handwritten:] 10/01/1996
. 1 The lease term is July 1, 1996 to March 31, 2003. (I.e.,
following Borje 65th birthday) The lessee has no intention to
extend the lease term after this date.
. 2 In case of cancellation during the current lease term, the
notice period is 3 months prior to the end of the next
quarter. The possibility of cancellation would occur only if
Borje Andersson) employment by Neste Cellplast AB would cease.
The lease agreement can therefore be terminated as of the date
of Borje Andersson last working day for Neste Cellplast AB.
. 3 Neste Cellplast AB has the right to assign the lease
agreement to a new tenant at the conditions
applicable to the lease period. (Provided, however that the
office is managed by Borje Andersson).
. 4 The rent includes all costs for electricity, heating,
water, sewerage, air conditioning, parking space, cleaning and
waste removal.
. 5 The rent, payable in advance, amounts to Skr. 5,000.- per
quarter, i.e. Skr 20,000 per year or Skr 1111 per square
meter/year; index adjustment does not apply.
. 6 The first two quarters in the now agreed lease period are
rent-free, as is the last one.
. 7 If the landlord carries out standard raising improvements,
the parties agree that this shall not affect the rent level
during the term of the lease. Unforeseen costs and any changed
taxes shall not affect the rent. The rent amount is exclusive
of VAT.
With best regards
[signature] [signature]
Stefan Linder Staffan Falkengren
Finance Director
Direct phone 0176-17474
Neste Cellplast AB
Headquarters
Braxenvagen 8
761 41 NORRTALJE
<PAGE>
<TABLE>
NIHAB HYRESKONTRAKT
FOR LOKAL Nr. 16001
<S> <C> <C>
Undertecknade har denna dag traffat foljande hyresavtal Kryss i ruta innebar att den darefter
foljande texten galler
Hyresvard
Norrtalje Industri- och Hantverkshus AB (NIHAB) Organisationnummer:
Hantverkaregatan 16, 761 30 Norrtalje 556194-6053
Hyresgast Personnr./orgnr.
Neste Cellplast AB 556190 - 3491
Lokalens Kommun Kvarter/stadsaga
adress Norrtalje Gorla 9:5
Gata Trappor Lagenhet nr.
Braxenvagen 8 761 41 Norrtalje
Lokalens skick
och anvandning
Lokalen med tillhorande utrymmen uthyre, om inte annat anges, i befintligt skick att
anvandas till: Cellplasttillverkning
Lokalens Butiksarea: Kontorsarea Lagerarea Ovriga utrymmen
storlek och plan m2 plan m2 plan m2 plan m2
omfattning 1 529 1 5316 TOT 5845m2
Bilaga
[ ] Omfattningen av de forhyrde lokalema har markerats pa bifogade ritning(ar)
tillfart for bil plats for parkeringsplats(er)
for i- och skylt garageplats(er)
[x] uriastning [x] plats for skylt [ ].skap/automat [x] bil(ar)
[ ] uthus [ ] bil(ar)
Inredning Lokalen uthyra Vid hyresfohallandet upphorande bilaga
skall hyresfohallandet, om inte annan
[x] utan sarskild for overenskommense traffats honom
verksameheten avsedd honom tillhong inredning och
[ ] med sarskild for verksamhten in godtagbart skick.
avsedd inreading eni bil
Kontraktstid Fran och med den Till och med den
1996-04-01 2006-03-31
Uppsagningstid Uppsagning av detta kontrakt fore den avpalade hyrestidends utgang
Forlangningstid skall ske samtidingen minst 9 manader i annat fall ar kontraktet forlangd med
5 ar for varje gang
Hyre Kronor
2.338.000 per ar utgorande [ ] total hyre [x] hyra exkl. Nedan markerade
Index bilaga 1
</TABLE>
<PAGE>
<TABLE>
<S> <C>
klausul [ ] Andring av oven angiven hyre sker i enligenhet med bifogade index klausul
Varme och Erforderlig uppvarmning av lokalenombesorjas av Varmvatten tilldelaa
varmvatten [ ] Hyresvarden [x] Hyresgasten [ ] hela aret [ ] inte alls
Kostnad [x] Bransle/Varmetillag utgar i enligenhet med bifogade klausul bilaga 1
Va-kostnad [x] Huresgasten har eget abonnemang bilaga 1
Kyle
Ventilation [ ] Kostnader for drift av sarskild kyl- och bilaga 1
ventilationtillagning ersatts i enligenhet med
bifogad klausul
El
[ ] En. Hyresvardens sjalvkostnad [ ] Hyresgasten har eget abonnemang 1
Trapp-stadning
[ ] Ingar i hyren [x] ombesorjs och bekostad av hyresgasten
Emballage-
och sop- [ ] Ingar i hyren [x] ombesorjas och bekostas av hyresgasten
hamtning (dock aligger det hyresvarden att tillhanda sopkista och
erforderligt utrymme
Snorojning
och [ ] Ingar i hyren [x] ombesorjs och bekostad av hyresgasten
Fastighetsskatt
[ ] Ingar i hyren [x] ersattning harfor erlaggs enligt sarskild bilaga 2
overenkommelse
</TABLE>
Oforut- Skulle efter avtalets tecknande - for avtal lopande pa langre
sedde tid an tre ar - oforutsedde kostnads okningar uppkomma for
kostnader fastigheten pa grund av
a) inforande eller hojning av sarskild for fastigheten
gallande skatt, avgift eller palaga varom riksdag,
regering, kommun eller myndighet kan komma att
b) generelle omkostnadsatgarder eller liknade pa
fastigheten som ej enbart avser lokalen och som
hyresvarden alaggs att utfora till foljd av beslut
av riksdag, regering, kommun eller myndighet
skall hyresvarden med verkan fran intradd kostnadsokning erlagga till
hyresvarden for pa lokalen belopande andel av den totale arliga
kostnadokningen fo fastigheten.
Lokalens andel ar procent (haranderen ej angivits beraknas den i
forhallande till i fastigheten ongaende [olaslig] vid tiden for
[olaslig] okningen).
Med skatt enligt sj ovan avses ej moms och fastighetsskatt in den man
ersattning harfor erlaggs i enlighet med sarskild overenkommelse ovan.
Ersattningen erlaggs enligt regler om hyrens betalning.
Mervards- [x] Fastighetensagare/hyresvarden ar ansvarig till moms for utrymning
skall av lokalen. Hyresgasten skall utover hyren erlaagga vid
varje tillfalle gallande moms.
(moms)
[ ] Om fastighetensgaren/hyresvarden efter beslut av
skattemyndigheter blir
<PAGE>
skatteskyldig till moms for utrymning a lokalen skall
hyresgasten utover hyren erlagga vid varje tillfalle gallande
moms.
Denne som erlaggs samtidigt med hyren beraknad och angivet hyresbelopp,
enligt varje tidpunkt gallande regler for moms pa hyre, [olaslig ]
Hyrens bataining Hyran erlagga utan anfordrean I forakott senast stata
vardagen fore verje
[x] Kalenderkvartais [ ] Kalendermanada borjan genom insattning pa konto
postgiro nr bankgiro nr
693408-7 677-8351
Rants Betainings-paminnelse Vid forsaned hyresbetaining skall
hyresgasten aftagga dela ranta enligt rantelagen, defe
ersattning for skrittig betainingspaminnerise enligt legan
om ersettning for inkassokostneder m m. Ersettning for
peminnelee utgar med belopp som vid varje tillfelle geller
enligt forordningen om ersettning for inkassokstneder m m.
Underhall m m [ ] Hyresvarden skall utfor och bekoste arforderligt
inre underhall av lokalema och av honorn tillhandshallen
inredning Dock att hyresgasten svarer for bilaga
[x] Hyresgasten skall utfors och bekoste erforderligt inre
underhall av ytakkt for golv, vaggar och tak jamte av
inredning tillhandahallen av hyresvarden Hyresgastens
underhalsskylidighet omfattar darutover bilaga
[ ] Frodeiningen av underhallansavaret framgar av saraklid
bilaga
Hyresgasten agar inte erhalla nadsettning I hyran for
hinder eller men I nyttanderatten for ad varunder
hyresvarden later varketalla sedvanligt underhall av
fastigheten eller de forhyrds loksleme. Det aligger dock
hyresvarden att I got tid underratte hyresgasten om
arbetete art och omfettning samt nar och under vilkan tid
arbetst skall utforse.
I det fall forhymingen galler butikslokathaniverkalokal
med varkssemhet bercende av kundtillstromning skall
kisundelfen aga glittighet endest om sarakdid
overneskommeise harom traffets.
Det etigger att pa eget ansvar och egen bekostnad svara
for de atgarder som eve froakrinsbolag eller bygnadenamnd,
miljo-och hatsbskyddenamno, brandmyndighet eller annan
myndighet kan komma att kraves for lokelens nytijande for
avsedd anvarndningl Hyresgasten skall samrede med
hyresvarden innan atgarder vidtas. [ ] hyresvarden [x]
hyresgasten
Om hyresgasten utan erforderligt bygglov vidtar andringer I lokelema
och varden fill forjd harav enligt regieme I PBL tvingas utge
byggehassavfif eller tillaggasvgift akail hyresgasten varden utge
motsvarande betopp.
Skyttar markiser Hyresgasten agar ufter samrad med varden uppsatta
fonster dorrar etc. for varksamheten sedvanlig skylt, under forutanlinin,
att hyresvarden ej her befoged anledning vagra och
att hyresgasten inhamtat erforderlige tillatand av
bearda myndigheter. Vid avnyttning allgger det
hyresgasten att aterstalla husfaseden I godtagbert
skick.
Vid mere orofattande fastighetunderhall sasom
fasadrenovering aligger det hyresgasten att pa egen
bekosnad och utan ersattning nadmonters och atar
uppmontera skyltar markiser och antenner.
<PAGE>
Hyresvarden forbinder sig att inta uppsattla
automater och skyttakap a yttervaggama till de av
hyresgasten forhyrde lokalma utan hyresgastens
medgivan samt medgar hyresgasten optionsratt att
uppsatta automater och skytakap a fragavrande vagger.
[ ] Hyresvarden [x] Hyresgasten svarer for skador pa grund
av averkan a fonster, entradorrar och skylter.
Hyresgasten ar skyldig att techne och vidmakthalla
glasforsakring betnaffande sariliga att lokelen horande
skylfonster och entedorrar
Lasanorningar Det eligger
[x] hyresvarden [ ]hyresgasten att utrusta lokalens med sadana
las-och toidakyddanordningar som krava for slitighet av
hyresgastens affars-eller forsingeforsakring.
Force Majeure Hyresvarden frieger sig fran skylighet att fulgora sin el av
avatet och fran skylghet att erlagga ksadestand om hans ateganden inte
ell eller endat till onomait hog kostnad kan fullgoras pa grund av krig
eller upptopp, pa grund av seden arbetsinstafee blcked eldsvada,
explosion eller ingapp av offentlig myndighet som hyresvarden inter
neder over och inter heller kunnat foruse.
Sakerhat Forutsattning for detta avtals glighet ar att sakerhet stais I
form av
[ ] bankgerenti [ ] borgen [ ] lemnes sonnet den bilaga
Saraklida bestanneiser For hyresavtalet galler bilaga bilaga 1
Underskrift Detta kontrakt, som inte utan saraklit medgivande far insava, har
uppratlats I tva likdigs exemplar, av vilka parteme tag ver alt.
Tidigere avtal mellan partema avseende denna lokal upphor att
galla for deta avtais kraftrandente.
Ort/datum Ort/datum
Helsingborg 1996-08-16 NORRTALJE 1996
Hyresvard Hyresgast
Lokalo Fastighetsforvaltning Neste-Cellplast AB
Staffan Falkengren Stefan Lander
Overens-from Pa grund av denna dag treffed overenskommalse upphor
kommelse kontraktet att galla till vitken dag hyresgasten
om avtlyttning forbinder sig att avflyta.
Ort/datum Hyresvard Hyresgast
Overlatse Ovanstaende hyreskontrakt galler from den
Pa
Frantradande hyresgast Tillradande hyresgast Pers nr/
Ovanstaende Ort/datum Hyresvard or nr
overlatse
godkannes
<PAGE>
NIHAB
NORRTALJE INDUSTRI-
& HANTVERKSHUS AB
<TABLE>
<CAPTION>
INDEXKLAUSUL for lokal Bilaga nr: 1
<S> <C> <C>
Avser Hyreskontrakt nr
16001 Gorla 9:5
Hyresvard Norrtalje Industri- & Hantverkshus AB
Hyresgast Neste Cellplast AB
Klausul Av det i kontraktet angivna hyresbeloppet pa 2.338.000
kronor skall 75% eller 1.753.000 kronor utgora bashyra.
Under hyrestiden skall med hansyn till forandringarna i
konsumentprisindex (totalindex med 1980 som basar)
tillagg till hyresbeloppet utga med viss procent a
bashyran enligt nedanstaende grunder.
Bashyran anses vara anpassad till indextalet for oktober
manad 1995
X Detta indextal (bastalet) ar 256.9
Detta indextal (bastalet) ar for narvarande ej kant.
Skulle indextalet nagon pafoljande oktobermanad ha
stigit med minst tre (3.0) enheter i forhallande till
bastalet, skall tillagg utga med procenttal varmed
indextalet andrats i forhallande till bastalet. I
fortfsattningen skall tillagg utga i forhallande till
indexandringarna varvid hyresforandringen beraknas pa
basis av den procentuella forandringen mellan bastalet
och indextalet for respektive oktobermanad. For att
hyresandringen i fortsattningen skall ske fordas att
index for nagon oktobermanad hojts eller sankts med
minst tre (3.0) enheter i forhallande till det indextal,
som gallde vid det senaste tillfallet da hyran andrats
enligt denna klausul.
Utgande hyra skall dock aldrig sattas lagre an det i
kontraktet angivna hyresbeloppet. Hyresandringen sker
alltid from 1 janurari efter det att oktoberindex
foranlett omrakning.
Underskrift Ort/datum Ort/datum
Norrtalje 1997-06-16 Norrtalje 1997-06-30
Hyresvard Hyresgast
Norrtalje Industri - Hantverkshus AB Neste Cellplast AB
Christer Stighall Johan Laftman
</TABLE>
<PAGE>
Page 1 of 2
NIHAB
Norrtalje Industri- LEASE CONTRACT
& Hantverkshus AB for Commercial Premises No. 16001
[Norrtalje Industry & Crafts House, Inc.]
The undersigned has on this day signed the it applies
Check space when the text following it applies
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Lessor Norrtalje Industri- och Hantverkshus AB (NIHAB) Organization No.
Hantverkaregatan 16, 761 30 Borrtalje 556194-6053
Lessee Neste Cellplast AB Personal/Organization No.
556190-3419
Address Municipality District
of premises Norrtalje Gorla 9:5
Street Floor Apt. No.
Braxenvagen 8 761 41 Norrtalje
Condition and use Premises and outside spaces are leased, if not indicated otherwise,
of the premises in their present condition to be used for Cellulose plastic production
Size and space Sales area Offices area Storage area Other spaces
of the premises Floor m/2/ Floor m/2/ Floor m/2/ Floor m/2/
1 529 1 5316
TOTAL: 5845 m2
Loading and Parking space for
[X] unloading space [X] Space for... [x] Car
[ ] Extent of premises is noted on attached drawing(s). [ ] Attachment
[x] Access by car for loading and unloading space
[ ] Space for drop-box or vending machine
[x] Space for sign [x] plats for skylt [ ] bil(ar)
[ ] outbuilding [ ] uthus
Fittings and Premises are leased [x] without special installations to pursue activities
attachment fixtures [x] with special installations to pursue activities
Term of contract From April 1, 1996 To March 31, 2006
Cancellation time Contract can be terminated with written notice 9 months before lapse of lease.
Extension time If not canceled, the contract can not be renewed for periods of 5 years each
Rent Skr. 2,338,000 Rent excluding charges as noted below.
Index clause [x] Change of the rent indicated above shall be according to the attached Index Clause
Heating and Hot Required heating of the premises shall be provided by
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Water Supply [x] the lessee [ ] the lessor
Hot water to be provided [ ] year round [ ] not at all
Cost [x] Fuel/heating surcharge to be borne by Lessee. Attachment
Cost of Water [x] Lessee has own supply contract Attachment
Cooling, [ ] Cost for operating of special cooling and Attachment
ventilation shall be compensated according to attached clause.
Electricity [ ] at Lessee's cost [x] Lessee has own contract
Stairway cleaning [ ] included in rent [x] at Lessee's expense and initiative
Trash and garbage [ ] included in rent [x] at Lessee's expense and initiative
removal
Snow removal [ ] included in rent [x] at Lessee's expense and initiative
and sanding
Real estate tax [ ] included in rent [x] reimbursement under separate
agreement Attachment 2
</TABLE>
Unforseen costs
If, after this contract is signed - for contracts extending for longer than
three years - unforeseen costs for the premises should arise owing to:
a) introduction or increase of tax applying particularly to the
premises, fee or surcharge as may be imposed by Parliament,
Government, City or Local Authority,
b) general cost items or the like to the premises, not applicable
specifically to the premises and which Lessor is obliged to
incur as a result of a decision of Parliament, Government,
City or Local Authority,
Lessee shall, with effect from the start of the cost increase, reimburse Lessor
for the share of the total annual cost increase attributable to the premises.
The share of the premises is ____ percent (if share is not stated, it is
calculated relative to the total rents for the premises at the time of the cost
increase).
Taxes under paragraph a) do not include VAT and real-estate taxes for which
compensation is made under the provisions of any separate agreement above.
Compensation will be paid under the rules for payment of rents below.
Value-added tax [x] The property owner/Lessor is liable for VAT for
renting the premises. Lessee shall pay the applicable VAT in
addition to the rent upon each occasion.
[ ] If the property owner/Lessor becomes liable for VAT on the
rent for the premises by decision of the taxing authorities,
Lessee shall pay the applicable VAT in addition to the rent
upon each occasion.
<PAGE>
The amount to be paid simultaneously with the rent, calculated from said amount
of rent plus, as provided by regulations on VAT on rents applicable at each
occasion, from any surcharges or other compensation as provided at each occasion
in this contract.
Interest, reminder If payment is delayed, Lessee shall pay
interest as provided by law plus compensation for
written reminder as provided by law regarding debt
collection costs. Compensation for reminder shall in
every case equal the sum provided by law regarding
debt collection costs.
Maintenance etc. [ ] Lessor shall undertake and pay for the interior
maintenance of the premises and of fixtures
maintained by him. Lessee shall, however, be
responsible for Attachment
[ ] Lessee shall undertake and pay for required
interior maintenance of the surface of floors, walls
and ceilings as well as for maintenance of
Lessee-owned fixtures.Attachment
[x] The allocation of maintenance costs is shown in
a separate attachment.
Attachment 2
Lessee is not entitled to reduction in rent for let or hinder in use during such
time Lessor performs usual maintenance of the premises, including buildings.
Lessor is responsible, however, for informing Lessee in good time concerning the
type and extent of the work and where and when the work will be performed.
In the event that the contract applies to a sales or workshop facility with
activity dependent upon customer access, this clause shall apply only if
separate agreement to this effect has been reached.
It is the responsibility of [ ] Lessor [x] Lessee
at his own cost to arrange for such measures as may by required by insurers,
building authorities, environmental or health authorities, fire authorities or
other authorities for the use of the premises for the intended purposes.
Lessee shall consult with Lessor before such measures are taken.
If Lessee undertakes alterations in the premises without the required
authorizations and Lessor is subsequently required under the Buildings Act to
pay a building fee or penalty, Lessee shall compensate Lessor with a
corresponding amount.
Signs, awnings, windows, doors, etc.: Lessee is entitled, after consultation
with Lessor, to erect customary signs for the activity with the understanding
that Lessor has no well-founded reason to refuse and that Lessee has obtained
all necessary permission from the cognizant authorities. When vacating the
premises, Lessee is responsible for restoring the facade of the premises to an
acceptable state.
During comprehensive maintenance of the premises such as renovation of the
facade, it is the responsibility of Lessee, at his cost and without
compensation, to dismantle and to remount signs, awnings and antennas.
Lessor undertakes not to install vending machines and drop-boxes on the outer
walls of the premises leased by Lessee without Lessee's permission and grants
Lessee the option of installing vending machines and drop-boxes on said walls.
[ ] Lessor [x] Lessee is responsible for compensation for damage
caused to windows, entrance doors and signs.
Lessee is responsible for obtaining and maintaining insurance coverage on all
glass in premises show windows and entry doors.
<PAGE>
Lock arrangements It is the responsibility of [blank] to equip the
premises with such locks and security measures as are
required under Lessee's business and industrial
insurance.
[ ] Lessor [x] Lessee
Force Majeure Lessor disclaims responsibility from fulfilling his
part of the contract and responsibility for
compensating for damage if his efforts cannot at all
or only at high cost be exercised because of war or
uprising, because of work stoppage, blockade,
catastrophic fire, explosion or intervention by
public authorities over which Lessor has no control
and which Lessor could not foresee.
Surety A precondition for the validity of the contract is
that surety be furnished in the form of Attachment
[ ] bank guarantee [ ] deposit [ ] furnished
no later than
Other provisions According to Attachment 3
Signature This contract has been drawn up in two identical
copies, of which each party receives its own. Prior
agreements between the parties concerning these
premises shall cease to be valid as of the signing of
this contract.
- --------------------------------------------------------------------------------
Address Post code City
Hantverkaregatan 16 761 30 NORRTALJE
Telephone Fax Postgiro Bankgiro
0176-719 50 0176-151 87 693406-7 677-8351
<TABLE>
<S> <C>
Place/Date Place/Date
NORRTALJE, June 16, 1996 NORRTALJE, June 26, 1996
Lessor Lessee
Norrtalje Industri- & Hantverkshus AB Neste Cellplast AB
[signature] [signature]
Christer Stighall Johan Laftman
</TABLE>
<PAGE>
INDEX CLAUSE
for commercial space Appendix No.
1
Concerning Lease contract No. Property
16001 Gorla 9:5
Lessor Norrtalje Industri- & Hantverkshus AB
Lessee Neste Cellplast AB
Clause Of the rent amount of Skr. 2,338,000 indicated in the
contract, 75% or Skr.1,753,500 shall make up the base rent.
During the lease term, a surcharge to the amount of the rent
shall be applied by virtue of the changes in the consumer
price index (total index with 1980 as base year) at a certain
percentage of the base rent, pursuant to the provisions set
forth below.
The base rent shall be considered to have been adjusted to the
index number for the month of October 1995.
[x] This index number (base number) is 256.9
Should the index number rise after the month of October rise
by at least three (3) units in relation to the base number,
the surcharge shall be raised by the percentage number by
which the index number changes over the base number.
Subsequently, the surcharge shall be in the amount to the
proportion by which the rent changes are computed, namely on
the basis of the percentage change between the base number and
the index number for the respective month of October. For the
rent changes to apply in the future, it is required that the
index for any month of October shall rise or decline by at
least three (3.0) units in relation to the index number in
effect on the last occasion when the rent changed according to
this clause.
However, the amount of the rent shall never be set lower than
the amount of the rent indicated in the contract. Rent changes
shall always be made as of January 1 after the October
indexclause recalculation.
Signature Place/Date Place/Date
Norrtalje, June 16, 1997 Norrtalje, June 26, 1997
The lessor The lessee
Norrtalje Industri- Neste Cellplast AB
& Hantverkshus AB [signature]
[signature] Johan Laftman
Christer Stighall
<PAGE>
CONFIDENTIAL TREATMENT
Exhibit 10.80
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECRETARY OF THE COMMISSION PURSUANT TO REGISTRANTS' APPLICATION OBJECTING TO
DISCLOSURE AND REQUESTING CONFIDENTIAL TREATMENT UNDER RULE 406; THE OMITTED
PORTIONS HAVE BEEN MARKED WITH BRACKETS.
[STYRENE MONOMER SUPPLY AGREEMENT]
This Agreement has been entered into by and between:
STYROCHEM FINLAND OY
POB 360
FIN-06101 PORVOO
FINLAND
hereinafter called STYROCHEM or the BUYER
And
ELF ATOCHEM SA
Cours Michelet
F 92091 PARIS LA DEFENSE CEDEX
FRANCE
hereinafter called ELF ATOCHEM or the SELLER
Whereas the BUYER wishes to buy and receive quantities of styrene monomer (THE
PRODUCT) from ELF ATOCHEM and whereas ELF ATOCHEM wishes to sell and deliver to
the BUYER quantities of the PRODUCT.
Therefore the parties hereby agree as follows:
1. QUALITY
-------
The PRODUCT delivered hereunder by the SELLER shall meet the specifications set
forth in Appendix "A" attached hereto.
2. DURATION
--------
This Agreement shall enter into effect on October 15th, 1997 and shall remain in
effect for an initial period of three years until October 14th, 2000, whereupon
it shall be automatically renewed by tacit agreement for periods of one (1) year
at a time unless terminated by either party by giving written notice thereof to
the other party at least twelve (12) months prior to the expiration of the
initial period or any subsequent period.
Notwithstanding the foregoing, either party can terminate this Agreement upon
written notice to the other party in the event either of the following occurs:
(a) the filing by or against either party of a petition in bankruptcy,
adjudication of either party as bankrupt or insolvent, or either party's
seeking, consenting to, or acquiescing in the appointment of any trustee,
receiver, conservator or liquidator: or (b) a material default by either party
in the performance of its obligation hereunder if such default is not cured
within thirty (30) days after receipt of written notice of such default from the
other party.
3. QUANTITIES OF STYRENE
---------------------
During the term of this agreement, ELF ATOCHEM agrees to deliver and STYROCHEM
agrees to purchase an annual quantity of styrene monomer to be identified by
STYROCHEM between twenty (20) and fifty (50) kilotons (KT). The annual quantity
will not exceed fifty (50) kilotons.
The annual quantity will be evenly spread over the year.
For the first year of the agreement the quantity agreed will be thirty nine
thousand five hundred metric tons (39500 MT).
<PAGE>
4. SCHEDULING AND DELIVERIES
-------------------------
4.1 Not less than [ ] months in advance of the commencement of each
contractual year, STYROCHEM shall notify ELF ATOCHEM in writing as to the
quantities of styrene to be delivered for that contractual year, within the
limits determined in Article 3.
Not less than [ ] days prior to the commencement of each calendar
month, STYROCHEM shall notify ELF ATOCHEM of STYROCHEM's estimated
requirement of styrene for each of the following three (3) calendar months
to be delivered by ELF ATOCHEM to STYROCHEM during the same period. Such
estimates shall be for ELF ATOCHEM's convenience only and shall not be
binding upon the parties.
Not less than [ ] days prior to the commencement of each calendar
month STYROCHEM and ELF ATOCHEM shall mutually agree on the monthly
requirement of the PRODUCT to be delivered and STYROCHEM will place a firm
written order accordingly.
For those purchase orders placed by STYROCHEM and accepted by ELF ATOCHEM
where ELF ATOCHEM does not satisfy the conditions thereof for any reason,
purchaser will have the right to place orders to a third party. With
respect to such orders placed by STYROCHEM with a third party ELF ATOCHEM
will pay STYROCHEM an amount, if any that STYROCHEM paid to such third
party for such orders in excess of the price that would have been paid to
ELF ATOCHEM for such order. Pursuant hereto, such orders placed by
STYROCHEM with a third party shall be deemed placed with and satisfied by
ELF ATOCHEM for the purposes of Article 6.2 below.
4.2 The PRODUCT shall be supplied by ELF ATOCHEM in approximately equal monthly
quantities after allowing for any planned and notified shutdowns by ELF
ATOCHEM Gonfreville production plant and STYROCHEM Finnish production
plants.
Styrene will be delivered by STYROCHEM on a CIF PORVOO of CIF PORI basis by
shipment of two thousand five hundred metric tons (2500MT) to three
thousand five hundred metric tons (3500MT) at seller's option.
5. VESSEL AND LOGISTICS
--------------------
5.1 The SELLER will procure a vessel meeting all relevant regulations and all
unloading port regulations and BUYER's safety standards.
5.2 Marine vessel will be designated by SELLER to BUYER at least seven (7) days
or at least five (5) working days in advance of the first day of the laycan
indicated in the said designation.
Nomination shall state the following details:
- PRODUCT
- Quantity of the PRODUCT +/- five percent (5%)
- vessel name
- charter party
- loading port
- port of destination
- load laycan
- laytime +8 hours notice
- demurrage
When vessel arrives within agreed arrival time the BUYER shall arrange for
unloading as expeditiously as possible. LONDON FORM charter party will
apply for laytime, demurrage and other maritime conditions. Any demurrage
claims should reach BUYER, fully documented at the latest three (3) months
after B/L date of the vessel.
2
<PAGE>
5.3 The exact quantity of the Products delivered pursuant to this Agreement
shall be determined and measured by a mutually accepted independent
surveyor. The surveyor will issue a certificate of quantity measured on
board.
The said independent surveyor shall issue a certificate of quality based on
analysis of samples taken from the shore tank before the commencement of
loading and the quality shall be verified by a composite sample taken from
the vessel's tanks after the loading has been completed.
The parties shall deliver each other copies of any certificate issued by
the independent surveyors at either loading or discharging port.
The expenses and costs relating to the independent surveyors hereunder
shall be on the account of SELLER at the loading port and account of BUYER
at the discharging port.
The surveyor's measurements at the loading port shall be binding upon both
parties.
No adjustment shall be made for variations in quantity that are less than
1/2% (one half of one percent) of the quantity stated on the bill of
lading.
5.4 Title, delivery and risk of loss to the Product shall pass to STYROCHEM as
such Product safety passes the flange connection between the delivery hose
and the vessel's cargo intake at the loading port.
5.5 "Chemical waste disposal clause"
If before sailing from discharge port a mandatory prewash of cargo tanks,
in accordance with requirements as per MARPOL 73/78 Annex II is necessary,
it is to be performed in direct continuation upon completion of discharging
cargo, in conformity with vessel's "Procedures and Arrangements Manual" and
in accordance with local port regulations. Time used for such mandatory
pre-wash shall be for Owner's account.
On being notified by Owners, or their representatives, upon sailing from
load port or latest when discharging port(s) is (are) nominated, Charterers
shall provide suitable and adequate facilities which shall be immediately
available and accessible to the vessel upon completion of discharge for the
reception of such washing water/cargo residue mixture originating from
cargo carried under this Charter Party and respective Bill(s) of Lading.
The cost for the use of such facilities and responsibility for ultimate
disposal of the cargo residue mixture shall be Receivers' account.
In the event that the vessel is ordered to vacate the discharging berth to
perform the mandatory pre-wash, as provided under the first paragraph
above, any shifting expenses and additional bunker costs to be for
Receivers' account.
Time used in shifting count as laytime or if vessel is on demurrage, as
time on demurrage.
Any delay in providing the necessary reception facilities and time used for
discharging cargo residue mixture shall count as laytime or, if vessel is
on demurrage, as time on demurrage.
Any action or lack of action taken under this clause shall not prejudiceany
other rights or obligations of the parties.
5.6 "Ice clause"
Vessel not to force ice but to follow icebreakers as far as the ice channel
is sufficiently wide. Receivers guarantee to place necessary icebreakers at
Vessel's disposal both inwards and outwards in accordance with and at the
discretion of the Finnish board of Navigation. Time stuck in ice or waiting
for icebreakers to count as half laytime or half demurrage, if on
demurrage. Ice risks premium to be for owner's account.
5.7 The trade terms contained in this Agreement shall be governed by Incoterms
1990 as may be amended from time to time except that if any provisions in
this Agreement conflict with Incoterms this Agreement shall have
precedence.
3
<PAGE>
6. PRICES AND PAYMENTS
-------------------
6.1 Price of styrene
On a CIF PORVOO or on a CIF PORI basis the price of each shipment will be
the lowest of the three (3) following formulas:
* Formula 1
---------
NWE CP minus [ ] percent
* Formula 2
---------
[ ] x (NWE CP minus [ ] percent) + [ ] x (spot T2 + [ ]DM/MT)
* Formula 3
---------
[ ] x (NWE CP minus [ ] percent) + [ ] x [(spot USG + [ ]USD/MT) x K +
[ ]DM/MT]
where:
NWE CP = North West Europe quarterly Contract Price (low end) as
published by ICIS in Deutsche Marks, valid for the month of
delivery.
SPOT T2 = Average of the weekly quotations for the month prior to the
month of delivery of the spot FOB T2 price for styrene in
Rotterdam area, as published by ICIS in US dollars and
converted in Deutsche Marks, using the USD/DM exchange rate
published by Banque of France and valid for the month prior
to the month of delivery.
SPOT USG = Average of the weekly quotations for the month prior to the
month of delivery of the spot FOB US Gulf price for styrene
as published by ICIS in US dollars and converted in Deutsche
Marks using the USD/DM exchange rate published by Banque de
France and valid for the month prior to the month of
delivery.
K = [ ] + Customs duties for EC imports from the United States,
valid for the month of delivery. For example K shall be
respectively as follows:
1997: K = [ ]
1998: K = [ ]
In the case of disappearance of the ICIS reference, or if the parties agree
that such reference shall not be considered as relevant, the parties will
endeavor to identify another reference and substitute it for such reference
within sixty (60) days after the written notice of either party requesting
such negotiations.
6.2 Quantity rebate
An additional rebate on quantities will be granted to the BUYER according
to mechanism detailed in Appendix B.
This rebate will be calculated and paid by a credit note at the end of each
quarter, provided that cumulated quantities at the end of each quarter are
corresponding to the prorated annual quantities set forth in Article 3.
6.3 Payment Terms
Payment shall be made upon presentation of commercial or telexed invoice
and the following supporting documents:
4
<PAGE>
* 2/3 original bills of lading and the delivering party's / shipowner's /
master's receipt for third original
* Surveyor's report
* Certificate of origin.
Any overdue payments will be charged with the interest rate of [ ]
percent ([ ]%) per annum.
If the due date falls on a bank holiday, a Saturday or a Sunday, payment
shall be due on the following business day.
All payments shall be made in Deutsche Marks (DEM) within [ ]
days after the date of invoice.
7. NO RESALE
---------
The BUYER declares that styrene monomer purchased from the SELLER under this
agreement is for its own consumption and for the sale to NESTE, NORLATEX, or
related business of STYROCHEM.
8. FORCE MAJEURE
-------------
The failure of any of the parties hereto to perform any obligation under this
agreement solely by reason of acts of God, acts of Government, riots, wars,
strikes (even if it is the parties power to concede), accidents in or shortage
of transportation or other causes beyond its reasonable control shall not be
deemed to be a breach of this Agreement. Provided, however, that the party so
prevented from complying herewith shall immediately give notice thereof to the
other party and shall continue to take all actions within its power to comply as
fully as possible herewith.
In all cases when Force Majeure shall affect the BUYER's ability to take or the
SELLER's ability to supply styrene monomer under this agreement, it is agreed
that the parties will come together in reciprocal good faith to discuss the most
suitable means for alleviating the results and best ensuring deliveries and
collections and the return as soon as possible to normal observance by the
impeded company of the present Agreement.
In all cases both parties agree that the supply of material shall be at levels
prorata in terms of tonnage to the SELLER's normal obligations to other parties
he supplies.
The party affected shall also inform immediately the other of the end of the
Force Majeure.
9. LIMITATION OF LIABILITY
-----------------------
Notwithstanding anything to the contrary contained in this Agreement, the SELLER
shall not be liable (whether in contract or in tort or otherwise) for any
indirect or consequential loss or loss of profits or use suffered in connection
with the supply to the BUYER of the PRODUCT providing the styrene monomer is
within the agreed attached specification. Seller agrees to defend indemnify and
hold harmless Buyer from and against all claims, actions, liabilities, damages,
costs and expenses (including attorney's fees) resulting from or relating to the
failure of the product to meet the specifications set forth in Appendix A.
10. ASSIGNMENT
----------
Neither party may assign its rights or obligations hereunder in whole or in part
without the written consent of the other party, which consent shall not be
unreasonably withheld, except that:
Either party may upon written notice to the other assign its rights or
obligations hereunder to any business entity which is directly or indirectly
wholly owned or controlled by it or its parent companies or which directly or
indirectly owns or controls it or its parent companies.
5
<PAGE>
This Agreement shall be binding upon and shall inure to the benefit of the
respective successors of the parties or to a person, firm or corporation
acquiring all or substantially all the business and assets of either party.
11. ARBITRATION / GOVERNING LAW
---------------------------
Any disputes, disagreements, controversy or claim arising out of or relating to
this Agreement, or a breach thereof, shall be finally settled by way of
arbitration under the Rules of Conciliation and Arbitration of the International
Chamber of Commerce (ICC Rules), in force at the date or Request of Arbitration,
by three arbitrators.
Each party will appoint one arbitrator and the third one will be appointed by
the other two within thirty (30) days following the appointment of the latter.
In case one party fails to appoint one arbitrator or in case the two arbitrators
appointed by the parties do not agree on the third one, the Arbitration Court of
the International Chamber of Commerce will proceed to such appointment as soon
as possible. The Arbitration will take place in STOCKHOLM, SWEDEN.
The proceedings shall be conducted in English under material Swedish law.
12. NOTICE
------
Any notice required or permitted shall be given hereunder by letter, telex or
telefax to the parties as follows:
to: STYROCHEM FINLAND OY
Attention to: Mr. Henrik Akermark
PO BOX 360
FIN-0601 PORVOO
FINLAND
with copy to: STYROCHEM INTERNATIONAL
Attention to: Mr. Thomas Springer
7980 West Buckeye Road
Phoenix, AZ 85043
to: ELF ATOCHEM SA
Petrochemicals Division
Cours Michelet
LA DEFENSE 10, Cedex 42
92091 PARIS LA DEFENSE
FRANCE
In witness whereof the parties have caused this Agreement to be executed by its
duly authorized representatives.
Paris La Defense,
made in duplicate
ELF ATOCHEM STYROCHEM OY
Division Petrochimie
Date: Date:
6
<PAGE>
APPENDIX A
[STYRENE MONOMER SPECIFICATION]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Specification Reference Standards
Test Methods
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purity % Min 99.7% ASTM D5135
Ethylbenzene ppm max less than or equal to 500 ASTM D5135
DVB ppm max less than or equal to 10 ASTM D5135
Phenylacetylene ppm max less than or equal to 150 ASTM D5135
Peroxides ppm max less than or equal to 20 ASTM D2340
Aldehydes ppm max less than or equal to 50 ASTM D2119
Polymers ppm max less than or equal to 5 (1) ASTM D2121
Chlorides ppm max less than or equal to 10 UOP 606
Water ppm max less than or equal to 130 NFT 20-052
Inhibitor P. TBC ppm max 10-15 ASTM D4590
Color APHA max less than or equal to 10 ASTM D1209
Total Sulfur ppm max less than or equal to 5 NFM 07 059
Benzene ppm max less than or equal to 5 (1) ASTM D 5135
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1): Target ppm max 1
7
<PAGE>
APPENDIX B
----------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ANNUAL
QUANTITY QUANTITY REBATE MECHANISM
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Q is less than or equal to [ ] KT No rebates
[ ] KT is less than Q is less than or equal to [ ] KT R = [ ]% on quantities in excess of [ ] KT
[ ] KT is less than Q is less than or equal to [ ] KT R = [ ]% on the [ ] KT bracket in excess of [ ] KY +
[ ]% on quantities in excess of [ ] KT
[ ] KT is less than Q is less than or equal to [ ] KT R = [ ]% on the [ ] KT bracket in excess of [ ] KT +
[ ]% on the [ ] KT bracket in excess of [ ] KT +
[ ]% on quantities in excess of [ ] KT
[ ] KT is less than Q is less than or equal to [ ] KT R = [ ]% on the [ ] KT bracket in excess of [ ] KT +
[ ]% on the [ ] KT bracket in excess of [ ] KT +
[ ]% on the [ ] KT bracket in excess of [ ] KT +
[ ]% on quantities in excess of [ ] KT
[ ] KY is less than Q is less than or equal to [ ] KT R = [ ]% on the [ ] KT bracket in excess of [ ] KT +
[ ]% on the [ ] KT bracket in excess of [ ] KT +
[ ]% on the [ ] KT bracket in excess of [ ] KT +
[ ]% on the [ ] KT bracket in excess of [ ] KT +
[ ]% on quantities in excess of [ ] KT
[ ] KT is less than Q is less than or equal to [ ] KT R = [ ]% on the [ ] KT bracket in excess of [ ] KT +
[ ]% on the [ ] KT bracket in excess of [ ] KT +
[ ]% on the [ ] KT bracket in excess of [ ] KT +
[ ]% on the [ ] KT bracket in excess of [ ] KT +
[ ]% on the [ ] KT bracket in excess of [ ] KT +
[ ]% on quantities in excess of [ ] KT
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
Exhibit 10.81
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into this 21st day of
Feb., 1997, between Radnor Holdings Corporation ("Company") and Caroline J.
Williamson ("Executive").
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
1. Employment. Company hereby employs Executive and Executive hereby
----------
accepts employment as Corporate Counsel and Secretary of Company. Executive
agrees to perform such duties as are customarily incident to such office s and
such other duties as may be assigned to her from time to time by Company.
2. Term. The term of this Agreement shall be three (3) years commencing
----
on 3/31/97 ("Initial Term") and, unless sooner terminated in accordance with
this Agreement, shall continue thereafter from year to year (each, a "Renewal
Term") unless either party gives written notice of termination to the other at
least ninety (90) days prior to the expiration of such Initial Term or Renewal
Term, as the case may be. The Initial Term and Renewal Term are collectively
referred to as the "Term."
3. Compensation. For all of the services rendered by Executive under this
------------
Agreement, Company shall pay Executive (collectively, the "Compensation") (a) a
bonus of Twenty Five Thousand Dollars ($25,000), payable immediately upon the
execution of this Agreement, (b) a base salary of One Hundred Twenty Thousand
Dollars ($120,000) per annum, payable in equal semi-monthly installments ("Base
Salary"), and (c) such additional compensation, including bonus as Company may
determine from time to time in its sole discretion. The Base Salary shall be
reviewed annually during the Term and may be increased in the sole discretion of
the Company based on corporate policy and Executive's performance.
4. Fringe Benefits. Executive shall be entitled to such benefits of
---------------
employment with Company as are in effect for salaried officers and employees of
Company with duties comparable to Executive, including insurance, disability,
medical, dental, profit-sharing, pension, retirement and other benefits plans.
5. Termination of Employment. This Agreement shall terminate in the event
-------------------------
of Executive's death. This Agreement may be terminated by Company upon written
notice to Executive: (i) in the event a mental or physical condition which
renders Executive unable to perform her duties hereunder, which condition
continues for at least ninety (90) consecutive days, or (ii) for cause (as
defined below). This Agreement may be terminated by Executive upon no less than
ninety (90) days prior written notice to Company. In the event of a termination
of this Agreement in accordance with this Section 5, Company shall have no
further obligations hereunder except to pay Executive (or her executor or
administrator) any Compensation earned by Executive prior to termination but not
yet paid. Cause shall be defined as (a) gross negligence of Executive; (b)
willful failure by Executive to perform her duties under this Agreement or
material breach of any agreement made by Executive herein which breach continues
uncured for more than thirty (30) days after Executive is notified of such
breach; (c) conversion by Executive of Company funds; or (d) Executive's
conviction of a felony. Determinations of cause shall be made in good faith by
a majority of Company's board of directors (other than Executive if Executive is
a member of the board) based upon reasonable evidence presented to the board.
6. Non-Disclosure. Executive shall not use for herself or divulge to
--------------
others any confidential information or data of Company. All notes and other
documents made or compiled by Executive, or made available to Executive, are
Company's property and all copies thereof shall be delivered to Company upon
termination of this Agreement.
7. Arbitration. Any claim arising out of this Agreement shall be settled
-----------
by arbitration in Philadelphia, Pennsylvania, in accordance with the rules of
the American Arbitration Association.
<PAGE>
8. Miscellaneous. The waiver by either party of any breach of the terms
-------------
of this Agreement will not be construed as a waiver of subsequent breaches.
This Agreement contains the entire Agreement between the parties. All
amendments to this Agreement must be in writing and signed by both parties to
this Agreement. All notices under this Agreement must be in writing and shall
be deemed given when actually received. This Agreement shall be construed in
accordance with Pennsylvania law.
IN WITNESS WHEREOF, the parties have executed this Agreement intending to
be legally bound.
RADNOR HOLDINGS CORPORATION
By: /s/ Michael T. Kennedy
-------------------------------
/s/ Caroline J. Williamson
-------------------------------
Caroline J. Williamson
<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 a part of this
registration statement.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
January 22, 1998
<PAGE>
Exhibit 23.2
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 a part of this
registration statement.
ARTHUR ANDERSEN OY
Helsinki, Finland
January 22, 1998
<PAGE>
Exhibit 23.3
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 a part of this
registration statement.
ARTHUR ANDERSEN AB
Stockholm, Sweden
January 22, 1998
<PAGE>
Exhibit 23.4
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 a part of this
registration statement.
ARTHUR ANDERSEN
Arhus, Denmark
January 22, 1998
<PAGE>
Exhibit 23.5
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement of
Radnor Holdings Corporation on Form S-4 of our report dated October 18, 1996
(October 30, 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 a
part of such Registration Statement, and to the reference to us under the
heading "Experts" in the Prospectus.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Fort Worth, Texas
January 22, 1998
<PAGE>
Exhibit 23.6
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our reports
for 1994 and 1995 for Neste Cellplast ABs financial statements and to all
references to our Firm included in or made a part of Form S-4 registration
statement.
Gothenburg 22 January 1998
OHRLINGS COOPERS & LYBRAND AB
/s/ Lennert Wiberg
- ------------------
Lennert Wiberg
<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> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-27-1996 DEC-26-1997
<PERIOD-START> DEC-30-1995 DEC-28-1996
<PERIOD-END> DEC-27-1996 SEP-26-1997
<CASH> 855 1,303
<SECURITIES> 0 0
<RECEIVABLES> 25,400 21,018
<ALLOWANCES> 713 824
<INVENTORY> 19,078 25,386
<CURRENT-ASSETS> 50,971 54,699
<PP&E> 115,763 126,269
<DEPRECIATION> 4,372 9,380
<TOTAL-ASSETS> 172,369 181,908
<CURRENT-LIABILITIES> 42,287 39,752
<BONDS> 104,362 115,632
0 0
0 0
<COMMON> 1 1
<OTHER-SE> 14,328 14,787
<TOTAL-LIABILITY-AND-EQUITY> 172,369 181,908
<SALES> 177,395 170,545
<TOTAL-REVENUES> 177,395 170,545
<CGS> 135,982 127,730
<TOTAL-COSTS> 135,982 127,730
<OTHER-EXPENSES> 33,685 30,316
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,496 8,781
<INCOME-PRETAX> 2,858 3,812
<INCOME-TAX> 121 323
<INCOME-CONTINUING> 1,389 3,489
<DISCONTINUED> 0 0
<EXTRAORDINARY> 710 0
<CHANGES> 0 0
<NET-INCOME> 2,099 3,489
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 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> RADNOR CHEMICAL CORPORATION
<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>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FR0M NESTE OY
POLYSTYRENE UPSTREAM BUSINESS IN PORVOO AND KOKEMAKI AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 SEP-30-1997
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 6,499 8,659
<ALLOWANCES> 0 0
<INVENTORY> 5,149 5,718
<CURRENT-ASSETS> 12,383 14,930
<PP&E> 48,982 43,805
<DEPRECIATION> 22,963 21,240
<TOTAL-ASSETS> 38,746 37,818
<CURRENT-LIABILITIES> 5,010 4,868
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 33,736 32,950
<TOTAL-LIABILITY-AND-EQUITY> 38,746 37,818
<SALES> 60,805 46,380
<TOTAL-REVENUES> 60,805 46,380
<CGS> 40,752 32,455
<TOTAL-COSTS> 40,752 32,455
<OTHER-EXPENSES> 15,770 11,413
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 4,283 2,512
<INCOME-TAX> 1,199 703
<INCOME-CONTINUING> 3,084 1,809
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,084 1,809
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ISORA OY AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 SEP-30-1997
<CASH> 4,863 4,241
<SECURITIES> 0 0
<RECEIVABLES> 1,311 2,462
<ALLOWANCES> 0 0
<INVENTORY> 1,383 1,311
<CURRENT-ASSETS> 9,804 9,308
<PP&E> 8,133 7,213
<DEPRECIATION> 3,887 3,758
<TOTAL-ASSETS> 14,286 12,958
<CURRENT-LIABILITIES> 3,575 3,564
<BONDS> 0 0
0 0
0 0
<COMMON> 3,858 3,858
<OTHER-SE> 5,035 4,546
<TOTAL-LIABILITY-AND-EQUITY> 14,286 12,958
<SALES> 19,298 13,759
<TOTAL-REVENUES> 19,298 13,759
<CGS> 14,960 9,842
<TOTAL-COSTS> 14,960 9,842
<OTHER-EXPENSES> 4,274 3,356
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 176 631
<INCOME-TAX> (152) 0
<INCOME-CONTINUING> 328 631
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 328 631
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NESTE
CELLPLAST AB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 SEP-30-1997
<CASH> 2,631 1,636
<SECURITIES> 0 0
<RECEIVABLES> 727 1,372
<ALLOWANCES> 0 0
<INVENTORY> 439 505
<CURRENT-ASSETS> 3,919 3,712
<PP&E> 5,503 5,068
<DEPRECIATION> 4,869 4,557
<TOTAL-ASSETS> 4,553 4,223
<CURRENT-LIABILITIES> 2,297 2,095
<BONDS> 0 0
0 0
0 0
<COMMON> 804 804
<OTHER-SE> 1,401 1,288
<TOTAL-LIABILITY-AND-EQUITY> 4,553 4,223
<SALES> 10,319 7,275
<TOTAL-REVENUES> 10,319 7,275
<CGS> 6,904 4,685
<TOTAL-COSTS> 6,904 4,685
<OTHER-EXPENSES> 2,595 1,909
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 900 718
<INCOME-TAX> (4) (18)
<INCOME-CONTINUING> 904 736
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 904 736
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NESTE
THERMISOL A/S AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 SEP-30-1997
<CASH> 872 720
<SECURITIES> 0 0
<RECEIVABLES> 327 575
<ALLOWANCES> 0 0
<INVENTORY> 242 332
<CURRENT-ASSETS> 1,473 1,698
<PP&E> 5,036 4,369
<DEPRECIATION> 1,936 1,800
<TOTAL-ASSETS> 4,573 4,267
<CURRENT-LIABILITIES> 1,719 1,376
<BONDS> 0 0
0 0
0 0
<COMMON> 2,237 1,973
<OTHER-SE> (1,093) (392)
<TOTAL-LIABILITY-AND-EQUITY> 4,573 4,267
<SALES> 5,470 5,083
<TOTAL-REVENUES> 5,470 5,083
<CGS> 3,405 2,816
<TOTAL-COSTS> 3,405 2,816
<OTHER-EXPENSES> 2,010 1,581
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 142 76
<INCOME-PRETAX> (87) 610
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (87) 610
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (87) 610
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
