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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended December 25, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 333-19495
RADNOR HOLDINGS CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 23-2674715
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
THREE RADNOR CORPORATE CENTER, SUITE 300
100 MATSONFORD ROAD, RADNOR, PENNSYLVANIA 19087
(address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 610-341-9600
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of March 19, 1999 there were 600 shares of the Registrant's Voting Common
Stock ($.10 par value), 245 shares of the Registrant's Nonvoting Common Stock
($.10 par value) and 5,400 shares of the Registrant's Class B Nonvoting Common
Stock ($.01 par value) outstanding. The aggregate market value of voting stock
held by non-affiliates of the Registrant as of such date was $0.
DOCUMENT INCORPORATED BY REFERENCE:
Portions of the Registrant's Prospectus dated February 6, 1998, included in
Amendment No. 1 to the Company's Registration Statement on Form S-4, Commission
File No. 333-42101, are incorporated by reference in Item 8.
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RADNOR HOLDINGS CORPORATION
1998 FORM 10-K
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM Page
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<S> <C>
PART I
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1. Business 1
Packaging & Insulation
Food Packaging Products 1
Insulation Products 2
Specialty Chemicals 2
General
Raw Materials 2
Risks Attendant to Foreign Operations 3
Proprietary Technology and Trademarks 3
Competition 3
Employees 4
Euro Introduction 4
Year 2000 4
Environmental Matters 4
2. Properties
Packaging & Insulation 7
Specialty Chemicals 7
3. Legal Proceedings 8
4. Submission of Matters to a Vote of Security Holders 8
PART II
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5. Market for Registrant's Common Equity and Related Stock Matters 9
6. Selected Financial Data 10
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11
7A. Quantitative and Qualitative Disclosure About Market Risk 15
8. Financial Statements and Supplementary Data 16
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 17
PART III
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10. Directors and Executive Officers of the Registrant 18
11. Executive Compensation 20
12. Security Ownership of Certain Beneficial Owners and Management 22
13. Certain Relationships and Related Transactions 24
PART IV
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14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 25
</TABLE>
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PART I
ITEM 1. BUSINESS
Radnor Holdings Corporation, through acquisition and internal development, has
established itself as a leading worldwide manufacturer and distributor of
specialty chemicals and foam packaging and insulation products for the
foodservice, insulation and packaging industries.
The packaging and insulation business segment manufactures and distributes
foam cup and container products for the foodservice industry as well as a
variety of standard and specialized insulation products. Through its WinCup
Holdings, Inc. ("WinCup") subsidiary, the Company is the second largest producer
in the United States of foam cups and containers for the foodservice industry.
The specialty chemicals business segment primarily manufactures and distributes
expandable polystyrene ("EPS") bead for internal consumption and distribution to
the insulation and packaging industries. Through its Radnor Chemical Corporation
subsidiary, the Company is the fifth largest worldwide producer of EPS.
Financial information concerning the Company's business segments appears in
Note 11 to the Consolidated Financial Statements included under Item 8 herein.
As used in this Report, the term "Radnor" or "Company" includes subsidiaries,
unless the context indicates otherwise.
PACKAGING & INSULATION
Radnor's downstream operations consist of food packaging and insulation
products where the Company is able to differentiate itself by its product
quality, customer service and production technology. The downstream operations
obtain nearly 100% of their EPS requirements from the specialty chemicals
segment.
FOOD PACKAGING PRODUCTS
The foam sector of the U.S. disposable cup and container market, which the
Company believes had sales of approximately $600 million in 1998, is highly
concentrated, with the Company and its primary competitor accounting for more
than 80% of the sector.
The Company manufactures a broad range of foam cups, bowls, containers,
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 for both hot and cold
beverages and are sold under the Dixie(R), COMpac(TM), Profit Pals(R),
STYROcup(R), Handi-Kup HK(R), and Simplicity(R) brand names. Foam bowls and
other containers are made in varying sizes for both hot and cold food products
and are sold under the STYROcontainers(R) brand name. The Company also
manufactures thermoformed leak-resistant plastic lids for its cups, bowls and
containers.
The Company sells its disposable food packaging products through a 64-person
sales organization and through an extensive network of more than 65 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 15 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.
The Company's food packaging products are made with custom-designed foam cup
molding machines, lid production machines and foam cup and container printing
machines. The Company operates ten plants throughout the U.S. that produce foam
cups, containers and lids.
The Company supplies food packaging products to a number of large national
companies and foodservice distributors. No customer represented more than 6.0%
of the Company's net sales for 1998. In addition, the five largest accounts
represented approximately 21.5% of the Company's net sales for 1998. Although
the Company has
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not lost sales from its key customers in 1996, 1997, 1998 or 1999 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.
INSULATION PRODUCTS
The Company's insulation operations directly convert EPS produced by the
specialty chemicals segment into a full range of building insulation panels,
such as roof, wall and floor panels for the building industry, as well as
specialized insulation products. These products are sold primarily in Finland
and the Scandinavian countries of Denmark, Sweden and Norway and accounted for
approximately 13.1% of the Company's consolidated net sales for 1998.
The Company maintains its own direct sales force for insulation products,
which sells to more than 2,000 customers, including large building wholesalers,
residential and commercial construction companies and distributors. A portion of
the insulation sales force is decentralized, allowing the Company to separately
market specialized products in addition to its standard product offerings.
The Company operates seven plants located in Finland, Sweden and Denmark that
manufacture insulation panels from EPS. These plants convert approximately one-
third of the Company's production of EPS in Europe into insulation products.
SPECIALTY CHEMICALS
The EPS industry is generally comprised of three grades of material: block
grade for rigid board insulation and molded parts, shape grade for a broad range
of packaging and specialty applications and T-grade for foodservice containers
and lost foam casting. The North American market for EPS products is estimated
at approximately 940 million pounds annually, including insulation, packaging
and foodservice grades. The European market is estimated at approximately 1.5
billion pounds annually consisting primarily of block and shape grades.
Worldwide, there are in excess of 20 manufacturers with the top five accounting
for approximately 60% of the market.
The Company manufactures EPS for its internal consumption in addition to
selling directly to third party manufacturers. The specialty chemicals segment
supplies nearly 100% of the packaging and insulation segment's EPS requirements.
Sales to the packaging and insulation operations were $53.8 million or 37.7% of
the specialty chemicals segment's total sales for 1998. The Company's EPS
includes a range of bead sizes and densities for conversion into foam
containers, light and heavy insulation boards, and various shape products.
In North America, the Company sells EPS through a dedicated sales force to
manufacturers of foam packaging and insulation products. In Europe, the Company
markets its EPS and other polystyrene products through a combination of its own
sales force, sales agency arrangements with third-party sales offices and
manufacturers' representatives. In support of these sales and marketing efforts,
the Company employs individuals who are knowledgeable of chemical engineering
and manufacturing processes in order to provide technical assistance to
customers.
The Company operates four plants in North America and two plants in Europe
that manufacture EPS from styrene monomer. These plants produced more than 285
million pounds or 129,300 metric tons of EPS during 1998.
GENERAL
RAW MATERIALS
The Company's packaging and insulation 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
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numerous large, vertically integrated chemical companies. Historically, styrene
monomer prices have fluctuated as a result of changes in petrochemical prices
and the capacity, supply and demand for styrene monomer. However, in recent
years, such prices have been relatively stable. Styrene monomer prices during
1997 ranged from $.28 to $.30 per pound. During 1998 and 1999 to date, styrene
monomer prices have ranged from $.23 to $.30 per pound.
The specialty chemicals business does not insulate the Company's packaging and
insulation operations from styrene monomer price fluctuations, although it
mitigates the impact of such fluctuations by increasing the Company's
flexibility to purchase styrene monomer. Radnor purchases styrene monomer from
various suppliers through long-term contracts as well as through spot market
transactions.
The raw materials used by the Company for the manufacture of thermoformed lids
are primarily plastic resins such as high-impact polystyrene ("HIPS"). Most of
the plastic resins used by the Company, including HIPS, are available from a
variety of sources.
RISKS ATTENDANT TO FOREIGN OPERATIONS
The Company conducts its businesses in numerous foreign countries and as a
result is subject to risks customarily encountered in foreign operations,
including fluctuations in foreign currency exchange rates and controls, import
and export controls, and other economic, political and regulatory policies of
local governments. The Company's foreign entities report their assets,
liabilities and results of operations in the currency in which the entity
primarily conducts its businesses. The foreign currencies are ultimately
translated into U.S. dollars for financial reporting purposes.
Note 11 to the Company's financial statements included under Item 8 herein
contains information with respect to the geographic composition of the Company's
operations and financial position as of and for the years ended December 25,
1998 and December 26, 1997.
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 owns or holds license rights with
respect to numerous patents relating to its lid design in manufacturing,
embossed cup design and continuous formed foam cup manufacturing processes. The
Company, however, does not consider these patents material to its operations.
The Company holds approximately 35 registered trademarks which are not
considered material to its operations.
COMPETITION
The Company's businesses face strong competition from others, some of which
are larger and have greater resources than Radnor.
Radnor's food packaging business competes in the U.S. principally with Dart
Container Corp., which has significantly greater financial resources than the
Company and controls the largest share of this market segment. In Europe,
Radnor's insulation business competes primarily with several regional
manufacturers who have financial resources and market share similar to that of
the Company.
Competition in the packaging and insulation segment is based primarily on
customer service, product quality and the price at which the products are
offered. The Company believes that its market position is attributable to its
high level of customer service and product quality, strategically located
manufacturing facilities, proprietary technology and experienced management
team. The Company does not believe that other companies operating in related
markets are likely to enter the packaging and insulation segment due to the
significant investment that would be required.
3
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In North America, the specialty chemicals business segment competes with Nova
Chemicals, Inc., Huntsman Chemical Corp. and BASF Corporation, which are larger
and have greater financial resources than the Company and which control a
significant share of the market for supplying EPS to manufacturers of insulation
and packaging products. In Europe, the Company competes with several companies
including BASF Corporation, Shell Oil Company, EniChem S.P.A. and Huntsman
Chemical Corp, which are larger and have substantially greater financial
resources than Radnor.
The Company believes that competition within the EPS market is primarily based
on price, although customer service and support and high quality products can be
significant competitive factors, particularly among the smaller manufacturers of
foam insulation and packaging products.
EMPLOYEES
As of December 25, 1998, the Company had approximately 1,800 full-time
employees. Except for employees in Europe, Radnor's employees are not
represented by any union. The Company has never experienced a material labor
strike or other material labor-related work stoppage and considers its relations
with its employees to be good.
In Finland, over 90% of the Company's employees are represented by one of
five unions and the Company is subject to three collective bargaining
agreements. In Sweden, over 90% of the Company's employees are represented by
one of four unions and the Company is subject to two collective bargaining
agreements. The Company is represented in Swedish collective bargaining
negotiations by Byggnadamnesforbundet (Construction Materials Federation). The
European Union directives regarding employment are applicable to the Company 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.
In Denmark, the Company is a member of Dansk Industri, a large Danish
employer association, which has negotiated collective bargaining agreements with
various trade unions throughout Denmark. Most of the Company's blue collar
employees in Denmark are represented by the trade union SID (semi-skilled
workers union). In addition, the Company has negotiated local agreements with
its Danish workers that supplement the collective bargaining agreements.
Moreover, 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.
The Company is dependent on the management experience and continued services
of the Company's executive officers, including its Chief Executive Officer,
Michael T. Kennedy. The loss of the services of these officers could have a
material adverse effect on the Company's business. In addition, the Company's
continued growth depends on its ability to attract and retain experienced key
employees.
EURO INTRODUCTION
The Company does not expect the introduction of the Euro resulting from the
European Monetary Union to have a significant impact on the Company's business.
YEAR 2000
Software failures due to processing efforts potentially arising from
calculations using Year 2000 dates are a known risk. The Company is currently
evaluating and managing the financial and operating risks associated with this
problem. Additional information regarding the Company's Year 2000 efforts is
included under Item 7 herein.
ENVIRONMENTAL MATTERS
The Company's facilities are used for manufacturing or warehousing foam
conversion products or the EPS from which such products are manufactured. Many
of these facilities are subject to federal, state, foreign and local
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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 Annual
Report 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 results of operations, based on its prior
experience in addressing compliance matters that raised potentially similar
issues for other facilities. Furthermore, the Company has no knowledge of any
claims regarding air emissions that could be expected to have a material adverse
effect on the Company's financial condition or results of operations. 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 Title V of the Clean Air Act, will not require substantial expenditures by
the Company or significant modifications of the Company's operations.
Certain of the Company's manufacturing facilities generate wastewater that is
regulated and requires permits for discharge. While the Company believes that
the majority of the wastewater discharges from its facilities are properly
permitted, certain of the Company's facilities have been cited for instances of
past noncompliance. All of these citations 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 are not reasonably likely to have a material adverse
effect on the Company's financial condition or results of operations, based both
on the Company's prior experience in obtaining similar permits or addressing
compliance matters that raised potentially similar issues for other facilities
and on preliminary estimates of the cost of addressing such potential permit
issues. It is possible, however, 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, foreign 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
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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 results of 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 containment
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 results of
operations.
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.
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ITEM 2. PROPERTIES
The following tables set forth, as of December 25, 1998, the Company's major
manufacturing, warehouse, machine assembly, utility and office facilities, all
of which are owned except as otherwise noted:
PACKAGING & INSULATION
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<TABLE>
<CAPTION>
APPROXIMATE
FLOOR SPACE
LOCATION USE SQ. FT.
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<S> <C> <C>
Corte Madera, California................... Manufacturing, warehouse, machine assembly and office 85,000
(leased)
Richmond, California....................... Warehouse (leased) 103,000
El Campo, Texas............................ Manufacturing and warehouse 91,000
Higginsville, Missouri..................... Manufacturing and warehouse 68,000
Jacksonville, Florida...................... Manufacturing and warehouse (leased) 128,000
Edison, New Jersey......................... Warehouse (leased) 95,000
Metuchen, New Jersey....................... Manufacturing 85,000
Mount Sterling, Ohio....................... Manufacturing and warehouse 50,000
Shreveport, Louisiana...................... Manufacturing and warehouse 73,000
Stone Mountain, Georgia.................... Manufacturing and warehouse (partially leased) 315,000
Phoenix, Arizona/(1)/...................... Manufacturing, warehouse, machine assembly and office 182,000
(leased)
West Chicago, Illinois..................... Manufacturing, warehouse and office (partially leased) 287,000
Nurmijarvi, Finland........................ Manufacturing, warehouse and office 49,000
Vammala, Finland........................... Manufacturing, warehouse and office 172,000
Muurola, Finland........................... Manufacturing, warehouse and office (leased) 11,000
Pietarsaari, Finland....................... Manufacturing, warehouse and office (leased) 36,000
Norrtalje, Sweden.......................... Manufacturing, warehouse and office (leased) 63,000
Vargarda, Sweden........................... Manufacturing, warehouse and office 63,000
Hedensted, Denmark......................... Manufacturing, warehouse and office 44,000
</TABLE>
__________________
(1) The Company purchased its Phoenix, Arizona manufacturing facility on March
1, 1999 for $9.4 million. This facility has 170,000 square feet of space
and represents 93% of the total floor space utilized by the Company in
Phoenix.
SPECIALTY CHEMICALS
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<CAPTION>
APPROXIMATE
FLOOR SPACE
LOCATION USE SQ. FT.
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<S> <C> <C>
Fort Worth, Texas.......................... Manufacturing, warehouse and office (partially leased) 76,000
Saginaw, Texas............................. Manufacturing, warehouse and office 106,000
Baie D'Urfe, Quebec........................ Manufacturing, warehouse and office 90,000
Manufacturing, warehouse, machine assembly, utility and 112,000
Porvoo, Finland............................ office (partially leased)
Kokemaki, Finland.......................... Manufacturing, warehouse, utility and office (leased) 52,000
</TABLE>
In addition, the Company leases approximately 8,000 square feet in
Radnor, Pennsylvania for its executive offices. The Company believes that its
present facilities are adequate for its current operations and that it will be
able to lease or otherwise acquire any additional facilities as may be required
for its future operations.
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ITEM 3. 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 Holdings Corporation
("Radnor"), WinCup, WinCup Holdings L.P. ("WinCup L.P."), James River Paper
Company, Inc. ("James River") and James River Corporation of Virginia. The suit
related 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. 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 position. On February 27, 1998, the court dismissed the
suit on the basis of forum non conveniens.
On June 24, 1998, Jackson and Holdings filed an action against the same
defendants asserting similar claims relating to the November 1995 sale in the
Court of Chancery for the State of Delaware in and for New Castle County. The
suit alleges, among other things, that, in connection with the November 1995
sale to James River, Radnor and certain defendants (i) breached or participated
in breaching certain fiduciary duties to Jackson and Holdings, (ii) improperly
interfered in certain alleged contractual rights of the nonvoting preferred
shareholders to prevent the sale from occurring, (iii) committed fraud against
Jackson and Holdings in structuring the transaction and in failing to disclose
the transaction to Jackson in a timely manner and (iv) usurped Holdings'
corporate opportunities in connection with the 1992 acquisition of WinCup and
the 1996 formation of WinCup L.P. The suit seeks a broad range of remedies
including the imposition of a constructive trust, payment to Holdings of the
profits received by James River and WinCup L.P. since the sale and WinCup L.P's
formation and damages of not less than $30.0 million.
The Company believes that the allegations in the complaint are without merit.
Holdings, through its investment banker, actively solicited a large number of
prospective purchasers regarding the sale of the cutlery and straws operations.
The Company believes that Jackson had no right to prevent the sale of Holdings'
assets. In connection with the sale, Holdings obtained opinions from
independent investment banking firms as to the fairness, from a financial point
of view, of the transaction to Holdings' stockholders and as to the
reasonableness of the negotiated value of certain noncompetition agreements
negotiated as part of the sale transaction. The proceeds received by Holdings
from the sale of the cutlery and straws operations, together with all the
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.
The Company is also 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
adverse effect on the Company's financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There are no matters to be reported hereunder.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCK MATTERS
MARKET INFORMATION
- ------------------
There currently exists no established public trading market for the Company's
Voting Common Stock, $.10 par value, Nonvoting Common Stock, $.10 par value, or
Class B Nonvoting Common Stock, $.01 par value. There have been no sales of
shares of any class of the Company's Common Stock by the holders thereof since
the Company's inception.
HOLDERS
- -------
As of March 19, 1999, there were 3 holders of record of the Company's Voting
Common Stock, 12 holders of record of the Company's Nonvoting Common Stock and 7
holders of record of the Company's Class B Nonvoting Common Stock.
DIVIDENDS
- ---------
In August 1998, the Company declared a dividend of $240.20 per share of the
Company's Voting Common Stock, Nonvoting Common Stock and Class B Nonvoting
Common Stock, which was paid in September 1998. As with any company, the
declaration and payment of dividends are subject to the discretion of the
Company's Board of Directors and will depend on various factors, including
restrictions on dividends contained in the Company's credit agreements and the
indentures pursuant to which the Company issued its 10% Senior Notes due 2003 on
December 5, 1996 (the "Series A Notes") and its 10% Series B Senior Notes due
2003 on October 15, 1997 (the "Series B Notes").
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ITEM 6. SELECTED FINANCIAL DATA
The following table presents summary consolidated financial data for the
Company. The following data should be read in conjunction with the consolidated
financial statements and the related notes thereto and Management's Discussion
and Analysis of the Financial Condition and Results of Operations, included
elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
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DEC. 30, DEC. 29, DEC. 27, DEC. 26, DEC. 25,
1994/(1)/ 1995/(1)/ 1996/(2)/ 1997/(3)/ 1998
------------ -------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
($ in thousands, except per share amounts)
RESULTS OF OPERATIONS:
Net sales $ 80,850 $ 86,239 $177,395 $243,583 $311,137
Cost of goods sold 64,078 75,690 135,982 181,404 220,691
------------ -------------- ------------- ------------ -------------
Gross profit 16,772 10,549 41,413 62,179 90,446
Distribution expense 5,584 6,027 14,099 18,076 23,004
Selling, general and administrative expenses 8,209 9,051 18,676 30,137 38,965
Restructuring charges - - 910 - -
------------ -------------- ------------- ------------ -------------
Income (loss) from operations 2,979 (4,529) 7,728 13,966 28,477
Interest 3,001 2,822 4,496 13,004 18,776
Other (income) expense, net 290 526 374 (133) 965
------------ -------------- ------------- ------------ -------------
Income (loss) from continuing operations
before income taxes and minority interest (312) (7,877) 2,858 1,095 8,736
Income tax expense (benefit)/(4)/ - - 121 (2,516) 3,340
------------ -------------- ------------- ------------ -------------
Income (loss) from continuing operations
before minority interest (312) (7,877) 2,737 3,611 5,396
Minority interest in income/(5)/ - - 1,348 - -
------------ -------------- ------------- ------------ -------------
Income (loss) from continuing operations $ (312) $ (7,877) $ 1,389 $ 3,611 $ 5,396
============ ============== ============= ============ =============
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital (deficit) $ 1,620 $(10,362) $ 8,684 $ 24,136 $ 23,909
Total assets 43,033 46,588 172,369 249,818 278,796
Total debt (including current portion) 35,410 16,252 104,599 179,173 190,382
Stockholders' equity (deficit) (11,969) 6,554 14,329 14,975 20,949
Cash dividends per share - - - 480 240
</TABLE>
_____________________
(1) 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 Company's consolidated financial statements.
(2) The financial data include the Company and its consolidated subsidiaries,
excluding discontinued operations, as of and for the year ended December
27, 1996. Prior to January 20, 1996 and December 5, 1996, the Company's
results from continuing operations do not include the results of J.R. Cup
and StyroChem (as such terms are defined in Item 7), respectively, which
were acquired on those respective dates. See Note 1 to the Company's
consolidated financial statements included herein.
(3) The financial data include the Company and its consolidated subsidiaries,
excluding discontinued operations, as of and for the year ended December
26, 1997. Prior to October 15, 1997, the Company's results from continuing
operations do not include the results of StyroChem Europe (as such term is
defined in Item 7), which was acquired on that date. See Note 1 to the
Company's consolidated financial statements included herein.
(4) See Note 7 to the Company's consolidated financial statements included
herein.
(5) See Note 1 to the Company's consolidated financial statements included
herein.
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
RESULTS OF OPERATIONS
- ---------------------
The following discussion and analysis should be read in conjunction with Item
6, "Selected Financial Data" and Item 8, "Financial Statements and Supplementary
Data" included elsewhere herein. In addition, financial results for 1996, 1997
and 1998 are not fully comparable because of the January 1996 acquisition of the
U.S. foam container operations of Fort James Corporation, formerly James River
("J.R. Cup"), the December 1996 acquisition of Radnor Chemical Corporation and
its subsidiaries, formerly SP Acquisition Co. ("StyroChem") and the October 1997
acquisition of the polystyrene production and conversion operations of Neste Oy
("StyroChem Europe").
CONSOLIDATED
<TABLE>
<CAPTION>
(Millions of dollars) 1998 1997 1996
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $311.1 $243.6 $177.4
- -------------------------------------------------------------------------
Gross profit 90.4 62.2 41.4
- -------------------------------------------------------------------------
Operating expenses 61.9 48.2 33.7
- -------------------------------------------------------------------------
Income from operations 28.5 14.0 7.7
- -------------------------------------------------------------------------
</TABLE>
The Company achieved record sales and income from operations for the year
ended December 25, 1998. Net sales increased 27.7% to $311.1 million as a
result of the acquisition of StyroChem Europe on October 15, 1997 and growth in
the Company's domestic specialty chemical business. Gross profit increased to
$90.4 million from $62.2 million in 1997. This 45.3% increase was primarily
attributable to the acquisition of StyroChem Europe, increased manufacturing
efficiencies and favorable raw material pricing within the specialty chemical
segment. Operating expenses increased marginally in 1998 to 19.9% of net sales
from 19.8% of net sales in 1997.
Fiscal 1997 sales increased by $66.2 million or 37.3% over 1996. This
increase was attributable to the acquisition of StyroChem Europe on October 15,
1997 and the acquisition of StyroChem on December 5, 1996, as well as growth in
the domestic food packaging business. Gross profit increased to $62.2 million
or 25.5% of net sales for 1997, from $41.4 million or 23.3% of net sales in
1996. This increase was primarily attributable to the acquisition of StyroChem
Europe and StyroChem, as well as a decline in raw material prices within the
specialty chemical business segment. Operating expenses increased to 19.8% of
net sales in 1997 from 19.0% of net sales in 1996 as a result of increased
selling commissions to retail customers within the packaging and insulation
segment and increased selling and administrative costs related to the
acquisition of StyroChem Europe.
SEGMENT ANALYSIS
Packaging & Insulation
<TABLE>
<CAPTION>
(Millions of dollars) 1998 1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $221.6 $187.9 $175.0
- ---------------------------------------------------------------------------
Gross profit 57.2 46.6 40.7
- ---------------------------------------------------------------------------
Operating expenses 43.0 37.1 33.4
- ---------------------------------------------------------------------------
Income from operations 14.2 9.5 7.3
- ---------------------------------------------------------------------------
</TABLE>
Net sales in the packaging and insulation business segment increased by $33.7
million in fiscal 1998 to $221.6 million. This 17.9% increase over 1997 was due
to the acquisition of the insulation operations of StyroChem Europe on October
15, 1997. Gross profit increased to 25.8% of net sales in 1998 from 24.8% of
net sales in 1997 as a result of the acquisition of StyroChem Europe. Operating
expenses declined to 19.4% of net sales in 1998
11
<PAGE>
from 19.7% of net sales in 1997 as a result of lower distribution costs within
the domestic packaging operations. The packaging and insulation segment had
record income from operations in 1998 of $14.2 million.
Fiscal 1997 net sales increased by $12.9 million over 1996. This 7.4%
increase was due to growth within the domestic food packaging business and the
acquisition of the insulation operations of StyroChem Europe. Gross profit
increased to 24.8% of net sales in 1997 from 23.3% of net sales in 1996. This
increase was attributable to increased manufacturing efficiencies within the
domestic food packaging business. Operating expenses increased to $37.1 million
in 1997 from $33.4 million in 1996 as a result of the acquisition of StyroChem
Europe. Income from operations increased by $2.2 million or 30.1% during 1997
due to the reasons described above.
Specialty Chemicals
<TABLE>
<CAPTION>
(Millions of dollars) 1998 1997 1996
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $142.6 $85.2 $ 3.7
- -------------------------------------------------------------------------
Gross profit 33.2 16.1 0.7
- -------------------------------------------------------------------------
Operating expenses 17.8 11.0 0.3
- -------------------------------------------------------------------------
Income from operations 15.4 5.1 0.4
- -------------------------------------------------------------------------
</TABLE>
Net sales increased to $142.6 million for 1998 from $85.2 million for 1997,
an increase of $57.4 million or 67.4%. Net sales include $53.8 million, $29.5
million and $1.3 million of sales to the packaging and insulation segment for
fiscal 1998, 1997 and 1996, respectively, that are eliminated in consolidation.
The increase in net sales from 1997 to 1998 is the result of increased sales in
the Company's domestic specialty chemical operations as well as the acquisition
of StyroChem Europe. Gross profit increased to 23.3% of net sales in 1998 from
18.9% in 1997. This increase was the result of increased operating efficiencies
and favorable raw material prices in the Company's domestic and foreign
specialty chemical operations. Operating expenses increased to $17.8 million in
1998 from $11.0 million in 1997 as a result of increased selling and
administrative costs associated with the acquisition and operation of StyroChem
Europe. The specialty chemical segment had record income from operations of
$15.4 million in 1998.
The Company entered the specialty chemical business on December 5, 1996 with
its purchase of StyroChem. The significant increase in operating results from
1996 to 1997 is due to this acquisition and the acquisition of StyroChem Europe
on October 15, 1997.
Corporate and Other
<TABLE>
<CAPTION>
(Millions of dollars) 1998 1997 1996
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 0.7 $ - $ -
- -------------------------------------------------------------------------
Gross profit - (0.5) -
- -------------------------------------------------------------------------
Operating expenses 1.1 0.1 -
- -------------------------------------------------------------------------
Loss from operations (1.1) (0.6) -
- -------------------------------------------------------------------------
</TABLE>
Corporate operating expenses increased by $1.0 million to $1.1 million during
fiscal 1998. This increase was primarily due to increased amortization of
intangible assets and increased operating costs at the Company's executive
offices in Radnor, Pennsylvania.
12
<PAGE>
INTEREST EXPENSE
- ----------------
<TABLE>
<CAPTION>
(Millions of dollars) 1998 1997 1996
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Interest expense $18.8 $13.0 $ 4.5
- -------------------------------------------------------------------------
</TABLE>
Interest expense for the year ended December 25, 1998 increased by $5.8
million over the prior year. This increase was primarily due to the increase in
borrowings related to the acquisition of StyroChem Europe in October 1997 and
the amortization of deferred financing fees and debt issuance premium of $1.0
million and $0.8 million in 1998 and 1997, respectively. In 1997, interest
expense rose by $8.5 million, due to higher average debt balances resulting from
the acquisitions of J.R. Cup and StyroChem in December 1996 and the acquisition
of StyroChem Europe in October 1997, as well as amortization of deferred
financing fees and debt issuance premium of $0.8 million and $0.2 million in
1997 and 1996, respectively.
OTHER EXPENSES
- --------------
<TABLE>
<CAPTION>
(Millions of dollars) 1998 1997 1996
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Other (income) expense $ 1.0 ($ 0.1) $ 0.4
- -------------------------------------------------------------------------
</TABLE>
Other expenses for the year ended December 25, 1998 include $0.6 million in
costs related to an attempted acquisition that was terminated by the Company.
Excluding the effect of these acquisition costs, other expenses fluctuated by
relatively insignificant amounts in both 1998 and 1997.
INCOME TAXES
- ------------
<TABLE>
<CAPTION>
(Millions of dollars) 1998 1997 1996
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax expense (benefit) $ 3.3 ($ 2.5) $ 0.1
- -------------------------------------------------------------------------
</TABLE>
Income tax expense increased to $3.3 million from a benefit of $2.5 million
in 1997. This increase was primarily due to a $7.6 million increase in pre-tax
income in 1998 as well as the prior year elimination of a valuation allowance
that had been recorded at December 27, 1996. The elimination of the valuation
allowance resulted in a tax benefit of $4.8 million that was reflected in the
1997 financial statements, and is the primary cause of the reduction in the
provision for income taxes from 1996 to 1997.
As of December 25, 1998, the Company had approximately $22.6 million of net
operating loss carryforwards for federal income tax purposes, which expire
through 2018.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During fiscal years 1997 and 1998, the Company's principal sources of funds
consisted of cash from operations and financing sources. During the year ended
December 25, 1998, after tax cash flow increased to $21.8 million, while
increases in working capital used cash of $4.7 million. In addition to cash
flows from operations, net borrowings under the credit facilities of $5.8
million and capital lease arrangements of $4.5 million, as well as a decrease in
cash of $4.8 million, were primarily used to fund capital expenditures of $17.7
million and a dividend payment of $1.5 million. The Company has managed its
growth in working capital and capital expenditures through a combination of
working capital financing and proceeds of long-term debt financing.
As of December 25, 1998, the Company had $22.9 million outstanding and $13.7
million available under its revolving credit agreements. 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 1996,
1997 and 1998 were $4.9 million, $18.4 million and $17.7 million, respectively.
By completing the sale of the Series B Notes and by amending its current credit
facility to an aggregate commitment of $40.0 million in 1997, the Company
believes that it has increased its flexibility over the next five years to make
capital expenditures that management
13
<PAGE>
believes will provide an attractive return on investment, including the purchase
of the Company's Phoenix, Arizona food packaging plant for $9.4 million on March
1, 1999.
The Company has had an increase in annual debt service requirements from
historical levels, due primarily to the acquisitions of J.R. Cup, StyroChem and
StyroChem Europe. 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. Management believes that cash generated from operations,
together with available borrowings under its revolving credit facilities 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 its
credit agreements to meet the Company's cash needs.
OTHER FINANCIAL DATA
- --------------------
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 1.3%, 1.8% and 2.2% in 1996, 1997 and 1998, respectively.
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 $910,000 of restructuring
charges expensed and paid during the year ended December 27, 1996.
Year 2000 Readiness Disclosure
Many existing computer hardware and software systems use only the last two
digits to identify a year. As a result, many systems do not yet recognize the
difference between years beginning with "20" instead of "19". This, as well as
other date related processing issues, may cause systems to fail or malfunction
unless corrected.
The Company's current Year 2000 assessment is that some of its data
processing systems are generally not compliant. Some of these systems can
easily be updated or modified to be compliant, but several of the Company's
systems cannot be updated because of software or hardware limitations. The
Company has begun the process of replacing these systems with Year 2000
compliant data processing systems. The cost to upgrade or replace the Company's
noncompliant systems is not expected to exceed $400,000, which includes
internal costs for personnel, training, supplies, travel and equipment. These
costs are expected to be funded through operations. The Company has assessed
its non-information technology systems and does not believe that any Year 2000
non-compliance with respect to these systems will have a material adverse effect
on the Company's business, financial condition, cash flows or results of
operations.
In the event that any of the Company's operations remain Year 2000
noncompliant near the end of 1999, the Company plans to transfer the accounting
and information processing of those operations to the Company's systems that are
Year 2000 compliant. The Company estimates that the overall risk to its
operations as a result of
14
<PAGE>
noncompliance with Year 2000 for its existing systems in a most likely worst
case scenario is less than $250,000. There can be no assurance, however, that
this estimate represents the Company's maximum Year 2000 exposure.
The ability of third parties with which the Company transacts business to
adequately address their Year 2000 issues is outside of the Company's control.
The Company is taking steps to obtain written confirmations that the systems of
its suppliers and customers are Year 2000 compliant and to determine whether the
nature of any noncompliance would have a material adverse effect on the
Company's business, financial condition, cash flows or results of operations.
The Company anticipates this process will be completed no later than June 25,
1999, and will develop contingency plans, as necessary, based upon the results
of the confirmations.
Even assuming that all material third parties confirm that they are or expect
to be Year 2000 compliant by December 31, 1999, it is not possible to state with
certainty that such parties will be so compliant, or that the operations of such
third parties will not be materially impacted by other parties with whom they
themselves have a material relationship, and who fail to timely become Year 2000
compliant. Consequently, it is not possible to predict whether or to what
extent the Year 2000 issues may have an adverse material impact on the Company
as a result of their impact on the operations of third parties with whom the
Company has a material relationship.
There can be no assurance that the failure of the Company or such third
parties to adequately address their respective Year 2000 issues will not have a
material adverse effect on the Company's business, financial condition, cash
flows or results of operations.
Forward Looking Statements
The statements contained in this Annual Report that are not historical facts,
including but not limited to the Company's plans for expansion, facility
consolidation, acquisition and raw material prices, 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 due to risks
relating to raw material price volatility, dependence on key customers,
international operations, dependence on key personnel and environmental matters,
as well as 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 Securities and Exchange Commission. See
"Business--Raw Materials", "Business--Risks Attendant to Foreign Operations",
"Business--Competition", "Business--Employees", "Business--Environmental
Matters" and "Management's Discussion and Analysis of Financial Condition and
Results of Operation--Year 2000 Compliance."
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
The Company's market risk is the potential loss arising from adverse changes
in interest rates. The Company's long-term debt obligations are mostly at fixed
interest rates and denominated in U.S. dollars. The Company manages its
interest rate risk by monitoring trends in interest rates as a basis for
determining whether to enter into fixed rate or variable rate agreements.
Market risk is estimated as the potential increase in fair value of the
Company's long-term debt obligations resulting from a hypothetical one-percent
decrease in interest rates and amounts to approximately $6.4 million over the
term of the debt.
Although the Company continues to evaluate derivative financial instruments
to manage foreign currency exchange rate changes, the Company does not currently
hold derivatives for managing these risks or for trading purposes.
15
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<S> <C>
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
Report of Independent Public Accountants F-1
Consolidated Balance Sheets as of December 26, 1997 and December 25, 1998 F-2
Consolidated Statements of Income for the Fiscal Years Ended December 27, 1996,
December 26, 1997 and December 25, 1998 F-3
Consolidated Statements of Changes of Stockholders' Equity for the Fiscal
Years Ended December 27, 1996, December 26, 1997 and December 25, 1998 F-4
Consolidated Statements of Cash Flows for the Fiscal Years Ended December 27,
1996, December 26, 1997 and December 25, 1998 F-5
Notes to Financial Statements F-7
</TABLE>
The following financial statements are incorporated by reference to the pages
indicated of the Company's Prospectus dated February 6, 1998 included in the
Company's Registration Statement on Form S-4, Commission File No. 333-42101 and
filed as Exhibit 99.1 to this Form 10-K:
<TABLE>
<S> <C>
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 December 5, F-34
1996
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 (unaudited) 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 (unaudited) F-52
Notes to Financial Statements F-53
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 unaudited) F-59
Statements of Changes in Stockholder's Equity for the Years Ended December 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 (unaudited) F-61
Notes to Financial Statements F-62
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
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 (unaudited) F-70
Statements of Changes in Stockholders' Equity for the Years Ended December 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 (unaudited) 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 (unaudited) F-79
Statements of Changes in Shareholder's Equity for the Years Ended December 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 (unaudited) F-81
Notes to Financial Statements F-82
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
There are no matters to be reported hereunder.
17
<PAGE>
PART IV
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and their ages as of March
19, 1999 are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Michael T. Kennedy.......... 44 President, Chief Executive Officer and Director
Michael V. Valenza.......... 39 Senior Vice President-Finance and Chief Financial Officer
Richard C. Hunsinger........ 50 Senior Vice President-Sales and Marketing
Donald D. Walker............ 57 Senior Vice President-Operations
John P. McNiff.............. 38 Senior Vice President-Corporate Development and Director
R. Radcliffe Hastings....... 48 Senior Vice President, Treasurer and Director
Donald C. Rogalski.......... 53 Senior Vice President-Administration
John P. McKelvey............ 58 Vice President-Human Resources
Van D. Groenewold........... 66 Vice President-Engineering
Caroline J. Williamson...... 31 Vice President and Corporate Counsel
Thomas J. Hopkins........... 42 Director
Vincent F. Garrity, Jr...... 61 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 Commonwealth Bancorp and Chartwell Investment Partners, LP.
Michael V. Valenza has served as Senior Vice President - Finance and Chief
Financial Officer 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 Chartwell Investment Partners, LP.
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
18
<PAGE>
America, for 18 years. Mr. Hastings has held a variety of management positions
in the U.S. banking group and in Bank of America's securities operation, BA
Securities, Inc., and was most recently Managing Director of the Money Manager
Group.
Donald C. Rogalski has served as Senior Vice President - Administration of the
Company since July 1993. Previously Mr. Rogalski held the positions of Chief
Financial Officer and Vice President of Finance for Stiffel Lamp Co. for seven
years. Prior to that, Mr. Rogalski worked for Packard Instrument Company for
nine years, with his last position there as Controller.
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. Groenewold has served as Vice President - Engineering for the Company
since November 1992. From February 1992 until November 1992, Mr. Groenewold was
Director of Engineering for the Company. From 1982 until joining the Company,
Mr. Groenewold 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. From September 1992 to March 1996,
Ms. Williamson was an associate with Duane, Morris & Heckscher LLP.
Thomas J. Hopkins has served as a director of the Company since May 1997. Mr.
Hopkins is a Senior Managing Director of Bear, Stearns & Co. Inc. where he has
been employed 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.
19
<PAGE>
ITEM 11. 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 25, 1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -AWARDS
---------------------------------------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS(#) COMPENSATION
- ------------------------------ ---- ----------- ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Michael T. Kennedy 1998 $2,000,000 $1,400,000 $61,459/(1)/ - $ 99,183/(2)/
President and Chief Executive 1997 1,500,000 875,000 - - 99,214/(2)/
Officer........................ 1996 863,597 - - - 3,766/(3)/
R. Radcliffe Hastings 1998 225,000 150,000 - - 4,480/(3)/
Senior Vice President and 1997 175,000 125,000 - - 1,666,613/(4)/
Treasurer...................... 1996 85,755 200,266 - - -
Michael V. Valenza 1998 225,000 150,000 - - 4,480/(3)/
Senior Vice President-Finance 1997 175,000 125,000 - 100 4,480/(3)/
and Chief Financial Officer.... 1996 126,923 100,000 - - 3,359/(3)/
Richard C. Hunsinger 1998 225,000 100,000 - - 4,480/(3)/
Senior Vice President- Sales 1997 175,000 75,000 - 50 4,480/(3)/
and Marketing.................. 1996 146,742 50,000 - - 4,070/(3)/
Donald D. Walker 1998 225,000 100,000 - - 4,480/(3)/
Senior Vice President- 1997 175,000 75,000 - 50 4,480/(3)/
Operations..................... 1996 146,154 50,000 - - 4,073/(3)/
</TABLE>
____________
(1) Represents transportation costs paid by the Company on behalf of Mr.
Kennedy.
(2) Includes $4,480 of matching contributions by the Company under the 401(k)
Retirement Savings Plan and premiums of $94,703 and $94,734 in 1998 and
1997, respectively, paid by the Company with respect to a supplemental life
insurance policy for the benefit of Mr. Kennedy.
(3) Represents a matching contribution by the Company under the 401(k)
Retirement Savings Plan.
(4) Represents compensation resulting from the transfer of 60 shares of Voting
Common Stock and 540 shares of Class B Nonvoting Common Stock from the
majority shareholder.
20
<PAGE>
The following table sets forth information with respect to options held at
December 25, 1998 by the persons named in the Summary Compensation Table above.
No options were granted to or exercised by such persons during the fiscal year
ended December 25, 1998.
<TABLE>
<CAPTION>
FISCAL YEAR-END OPTIONS VALUES
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 25, 1998 AT DECEMBER 25, 1998(1)
-----------------------------------------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
Michael T. Kennedy.................... - - - -
R. Radcliffe Hastings................. - - - -
Michael V. Valenza.................... 58 80 208,600 97,200
Richard C. Hunsinger.................. 110 40 497,150 48,600
Donald D. Walker...................... 110 40 497,150 48,600
</TABLE>
- -------------
(1) Based on the estimated fair value of $8,200 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.
21
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 19, 1999, with
respect to each person who is known by the Company to own beneficially 5% or
more of each class of voting securities of the Company.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
TITLE OF CLASS OF BENEFICIALLY PERCENT
NAME OF INDIVIDUAL OR IDENTITY OF GROUP CAPITAL 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>
22
<PAGE>
The following table sets forth certain information as of March 19, 1999, 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
BENEFICIALLY OF
NAME OF INDIVIDUAL OR IDENTITY OF GROUP TITLE OF 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 3,760/(3)/ 69.6%
Nonvoting Common Stock - -
Michael V. Valenza..................... Voting Common Stock - -
Class B Nonvoting Common Stock - -
Nonvoting Common Stock 78 25.7%
Richard C. Hunsinger................... Voting Common Stock - -
Class B Nonvoting Common Stock - -
Nonvoting Common Stock 160 45.1%
Donald D. Walker....................... Voting Common Stock - -
Class B Nonvoting Common Stock - -
Nonvoting Common Stock 160 45.1%
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 4,320/(4)/ 80.0%
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 (12 persons).................. Voting Common Stock 600 100.0%
Class B Nonvoting Common Stock 5,400 100.0%
Nonvoting Common Stock 653 92.2%
</TABLE>
- --------------
(1) Includes shares of Nonvoting Common Stock that certain individuals have the
right to acquire, on or before May 18, 1999, upon the exercise of stock
options granted pursuant to the Company's Equity Incentive Plan, as
follows: Michael V. Valenza-58; Richard C. Hunsinger-110; Donald D. Walker-
110; and the directors and all executive officers as a group-463.
(2) Based upon 600, 5,400 and 245 outstanding shares of Voting Common Stock,
Class B Nonvoting Common Stock and Nonvoting Common Stock, respectively.
(3) These shares are held in a grantor retained annuity trust created by Mr.
Kennedy for the benefit of himself, his wife and his children. Mr. Kennedy
retained the right to acquire these shares from the trust under certain
circumstances specified in the instrument governing the trust.
(4) Represents 560 shares held in various trusts for the benefit of Mr.
Kennedy's children of which Mr. Garrity is a trustee and the 3,760 shares
held in the trust that is the subject of footnote 3 above of which Mr.
Garrity is also trustee. Mr. Garrity disclaims beneficial ownership of all
of these shares.
23
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has advanced $189,437 on a non-interest-bearing basis to Michael
T. Kennedy, the Company's Chief Executive Officer, for certain incurred
insurance costs.
The Company has advanced $75,000 on a non-interest-bearing basis to Michael V.
Valenza, the Company's Senior Vice President-Finance and Chief Financial
Officer, for certain incurred relocation costs.
The Company provides certain management services and rights to a related
company. For the management services and rights the Company receives a fee and
royalties and is reimbursed for all expenses advanced on behalf of the entity.
During 1998, the Company earned management fees and royalties of $0.9 million.
At December 25, 1998 unpaid management fees, royalties and expense advances
totaled $3.0 million.
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 Senior Managing Director of
Bear, Stearns & Co. Inc., an investment banking firm that performed services for
the Company in 1998.
24
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) DOCUMENTS FILED AS PART OF THIS ANNUAL REPORT
- --------------------------------------------------
1. The consolidated financial statements of the Company and its subsidiaries
are listed in Item 8.
2. Financial Statement Schedules - None.
3. Exhibits:
3.1 Restated Certificate of Incorporation of Radnor Holdings Corporation,
as amended
3.2 Bylaws of Radnor Holdings Corporation (Incorporated by reference to
Exhibit 3.2 filed with Form S-4 Registration Statement, filed by
Radnor Holdings Corporation, WinCup Holdings, Inc., Radnor Chemical
Corporation (formerly SP Acquisition Co.), StyroChem U.S., Inc.
(formerly StyroChem International, Inc.), StyroChem Canada, Ltd.
(formerly StyroChem International, Ltd.) and Radnor Management, Inc.,
Commission File No. 333-19495 (the "Original S-4''))
4.1 Indenture, dated as of December 5, 1996 among Radnor Holdings
Corporation, WinCup Holdings, Inc., Radnor Chemical Corporation,
StyroChem U.S., Inc., StyroChem Canada, Ltd. and First Union National
Bank, including form of Notes and Guarantees (Incorporated by
reference to Exhibit 4.1 filed with the Original S-4)
4.2 First Supplemental Indenture, dated as of December 17, 1996 among
Radnor Holdings Corporation, WinCup Holdings, Inc., Radnor Chemical
Corporation, StyroChem U.S., Inc., StyroChem Canada, Ltd., Radnor
Management, Inc. and First Union National Bank (Incorporated by
reference to Exhibit No. 4.2 filed with the Form 10-K for the year
ended December 26, 1997 filed by Radnor Holdings Corporation)
4.3 Second Supplemental Indenture, dated as of October 15, 1997 among
Radnor Holdings Corporation, WinCup Holdings, Inc., Radnor Chemical
Corporation, StyroChem U.S., Inc., StyroChem Canada, Ltd., Radnor
Management, Inc., StyroChem Europe (The Netherlands) B.V., StyroChem
Finland Oy, ThermiSol Denmark ApS, ThermiSol Finland Oy, ThermiSol
Sweden AB and First Union National Bank (Incorporated by reference to
Exhibit No. 4.3 filed with the Form 10-K for the year ended December
26, 1997 filed by Radnor Holdings Corporation)
4.4 Third Supplemental Indenture, dated as of February 9, 1998 among
Radnor Holdings Corporation, WinCup Holdings, Inc., Radnor Chemical
Corporation, StyroChem U.S., Inc., StyroChem Canada, Ltd., Radnor
Management, Inc., StyroChem Europe (The Netherlands) B.V., StyroChem
Finland Oy, ThermiSol Denmark ApS, ThermiSol Finland Oy, ThermiSol
Sweden AB, Radnor Delaware, Inc. and First Union National Bank
(Incorporated by reference to Exhibit No. 4.4 filed with the Form 10-K
for the year ended December 26, 1997 filed by Radnor Holdings
Corporation)
4.5 Fourth Supplemental Indenture, dated as of July 16, 1998 among Radnor
Holdings Corporation, WinCup Holdings, Inc., Radnor Chemical
Corporation, StyroChem U.S., Inc., Radnor Management, Inc., Radnor
Delaware, Inc. and First Union National Bank (Incorporated by
reference to Exhibit No. 4.1 filed with the Form 10-Q for the quarter
ended June 26, 1998 filed by Radnor Holdings Corporation)
4.6 Fifth Supplemental Indenture, dated as of January 21, 1999 among
Radnor Holdings Corporation, WinCup Holdings, Inc., Radnor Chemical
Corporation, Radnor Delaware, Inc., Radnor Management, Inc., StyroChem
U.S., Ltd., WinCup Texas, Ltd., StyroChem GP, L.L.C., StyroChem LP,
L.L.C., WinCup GP, L.L.C. and WinCup LP, L.C.C. and First Union
National Bank
25
<PAGE>
4.7 Exchange and Registration Rights Agreement, dated as of December 5,
1996 among Radnor Holdings Corporation, WinCup Holdings, Inc., Radnor
Chemical Corporation, StyroChem U.S., Inc., StyroChem Canada, Ltd.,
Alex. Brown & Sons Incorporated and NatWest Capital Markets Limited
(Incorporated by reference to Exhibit 4.2 filed with the Original S-4)
4.8 Indenture, dated as of October 15, 1997 among Radnor Holdings
Corporation, WinCup Holdings, Inc., Radnor Chemical Corporation,
StyroChem U.S., Inc., Radnor Management, Inc. and First Union National
Bank, including form of Notes and Guarantees (Incorporated by
reference to Exhibit 4.1 filed with Form S-4 Registration Statement,
filed by Radnor Holdings Corporation, WinCup Holdings, Inc., Radnor
Chemical Corporation, StyroChem U.S., Inc., and Radnor Management,
Inc., Commission File No. 333-42101 (the "Series B S-4"))
4.9 First Supplemental Indenture, dated as of February 9, 1998 among
Radnor Holdings Corporation, WinCup Holdings, Inc., Radnor Chemical
Corporation, StyroChem U.S., Inc., Radnor Management, Inc., Radnor
Delaware, Inc. and First Union National Bank (Incorporated by
reference to Exhibit 4.7 filed with the Form 10-K for the year ended
December 26, 1997 filed by Radnor Holdings Corporation)
4.10 Second Supplemental Indenture, dated as of January 21, 1999 among
Radnor Holdings Corporation, WinCup Holdings, Inc., Radnor Chemical
Corporation, Radnor Delaware, Inc., Radnor Management, Inc., StyroChem
U.S., Ltd., WinCup Texas, Ltd., StyroChem GP, L.L.C., StyroChem LP,
L.L.C., WinCup GP, L.L.C. and WinCup LP, L.C.C. and First Union
National Bank
4.11 Exchange and Registration Rights Agreement, dated as of October 15,
1997 among Radnor Holdings Corporation, WinCup Holdings, Inc., Radnor
Chemical Corporation, StyroChem U.S., Inc., Radnor Management, Inc.,
Bear, Stearns & Co. Inc., NatWest Capital Markets Limited and BT Alex.
Brown Incorporated (Incorporated by reference to Exhibit 4.2 filed
with the Series B S-4)
* 10.1 Sales Agent Agreement, dated January 20, 1996, between James River
Paper Company, Inc. and WinCup Holdings, Inc. (as successor in
interest to 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 to the Original S-4)
* 10.2 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 Original S-4)
10.3 License Agreement, dated January 20, 1996, among James River
Corporation of Virginia, James River Paper Company, Inc., and WinCup
Holdings, Inc. (as successor in interest to 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 Original S-4)
10.4 Patent License Agreement, dated January 20, 1996, among James River
Corporation of Virginia, James River Paper Company, Inc., and WinCup
Holdings, Inc. (as successor in interest to 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 Original S-4)
* 10.5 Contract of Sale, dated as of December 5, 1996, among Chevron Chemical
Company, Radnor Chemical Corporation, StyroChem U.S., Inc. and
StyroChem Canada, Ltd. (Incorporated by reference to Exhibit No. 10.11
filed with Amendment No.1 to the Original S-4)
** 10.6 First Amendment to Styrene Monomer Contract of Sale, dated as of
October 1, 1998, among Chevron Chemical Company LLC, Radnor Chemical
Corporation, StyroChem U.S., Inc. and StyroChem Canada, Ltd.
26
<PAGE>
* 10.7 Contract between ARCO Chemical Company and WinCup Holdings, Inc. (as
successor in interest to 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 Original S-4)
* 10.8 Supply Agreement by and between Radnor Chemical Corporation and James
River Canada, Inc., dated March, 1996 (Incorporated by reference to
Exhibit No. 10.17 filed with Amendment No. 1 to the Original S-4)
10.9 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 Original S-4)
10.10 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, Inc. (as successor in interest to
WinCup Holdings, L.P.) on January 20, 1996 (Incorporated by reference
to Exhibit No. 10.26 filed with Amendment No. 1 to the Original S-4)
10.11 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, Inc. (as successor in interest
to WinCup Holdings, L.P.) on January 20, 1996 (Incorporated by
reference to Exhibit No. 10.27 filed with Amendment No. 1 to the
Original S-4)
10.12 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
Original S-4)
10.13 Standard Form Multi-Tenancy Industrial Lease between WinCup Holdings,
Inc. and CK Airpark Associates, dated June 1, 1994, assigned to WinCup
Holdings, Inc. (as successor in interest to WinCup Holdings, L.P.) on
January 20, 1996 (Incorporated by reference to Exhibit No. 10.32 filed
with Amendment No. 1 to the Original S-4)
10.14 Industrial Building Lease between Centerpoint Properties Corporation
and WinCup Holdings, Inc. (as successor in interest to WinCup
Holdings, L.P.) dated May 1996 (Incorporated by reference to Exhibit
10.33 filed with the Series B S-4)
10.15 Radnor Corporate Center Office Lease by and between Radnor Center
Associates and WinCup Holdings, Inc. (as successor in interest to
WinCup Holdings, L.P.), dated May 31, 1996 (Incorporated by reference
to Exhibit No. 10.34 filed with Amendment No. 1 to the Original S-4)
10.16 Standard Commercial Lease by and between Bradford Management Company
of Dallas, Inc. and StyroChem U.S., 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 Original S-4)
***10.17 Executive Employment Agreement by and between Radnor Holdings
Corporation and Richard Hunsinger, dated May 1, 1993, as amended in
October, 1995 (Incorporated by reference to Exhibit No. 10.38 filed
with the Original S-4)
***10.18 Radnor Holdings Corporation 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 Original S-4)
***10.19 Radnor Holdings Corporation 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
Original S-4)
10.20 Second Amended and Restated Revolving Credit and Security Agreement
among BNY Financial Corporation, NationsBank, N.A., WinCup Holdings,
Inc., Radnor Chemical Corporation, StyroChem
27
<PAGE>
U.S., Inc. and Radnor Holdings Corporation, dated October 15, 1997
(Incorporated by reference to Exhibit 10.41 filed with the Series B S-
4), as amended by Joinder dated February 9, 1998 joining Radnor
Delaware, Inc. (Incorporated by reference to Exhibit 10.32 filed with
the Form 10-K for the year ended December 26, 1997 filed by Radnor
Holdings Corporation), as further amended by Amendment No. 1 to Second
Amended and Restated Revolving Credit and Security Agreement among BNY
Financial Corporation, NationsBank, N.A., WinCup Holdings, Inc.,
Radnor Chemical Corporation, StyroChem U.S., Inc., Radnor Delaware,
Inc. and Radnor Holdings Corporation, dated June 26, 1998
(Incorporated by reference to Exhibit No. 10.1 filed with the Form 10-
Q for the quarter ended June 26, 1998 filed by Radnor Holdings
Corporation), as further amended by Amendment No. 2 to Second Amended
and Restated Revolving Credit and Security Agreement among BNY
Financial Corporation, NationsBank, N.A., WinCup Holdings, Inc.,
Radnor Chemical Corporation, StyroChem U.S., Inc., Radnor Delaware,
Inc. and Radnor Holdings Corporation, dated October 1, 1998, as
further amended by Amendment No. 3 to Second Amended and Restated
Revolving Credit and Security Agreement among BNY Financial
Corporation, NationsBank, N.A., WinCup Holdings, Inc., Radnor Chemical
Corporation, StyroChem U.S., Inc., Radnor Delaware, Inc. and Radnor
Holdings Corporation, dated December 23, 1998
10.21 Amended and Restated Revolving Credit Note, dated December 5, 1996,
made by Radnor Holdings Corporation, WinCup Holdings, Inc., Radnor
Chemical Corporation, and StyroChem U.S., 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 Original S-4)
10.22 Amended and Restated Revolving Credit Note, dated December 5, 1996,
made by Radnor Holdings Corporation, WinCup Holdings, Inc., Radnor
Chemical Corporation, and StyroChem U.S., Inc. in favor of
NationsBank, N.A. (Incorporated by reference to Exhibit No. 10.43
filed with Amendment No. 1 to the Original S-4)
10.23 Trademark Collateral Security Agreement, dated December 5, 1996,
between StyroChem U.S., Inc. and The Bank of New York Commercial
Corporation (Incorporated by reference to Exhibit No. 10.44 filed with
Amendment No. 1 to the Original S-4)
10.24 Trademark Assignment of Security, dated December 5, 1996, between
StyroChem U.S., Inc. and The Bank of New York Commercial Corporation
(Incorporated by reference to Exhibit No. 10.45 filed with Amendment
No. 1 to the Original S-4)
10.25 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 Original S-4)
10.26 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 Original S-4)
10.27 Patent Collateral Security Agreement, dated December 5, 1996, between
StyroChem U.S., Inc. and The Bank of New York Commercial Corporation
(Incorporated by reference to Exhibit No. 10.48 filed with Amendment
No. 1 to the Original S-4)
10.28 Patent Assignment of Security, dated December 5, 1996, between
StyroChem U.S., Inc. and The Bank of New York Commercial Corporation
(Incorporated by reference to Exhibit No. 10.49 filed with Amendment
No. 1 to the Original S-4)
10.29 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 Original S-4)
28
<PAGE>
10.30 Agreement Respecting a Term Loan and Other Credit Facilities, dated
February 25, 1994, between Bank of Montreal and StyroChem Canada,
Ltd., as amended (Incorporated by reference to Exhibit No. 10.63 filed
with Amendment No. 1 to the Original S-4)
10.31 Letter of Undertaking, dated December 5, 1996, made by StyroChem
Canada, Ltd. and Radnor Holdings Corporation in favor of Bank of
Montreal (Incorporated by reference to Exhibit No. 10.64 filed with
the Original S-4)
10.32 Guaranty, dated February 25, 1994, made by Radnor Chemical Corporation
in favor of Bank of Montreal (Incorporated by reference to Exhibit No.
10.65 filed with Amendment No. 1 to the Original S-4)
***10.33 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 Original S-4)
10.34 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)
10.35 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 Exhibit 10.68 filed with the Series B S-
4)
10.36 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 Exhibit 10.69 filed with the Series B S-
4)
10.37 Plant Lease 195 Tamal Vista Boulevard, Corte Madera, California,
between Hunt Brothers Leasing, L.L.C. and WinCup Holdings, Inc. (as
successor in interest to WinCup Holdings, L.P.), dated May 1, 1997
(Incorporated by reference to Exhibit 10.70 filed with the Series B S-
4)
10.38 Engineering Lease 201 Tamal Vista Boulevard, Corte Madera, California,
between Hunt Brothers Leasing, L.L.C. and WinCup Holdings, Inc. (as
successor in interest to WinCup Holdings, L.P.), dated May 1, 1997
(Incorporated by reference to Exhibit 10.71 filed with the Series B S-
4)
10.39 Warehouse Lease 205 Tamal Vista Boulevard, Corte Madera, California,
between Hunt Brothers Leasing, L.L.C. and WinCup Holdings, Inc. (as
successor in interest to WinCup Holdings, L.P.), dated May 1, 1997
(Incorporated by reference to Exhibit 10.72 filed with the Series B S-
4)
10.40 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
(Incorporated by reference to Exhibit 10.73 filed with Amendment No. 1
to the Series B S-4)
10.41 Lease Agreement between Oy KWH Plast Ab, Jakobstad and Isora Oy dated
January 24, 1995 (Incorporated by reference to Exhibit 10.74 filed
with the Series B S-4)
10.42 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
29
<PAGE>
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 Exhibit 10.75 filed with the Series B S-4)
10.43 Lease Agreement between Avena Siilot Oy and Neste Oy Polystyreeni
dated March 13, 1997 (Incorporated by reference to Exhibit 10.76 filed
with the Series B S-4)
10.44 Office Lease Agreement between Keharakenpajat Oy and Neste Oy
Polystyreeni dated July 1, 1995 (Incorporated by reference to Exhibit
10.77 filed with Amendment No. 1 to the Series B S-4)
10.45 Lease Contract between Lokalo Fastighetsfarvaltning and Neste
Cellplast AB dated August 16, 1996 (Incorporated by reference to
Exhibit 10.78 filed with Amendment No. 1 to the Series B S-4)
10.46 Lease Contract between Norrtalje Industri- och Hantverkshus AB (NIHAB)
and Neste Cellplast AB dated June 26, 1996 (Incorporated by reference
to Exhibit 10.79 filed with Amendment No. 1 to the Series B S-4)
* 10.47 Styrene Monomer Supply Agreement dated as of October 15, 1997 between
StyroChem Finland Oy and Elf Atochem SA (Incorporated by reference to
Exhibit 10.80 filed with Amendment No. 1 to the Series B S-4)
***10.48 Employment Agreement dated February 21, 1997 between Radnor Holdings
Corporation and Caroline J. Williamson (Incorporated by reference to
Exhibit 10.81 filed with Amendment No. 1 to the Series B S-4)
** 10.49 Agreement of Sale dated as of January 1, 1998 between ARCO Chemie
Nederland, Ltd. and StyroChem Finland Oy
***10.50 Radnor Holdings Corporation Key Executive Retirement Plan
***10.51 Executive Employment Agreement dated as of July 1, 1993 between Radnor
Holdings Corporation and Don Rogalski
***10.52 Letter Agreement dated as of December 10, 1998 between Radnor Holdings
Corporation and Van D. Groenewold
21.1 List of Subsidiaries of the Registrant
27.1 Financial Data Schedule (Radnor Holdings Corporation)
99.1 Pages F-32 to F-84 of the Company's Prospectus dated February 6, 1998,
included in Amendment No. 1 to the Company's Registration Statement on
Form S-4, Commission File No. 333-42101
* Portions of this Exhibit have been deleted pursuant to an Order
Granting the Company's Application under Securities Act and Rule 406
Promulgated Thereunder for Confidential Treatment.
** Portions of this Exhibit have been deleted pursuant to the Company's
Application under Exchange Act and Rule 24b-2 Promulgated Thereunder
for Confidential Treatment.
*** This exhibit represents a management contract or compensatory plan or
arrangement.
(B) REPORTS ON FORM 8-K
There were no reports filed on Form 8-K during the fiscal year ended December
25, 1998.
30
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
RADNOR HOLDINGS CORPORATION
Date: March 19, 1999 By:/s/ MICHAEL T. KENNEDY
------------------------------------
Michael T. Kennedy
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant in
the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ MICHAEL T. KENNEDY Chairman of the Board and March 19, 1999
- ---------------------------- Chief Executive Officer
Michael T. Kennedy
/s/ R. RADCLIFFE HASTINGS Senior Vice President, March 19, 1999
- ---------------------------- Treasurer and Director
R. Radcliffe Hastings
/s/ MICHAEL V. VALENZA Senior Vice President - Finance, March 19, 1999
- ---------------------------- Chief Financial Officer and
Michael V. Valenza Chief Accounting Officer
/s/ JOHN P. MCNIFF Senior Vice President - Corporate March 19, 1999
- ---------------------------- Development and Director
John P. McNiff
/s/ VINCENT F. GARRITY, JR. Director March 19, 1999
- ----------------------------
Vincent F. Garrity, Jr.
/s/ THOMAS J. HOPKINS Director March 19, 1999
- ----------------------------
Thomas J. Hopkins
</TABLE>
31
<PAGE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT
Registrant has not sent and does not anticipate sending any annual report to
its security holders other than a copy of this Form 10-K report. Registrant has
not sent and does not anticipate sending any proxy statement, form of proxy or
other proxy solicitation material to more than ten of its security holders with
respect to any annual or other meeting of security holders, as it has only three
holders of voting securities. If any annual report other than this Form 10-K
report is hereafter furnished to Registrant's security holders, or if any proxy
statement, form of proxy or other proxy solicitation material is hereafter sent
to more than ten of its security holders with respect to any annual or other
meeting of security holders, Registrant will furnish four copies thereof to the
Securities and Exchange Commission when it is so sent.
32
<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) and subsidiaries as of December 26, 1997
and December 25, 1998, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 25, 1998. 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 Radnor Holdings Corporation and
subsidiaries as of December 26, 1997 and December 25, 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended December 25, 1998, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Philadelphia, Pennsylvania
March 3, 1999
F-1
<PAGE>
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
--------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
DECEMBER 26, 1997 AND DECEMBER 25, 1998
---------------------------------------
(In thousands, except share amounts)
<TABLE>
<CAPTION>
1997 1998
----------------- ----------------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash $ 8,810 $ 3,975
Marketable securities -- 546
Accounts receivable, net 28,589 28,655
Inventories, net 28,451 35,267
Prepaid expenses and other 3,520 4,075
Deferred tax asset 1,708 2,255
-------- --------
71,078 74,773
-------- --------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 4,073 5,813
Supplies and spare mold parts 2,825 3,223
Buildings and improvements 28,662 32,952
Machinery and equipment 141,421 161,925
-------- --------
176,981 203,913
Less- Accumulated depreciation (11,868) (22,536)
-------- --------
165,113 181,377
-------- --------
OTHER ASSETS 13,627 22,646
-------- --------
$249,818 $278,796
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 28,565 $ 28,756
Accrued liabilities 18,151 20,618
Current portion of long-term debt 226 729
Current portion of capitalized lease obligations -- 761
-------- --------
46,942 50,864
-------- --------
LONG-TERM DEBT, net of current portion 178,947 189,653
-------- --------
CAPITALIZED LEASE OBLIGATIONS, net of current portion -- 4,855
-------- --------
DEFERRED TAX LIABILITY 8,543 11,839
-------- --------
OTHER NONCURRENT LIABILITIES 411 636
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 4)
STOCKHOLDERS' EQUITY:
Voting and nonvoting common stock, 22,700 shares authorized, 6,245 shares
issued and outstanding 1 1
Additional paid-in capital 19,387 19,387
Retained earnings (deficit) (2,809) 1,087
Cumulative translation adjustment (1,604) 474
-------- --------
Total stockholders' equity 14,975 20,949
-------- --------
$249,818 $278,796
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-2
<PAGE>
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
--------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
FOR THE FISCAL YEARS ENDED DECEMBER 27, 1996, DECEMBER 26, 1997
---------------------------------------------------------------
AND DECEMBER 25, 1998
---------------------
(In thousands)
<TABLE>
<CAPTION>
1996 1997 1998
-------------- -------------- -------------
<S> <C> <C> <C>
NET SALES $177,395 $243,583 $311,137
COST OF GOODS SOLD 135,982 181,404 220,691
-------- -------- --------
GROSS PROFIT 41,413 62,179 90,446
-------- -------- --------
OPERATING EXPENSES:
Distribution 14,099 18,076 23,004
Selling, general and administrative 18,676 30,137 38,965
Restructuring charges 910 -- --
-------- -------- --------
33,685 48,213 61,969
-------- -------- --------
INCOME FROM OPERATIONS 7,728 13,966 28,477
-------- -------- --------
OTHER (INCOME) EXPENSE:
Interest 4,496 13,004 18,776
Other, net 374 (133) 965
-------- -------- --------
4,870 12,871 19,741
-------- -------- --------
Income before income taxes and minority interest 2,858 1,095 8,736
--------
PROVISION (BENEFIT) FOR INCOME TAXES 121 (2,516) 3,340
MINORITY INTEREST IN INCOME 1,348 -- --
-------- -------- --------
Income before extraordinary gain 1,389 3,611 5,396
-------- -------- --------
EXTRAORDINARY ITEM-GAIN ON EARLY EXTINGUISHMENT OF DEBT 710 -- --
-------- -------- --------
NET INCOME $ 2,099 $ 3,611 $ 5,396
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-3
<PAGE>
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
--------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
FOR THE FISCAL YEARS ENDED DECEMBER 27, 1996, DECEMBER 26, 1997
---------------------------------------------------------------
AND DECEMBER 25, 1998
---------------------
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Voting and
Nonvoting Series A
Common Stock Convertible Additional Retained Cumulative
-------------- Preferred Paid-in Earnings/ Translation
Shares Amount Stock Capital (Deficit) Adjustment Total
------ ------ ----------- ---------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 29, 1995 6,245 $ 1 $ 8,575 $ 3,497 $(5,519) $ -- $ 6,554
Comprehensive income-
Net income -- -- -- -- 2,099 -- 2,099
Cumulative translation
adjustment -- -- -- -- -- 28 28
-------
Total comprehensive income 2,127
-------
Effect of partnership
equity transaction (Note 1) -- -- -- 8,648 -- -- 8,648
Redemption of preferred
stock -- -- (8,575) 5,575 -- -- (3,000)
------ ------ ----------- ------- ------- ------- -------
BALANCE, DECEMBER 27, 1996 6,245 1 -- 17,720 (3,420) 28 14,329
Comprehensive income-
Net income -- -- -- -- 3,611 -- 3,611
Cumulative translation
adjustment -- -- -- -- -- (1,632) (1,632)
-------
Total comprehensive income 1,979
-------
Transfer of stock ownership -- -- -- 1,667 -- -- 1,667
Cash dividends - $480 per
share -- -- -- -- (3,000) -- (3,000)
------ ------ ----------- ------- ------- ------- -------
BALANCE, DECEMBER 26, 1997 6,245 1 -- 19,387 (2,809) (1,604) 14,975
Comprehensive income-
Net income -- -- -- -- 5,396 -- 5,396
Cumulative translation
adjustment -- -- -- -- -- 2,078 2,078
-------
Total comprehensive income 7,474
-------
Cash dividends - $240 per
share -- -- -- -- (1,500) -- (1,500)
------ ------ ----------- ------- ------- ------- -------
BALANCE, DECEMBER 25, 1998 6,245 $ 1 $ -- $19,387 $ 1,087 $ 474 $20,949
====== ====== =========== ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
--------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE FISCAL YEARS ENDED DECEMBER 27, 1996, DECEMBER 26, 1997
---------------------------------------------------------------
AND DECEMBER 25, 1998
---------------------
(In thousands)
<TABLE>
<CAPTION>
1996 1997 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,099 $ 3,611 $ 5,396
Adjustments to reconcile net income to net cash provided by
operating activities-
Depreciation and amortization 5,076 9,530 13,857
Unrealized gain on marketable securities -- -- (46)
Deferred income taxes -- (2,627) 2,612
Transfer of stock ownership -- 1,667 --
Minority interest in income 1,348 -- --
Extraordinary gain on early extinguishment of debt (710) -- --
Changes in operating assets and liabilities, net of effects of
acquisition and disposition of businesses--
Accounts receivable, net (4,703) 9,540 394
Inventories 2,906 (3,666) (6,815)
Prepaid expenses and other (1,314) (766) (921)
Accounts payable 260 (6,511) 328
Accrued liabilities 263 2,196 2,339
-------- -------- --------
Net cash provided by continuing operations 5,225 12,974 17,144
Net cash provided by discontinued operations 982 -- --
-------- -------- --------
Net cash provided by operating activities 6,207 12,974 17,144
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,944) (18,411) (17,661)
Acquisition of J.R. Cup, net of cash acquired (21,592) -- --
Acquisition of StyroChem, net of cash acquired (26,168) -- --
Acquisition of StyroChem Europe, net of cash acquired -- (52,299) (345)
Acquisition of Epsilevy Oy, net of cash acquired -- -- (794)
Increase in other assets (835) (1,368) (10,141)
-------- -------- --------
Net cash used in investing activities (53,539) (72,078) (28,941)
-------- -------- --------
</TABLE>
(Continued)
F-5
<PAGE>
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
--------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE FISCAL YEARS ENDED DECEMBER 27, 1996, DECEMBER 26, 1997
---------------------------------------------------------------
AND DECEMBER 25, 1998
---------------------
(In thousands)
(Continued)
<TABLE>
<CAPTION>
1996 1997 1998
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) on revolving credit lines and
unsecured notes payable $ (5,006) $12,663 $ 5,820
Borrowings on mortgage note 364 -- 259
Payments on mortgage note (4,616) (248) (252)
Borrowings on bank term loans 19,426 -- --
Payments of bank term loans (19,426) -- --
Borrowings on capitalized lease obligations -- -- 4,871
Payments on capitalized lease obligations -- -- (373)
Issuance of senior notes 100,000 62,203 --
Payments of acquisition notes (35,760) -- --
Payments of dividends -- (3,000) (1,500)
Retirement of preferred stock (3,000) -- --
Other (3,800) (3,808) (1,956)
-------- ------- -------
Net cash provided by financing activities 48,182 67,810 6,869
-------- ------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH -- (751) 93
-------- ------- -------
NET INCREASE (DECREASE) IN CASH 850 7,955 (4,835)
CASH, beginning of period 5 855 8,810
-------- ------- -------
CASH, end of period $ 855 $ 8,810 $ 3,975
======== ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for interest, including
discontinued operations $ 3,626 $11,667 $17,619
======== ======= =======
Cash paid during the period for income taxes, net of refunds of
$415 in 1997 and $132 in 1998 $ -- $ 196 $ (48)
======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
--------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. ORGANIZATION, ACQUISITIONS AND DISCONTINUED OPERATIONS:
-------------------------------------------------------
The Company
- -----------
Radnor Holdings Corporation ("Radnor") was incorporated in Delaware on November
6, 1991 to acquire the outstanding stock of Benchmark Holdings, Inc.
("Benchmark") and WinCup Holdings, Inc. ("WinCup"). Radnor, through its WinCup
subsidiary, is the second largest producer in the United States of foam cups and
containers for the foodservice industry. Through its Radnor Chemical Corporation
subsidiary, Radnor is the fifth largest worldwide producer of expandable
polystyrene ("EPS"). Radnor and its subsidiaries (collectively the "Company")
sell their products primarily to national, institutional, retail and wholesale
customers throughout the U.S., Canada, Mexico, and Europe. The Company markets
its products under a variety of brand and trade names, including "WinCup,"
"Handi-Kup," "StyroChem" and "ThermiSol."
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 28% and 22% of the Company's net sales for fiscal years 1997 and
1998, respectively. Although the Company has not lost sales from its key
customers in fiscal years 1997 and 1998, 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.
StyroChem Europe Acquisition
- ----------------------------
On October 15, 1997, the Company acquired the polystyrene production and
conversion operations of Neste Oy ("StyroChem Europe"). The acquisition was
accounted for as a purchase and, accordingly, the purchased assets and assumed
liabilities of StyroChem Europe were recorded at estimated fair values at the
date of acquisition. The purchase price was 213.0 million Finnish Markkas
(approximately $40.8 million as of the date of closing) plus the net working
capital of 60.0 million Finnish Markkas (approximately $11.5 million as of the
date of closing). The purchase price was allocated to accounts receivable
($13.8 million), inventory ($6.5 million), property, plant and equipment ($40.8
million), accounts payable ($6.4 million) and accrued liabilities ($2.4
million). A portion of the proceeds from the Company's offering of $60.0
million 10% Series B Senior Notes due 2003 was utilized to fund the purchase
price.
StyroChem Acquisition
- ---------------------
On December 5, 1996, the Company acquired all of the issued and outstanding
capital stock of and other equity interests in Radnor Chemical Corporation,
formerly 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 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. The purchase price was
allocated to cash ($2.4 million),
F-7
<PAGE>
accounts receivable ($11.5 million), inventory ($7.3 million), property, plant
and equipment ($23.5 million), other assets ($1.0 million), accounts payable
($16.3 million) and accrued liabilities ($5.0 million). Approximately $1.4
million of the purchase price had been placed in a separate escrow account, and
has been 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 (the "Agreement") with
Fort James Corporation, formerly James River Paper Company, Inc. ("Fort James"),
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 Fort James as the sole limited partner. Ownership interests were
allocated 55% to WinCup and 45% to Fort James. The WinCup contribution of
assets and liabilities was accounted for at historical cost.
The acquisition of assets and liabilities from Fort James has been accounted for
as a purchase by the partnership in accordance with APB Opinion No. 16 and,
accordingly, the assets and liabilities of Fort James have been recorded at
estimated fair values at the date of the purchase. The purchase price consisted
of approximately (i) $19.1 million of cash, (ii) $16.8 million of promissory
notes (Note 3), (iii) the assumption of $1.0 million of liabilities and (iv) the
45% equity interest in the partnership valued at $17.7 million. This
partnership equity transaction resulted in an increase in WinCup's pro rata
share (55%) of the underlying equity in the partnership which has been recorded
as an addition to paid-in capital. The purchase price was allocated to
inventories ($8.2 million) and property, plant and equipment ($46.4 million).
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 Fort James'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, Fort James 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, the Company exercised the
option and acquired the 45% partnership interest from Fort James. The price
paid by the Company to acquire the 45% interest exceeded the carrying value of
the minority interest by approximately $7.3 million.
Pro Forma Results of Operations
- -------------------------------
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 1996 follow
(in thousands):
1996 1997
--------------- ---------------
Net sales $317,125 $312,410
Income from operations 20,585 21,317
Income before extraordinary item 3,606 6,811
F-8
<PAGE>
Pro forma results are unaudited and are based on historical results, adjusted
for the impact of certain acquisition related items, 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 1996. In
addition, they are not intended to be a projection of future results.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
Fiscal Year
- -----------
The Company's fiscal year is the fifty-two or fifty-three week period that ends
on the last Friday of December of each year. The fiscal years ended December
27, 1996, December 26, 1997 and December 25, 1998 are fifty-two week periods.
Principles of Consolidation
- ---------------------------
The accompanying consolidated financial statements include the accounts of
Radnor and all of its majority-owned subsidiaries. All material intercompany
balances and transactions have been eliminated in consolidation. The equity
method of accounting is used when the Company has a 20% to 50% ownership
interest in other companies. Under the equity method, original investments are
recorded at cost and adjusted for the Company's share of undistributed earnings
or losses of these companies.
Accounts Receivable, Net
- ------------------------
Accounts receivable are net of allowances for doubtful accounts of $829,000 and
$764,000 at December 26, 1997 and December 25, 1998, respectively. Bad debt
expense was $120,000, $179,000 and $150,000 for fiscal years 1996, 1997, and
1998, respectively. The related write-offs of accounts receivable were
$112,000, $63,000 and $215,000 for those years, respectively. Additionally, a
reserve of $209,000 was acquired in 1996 as part of the StyroChem Acquisition.
Inventories
- -----------
Inventories are recorded at the lower of cost (first-in, first-out) or market.
Inventories at December 26, 1997 and December 25, 1998, consist of the following
(in thousands):
1997 1998
--------------- ---------------
Raw materials $ 9,612 $12,576
Work in process 1,303 1,251
Finished goods 17,536 21,440
------- -------
$28,451 $35,267
======= =======
Property, Plant and Equipment
- -----------------------------
Property, plant and equipment are stated 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. Maintenance and
repairs are charged to operations currently, and replacements and significant
F-9
<PAGE>
improvements are capitalized. Depreciation expense in fiscal 1996, 1997 and
1998 was $4,451,000, $7,504,000 and $10,933,000, respectively.
Supplies and Spare Mold Parts
- -----------------------------
Supplies and spare mold parts include maintenance parts maintained in a central
stores location. When needed at the manufacturing facilities, parts are shipped
and expensed.
Other Assets
- ------------
Other assets include deferred financing costs of $6.8 million and $7.4 million
as of December 26, 1997 and December 25, 1998, respectively, related to the
financing arrangements and note offerings executed in 1996 and 1997. Such costs
are being amortized over the terms of the related debt instruments.
Amortization of deferred financing costs of $836,000 and $1,286,000 is included
in interest expense for the years ended December 26, 1997 and December 25, 1998,
respectively. In addition, other assets include a noncompete agreement of $2.8
million, net of amortization of $2.0 million, resulting from the StyroChem
Acquisition, which is being amortized over five years.
Environmental Expenditures
- --------------------------
Environmental expenditures that relate to an existing condition caused by past
operations and that do not contribute to current or future revenue generation
are expensed. Liabilities are recorded when environmental assessments and/or
cleanups are probable, and the costs can be reasonably estimated.
Income Taxes
- ------------
The Company accounts for income taxes under the liability method. Under this
method, deferred tax assets and liabilities are recognized for the tax effects
of temporary differences between the financial reporting and tax bases of assets
and liabilities using enacted tax law and statutory tax rates applicable to the
periods in which the temporary differences are expected to affect taxable
income.
Revenue Recognition
- -------------------
Revenue is recognized when goods are shipped.
Currency Translation
- --------------------
The Company conducts business in a number of foreign countries and as a result
is subject to the risk of fluctuations in foreign currency exchange rates and
other political and economic risks associated with international business. The
Company's foreign entities report their assets, liabilities and results of
operations in the currency in which the entity primarily conducts its business.
Adjustments resulting from the translation of the financial statements are
reflected as a currency translation adjustment in stockholders' equity.
Currency transaction gains and losses, which are included in operating results,
are not significant.
Research and Development
- ------------------------
Research and development costs are charged to expense as incurred and are
included in cost of goods sold. These costs have represented 1.3%, 1.8% and
2.2% of net sales in 1996, 1997 and 1998, respectively.
F-10
<PAGE>
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 was determined by the Company
using market quotes, if available, or discounted cash flows using market
interest rates. 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 loan and
the lines of credit approximate fair value because they have variable interest
rates based on either the prime rate, LIBOR or HELIBOR. The fair value of the
senior notes was $161,600,000 at December 25, 1998.
3. LONG-TERM DEBT:
---------------
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
1997 1998
------------- -------------
<S> <C> <C>
Series A Senior Notes bearing interest at 10%, interest payable semi-
annually, due December 1, 2003 $100,000 $100,000
Series B Senior Notes, including a premium of $1,862 at December 25,
1998, bearing interest at 10%, interest payable semi-annually, due
December 1, 2003 62,159 61,862
Outstanding balance under the $40 million Second Amended and Restated
Revolving Credit and Security Agreement (the "Amended Credit
Agreement"), which includes a $10 million European subsidiary
sublimit, bearing interest at the Company's option at a rate based
upon various formulae as defined within the agreement. At December
25, 1998, the domestic rate was based on 30-day LIBOR (5.63%) plus
1.75%. The weighted average rate for the European sublimit was
5.23% as of December 25, 1998. The revolving loans under the
Amended Credit Agreement will mature on October 15, 2002. All the
obligations of the Company under the Amended Credit Agreement are
secured by a lien on substantially all of the Company's U.S. and
European subsidiaries' inventory and receivables. 15,544 22,801
Outstanding balance under the Canadian Revolving Credit Facility
(borrowing capacity of $2.5 million Canadian including a letter of
credit subfacility and a Foreign Exchange Future Contracts
subfacility), Canadian dollar advances bearing interest at Canadian
prime rate (6.75% at December 25, 1998) plus 0.5% and U.S. dollar
advances bearing interest at the base rate plus 0.5%. Loans under
the Canadian Revolving Credit Facility are payable on demand and
secured by substantially all of the assets of the Company's Canadian
subsidiary. 1,244 80
</TABLE>
F-11
<PAGE>
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Outstanding balance under the Canadian term loan, bearing interest at
Canadian prime rate plus 1.50% payable in equal quarterly principal
payments of $81,250 Canadian plus interest, with final payment due
November 1998. The term loan is secured by substantially all of the
assets of the Company's Canadian subsidiary. $ 226 $ --
Outstanding balance under the Canadian term loan, bearing interest at
Canadian prime rate plus 1.0%, secured by substantially all assets
of the Company's Canadian subsidiary, payable in quarterly
installments of approximately $13,350 over a maximum of five years. -- 233
Outstanding balance under a term loan facility (the "Stone Mountain
Facility"), bearing interest at LIBOR rates with various maturities
(5.63% at December 25, 1998) plus margin (2.0% at December 25, 1998)
or prime (7.75% at December 25, 1998) plus margin (.25% at December
25, 1998). The term loan is payable in quarterly principal
installments of $150,000 plus interest with final payment due September
2003. The term loan is secured by a mortgage agreement. -- 5,066
Outstanding balance under a term loan facility, bearing interest at
3-month HELIBOR (3.29% at December 25, 1998) plus margin (2.5% at
December 25, 1998) payable in semi- annual principal installments
of approximately $20,000 plus interest with final payment due
January 2004. -- 216
Outstanding balance under a term loan facility, bearing interest at
6-month HELIBOR (3.27% at December 25, 1998) plus margin (1.25% at
December 25, 1998) payable in semi-annual principal installments of
approximately $17,000 plus interest with final payment due January
2002. -- 124
-------- --------
179,173 190,382
Less Current portion (226) (729)
-------- --------
$178,947 $189,653
======== ========
</TABLE>
In July 1998 the Company entered into the Stone Mountain Facility to finance the
purchase of its Stone Mountain, Georgia manufacturing facility.
On October 15, 1997, the Company completed a $60 million Series B Senior Note
offering. The proceeds were used to finance the StyroChem Europe acquisition
and repay a portion of the outstanding principal and accrued interest under the
revolving credit facility. The debt issuance premium on the Series B Notes is
being amortized over the life of the notes. For fiscal years 1997 and 1998
premium amortization of $44,000 and $297,000, respectively, has been recorded as
a reduction of interest expense.
On October 15, 1997, the Company also entered into the Second Amended Credit
Agreement with two banks, as agents and lenders, 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
F-12
<PAGE>
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 sub-limit on standby letters of credit and a
$1 million sub-limit on documentary letters of credit. At December 26, 1997 and
December 25, 1998, the Company had outstanding $1.9 million and $1.8 million of
letters of credit, respectively.
On December 5, 1996, the Company completed a $100 million Series A Senior Note
offering. The proceeds were used to (i) repay existing indebtedness, including
amounts outstanding under the Company's existing term notes, revolving credit
agreements, 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.
Each of the above agreements contain certain restrictive covenants which
include, among other things, restrictions on the declaration or payment of
dividends, the repurchase of stock, the incurrence of additional debt, the
amount of capital expenditures and additional investments and the sale or
disposition of assets. The Company is also required to maintain a minimum net
worth and certain financial ratios including debt to equity, current, debt
coverage and earnings to interest expense. The Company is currently in
compliance with all financial covenants.
Future debt maturities, excluding the debt premium, are as follows (in
thousands):
<TABLE>
<S> <C>
1999 $ 729
2000 729
2001 729
2002 23,592
2003 162,734
2004 and thereafter 7
--------
$188,520
========
</TABLE>
4. COMMITMENTS AND CONTINGENCIES:
------------------------------
Leases
- ------
The Company leases certain of its manufacturing, warehouse and office facilities
and transportation equipment under noncancelable operating and capital lease
arrangements.
The future minimum payments under operating leases are as follows (in
thousands):
<TABLE>
<S> <C>
1999 $ 6,031
2000 5,564
2001 4,750
2002 4,182
2003 3,402
2004 and thereafter 7,433
-------
$31,362
=======
</TABLE>
Rental expense for all operating leases was $4,148,000, $6,144,000 and
$7,249,000 for fiscal years 1996, 1997 and 1998, respectively.
F-13
<PAGE>
The future minimum payments under capital leases are as follows (in thousands):
<TABLE>
<S> <C>
1999 $1,192
2000 1,192
2001 1,192
2002 1,192
2003 1,192
2004 and thereafter 1,202
------
Total minimum lease payments 7,162
Less interest 1,546
------
Present value of net minimum lease payments 5,616
Less current maturities 761
------
Capital lease obligations $4,855
======
In August 1998 the Company entered into a $1.1 million capital lease transaction
to finance the purchase of certain transportation equipment. The lease bears
interest at 7.44% and calls for quarterly payments of $39,000 with a final
payment of $413,000 due in August 2005.
</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 adverse
effect on the Company's financial position or results of operations.
Supply Agreements
- -----------------
In October 1998, the Company amended its styrene monomer supply contract with
Chevron Chemical Company. The initial term of the contract extends through
December 2003. Under the amended contract, the Company is required to purchase
the first 160 million pounds of its domestic styrene monomer requirements per
year from Chevron and has certain rights to purchase additional styrene monomer.
In October 1997, in connection with the StyroChem Europe Acquisition, the
Company negotiated a contract with Elf AtoChem S.A. 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.
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
25, 1998, there are issued and outstanding 600 shares of Voting Common Stock,
5,400 shares of Class B Nonvoting Common Stock and 245 shares of Nonvoting
Common Stock. All shares have a par value of $.10 except for shares of Class B
Nonvoting Common Stock, which have a par value of $.01. In October 1996, the
Company completed a recapitalization in which each outstanding share of Voting
Common Stock was converted into 0.1 shares of Voting Common Stock and 0.9 shares
of Class B Nonvoting Common Stock.
F-14
<PAGE>
The Company's principal stockholder transferred ownership of 60 shares of Voting
Common Stock and 540 shares of Class B Nonvoting Common Stock to an officer of
the Company, and the estimated fair value of such stock has been reflected as
compensation expense in the 1997 financial statements.
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 components of income before taxes by source of income are as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1997 1998
------------- ------------- ------------
<S> <C> <C> <C>
United States $1,648 $ (282) $4,261
Non-U.S. (138) 1,377 4,475
------ ------ ------
$1,510 $1,095 $8,736
====== ====== ======
</TABLE>
The provision (benefit) for income taxes for each of the three years in the
period ended December 25, 1998, is as follows (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal $ 168 $ 20 $ 47
State 10 34 176
Foreign -- -- 505
Deferred (57) 5,972 3,061
Utilization (generation) of net operating
loss carryforwards 1,324 (3,785) (449)
Change in valuation allowance (1,324) (4,757) --
-------- -------- -------
$ 121 $(2,516) $3,340
======== ======== =======
</TABLE>
F-15
<PAGE>
The components of deferred taxes at December 26, 1997 and December 25, 1998 are
as follows (in thousands):
<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 8,542 $ 8,991
Vacation pay and compensation accruals 559 601
Bad debt, inventory and returns and
allowances 656 900
Other accruals 967 932
------- -------
10,724 11,424
Deferred tax liabilities:
Accelerated tax depreciation 16,693 20,145
Other 866 863
------- -------
Net deferred tax liability $(6,835) $(9,584)
======= =======
</TABLE>
The provision (benefit) for income taxes varies from the amount determined by
applying the United States federal statutory rate to pre-tax income as a result
of the following (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- ------
<S> <C> <C> <C>
United States federal statutory income tax $ 972 $ 372 $2,970
State income taxes, net of federal benefit 140 50 177
Change in valuation allowance (1,324) (4,757) --
Nondeductible expenses 42 2 77
Dividends received from foreign affiliate -- 214 --
Foreign tax rate differential -- -- (141)
Other 291 1,603 257
------- ------- ------
$ 121 $(2,516) $3,340
======= ======= ======
</TABLE>
As of December 25, 1998, the Company had approximately $22.6 million of net
operating loss carryforwards for federal income tax purposes, which expire
through 2018. A valuation allowance was provided for substantially all of the
loss carryforward tax benefit at December 27, 1996. In 1997, as a result of
management's reevaluation of the Company's future profitability outlook, the
valuation allowance was eliminated and a tax benefit of $4.8 million was
reflected in the 1997 financial statements.
8. STOCK OPTION PLAN:
------------------
The 1992 Equity Incentive Plan (the "Plan") provides for the grant of
nonqualified options to purchase shares of the Nonvoting Common Stock subject to
certain limitations. Nonqualified 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
F-16
<PAGE>
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>
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Options outstanding at beginning of period 710 700 1,115
Granted -- 440 --
Exercised -- -- --
Canceled (10) (25) (2)
------ ------ ------
Options outstanding at end of period 700 1,115 1,113
====== ====== ======
Options available for grant 549 134 136
====== ====== ======
Exercisable at end of period 362 584 761
====== ====== ======
</TABLE>
The exercise price for all options granted prior to 1997 is $3,350 per share
while the exercise price for all options granted during 1997 is $6,985. These
amounts represent the fair market value as determined by the board of directors
on the grant dates. There were no options granted during 1998.
The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations in accounting for its
stock options plans. Accordingly, no compensation expense has been recognized
related to the plans described above. If compensation cost for these plans had
been determined using the fair-value method prescribed by SFAS No. 123,
"Accounting for Stock Based Compensation," the Company's net income would have
been reduced to the pro forma amounts indicated below.
<TABLE>
<CAPTION>
(in thousands) 1997 1998
--------------- ---------------
<S> <C> <C>
Net income - as reported $3,611 $5,396
Net income - pro forma 3,492 5,110
</TABLE>
This pro forma impact may not be representative of the effects for future years
and is likely to increase as additional options are granted and amortized over
the vesting period.
As the Company's stock is not publicly traded, the fair value of each option was
estimated on the grant date using the minimum value method (which excludes a
volatility assumption), with the following assumptions:
<TABLE>
<CAPTION>
1997 1998
---------------- ----------------
<S> <C> <C>
Risk-free rate of interest 6.31% 6.31%
Expected life in years 10 10
Dividend yield 0% 0%
</TABLE>
9. EMPLOYEE BENEFIT PLAN:
----------------------
The Company sponsors a 401(k) savings and profit sharing plan, which covers all
employees who have at least 1,000 hours of service during the 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
F-17
<PAGE>
contributions for the three years in the period ended December 25, 1998.
Employer matching contributions to the plan amounted to approximately $441,000,
$591,000 and $689,000 for each of the three years in the period ended December
25, 1998, respectively.
Additionally, as a result of the acquisition of StyroChem Europe, certain of the
European subsidiaries maintain retirement benefit plans. Pension expense
related to these plans were $181,000 in 1997 and $1,375,000 in 1998.
10. RELATED PARTY TRANSACTIONS:
---------------------------
A director of the Company is a partner in the law firm which serves as the
Company's primary legal counsel. During 1997 and 1998, the Company paid fees of
$831,000 and $471,000 to this firm. A director of the Company is a Senior
Managing Director of an investment banking firm that performed services for the
Company in 1997 and 1998. During 1997 and 1998, the Company paid total fees of
$1,050,000 and $252,000 to this firm, respectively. The Company licenses certain
rights and provides administrative support to a related company from which
approximately $3.0 million was due at December 25, 1998.
11. SEGMENT INFORMATION:
--------------------
In 1998, the Company adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." SFAS No. 131 introduces a new model for
segment reporting called the management approach. The management approach is
based on the way that the chief operating decision maker organizes segments
within a company for making operating decisions and assessing performance.
The Company has two business segments that operate within three distinct
geographic regions. The packaging and insulation segment produces food
packaging and insulation products for distribution to the foodservice,
insulation and packaging industries. The specialty chemicals segment produces
EPS for internal consumption by the packaging and insulation segment in addition
to selling to third-party manufacturers. Each of these segments operates in the
United States, Canada and Europe. The following tables summarize the Company's
financial information and results of operations by segment and geographic region
for fiscal years 1997 and 1998.
Operating:
<TABLE>
<CAPTION>
(In thousands)
Packaging and Specialty Corporate and
1997 Insulation Chemicals Other Eliminations Consolidated
- ----------------------- ------------- --------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to Unaffiliated
Customers $187,931 $55,652 $ -- $ -- $243,583
Transfers Between
Operating Segments -- 29,495 -- (29,495) --
Operating Income (Loss) 9,481 5,086 (601) -- 13,966
Identifiable Assets 142,828 97,581 9,409 -- 249,818
Capital Expenditures 10,560 6,862 989 -- 18,411
Depreciation Expense 5,630 1,874 -- -- 7,504
</TABLE>
F-18
<PAGE>
<TABLE>
<CAPTION>
Packaging and Specialty Corporate and
1998 Insulation Chemicals Other Eliminations Consolidated
- ------------------------- ------------- --------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to Unaffiliated
Customers $221,573 $ 88,861 $ 703 -- $311,137
Transfers Between
Operating Segments -- 53,750 -- (53,750) --
Operating Income (Loss) 14,155 15,375 (1,053) -- 28,477
Identifiable Assets 152,863 104,904 21,029 -- 278,796
Capital Expenditures 8,750 8,556 355 -- 17,661
Depreciation Expense 6,977 3,870 86 -- 10,933
</TABLE>
Geographic:
<TABLE>
<CAPTION> United
1997 States Canada Europe/(1)/ Eliminations Consolidated
- ------------------------- ------------- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to Unaffiliated
Customers $210,788 $16,314 $16,481 $ -- $243,583
Transfers Between
Geographic Segments -- 2,252 -- (2,252) --
Operating Income 10,431 1,739 1,796 -- 13,966
Identifiable Assets 174,581 8,182 67,055 -- 249,818
</TABLE>
<TABLE>
<CAPTION>
United
1998 States Canada Europe Eliminations Consolidated
- ------------------------- ------------- -------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to Unaffiliated
Customers $212,004 $13,013 $ 86,120 $ -- $311,137
Transfers Between
Geographic Segments -- 8,190 -- (8,190) --
Operating Income 15,322 2,539 10,616 -- 28,477
Identifiable Assets 198,269 8,248 72,279 -- 278,796
</TABLE>
/(1)/ Represents the results of operations of StyroChem Europe from the October
15, 1997 (date of acquisition) through December 26, 1997.
F-19
<PAGE>
12. SUPPLEMENTAL FINANCIAL INFORMATION:
-----------------------------------
Radnor Holdings Corporation is a holding company which has no operations or
assets separate from its investments in subsidiaries. The $100 million Series A
Senior Notes and the $60 million Series B Senior Notes are guaranteed by
substantially all of the Company's domestic subsidiaries. The following
represents summarized combining financial information of the holding company,
combined guarantor subsidiaries and the combined non-guarantor subsidiaries as
of and for the year ended December 26, 1997 and December 25, 1998 (in
thousands):
<TABLE>
<CAPTION>
Holding Guarantor Non-Guarantor
1997 Company Subsidiaries Subsidiaries/(1)/ Eliminations Consolidated
- -------------------------- ------- ------------ ------------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Sales $ -- $210,788 $35,047 $ (2,252) $243,583
Gross Profit -- 53,132 9,047 -- 62,179
Operating Income -- 10,438 3,528 -- 13,966
Net Income -- 2,506 1,105 -- 3,611
Current Assets 1,166 42,273 28,775 (1,136) 71,078
Noncurrent Assets 147,334 180,938 48,997 (198,529) 178,740
Current Liabilities 1,135 29,025 18,120 (1,338) 46,942
Noncurrent Liabilities 162,159 61,421 55,447 (91,126) 187,901
</TABLE>
<TABLE>
<CAPTION>
Holding Guarantor Non-Guarantor
1998 Company Subsidiaries Subsidiaries Eliminations Consolidated
- -------------------------- ------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Sales $ -- $212,004 $107,323 $ (8,190) $311,137
Gross Profit -- 56,966 33,480 -- 90,446
Operating Income -- 14,869 13,184 424 28,477
Net Income -- 2,605 3,990 (1,199) 5,396
Current Assets 550 47,107 30,324 (3,208) 74,773
Noncurrent Assets 142,145 199,186 54,524 (191,832) 204,023
Current Liabilities 1,096 36,601 17,085 (3,918) 50,864
Noncurrent Liabilities 161,862 69,369 58,867 (83,115) 206,983
</TABLE>
/(1)/ Includes the results of operations of StyroChem Europe from the October
15, 1997 (date of acquisition) through December 26, 1997.
F-20
<PAGE>
EXHIBIT INDEX
3.1 Restated Certificate of Incorporation of Radnor Holdings Corporation,
as amended
3.2 Bylaws of Radnor Holdings Corporation (Incorporated by reference to
Exhibit 3.2 filed with Form S-4 Registration Statement, filed by
Radnor Holdings Corporation, WinCup Holdings, Inc., Radnor Chemical
Corporation (formerly SP Acquisition Co.), StyroChem U.S., Inc.
(formerly StyroChem International, Inc.), StyroChem Canada, Ltd.
(formerly StyroChem International, Ltd.) and Radnor Management, Inc.,
Commission File No. 333-19495 (the "Original S-4''))
4.1 Indenture, dated as of December 5, 1996 among Radnor Holdings
Corporation, WinCup Holdings, Inc., Radnor Chemical Corporation,
StyroChem U.S., Inc., StyroChem Canada, Ltd. and First Union National
Bank, including form of Notes and Guarantees (Incorporated by
reference to Exhibit 4.1 filed with the Original S-4)
4.2 First Supplemental Indenture, dated as of December 17, 1996 among
Radnor Holdings Corporation, WinCup Holdings, Inc., Radnor Chemical
Corporation, StyroChem U.S., Inc., StyroChem Canada, Ltd., Radnor
Management, Inc. and First Union National Bank (Incorporated by
reference to Exhibit No. 4.2 filed with the Form 10-K for the year
ended December 26, 1997 filed by Radnor Holdings Corporation)
4.3 Second Supplemental Indenture, dated as of October 15, 1997 among
Radnor Holdings Corporation, WinCup Holdings, Inc., Radnor Chemical
Corporation, StyroChem U.S., Inc., StyroChem Canada, Ltd., Radnor
Management, Inc., StyroChem Europe (The Netherlands) B.V., StyroChem
Finland Oy, ThermiSol Denmark ApS, ThermiSol Finland Oy, ThermiSol
Sweden AB and First Union National Bank (Incorporated by reference to
Exhibit No. 4.3 filed with the Form 10-K for the year ended December
26, 1997 filed by Radnor Holdings Corporation)
4.4 Third Supplemental Indenture, dated as of February 9, 1998 among
Radnor Holdings Corporation, WinCup Holdings, Inc., Radnor Chemical
Corporation, StyroChem U.S., Inc., StyroChem Canada, Ltd., Radnor
Management, Inc., StyroChem Europe (The Netherlands) B.V., StyroChem
Finland Oy, ThermiSol Denmark ApS, ThermiSol Finland Oy, ThermiSol
Sweden AB, Radnor Delaware, Inc. and First Union National Bank
(Incorporated by reference to Exhibit No. 4.4 filed with the Form 10-K
for the year ended December 26, 1997 filed by Radnor Holdings
Corporation)
4.5 Fourth Supplemental Indenture, dated as of July 16, 1998 among Radnor
Holdings Corporation, WinCup Holdings, Inc., Radnor Chemical
Corporation, StyroChem U.S., Inc., Radnor Management, Inc., Radnor
Delaware, Inc. and First Union National Bank (Incorporated by
reference to Exhibit No. 4.1 filed with the Form 10-Q for the quarter
ended June 26, 1998 filed by Radnor Holdings Corporation)
4.6 Fifth Supplemental Indenture, dated as of January 21, 1999 among
Radnor Holdings Corporation, WinCup Holdings, Inc., Radnor Chemical
Corporation, Radnor Delaware, Inc., Radnor Management, Inc., StyroChem
U.S., Ltd., WinCup Texas, Ltd., StyroChem GP, L.L.C., StyroChem LP,
L.L.C., WinCup GP, L.L.C. and WinCup LP, L.C.C. and First Union
National Bank
1
<PAGE>
4.7 Exchange and Registration Rights Agreement, dated as of December 5,
1996 among Radnor Holdings Corporation, WinCup Holdings, Inc., Radnor
Chemical Corporation, StyroChem U.S., Inc., StyroChem Canada, Ltd.,
Alex. Brown & Sons Incorporated and NatWest Capital Markets Limited
(Incorporated by reference to Exhibit 4.2 filed with the Original S-4)
4.8 Indenture, dated as of October 15, 1997 among Radnor Holdings
Corporation, WinCup Holdings, Inc., Radnor Chemical Corporation,
StyroChem U.S., Inc., Radnor Management, Inc. and First Union National
Bank, including form of Notes and Guarantees (Incorporated by
reference to Exhibit 4.1 filed with Form S-4 Registration Statement,
filed by Radnor Holdings Corporation, WinCup Holdings, Inc., Radnor
Chemical Corporation, StyroChem U.S., Inc., and Radnor Management,
Inc., Commission File No. 333-42101 (the "Series B S-4")
4.9 First Supplemental Indenture, dated as of February 9, 1998 among
Radnor Holdings Corporation, WinCup Holdings, Inc., Radnor Chemical
Corporation, StyroChem U.S., Inc., Radnor Management, Inc., Radnor
Delaware, Inc. and First Union National Bank (Incorporated by
reference to Exhibit 4.7 filed with the Form 10-K for the year ended
December 26, 1997 filed by Radnor Holdings Corporation)
4.10 Second Supplemental Indenture, dated as of January 21, 1999 among
Radnor Holdings Corporation, WinCup Holdings, Inc., Radnor Chemical
Corporation, Radnor Delaware, Inc., Radnor Management, Inc., StyroChem
U.S., Ltd., WinCup Texas, Ltd., StyroChem GP, L.L.C., StyroChem LP,
L.L.C., WinCup GP, L.L.C. and WinCup LP, L.C.C. and First Union
National Bank
4.11 Exchange and Registration Rights Agreement, dated as of October 15,
1997 among Radnor Holdings Corporation, WinCup Holdings, Inc., Radnor
Chemical Corporation, StyroChem U.S., Inc., Radnor Management, Inc.,
Bear, Stearns & Co. Inc., NatWest Capital Markets Limited and BT Alex.
Brown Incorporated (Incorporated by reference to Exhibit 4.2 filed
with the Series B S-4)
* 10.1 Sales Agent Agreement, dated January 20, 1996, between James River
Paper Company, Inc. and WinCup Holdings, Inc. (as successor in
interest to 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 to the Original S-4)
* 10.2 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 Original S-4)
10.3 License Agreement, dated January 20, 1996, among James River
Corporation of Virginia, James River Paper Company, Inc., and WinCup
Holdings, Inc. (as successor in interest to 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 Original S-4)
10.4 Patent License Agreement, dated January 20, 1996, among James River
Corporation of Virginia, James River Paper Company, Inc., and WinCup
Holdings, Inc. (as successor in interest to 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 Original S-4)
* 10.5 Contract of Sale, dated as of December 5, 1996, among Chevron Chemical
Company, Radnor Chemical Corporation, StyroChem U.S., Inc. and
StyroChem Canada, Ltd. (Incorporated by reference to Exhibit No. 10.11
filed with Amendment No.1 to the Original S-4)
** 10.6 First Amendment to Styrene Monomer Contract of Sale, dated as of
October 1, 1998, among Chevron Chemical Company LLC, Radnor Chemical
Corporation, StyroChem U.S., Inc. and StyroChem Canada, Ltd.
2
<PAGE>
* 10.7 Contract between ARCO Chemical Company and WinCup Holdings, Inc. (as
successor in interest to 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 Original S-4)
* 10.8 Supply Agreement by and between Radnor Chemical Corporation and James
River Canada, Inc., dated March, 1996 (Incorporated by reference to
Exhibit No. 10.17 filed with Amendment No. 1 to the Original S-4)
10.9 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 Original S-4)
10.10 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, Inc. (as successor in interest to
WinCup Holdings, L.P.) on January 20, 1996 (Incorporated by reference
to Exhibit No. 10.26 filed with Amendment No. 1 to the Original S-4)
10.11 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, Inc. (as successor in interest
to WinCup Holdings, L.P.) on January 20, 1996 (Incorporated by
reference to Exhibit No. 10.27 filed with Amendment No. 1 to the
Original S-4)
10.12 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
Original S-4)
10.13 Standard Form Multi-Tenancy Industrial Lease between WinCup Holdings,
Inc. and CK Airpark Associates, dated June 1, 1994, assigned to WinCup
Holdings, Inc. (as successor in interest to WinCup Holdings, L.P.) on
January 20, 1996 (Incorporated by reference to Exhibit No. 10.32 filed
with Amendment No. 1 to the Original S-4)
10.14 Industrial Building Lease between Centerpoint Properties Corporation
and WinCup Holdings, Inc. (as successor in interest to WinCup
Holdings, L.P.) dated May 1996 (Incorporated by reference to Exhibit
10.33 filed with the Series B S-4)
10.15 Radnor Corporate Center Office Lease by and between Radnor Center
Associates and WinCup Holdings, Inc. (as successor in interest to
WinCup Holdings, L.P.), dated May 31, 1996 (Incorporated by reference
to Exhibit No. 10.34 filed with Amendment No. 1 to the Original S-4)
10.16 Standard Commercial Lease by and between Bradford Management Company
of Dallas, Inc. and StyroChem U.S., 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 Original S-4)
***10.17 Executive Employment Agreement by and between Radnor Holdings
Corporation and Richard Hunsinger, dated May 1, 1993, as amended in
October, 1995 (Incorporated by reference to Exhibit No. 10.38 filed
with the Original S-4)
***10.18 Radnor Holdings Corporation 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 Original S-4)
***10.19 Radnor Holdings Corporation 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
Original S-4)
10.20 Second Amended and Restated Revolving Credit and Security Agreement
among BNY Financial Corporation, NationsBank, N.A., WinCup Holdings,
Inc., Radnor Chemical Corporation, StyroChem
3
<PAGE>
U.S., Inc. and Radnor Holdings Corporation, dated October 15, 1997
(Incorporated by reference to Exhibit 10.41 filed with the Series B S-
4), as amended by Joinder dated February 9, 1998 joining Radnor
Delaware, Inc. (Incorporated by reference to Exhibit 10.32 filed with
the Form 10-K for the year ended December 26, 1997 filed by Radnor
Holdings Corporation), as further amended by Amendment No. 1 to Second
Amended and Restated Revolving Credit and Security Agreement among BNY
Financial Corporation, NationsBank, N.A., WinCup Holdings, Inc.,
Radnor Chemical Corporation, StyroChem U.S., Inc., Radnor Delaware,
Inc. and Radnor Holdings Corporation, dated June 26, 1998
(Incorporated by reference to Exhibit No. 10.1 filed with the Form 10-
Q for the quarter ended June 26, 1998 filed by Radnor Holdings
Corporation), as further amended by Amendment No. 2 to Second Amended
and Restated Revolving Credit and Security Agreement among BNY
Financial Corporation, NationsBank, N.A., WinCup Holdings, Inc.,
Radnor Chemical Corporation, StyroChem U.S., Inc., Radnor Delaware,
Inc. and Radnor Holdings Corporation, dated October 1, 1998, as
further amended by Amendment No. 3 to Second Amended and Restated
Revolving Credit and Security Agreement among BNY Financial
Corporation, NationsBank, N.A., WinCup Holdings, Inc., Radnor Chemical
Corporation, StyroChem U.S., Inc., Radnor Delaware, Inc. and Radnor
Holdings Corporation, dated December 23, 1998
10.21 Amended and Restated Revolving Credit Note, dated December 5, 1996,
made by Radnor Holdings Corporation, WinCup Holdings, Inc., Radnor
Chemical Corporation, and StyroChem U.S., 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 Original S-4)
10.22 Amended and Restated Revolving Credit Note, dated December 5, 1996,
made by Radnor Holdings Corporation, WinCup Holdings, Inc., Radnor
Chemical Corporation, and StyroChem U.S., Inc. in favor of
NationsBank, N.A. (Incorporated by reference to Exhibit No. 10.43
filed with Amendment No. 1 to the Original S-4)
10.23 Trademark Collateral Security Agreement, dated December 5, 1996,
between StyroChem U.S., Inc. and The Bank of New York Commercial
Corporation (Incorporated by reference to Exhibit No. 10.44 filed with
Amendment No. 1 to the Original S-4)
10.24 Trademark Assignment of Security, dated December 5, 1996, between
StyroChem U.S., Inc. and The Bank of New York Commercial Corporation
(Incorporated by reference to Exhibit No. 10.45 filed with Amendment
No. 1 to the Original S-4)
10.25 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 Original S-4)
10.26 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 Original S-4)
10.27 Patent Collateral Security Agreement, dated December 5, 1996, between
StyroChem U.S., Inc. and The Bank of New York Commercial Corporation
(Incorporated by reference to Exhibit No. 10.48 filed with Amendment
No. 1 to the Original S-4)
10.28 Patent Assignment of Security, dated December 5, 1996, between
StyroChem U.S., Inc. and The Bank of New York Commercial Corporation
(Incorporated by reference to Exhibit No. 10.49 filed with Amendment
No. 1 to the Original S-4)
10.29 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 Original S-4)
4
<PAGE>
10.30 Agreement Respecting a Term Loan and Other Credit Facilities, dated
February 25, 1994, between Bank of Montreal and StyroChem Canada,
Ltd., as amended (Incorporated by reference to Exhibit No. 10.63 filed
with Amendment No. 1 to the Original S-4)
10.31 Letter of Undertaking, dated December 5, 1996, made by StyroChem
Canada, Ltd. and Radnor Holdings Corporation in favor of Bank of
Montreal (Incorporated by reference to Exhibit No. 10.64 filed with
the Original S-4)
10.32 Guaranty, dated February 25, 1994, made by Radnor Chemical Corporation
in favor of Bank of Montreal (Incorporated by reference to Exhibit No.
10.65 filed with Amendment No. 1 to the Original S-4)
***10.33 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 Original S-4)
10.34 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)
10.35 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 Exhibit 10.68 filed with the Series B S-
4)
10.36 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 Exhibit 10.69 filed with the Series B S-
4)
10.37 Plant Lease 195 Tamal Vista Boulevard, Corte Madera, California,
between Hunt Brothers Leasing, L.L.C. and WinCup Holdings, Inc. (as
successor in interest to WinCup Holdings, L.P.), dated May 1, 1997
(Incorporated by reference to Exhibit 10.70 filed with the Series B S-
4)
10.38 Engineering Lease 201 Tamal Vista Boulevard, Corte Madera, California,
between Hunt Brothers Leasing, L.L.C. and WinCup Holdings, Inc. (as
successor in interest to WinCup Holdings, L.P.), dated May 1, 1997
(Incorporated by reference to Exhibit 10.71 filed with the Series B S-
4)
10.39 Warehouse Lease 205 Tamal Vista Boulevard, Corte Madera, California,
between Hunt Brothers Leasing, L.L.C. and WinCup Holdings, Inc. (as
successor in interest to WinCup Holdings, L.P.), dated May 1, 1997
(Incorporated by reference to Exhibit 10.72 filed with the Series B S-
4)
10.40 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
(Incorporated by reference to Exhibit 10.73 filed with Amendment No. 1
to the Series B S-4)
10.41 Lease Agreement between Oy KWH Plast Ab, Jakobstad and Isora Oy dated
January 24, 1995 (Incorporated by reference to Exhibit 10.74 filed
with the Series B S-4)
10.42 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
5
<PAGE>
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 Exhibit 10.75 filed with the Series B S-4)
10.43 Lease Agreement between Avena Siilot Oy and Neste Oy Polystyreeni
dated March 13, 1997 (Incorporated by reference to Exhibit 10.76 filed
with the Series B S-4)
10.44 Office Lease Agreement between Keharakenpajat Oy and Neste Oy
Polystyreeni dated July 1, 1995 (Incorporated by reference to Exhibit
10.77 filed with Amendment No. 1 to the Series B S-4)
10.45 Lease Contract between Lokalo Fastighetsfarvaltning and Neste
Cellplast AB dated August 16, 1996 (Incorporated by reference to
Exhibit 10.78 filed with Amendment No. 1 to the Series B S-4)
10.46 Lease Contract between Norrtalje Industri- och Hantverkshus AB (NIHAB)
and Neste Cellplast AB dated June 26, 1996 (Incorporated by reference
to Exhibit 10.79 filed with Amendment No. 1 to the Series B S-4)
* 10.47 Styrene Monomer Supply Agreement dated as of October 15, 1997 between
StyroChem Finland Oy and Elf Atochem SA (Incorporated by reference to
Exhibit 10.80 filed with Amendment No. 1 to the Series B S-4)
***10.48 Employment Agreement dated February 21, 1997 between Radnor Holdings
Corporation and Caroline J. Williamson (Incorporated by reference to
Exhibit 10.81 filed with Amendment No. 1 to the Series B S-4)
** 10.49 Agreement of Sale dated as of January 1, 1998 between ARCO Chemie
Nederland, Ltd. and StyroChem Finland Oy
***10.50 Radnor Holdings Corporation Key Executive Retirement Plan
***10.51 Executive Employment Agreement dated as of July 1, 1993 between Radnor
Holdings Corporation and Don Rogalski
***10.52 Letter Agreement dated as of December 10, 1998 between Radnor Holdings
Corporation and Van D. Groenewold
21.1 List of Subsidiaries of the Registrant
27.1 Financial Data Schedule (Radnor Holdings Corporation)
99.1 Pages F-32 to F-84 of the Company's Prospectus dated February 6, 1998,
included in Amendment No. 1 to the Company's Registration Statement on
Form S-4, Commission File No. 333-42101
* Portions of this Exhibit have been deleted pursuant to an Order
Granting the Company's Application under Securities Act and Rule 406
Promulgated Thereunder for Confidential Treatment.
** Portions of this Exhibit have been deleted pursuant to the Company's
Application under Exchange Act and Rule 24b-2 Promulgated Thereunder
for Confidential Treatment.
*** This exhibit represents a management contract or compensatory plan or
arrangement.
6
<PAGE>
EXHIBIT 3.1
RESTATED
CERTIFICATE OF INCORPORATION
OF
RADNOR HOLDINGS CORPORATION
The Restated Certificate of Incorporation of Radnor Holdings Corporation
(the "Corporation") was duly adopted by the Board of Directors of the
Corporation in accordance with Section 245 of the General Corporation Law of the
State of Delaware. This Restated Certificate of Incorporation only restates and
integrates and does not further amend the provisions of the Corporation's
Certificate of Incorporation as heretofore amended or supplemented, and there is
no discrepancy between those provisions and the provisions of this Restated
Certificate of Incorporation.
FIRST. - The name of the Corporation is Radnor Holdings Corporation.
SECOND. - The registered office of the Corporation is to be located at 1209
Orange Street, Wilmington, Delaware, 19801, in the County of New Castle. The
registered agent at this address is The Corporation Trust Company.
THIRD. - The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH. - The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 24,700 shares, consisting of 2,000
shares of Series Preferred Stock, $.10 par value (the "Series Preferred Stock"),
11,650 shares of Voting Common Stock, $.10 par value (the "Voting Common
Stock"), 5,650 shares of Nonvoting Common Stock, $.10 par value (the "Nonvoting
Common Stock"), and 5,400 shares of Class B Nonvoting Common Stock, $.01 par
value (the "Class B Nonvoting Common Stock") (the Voting Common Stock, the
Nonvoting Common Stock and the Class B Nonvoting Common Stock are hereinafter
sometimes referred to as the "Common Stock").
<PAGE>
A. Series Preferred Stock
The Series Preferred Stock may be issued from time to time in one or
more series with such distinctive designations as may be stated in the
resolution or resolutions providing for the issuance of such stock from time to
time adopted by the board of directors. The resolution or resolutions providing
for the issue of shares of a particular series shall fix, subject to applicable
laws and the provisions of this Article Fourth, the designations, rights,
preferences and limitations of the shares of each such series. The authority of
the board of directors in respect to each series shall include, but not be
limited to, determination of the following:
I. the consideration for which such Series Preferred Stock shall be
issued;
II. the number of shares constituting such series, including the
authority to increase or decrease such number, and the distinctive designation
of such series;
III. the dividend rate of the shares of such series, if any, whether
the dividends shall be cumulative and, if so, the date from which they shall be
cumulative, and the relative rights of priority, if any, of payment of dividends
on shares of such series;
IV. the right, if any, of the Corporation to redeem shares of such
series and the terms and conditions of such redemption;
V. the rights of the shares in case of a voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, and the relative
rights of priority, if any, of payment of shares of such series;
VI. the obligation, if any, of the Corporation to retire shares of
such series pursuant to retirement or sinking fund or funds of a similar nature
or otherwise and the terms and conditions of such obligation;
<PAGE>
VII. the terms and conditions, if any, upon which shares of such
series shall be convertible into or exchangeable for shares of stock of any
other class or classes, including the price or prices or the rate or rates of
conversion or exchange and the terms of adjustment, if any;
VIII. the voting rights and requirements, if any, of the shares of
such series, in addition to any voting rights required by law; and
IX. any other rights, preferences or limitations of shares of such
series.
Except to the extent otherwise expressly provided the Delaware General
Corporation Law, as amended or as may be specified by the board of directors of
the Corporation in the resolution authorizing the issue of any series of Series
Preferred Stock or otherwise, for the issuance for such stock or by the holders
of shares of any Series Preferred Stock shall not have any right to vote on any
matter submitted to the stockholders of the Corporation for a vote.
B. Common Stock
Except as set forth below, each share of Common Stock issued and
outstanding shall be identical in all respects one with the other. Except for
and subject to any rights which may be granted to the holders of the Series
Preferred Stock or as may be provided by the laws of the State of Delaware, the
holders of Common Stock shall have exclusively all other rights of stockholders
including, but not by way of limitation, (i) the rights to receive dividends,
when and as declared by the board of directors out of assets lawfully available
therefor, and (ii) in the event of any distribution of assets upon liquidation,
dissolution or winding up of the Corporation or otherwise, the right to receive
ratably and equally all assets and funds of the Corporation remaining after the
payment of or provision for all obligations of the Corporation and the payment,
if any, to the holders of Series Preferred Stock of the specific amounts which
they are entitled to receive upon such liquidation, dissolution or winding up of
the Corporation as herein provided. With respect to the declaration or payment
of any dividends with
<PAGE>
respect to the Common Stock (whether in cash, stock, including Common Stock, or
other property), any distribution of assets to holders of the Corporation's
Common Stock upon any liquidation, dissolution or winding up of the Corporation
or any consolidation, subdivision or other reclassification of any shares of the
Corporation's Common Stock or any other matter (other than voting or conversion
rights), the Corporation shall not differentiate in any respect among the
outstanding shares of Voting Common Stock, Nonvoting Common Stock and Class B
Nonvoting Common Stock.
Except to the extent otherwise expressly provided by the Delaware
General Corporation Law, as amended, the holders of shares of Nonvoting Common
Stock and Class B Nonvoting Common Stock shall not be entitled to vote on any
matter submitted to the stockholders of the Corporation for a vote.
At the option of the holder thereof, each share of Nonvoting Common
Stock shall be convertible into one share of Voting Common Stock upon the
earliest to occur of: (i) the date on which the Corporation gives notice as
required pursuant to Section 5(A)(i) of that certain Registration Rights
Agreement between the Corporation and Scott Paper Company (the "Rights
Agreement") to be executed pursuant to the terms of the Stock Purchase Agreement
dated February 14, 1992 between WinCup Holdings, Inc. and Scott Paper Company;
(ii) the expiration of the 30-day period specified in Section 4(A)(iii) of the
Rights Agreement and (iii) the date on which there is an event or series of
events as a result of which neither Michael T. Kennedy nor any entity or person
as to which Michael T. Kennedy has the then-existing right or power to elect or
otherwise designate a majority of the board of directors (or similar governing
body), directly or indirectly, has the then-existing right or power to elect or
otherwise designate a majority of the board of directors of the Corporation.
The Corporation shall reserve and keep available out of its authorized
but unissued Voting Common Stock such number of shares of Voting Common Stock as
shall from time to time be sufficient to effect conversions of the shares of
Nonvoting Common Stock which may be issued from time to time."
<PAGE>
FIFTH. - The Corporation shall have perpetual existence.
SIXTH. - The Corporation shall indemnify directors and officers of the
Corporation to the fullest extent permitted by law.
SEVENTH. - A director of the Corporation shall not be personally liable to
the Corporation or to its stockholders for monetary damages for breach of
fiduciary duty as a director except for liability to the extent provided by
applicable law (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders; or (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law; or (iii)
under Section 174 of the General Corporation Law of the State of Delaware; or
(iv) for any transaction from which the director derived an improper personal
benefit. In discharging the duties of their respective positions, the directors
and individual officer may, in considering the best interests of the
Corporation, consider the effects of any action upon employees, suppliers and
customers of the Corporation, communities in which offices or other
establishments of the Corporation are located, and all other pertinent factors.
EIGHTH. - The directors of the Corporation shall have the power to make and
to alter or amend the Bylaws; to fix the amount to be reserved as working
capital; and to authorize and cause to be executed, mortgages and liens, without
limit as to the amount, upon the property and franchise of the Corporation.
NINTH. - The stockholders and directors shall have the power to hold
meetings and keep the books, documents and papers of the Corporation outside the
State of Delaware, at such places as may be from time to time designated by the
Bylaws of the Corporation or by resolution of the directors, except as otherwise
required by the laws of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, said Radnor Holdings Corporation has caused this
restated Certificate of Incorporation to be signed by Michael T. Kennedy, its
President, and attested by Michael V. Valenza, its Assistant Secretary, this 8th
day of January, 1997.
(SEAL) RADNOR HOLDINGS CORPORATION
Attest:
/s/ Michael V. Valenza By: /s/ Michael T. Kennedy
- ---------------------- ---------------------------
Name: Michael V. Valenza Name: Michael T. Kennedy
Title: Assistant Secretary Title: President
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED
CERTIFICATE OF INCORPORATION
OF
RADNOR HOLDINGS CORPORATION
We, Michael T. Kennedy, President, and Caroline J. Williamson, Secretary,
of RADNOR HOLDINGS CORPORATION, a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"),
DO HEREBY CERTIFY:
FIRST: That the holders of Voting Common Stock and the holders of
Nonvoting Common Stock of the Corporation, pursuant to written consents dated
January 28, 1999, duly adopted the following resolution proposing and declaring
advisable the following amendment to the Restated Certificate of Incorporation
of the Corporation:
RESOLVED, that the first clause of Article Fourth, Section B,
paragraph three of the Restated Certificate of Incorporation shall be
amended and restated to read as follows:
"At the option of the holder thereof, each share of Nonvoting
Common Stock shall be convertible into one-tenth of one share of
Voting Common Stock and nine-tenths of one share of Nonvoting Common
Stock upon the earliest to occur of:"
FURTHUR RESOLVED, that Article Fourth, Section B, paragraph three,
subsection (iii) of the Restated Certificate of Incorporation shall be
amended and restated to read as follows:
"(iii) the date on which there is an event or series of events as
a result of which none of the following possesses the then-existing
right or power, directly or indirectly, to elect or otherwise
designate a majority of the board of directors of the Corporation: (a)
Michael T. Kennedy, (b) one or more members of the "Kennedy Group" (as
hereinafter defined), or (c) an entity or person as to which
<PAGE>
Michael T. Kennedy or one or more members of the Kennedy Group
possesses the then-existing right or power, directly or indirectly, to
elect or otherwise designate a majority of the board of directors (or
similar governing body). "Kennedy Group" means, with respect to
Michael T. Kennedy, each of the following: his estate, his spouse, any
of his issue, and a trust or trusts under which his spouse or any of
his issue is or are beneficiaries."
SECOND: With respect to such adoption, written consents of the holders of
Voting Common Stock and the holders of Nonvoting Common Stock of the Corporation
have been given in accordance with the provisions of Section 228 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Radnor Holdings Corporation has caused this
certificate to be signed by Michael T. Kennedy, President and attested by
Caroline J. Williamson, Secretary, this 9th day of February, 1999.
Attest: RADNOR HOLDINGS CORPORATION
/s/ Caroline J. Williamson By: /s/ Michael T. Kennedy
- -------------------------- ----------------------
Caroline J. Williamson, Michael T. Kennedy
Secretary President
<PAGE>
EXHIBIT 4.6
- --------------------------------------------------------------------------------
RADNOR HOLDINGS CORPORATION
as Issuer,
WINCUP HOLDINGS, INC.
RADNOR CHEMICAL CORPORATION
RADNOR DELAWARE, INC.
RADNOR MANAGEMENT, INC.
STYROCHEM U.S., LTD.
WINCUP TEXAS, LTD.
STYROCHEM GP, L.L.C.
STYROCHEM LP, L.L.C.
WINCUP GP, L.L.C.
and
WINCUP LP, L.L.C.
as Guarantors
and
FIRST UNION NATIONAL BANK
as Trustee
_____________________
FIFTH SUPPLEMENTAL INDENTURE
Dated as of January 21, 1999
(Supplementing a Trust Indenture dated as of December 5, 1996,
as amended by a First Supplemental Indenture dated as of December 17, 1996, and
as amended by a Second Supplemental Indenture dated as of October 15, 1997, and
as amended by a Third Supplemental Indenture dated as of February 9, 1998, and
as amended by a Fourth Supplemental Indenture dated as of July 8, 1998)
$100,000,000
10% Senior Notes due 2003
- --------------------------------------------------------------------------------
<PAGE>
THIS FIFTH SUPPLEMENTAL INDENTURE, dated as of the 21st day of January,
1999 (this "Fifth Supplemental Indenture"), is among RADNOR HOLDINGS
CORPORATION, a Delaware corporation (the "Company"), WINCUP HOLDINGS, INC., a
Delaware corporation, RADNOR CHEMICAL CORPORATION (formerly known as SP
Acquisition Co.), a Delaware corporation, RADNOR DELAWARE, INC., a Delaware
corporation, RADNOR MANAGEMENT, INC., a Delaware corporation, STYROCHEM U.S.,
LTD. (formerly known as StyroChem International, Inc. and StyroChem U.S., Inc.),
a Texas limited partnership (collectively, the "Guarantors"), WINCUP TEXAS,
LTD., a Texas limited partnership, STYROCHEM GP, L.L.C., a Delaware limited
liability company, STYROCHEM LP, L.L.C., a Delaware limited liability company,
WINCUP GP, L.L.C., a Delaware limited liability company and WINCUP LP, L.L.C., a
Delaware limited liability company (collectively the "New Guarantors") and FIRST
UNION NATIONAL BANK, as trustee (the "Trustee").
RECITALS:
The Company, the Guarantors and the Trustee are parties to a certain
Indenture dated December 5, 1996, as amended by a First Supplemental Indenture
dated as of December 17, 1996, as amended by a Second Supplemental Indenture
dated as of October 15, 1997, as amended by a Third Supplemental Indenture dated
as of February 9, 1998, as amended by a Fourth Supplemental Indenture dated as
of July 8, 1998 (as amended, the "Indenture"), relating to the creation by the
Company of an issue of $100,000,000 of its 10% Senior Notes, due 2003 (the
"Securities");
Each Guarantor has issued a guarantee of the Securities (collectively, the
"Guarantees") pursuant to which the Guarantors have guaranteed, in accordance
with Article Thirteen of the Indenture, all Indenture Obligations (as such term
is defined in the Indenture); and
The Company, the Guarantors, the New Guarantors and the Trustee now desire
to enter into this Fifth Supplemental Indenture pursuant to Section 901(vi) of
the Indenture, without the consent of the Holders, in order to add the New
Guarantors as Guarantors and Restricted Subsidiaries under the Indenture;
Capitalized terms used herein without definition shall have the meanings
given such terms in the Indenture.
NOW, THEREFORE, THIS FIFTH SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and for other good and valuable
consideration, it is covenanted and agreed, for the benefit of each other and
for the equal and proportionate benefit of the Holders of the Securities issued
under the Indenture, as follows:
<PAGE>
ARTICLE ONE
JOINDER AND GUARANTEE OF THE NEW GUARANTORS
Section 101. The New Guarantors hereby absolutely, unconditionally and
irrevocably guarantee, on a joint and several basis with the Guarantors, to the
Trustee and the Holders, as if each New Guarantor was the principal debtor, the
punctual payment and performance when due of all Indenture Obligations (which
for purposes of this Guarantee shall also be deemed to include all commissions,
fees, charges, costs and expenses (including reasonable legal fees and
disbursements of one counsel) arising out of or incurred by the Trustee or the
Holders in connection with the enforcement of this Guarantee). This Guarantee
shall rank pari passu with any Senior Indebtedness of New Guarantors and shall
be subject in all respects to, and governed by all of the terms and provisions
applicable to Guarantees in, the Indenture, including without limitation Article
Thirteen thereof.
Section 102. As of the date hereof, all references to the "Guarantors" in
the Indenture shall be deemed to refer collectively to: (i) the Guarantors in
existence on the date hereof and (ii) New Guarantors.
IN WITNESS WHEREOF, the parties hereto have caused this Fifth Supplemental
Indenture to be duly executed, all as of the day and year first above written.
RADNOR HOLDINGS CORPORATION
Attest: /s/ Caroline J. Williamson By: /s/ Michael T. Kennedy
-------------------------- ---------------------------
Caroline J. Williamson Michael T. Kennedy
Secretary President
WINCUP HOLDINGS, INC.
Attest: /s/ Caroline J. Williamson By: /s/ Michael T. Kennedy
-------------------------- ---------------------------
Caroline J. Williamson Michael T. Kennedy
Secretary President
RADNOR CHEMICAL CORPORATION
Attest: /s/ Caroline J. Williamson By: /s/ Michael T. Kennedy
-------------------------- ---------------------------
Caroline J. Williamson Michael T. Kennedy
Secretary President
3
<PAGE>
RADNOR DELAWARE, INC.
Attest: /s/ Caroline J. Williamson By: /s/ Michael T. Kennedy
-------------------------- ---------------------------
Caroline J. Williamson Michael T. Kennedy
Secretary President
RADNOR MANAGEMENT, INC.
Attest: /s/ Caroline J. Williamson By: /s/ Michael T. Kennedy
-------------------------- ---------------------------
Caroline J. Williamson Michael T. Kennedy
Secretary President
STYROCHEM U.S., LTD.
By: StyroChem GP, L.L.C.,
its general partner,
By: Radnor Chemical Corporation,
its sole member
Attest: /s/ Caroline J. Williamson By: /s/ Michael T. Kennedy
-------------------------- ---------------------------
Caroline J. Williamson Michael T. Kennedy
Secretary President
WINCUP TEXAS, LTD.
By: WinCup GP, L.L.C.,
its general partner,
By: WinCup Holdings, Inc.,
its sole member
Attest: /s/ Caroline J. Williamson By: /s/ Michael T. Kennedy
-------------------------- ---------------------------
Caroline J. Williamson Michael T. Kennedy
Secretary President
4
<PAGE>
STYROCHEM GP, L.L.C.
By: Radnor Chemical Corporation,
its sole member
Attest: /s/ Caroline J. Williamson By: /s/ Michael T. Kennedy
-------------------------- ---------------------------
Caroline J. Williamson Michael T. Kennedy
Secretary President
STYROCHEM LP, L.L.C.
By: Radnor Chemical Corporation,
its sole member
Attest: /s/ Caroline J. Williamson By: /s/ Michael T. Kennedy
-------------------------- ---------------------------
Caroline J. Williamson Michael T. Kennedy
Secretary President
WINCUP GP, L.L.C.
By: WinCup Holdings, Inc.,
its sole member
Attest: /s/ Caroline J. Williamson By: /s/ Michael T. Kennedy
-------------------------- ---------------------------
Caroline J. Williamson Michael T. Kennedy
Secretary President
WINCUP LP, L.L.C.
By: WinCup Holdings, Inc.,
its sole member
Attest: /s/ Caroline J. Williamson By: /s/ Michael T. Kennedy
-------------------------- ---------------------------
Caroline J. Williamson Michael T. Kennedy
Secretary President
FIRST UNION NATIONAL BANK,
as Trustee
Attest: /s/ Ralph E. Jones By: /s/ Alan G. Finn
-------------------------- ---------------------------
Name: Ralph E. Jones Alan G. Finn
Title: Corporate Trust Officer Assistant Vice President
5
<PAGE>
EXHIBIT 4.10
- --------------------------------------------------------------------------------
RADNOR HOLDINGS CORPORATION
as Issuer,
WINCUP HOLDINGS, INC.
RADNOR CHEMICAL CORPORATION
RADNOR DELAWARE, INC.
RADNOR MANAGEMENT, INC.
STYROCHEM U.S., LTD.
WINCUP TEXAS, LTD.
STYROCHEM GP, L.L.C.
STYROCHEM LP, L.L.C.
WINCUP GP, L.L.C.
and
WINCUP LP, L.L.C.
as Guarantors
and
FIRST UNION NATIONAL BANK
as Trustee
SECOND SUPPLEMENTAL INDENTURE
Dated as of January 21, 1999
(Supplementing a Trust Indenture dated as of October 15, 1997
as amended by a First Supplemental Indenture dated as of
February 9, 1998)
_________________
$60,000,000
10% Series B Senior Notes due 2003
- --------------------------------------------------------------------------------
<PAGE>
THIS SECOND SUPPLEMENTAL INDENTURE, dated as of the 21st day of January,
1999 (this "Second Supplemental Indenture"), is among RADNOR HOLDINGS
CORPORATION, a Delaware corporation (the "Company"), WINCUP HOLDINGS, INC., a
Delaware corporation, RADNOR CHEMICAL CORPORATION (formerly known as SP
Acquisition Co.), a Delaware corporation, RADNOR DELAWARE, INC., a Delaware
corporation, RADNOR MANAGEMENT, INC., a Delaware corporation and STYROCHEM U.S.,
LTD. (formerly known as StyroChem International, Inc. and StyroChem U.S., Inc.),
a Texas limited partnership, (collectively, the "Guarantors"), WINCUP TEXAS,
LTD., a Texas limited partnership, STYROCHEM GP, L.L.C., a Delaware limited
liability company, STYROCHEM LP, L.L.C., a Delaware limited liability company,
WINCUP GP, L.L.C., a Delaware limited liability company and WINCUP LP, L.L.C., a
Delaware limited liability company, (collectively, the "New Guarantors") and
FIRST UNION NATIONAL BANK, as trustee (the "Trustee").
RECITALS:
The Company, the Guarantors and the Trustee are parties to a certain
Indenture dated October 15, 1997, as amended by a First Supplemental Indenture
dated as of February 9, 1998 (as amended, the "Indenture") relating to the
creation by the Company of an issue of $60,000,000 of its 10% Series B Senior
Notes, due 2003 (the "Securities");
Each Guarantor has issued a guarantee of the Securities (collectively, the
"Guarantees") pursuant to which the Guarantors have guaranteed, in accordance
with Article Thirteen of the Indenture, all Indenture Obligations (as such term
is defined in the Indenture); and
The Company, the Guarantors, the New Guarantors and the Trustee now desire
to enter into this First Supplemental Indenture pursuant to Section 901(vi) of
the Indenture, without the consent of the Holders, in order to add the New
Guarantors as Guarantors and Restricted Subsidiaries under the Indenture;
Capitalized terms used herein without definition shall have the meanings
given such terms in the Indenture.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and for other good and valuable
consideration, it is covenanted and agreed, for the benefit of each other and
for the equal and proportionate benefit of the Holders of the Securities issued
under the Indenture, as follows:
ARTICLE ONE
JOINDER AND GUARANTEE OF THE NEW GUARANTORS
Section 101. The New Guarantors hereby absolutely, unconditionally and
irrevocably guarantee, on a joint and several basis with the Guarantors, to the
Trustee and the Holders, as if each New Guarantor was the principal debtor, the
punctual payment and performance when due of all Indenture Obligations (which
for purposes of this Guarantee shall also be deemed
2
<PAGE>
to include all commissions, fees, charges, costs and expenses (including
reasonable legal fees and disbursements of one counsel) arising out of or
incurred by the Trustee or the Holders in connection with the enforcement of
this Guarantee). This Guarantee shall rank pari passu with any Senior
Indebtedness of the New Guarantors and shall be subject in all respects to, and
governed by all of the terms and provisions applicable to Guarantees in, the
Indenture, including without limitation Article Thirteen thereof.
Section 102. As of the date hereof, all references to the "Guarantors" in
the Indenture shall be deemed to refer collectively to: (i) the Guarantors in
existence on the date hereof and (ii) the New Guarantors.
IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental
Indenture to be duly executed, all as of the day and year first above written.
RADNOR HOLDINGS CORPORATION
Attest: /s/ Caroline J. Williamson By: /s/ Michael T. Kennedy
-------------------------- ----------------------------------
Caroline J. Williamson Michael T. Kennedy
Secretary President
WINCUP HOLDINGS, INC.
Attest: /s/ Caroline J. Williamson By: /s/ Michael T. Kennedy
-------------------------- ----------------------------------
Caroline J. Williamson Michael T. Kennedy
Secretary President
RADNOR CHEMICAL CORPORATION
Attest: /s/ Caroline J. Williamson By: /s/ Michael T. Kennedy
-------------------------- ----------------------------------
Caroline J. Williamson Michael T. Kennedy
Secretary President
RADNOR DELAWARE, INC.
Attest: /s/ Caroline J. Williamson By: /s/ Michael T. Kennedy
-------------------------- ----------------------------------
Caroline J. Williamson Michael T. Kennedy
Secretary President
3
<PAGE>
RADNOR MANAGEMENT, INC.
Attest: /s/ Caroline J. Williamson By: /s/ Michael T. Kennedy
-------------------------- ----------------------------------
Caroline J. Williamson Michael T. Kennedy
Secretary President
STYROCHEM U.S., LTD.
By: StyroChem GP, L.L.C.,
its general partner,
By: Radnor Chemical Corporation,
its sole member
Attest: /s/ Caroline J. Williamson By: /s/ Michael T. Kennedy
-------------------------- ----------------------------------
Caroline J. Williamson Michael T. Kennedy
Secretary President
WINCUP TEXAS, LTD.
By: WinCup GP, L.L.C.,
its general partner,
By: WinCup Holdings, Inc.,
its sole member
Attest: /s/ Caroline J. Williamson By: /s/ Michael T. Kennedy
-------------------------- ----------------------------------
Caroline J. Williamson Michael T. Kennedy
Secretary President
STYROCHEM GP, L.L.C.
By: Radnor Chemical Corporation,
its sole member
Attest: /s/ Caroline J. Williamson By: /s/ Michael T. Kennedy
-------------------------- ----------------------------------
Caroline J. Williamson Michael T. Kennedy
Secretary President
4
<PAGE>
STYROCHEM LP, L.L.C.
By: Radnor Chemical Corporation,
its sole member
Attest: /s/ Caroline J. Williamson By: /s/ Michael T. Kennedy
-------------------------- ----------------------------------
Caroline J. Williamson Michael T. Kennedy
Secretary President
WINCUP GP, L.L.C.
By: WinCup Holdings, Inc.,
its sole member
Attest: /s/ Caroline J. Williamson By: /s/ Michael T. Kennedy
-------------------------- ----------------------------------
Caroline J. Williamson Michael T. Kennedy
Secretary President
WINCUP LP, L.L.C.
By: WinCup Holdings, Inc.,
its sole member
Attest: /s/ Caroline J. Williamson By: /s/ Michael T. Kennedy
-------------------------- ----------------------------------
Caroline J. Williamson Michael T. Kennedy
Secretary President
FIRST UNION NATIONAL BANK,
as Trustee
Attest: /s/ Ralph E. Jones By: /s/ Alan G. Finn
-------------------------- ----------------------------------
Name: Ralph E. Jones Alan G. Finn
Title: Corporate Trust Officer Assistant Vice President
5
<PAGE>
CONFIDENTIAL TREATMENT
EXHIBIT 10.6
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECRETARY OF THE COMMISSION PURSUANT TO REGISTRANT'S APPLICATION OBJECTING TO
DISCLOSURE AND REQUESTING CONFIDENTIAL TREATMENT UNDER RULE 24b-2; THE OMITTED
PORTIONS HAVE BEEN MARKED WITH BRACKETS.
October 1, 1998
Radnor Chemical Corporation
StyroChem U.S. Inc.
StyroChem Canada Ltd.
WinCup Holdings Inc.
7980 W. Buckeye Rd.
Phoenix, AZ 85043
Attn: Mr. Thomas Springer
First Amendment to Styrene Monomer Contract of Sale,
Dated December 5, 1996
Gentlemen:
Please accept this letter as a First Amendment to the December 5, 1996 Styrene
Monomer Contract of Sale (hereinafter "Contract") between Chevron Chemical
Company LLC ("Chevron"), formerly Chevron Chemical Company, and Radnor Chemical
Corporation ("RCC"), formerly SP Acquisition Co.; StyroChem U.S. Inc. ("SUS"),
formerly StyroChem International Inc.; and StyroChem Canada Ltd. ("SCL"),
formerly StyroChem International Ltd. This First Amendment is effective as of
January 1, 1998, and shall amend the Contract as follows:
1. WinCup Holdings Inc. ("WinCup") shall be added as a party under the
Contract. References to "Purchaser" in the Contract and this First
Amendment shall mean collectively "RCC", "SUS", "SCL" and "WinCup".
2. Section 1, revise in its entirety to read as follows:
Purchaser desires to purchase from Chevron, solely for Purchaser's use in
the manufacture in North America of styrene derivative products, Styrene
Monomer meeting the specifications contained in Exhibit A; and Chevron
agrees to supply such Product to Purchaser for that limited purpose.
3. Section 2, revise in its entirety to read as follows:
a. Subject to Paragraph b. below, the quantity of Product to be sold and
delivered hereunder shall be Purchaser's Styrene Monomer requirements,
which in no event shall be less than 160,000,000 pounds annually.
Quantities purchased from Chevron in excess of 210,000,000 pounds annually
shall be at Chevron's option.
b. Notwithstanding Paragraph a. above, Purchaser shall have the option of
purchasing a [___________] pound increment of Product annually from either
Chevron or another domestic producer of Product, provided Purchaser
purchases a minimum of 160,000,000 pounds of Product from Chevron during
the calendar year in question.
<PAGE>
c. Based upon Paragraphs a. and b. above, Purchaser shall nominate the
quantity of Styrene Monomer it shall purchase from Chevron for the calendar
year in question by providing Chevron written notice prior to [_________]
of the preceding calendar year. In the event said nominated quantity is in
excess of 210,000,000 pounds for any calendar year, Chevron shall, within
thirty (30) days of receipt of Purchaser's nomination, notify Purchaser in
writing concerning whether or not it shall supply Purchaser with Product
quantities in excess of 210,000,000 pounds.
4. Section 4, revise in its entirety to read as follows:
Chevron shall be responsible for arranging for the shipment of Product from
St. James, Louisiana to Purchaser's facilities in Fort Worth, Texas;
Montreal, Quebec; and Marietta, Ohio, as designated by Purchaser, and
Purchaser shall be responsible for the cost of such shipment.
The parties agree that if the aggregate actual cost of shipment incurred by
Purchaser in any month ("Actual Shipping Cost") exceeds the "Freight
Allowance" (as defined below) for shipment of Product to the foregoing
designated destinations, then Chevron shall promptly reimburse Purchaser
for the total amount of such excess. For purposes of this Contract, the
"Freight Allowance" for shipments of Product from St. James, Louisiana to
Purchaser's facilities in Fort Worth, Texas and Montreal, Quebec shall be
[_________] U.S. cents per pound ("cpp") and [__________] Canadian cents
per pound, respectively. These Freight Allowances shall be readjusted on
[_________], 1999 and each anniversary thereafter in accordance with the
Rail Cost Adjustment Factor (RCAF), Unadjusted Increase Scale, as published
by the American Association of Railroads. If, however, during the term
hereof there shall cease to be any merchant marketers of Product
manufactured in Sarnia, Ontario, the "Freight Allowance" with respect to
shipments to Purchaser's facility in Montreal, Quebec shall be changed to
an amount equal to the lowest rail shipping cost available to Purchaser
from the closest merchant marketer of Product, and subsequently adjusted in
accordance with the immediately preceding sentence. For purposes of this
Contract, the "Freight Allowance" for shipments of Product from St. James,
Louisiana to Marietta, Ohio shall be [_________] U.S. cents per pound.
This Freight Allowance shall be readjusted on [__________], 1999 and each
anniversary thereafter in accordance with any change in the Consumer Price
Index for all Consumers, published by the U.S. Department of Labor for the
twelve (12) month period then completed.
5. Section 5.(b), last sentence, revise to read as follows:
Purchaser shall make payment hereunder by check, except in the case of SCL
who shall make payment by wire transfer.
6. Section 10, add the following at the end:
Product purchases hereunder by each purchaser during the calendar year in
question shall be totaled together for purposes of determining what rebate,
if any, Purchaser is eligible for. Credits for such rebate shall be issued
to the Purchaser based upon Purchaser's actual purchases during said
calendar year.
2
<PAGE>
7. Add the following new Section 24:
a. Notwithstanding anything contained herein to the contrary, the
purchase price to be paid for Product shall be calculated as follows:
(i) The price for the first 150,000,000 pound increment of Product
purchased hereunder during any calendar year shall be determined in
accordance with the Section 9 of the Contract;
(ii) The price for the second 60,000,000 pound increment of Product
purchased hereunder during any calendar year shall be the lower of
the:
1. Price for Product as determined in accordance with Section
9 of the Contract; and
2. [_______] as published in CMAI's month-end Monomers Market
---------------
Report, and shall be the average of the values if a range is
------
published.
Notwithstanding anything contained herein to the contrary, quantities
of Product purchased [________] under 2. above shall not be eligible
for any discounts or rebates under Section 10 of the Contract. Said
quantities, however, shall be counted for the purposes of determining
what rebate(s), if any, Purchaser is eligible for during the calendar
year in question; and
(iii) For quantities purchased in excess of 210,000,000 pounds during
any calendar year ("Excess Product"), the price for [_______] percent
([_______]%) of said Excess Product shall be determined in accordance
with Section 9 of the Contract, and the price for the remaining
[________] percent ([__]%) of said Excess Product shall be determined
in accordance with Paragraph a.(ii) above.
b. (i) For purposes of invoicing the first 210,000,000 pounds of
Product delivered to Buyer hereunder during the calendar year in
question, the following monthly quantity of Product delivered during
said calendar year shall be invoiced at the price determined in
accordance with Paragraph a.(ii) above for said month:
[________] = MQ x [(Q - [________])/Q], where
[_______] is the quantity of Product delivered to Purchaser
during the calendar month in question which shall be
invoiced in accordance with Paragraph a.(ii) above;
"MQ" or "Monthly Quantity" is quantity of Product delivered
to Purchaser during said month; and
"Q" is the Product quantity nominated by Purchaser for the
calendar year in question pursuant to the provisions of
Section 2 of
3
<PAGE>
the Contract, up to a maximum of 210,000,000 pounds; in no
event "Q" be less than 160,000,000 pounds.
The remaining quantity of Product delivered during the month in
question shall be invoiced in accordance with Section 9 of the
Contract for said month.
(ii) For purposes of invoicing Excess Product delivered to Purchaser
hereunder during the calendar year in question, the following monthly
quantity of Excess Product delivered during said calendar year shall
be invoiced at the price determined in accordance with Paragraph
a.(ii) above for said month:
[________] = EMQ x [________], where
[________] is the monthly quantity of Excess Product
delivered to Purchaser during the calendar year in question
which shall be invoiced in accordance with Paragraph a.(ii)
above; and
"EMQ" or "Excess Monthly Quantity" is monthly quantity of
Excess Product delivered to Purchaser during said month.
The remaining quantity of Excess Product delivered during the month in
question shall be invoiced in accordance with Section 9 of the
Contract for said month.
(iii) In the event Purchaser's Product purchases during said calendar
year are less than 160,000,000 pounds, a price reconciliation shall be
performed at the end of said calendar year for each month of the
calendar year in question based upon Purchaser's actual total
purchases for said calendar year.
8. Exhibit B is deleted.
All other terms and conditions of the Contract shall remain in full force and
effect.
Understood and Agreed:
Radnor Chemical Corporation Chevron Chemical Company LLC
By: /s/ Donald Rogalski By: /s/ J.M. Parker
------------------------ --------------------
Title: Sr. Vice President - Administration Title: General Manager - Styrene
------------------------------------- ---------------------------
Date: 10/15/98 Date: 10/27/98
---------- ----------
4
<PAGE>
StyroChem U.S. Inc. StyroChem Canada Ltd.
By: /s/ Donald Rogalski By: /s/ Donald Rogalski
----------------------- -----------------------
Title: Sr. Vice President - Administration Title: Sr. Vice President-
------------------------------------ --------------------
Administration
--------------
Date: 10/15/98 Date: 10/15/98
--------- ---------
WinCup Holdings Inc.
By: /s/ Donald Rogalski
------------------------
Title: Sr. Vice President - Administration
-------------------------------------
Date: 10/15/98
----------
5
<PAGE>
EXHIBIT 10.20
AMENDMENT NO. 2
TO
SECOND AMENDED AND RESTATED REVOLVING
CREDIT AND SECURITY AGREEMENT
THIS AMENDMENT NO. 2 ("Amendment") is entered into as of October 1,
1998, by and among WinCup Holdings, Inc., Radnor Chemical Corporation (formerly
SP Acquisition Co.), StyroChem U.S., Inc. (formerly StyroChem International,
Inc.), Radnor Holdings Corporation ("Radnor") and Radnor Delaware, Inc.
(collectively, "Borrowers"), BNY Financial Corporation ("BNYFC"), NationsBank,
N.A. ("NationsBank") and each of the other financial institutions which are or
become parties thereto (collectively, "Lenders") and BNYFC, as administrative
and collateral agent for the Lenders (in such capacity, "Agent").
BACKGROUND
----------
Borrowers, Lenders and Agent are parties to a Second Amended and
Restated Revolving Credit and Security Agreement dated as of October 15, 1997,
as amended by Amendment No. 1 dated as of March 9, 1998 (as amended, and as may
be further amended, supplemented or otherwise modified from time to time, the
"Loan Agreement") pursuant to which Lenders provide Borrowers with certain
financial accommodations. Styrochem Europe (the Netherlands) B.V., Styrochem
Finland Oy, Thermisol Denmark APS ("Thermisol Denmark"), Thermisol Sweden AB,
Thermisol Finland Oy (collectively "European Borrowers"), BNY Financial Limited
("BNY UK") and NationsBank are parties to a certain Supplement Revolving
Multicurrency Credit Agreement dated December 12, 1997 (the "European
Supplement") which is guaranteed by the U.S. Guarantors (as defined in the
European Supplement).
Each of the Borrowers and European Borrowers has requested that Agent
and Lenders amend the Loan Agreement pursuant to the terms described herein and
Lenders and Agent are willing to do so on the terms and conditions hereafter set
forth.
NOW, THEREFORE, in consideration of any loan or advance or grant of
credit heretofore or hereafter made to or for the account of Borrowers and
European Borrowers by any Lender and Agent, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Definitions. All capitalized terms not otherwise defined
-----------
herein shall have the meanings given to them in the Loan Agreement.
2. Amendment to Loan Agreement. Subject to satisfaction of the
---------------------------
conditions precedent set forth in Section 3 below, the Loan Agreement and the
European Supplement are hereby amended as follows:
<PAGE>
(a) Section 1.2 of the Loan Agreement and of the European Supplement
are hereby amended by amending the following defined term in its entirety as
follows:
"EBITDA" shall mean the net income of Radnor on a Consolidated Basis
------
plus interest expense, taxes, depreciation and amortization deducted in
calculating net income for such period, determined on a proforma basis
after giving effect to acquisitions of operating businesses made in
compliance with subsection 7.1(a) of the Loan Agreement and subsection
7(a)(i) of the European Supplement or otherwise approved by the Lenders.
3. Conditions of Effectiveness. This Amendment shall become effective
---------------------------
upon satisfaction of the following conditions precedent: Agent, on behalf of the
Lenders and the lenders under the European Supplement, shall have received four
(4) copies of this Amendment executed by Borrowers and Lenders and ratified by
the parties to the European Supplement.
4. Representations and Warranties. Borrowers and European Borrowers
------------------------------
hereby represent and warrant as follows:
(a) This Amendment, the Loan Agreement and the European Supplement,
as amended hereby, constitute legal, valid and binding obligations of Borrowers
and are enforceable against Borrowers and the European Borrowers in accordance
with their respective terms.
(b) Upon the effectiveness of this Amendment, Borrowers and the
European Borrowers hereby reaffirm all covenants, representations and warranties
made in the Loan Agreement and the European Supplement, respectively, to the
extent the same are not amended hereby and agree that all such covenants,
representations and warranties shall be deemed to have been remade as of the
effective date of this Amendment.
(c) No Event of Default or Default has occurred and is continuing or
would exist after giving effect to this Amendment.
(d) Borrowers and European Borrowers have no defense, counterclaim or
offset with respect to the Loan Agreement and the European Supplement.
5. Effect on the Loan Agreement.
----------------------------
(a) Upon the effectiveness of this Amendment, each reference in the
Loan Agreement or the European Supplement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import shall mean and be a reference to the
Loan Agreement and the European Supplement, respectively, as amended hereby.
2
<PAGE>
(b) Except as specifically amended herein, the Loan Agreement, the
European Supplement and all other documents, instruments and agreements executed
and/or delivered in connection therewith, shall remain in full force and effect,
and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall
not operate as a waiver of any right, power or remedy of Lenders, nor constitute
a waiver of any provision of the Loan Agreement or the European Supplement, as
the case may be, or any other documents, instruments or any other documents, or
agreements executed and/or delivered under or on correction therewith.
(d) Each of the U.S. Guarantors and the European Guarantors hereby
confirms and agrees that after the execution of this Amendment its guarantee
under the European Supplement is and will remain in full force and effect.
6. Governing Law. This Amendment shall be binding upon and inure to the
-------------
benefit of the parties hereto and their respective successors and assigns and
shall be governed by and construed in accordance with the laws of the State of
New York provided that any amendments and agreements herein relating solely to
the European Supplement shall be governed by English law.
7. Headings. Section headings in this Amendment are included herein for
--------
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
8. Counterparts; Telecopied Signatures. This Amendment 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.
3
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed as of the
day and year first written above.
WINCUP HOLDINGS, INC.
By: /s/ Michael T. Kennedy
------------------------------------
Michael T. Kennedy
President
RADNOR CHEMICAL CORPORATION
By: /s/ Michael T. Kennedy
------------------------------------
Michael T. Kennedy
President
STYROCHEM U.S., INC.
By: /s/ Michael T. Kennedy
-------------------------------------
Michael T. Kennedy
President
RADNOR HOLDINGS CORPORATION
By: /s/ Michael T. Kennedy
-------------------------------------
Michael T. Kennedy
President
RADNOR DELAWARE, INC.
By: /s/ Michael T. Kennedy
-------------------------------------
Michael T. Kennedy
Chairman
BNY FINANCIAL CORPORATION, AS AGENT
AND A LENDER
By: /s/ Anthony Viola
-------------------------------------
Name: Anthony Viola
-----------------------------------
Title: Vice President
----------------------------------
NATIONSBANK, N.A., AS A LENDER
By: /s/ John E. Williams
-------------------------------------
Name: John E. Williams
-----------------------------------
Title: Senior Vice President
----------------------------------
4
<PAGE>
AGREEMENT AND RATIFICATION
The undersigned parties to the European Supplement referenced in the
foregoing Amendment No. 2 hereby ratify and approve the same, and agree that the
European Supplement is modified as provided therein and ratify each of the
representations, warranties and conditions set forth therein as if made by the
European Borrowers. This ratification agreement shall become a part of the
European Supplement and shall be governed by and construed in accordance with
the laws of England.
STYROCHEM EUROPE (THE NETHERLANDS) B.V.
By: /s/ Michael T. Kennedy
------------------------------------
Michael T. Kennedy
Managing Director A
STYROCHEM FINLAND OY
By: /s/ Michael T. Kennedy
------------------------------------
Michael T. Kennedy
Director
THERMISOL DENMARK APS
By: /s/ Michael T. Kennedy
------------------------------------
Michael T. Kennedy
Director
THERMISOL SWEDEN AB
By: /s/ Michael T. Kennedy
-------------------------------------
Michael T. Kennedy
Director
THERMISOL FINLAND OY
By: /s/ Michael T. Kennedy
--------------------------------------
Michael T. Kennedy
Director
WINCUP HOLDINGS, INC.
By: /s/ Michael T. Kennedy
--------------------------------------
Michael T. Kennedy
President
SIGNATURE PAGE CONTINUED ON NEXT PAGE
5
<PAGE>
CONTINUATION OF SIGNATURE PAGE TO AGREEMENT AND RATIFICATION
RADNOR CHEMICAL CORPORATION
By: /s/ Michael T. Kennedy
-------------------------------------
Michael T. Kennedy
President
STYROCHEM U.S., INC.
By: /s/ Michael T. Kennedy
--------------------------------------
Michael T. Kennedy
President
RADNOR HOLDINGS CORPORATION
By: /s/ Michael T. Kennedy
--------------------------------------
Michael T. Kennedy
President
BNY FINANCIAL LIMITED
By: /s/ Alan Hooper
--------------------------------------
NATIONSBANK, N.A.
By: /s/ John E. Williams, SVP
--------------------------------------
6
<PAGE>
AMENDMENT NO. 3
TO
SECOND AMENDED AND RESTATED REVOLVING
CREDIT AND SECURITY AGREEMENT
THIS AMENDMENT NO. 3 ("Amendment") is entered into as of December 23,
1998, by and among WinCup Holdings, Inc., Radnor Chemical Corporation (formerly
SP Acquisition Co.), StyroChem U.S., Inc. (formerly StyroChem International,
Inc.), Radnor Holdings Corporation ("Radnor") and Radnor Delaware, Inc.
(collectively, "Borrowers"), BNY Financial Corporation ("BNYFC"), NationsBank,
N.A. ("NationsBank") and each of the other financial institutions which are or
become parties thereto (collectively, "Lenders") and BNYFC, as administrative
and collateral agent for the Lenders (in such capacity, "Agent").
BACKGROUND
----------
Borrowers, Lenders and Agent are parties to a Second Amended and
Restated Revolving Credit and Security Agreement dated as of October 15, 1997,
as amended by Amendment No. 1 dated as of March 9, 1998 and Amendment No. 2
dated as of October 1, 1998 (as amended, and as may be further amended,
supplemented or otherwise modified from time to time, the "Loan Agreement")
pursuant to which Lenders provide Borrowers with certain financial
accommodations. Styrochem Europe (the Netherlands) B.V., Styrochem Finland Oy,
Thermisol Denmark APS ("Thermisol Denmark"), Thermisol Sweden AB, Thermisol
Finland Oy (collectively "European Borrowers"), BNY Financial Limited ("BNY UK")
and NationsBank are parties to a certain Supplement Revolving Multicurrency
Credit Agreement dated December 12, 1997 (the "European Supplement") which is
guaranteed by the U.S. Guarantors (as defined in the European Supplement).
Each of the Borrowers and European Borrowers has requested that Agent
and Lenders amend the Loan Agreement pursuant to the terms described herein and
Lenders and Agent are willing to do so on the terms and conditions hereafter set
forth.
NOW, THEREFORE, in consideration of any loan or advance or grant of
credit heretofore or hereafter made to or for the account of Borrowers and
European Borrowers by any Lender and Agent, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Definitions. All capitalized terms not otherwise defined
-----------
herein shall have the meanings given to them in the Loan Agreement.
2. Amendment to Loan Agreement. Subject to satisfaction of the
---------------------------
conditions precedent set forth in Section 3 below, the Loan Agreement and the
European Supplement are hereby amended as follows:
<PAGE>
(a) The proviso at the end of Section 9.12 is hereby amended in its
entirety to read as follows:
"provided that such projections for the 1999 fiscal year shall be
due January 31, 1999"
(b) Section 7.6 of the Loan Agreement and Section 7(f) of the
European Supplement are hereby amended as follows:
(i) by increasing the amount of permitted capital expenditures
for the fiscal year ended December 31, 1998 as follows:
"$22,500,000 provided, however, Borrowers may make
-------- -------
additional capital expenditures in fiscal year ended
December 31, 1998 solely to purchase that certain foam
packaging plant in Stone Mountain, Georgia in an aggregate
amount not to exceed $5,000,000."
(ii) by increasing the amount of permitted capital expenditures
in fiscal year ended December 31, 1999 as follows:
"$22,500,000, provided, however, Borrowers may make
-------- -------
additional capital expenditures in fiscal year ended
December 31, 1999 solely to purchase that certain foam
packaging plant in Tolleson, Arizona in an aggregate amount
not to exceed $9,300,000."
3. Conditions of Effectiveness. This Amendment shall become
---------------------------
effective upon satisfaction of the following conditions precedent: Agent, on
behalf of the Lenders and the lenders under the European Supplement, shall have
received (i) four (4) copies of this Amendment executed by Borrowers and Lenders
and ratified by the parties to the European Supplement and (ii) if not currently
filed in such jurisdictions, UCC-1 Financing Statements executed by Borrowers in
the appropriate jurisdictions in Georgia and Arizona.
4. Representations and Warranties. Borrowers and European
------------------------------
Borrowers hereby represent and warrant as follows:
(a) This Amendment, the Loan Agreement and the European
Supplement, as amended hereby, constitute legal, valid and binding obligations
of Borrowers and are enforceable against Borrowers and the European Borrowers in
accordance with their respective terms.
(b) Upon the effectiveness of this Amendment, Borrowers and the
European Borrowers hereby reaffirm all covenants, representations and warranties
made in the Loan Agreement and the European Supplement, respectively, to the
extent the same are not amended hereby and agree that all such covenants,
representations and warranties shall be deemed to have been remade as of the
effective date of this Amendment.
2
<PAGE>
(c) No Event of Default or Default has occurred and is continuing
or would exist after giving effect to this Amendment.
(d) Borrowers and European Borrowers have no defense,
counterclaim or offset with respect to the Loan Agreement and the European
Supplement.
5. Effect on the Loan Agreement.
----------------------------
(a) Upon the effectiveness of this Amendment, each reference in
the Loan Agreement or the European Supplement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import shall mean and be a reference to the
Loan Agreement and the European Supplement, respectively, as amended hereby.
(b) Except as specifically amended herein, the Loan Agreement,
the European Supplement and all other documents, instruments and agreements
executed and/or delivered in connection therewith, shall remain in full force
and effect, and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy of Lenders, nor
constitute a waiver of any provision of the Loan Agreement or the European
Supplement, as the case may be, or any other documents, instruments or any other
documents, or agreements executed and/or delivered under or on correction
therewith.
(d) Each of the U.S. Guarantors and the European Guarantors
hereby confirms and agrees that after the execution of this Amendment its
guarantee under the European Supplement is and will remain in full force and
effect.
6. Governing Law. This Amendment shall be binding upon and insure
-------------
to the benefit of the parties hereto and their respective successors and assigns
and shall be governed by and construed in accordance with the laws of the State
of New York provided that any amendments and agreements herein relating solely
to the European Supplement shall be governed by English law.
7. Headings. Section headings in this Amendment are included
--------
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
8. Counterparts; Telecopied Signatures. This Amendment 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..
3
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed as of the
day and year first written above.
WINCUP HOLDINGS, INC.
By: /s/ Michael T. Kennedy
---------------------------------
Michael T. Kennedy
President
RADNOR CHEMICAL CORPORATION
By: /s/ Michael T. Kennedy
---------------------------------
Michael T. Kennedy
President
STYROCHEM U.S., INC.
By: /s/ Michael T. Kennedy
--------------------------------
Michael T. Kennedy
President
RADNOR HOLDINGS CORPORATION
By: /s/ Michael T. Kennedy
--------------------------------
Michael T. Kennedy
President
RADNOR DELAWARE, INC.
By: /s/ Michael T. Kennedy
--------------------------------
Michael T. Kennedy
Chairman
BNY FINANCIAL CORPORATION, AS AGENT
AND A LENDER
By: /s/ Daniel J. Murray
--------------------------------
Name: Daniel J. Murray
------------------------------
Title: SVP
------------------------------
NATIONSBANK, N.A., AS A LENDER
By: /s/ Deborah J. Graziano
---------------------------------
Name: Deborah J. Graziano
-------------------------------
Title: Vice President
-----------------------------
4
<PAGE>
AGREEMENT AND RATIFICATION
The undersigned parties to the European Supplement referenced in the
foregoing Amendment No. 3 hereby ratify and approve the same, and agree that the
European Supplement is modified as provided therein and ratify each of the
representations, warranties and conditions set forth therein as if made by the
European Borrowers. This ratification agreement shall become a part of the
European Supplement and shall be governed by and construed in accordance with
the laws of England.
STYROCHEM EUROPE (THE NETHERLANDS) B.V.
By: /s/ Michael T. Kennedy
---------------------------------
Michael T. Kennedy
Managing Director A
STYROCHEM FINLAND OY
By: /s/ Michael T. Kennedy
---------------------------------
Michael T. Kennedy
Director
THERMISOL DENMARK APS
By: /s/ Michael T. Kennedy
---------------------------------
Michael T. Kennedy
Director
THERMISOL SWEDEN AB
By: /s/ Michael T. Kennedy
---------------------------------
Michael T. Kennedy
Director
THERMISOL FINLAND OY
By: /s/ Michael T. Kennedy
---------------------------------
Michael T. Kennedy
Director
WINCUP HOLDINGS, INC.
By: /s/ Michael T. Kennedy
---------------------------------
Michael T. Kennedy
President
SIGNATURE PAGE CONTINUED ON NEXT PAGE
5
<PAGE>
CONTINUATION OF SIGNATURE PAGE TO AGREEMENT AND RATIFICATION
RADNOR CHEMICAL CORPORATION
By: /s/ Michael T. Kennedy
----------------------------------
Michael T. Kennedy
President
STYROCHEM U.S., INC.
By: /s/ Michael T. Kennedy
----------------------------------
Michael T. Kennedy
President
RADNOR HOLDINGS CORPORATION
By: /s/ Michael T. Kennedy
----------------------------------
Michael T. Kennedy
President
BNY FINANCIAL LIMITED
By: /s/ Anthony Marsicno, EVP
-----------------------------------
NATIONSBANK, N.A.
By: /s/ Deborah J. Graziano
----------------------------------
6
<PAGE>
CONFIDENTIAL TREATMENT
EXHIBIT 10.49
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECRETARY OF THE COMMISSION PURSUANT TO REGISTRANT'S APPLICATION OBJECTING TO
DISCLOSURE AND REQUESTING CONFIDENTIAL TREATMENT UNDER RULE 24b-2; THE OMITTED
PORTIONS HAVE BEEN MARKED WITH BRACKETS.
AGREEMENT OF SALE
-----------------
This Agreement is entered into on the 1st day of January 1998 between:
1. ARCO CHEMIE NEDERLAND, LTD. acting through its Dutch branch at Theemsweg
14, Botlek, 3000 HD Rotterdam, The Netherlands ("Seller"); and
2. STYROCHEM FINLAND OY having its registered office at P.O. Box 360, 06101
Porvoo, Finland ("Buyer").
The parties agree as follows:
1. SALE AND PURCHASE OF PRODUCT - SPECIFICATIONS
---------------------------------------------
1.1 Seller shall sell, and Buyer shall purchase, the following product:
Styrene Monomer T2
Such product is hereinafter referred to as "Product".
1.2 The Product shall meet the specifications attached at Annex 1 hereto.
2. QUANTITY
--------
2.1 Buyer shall purchase and Seller shall sell the following quantities of
Product +/- 5% at Buyer's option:
1998 [ ] KT
1999 [ ] KT
2000 [ ] KT
<PAGE>
2001 [ ] KT
2002 and beyond [ ] KT
2.2 In the event that Buyer wishes to buy quantities of Product in excess
of the quantities specified in section 2.1 in any one calendar year,
Buyer shall place the additional order with Seller on or before [ ] of
the preceding calendar year and Seller shall notify Buyer of its
acceptance or rejection thereof on or before [ ] of the preceding
calendar year.
2.3 Buyer shall use its best efforts to take the Product in regular
monthly quantities.
3. DURATION
--------
This Agreement shall come into force on 1 January 1998 and shall continue
for an initial period of five years. It shall continue thereafter unless
and until terminated by either party giving not less than one calendar year
prior written notice to the other party expiring on 31 December 2002 at the
earliest.
4. PRICE AND REBATE
----------------
4.1 The price for the Product is the lowest of:
1) ICIS contract low less [ ]%
or
2) the average of [ ]
or
3) ICIS contract low less [ ]% of Market Premium
or
-2-
<PAGE>
4) USGC CMAI market contract low less [ ]% plus freight and
duty
or
5) [ ] plus freight and duty;
the transatlantic freight and the freight from Rotterdam to Pori or
Porvoo to be agreed during the first month of any calendar year by
Buyer and Seller. Seller shall send Buyer quotations from shippers
prior to 14 January of any calendar year. The freight shall be fixed
at $[ ]/MT for 1998 USGC/Rotterdam.
where: Market Premium = ICIS contract low less Cost.
Cost = A + B + C + D + E
A = [ ] DM/MT capital recovery escalated with the rate of
inflation in the Netherlands
B = [ ] DM/MT (L/L) fixed cash cost, where
L = the latest wage index known on the last day of the
relevant month as published by the Dutch CBS under the
reference "Indexcijfers CAO lonen per month, inclusief
bijzondere beloningen (1990=100) -Chemische Industrie,
category adult workers"
L/o/ = the October 1997 "Indexcijfer CAO lonen per month
inclusief bijzondere beloningen" category adult workers =
118.8
C = [ ] DM/MT (NG/NGo) variable cash cost, where
NG = N.V. Nederlandse Gasunie listed quarterly price
(Verrekenprijzen Grootverbruikers) for natural gas (zone
D) including any taxes, monthly fees or other charges
expressed in Dfl per Nm/3/of standard Groningen natural
gas with a calorific value of 35.17 MJ per Nm/3/
NG/o/ = the January 1, 1998 natural gas price, i.e.
Dfl.0.22559
-3-
<PAGE>
D = [ ] MT x market ethylene (contract)
E = [ ] MT x market benzene (contract)
Reference:
----------
* ICIS - LOR European or CMAI United States Bimonthly publication
(monomer market report) published closest prior to the bill of
lading date.
* Rates of exchange as published by the Financial Times on the Monday
prior to the bill of lading date.
4.2 Buyer shall be entitled to an annual volume rebate of [ ]% of the
total amount invoiced upon achievement of the volumes set out in
article 2.1, payable by credit note on or before [ ] of the
subsequent calendar year.
5. MODE OF DELIVERY
----------------
The Product shall be delivered by vessel in 2500-3000 MT lots unless
otherwise agreed prior to shipment.
6. DELIVERY TERMS
--------------
6.1 The Product shall be delivered CIF Pori or Porvoo (Incoterms 1990 to
apply) unless article 6.2 applies.
6.2 If the Price for the Product is as set out in article 4.1, 4) or 5)
above and Buyer and Seller fail to agree the freight charges, the
Product shall be delivered FOB USGC (Incoterms 1990 to apply).
-4-
<PAGE>
7. TAXES
-----
The Buyer shall pay to the Seller in addition to the price herein provided,
any sales tax and/or value added tax (BTW) tax or equivalent thereof that
might currently or in the future be imposed by any government authority
with respect to the sale of the Product by Seller to Buyer.
8. PAYMENT - CREDIT
----------------
8.1 At the time of shipment, Seller shall send Buyer a provisional invoice
in Deutsch marks estimating the price for the relevant shipment.
8.2 By the end of the calendar month in which delivery occurs, Seller
shall invoice Buyer with a final invoice in Deutsch marks for
deliveries made during that month.
8.3 Payment must be made by [ ] by bank transfer.
8.4 If Buyer does not pay any amount which Buyer owes on the basis of the
above, Seller shall be entitled to payment of interest on the amount
of all Seller's claims which are overdue in the amount of [ ]% per
month or part of a month during which Buyer remains in default. This
interest obligation is also effective for all interest which is due
for longer than a year.
8.5 If Buyer fails to pay Seller in accordance with the above terms, then
Seller, at its option and without prejudice to its other rights and
remedies, may (i) terminate this Contract forthwith and without
notice, (ii) suspend deliveries until all indebtedness is paid in
full, and/or (iii) place Buyer on a cash-on-delivery basis. In the
event of default in payment, Buyer shall pay Seller's reasonable costs
of collection, including, but not limited to,
-5-
<PAGE>
reasonable attorneys' fees.
8.6 If in the sole and reasonable opinion of Seller the financial standing
of Buyer is impaired or unsatisfactory, deliveries may be suspended or
Buyer may be placed on cash-on-delivery status until arrangements are
made for security satisfactory to Seller or, at Seller's option, until
all of Buyer's indebtedness to Seller is paid in full.
8.7 Except as provided in article 4.2, no prompt payment or other type of
discount applies and all payments under this Contract shall be made at
the full invoiced amount.
8.8 Invoicing will be in Deutsch Marks. The exchange rates published in
the Financial Times on the Monday prior to shipment shall be used. The
Deutsch Mark shall be replaced by the Euro upon its introduction.
9. SHIPMENTS
---------
9.1 Buyer shall place individual orders and give shipping instructions at
the latest [ ] days prior to the desired delivery date. Buyer's
shipping instructions shall include all pertinent information,
including but not limited to desired date of delivery or loading.
Seller shall confirm availability of Product within [ ] hours of
receipt of the order and the delivery date within [ ] working
days of receipt of the order. Seller shall use reasonable endeavours
to meet the desired delivery date.
If Seller is unable to deliver an individual order accepted by Seller
on or before the delivery date agreed upon for any reason except those
described in article 12, Purchaser shall be entitled to place orders
with a third party to the extent that such is necessary to prevent a
reduction in their operations which cannot be recovered at a later
date. In such case, Seller shall be liable to Buyer for the amount,
if any, that Buyer
-6-
<PAGE>
pays to such third party in excess of the price which would have been
payable by Buyer under the terms of this Agreement and any such
quantities purchased from that third party shall be deemed to have
been supplied by Seller for the purposes of article 4.2.
9.2 Buyer shall promptly receive and unload shipments and pay all
demurrage, rental and other charges or damages resulting from Buyer's
delay in receiving or unloading the Product.
9.3 Shipments shall not be diverted or reconsigned by Buyer without the
prior written consent of Seller other than to Neste Oy or Norlatex.
10. TRANSFER OF TITLE
-----------------
Title to the Product shall transfer upon delivery to Buyer.
11. RISK OF LOSS - LIABILITY
------------------------
Risk of loss in connection with the Product shall pass from Seller to Buyer
as specified in the Incoterms 1990. Liability in connection with the
Product shall pass from Seller to Buyer at the same time as the risk of
loss.
12. FORCE MAJEUR
------------
12.1 When either party's ability to manufacture or deliver or receive
Product or to otherwise perform under this Contract (other than
Buyer's obligation or ability to make payment for Product delivered
under this Contract) is impeded, restricted, or affected (A) by any
cause beyond such Party's reasonable control such as, but not limited
to, (i) fire, explosion, flood, storm, earthquake, tidal wave, war,
military operation, national emergency, civil commotion, or other
event of the type of the foregoing,
-7-
<PAGE>
(ii) any strike or other difference with workers or unions (without
regard to the reasonableness of acceding to the demands of such
workers or unions), (iii) any governmental law, regulation, decree,
order, or similar act, or (iv) any shortage in supplies of, or
impairment in the facilities of production, manufacture,
transportation, or distribution of, either party attributable to (a)
mechanical or other breakdown or failure, (b) the order, requisition,
request, or recommendation of any governmental agency or acting
governmental authority, or either party's compliance therewith, (c)
governmental proration, regulation, or priority, or (d) the inability
of Seller to obtain, on terms deemed to be reasonable, any feedstock
or other raw material (including energy) or (B) by any cause beyond
such party's reasonable control, similar or dissimilar to any
aforementioned cause, then the party whose ability is so impeded,
restricted, or affected shall have the right, by notice to the other
party, to reduce or suspend, in part or in full, deliveries or receipt
of Product hereunder for the period during which such cause persists.
12.2 For the purpose of the application and interpretation of the
provisions of this Article, it is expressly deemed that all Product is
to be produced at Seller's own facilities. If Seller's ability to
supply Buyer with Product from Seller's facility is impeded,
restricted, or affected by one or more of the aforesaid causes, then
Seller shall use its reasonable efforts to supply Product from its
worldwide production capacity. Seller shall not be under the
obligation to purchase or obtain the Product for Buyer on the open
market or from other producers or suppliers of the Product.
However, in the event that Seller should, nevertheless, decide to
purchase or obtain Product on the open market or from other producers
or suppliers of Product, then any such purchase or obtaining of
Product shall not create a continuing obligation for Seller to do so.
12.3 Seller's obligation to sell Product is subject to modification and
reduction
-8-
<PAGE>
in accordance with any present or future allocation programme of any
governmental authority.
13. CLAIMS
------
13.1 All claims of Buyer with respect to the quality or quantity of
Products sold and delivered pursuant to this Contract shall be deemed
waived and forever barred unless Buyer notifies Seller of the nature
and details of the claim in writing within thirty days after the
defect could have reasonably been detected. Any such claim that is
not asserted as a claim, counterclaim, defence, or set-off in a
judicial proceeding instituted within one year after Seller's written
denial thereof shall be forever waived, barred and released.
13.2 If the Product meets the specifications set out in Annex 1, Buyer
assumes all risk and responsibility for the handling of any Product,
for the results obtained by the use of any Product in manufacturing
processes or otherwise, or for the results obtained by the use of any
Product in combination with other substances, irrespective of the fact
that such use or any handling of such Product may be in accordance
with any description, advice, or suggestion of Seller. If any
description, advice, or suggestion is given, it is given and accepted
at Buyer's risk, and Seller shall not be responsible or liable
therefor or for the results thereof.
14. PRODUCT HAZARDS
---------------
Buyer acknowledges receipt of Seller's Material Safety Data Sheets for
Product and is aware of the hazards or risks in handling or using Product.
Buyer shall fully inform its employees, agents, contractors, and customers
who handle, use, buy, or may be exposed to any Product of such Product's
hazards or risks and shall hold Seller harmless from all claims by its
employees and such other third
-9-
<PAGE>
parties for compensation for damages caused by the Product to the extent such
damage is addressed in the Material Safety Data Sheets. Buyer shall provide
copies of Seller's Material Safety Data Sheets, and any updates furnished by
Seller, to all such employees, agents, contractors, and customers; and Buyer
shall conspicuously post the Material Safety Data Sheets throughout the area of
Buyer's plants or premises where exposure to any Product may occur.
15. WARRANTIES
----------
15.1 Seller warrants that all Product shall meet the specifications
established in this Contract.
15.2 Seller warrants that all Product shall be delivered free of the
rightful claim by anyone of infringement of any patent or other right.
15.3 Seller makes no other express or implied warranty, statutory or
otherwise, concerning any product, including, without limitation, any
warranty of fitness for a particular purpose, any warranty of
merchantability, or any warranty as to quality or correspondence with
any description or sample. Seller does not warrant against any claim
of infringement of any patent based on (1) combinations of any product
with other materials or (2) the use of any product in the operation of
any process.
16. LIMITATION OF DAMAGES
---------------------
Buyer's exclusive remedy for any and all losses or damages resulting from
the sale of Product under this Contract, including, but not limited to, any
allegation of breach of warranty, breach of contract, negligence, or strict
liability, shall be limited, at Buyer's option to either the return of the
purchase price or the replacement of the particular product for which a
claim is made and proved.
-10-
<PAGE>
17. FURTHER LIMITATION OF DAMAGES
-----------------------------
In no event shall Seller be liable for any special, consequential,
incidental, or indirect losses or damages attributable to the sale of
Product under this Contract or to any other matter arising out of or in
connection with this Contract except that Seller shall be liable for all
reasonable expenses (including reasonable legal fees) incurred by Buyer in
collecting amounts due from Seller under the terms of this Agreement or in
enforcing any other rightful claims Buyer may have under the terms of this
Agreement.
18. DEFAULT
-------
18.1 If either party does not perform, does not timely perform or does not
properly perform one or more of its material obligations within ten
(10) days after written notification from the other party, is declared
bankrupt, applies for a moratorium of payment, starts to liquidate its
business, offers a settlement agreement to its creditors, or appears
in any other way to be insolvent, the other party shall be entitled to
suspend its obligations until arrangements are made for security
satisfactory to such other party or until all indebtedness to such
other party is paid in full or at such other party's option to
terminate the contract by giving notice of termination without
judicial intervention and without a term of notice and in addition, to
claim compensation for costs, damages and interest.
18.2 Seller's obligation to deliver will be suspended for so long as Buyer
has not complied with any obligation towards Seller. Buyer's
obligation to pay will be suspended for so long as Seller has not
complied with any obligation towards Buyer.
-11-
<PAGE>
19. CONFIDENTIALITY
---------------
Unless otherwise agreed between the Parties, any information exchanged
between Buyer and Seller pursuant to this Agreement, including the content
of this Agreement, is strictly confidential and shall neither be
communicated to any third Party nor be used for other purposes than the
performance of this Agreement.
20. GENERAL
-------
20.1 This Contract shall be binding upon and inure to the benefit of the
successors and assigns of Buyer and the successors and assigns of
Seller, but shall not be assigned by either party, except to an
affiliate, without the prior written consent of the other party.
20.2 This Contract is to be construed in accordance with English law. Any
dispute arising from this contract shall be submitted to the competent
Court in the London, England.
20.3 No amendment, addition to, modification, or waiver of all or any part
of this Contract shall be of any force or effect unless in writing and
signed by Seller and Buyer. If the provisions of this Contract and the
provisions of any purchase order or order acknowledgment written in
connection with this Contract conflict, then the provisions of this
Contract shall prevail.
20.4 The applicability of any conditions of Buyer or Seller other than
those set forth herein is expressly rejected.
20.5 Any notice required or permitted under this Contract shall be given by
letter, telex, or telefax to the Parties as follows:
-12-
<PAGE>
To Buyer: Styrochem Finland OY
Attention of: Mr. Henrik Akermark
PO Box 360
FIN-0601 Porvoo
Finland
with a copy to:
Styrochem U.S., Inc.
Attention of: Mr. Thomas Springer
7980 West Buckeye Road
Phoenix, AZ 85043
U.S.A.
To Seller: ARCO Chemie Nederland, Ltd.
c/o ARCO Chemical Europe, Inc.
Attention of: Global Director Styrene
ARCO Chemical House
Bridge Avenue
Maidenhead
Berkshire SL6 1YP
United Kingdom
-13-
<PAGE>
IN WITNESS WHEREOF, Seller and Buyer have executed this Contract in counterparts
as of the date first above written.
ARCO CHEMIE NEDERLAND, LTD.
By: /s/ J.P. Benders
------------------------
Title: MFG. Director Benelux
------------------------
STYROCHEM FINLAND OY
By: /s/ Donald Rogalski
------------------------
Title: SR VP Admin.
------------------------
-14-
<PAGE>
ANNEX 1
PRODUCT FOR RESALE SALES SPECIFICATIONS
Date : January 1998
Reference : JPP/PAR/S/STY01
Revision : 02
STYRENE MONOMER
<TABLE>
<CAPTION>
<S> <C> <C>
Property Specification Limits Test Method
- ------------------------------- -------------------- ------------
Purity, % wt 99.7 min ASTM D-5135
Inhibitor, ppm wt 10 - 15 ASTM D-4590
Polymers, ppm wt 10 max. ASTM D-2121A
Aldehydes, ppm wt 100 max. ASTM D-2119
Peroxides, ppm wt 50 max. ASTM D-2340
Chlorides, ppm wt 10 max. UOP-779
Sulphur total, ppm wt 25 max. ASTM D3120
Platinium-Cobalt Colour scale 10 max. ASTM D-1209
Ethylbenzene, ppm wt 500 max. ASTM D-5135
Benzene, ppm wt 1 max. GC
</TABLE>
-15-
<PAGE>
EXHIBIT 10.50
RADNOR HOLDINGS CORPORATION
SENIOR EXECUTIVE RETIREMENT PLAN
<PAGE>
RADNOR HOLDINGS CORPORATION
SENIOR EXECUTIVE RETIREMENT PLAN
--------------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C>
I. PURPOSE 1
II. DEFINITIONS 1
III. PARTICIPATION; CONTRIBUTIONS 5
IV. INVESTMENTS AND ALLOCATIONS 6
V. BENEFITS 9
VI. VESTING 11
VII. DEATH BENEFIT 12
VIII. PROHIBITED ACTIVITIES 14
IX. ADMINISTRATION OF THE PLAN 15
X. GENERAL PROVISIONS 18
XI. ADOPTION 22
</TABLE>
<PAGE>
RADNOR HOLDINGS CORPORATION
SENIOR EXECUTIVE RETIREMENT PLAN
--------------------------------
ARTICLE I. PURPOSE
- -------------------
The purpose of this Plan is to provide for the payment of supplemental
retirement benefits to certain designated senior executives of Radnor Holdings
Corporation and its affiliates as part of an integrated executive compensation
program intended to assist in attracting, motivating and retaining senior
executives of superior ability, industry and loyalty.
ARTICLE II. DEFINITIONS
- ------------------------
The following terms used in this Plan shall have the following meanings
unless a different meaning is clearly required by the context:
2.1 "Active Participant" means a Participant who is also an active
------------------
employee of the Employer.
2.2 "Administrator" means the Plan Sponsor or any individual or
-------------
individuals appointed by the Plan Sponsor to be responsible for the
administration and operation of the Plan in accordance with Article IX hereof.
2.3 "Application" means a written form by which a Participant agrees to
-----------
participate in the Plan, by which the Participant elects to defer a fixed dollar
amount from his annual cash compensation and on which the Participant makes
certain other designations and elections as required thereon.
2.4 "Benefit Commencement Date" means the first day of the month next
-------------------------
following the Normal Retirement Date on which a Participant retires or any
earlier date authorized by the Administrator for the commencement of benefit
payments.
2.5 "Chairman of the Board" means the Chairman of the Board of Directors
---------------------
of the Plan Sponsor, as it shall be constituted from time to time.
2.6 "Code" means the Internal Revenue Code of 1986, as amended, any
----
successor statute of similar purpose and any regulations issued thereunder.
2.7 "Cost of Insurance" means the annual term insurance cost of
-----------------
maintaining the death benefit coverage of each Insurance Policy in force, as
determined by the Insurer.
<PAGE>
2.8 "Deferred Benefit Account" means the book account to which a
------------------------
Participant's Deferral Contributions and Matching Contributions shall be
credited and to which the other adjustments provided for in Article IV hereof
shall be credited or debited, as the case may be.
2.9 "Deferral Contribution" means the amount credited to a Participant's
---------------------
Deferred Benefit Account pursuant to Section 3.3 hereof.
2.10 "Effective Date" means January 1, 1998.
--------------
2.11 "Employer" means the Plan Sponsor and each Participating Company.
--------
Except as used in Article VIII hereof, each reference to the singular shall be
deemed a reference to each Employer individually. In Article VIII "Employer" is
intended to refer to the Plan Sponsor and each Participating Company together.
2.12 "Enrollment Period" means the initial period of forty-five days
-----------------
commencing on the date an individual becomes a Senior Executive, provided that
if there is less than forty-five days until the Senior Executive's initial Entry
Date, the initial Enrollment Period shall be shortened to the period preceding
such Entry Date. Apart from this initial Enrollment Period, Enrollment Period
means for each Plan Year the period from November 1 to December 15 immediately
preceding the first day of such Plan Year.
2.13 "Entry Date" means the first day of January, April, July and October.
----------
2.14 "Insurance Policy" or "Policy" means each Pacific Life Custom COLI
---------------- ------
Flexible Premium Variable Life Insurance Policy, including any rider thereto,
("Pacific Life Policy") owned by the Rabbi Trust, insuring the life of a
Participant and naming the Rabbi Trust as the beneficiary or any similar policy
which may be obtained hereafter either as a substitute for, or as an addition
to, a Pacific Life Policy.
2.15 "Insurer" means the life insurance company that has issued an
-------
Insurance Policy on the life of a Participant pursuant to this Plan.
2.16 "Investment Option" means any investment vehicle deemed to be made
-----------------
available under the Plan. With respect to amounts deemed to be invested in a
Policy on the life of a Participant, such Investment Options may include, but
are not limited to, each of the separate mutual fund variable accounts available
under such Policy. With respect to the amounts credited to the Deferred Benefit
Accounts which are not deemed to be invested in
2
<PAGE>
a Policy, Investment Options may include, but are not limited to, each of the
mutual funds or other investment vehicles selected by the Administrator and
deemed available for investment of the assets held by the Rabbi Trust.
2.17 "Marginal Tax Rate" means the sum of (a) the highest marginal tax
-----------------
rate, including any surcharge, that could be applicable to the Plan Sponsor for
federal income tax purposes for the taxable year for which the determination is
being made and (b) the tax-effected composite of the highest marginal tax rates,
including any surcharges, for state income tax purposes, e.g., the product of
(i) the composite of the highest marginal state tax rates imposed on the members
of the Plan Sponsor's consolidated group and (ii) one minus the federal marginal
highest tax rate, that apply to the Plan Sponsor and its affiliates for the same
taxable year being used for purposes of part (a), above. For example, the 1998
Marginal Tax Rate (assuming the composite of the highest marginal state tax
rates is ten percent (10%)) is the sum of 35% (the highest marginal federal tax
rate) and 6.5% (the tax-effected composite marginal state tax rate).
2.18 "Matching Contribution" means the amount credited to a Participant's
---------------------
Deferred Benefit Account pursuant to Section 3.4 hereof.
2.19 "Memorandum" means the Offering Memorandum, dated May 1, 1997 and
----------
supplemented as of September 1, 1997, for the Pacific Life Policy, as it may be
further supplemented or amended from time to time, and any other similar
offering memorandum for any other Insurance Policy. The terms and conditions of
each such Memorandum shall be deemed incorporated herein by this reference.
2.20 "Normal Retirement Date" means the date on which a Participant who
----------------------
has both attained age 65 and completed at least five Years of Active
Participation retires from his Employer.
2.21 "Participant" means a current or former Senior Executive who elected
-----------
to participate by completing an Application, who is receiving, or who may become
eligible to receive, a benefit under the Plan and for whom a Deferred Benefit
Account is being maintained.
2.22 "Participating Company" means WinCup Holdings, Inc., StyroChem U.S.,
---------------------
Inc., Radnor Management, Inc. and any other eligible employer that in accordance
with Section 9.7 hereof has agreed to adopt and to become a party to the Plan
and the Trust Agreement with the approval of the Chairman of the Board.
3
<PAGE>
2.23 "Plan" means the Radnor Holdings Corporation Senior Executive
----
Retirement Plan, as set forth herein and as it may be amended from time to time.
2.24 "Plan Sponsor" means Radnor Holdings Corporation, a Delaware
------------
corporation and any successor to its business.
2.25 "Plan Year" means January 1, 1998 to December 31, 1998 and each
---------
calendar year thereafter during which this Plan remains in effect.
2.26 "Rabbi Trust" means the grantor trust and trust fund, of which the
-----------
Plan Sponsor is the grantor, within the meaning of subpart E, part I, subchapter
J, chapter 1, subtitle A of the Code, and which is established and maintained
pursuant to the terms of the Trust Agreement.
2.27 "Senior Executive" means an officer, general manager, salesman or
----------------
other senior executive who is a member of a select group of management or
highly-compensated employees employed by an Employer and who the Chairman of the
Board has designated as eligible to participate in this Plan.
2.28 "Trust Agreement" means the agreement and declaration of trust
---------------
executed pursuant to Section 9.5 hereof.
2.29 "Trustee" means the corporate trustee or one or more individuals,
-------
collectively, appointed and acting as trustee under the Trust Agreement and such
successor and additional trustees as shall be named pursuant to the terms of the
Trust Agreement.
2.30 "Valuation Date" means the last day of each calendar quarter ending
--------------
after the Effective Date, and for each Participant whose employment has
terminated, the date of such termination.
2.31 "Years of Active Participation" means the quotient (rounded to the
-----------------------------
next lower whole number) obtained by dividing (i) the number of months of
participation by an Active Participant, completed during the period from the
effective date of an Active Participant's initial deferral election to the
earlier of the date on which an Active Participant no longer has a balance in
his Deferred Benefit Account or the date on which he is no longer an employee of
the Employer, by (ii) twelve (12). Participation, active or otherwise, shall
also cease following the termination of the Plan. Separate periods for which a
Participant is credited with Years of Active Participation, but which are
separated by one or more periods which do not qualify as participation by an
Active Participant, shall be aggregated for purposes of determining the
Participant's total Years of Active Participation.
4
<PAGE>
ARTICLE III. PARTICIPATION; CONTRIBUTIONS
- ------------------------------------------
3.1 Commencement of Participation. Each individual when first designated
-----------------------------
a Senior Executive shall be initially eligible to commence participation on the
immediately following Entry Date. In order to commence his participation a
Senior Executive must file an Application with the Administrator during the
initial Enrollment Period. If the Senior Executive fails to commence
participation in this Plan on the initial Entry Date, the Senior Executive shall
thereafter commence participation on the January 1st next following the
Enrollment Period during which his initial Application is filed with the
Administrator. Participation in the Plan is voluntary. Prior to a Senior
Executive's commencement of participation in the Plan, the Administrator shall
provide each Senior Executive with a copy of the most recent prospectus
associated with each Investment Option and shall make available a copy of the
Memorandum to each Senior Executive who requests a copy to review. Each Senior
Executive shall be considered to be familiar with the terms and conditions of
the Memorandum regardless of whether the Senior Executive has requested a copy
to review. By applying to become an Active Participant, a Senior Executive
shall be deemed conclusively to have assented to the provisions of this Plan and
all amendments hereto.
3.2 Re-Employment. If a Participant whose employment with the Employer
-------------
has been terminated is subsequently re-employed, he shall not become an Active
Participant until he is again designated as a Senior Executive and he applies to
commence participation in accordance with the provisions of Section 3.1 hereof.
3.3 Participant Deferral Election.
-----------------------------
3.3.1 In a Participant's initial Application the Participant shall
direct his Employer to reduce his annual cash compensation by a fixed dollar
amount which in turn shall be credited by the Administrator to the Participant's
Deferred Benefit Account within no more than thirty days after the date on which
the Participant would have otherwise received such deferred amount as current
compensation. A Participant's compensation deferrals shall be made through
periodic payroll reductions.
3.3.2 As a condition of becoming a Participant, a Senior Executive
must agree that his initial deferral election shall be irrevocable for a period
of five consecutive years ending on the day before the fifth anniversary of the
effective date of such deferral election. In the event that this condition is
not satisfied, the Employer shall pay to the Participant within 90 days of the
revocation of the Participant's initial deferral election an amount equal to the
lesser of (i) the
5
<PAGE>
product of the cash surrender value of the Policy insuring the Participant's
life and a fraction, the numerator of which shall be an amount equal to the
aggregate Deferral Contributions credited to the Participant's Deferred Benefit
Account and the denominator of which shall be the sum of the aggregate Deferral
Contributions and Matching Contributions credited to the Participant's Deferred
Benefit Account or (ii) the Participant's aggregate Deferral Contributions. The
Participant's participation in this Plan shall cease upon receipt of this
payment and the unpaid balance in the Participant's Deferred Benefit Account
shall be forfeited. If such Senior Executive again chooses to become a
Participant, each subsequent deferral election shall be treated as an initial
deferral election until the five year requirement set forth in this Section
3.3.2 has been satisfied.
3.3.3 Once a Participant has maintained a single deferral election in
effect for at least five years, the Participant may from time to time thereafter
change his deferral election by a notice provided to the Administrator or its
designee in writing or in any other form acceptable to the Administrator during
any Enrollment Period. In the absence of any such change, the Participant's
deferral election shall continue in force indefinitely.
3.4 Matching Contribution. By no later than the last day of each Plan
---------------------
Year, the Employer shall credit a Matching Contribution to each Active
Participant's Deferred Benefit Account in an amount equal to 100% of such
Participant's Deferral Contributions made during such Plan Year, provided that
in no event shall a Matching Contribution greater than $10,000 be credited to
any Active Participant's Deferred Benefit Account for any Plan Year.
ARTICLE IV. INVESTMENTS AND ALLOCATIONS
- ----------------------------------------
4.1 Deferred Benefit Accounts. A Deferred Benefit Account shall be
-------------------------
established and maintained in the name of each Participant which shall become
vested in the Participant as specified in Article VI hereof and to which shall
be credited or debited, as the case may be: (i) amounts equal to the
Participant's Deferral Contributions; (ii) amounts equal to the Employer's
Matching Contributions; (iii) any deemed earnings and losses allocated to the
Deferred Benefit Account; (iv) any taxes due with respect to earnings credited
to the Deferred Benefit Account; and (v) the fees, taxes, Cost of Insurance and
other charges or expenses which must be debited from the Deferred Benefit
Account in accordance with the terms of any Investment Option in which all or
any portion of the balance in a Deferred Benefit Account is deemed invested.
6
<PAGE>
4.2 Allocation of Investment Results. Pursuant to Section 4.5 hereof,
--------------------------------
each Participant shall have the right to direct the Administrator as to how
amounts credited to his Deferred Benefit Account shall be deemed to be invested
among the Investment Options made available under the Plan. As of each
Valuation Date the Administrator shall determine the increase or decrease in the
deemed value of each Investment Option since the last Valuation Date and shall
allocate that deemed investment experience plus any earnings, gains and losses
deemed realized by the Trust among the Participants' Deferred Benefit Accounts
based on the amount from each Deferred Benefit Account deemed invested in each
Investment Option. Such investment experience shall be net of any Cost of
Insurance, fees, taxes or other charges or expenses incurred with respect to any
Investment Option either at the time a deemed investment is made or thereafter.
For this purpose, the deemed value of an Insurance Policy on any Valuation Date
shall be its then cash surrender value, as determined by the Insurer.
4.3 Accounting for Distributions. As of the date of any distribution
----------------------------
hereunder, the distribution to a Participant or his beneficiary shall be debited
from such Participant's Deferred Benefit Account. Such amount shall be charged
on a pro rata basis against the Investment Options in which the Participant's
account balance is deemed to be invested.
4.4 Allocation Not Equivalent of Vesting. The fact that an allocation has
------------------------------------
been made pursuant to this Article IV will not operate to vest in a Participant
any right, title or interest in or to any benefit under the Plan. Vesting of
such benefits shall occur only in accordance with the provisions of Article VI
hereof.
4.5 Investment Directions of Participants. Subject to such limitations as
-------------------------------------
may from time to time be required by law or by this Plan or as may be imposed by
the Administrator or the Trustee and further subject to the operating rules and
procedures set forth in this Section 4.5 or such rules and procedures as may be
imposed from time to time by the Administrator or the Trustee, each Participant
may communicate to the Administrator or its designee in such manner and
frequency as shall be designated by the Administrator a direction as to how the
amounts credited to his Deferred Benefit Account should be deemed to be invested
(in any whole percentage) among the Investment Options. Such election shall
separately designate a deemed investment (i) for that portion of the
Participant's Deferred Benefit Account attributable to amounts that have been
credited to that account prior to the date on which such direction shall become
effective, and (ii) for that portion of the Participant's Deferred Benefit
Account credited thereto after the date on which such direction shall become
effective. Such directions shall become effective subject to the following
rules and procedures:
7
<PAGE>
4.5.1 Any initial or subsequent investment direction shall be made
during an Enrollment Period on the Application or on any other form or in any
other manner authorized by the Administrator or its designee and shall be
effective as of the date which is no more than thirty (30) days (or such shorter
period as the Administrator may determine) after the filing of the appropriate
form or after the receipt of any other authorized form of communication by the
Administrator or its designee.
4.5.2 All amounts credited to a Participant's Deferred Benefit
Account shall be deemed to be invested in accordance with the Participant's then
effective investment direction. As of the effective date of any new investment
direction, all or a portion of the Participant's Deferred Benefit Account on
that date shall be reallocated among the designated Investment Options according
to the new investment direction and in the percentages specified in that
investment direction unless and until a subsequent investment direction shall be
filed and become effective.
4.5.3 If the Administrator receives an investment direction which it
finds is incomplete, unclear or improper, the Participant's investment direction
then in effect shall remain in effect (or, in the case of a deficiency in an
initial investment direction, the Participant shall be deemed to have filed no
investment direction) until an effective direction is received, unless the
Administrator permits corrective action prior thereto.
4.5.4 If the Administrator possesses at any time a direction as to
the deemed investment of less than all of the balance in a Participant's
Deferred Benefit Account, the Participant shall be considered to have directed
that the undesignated portion of the Deferred Benefit Account be deemed to be
invested in the fixed income account of any Investment Option.
4.6 Payment of Fees and Expenses. As of each Valuation Date,
----------------------------
recordkeeping fees and Trustee fees, if any, of the Plan and the Rabbi Trust and
any other professional fees or expenses incurred in connection with the
operation of the Plan and the Rabbi Trust since the last Valuation Date shall be
paid by the Trustee out of the Rabbi Trust, unless the Administrator, in its
sole discretion, determines to provide for the payment of such fees and
expenses. If payment is made from the Rabbi Trust, a Participant's allocable
share of such payment shall be ratably debited from the balance in the
Participant's Deferred Benefit Account.
4.7 No Actual Investment Obligation. Notwithstanding the existence of the
-------------------------------
Rabbi Trust, each Deferred Benefit Account shall be a bookkeeping entry only.
Neither the Employer nor the Trustee shall be obligated to purchase or maintain
any asset in connection with the establishment and maintenance of the Deferred
8
<PAGE>
Benefit Accounts, and any reference to investments or Investment Options is
solely for the purpose of computing the value of benefits under this Plan. To
the extent a Participant, beneficiary or any other person acquires a right to
receive payments under this Plan, that right shall be no greater than the right
of any unsecured general creditor of the Employer. Neither this Plan nor any
action taken pursuant to the terms of this Plan shall be considered to create a
fiduciary relationship between the Employer and any Participant or any other
person or to establish a trust in which the assets are protected against the
claims of any unsecured general creditor of the Employer.
ARTICLE V. BENEFITS
- --------------------
5.1 Normal Pension Benefit. Except as otherwise provided in Sections 5.5
----------------------
and 6.3 hereof, if a Participant retires on a Normal Retirement Date his
Employer shall pay to him an annual pension, as defined in Section 5.1.1 hereof,
for each year ending before the fifteenth anniversary of his Benefit
Commencement Date. This annual pension shall be paid in monthly installments,
commencing on the Participant's Benefit Commencement Date and continuing to be
paid on the first day of each subsequent month during the fifteen year payment
period.
5.1.1 The amount of a Participant's annual pension shall be the
product of the annual benefit fraction and the total pension amount, where:
5.1.1.1 the annual benefit fraction shall be 1/15 for the
first year, 1/14 for the second year, 1/13 for the third year, and so forth
(i.e., the denominator for each succeeding year being one less than the
denominator in effect during the previous year).
5.1.1.2 the total pension amount for each Plan Year shall be
the amount credited to the Participant's Deferred Benefit Account as of the
Valuation Date immediately preceding the Benefit Commencement Date and each
anniversary thereof.
5.1.2 A Participant who is entitled to a normal pension benefit shall
also be paid a monthly supplemental pension benefit for as long as the normal
pension benefit is being paid equal to the product of his monthly normal pension
benefit and the Marginal Tax Rate, divided by one minus the Marginal Tax Rate.
5.2 Vested Annual Pension. Except as otherwise provided in Sections 5.5
---------------------
and 6.3 hereof, if a Participant who has completed at least 20 Years of Active
Participation terminates employment with the Employer before reaching his
earliest Normal Retirement Date, his Employer shall pay to him a vested annual
pension in an
9
<PAGE>
amount equal to the annual pension and the supplemental pension, determined
pursuant to Section 5.1 hereof as of the Valuation Date immediately preceding
the first day of the month that follows what would have been the Participant's
earliest Normal Retirement Date. The payment of the vested annual pension shall
commence on the Benefit Commencement Date following such Normal Retirement Date
and shall continue to be paid for each year ending before the fifteenth
anniversary of his Benefit Commencement Date. This vested annual pension shall
be paid in monthly installments, on the first day of each month during the
fifteen year payment period.
5.3 Limited Annual Pension. Except as otherwise provided in Sections 5.5
----------------------
and 6.3 hereof, if a Participant who has more than five, but less than twenty,
Years of Active Participation terminates employment with the Employer before
reaching his earliest Normal Retirement Date, his Employer shall pay to him a
limited annual pension, as defined in Section 5.4 hereof, beginning on the
Benefit Commencement Date following what would have been the Participant's
earliest Normal Retirement Date, for each year ending before the fifteenth
anniversary of his Benefit Commencement Date. This benefit shall be paid in
monthly installments on the first day of each month during the fifteen year
payment period.
5.4 Amount of Limited Annual Pension. The amount of the limited annual
--------------------------------
pension shall be the product of the annual benefit fraction and the total
limited annual pension amount, where:
5.4.1 the annual benefit fraction shall be as defined in Section
5.1.1.1 hereof; and
5.4.2 the total limited annual pension amount for each Plan Year
shall be the vested portion of the amount credited to the Participant's Deferred
Benefit Account as of the Valuation Date immediately preceding the Participant's
Benefit Commencement Date and each anniversary thereof;
5.4.3 a Participant who is entitled to a limited annual pension shall
also be paid a monthly supplemental pension benefit for as long as the limited
annual pension is paid equal to the product of the monthly limited pension
amount and the Marginal Tax Rate, divided by one minus the Marginal Tax Rate.
5.5 Forfeiture of Benefit Payments and Other Amounts. In addition to (and
------------------------------------------------
not in derogation of) the forfeitures provided for in Section 6.3 hereof, if at
any time while a Senior Executive is a Participant, he breaches any of the
covenants relating to confidential information, nonsolicitation or
noncompetition set forth in Article VIII hereof, the portion of the
Participant's Deferred Benefit Account attributable to
10
<PAGE>
Matching Contributions shall be forfeited and all payments derived from such
Matching Contributions that may be required under this Plan following such
breach shall cease and be forfeited. Thereafter, the Employer shall recalculate
such Participant's annual pension amount as if he had terminated employment with
less than twenty Years of Active Participation, as provided in Section 5.4
hereof. All forfeitures arising pursuant to this Section 5.5 or any other
provision of this Plan shall be used to reduce the amount of Matching
Contributions that the Employer is required to make with respect to the Plan
Year in which the forfeitures arose.
5.6 Form of Payment. All distributions under the Plan shall be made in
---------------
cash or cash equivalents.
ARTICLE VI. VESTING
- --------------------
6.1 Retirement Date. Except as otherwise provided in Sections 5.5 and 6.3
---------------
hereof, a Participant shall have a 100% vested interest in the balance in his
Deferred Benefit Account if he retires from the Employer on a Normal Retirement
Date.
6.2 Termination Prior to Retirement Date. Except as otherwise provided in
------------------------------------
Sections 5.5 and 6.3 hereof, the vested interest of a Participant whose
employment terminates before his earliest Normal Retirement Date shall be:
6.2.1 100% of that portion of the balance in the Participant's
Deferred Benefit Account that is equal to the product of such balance and a
fraction, the numerator of which is the Participant's aggregate Deferral
Contributions and the denominator of which is the sum of the Participant's
aggregate Deferral and Matching Contributions, if the Participant has completed
less than 20 Years of Active Participation.
6.2.2 100% of the balance credited to his Deferred Benefit Account,
if the Participant has completed at least 20 Years of Active Participation.
6.3 Forfeiture. Except as hereinafter provided, a Participant shall
----------
forfeit his right to an annual pension in the event he dies before receiving
payment of his annual pension for the entire fifteen year payment period or in
the event the Employer terminates the Participant's employment for cause. In
the latter event, the Participant shall only be entitled to the payment of an
amount determined under Section 3.3.2 hereof as if the Participant had not
satisfied the condition described in that section. For purposes of this Section
6.3 "cause" shall have one of the following meanings:
11
<PAGE>
6.3.1 If the Participant has an employment agreement with the
Employer that defines what constitutes a termination for "cause" for purposes of
that agreement, such definition shall also apply to this Plan; and
6.3.2 In all other cases, "cause" shall mean:
6.3.2.1 fraud, theft, misappropriation or embezzlement of the
Employer's funds;
6.3.2.2 conviction of any felony, crime involving fraud or
misrepresentation, or any other crime (whether or not connected with his
employment) the effect of which is likely to adversely affect the Employer;
6.3.2.3 abuse of alcohol, drugs or other controlled substances
which interferes with the performance by the Participant of his employment
duties; or
6.3.2.4 failure to substantially perform the Participant's
employment duties, which failure continues uncured for a period of more than
thirty (30) days and which failure is not principally caused by a physical or
mental disability of the Participant.
6.3.3 Notwithstanding the foregoing provisions of Section 6.3 or any
other provision hereof, a Participant shall not be deemed to have been
terminated for cause unless there shall have been delivered to the Participant a
letter signed by the Chairman of the Board, stating that, in the good faith
opinion of the Chairman of the Board, the Participant was guilty of conduct
described in Section 6.3.2 hereof and specifying the particulars thereof in
reasonable detail.
ARTICLE VII. DEATH BENEFIT
- ---------------------------
7.1 Death after Pension Commencement. If a Participant dies after the
--------------------------------
commencement of his pension benefit under Section 5.1, 5.2 or 5.3 hereof, but
before he receives 180 monthly installments, then, except as otherwise provided
in Section 7.5 hereof, the Employer shall pay to the Participant's beneficiary
an amount determined in accordance with Section 7.3 hereof.
7.2 Death before Pension Commencement. If a Participant dies before his
---------------------------------
pension benefit has commenced under Section 5.1, 5.2 or 5.3 hereof, then, except
as otherwise provided in Section 7.5 hereof, the Employer shall pay to the
Participant's beneficiary an amount determined in accordance with Section 7.3
hereof.
7.3 Amount of Death Benefit. The amount of the death benefit provided
-----------------------
under the conditions set forth in Sections 7.1 and 7.2 hereof
12
<PAGE>
shall be an amount equal to the proceeds of the Policy, if any, insuring the
Participant's life, reduced by an amount equal to the sum of (i) the aggregate
Matching Contributions made to the Participant's Deferred Benefit Account and
(ii) an amount equal to the product of the Participant's aggregate Deferral
Contributions and the Marginal Tax Rate (Such reduced amount is hereafter
referred to as the "net proceeds.") and then further supplemented by a portion
of the proceeds equal to the product of the net proceeds and the Marginal Tax
Rate, divided by one minus the Marginal Tax Rate.
7.4 Beneficiary Designation. Any death benefit payable pursuant to this
-----------------------
Article VII shall be paid to the beneficiary designated by the Participant.
Such designation and any subsequent change of designation shall be made in
writing on an appropriate form and shall be filed with the Administrator. If
more than one beneficiary has been designated and survives the Participant, the
Employer shall pay the benefit in equal shares to the designated surviving
beneficiaries, unless a different proportion has been directed. If no
designated beneficiary survives the Participant, the death benefit shall be paid
to the Participant's estate.
7.5 Insurance Policies. It is the Employer's expectation that the death
------------------
benefits provided for in this Article VII shall be provided through the purchase
of an Insurance Policy on each Participant's life. These Insurance Policies
will be owned by the Rabbi Trust and the Rabbi Trust will be designated as the
sole beneficiary thereof. Each Participant shall provide the Administrator with
such information as it may require in order to enable the Trustee to apply for
such insurance and to cooperate fully with the Administrator in respect of such
application, including, without limitation, the taking of a physical
examination, if requested to do so.
7.5.1 Notwithstanding the foregoing provisions of this Section 7.5,
in the event the Insurer to which an application for insurance coverage is made
declines to issue an Insurance Policy at standard premium rates, the
Administrator may determine not to purchase a Policy on such terms and may, in
its sole discretion, determine to make other arrangements for the payment of an
alternative death benefit hereunder. Such alternative arrangements may include,
without limitation, purchasing additional life insurance on the life of a
Participant who is insurable at standard premium rates.
7.5.2 If a Participant should die while employed and the proceeds of
the Policy on the Participant's life are not paid to the Rabbi Trust because the
information the Participant
13
<PAGE>
furnished in connection with the issuance of such Policy was materially false or
the Participant's death was caused by suicide within two years of the date of
issuance of such Policy, the Employer will be under no obligation to pay the
death benefit provided under this Article VII. In that event the Participant's
beneficiary shall be entitled to the amount, if any, in the Participant's
Deferred Benefit Account after the Employer has recovered its costs (including
lost tax deductions), as described in Section 7.3(i) and (ii) hereof.
ARTICLE VIII. PROHIBITED ACTIVITIES
- ------------------------------------
8.1 Noncompetition and Nonsolicitation. As a condition to the payment of
----------------------------------
benefits hereunder, each Participant shall refrain during his employment and
during the entire period preceding his receipt of all payments due to him
pursuant to Article IV hereof from engaging in all of the following activities:
8.1.1 Entering into or engaging, directly or indirectly, in any
business (either financially or as a shareholder, employee, officer, partner,
independent contractor, or owner) which is competitive with the business of the
Employer, provided that nothing herein shall prevent a Participant from
investing in the securities of any company which are publicly traded so long as
his investment does not give him any voice in the management or conduct of the
affairs of such company;
8.1.2 Soliciting business, accepting any business from or otherwise
doing, or contracting to do, business with any person or entity who at any time
during the Participant's period of employment with the Employer was an active
customer or was actively solicited by the Employer according to the books and
records of the Employer; or
8.1.3 Soliciting, enticing, persuading, inducing, requesting or
otherwise causing any employee, officer or agent of the Employer to refrain from
rendering services to the Employer or to terminate his relationship, contractual
or otherwise, with the Employer.
8.2 Nondisclosure Covenant. Each Participant covenants and agrees that he
----------------------
will not, except in the performance of his duties on behalf of the Employer,
communicate or disclose to any person (other than the Employer and its
employees), or use for his own account, without the prior written consent of an
authorized representative of the Employer, any Confidential Information (as
hereinafter defined) which was obtained or acquired by the Participant during
his employment with the Employer. The Participant (i) shall retain such
Confidential Information in trust for the sole benefit of the Employer and its
successors and assigns, and (ii) shall promptly deliver to the Employer all
14
<PAGE>
tangible evidence of such Confidential Information prior to, or at the
termination of, his employment with the Employer. For purposes of this
Agreement, "Confidential Information" shall mean any and all knowledge and
information relating to the business affairs of the Employer, their products,
processes and/or services and their customers, creditors, shareholders,
suppliers, contractors, agents, consultants and employees, including (but not
limited to) the provisions of this Plan, provided, however, that Confidential
Information shall not include any information which may be in the public domain
or have come into the public domain not as a result of a breach by the
Participant of his covenant hereunder.
ARTICLE IX. ADMINISTRATION OF THE PLAN
- ---------------------------------------
9.1 Powers and Duties of the Administrator. The Administrator shall be
--------------------------------------
responsible for the operation and administration of the Plan, and shall have
such powers as may be necessary or appropriate to carry out the provisions of
the Plan and to perform its duties hereunder, including the power:
9.1.1 To engage such persons as it deems necessary or advisable to
assist in the administration of the Plan or to render advice with respect to the
responsibilities of the Administrator under the Plan, including accountants,
actuaries and attorneys.
9.1.2 To make use of the services of employees of the Employer in
administrative matters.
9.1.3 To obtain and act on the basis of all tables, valuations,
certificates, opinions, and reports furnished by the persons described in
Section 9.1.1 or 9.1.2 hereof.
9.1.4 To determine all benefits and resolve all questions pertaining
to the administration and interpretation of the Plan, either by rules of general
applicability or by particular decisions. To the maximum extent permitted by
law, all interpretations of the Plan and other decisions of the Administrator
shall be conclusive and binding on all parties.
9.1.5 To adopt such forms, rules and regulations as it shall deem
necessary or appropriate for the administration of the Plan and the conduct of
its affairs, provided that any such forms, rules and regulations shall not be
inconsistent with the provisions of the Plan.
9.1.6 To remedy any inequity from any incorrect information received
by, or communicated to, the Administrator or from administrative error.
15
<PAGE>
9.1.7 To commence or defend in any legal or administrative proceeding
any litigation arising from the operation of the Plan.
9.1.8 To direct the Trustee as to how to make all elections required
by the Insurance Policies, including, but not limited to, the selection of a
death benefit qualification test, and to direct the Trustee to take whatever
actions the Administrator deems necessary or appropriate in order to avoid
having an Insurance Policy become a "modified endowment contract," as defined in
Code section 7702A.
9.2 Required Information. A Participant and any beneficiary eligible to
--------------------
receive benefits under the Plan shall furnish to the Administrator any
information or proof requested by the Administrator and reasonably required for
the proper administration of the Plan, including, but not limited to, the
information required to obtain an Insurance Policy, as provided for in Section
7.5 hereof. Failure on the part of a Participant or beneficiary to comply with
any such request within a reasonable period of time shall be sufficient grounds
for delay in the payment of benefits under the Plan until such information or
proof is received by the Administrator.
9.3 Nonuniform Determinations. Neither the Administrator's, the Plan
-------------------------
Sponsor's or the Chairman of the Board's determinations or interpretations under
the Plan need be uniform and may be made by the Administrator, the Plan Sponsor
or the Chairman of the Board selectively among Participants (whether or not such
Participants are similarly situated). Without limiting the generality of the
foregoing, the Administrator and the Chairman of the Board shall be entitled,
among other things, (a) to make nonuniform and selective determinations with
respect to the acceleration of vesting, (b) the commencement of benefit
payments, (c) the selection of Investment Options and (d) any other matters
regarding the administration or operation of the Plan as to which either is
responsible. Moreover, the Administrator, the Plan Sponsor or the Chairman of
the Board may elect, in his or its sole discretion, to waive any requirement or
restriction set forth in the Plan without being required to implement the same
or a similar waiver for the same Participant at a future time or for other
similarly situated Participants.
9.4 Claims Procedure and Review.
---------------------------
9.4.1 Claims for benefits under the Plan shall be filed in writing by
a claimant with the Administrator. Within 60 days after receipt of such claim,
the Administrator shall act on the claim and shall notify the claimant in
writing as to whether the claim has been granted in whole or in part; provided,
however, if the claimant has not received written notice of
16
<PAGE>
such decision within such 60-day period, the claimant shall, for the purpose of
Section 9.4.3 hereof, regard his claim as having been denied.
9.4.2 Any notice of denial of a claim, in whole or in part, shall set
forth (i) the specific reason or reasons for the denial, (ii) reference to the
Plan provisions on which the denial is based, and (iii) a copy of the Plan's
claims and review provisions.
9.4.3 Any claimant who has had a claim denied, in whole or in part,
under the Plan shall be entitled, upon the filing of a written request for
review with the Administrator within 60 days after receipt by the claimant of
written notice of such denial (or, if the claimant had not received written
notice of the decision within the 60-day period described in Section 8.5.1
hereof, within 120 days of receipt of the claim form by the Administrator), to
appeal the denial of his claim to the Administrator.
9.4.4 The claimant shall be entitled in connection with such appeal
to examine pertinent documents and submit issues and comments in writing to the
Administrator. Any decision on review by the Administrator shall be in writing,
and shall include specific reasons for the decision (including reference to the
Plan provisions on which the decision is based). Such decision shall be made by
the Administrator not later than 60 days after receipt by it of the claimant's
request for review.
9.5 Designation of Trustee. The Chairman of the Board shall name and
----------------------
designate a Trustee and shall enter into a Trust Agreement for the purpose of
establishing the Rabbi Trust. The Chairman of the Board shall have the power,
by a written instrument, to amend the Trust Agreement, remove the Trustee, and
designate a successor Trustee, as provided in the Trust Agreement.
9.6 Litigation. In any action or judicial proceeding affecting the Plan
----------
and the Rabbi Trust, it shall be necessary to join as a party only the Plan
Sponsor. Except as may be otherwise required by law, no Participant or
beneficiary shall be entitled to any notice or service of process, and any final
judgment entered in such action shall be binding on all persons interested in,
or claiming under, the Plan.
9.7 Adoption by Participating Companies.
-----------------------------------
9.7.1 This Plan may be adopted by any parent, subsidiary, related or
affiliated company which the Chairman of the Board shall designate and declare
as eligible to adopt and
17
<PAGE>
participate in the Plan (an "adopting company"), subject to the following
conditions:
9.7.1.1 Each employer who becomes an adopting company after
the Effective Date shall execute and deliver such instruments as the Chairman of
the Board shall deem necessary or desirable, including an instrument evidencing
the joinder of the adopting company in the Plan and Trust Agreement; and
9.7.1.2 Each adopting company shall designate the Chairman of
the Board as its agent to act for it in all transactions regarding the Plan,
including, without limitation, its amendment and termination, as provided by
Article X hereof, as well as its administration, as provided by this Article IX.
9.7.2 In the event of such adoption, the Administrator designated by
the Chairman of the Board shall thereafter also act as the Administrator for the
adopting company.
9.7.3 The Plan shall be effective with respect to each adopting
company and its employees on such date as shall be specified in the resolutions
of such company's board of directors, authorizing the adoption of the Plan.
9.7.4 The Participating Companies on the Effective Date shall be
deemed to have satisfied the conditions set forth in this Section 9.7 by virtue
of their participation in the Plan.
9.8 Withdrawal from Plan. Any Participating Company may withdraw from
--------------------
this Plan at any time by giving ninety (90) days prior written notice to the
Administrator. Such withdrawal shall be treated as a partial termination with
respect to the Participants to whom such withdrawal applies. The withdrawing
Employer shall thereafter cease to participate in this Plan and its Senior
Executives shall cease to be eligible to participate in the Plan.
ARTICLE X. GENERAL PROVISIONS
- ------------------------------
10.1 Funding. This Plan shall be unfunded and credits to the Deferred
-------
Benefit Account of each Participant shall not be set apart nor otherwise made
available so that they may be drawn upon at any time, except as provided in this
Plan. Neither any Participant nor any beneficiary shall have any rights, title
or interest in such credits or any claim against them. Payments shall only be
made at such times and in the manner expressly provided in the Plan, and the
Employer shall only have a contractual obligation to make the payments when due.
No notes or security for the payment of any Participant's benefit shall be
issued or provided by the Employer. Except as otherwise provided
18
<PAGE>
for in the Trust Agreement, payment of benefits hereunder shall be made from the
general assets of the Employer.
10.2 Nonalienation. No Participant or beneficiary shall pledge,
-------------
hypothecate, anticipate, assign or in any way create a lien upon any amounts
provided under this Plan, and no benefit payable hereunder shall be assignable
in anticipation of payment either by voluntary or involuntary acts, or by
operation of law. Moreover, no benefit payable under the Plan shall in any
manner be liable for or subject to the debts, contracts, liabilities,
engagements or torts of the person entitled thereto. Further, (i) withholding
of taxes from Plan benefit payments, (ii) the recovery under the Plan of
overpayments of benefits previously made to a Participant or beneficiary, (iii)
if applicable, the transfer of benefit rights from this Plan to another plan, or
(iv) the direct deposit of benefit payments to an account in a banking
institution shall not be construed as an assignment or alienation. In the event
that any Participant's or beneficiary's benefits hereunder are garnished or
attached by order of any court, the Administrator may bring an action for a
declaratory judgment in a court of competent jurisdiction to determine the
proper recipient of the benefits to be paid under the Plan. During the pendency
of such action, any benefits that become payable shall be held as credits to the
Participant's or beneficiary's Deferred Benefit Account or, if the Administrator
prefers, paid into the court as they become payable, to be distributed by the
court to the recipient as it deems proper at the close of such judicial
preceding.
10.3 No Employment Contract. The establishment of this Plan shall not be
----------------------
construed to confer upon any Senior Executive the legal right to be retained in
the employ of the Employer, or give a Senior Executive or any beneficiary, any
right to any payment whatsoever, except to the extent of the benefits provided
for hereunder.
10.4 Incompetent Recipient. If the Administrator determines that any
---------------------
person to whom a benefit is payable under the Plan is incompetent by reason of
age or physical or mental disability, the Administrator shall have the power to
cause the payments becoming due to such person to be made to another for his
benefit without any responsibility to see to the application of such payments.
Any payment made pursuant to such power shall, as to the amount of such payment,
operate as a complete discharge of the Employer.
10.5 Questions of Identity. If at any time any doubt exists as to the
---------------------
identity of any person entitled to any payment hereunder or the amount or time
of such payment, the Employer shall cause such sum to be held in the Rabbi Trust
until such identity, amount or time is finally determined or until a final
19
<PAGE>
order of a court of competent jurisdiction is obtained. Notwithstanding the
foregoing, the Employer shall also be entitled, in its sole discretion, to cause
such sum to be paid into court in accordance with the appropriate rules of law.
10.6 Effect on Other Benefits. The benefits of each Participant shall be
------------------------
in addition to any benefits paid or payable to or on account of the Participant
under any other pension, disability, equity, annuity or retirement plan or
policy. However, any supplemental retirement income credited under this Plan
shall not be deemed part of the Participant's total compensation for the purpose
of computing benefits to which he may be entitled under any pension plan or
other supplemental compensation arrangement, unless such plan or arrangement
specifically provides to the contrary.
10.7 Waiver of Liability. No liability shall attach to or be incurred by
-------------------
any officer or director of the Employer under or by reason of the terms,
conditions and provisions contained in this Plan, or for the acts or decisions
taken or made thereunder or in connection therewith; and as a condition
precedent to the establishment of the Plan or the receipt of benefits hereunder,
or both, such liability, if any, is expressly waived and released by each
Participant and by any and all persons claiming under or through such
Participant. Such waiver and release shall be conclusively evidenced by any act
of participation in, or the acceptance of benefits under, the Plan.
10.8 Conflicts. In the event of any conflict between the terms and
---------
conditions of an Investment Option and the terms and conditions of this Plan,
the terms and conditions of the Investment Option shall control.
10.9 Amendment and Termination. The Chairman of the Board shall have the
-------------------------
sole authority to modify, amend or terminate the Plan, provided that no
amendment or termination shall have an adverse effect upon rights which have
vested or upon amounts which are being paid as of the date of such amendment or
termination. Should this Plan be terminated, each Participant shall receive
written notice of when such termination shall be effective.
10.9.1 Notwithstanding the provisions of this Section 10.9, the Plan
and the Trust Agreement may be amended at any time, retroactively if deemed
necessary in the opinion of the Administrator, in order to ensure that the Plan
is characterized as a non-qualified plan of deferred compensation maintained for
a select group of management or highly compensated employees, as described under
Code section 451 and under sections 201(2), 301(a)(3) and 401(a)(1) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and to
conform the
20
<PAGE>
Plan and the Rabbi Trust to the provisions and requirements of any applicable
law (including ERISA and the Code) and to ensure that the Rabbi Trust is
characterized as a grantor trust as described in Code sections 671 through 679.
No such required amendment shall be considered prejudicial to any interest of a
Participant or beneficiary hereunder.
10.9.2 This Section 10.9.2 shall become operative on a complete
termination of the Plan. The provisions of this Section 10.9.2 shall also
become operative on a partial termination of the Plan, as determined by the
Chairman of the Board, but only with respect to that portion of the Plan
attributable to the Participants to whom the partial termination is applicable.
Upon the effective date of any such event, notwithstanding any other provisions
of the Plan, no persons who were not theretofore Participants shall be eligible
to become Participants, and all nonvested interests of Participants not yet
fully vested shall be forfeited unless the Chairman of the Board otherwise
provides for full vesting. The value of the vested interests of all
Participants and beneficiaries shall be determined and, after debiting such
Deferred Benefit Account with its allocable shares of the estimated expenses
arising from the liquidation of the Plan, the vested balance in each
Participant's Deferred Benefit Account shall be paid to them as soon as is
practicable after such termination. In the sole discretion of the Chairman of
the Board, this payment may be made through the transfer to a Participant of the
Insurance Policy on his life, as long as the terms of the Insurance Policy
contemplate and authorize such a transfer.
10.10 Suspension of Credits. The Chairman of the Board shall also have
---------------------
the authority to suspend operation of the Plan on a temporary or a permanent
basis. In the event of such suspension, the Employer shall continue all aspects
of the Plan, other than the crediting of Deferral and Matching Contributions,
during the period of the suspension. Benefit payments will also continue to be
made during the period of the suspension in accordance with the provisions of
the Plan.
10.11 Severability. Should any provision of the Plan or any regulation
------------
adopted thereunder be deemed, or be held, to be unlawful or invalid for any
reason, such fact shall not adversely affect the other Plan provisions or
regulations, unless such invalidity shall render impossible or impractical the
functioning of the Plan, and, in such case, the Chairman of the Board shall
immediately adopt a new provision or regulation to take the place of the one
held illegal or invalid.
10.12 Notices. Any notices required or permitted to be given under this
-------
Plan shall be sufficient if in writing and if sent by certified mail, postage
prepaid or if delivered by a nationally
21
<PAGE>
recognized overnight delivery service to the last known address of the
Participant as shown on the Employer's personnel records or to the principal
executive offices of the Plan Sponsor, marked to the attention of its General
Counsel, as the case may be.
10.13 Governing Law. The Plan shall be governed by the internal laws of
-------------
the Commonwealth of Pennsylvania, without regard to conflict of law principles.
10.14 Binding Effect. This Plan shall be binding upon each Senior
--------------
Executive, his personal or legal representatives, executors, administrators,
heirs, successors and assigns. In the event of a merger, consolidation, or
reorganization involving the Employer, this Plan shall continue in force and
become an obligation of the Employer's successor or successors.
10.15 Gender and Number. Whenever used in the Plan, the masculine shall
-----------------
include the feminine and the singular shall include the plural.
10.16 Headings. The article and section headings contained herein are for
--------
convenience of reference only and are not to be considered in the interpretation
of the terms and conditions of the Plan.
ARTICLE XI. ADOPTION
- ---------------------
To record the adoption of this Plan, the Plan Sponsor on behalf of itself
and the other Employers has caused its duly authorized officers to execute this
instrument as of the 1st day of January, 1998.
Attest: RADNOR HOLDINGS CORPORATION
/s/ Caroline J. Williamson By: /s/ Michael T. Kennedy
- --------------------------- ---------------------------
Secretary Chairman
22
<PAGE>
EXHIBIT 10.51
EXECUTIVE EMPLOYMENT AGREEMENT
------------------------------
This Executive Employment Agreement ("Agreement") is made as of July 1st,
1993, by and between BENCHMARK CORPORATION OF DELAWARE (the "Company"), a
Delaware corporation, and DON ROGALSKI (the "Executive").
RECITAL
-------
The parties hereto desire to enter into this Agreement to provide for the
employment of the Executive by the Company and for certain other matters in
connection with such employment, all as set forth more fully in this Agreement.
NOW THEREFORE, in consideration of the mutual convenants contained herein,
and intending to be legally bound hereby, the Company and the Executive agree as
follows:
ARTICLE I
Employment Generally
--------------------
1.1. Position and Duties. During the term of this Agreement, the
-------------------
Executive shall serve on a full-time basis as Senior Vice President -
Administration of the Company, with such powers and responsibilities as are
customarily incident to such office. The Executive will diligently and
competently perform such reasonable duties in connection with the business and
affairs of the Company as may be assigned to him by the Board of
<PAGE>
Directors of the Company, which duties and responsibilities shall be consistent
with his position as Senior Vice President - Administration.
1.2. Obligations of Executive.
------------------------
(a) The Executive shall abide by the rules, customs and usages from
time to time reasonably established by the Company, shall devote his full
business time, attention and energies to the business of the Company, and shall
not, during the term of this Agreement, be engaged in any other business
activity, whether or not such business activity is pursued for gain, profit or
other pecuniary advantage, except as permitted by Section 1.2(b).
(b) The terms of this Section 1.2 shall not prevent the Executive
from making passive investments of his assets in such form or manner as he
chooses; provided, however, that the Executive shall not have any personal
interest, direct or indirect, financial or otherwise, in any supplier to, buyer
from, or competitor of the Company, or in any transaction between the Company
and a supplier or buyer unless such interest is, or arises solely from ownership
of, less than one percent (1%) of the outstanding capital stock of such supplier
or buyer and such capital stock is available to the general public through
trading on any national, regional or over-the-counter securities market.
2
<PAGE>
1.3. Term.
----
(a) Subject to the termination provisions of Article II hereof and
Section 4.7 hereof, the initial term ("Initial Term") of this Agreement shall
begin on July 15, 1993 (or upon such earlier date as agreed to by the parties)
and shall expire on July 14, 1996. Absent notice of termination given by either
party not less than ninety (90) days prior to the expiration of the initial term
(or any successor term, as the case may be), this Agreement shall automatically
renew for successive terms of twelve months.
1.4. Compensation and General Benefits.
---------------------------------
(a) Salary. During the Term of this Agreement, the Company shall pay
------
to the Executive a base salary (the "Base Salary") at the rate of not less than
$120,000 per annum. The Base Salary shall be payable in bi-monthly installments.
The Base Salary shall be subject to review every twelve months for increase in
the sole and absolute discretion of the Company's Board of Directors based on
corporate policy and the Executive's performance.
(b) Bonus. The Executive shall receive a lump sum payment upon
-----
execution of this Agreement and shall be eligible to participate in the
Company's Equity Incentive Plan and Management Equity Participation Plan as set
forth on Exhibit A attached hereto and made a part hereof. In addition, the
Company's Board of Directors shall determine the eligibility of the Executive to
3
<PAGE>
participate in any additional incentive compensation programs developed by the
Company for its key employees.
(c) Benefits.
--------
(i) The Company may, in its discretion, determine to
purchase insurance on the life of the Executive, with the Company as sole
beneficiary. In such event, the Executive agrees to submit to reasonable medical
examinations and otherwise reasonably to cooperate with the Company in
connection with obtaining such insurance.
(ii) During the term of this Agreement, the Executive shall
receive a $600.00 per month automobile allowance and shall be reimbursed, upon
submission to the Company of appropriate documentation, for gasoline used in the
operation thereof.
(iii) The Executive shall be entitled to four weeks paid
vacation during each year in which this Agreement is in effect.
(iv) The Executive shall be entitled, during the term of
this Agreement, to such other benefits of employment with the Company as are now
or may hereafter be in effect for salaried officers and employees of the Company
including without limitation such insurance, disability, medical and dental and
other benefit plans or programs as are now or hereafter established or
maintained by the Company for employees and/or Executives of the Company.
4
<PAGE>
(v) The Executive shall be reimbursed, upon submission of
written proof satisfactory to the Company, for the reasonable and necessary
expenses of relocation from Glendale Heights, Illinois, to Phoenix, Arizona, in
accordance with the Company's Relocation Policy, which expenses include: (1) the
reasonable and necessary expenses incurred in selling the Executive's primary
residence in Glendale Heights, Illinois, including payment of real estate
broker's commissions, financing costs, closing costs, attorneys fees, surveyors
costs, state, county and city real estate transfer taxes, title expenses and
moving expenses; (2) reasonable expenses incurred in connection with the
purchase of a home in the Phoenix area, including temporary living expenses
(e.g., rent on living quarters in the Phoenix area) for the first one hundred
eighty days this Agreement is in effect or until the Executive purchases living
quarter in the Phoenix area, whichever is sooner; and (3) the expenses incurred
in packing, moving and unpacking the Executive's personal effects and, if
necessary, storage expenses for such personal effects for up to ninety days. In
accordance with the Company's Relocation Policy, estimates of the moving
expenses described in (1), (2) and (3) above shall be submitted by the Executive
to the Company's Vice President of Human Resources for pre-approval.
1.5 Expenses. The Executive shall be reimbursed for the business, travel
--------
and other expenses reasonably incurred by him in connection with the performance
of his duties hereunder.
5
<PAGE>
ARTICLE II
Termination
-----------
2.1. Disability.
----------
(a) In the event that the Executive is unable substantially to
perform his duties and responsibilities hereunder by reason of physical or
mental illness, injury or incapacity ("Disability") for sixty (60) consecutive
days or for an aggregate of more than ninety (90) days in any six (6) month
period, during which time he shall continue to be compensated as provided in
Section 1.4 hereof, this Agreement may be terminated by the Company in
accordance with the provisions of this Section 2.1. Upon such termination, the
Company shall have no further liability or obligation to the Executive for
compensation hereunder except for the payment of any amount to which the
Executive may be entitled because of his participation in any incentive
compensation program developed by the Company. In the event of a termination
pursuant to this Section 2.1, the Executive will continue to be entitled to
receive any payments prescribed under any of the Company's disability benefits
plans under which he is covered. Termination of the Executive's employment
pursuant to this Section 2.1 shall be effective thirty (30) days after the
Company's written notice of termination by reason of Disability to the
Executive. The Executive's Base Salary shall be paid through the effective date
of termination.
(b) If the Executive shall resume his duties within ninety (90) days
after receipt of a notice of termination
6
<PAGE>
pursuant to Section 2.1(a) and continue to perform such duties for eight (8)
consecutive weeks thereafter, this Agreement shall continue in full force and
effect, without any reduction in salary or other benefits, and the notice of
termination shall be considered null and void and of no effect.
2.2 Death. This Agreement shall terminate upon the death of the Executive
-----
and thereafter the Company shall have no liability or obligation to the
Executive's estate hereunder, except for salary and other compensation earned by
the Executive but not paid.
2.3. Cause. Notwithstanding any other provision of this Agreement, the
-----
Board of Directors of the Company may terminate this Agreement at any time for
"Cause". For the purpose of this Agreement, the term "Cause" shall mean with
respect to the Executive: (a) a breach of the provisions of Section 3.1 or 3.2
of this Agreement; (b) any fraudulent or dishonest conduct; (c) conviction of a
crime involving moral turpitude; (d) chronic alcoholism or drug addiction; (e)
indictment by a grand jury for commission of a felony unless such indictment is
dismissed within sixty (60) days of its issuance; or (f) the refusal, for a
period of time exceeding sixty (60) days, to substantially perform the
Executive's duties as set forth in Section 1.1 of this Agreement after a demand
for substantial performance has been delivered to the Executive by written
notice of the Board of Directors of the Company which specifically identifies
the manner in which the
7
<PAGE>
Board believes that the Executive has not substantially performed his duties.
ARTICLE III
Noncompetition: Confidentiality
--------------------------------
3.1 Noncompetition.
--------------
(a) During the term of this Agreement including any renewals hereto and
for a period of two (2) years immediately following the termination of this
Agreement, the Executive shall not, without the prior written consent of the
Company, engage directly or indirectly in any business (either financially or as
employee, officer, partner, independent contractor, owner, shareholder of more
than one percent (1%) of the outstanding capital stock of such business, or in
any other capacity calling for the rendition of personal services or acts of
management, operation or control) which is competitive with the business of the
Company in any geographical area in which such entity engages in business.
Furthermore, the Executive agrees that for so long as this Agreement is in
effect and for a period of two (2) years following the termination of this
Agreement for any reason whatsoever, the Executive shall not hire, as employee,
consultant, agent or otherwise, nor shall he solicit the participation in any
business activity that is competitive with the business of the Company (as
owner, part-owner, partner, director, officer, trustee, employee, agent,
consultant, shareholder of more than one percent (1%) of the outstanding
8
<PAGE>
capital stock of such business entity, or in any other capacity) of any person
who is an employee, consultant or agent of the Company, or who was such an
employee, consultant or agent within one year preceding the date of the
termination of the Executive's employment with the Company.
3.2. Non-Disclosure. The Executive recognizes and acknowledges that he
--------------
will have access to certain confidential information of the Company and that
such information constitutes valuable, special and unique property of the
Company. The Executive agrees that he will not, for any reason or purpose
whatsoever, during or after the term of this Agreement, disclose any of such
confidential information to any party without the express authorization of the
Company except as necessary in the ordinary course of performing his duties
hereunder. The Executive acknowledges and agrees that all papers, documents,
writings and other materials produced by him or coming into his possession
during his employment hereunder will at all times remain the property of the
Company and upon termination of this Agreement the Executive shall surrender all
such materials to the Company.
3.3 Injunctive Relief. The Executive acknowledges that his compliance
-----------------
with the agreements in Sections 3.1 and 3.2 hereof is necessary to protect the
goodwill and other proprietary interests of the Company and that during the
performance of his duties under this Agreement he will become conversant with
the affairs, trade secrets, customers and other proprietary
9
<PAGE>
information of the Company. The Executive acknowledges that a breach of his
agreement in Sections 3.1 and 3.2 hereof will result in irreparable and
continuing damage to the Company for which there will be no adequate remedy at
law; and the Execut ive agrees that in the event of any breach of the aforesaid
agreements, the Company and its successors and assigns shall be entitled to
injunctive relief and to such other and further relief as may be proper.
3.4. Severability. If any term or provision of this Article III shall be
------------
determined by a court of competent jurisdiction to be unenforceable because of
the scope or duration thereof or the geographic area included therein, the
parties hereto hereby expressly agree that the court making such determination
shall have the power to reduce the scope and duration and restrict the
geographical area of such term or provision which the court shall deem necessary
to permit enforcement of such term or provision.
3.5. Survival. The provisions of this Article III shall survive the
--------
termination of this Agreement.
ARTICLE IV
Miscellaneous General Provisions
--------------------------------
4.1. Notices. Any notices, requests, demands and other communications
-------
provided for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail to the Executive at the last address he had filed
in writing with the
10
<PAGE>
Company or, in the case of the Company, at its principal executive offices.
4.2. Non-Alienation. The Executive shall not pledge, hypothecate,
--------------
anticipate or in any way create a lien upon any amounts provided under this
Agreement; and no benefits payable hereunder shall be assignable in anticipation
of payment either by voluntary or involuntary acts, or by operation of law.
4.3 Waivers. No claim or right arising out of a breach or default under
-------
this Agreement shall be discharged in whole or in part by a waiver of that claim
or right unless the waiver is supported by consideration and is in writing and
executed by the aggrieved party hereto or his or its duly authorized agent. A
waiver by any party hereto of a breach or default by the other party hereto of
any provision of this Agreement shall not be deemed a waiver of future
compliance therewith, and such provision shall remain in full force and effect.
4.4 Governing Law. The provisions of this Agreement shall be construed in
-------------
accordance with the internal laws of the Commonwealth of Pennsylvania, without
consideration of conflict of laws principles.
4.5 Arbitration of All Disputes. Except as provided in Article III, any
---------------------------
controversy or claim arising out of or relating to this Agreement or the breach
thereof shall be settled by arbitration in Philadelphia, Pennsylvania, in
accordance with the rules then obtaining of the American Arbitration Association
and any decision made in accordance with such rules shall be binding
11
<PAGE>
on all parties in interest, and judgment upon any award rendered may be entered
in any court having jurisdiction thereof.
4.6. Amendment. Any amendment to this Agreement shall be effective only
---------
if in writing and signed by the parties hereto.
4.7. Bind and Inure; Change of Control.
---------------------------------
(a) This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors in interest. In the event that a
"Change of Control" (as defined below) of the Company occurs during the Initial
Term of this Agreement and the Executive's employment with the Company is
subsequently terminated during the Initial Term, then, subject to Section 4.7(b)
hereof, the Company shall pay to the Executive in cash a "Termination Payment"
which shall be either (i) a sum equal to the Base Salary which would have been
payable to the Executive during the remainder of the Initial Term of this
Agreement had the Executive's employment not been terminated or (ii) a sum equal
to one and one-half times the Executive's Base Salary, whichever sum is greater.
If a Change of Control occurs between April 16, 1996 and July 14, 1996 and the
Company has given the Executive notice of termination pursuant to Section 1.3(a)
hereof prior to April 16, 1996, such notice of
12
<PAGE>
termination shall be effective and the Company shall be obligated to
make the Termination Payment to the Executive. " "Change of Control" shall mean
such time as Michael T. Kennedy ceases to own sufficient shares of the capital
stock of the Company to elect a majority of the Board of Directors of the
Company or ceases to have the power to direct or cause the direction of the
management and policies of the Company.
(b) Nothing in Section 4.7(a) hereof shall prevent the Company from
termination the Executive at any time for cause pursuant to Section 2.3 hereof.
In the event the Executive is terminated pursuant to Section 2.3 hereof during
the Initial Term and a Change of Control occurs prior to such termination, the
Company shall not be obligated to make any Termination Payment to the Executive.
4.8 Headings. The section headings have been included herein for
--------
convenience only and shall not be considered in interpreting this Agreement.
4.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties on separate counterparts, and each such
counterpart shall be deemed to be an original but all such counterparts shall
together constitute one and the same agreement.
4.10. Entire Agreement.
----------------
This Agreement constitutes the full and complete understanding and
agreement of the Executive and the Company respecting the subject matter hereof,
and supersedes all prior
13
<PAGE>
understandings and agreements, oral or written, express or implied.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and the Company
has caused this Agreement to be executed by a duly authorized officer, all as of
the day and year first above written.
/s/ Don Rogalski 6/26/93
-----------------------------------
DON ROGALSKI
BENCHMARK CORPORATION OF
DELAWARE
By: /s/ Michael T. Kennedy 6/28/93
-----------------------------------
MICHAEL T. KENNEDY
President/Authorized
Signatory
14
<PAGE>
EXHIBIT A
Lump Sum Payment
- ----------------
The Executive shall be entitled to receive a lump sum payment upon the
execution of this Agreement in the amount of $35,000, less statutory tax
deductions or withholdings.
Equity Incentive Plan
- ---------------------
Upon commencement of the Executive's employment pursuant to this Agreement,
the Executive shall be granted the option to purchase, subject to compliance
with applicable securities laws, any part or all of an aggregate of 75 shares of
the Company's Nonvoting Common Stock in accordance with the terms of the
Company's Equity Incentive Plan.
Management Equity Participation Plan
- ------------------------------------
The Executive shall be granted the right to purchase, subject to compliance
with applicable securities laws, up to 40 shares (the "Shares") of the Company's
Nonvoting Stock at the exercise price of $800 per share under the terms of the
Company's Management Equity Participation Plan. Upon commencement of the
Executive's employment pursuant to this Agreement, the Company shall pay to the
Executive by check the amount of $46,142.75, which amount includes statutory tax
deductions and withholdings, and the Executive shall concurrently endorse such
check back to the Company in full payment of the exercise price for the Shares.
Thereafter, the Company shall, in its customary manner, deposit such sums of
money as are required to pay all statutory tax deposits of withholdings to
appropriate governmental taxing authorities.
15
<PAGE>
EXHIBIT 10.52
December 10, 1998
Mr. Van D. Groenewold
1143 West Townley Avenue
Phoenix, Arizona 85021
Dear Dick:
As we discussed several times, we would like to provide you with an
additional incentive to work beyond retirement and at the same time award you
for your years of valuable service. In this regard, following is a summary of
your agreement with WinCup Holdings, Inc. ("WinCup") regarding your continued
employment with WinCup:
1. You agree that so long as you are physically capable of doing so you
will continue to work full-time for WinCup in your current capacity
for a period of twenty-four (24) months commencing on the date of your
execution of this letter agreement (the "Initial Term").
2. Upon expiration of the Initial Term you shall have the option to
extend your employment for up to three (3) successive one (1) year
terms (each, a "Renewal Term" and together with the Initial Term, the
"Term"). These options are each exercisable by written notice to
WinCup no later than thirty (30) days prior to the expiration of the
Initial Term or Renewal Term then in effect. You agree that during
each Renewal Term you will continue, for so long as you are physically
capable of doing so, to work full-time for WinCup in your current
capacity.
3. As consideration for your continued employment, WinCup agrees to
contribute on your behalf the pre-tax sum of $75,000 into an
investment fund agreeable to you and WinCup. The terms and conditions
governing this investment shall be governed by a separate agreement
between you and WinCup. In addition, you will receive, within thirty
(30) days after the end of each year of the Term during which you
continue to work full-time in your current capacity, a bonus of up to
one hundred percent (100%) of your annual salary then in effect (each,
an "Incentive Payment"). The Incentive Payment will be based on your
performance during such year of the Term in the following areas:
(a) Completion of the thermoformed cup project, which should be
operational upon expiration of the non-competition provision
between the Company and Fort James Operating Company (formerly
James River) and should include state of the art equipment which
ensures low production costs and high quality product;
<PAGE>
Page 2
Mr. Van D. Groenewold
December 9, 1998
(b) In the event the Company completes the Thermocup acquisition, re-
engineering the Thermocup plant within one (1) year, to include
all machines, molds, packing equipment and printers;
(c) Training of a successor to replace you upon your retirement;
(d) Completion of fine tuning of the Stone Mountain re-engineering
projects to enable that facility to be a low cost producer within
the Company through packing room automation resulting in a
reduction of manpower and further reduction in utility costs; and
(e) Oversight of completion of engineering projects.
You will be eligible to receive the Incentive Payment for a year of
the Term only if you have worked full-time in your current capacity
for the entire year of the Term, except that if you are unable to work
full-time in your current capacity for the entire year of the Term due
to your death or disability, then you will receive a pro rata portion
of the Incentive Payment based on the number of days you worked full-
time in your current capacity during the year of the Term.
The Incentive Payment structure outlined above will replace any bonus
program in which you currently participate.
If you are in agreement with the above terms and conditions, please sign in
the space provided below and return the signed copy to my attention.
Warmest Personal Regards,
/s/ Michael T. Kennedy
Michael T. Kennedy,
Chairman and CEO
Agreed and Accepted
This 14th day of December, 1998:
---- --------
/s/ Van D. Groenewold
- --------------------------
Van D. Groenewold
<PAGE>
Exhibit 21.1
------------
SUBSIDIARIES OF THE REGISTRANT
------------------------------
<TABLE>
<CAPTION>
State or
Jurisidiction of
Incorporation Names Under Which
Name of Subsidiary or Organization Subsidiary Does Business
- ---------------------------- ---------------- ----------------------------------
<S> <C> <C>
WinCup Holdings, Inc.(1) Delaware WinCup Holdings, Inc.
WinCup Holdings of Texas, Inc.
WinCup
Radnor Chemical Delaware Radnor Chemical Corporation
Corporation (1)
StyroChem Canada, Ltd.(2) Quebec StyroChem Canada, Ltd.
StyroChem International
StyroChem U.S., Ltd.(3) Texas StyroChem U.S., Ltd.
StyroChem International
WinCup Texas, Ltd.(4) Texas WinCup Texas, Ltd.
WinCup
StyroChem GP, L.L.C.(2) Delaware StyroChem GP, L.L.C.
StyroChem LP, L.L.C.(2) Delaware StyroChem LP, L.L.C
WinCup GP, L.L.C.(5) Delaware WinCup GP, L.L.C.
WinCup LP, L.L.C.(5) Delaware WinCup LP, L.L.C
Radnor Management, Inc.(1) Delaware Radnor Management, Inc.
StyroChem Europe (The The Netherlands StyroChem Europe (The Netherlands)
Netherlands) B.V.(2) B.V.
StyroChem Finland Oy(6) Finland StyroChem Finland Oy
StyroChem International
ThermiSol Denmark ApS(6) Denmark ThermiSol Denmark ApS
ThermiSol Finland Oy(6) Finland ThermiSol Finland Oy
ThermiSol Sweden AB(6) Sweden ThermiSol Sweden AB
Radnor Delaware, Inc.(5) Delaware Radnor Delaware, Inc.
</TABLE>
- ------------------
(1) Owned 100% by Radnor Holdings Corporation.
(2) Owned 100% by Radnor Chemical Corporation.
(3) Owned 99% by StyroChem LP, L.L.C. and 1% by StyroChem GP, L.L.C.
(4) Owned 99% by WinCup LP, L.L.C. and 1% by WinCup GP, L.L.C.
(5) Owned 100% by WinCup Holdings, Inc.
(6) Owned 100% by StyroChem Europe (The Netherlands) B.V.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM RADNOR
HOLDINGS CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-25-1998
<PERIOD-START> DEC-27-1997
<PERIOD-END> DEC-25-1998
<CASH> 3,975
<SECURITIES> 546
<RECEIVABLES> 28,655
<ALLOWANCES> 0
<INVENTORY> 35,267
<CURRENT-ASSETS> 74,773
<PP&E> 203,913
<DEPRECIATION> 22,536
<TOTAL-ASSETS> 278,796
<CURRENT-LIABILITIES> 50,864
<BONDS> 194,508
0
0
<COMMON> 1
<OTHER-SE> 20,948
<TOTAL-LIABILITY-AND-EQUITY> 278,796
<SALES> 311,137
<TOTAL-REVENUES> 311,137
<CGS> 220,691
<TOTAL-COSTS> 220,691
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,776
<INCOME-PRETAX> 8,736
<INCOME-TAX> 3,340
<INCOME-CONTINUING> 5,396
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,396
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<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>
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
period):
United States...................... $25,709,341 $24,150,958 $23,684,841
Canada............................. 7,141,134 6,815,579 7,984,239
----------- ----------- -----------
Total............................ $32,850,475 $30,966,537 $31,669,080
=========== =========== ===========
</TABLE>
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
LIABILITIES............................ $ 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
administrative.......... (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
OPERATIONS BEFORE INCOME
TAXES..................... 761 317 900 954 718
Current income tax
provision............... (2) (6) (4) (4) 8
Deferred income tax
benefit................. 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
(unaudited)...................... -- -- -- (210)
------ ---- ------ -----
BALANCE, September 30, 1997
(unaudited)........................ 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
OPERATIONS............. (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
ACTIVITIES:
Net income (loss)............ $ (408) $ (141) $ (87) $(132) $ 610
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
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
ACTIVITIES:
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
ACTIVITIES:
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> <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
