<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 18, 1997
REGISTRATION NO. 333-28157
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ISSUER OF EXCHANGE NOTES REGISTERED HEREBY
TEKNI-PLEX, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3086 22-3286312
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
GUARANTOR OF EXCHANGE NOTES REGISTERED HEREBY
DOLCO PACKAGING CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3086 95-2467518
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
201 INDUSTRIAL PARKWAY
SOMERVILLE, NEW JERSEY 08876
(908) 722-4800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
------------------------
DR. F. PATRICK SMITH
CHIEF EXECUTIVE OFFICER
TEKNI-PLEX, INC.
DOLCO PACKAGING CORP.
201 INDUSTRIAL PARKWAY
SOMERVILLE, NEW JERSEY 08876
(908) 722-4800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPY TO:
ROBERT W. GRAY, ESQ.
WINTHROP, STIMSON, PUTNAM & ROBERTS
ONE BATTERY PARK PLAZA
NEW YORK, NEW YORK 10004
(212) 858-1000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
================================================================================
<PAGE> 2
CROSS REFERENCE SHEET
FURNISHED PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
------------------------------------------- ---------------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus... Facing Page of the Registration Statement;
Cross Reference Sheet; Outside Front Cover
Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front Cover Page; Available
Information
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............ Prospectus Summary; Risk Factors; Selected
Historical Financial Information; Pro Forma
Unaudited Condensed Financial Information
4. Terms of the Transaction................... Outside Front Cover Page; Prospectus Summary;
Description of New Credit Facility; The
Exchange Offer; Description of Exchange
Notes; Certain United States Federal Income
Tax Considerations
5. Pro Forma Financial Information............ Pro Forma Unaudited Condensed Financial
Information
6. Material Contracts with the Company Being
Acquired................................. *
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters....................... *
8. Interests of Named Experts and Counsel..... Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. *
10. Information with Respect to S-3
Registrants.............................. *
11. Incorporation of Certain Information by
Reference................................ *
12. Information with Respect to S-2 or S-3
Registrants.............................. *
13. Incorporation of Certain Information by
Reference................................ *
14. Information with Respect to Registrants
Other Than S-3 or S-2 Registrants........ Outside Front Cover Page; Prospectus Summary;
Risk Factors; Use of Proceeds;
Capitalization; Selected Historical
Financial Information; Pro Forma Unaudited
Condensed Financial Information;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Industry; Business; Management;
Security Ownership; Certain Transactions
15. Information with Respect to S-3
Companies................................ *
16. Information with Respect to S-2 or S-3
Companies................................ *
17. Information with Respect to Companies Other
than S-3 and S-2 Companies............... *
18. Information if Proxies, Consents or
Authorizations are to be Solicited....... *
19. Information if Proxies, Consents or
Authorizations are not to be Solicited,
or in an Exchange Offer.................. Management; Security Ownership; Certain
Transactions
</TABLE>
- ---------------
* Not Applicable
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY
NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 18, 1997
PROSPECTUS
TEKNI-PLEX, INC.
OFFER TO EXCHANGE ITS
SERIES B 11 1/4% SENIOR SUBORDINATED NOTES DUE 2007
FOR ANY AND ALL OF ITS OUTSTANDING
11 1/4% SENIOR SUBORDINATED NOTES DUE 2007
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1997, UNLESS EXTENDED.
- --------------------------------------------------------------------------------
Tekni-Plex, Inc., a Delaware corporation ("Tekni-Plex"), hereby offers (the
"Exchange Offer"), upon the terms and subject to the conditions set forth in
this Prospectus (the "Prospectus") and the accompanying Letter of Transmittal
(the "Letter of Transmittal"), to exchange $1,000 principal amount of its Series
B 11 1/4% Senior Subordinated Notes due 2007 (the "Exchange Notes"), which will
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which this Prospectus
is a part, for each $1,000 principal amount of its outstanding 11 1/4% Senior
Subordinated Notes due 2007 (the "Old Notes"), of which $75,000,000 aggregate
principal amount is outstanding. The form and terms of the Exchange Notes are
substantially identical to the form and terms of the Old Notes except that the
Exchange Notes will bear a Series B designation and will have been registered
under the Securities Act and, therefore, will not bear legends restricting their
transfer and will not contain certain provisions relating to an increase in the
interest rate which were included in the terms of the Old Notes in certain
circumstances relating to the timing of the Exchange Offer. The Exchange Notes
will evidence the same debt as the Old Notes (which they replace) and will be
issued under and be entitled to the benefits of the Indenture dated as of April
1, 1997 (the "Indenture") among Tekni-Plex, Dolco Packaging Corp., a wholly
owned subsidiary of Tekni-Plex (the "Guarantor"), and Marine Midland Bank, as
trustee (the "Trustee"), governing the Old Notes. The Exchange Notes will be
fully and unconditionally guaranteed (the "Exchange Guarantee") by the Guarantor
in and on substantially identical form and terms as the guarantee by the
Guarantor of the Old Notes (the "Old Guarantee"). See "The Exchange Offer" and
"Description of Exchange Notes."
As of March 28, 1997, after giving pro forma effect to the Transactions, the
Company's total debt would have been $76.0 million (including the Exchange
Notes) and, in addition, the Company could have borrowed up to $75.0 million of
secured senior indebtedness under the New Credit Facility (as defined) without
requiring the consent of the holder of Exchange Notes. Other than the foregoing,
the Company and the Guarantor do not intend or plan to incur any significant
indebtedness in the near future.
Tekni-Plex will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time, on , 1997,
unless extended by Tekni-Plex in its sole discretion (the "Expiration Date").
Notwithstanding the foregoing, Tekni-Plex will not extend the Expiration Date
beyond September 16, 1997 (which, if extended to such date, would represent a
maximum Exchange Offer period of days). Tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m. on the Expiration Date. The Old Notes may be
tendered only in integral multiples of $1,000 principal amount. The Exchange
Offer is subject to certain customary conditions. See "The Exchange Offer."
The Old Notes were sold on April 4, 1997 (the "Issue Date") to the Initial
Purchaser (as defined) in a transaction not registered under the Securities Act
in reliance upon an exemption under the Securities Act. The Initial Purchaser
subsequently placed the Old Notes with qualified institutional buyers in
reliance upon Rule 144A under the Securities Act and with a limited number of
institutional accredited investors that agreed to comply with certain transfer
restrictions and other conditions. Accordingly, the Old Notes may not be
reoffered, resold or otherwise transferred in the United States unless
registered under the Securities Act or unless an applicable exemption from the
registration requirements of the Securities Act is available. The Exchange Notes
are being offered hereunder in order to satisfy certain obligations of
Tekni-Plex and the Guarantor under the Registration Rights Agreement (as
defined) entered into in connection with the offering of the Old Notes. See "The
Exchange Offer."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, Tekni-Plex and the
Guarantor believe the Exchange Notes issued pursuant to the Exchange Offer may
be offered for resale, resold and otherwise transferred by any holder thereof
(other than any such holder that is an "affiliate" of Tekni-Plex or the
Guarantor within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holder's business and such holder has no arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes. See "The Exchange Offer -- Purpose and Effect of the Exchange
Offer" and "The Exchange Offer -- Resale of the Exchange Notes." Each
broker-dealer (a "Participating Broker-Dealer") that receives Exchange Notes for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of Exchange Notes
received in exchange for Old Notes where such Old Notes were acquired by such
Participating Broker-Dealer as a result of market-making activities or other
trading activities. Tekni-Plex has agreed that, for a period of 180 days after
the Expiration Date, it will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale. See "Plan of
Distribution."
Holders of Old Notes not tendered and accepted in the Exchange Offer will
continue to hold such Old Notes and will be entitled to all the rights and
benefits and will be subject to the limitations applicable thereto under the
Indenture and with respect to transfer under the Securities Act. Tekni-Plex will
pay all the expenses incurred by it incident to the Exchange Offer. See "The
Exchange Offer."
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DESCRIPTION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND IN
EVALUATING AN INVESTMENT IN THE EXCHANGE NOTES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is 1997.
<PAGE> 4
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE EXCHANGE
OFFER MADE BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
(AS DEFINED). THIS PROSPECTUS DOES NOT CONSTITUTE AN EXCHANGE OFFER TO, AND THE
COMPANY WILL NOT ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN
ANY JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY EXCHANGE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF OR THAT INFORMATION SET FORTH HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE
EXCHANGE NOTES, WHETHER OR NOT PARTICIPATING IN THE EXCHANGE OFFER, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATIONS OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 4
Risk Factors.......................... 13
Use of Proceeds....................... 17
Capitalization........................ 17
Selected Historical Financial
Information......................... 18
Pro Forma Unaudited Condensed
Financial Information............... 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 23
Industry.............................. 28
Business.............................. 30
<CAPTION>
PAGE
----
<S> <C>
Management............................ 39
Security Ownership.................... 41
Certain Transactions.................. 42
Description of New Credit Facility.... 42
The Exchange Offer.................... 44
Description of Exchange Notes......... 53
Certain United States Federal Income
Tax Considerations.................. 78
Plan of Distribution.................. 79
Legal Matters......................... 80
Experts............................... 80
Available Information................. 80
Index to Financial Statements and
Schedule............................ F-1
</TABLE>
There has not previously been any public market for the Old Notes or the
Exchange Notes. Tekni-Plex does not intend to list the Exchange Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active market for the
Exchange Notes will develop. See "Risk Factors -- Lack of Public Market for the
Notes." Moreover, to the extent that Old Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Old Notes could be adversely affected.
Initially, the Exchange Notes will be available only in book-entry form.
Tekni-Plex expects that the Exchange Notes issued pursuant to this Exchange
Offer will be issued in the form of a Global Note (as defined), which will be
deposited with, or on behalf of, The Depository Trust Company (the "Depositary"
or "DTC") and registered in its name or in the name of Cede & Co., its nominee.
Beneficial interests in the Global Note representing the Exchange Notes will be
shown on, and transfers thereof to qualified institutional buyers will be
effected through, records maintained by DTC and its participants. After the
initial issuance of the Global Note, Exchange Notes in certified form will be
issued in exchange for the Global Note only on the terms set forth in the
Indenture. See "Description of Exchange Notes -- Book-Entry; Delivery and Form."
2
<PAGE> 5
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS." ALL STATEMENTS OTHER
THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS PROSPECTUS, INCLUDING,
WITHOUT LIMITATION, CERTAIN STATEMENTS UNDER THE "PROSPECTUS SUMMARY,"
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," "INDUSTRY," AND "BUSINESS" AND LOCATED ELSEWHERE HEREIN REGARDING
THE COMPANY'S FINANCIAL POSITION AND BUSINESS STRATEGY, MAY CONSTITUTE
FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS
REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CAN GIVE NO
ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT. IMPORTANT
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S
EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE DISCLOSED IN THIS PROSPECTUS,
INCLUDING WITHOUT LIMITATION IN CONJUNCTION WITH THE FORWARD-LOOKING STATEMENTS
INCLUDED IN THIS PROSPECTUS AND UNDER "RISK FACTORS." ALL SUBSEQUENT WRITTEN AND
ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON
ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY
STATEMENTS.
3
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless the context otherwise requires, references
in this Prospectus to "Tekni-Plex" refer to Tekni-Plex, Inc., and references to
the "Company" refer to Tekni-Plex, Inc. and its subsidiary. All references in
this Prospectus to "fiscal year" refer to the Company's fiscal year which ends
on the Friday closest to June 30 of that calendar year. For example, fiscal year
1996 refers to the year-ended June 28, 1996. Unless otherwise noted, all
references in this Prospectus to market share refer to market share within the
United States.
THE COMPANY
GENERAL
The Company designs, manufactures and markets packaging materials primarily
for the pharmaceutical and food industries. Currently, its products fall into
two categories. The Flexible Packaging Group produces laminated and coated
packaging materials primarily for pharmaceutical end-uses. The Company is the
market leader for clear, high-barrier laminations for pharmaceutical blister
packaging with an estimated greater than 90% share of the market for such
products. These packaging materials are used for fast-acting pharmaceuticals
that are generally highly reactive to moisture. The Foam Products Group produces
foamed polystyrene packaging products such as egg cartons and processor trays
for the poultry and meat industries. The Company produces in excess of 80% of
all foam egg cartons and has approximately 40% of the egg carton market. The
Company has also built a strong presence in the processor tray market, where it
has an estimated share of greater than 20%.
The management of the Company focuses on organizational development,
imparting a results-oriented culture to all areas of its businesses. Management
seeks and implements product and process improvements to produce higher quality
products, improve efficiencies, reduce labor and material costs, and create
differentiated products and product line extensions. The Company has also
expanded its product offerings by acquiring synergistic packaging companies and
has significantly reduced costs through product line rationalization and
re-negotiation of supplier agreements. Management believes that this focus will
continue with respect to the Company's on-going business and will be the basis
for successfully integrating future acquisitions.
In March 1994, the Company was acquired by its current controlling
shareholder, and Dr. F. Patrick Smith was appointed its Chief Executive Officer.
Kenneth W.R. Baker, the current Chief Operating Officer, was appointed in April
1994. At the time of the acquisition, the Company had two operating facilities
located in Somerville, New Jersey ("Somerville"), and Brooklyn, New York
("Brooklyn"), and its principal product lines were clear, high barrier
laminations and closure liners sold primarily to the pharmaceutical industry,
and foam processor trays used predominantly for poultry packaging. In December
1995, the Company acquired the Flemington, New Jersey, operation ("Flemington")
of Hargro Flexible Packaging Corporation ("Hargro"), thereby expanding the
Company's flexible packaging product line. In February 1996, the Company
acquired Dolco Packaging Corp. ("Dolco"), the nation's leading supplier of foam
egg cartons.
Since its acquisition by the current owners, the Company has achieved
significant improvements in profitability. For the trailing twelve months ended
March 28, 1997, the Company had revenues of $143.5 million, net income of $7.2
million and EBITDA of $29.7 million for an EBITDA margin of 20.7%, compared with
revenues of $44.9 million, net income of $2.8 million and EBITDA of $3.8 million
for an EBITDA margin of 8.5% for the year ended December 31, 1993. This
improvement has continued. For the nine months ended March 28, 1997, the Company
had revenues of $109.8 million, net income of $6.4 million and EBITDA of $22.9
million for an EBITDA margin of 20.8%, compared with revenues of $47.2 million,
net income of $0.2 million and EBITDA of $7.3 million for an EBITDA margin of
15.5% for the nine months ended March 29, 1996. "EBITDA" is defined as net
income before interest, income taxes, depreciation and amortization. EBITDA is
presented because it is a widely accepted financial indicator of a company's
ability to incur and service debt. "EBITDA margin" is calculated as the ratio of
EBITDA to net sales for the period.
4
<PAGE> 7
The Company competes within the nearly $15 billion flexible and semi-rigid
segment of the packaging industry. The Company believes that this segment is
growing at the expense of the more mature rigid packaging segments (e.g., glass,
metal and folding cartons) that currently account for roughly $28 billion in
revenues. The Company generally competes in technically sophisticated areas,
such as primary pharmaceutical packaging which is subject to strict Federal Food
and Drug Administration ("FDA") regulatory requirements.
COMPETITIVE STRENGTHS
The Company believes that its competitive strengths include:
- Producer of high quality, technically sophisticated products. The
Company has a long-standing reputation as a manufacturer of high-quality,
high performance primary packaging products (where the packaging material
comes into direct contact with the end-product). The Company's emphasis
on quality is evidenced by its product lines which address the high-end
of their respective markets. The Company primarily competes in
technically sophisticated areas such as the high-barrier pharmaceutical
blister packaging market where high performance characteristics are
required due to the sensitive nature of the product. A significant
portion of the Company's processor tray product line is aimed at the
high-performance segment of the processor tray market where strength and
durability are essential due to the high speed, automated machinery used
by the processors. As the leading supplier of foam egg cartons, the
Company produces a high quality product with superior performance
characteristics compared to competitive offerings.
- Cost efficient producer. The Company continually focuses on improving
underlying operations and reducing costs. Since the 1994 acquisition,
current management has improved the Company's cost structure from an
EBITDA margin (as defined) of 8.5% and income before income taxes as a
percent of sales of 6.8% on sales of $44.9 million for the year ended
December 31, 1993 to an EBITDA margin (as defined) of 20.7% and income
before income taxes as a percent of sales of 8.0% on sales of $143.5
million for the twelve months ended March 28, 1997.
- Experienced management team. The current management team has been
successful in selecting and integrating strategic acquisitions and in
improving underlying business fundamentals in the regular course of
business. Members of the management team have worked together in the
packaging industry for many years and have a strong track record.
Together, they have integrated acquisitions, effected turnarounds,
provided strategic direction and leadership, increased sales and market
share, improved manufacturing efficiencies and productivity, and
developed new technologies to enhance the competitive strengths of the
companies they have managed. See "Management."
- Strong market share in core businesses. The Company has a strong market
presence in most of its core product lines. The Company produces in
excess of 80% of all foam egg cartons and has approximately 40% of the
overall egg carton market which is split approximately equally between
foam and pulp-based products. The Company has an estimated greater than
90% share of the market for clear, high-barrier laminations for
pharmaceutical blister packaging. The Company has also built a strong
presence in the processor tray market where it has an estimated share of
greater than 20%.
- Successful integration of acquisitions. The Company has a strong track
record of identifying and integrating both small and large acquisitions.
After significantly improving the business of Tekni-Plex following the
1994 acquisition, management successfully integrated both the Flemington
and Dolco operations, the latter being a public company then nearly twice
the Company's size. During the same period, the Brooklyn and Flemington
operations were merged, substantially improving production efficiencies
and reducing waste.
- Strong customer relationships. The Company has long-standing
relationships with many of its customers. The Company estimates the
average tenure among the Company's top ten customers at more than 14
years. The Company attributes its long relationships with its customers
to the ability to consistently manufacture high quality products and to
consistently provide a superior level of customer
5
<PAGE> 8
service. The Company routinely wins recognition for its superior products
and customer service including a recent Outstanding Supplier Award from
Pharmacia & Upjohn, and an Outstanding Quality Award from Abbott
Laboratories.
BUSINESS STRATEGY
The Company seeks to maximize its growth and profitability and take
advantage of its competitive strengths by pursuing the following business
strategy:
- Ongoing cost reduction through technical process improvement. The
Company has an ongoing program to improve manufacturing and other
processes in order to drive down costs. Examples of cost improvement
programs include: (i) material and energy conservation through enhanced
process controls; (ii) reduction in machine set-up time through the use
of proprietary technology; (iii) continual product line rationalization;
and (iv) development of backward integration opportunities.
- Growth through acquisitions. The Company believes that there is a
significant opportunity to consolidate the highly fragmented packaging
industry in the United States. The Company makes acquisitions based on
the following factors: (i) the Company seeks to acquire product lines
which logically extend its presence in the markets it currently serves,
thereby enhancing the Company's value to its customers; (ii) the Company
seeks add-on acquisitions which increase its market share in a particular
product line, thereby providing opportunity to gain economies of scale
and reduce costs; (iii) the Company seeks opportunities for technology
sharing where acquired and existing operations are enhanced by combining
and sharing complementary technologies; and (iv) the Company seeks
acquisitions that provide opportunity for synergistic cost reduction due
to duplication of effort and acquisitions where imparting the Company's
focused, results-oriented culture will lead to enhanced operating
results.
- Internal growth through product line extension and improvement. The
Company continually seeks to improve and extend its product lines and
leverage its existing technological capabilities in order to increase
market share and improve profitability. Before 1994, the Company's line
of pharmaceutical blister laminations addressed a relatively small
(although important) range of performance requirements, namely the
high-barrier segment of the market. New products developed since that
time have extended the Company's offerings to include the ultra-high
barrier segment (previously confined to foil-based products) and the
low-to-medium barrier segment (previously confined to solution-coated
products). In addition, the Company believes that it has a significant
opportunity to increase sales of its foamed polystyrene packaging
products by focusing on incremental improvements to these products.
- Growth through international expansion. The Company currently exports
approximately ten percent of its pharmaceutical packaging sales. Given
the Company's reputation, its recently expanded product line, and the
multi-national nature of many of its customers, the Company believes
there is significant opportunity to expand international sales.
Accordingly, the Company has hired an international sales manager who has
significant experience in selling to the international pharmaceutical
industry. The Company has also begun to set up a network of agents in
various international markets.
6
<PAGE> 9
THE EXCHANGE OFFER
Old Notes.................. The Old Notes were sold on April 4, 1997 to J.P.
Morgan Securities Inc. (the "Initial Purchaser")
pursuant to a Purchase Agreement dated as of April
1, 1997 (the "Purchase Agreement") by and among the
Company, the Guarantor and the Initial Purchaser.
The Initial Purchaser subsequently resold the Old
Notes to qualified institutional buyers pursuant to
Rule 144A under the Securities Act and to a limited
number of institutional accredited investors that
agreed to comply with certain transfer restrictions
and other conditions.
Registration Rights
Agreement.................. Pursuant to the Purchase Agreement, the Company,
the Guarantor and the Initial Purchaser entered
into a Registration Rights Agreement dated as of
April 4, 1997 (the "Registration Rights
Agreement"), which grants to the holders of the Old
Notes certain exchange and registration rights. The
Exchange Offer is intended to satisfy certain of
such exchange rights which will terminate upon the
consummation of the Exchange Offer.
The Exchange Offer......... The Company is offering to exchange $1,000
principal amount of Exchange Notes for each $1,000
principal amount of Old Notes. As of the date
hereof, $75,000,000 aggregate principal amount of
Old Notes are outstanding.
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to
third parties, the Company believes that Exchange
Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale,
resold and otherwise transferred by any holder
thereof (other than any such holder which is an
"affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery requirements of the Securities Act,
provided that such Exchange Notes are acquired in
the ordinary course of such holder's business and
that such holder does not intend to participate and
has no arrangement or understanding with any person
to participate in the distribution of such Exchange
Notes.
Each Participating Broker-Dealer that receives
Exchange Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale
of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a
prospectus, a Participating Broker-Dealer will not
be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating
Broker-Dealer in connection with resales of
Exchange Notes received in exchange for Old Notes
where such Old Notes were acquired by such
Participating Broker-Dealer as a result of
market-making activities or other trading
activities. The Company has agreed that, for a
period of 180 days after the Expiration Date, it
will make this Prospectus available to any
Participating Broker-Dealer for use in connection
with any such resale. See "Plan of Distribution."
Any holder of Old Notes who tenders in the Exchange
Offer with the intention to participate, or for the
purpose of participating, in a distribution of the
Exchange Notes could not rely on the position of
the staff of the Commission enunciated in no-action
letters and, in the absence of an exemption
therefrom, must comply with the registration and
prospectus delivery requirements of the Securities
Act in connection with any resale
7
<PAGE> 10
transaction. Failure to comply with such
requirements in such instance may result in such
holder incurring liability under the Securities Act
for which the holder is not indemnified by the
Company.
Expiration Date............ 5:00 p.m., New York City time, on , 1997
unless the Exchange Offer is extended by the
Company in its sole discretion, in which case the
term "Expiration Date" means the latest date and
time to which the Exchange Offer is extended.
Notwithstanding the foregoing, the Company will not
extend the Expiration Date beyond September 16,
1997 (which, if extended to such date, would
represent a maximum Exchange Offer period of
days).
Interest................... Interest on Exchange Notes shall accrue from the
last interest payment date on which interest was
paid on the Old Notes so surrendered, or, if no
interest has been paid on such Old Notes, from
April 4, 1997. No interest will be paid on the Old
Notes accepted for exchange.
Conditions to the
Exchange Offer........... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. See
"The Exchange Offer -- Conditions."
Procedures for Tendering
Old Notes................ Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such
facsimile, together with the Old Notes and any
other required documentation to the Exchange Agent
(as defined) at the address set forth herein. By
executing the Letter of Transmittal, each holder
will be deemed to represent to the Company, among
other things, that (i) the Exchange Notes acquired
pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the person
receiving such Exchange Notes, whether or not such
person is the holder, (ii) neither the holder nor
any such other person has any arrangement or
understanding with any person to participate in the
distribution of such Exchange Notes in violation of
the Securities Act, (iii) neither the holder nor
any such other person is an "affiliate," as defined
under Rule 405 of the Securities Act, of the
Company and (iv) such holder has full power and
authority to exchange the Old Notes for the
Exchange Notes. See "The Exchange Offer -- Purpose
and Effect of the Exchange Offer" and
"-- Procedures for Tendering."
Untendered Notes........... Following the consummation of the Exchange Offer,
holders of Old Notes eligible to participate but
who do not tender their Old Notes will not have any
further registration rights and such Old Notes will
continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market
for such Old Notes could be adversely affected.
Consequences of
Failure to Exchange...... Old Notes that are not exchanged pursuant to the
Exchange Offer will remain restricted securities.
Accordingly, such Old Notes may be resold only (i)
to the Company, (ii) pursuant to Rule 144A or Rule
144 under the Securities Act or pursuant to some
other exemption under the Securities Act, (iii)
outside the United States to a foreign person
pursuant to the requirements of Rule 904 under the
Securities Act, or (iv) pursuant to an effective
registration statement under the Securities
8
<PAGE> 11
Act. See "The Exchange Offer -- Consequences of
Failure to Exchange."
Shelf Registration
Statement.................. If any holder of the Old Notes (other than any such
holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities
Act) is not eligible under applicable securities
laws to participate in the Exchange Offer, and such
holder has provided information regarding such
holder and the distribution of such holder's Old
Notes to the Company for use therein, the Company
has agreed to register the Old Notes on a shelf
registration statement (the "Shelf Registration
Statement") and to use its best efforts to cause it
to be declared effective by the Commission as
promptly as reasonably practical on or after the
consummation of the Exchange Offer. The Company has
agreed to maintain the effectiveness of the Shelf
Registration Statement, under certain
circumstances, until the date on which the Old
Notes are no longer "restricted securities" (within
the meaning of Rule 144 under the Securities Act).
Special Procedures for
Beneficial Owners........ Any beneficial owner whose Old Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender should contact such registered holder
promptly and instruct such registered holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's
own behalf, such owner must, prior to completing
and executing the Letter of Transmittal and
delivering its Old Notes, either make appropriate
arrangements to register ownership of the Old Notes
in such owner's name or obtain a properly completed
bond power from the registered holder. The transfer
of registered ownership may take considerable time.
Guaranteed Delivery
Procedures............... Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes,
the Letter of Transmittal or any other documents
required by the Letter of Transmittal to the
Exchange Agent (or comply with the procedures for
book-entry transfer) prior to the Expiration Date,
must tender their Old Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer -- Guaranteed Delivery Procedures."
Withdrawal Rights.......... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
Acceptance of Old Notes
and Delivery of
Exchange Notes........... The Company will accept for exchange any and all
Old Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The Exchange Notes
issued pursuant to the Exchange Offer will be
delivered on the earliest practicable date
following the Expiration Date. See "The Exchange
Offer -- Terms of the Exchange Offer."
Use of Proceeds............ The Company will not receive any cash proceeds from
the issuance of the Exchange Notes in the Exchange
Offer. See "Use of Proceeds."
Exchange Agent............. Marine Midland Bank, as Trustee, is serving as
Exchange Agent in connection with the Exchange
Offer.
9
<PAGE> 12
THE EXCHANGE NOTES
General.................... The form and terms of the Exchange Notes are
substantially identical to the form and terms of
the Old Notes except that (i) the Exchange Notes
bear a Series B designation, (ii) the Exchange
Notes have been registered under the Securities Act
and, therefore, will not bear legends restricting
the transfer thereof, and (iii) the holders of
Exchange Notes will not be entitled to certain
rights under the Registration Rights Agreement,
including the provisions providing for an increase
in the interest rate on the Old Notes in certain
circumstances relating to the timing of the
Exchange Offer, which rights will terminate when
the Exchange Offer is consummated. See "The
Exchange Offer -- Purpose and Effect of the
Exchange Offer." The Exchange Notes will evidence
the same debt as the Old Notes (which they replace)
and will be entitled to the benefits of the
Indenture. See "Description of Exchange Notes." The
Old Notes and/or the Exchange Notes, whichever was,
is or will be outstanding in the particular
context, are referred to herein collectively as the
"Notes."
Securities Offered......... $75,000,000 aggregate principal amount of Series B
11 1/4% Senior Subordinated Notes due 2007 of the
Company.
Maturity Date.............. April 1, 2007.
Interest Payment Dates..... April 1 and October 1 of each year, commencing
October 1, 1997.
Ranking.................... The Exchange Notes will constitute unsecured debt
obligations of the Company and will rank
subordinate in right of payment to all existing and
future Senior Debt including any Indebtedness (as
defined) under the Credit Agreement. At March 28,
1997, after giving pro forma effect to the
Transactions, there would have been no outstanding
indebtedness to which the Notes would have been
subordinated. However, the Company can borrow up to
approximately $75 million under the terms of the
Credit Agreement, all of which would constitute
Senior Debt. See "Description of New Credit
Facility."
Exchange Guarantee......... The Exchange Notes will be fully and
unconditionally guaranteed on a senior subordinated
basis by the Guarantor. The form and terms of the
Exchange Guarantee is substantially identical to
the form and terms of the Old Guarantee. The
Exchange Guarantee will be a general unsecured
obligation of the Guarantor and will rank
subordinate in right of payment to all existing and
future Senior Debt of such Guarantor, including
such Guarantor's guarantee of Indebtedness under
the Credit Agreement. The Exchange Guarantee will
rank pari passu in right of payment with any other
senior subordinated indebtedness of the Guarantor.
The Old Guarantee and/or the Exchange Guarantee,
whichever was, is or will be outstanding in the
particular context, are referred to herein
collectively as the "Guarantee."
Optional Redemption........ The Exchange Notes will be redeemable at the option
of the Company, in whole or in part, at any time on
or after April 1, 2002, at the redemption prices
set forth herein, plus accrued and unpaid interest
to the redemption date. In addition, on or prior to
April 1, 2000, the Company may redeem up to 33% in
aggregate principal amount of the Notes at a
redemption price of 111.25% of the principal amount
thereof, plus accrued and unpaid interest to the
redemption date, with the net cash proceeds
received by the Company from one or more public
offerings of its Capital Stock (as defined) (other
than Disqualified Stock
10
<PAGE> 13
(as defined)); provided, however, that at least
$60.0 million in aggregate principal amount of the
Notes remains outstanding immediately after any
such redemption (excluding any Notes owned by the
Company or any of its Affiliates (as defined)). See
"Description of Exchange Notes -- Optional
Redemption."
Change of Control.......... Upon a Change of Control (as defined), each holder
of the Exchange Notes may require the Company to
repurchase such holder's Exchange Notes, in whole
or in part, at a purchase price equal to 101% of
the principal amount thereof plus accrued and
unpaid interest to the purchase date. See
"Description of Exchange Notes -- Change of
Control." The Credit Agreement prohibits the
purchase of outstanding Exchange Notes prior to
repayment of the borrowings under the Credit
Agreement. There can be no assurance that upon a
Change of Control the Company will have sufficient
funds to repurchase any of the Exchange Notes. See
"Description of New Credit Facility."
Modification of
the Indenture............ The Company and the Trustee, with the consent of
the holders of a majority in aggregate principal
amount of the outstanding Notes, may amend the
Indenture; provided, however, that consent is
required from the holder of each Note affected
thereby in instances such as reductions in the
amount or changes in the timing of interest
payments, reductions in the principal and changes
in the maturity, redemption or repurchase dates of
the Notes. See "Description of Exchange
Notes -- Modification and Waiver."
Events of Default.......... An Event of Default (as defined) occurs under the
Indenture in instances such as the failure to pay
principal when due, the failure to pay any interest
within 30 days of when due and payable, the failure
to perform or comply with various covenants under
the Indenture or the default under the terms of
certain other indebtedness of the Company. See
"Description of Exchange Notes -- Events of
Default."
Covenants.................. The Indenture contains certain covenants that,
among other things, limits the ability of the
Company or any of its Restricted Subsidiaries (as
defined) to incur additional Indebtedness, make
certain Restricted Payments (as defined) and
Investments (as defined), create Liens (as
defined), permit dividend or other payment
restrictions to apply to Subsidiaries (as defined),
enter into certain transactions with Affiliates or
Related Persons (as defined) or consummate certain
merger, consolidation or similar transactions. In
addition, in certain circumstances, the Company
will be required to offer to purchase Exchange
Notes at 100% of the principal amount thereof with
the net proceeds of certain asset sales. These
covenants are subject to a number of significant
exceptions and qualifications. See "Description of
Exchange Notes."
For additional information regarding the Exchange Notes, see "Description
of Exchange Notes."
RISK FACTORS
Prospective investors should carefully consider the specific matters set
forth under "Risk Factors" as well as the other information and data included in
this Prospectus in evaluating the Exchange Offer and an investment in the
Exchange Notes.
11
<PAGE> 14
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
The following table sets forth (i) summary historical consolidated financial
information of the Company for the periods provided below, and (ii) adjusted pro
forma financial information for the Company as of and for the year ended June
28, 1996 and as of and for the nine month period ended March 28, 1997. The
information contained in the table has been derived from, and should be read in
conjunction with, the audited consolidated financial statements and unaudited
interim consolidated financial statements of the Company, including the notes
thereto. Unaudited interim data reflect, in the opinion of the Company's
management, all adjustments (consisting solely of normal recurring adjustments)
considered necessary for a fair presentation of results for such interim
periods. Results of operations for the unaudited interim periods are not
necessarily indicative of the results that may be expected for any other interim
or annual period. In addition, on March 18, 1994, the Company was acquired by
current ownership, in a transaction accounted for under the purchase method of
accounting. The financial statements for the periods prior to March 18, 1994 are
presented on the predecessors' basis of accounting and accordingly, are not
comparable to the periods subsequent to March 18, 1994. The accompanying pro
forma unaudited condensed statements of operations are based upon the
consolidated financial statements of Tekni-Plex and Dolco, adjusted to give
effect to the Dolco acquisition (accounted for as a purchase) and the
Transactions (as defined), as if the acquisition and the Transactions had
occurred at the beginning of the periods presented. The accompanying pro forma
unaudited condensed balance sheet data are adjusted to give effect to the
Transactions as if they had occurred on March 28, 1997.
<TABLE>
<CAPTION>
ADJUSTED
PRO FORMA (A)
FOR THE PERIODS --------------------
----------------------------------- NINE
YEAR YEARS ENDED NINE MONTHS ENDED YEAR MONTHS
ENDED JAN. 1 TO MAR. 19 TO -------------------- -------------------- ENDED ENDED
DEC. 31, MAR. 18, JUL. 1, JUN. 30, JUN. 28, MAR. 29, MAR. 28, JUN. 28, MAR. 28,
1993 1994 1994 1995 1996 1996 1997 1996 1997
-------- --------- ---------- -------- -------- -------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net sales........... $44,878 $ 9,418 $12,723 $44,688 $ 80,917 $ 47,248 $109,828 $135,800 $109,828
Gross profit........ 8,274 1,494 2,762 9,747 18,582 9,669 28,589 28,708 28,589
Income from
operations........ 3,198 892 1,241 4,933 8,243 4,355 16,594 11,753 16,594
Interest expense.... 160 22 1,141 4,322 5,816 3,663 6,068 9,143 6,830
Other (income)
expense........... 7 45 62 234 469 252 524 336 524
Pre-tax income...... 3,031 825 38 377 1,958 440 10,002 2,274 9,240
Income tax provision
(b)............... 267 56 17 211 982 220 3,555 976 3,265
Net income.......... $ 2,764 $ 769 $ 21 $ 166 $ 976 $ 220 $ 6,447 $ 1,298 $ 5,975
OTHER FINANCIAL
DATA:
EBITDA (c).......... $ 3,800 $ 985 $ 1,988 $ 7,922 $ 14,157 $ 7,317 $ 22,881 $ 20,262 $ 22,881
EBITDA margin (c)... 8.5% 10.5% 15.6% 17.7% 17.5% 15.5% 20.8% 14.9% 20.8%
Depreciation and
amortization...... $ 608 $ 138 $ 879 $ 3,462 $ 6,821 $ 3,393 $ 7,259 $ 8,845 $ 7,259
Capital
expenditures...... 1,423 420 157 614 2,275 1,026 2,735 2,275 2,735
Cash flows:
From
operations.... 3,512 (564) 1,147 2,354 6,568 (4,329) 13,290 6,568 (4,329)
From
investing..... (1,871) 315 (45,567) (614) (49,522) (48,272) (2,773) (49,522) (48,272)
From
financing..... (570) (1,121) 44,465 (1,451) 43,669 52,289 (9,737) 43,669 52,289
RATIOS:
Ratio of earnings to
fixed charges
(d)............... 19.9x 38.5x 1.0x 1.1x 1.3x 1.1x 2.6x 1.2x 2.4x
Ratio of EBITDA to
interest
expense........... 2.2 3.4
BALANCE SHEET DATA
(END OF PERIOD):
Working capital..... $ 6,023 $ 4,565 $ 1,673 $ 3,173 $ 11,660 $ 7,508 $ 13,290 $ 26,125
Total assets........ 15,701 14,900 53,724 53,415 121,770 125,873 117,678 127,177
Total debt
(including current
portion).......... 1,616 588 36,396 35,004 70,436 78,020 60,801 75,989
Stockholders'
equity............ 10,086 10,855 11,521 11,687 24,162 23,407 30,609 27,843
</TABLE>
- ---------------
(a) Amounts represent the pro forma statement of operations data, balance sheet
data and other financial data of the Company after giving effect to the
acquisition of Dolco and the Transactions in the manner described under "Pro
Forma Unaudited Condensed Financial Information."
(b) Prior to the acquisition of Tekni-Plex by the current owners, the previous
owners elected to be taxed as an "S" corporation for federal income tax
purposes. Accordingly, there was no provision for federal income taxes for
periods prior to March 18, 1994 as such income was reported on the federal
income tax returns of the shareholders.
(c) EBITDA is defined as net income before interest, income taxes, depreciation
and amortization. EBITDA is presented because it is a widely accepted
financial indicator of a company's ability to incur and service debt.
However, EBITDA should not be considered in isolation as a substitute for
net income or cash flow data prepared in accordance with generally accepted
accounting principles or as a measure of the Company's profitability or
liquidity. In addition, this measure of EBITDA may not be comparable to
similar measures reported by other companies. EBITDA margin is calculated as
the ratio of EBITDA to net sales for the period. For fiscal 1996,
amortization included $522 related to the write off of prior unamortized
debt costs.
(d) For purposes of the ratio of earnings to fixed charges, (i) earnings are
calculated as the Company's earnings before income taxes and fixed charges
and (ii) fixed charges include interest on all indebtedness, amortization of
deferred financing costs and accretion of all warrants.
12
<PAGE> 15
RISK FACTORS
Holders of Old Notes should consider carefully the following factors as
well as the other information and data included in this Prospectus prior to
tendering their Old Notes in the Exchange Offer.
SUBSTANTIAL LEVERAGE; RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S
INDEBTEDNESS
On a pro forma basis after giving effect to the Transactions, the Company's
total debt and stockholder's equity would have been $76.0 million and $27.8
million, respectively, as of March 28, 1997, and the Company and its subsidiary
would have had approximately $1.0 million of long-term indebtedness outstanding
in addition to the Notes. On a pro forma basis after giving effect to the
Transactions, the Company's annual debt service would have been $8.5 million and
the ratio of earnings to fixed charges would have been 1.2 to 1 for the fiscal
year ended June 28, 1996.
On a pro forma basis after giving effect to the Transactions as of March
28, 1997, and subject to certain restrictions, the Company could have borrowed
up to $75.0 million of secured senior indebtedness under the New Credit Facility
without requiring the consent of the holders of Exchange Notes. If the entire
$75.0 million under the New Credit Facility had been outstanding from the
beginning of fiscal year 1996, the Company's annual debt service (all interest)
for such fiscal year would have increased by approximately $6.4 million based on
an assumed fixed interest rate of 8.5%. A substantial increase in the Company's
leverage and obligations could have important consequences to the holders of
Exchange Notes, including: (i) the impairment of the Company's ability to obtain
additional financing for working capital, capital expenditures, acquisitions or
other purposes; (ii) the use of a substantial portion of the Company's cash flow
from operations for debt service; (iii) the competitive disadvantages that may
result from the Company being more highly leveraged than some of its
competitors; and (iv) making the Company more vulnerable to economic downturns
and limiting its ability to withstand competitive pressures.
In addition, the Company's operating flexibility with respect to certain
business matters will be limited by covenants contained in the Indenture and the
New Credit Facility. Among other things, these covenants will limit the ability
of the Company and its subsidiaries to incur additional indebtedness, create
liens upon assets, apply the proceeds from disposal of assets, make dividend
payments and other distributions on capital stock and redeem capital stock.
There can be no assurance that such covenants will not adversely affect the
Company's ability to finance its future operations or capital needs or to engage
in other business activities that may be in the interest of the Company. See
"Description of New Credit Facility" and "Description of Exchange
Notes -- Covenants."
The Company expects that its cash flow will be sufficient to cover its
expenses, including fixed charges. However, no assurance can be given that the
Company's operating results will be sufficient for the Company to meet such
obligations. The Company's ability to satisfy its obligations will be dependent
upon its future performance, which is subject to prevailing economic conditions
and financial, business and other factors, including factors beyond the
Company's control.
RAW MATERIAL PRICE VOLATILITY AND AVAILABILITY
The Company's polystyrene foam products are manufactured from high heat
crystal polystyrene resin ("polystyrene resin"). Polystyrene resin is a
commodity petrochemical that is readily available in bulk quantities from
numerous large, vertically integrated chemical companies. The Company purchases
polystyrene resin from several of the top suppliers. Prices for polystyrene
resin have fluctuated in the past and may continue to do so in the future.
Historically, the Company has been able to pass on substantially all of the
price increases in raw materials to its customers. However, there can be no
assurance that the Company will be able to do so in the future. If raw material
prices increase and the Company is unable to pass such price increases on to its
customers, employ successful hedging strategies, enter into supply contracts at
favorable prices or buy on the spot market at favorable prices, the Company's
profitability may be adversely affected.
A key raw material used in manufacturing the Company's blister packaging
materials is Aclar(R), a proprietary material produced by Allied Signal. Allied
Signal is currently the sole manufacturer and supplier
13
<PAGE> 16
of Aclar(R). There is no long-term supply contract with Allied Signal and any
interruption in the supply of this material could disrupt production of the
Company's blister packaging materials. To the extent that the Company's supply
of raw materials is hindered and no alternative source can be found, the
Company's profitability may be adversely affected.
COMPETITION
Many of the Company's competitors are larger and, in some cases, have
significantly greater resources than the Company. Within the polystyrene foam
processor tray market, the Company competes principally with Tenneco Packaging
and W.R. Grace, both of which have significantly greater financial resources
than the Company and together control the largest share of this market. In the
egg packaging market, the Company's primary competitor is Tenneco Packaging
which manufactures pulp-based egg cartons. The Company's clear, high-barrier
pharmaceutical blister packaging products primarily compete with solution-coated
and foil-based products manufactured by various competitors including Klockner
Pentaplast. See "Business -- Competition." While the packaging industry overall
is relatively large, the market for high performance pharmaceutical-type
packaging materials is considerably smaller, and the Company's achievement of
its internal expansion goals assumes expansion of its customers' volume for its
products, finding new applications for its existing high performance materials,
and development of new materials for new applications.
INTEGRATION OF ACQUISITIONS
As part of its business strategy, the Company intends to pursue suitable
acquisitions. Nonetheless, there can be no assurance that the Company will
identify suitable acquisitions or that such acquisitions can be made at an
acceptable price. In the event the Company acquires additional businesses, it
may require substantial capital. Although the Company will be able to borrow
under the New Credit Facility under certain circumstances to fund acquisitions,
there can be no assurance that such borrowings will be available in sufficient
amount or that other financing will be available in amounts and on terms that
the Company deems acceptable. Furthermore, the integration of acquired
businesses may result in unforeseen difficulties that require a disproportionate
amount of management's attention and other Company resources. There can be no
assurance that the Company will continue to achieve synergies comparable to
those from recent acquisitions.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the management experience and continued
services of its executive officers, including Dr. F. Patrick Smith and Kenneth
W.R. Baker. See "Management." 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.
ENVIRONMENTAL MATTERS
Like similar companies, the Company's facilities, operations, and
properties are subject to federal, state, and local environmental laws and
regulations. As a result, the Company is involved from time to time in
administrative or legal proceedings relating to environmental matters. There can
be no assurance that the aggregate amount of future compliance costs and other
environmental liabilities will not be material. The Company cannot predict what
environmental legislation or regulations will be enacted in the future, how
existing or future laws or regulations will be administered or interpreted or
what environmental conditions may be found to exist. Enactment of more stringent
laws or regulations or more strict interpretation of existing laws and
regulations may require additional expenditures by the Company, some of which
could be material. See "Business -- Environmental Matters."
Prior to the 1994 acquisition of the Company, public awareness and interest
in environmental issues adversely affected the polystyrene foam packaging
industry. In particular, in 1990, McDonald's discontinued its well-recognized
polystyrene foam clam shell sandwich package in favor of paper packaging. In
response, various recycling programs were commenced in the United States.
Although the Company believes that the environmental concerns that negatively
affected demand for these products in the 1980s have subsided and, to
14
<PAGE> 17
some extent, given way to a view by many that polystyrene foam does not have
significantly worse environmental problems than other materials, there can be no
assurance that public awareness and interest in environmental issues will not
adversely affect the plastics and polystyrene industry.
CONTROL OF THE COMPANY
The Company is owned by Tekni-Plex Partners L.P., a limited partnership
organized under the laws of the State of Delaware, and its related investors
(the "Tekni-Plex Partnership"). Tekni-Plex Partnership beneficially owns 100
percent of the outstanding shares of the Company and 97.5% of the Company on a
fully diluted basis and controls the affairs and policies of the Company.
Tekni-Plex Partnership is controlled by MST/TP Partners, L.P. ("MST/TP L.P."),
which in turn is controlled, directly or indirectly, by J. Andrew McWethy, Barry
A. Solomon, and Stephen A. Tuttle, who are all directors of the Company.
Circumstances may occur in which the interests of Tekni-Plex Partnership, MST/TP
L.P. and the three individuals could be in conflict with the interests of the
holders of the Exchange Notes. In addition, Tekni-Plex Partnership may have an
interest in pursuing acquisitions, divestitures or other transactions that, in
its judgment, could enhance the value of its individual partners' equity
investments in the partnership, even though such transactions may involve risks
to the holders of the Exchange Notes.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of Exchange Notes
may require the Company to repurchase all or a portion of such holder's Exchange
Notes. If a Change of Control were to occur, there can be no assurance that the
Company would have sufficient financial resources, or would be able to arrange
financing to pay the repurchase price for all Exchange Notes tendered by holders
thereof. Further, the provisions of the Indenture may not afford holders of
Exchange Notes protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction involving the
Company that may adversely affect holders of Exchange Notes, if such transaction
does not result in a Change of Control. In addition, the terms of the New Credit
Facility may limit the Company's ability to repurchase any Exchange Notes and
will also identify certain events that would constitute a Change of Control, as
well as certain other events with respect to the Company or certain of its
subsidiaries, that would constitute an event of default under the New Credit
Facility. Any future credit agreements or other agreements relating to other
indebtedness to which the Company becomes a party may contain similar
restrictions and provisions. In the event a Change of Control occurs at a time
when the Company is prohibited from repurchasing Exchange Notes, the Company
could seek the consent of its lenders to repurchase Exchange Notes or could
attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such consent or repay such borrowing, the Company would
remain prohibited from repurchasing Exchange Notes. In such case, the Company's
failure to repurchase tendered Exchange Notes would constitute an Event of
Default under the Indenture, which would, in turn, constitute a further default
under certain of the Company's existing debt agreements and may constitute a
default under the terms of other indebtedness that the Company may enter into
from time to time. See "Description of Exchange Notes -- Change of Control."
RANKING OF THE EXCHANGE NOTES
The Exchange Notes will be senior subordinated unsecured obligations of the
Company, and will rank subordinate in right of payment to all existing and
future senior indebtedness of the Company. In addition, the Exchange Notes will
be effectively subordinated in right of payment to all existing and future
secured indebtedness of the Company and the Company's subsidiaries, including
indebtedness under the New Credit Facility. Loans under the New Credit Facility
will be secured by substantially all of the assets of the Company. As of March
28, 1997, after giving pro forma effect to the Transactions, there would have
been no outstanding indebtedness to which the Exchange Notes would have been
subordinated. However, the Company could have borrowed up to $75.0 million of
indebtedness under the New Credit Facility and, without the consent of the
holders of the Exchange Notes, may increase such facility to $100.0 million, all
of which would constitute Senior Debt. Further, the Company intends to borrow
under such facility in the relative short term. The Guarantee will be senior
subordinated unsecured obligations of the Guarantor, and
15
<PAGE> 18
will rank subordinate in right of payment to all existing and future senior
indebtedness of the Guarantor, including its guarantee under the New Credit
Facility. Under the terms of the Indenture, the Company will be permitted, upon
the satisfaction of certain conditions, to incur additional senior indebtedness.
See "Description of New Credit Facility," "Description of Exchange
Notes -- Ranking" and "-- Covenants."
LACK OF PUBLIC MARKET FOR THE NOTES
Prior to the Exchange Offer, there has not been any public market for the
Old Notes. The Old Notes have not been registered under the Securities Act and
will be subject to restrictions on transferability to the extent that they are
not exchanged for Exchange Notes by holders who are entitled to participate in
the Exchange Offer. The holders of Old Notes (other than any such holder that is
an "affiliate" of the company within the meaning of Rule 405 under the
Securities Act) who are not eligible to participate in the Exchange Offer are
entitled to certain registration rights, and the Company is required to file a
Shelf Registration Statement with respect to such Old Notes. The Exchange Notes
will constitute a new issue of securities with no established trading market,
and there can be no assurance as to (i) the liquidity of any such market that
may develop, (ii) the ability of holders of Exchange Notes to sell their
Exchange Notes or (iii) the price at which the holders of Exchange Notes would
be able to sell their Exchange Notes. If such a market were to exist, the
Exchange Notes could trade at prices that may be higher or lower than their
principal amount or purchase price, depending on many factors, including
prevailing interest rates, the market for similar notes and the financial
performance of the Company and its subsidiary. The Company does not intend to
list the Exchange Notes on any national securities exchange or to seek the
admission thereof to trading in the National Association of Securities Dealers
Automated Quotation System. The Company has been advised by the Initial
Purchaser that, following completion of the Exchange Offer, the Initial
Purchaser presently intends to make a market in the Exchange Notes. However, the
Initial Purchaser is not obligated to do so, and any market-making activity with
respect to the Exchange Notes may be discontinued at any time without notice. In
addition, such market-making activity will be subject to the limits imposed by
the Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and may be limited during such exchange offer or the pendency
of an applicable shelf registration statement. There can be no assurance that an
active trading market will develop for the Exchange Notes or that such trading
market will be liquid. If a trading market does not develop or is not
maintained, holders of the Exchange Notes may experience difficulty in reselling
the Exchange Notes or may be unable to sell them at all. If a market for the
Exchange Notes develops, any such market may be discontinued at any time.
EXCHANGE OFFER PROCEDURES
Issuance of the Exchange Notes in exchange for the Old Notes pursuant to
the Exchange Offer will be made only after a timely receipt by the Company of
such Old Notes, a properly completed and duly executed Letter of Transmittal and
all other required documents. Therefore, holders of the Old Notes desiring to
tender such Old Notes in exchange for Exchange Notes should allow sufficient
time to ensure timely delivery. The Company is under no duty to give
notification of defects or irregularities with respect to the tenders of Old
Notes for exchange. Old Notes that are not tendered or are tendered but not
accepted will, following the consummation of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer thereof and, upon
consummation of the Exchange Offer, certain registration rights under the
Registration Rights Agreement will terminate. In addition, any holder of Old
Notes who tenders in the Exchange Offer for the purpose of participating in a
distribution of the Exchange Notes may be deemed to have received restricted
securities and, if so, will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transactions. Each Participating Broker-Dealer that receives Exchange
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such Participating Broker-Dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution." To the extent that Old Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Old Notes could be adversely affected. See "The Exchange Offer."
16
<PAGE> 19
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement. The Company will not
receive any cash proceeds from the issuance of the Exchange Notes in the
Exchange Offer.
On April 4, 1997, the gross proceeds of $75.0 million from the issuance of
the Old Notes and the net proceeds of approximately $18.2 million from the
additional contribution of capital to the Company were used to: (i) repay all
outstanding obligations under the then Existing Credit Facility (approximately
$36.8 million); (ii) repay the then existing senior subordinated notes,
including accrued interest and the applicable premium, (approximately $25.2
million); (iii) repurchase the then outstanding warrants ($20.0 million); and
(iv) pay transaction expenses related to the issuance of Old Notes
(approximately $4.2 million); and the remainder (approximately $8.0 million) was
retained for general corporate purposes. The issuance of the Old Notes, the
execution of the New Credit Facility and the additional contribution of capital
to the Company, collectively with the use of proceeds thereof set forth above,
are referred to herein as the "Transactions."
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as
of March 28, 1997 and the pro forma capitalization of the Company on such date
after giving effect to the Transactions. See "Use of Proceeds."
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
------- ---------
(DOLLARS IN
THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Long-term debt (including current portion):
Existing Credit Facility.............................................. $36,500 $ --
New Credit Facility(a)................................................ -- --
Existing senior subordinated notes(b)................................. 23,312 --
11 1/4% Senior Subordinated Notes due 2007............................ -- 75,000
Other................................................................. 989 989
------- -------
Total long-term debt.................................................... 60,801 75,989
------- -------
Redeemable warrants..................................................... 2,227 --
Stockholder's equity:
Common stock and additional paid-in capital........................... 23,000 41,248
Retained earnings(c).................................................. 7,609 (13,405)
------- -------
Total stockholder's equity......................................... 30,609 27,843
------- -------
Total capitalization.......................................... $93,637 $ 103,832
======= =======
</TABLE>
- ---------------
(a) On a pro forma basis as of March 28, 1997, the Company would have had
approximately $75,000 unused and available, subject to certain restrictions,
under the New Credit Facility.
(b) Before prepayment penalty and net of discounts.
(c) Reflects loss on early extinguishment of notes, repurchase of warrants and
write-off of debt issue costs.
17
<PAGE> 20
SELECTED HISTORICAL FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
The following table sets forth selected historical consolidated financial
information of the Company, and has been derived from and should be read in
conjunction with the audited consolidated financial statements and unaudited
interim consolidated financial statements, including the notes thereto.
Unaudited interim data reflect, in the opinion of the Company's management, all
adjustments (consisting solely of normal recurring adjustments) considered
necessary for a fair presentation of results for such interim periods. Results
of operations for the unaudited interim periods are not necessarily indicative
of the results that may be expected for any other interim or annual period. In
addition, on March 18, 1994, Tekni-Plex was acquired by the current owners, in a
transaction accounted for under the purchase method of accounting. The financial
statements for the periods prior to March 18, 1994 are presented on the
predecessors' basis of accounting and accordingly, are not comparable to the
periods subsequent to March 18, 1994.
<TABLE>
<CAPTION>
FOR THE PERIODS
----------------------- YEARS ENDED NINE MONTHS ENDED
YEARS ENDED DEC. 31, JAN. 1 TO MAR. 19 TO -------------------- --------------------
----------------------------- MAR. 18, JUL. 1, JUN. 30, JUN. 28, MAR. 29, MAR. 28,
1991 1992 1993 1994 1994 1995 1996 1996 1997
------- ------- ------- --------- ---------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $36,773 $43,453 $44,878 $ 9,418 $12,723 $44,688 $ 80,917 $ 47,248 $109,828
Cost of goods sold...... 31,405 35,860 36,604 7,924 9,961 34,941 62,335 37,579 81,239
Gross profit............ 5,368 7,593 8,274 1,494 2,762 9,747 18,582 9,669 28,589
Selling, general and
administrative
expenses.............. 2,783 4,057 5,076 602 1,521 4,814 10,339 5,314 11,995
Income from
operations............ 2,585 3,536 3,198 892 1,241 4,933 8,243 4,355 16,594
Interest expense........ 338 196 160 22 1,141 4,322 5,816 3,663 6,068
Other (income)
expense............... (2) (33) 7 45 62 234 469 252 524
Pre-tax income.......... 2,249 3,373 3,031 825 38 377 1,958 440 10,002
Income tax
provision(a).......... 190 305 267 56 17 211 982 220 3,555
Net income.............. $ 2,059 $ 3,068 $ 2,764 $ 769 $ 21 $ 166 $ 976 $ 220 $ 6,447
OTHER FINANCIAL DATA:
EBITDA(b)............... $ 3,268 $ 4,204 $ 3,800 $ 985 $ 1,988 $ 7,922 $ 14,157 $ 7,317 $ 22,881
EBITDA margin(b)........ 8.9% 9.7% 8.5% 10.5% 15.6% 17.7% 17.5% 15.5% 20.8%
Depreciation and
amortization.......... $ 681 $ 636 $ 608 $ 138 $ 879 $ 3,462 $ 6,821 $ 3,393 $ 7,259
Capital expenditures.... 58 502 1,423 420 157 614 2,275 1,026 2,735
Cash flows:
From operations..... 2,209 2,181 3,512 (564) 1,147 2,354 6,568 (4,329) 13,290
From investing...... (349) (1,295) (1,871) 315 (45,567) (614) (49,522) (48,272) (2,773)
From financing...... (1,849) (680) (570) (1,121) 44,465 (1,451) 43,669 52,289 (9,737)
Ratio of earnings to
fixed charges(c)...... 7.7x 18.2x 19.9x 38.5x 1.0x 1.1x 1.3x 1.1x 2.6x
Ratio of EBITDA to
interest expense...... 1.7 1.8 2.4 2.0 3.8
BALANCE SHEET DATA:
Working capital......... $ 3,479 $ 5,307 $ 6,023 $ 4,565 $ 1,673 $ 3,173 $ 11,660 $ 7,508 $ 13,290
Total Assets............ 11,820 13,204 15,701 14,900 53,724 53,415 121,770 125,873 117,678
Total debt (including
current portion)...... 2,208 1,913 1,616 588 36,396 35,004 70,436 78,020 60,801
Stockholders' equity.... 4,885 7,565 10,086 10,855 11,521 11,687 24,162 23,407 30,609
</TABLE>
- ---------------
(a) Prior to the acquisition of Tekni-Plex by the current owners, the previous
owners elected to be taxed as an "S" corporation for federal income tax
purposes. Accordingly, there was no provision for federal income taxes for
periods prior to March 18, 1994 as such income was reported on the federal
income tax returns of the shareholders.
(b) EBITDA is defined as net income before interest, income taxes, depreciation
and amortization. EBITDA is presented because it is a widely accepted
financial indicator of the Company's ability to incur and service debt.
However, EBITDA should not be considered in isolation as a substitute for
net income or cash flow data prepared in accordance with generally accepted
accounting principles or as a measure of a company's profitability or
liquidity. In addition, this measure of EBITDA may not be comparable to
similar measures reported by other companies. EBITDA margin is calculated as
the ratio of EBITDA to net sales for the period. For fiscal 1996,
amortization included $522 related to the write off of prior unamortized
debt costs.
(c) For purposes of the ratio of earnings to fixed charges, (i) earnings are
calculated as the Company's earnings before income taxes and fixed charges
and (ii) fixed charges include interest on all indebtedness, amortization of
deferred financing costs and accretion of the warrant.
18
<PAGE> 21
PRO FORMA UNAUDITED CONDENSED FINANCIAL INFORMATION
The accompanying pro forma unaudited condensed statements of operations are
based upon the historical consolidated financial statements of Tekni-Plex and
Dolco, adjusted to give effect to the Dolco acquisition (accounted for as a
purchase) and the Transactions, as if the acquisition and the Transactions had
occurred at the beginning of the periods presented. The accompanying pro forma
unaudited condensed balance sheet is adjusted to give effect to the Transactions
as if they had occurred on March 28, 1997. The pro forma condensed statements of
operations are not necessarily indicative of the results that would have been
obtained if the acquisition and the Transactions had occurred on the dates
indicated or for any future period or date. The pro forma adjustments give
effect to available information and assumptions that the Company believes are
reasonable. The pro forma condensed financial information should be read in
conjunction with the Company's historical consolidated financial statements and
notes thereto and the historical consolidated financial statements of Dolco and
the notes thereto. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
PRO FORMA UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 28, 1996
--------------------------------------------------------------------------
ACQUISITION TRANSACTION ADJUSTED
TEKNI-PLEX(A) DOLCO(A) ADJUSTMENTS ADJUSTMENTS PRO FORMA
-------------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net sales...................... $ 80,917 $ 54,883 $ -- $ -- $ 135,800
Cost of sales.................. 62,335 43,664 1,093(b) -- 107,092
------- ------- ------- ----- --------
Gross profit................... 18,582 11,219 (1,093) -- 28,708
Selling, general and
administrative expenses...... 10,339 7,785 (1,169)(c) -- 16,955
------- ------- ------- ----- --------
Income from operations......... 8,243 3,434 76 -- 11,753
Other expenses (income):
Interest..................... 5,816 198 2,242(d) 887(f) 9,143
Other........................ 469 (133) -- -- 336
------- ------- ------- ----- --------
Income before tax provision for
income taxes................. 1,958 3,369 (2,166) (887) 2,274
Provision for income taxes..... 982 (1,324) 1,655(e) (337)(g) 976
------- ------- ------- ----- --------
Net income........... $ 976 $ 4,693 $(3,821) $(550) $ 1,298
======= ======= ======= ===== ========
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 28, 1997
--------------------------------------------
TRANSACTION ADJUSTED
TEKNI-PLEX(A) ADJUSTMENTS PRO FORMA
-------------- ----------- ---------
<S> <C> <C> <C>
Net sales.............................................. $109,828 $ -- $ 109,828
Cost of sales.......................................... 81,239 -- 81,239
------- -------
Gross profit........................................... 28,589 -- 28,589
Selling, general and administrative expenses........... 11,995 -- 11,995
------- ------- -------
Income from operations................................. 16,594 -- 16,594
Other expenses (income):
Interest............................................. 6,068 762(f) 6,830
Other................................................ 524 -- 524
------- ------- -------
Income before tax provision for income taxes........... 10,002 (762) 9,240
Provision for income taxes............................. 3,555 (290)(g) 3,265
------- ------- -------
Net income................................... $ 6,447 $(472) $ 5,975
======= ======= =======
</TABLE>
See Notes to Pro Forma Unaudited Condensed Statements of Operations.
19
<PAGE> 22
NOTES TO PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
Adjustments to reflect the acquisition of Dolco as of July 1, 1995 are to
record the following:
(a) Dolco information in the Dolco column is for the period from July 1,
1995 to February 21, 1996. Subsequent to February 21, 1996, Dolco
information is included in the statement of operations of Tekni-Plex.
(b) The increase in depreciation of $1,093 as the result of the write-up of
the fixed assets of $15,076 to fair market value.
(c) The increase in depreciation of $22 as the result of the write-up of the
fixed assets to fair market value and the increase in amortization of
$909 relating to goodwill of $14,044 as a result of the acquisition is
offset by the reduction of administrative expenses of $2,100 resulting
from the elimination of redundant costs related to the existence of a
separate public company. Such redundant costs include duplicate
executive and administrative personnel, reports to stockholders, audit
fees, bank fees, and others.
(d) The increase in interest expense of $2,242 to reflect the increased debt
as a result of the acquisition.
(e) The tax benefit of $823 as a result of adjustments (b), (c) and (d)
above, calculated at the Company's marginal effective tax rate of 38%,
is offset by the elimination of the Dolco tax benefit and recording
taxes of $2,478, calculated at the same marginal effective tax rate.
Adjustments to reflect the Transaction, as if it had occurred as of the
beginning of the periods presented, are to record the following:
(f) The pro forma adjustments to interest expense reflect the following:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
JUNE 28, MARCH 28,
1996 1997
---------- ------------
<S> <C> <C>
Elimination of historical interest expense on the following:
Existing Credit Facility..................................................... $ (4,747) $ (3,265)
Existing senior subordinated notes........................................... (2,880) (2,160)
Amortization of existing deferred financing costs and warrants............... (498) (447)
Interest expense on the Notes at a rate of 11.25%............................ 8,438 6,329
Interest expense on the New Credit Facility at an assumed rate of 7.5%....... 154 --
Amortization of estimated net deferred financing costs....................... 420 305
------- --------
$ 887 $ 762
======= ========
</TABLE>
The Pro Forma Unaudited Condensed Statement of Operations exclude the effect
of an extraordinary loss on the early extinguishment of debt of $21,014 that
the Company will record upon the consummation of the Transactions.
(g) The tax benefit of $337 and $290 for the year ended June 28, 1996 and
the nine months ended March 28, 1997, respectively, on adjustment (f),
calculated at the Company's marginal effective tax rate of 38%
20
<PAGE> 23
PRO FORMA UNAUDITED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
AT MARCH 28, 1997
-----------------------------------------------------------
TRANSACTION OTHER ADJUSTED
COMPANY PROCEEDS (a) ADJUSTMENTS PRO FORMA
-------- ------------ ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current:
Cash................................... $ 1,829 $ 89,048 $ (81,700)(b,c) $ 9,177
Accounts receivable, net of an
allowance........................... 13,772 -- -- 13,772
Inventory.............................. 13,493 -- -- 13,493
Deferred income taxes.................. 1,615 -- -- 1,615
Prepaid expenses and other current
assets.............................. 1,971 -- 1,291(b) 3,262
-------- ------- -------- --------
Total current assets................ 32,680 89,048 (80,409) 41,319
Property, plant and equipment, net....... 42,678 -- -- 42,678
Intangible assets, net of accumulated
amortization........................... 37,656 -- -- 37,656
Deferred charges, net of accumulated
amortization........................... 4,242 4,200 (3,340)(d) 5,102
Other assets............................. 422 422
-------- ------- -------- --------
$117,678 $ 93,248 $ (83,749) $ 127,177
======== ======= ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt...... $ 3,500 $ -- $ (3,500)(b) $ --
Accounts payable-trade................. 5,730 -- -- 5,730
Accrued payroll and benefits........... 2,337 -- -- 2,337
Accrued interest....................... 1,045 -- -- 1,045
Accrued liabilities-other.............. 6,082 -- -- 6,082
Income taxes payable................... 696 -- (696)(b,d) --
-------- ------- -------- --------
Total current liabilities........... 19,390 -- (4,196) 15,194
-------- ------- -------- --------
Long-term debt........................... 57,301 -- (56,312)(b) 989
Notes.................................... -- 75,000 -- 75,000
Deferred income taxes.................... 7,450 -- -- 7,450
Other liabilities........................ 701 -- -- 701
Redeemable warrants...................... 2,227 -- (2,227)(c) --
Stockholder's equity:
Capital stock and additional paid-in
capital............................. 23,000 18,248 -- 41,248
Retained earnings...................... 7,609 -- (21,014)(b,c,d) (13,405)
-------- ------- -------- --------
Total stockholder's equity............... 30,609 18,248 (21,014) 27,843
-------- ------- -------- --------
$117,678 $ 93,248 $ (83,749) $ 127,177
======== ======= ======== ========
</TABLE>
See Notes to Pro Forma Unaudited Condensed Balance Sheet.
21
<PAGE> 24
NOTES TO PRO FORMA UNAUDITED CONDENSED BALANCE SHEET
Adjustments to reflect the Transactions as if they had occurred on March
28, 1997 are as follows:
(a) The issuance of $75,000 of Notes net of debt issue costs of $4,200 and
proceeds of $18,248 from the additional contribution of capital.
(b) The repayment of the Existing Credit Facility and long term debt including a
prepayment penalty of $1,200 (calculated as of the Closing Date) and the
extraordinary loss on early extinguishment of debt of $688, net of tax
benefit of $717.
(c) The repurchase of the warrants and the related loss on extinguishment of
$17,773.
(d) The write-off of existing deferred debt issue costs of $3,340, net of tax
benefit of $1,270.
22
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
COMPARABILITY OF PERIODS
Prior to 1994, Tekni-Plex operated on a calendar year basis. The current
owners acquired Tekni-Plex on March 18, 1994. In connection with that purchase,
the fiscal year end of Tekni-Plex was changed to the Friday closest to June 30.
Financial results for the six months ended July 1, 1994 were divided into two
periods, from January 1 to March 18, and from March 19 to July 1. Financial
results for the fiscal year 1995 are compared to the periods ended July 1 and
March 18, 1994 and the calendar year ended December 31, 1993. These financial
results are not fully comparable because of the differences in length of the
relevant periods, and the periods prior to March 18, 1994 are not fully
comparable due to the differing basis of accounting as a result of the
acquisition by the current owners.
Financial results for the nine months ended March 28, 1997 are not fully
comparable to the nine months ended March 29, 1996, and financial results for
the year ended June 28, 1996 are not fully comparable to the year ended June 30,
1995, because of the acquisition of Flemington on December 22, 1995 (although
the Company does not consider this acquisition in itself to be substantial in
the overall context) and the acquisition of Dolco on February 21, 1996.
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Historical Financial Information" and the Financial Statements
included elsewhere in this Prospectus. The following table sets forth, for the
periods indicated, selected operating data as a percentage of net sales.
SELECTED FINANCIAL INFORMATION
(PERCENTAGE OF NET SALES)
<TABLE>
<CAPTION>
FOR THE PERIODS
------------------------ YEARS ENDED NINE MONTHS ENDED
YEAR ENDED JAN. 1 TO MAR. 19 TO --------------------- ---------------------
DEC. 31, MAR. 18, JUL. 1, JUN. 30, JUN. 28, MAR. 29, MAR. 28,
1993 1994 1994 1995 1996 1996 1997
---------- --------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........ 81.6 84.1 78.3 78.2 77.0 79.5 74.0
Gross profit......... 18.4 15.9 21.7 21.8 23.0 20.5 26.0
Selling, general and
administrative
expenses........... 11.3 6.4 12.0 10.8 12.8 11.3 10.9
Income from
operations......... 7.1 9.5 9.8 11.0 10.2 9.2 15.1
Interest expense..... 0.4 0.2 9.0 9.7 7.2 7.8 5.5
Provision for income
taxes.............. 0.6 0.6 0.1 0.5 1.2 0.5 3.2
Net income........... 6.2 8.2 0.2 0.4 1.2 0.5 5.9
Depreciation and
amortization....... 1.4 1.5 6.9 7.7 8.4 7.3 6.6
EBITDA(a)............ 8.5 10.5 15.6 17.7 17.5 15.5 20.8
</TABLE>
- ---------------
(a) EBITDA is defined as net income before interest, income taxes, depreciation
and amortization. EBITDA is presented because it is a widely accepted
financial indicator of a company's ability to incur and service debt.
However, EBITDA should not be considered in isolation as a substitute for
net income or cash flow data prepared in accordance with generally accepted
accounting principles or as a measure of the Company's profitability or
liquidity. In addition, this measure of EBITDA may not be comparable to
similar measures reported by other companies.
23
<PAGE> 26
NINE MONTHS ENDED MARCH 28, 1997 COMPARED TO NINE MONTHS ENDED MARCH 29, 1996
Net Sales for the nine months ended March 28, 1997 were $109.8 million,
more than double net sales of $47.2 million for the nine months ended March 29,
1996. The increase was due primarily to the acquisition of Dolco in February
1996, which accounted for $55.2 million, and to a much lesser extent to the
acquisition of Flemington in December 1995. The level of growth for the nine
months ended March 28, 1997, is not necessarily indicative of future operations.
Cost of sales increased to $81.2 million for the nine months ended March
28, 1997, of which the Dolco operation accounted for $40.3 million of such
increase, from $37.6 million for the same period in 1996. Expressed as a
percentage of net sales, cost of sales improved to 74.0% for the nine months
ended March 28, 1997 from 79.5% for the same period in 1996. The decline in cost
of sales as a percentage of net sales was due primarily to a decline in raw
material costs resulting from improved market conditions and the increased
purchasing power of the Company. This level of increase in costs and decrease as
a percent of sales may not be indicative of future operations.
Gross profit, as a result, increased to $28.6 million or 26.0% of net sales
for the nine months ended March 28, 1997, from $9.7 million or 20.5% of net
sales for the same period in 1996.
Selling, general and administrative expenses increased to $12.0 million or
10.9% of net sales for the nine months ended March 28, 1997, from $5.3 million
or 11.3% of net sales for the same period in 1996. Selling, general and
administrative expenses decreased as a percentage of net sales due primarily to
the acquisition of Dolco with no relatively comparable increase in the general
and administrative staff of the Company. See also note 9 to the financial
statements of the Company regarding stock options.
Income from operations increased to $16.6 million or 15.1% of net sales for
the nine months ended March 28, 1997, from $4.4 million or 9.2% of net sales for
the same period in 1996, for the reasons stated above.
Interest expense increased to $6.1 million or 5.5% of net sales for the
nine months ended March 28, 1997, from $3.7 million or 7.8% of net sales for the
same period in 1996 due primarily to increased borrowings related to the Dolco
acquisition which accounted for an increase of $2.4 million. Expressed as a
percentage of net sales, interest expense for the 1997 period fell to 5.5% from
7.8% for the 1996 period as a result of the decreasing debt as a percentage of
net sales following the Dolco and Flemington acquisitions.
Provision for income taxes increased to $3.6 million or 3.2% of net sales
for the nine months ended March 28, 1997, from $0.2 million or 0.5% of net sales
for the same period in 1996. The Company's effective tax rate was 36% for the
nine months ended March 28, 1997. The decrease from the Company's expected rate
of 38% was a result of the realization of certain state tax benefits.
Net income increased to $6.4 million or 5.9% of net sales for the nine
months ended March 28, 1997, from $0.2 million or 0.5% of net sales for the same
period in 1996, for the reasons discussed above.
Depreciation and amortization increased to $7.3 million or 6.6% of net
sales for the nine months ended March 28, 1997 from $3.4 million or 7.3% of net
sales for the same period in 1996. The increase in depreciation and amortization
is due to the acquisition of Dolco which represented $4.0 million of
depreciation and amortization.
EBITDA increased to $22.9 million or 20.8% of net sales for the nine months
ended March 28, 1997, from $7.3 million or 15.5% of net sales or the same period
in 1996, for the reasons stated above.
YEAR ENDED JUNE 28, 1996 COMPARED TO YEAR ENDED JUNE 30, 1995
Net sales increased to $80.9 million in fiscal year 1996, representing an
increase of $36.2 million or 81.1% over net sales of $44.7 million in fiscal
year 1995. The increase in net sales was primarily the effect of four full
months of Dolco results.
Cost of sales increased to $62.3 million in fiscal year 1996 from $34.9
million in fiscal year 1995, primarily due to the acquisitions. However, when
expressed as a percent of net sales, cost of sales decreased to 77.0% for
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fiscal year 1996 from 78.2% for fiscal year 1995. The decline in cost of sales
as a percentage of net sales was due primarily to the increased purchasing power
of the Company and reductions in manufacturing overhead as a result of the Dolco
acquisition.
Gross profit, as a result, increased to $18.6 million or 23.0% of net sales
in fiscal year 1996 from $9.7 million or 21.8% of net sales in fiscal year 1995.
Selling, general and administrative expenses increased to $10.3 million or
12.8% of net sales in fiscal year 1996, from $4.8 million or 10.8% of net sales
in fiscal year 1995. The increase in selling, general and administrative
expenses was due primarily to the Dolco acquisition. The increase in selling,
general and administrative expenses as a percentage of net sales was due to the
to the historically higher selling, general and administrative expenses as a
percentage of net sales in the Dolco operation.
Income from operations increased to $8.2 million or 10.2% of net sales in
fiscal year 1996 from $4.9 million or 11.0% of net sales for the same period in
1995. As a percentage of net sales, the increase in gross profit was more than
offset by the increase in selling, general and administrative expenses.
Interest expense increased to $5.8 million or 7.2% of net sales in fiscal
year 1996, from $4.3 million or 9.7% of net sales in fiscal year 1995 due
primarily to an increase in borrowings related to the Dolco acquisition. The
lower percentage of net sales for 1996 interest expenses reflects the decreasing
debt as a percentage of net sales following the Dolco acquisition.
Provision for income taxes increased to $1.0 million and an effective tax
rate of 50.2% in fiscal year 1996, from $0.2 million and an effective tax rate
of 56.0% in fiscal year 1995. The effective tax rate is higher than the
Company's expected rate of 38% due to certain state and local taxes incurred
which relate to prior periods in both fiscal years.
Net income increased to $1.0 million or 1.2% of net sales in fiscal year
1996 from $0.2 million or 0.4% of net sales in fiscal year 1995, for the reasons
discussed above.
Depreciation and amortization increased to $6.8 million or 8.4% of net
sales for the year ended June 28, 1996 from $3.5 million or 7.7% of net sales
for the same period in 1995. The increase in depreciation and amortization is
due to the acquisition of Dolco.
EBITDA increased to $14.2 million or 17.5% of net sales in fiscal year 1996
from $7.9 million or 17.7% of net sales for fiscal year 1995, for the reasons
stated above.
YEAR ENDED JUNE 30, 1995 COMPARED TO PERIODS FROM MARCH 19 TO JULY 1, 1994 AND
FROM JANUARY 1 TO MARCH 18, 1994 AND TO YEAR ENDED DECEMBER 31, 1993
Net sales were $44.7 million for fiscal year 1995 compared to $12.7
million, $9.4 million and $44.9 million for the periods ended July 1, 1994 and
March 18, 1994 and the year ended December 31, 1993, respectively. Expressed as
net sales per week, revenues were steady at approximately $860,000 for fiscal
year 1995 and each of the preceding periods.
Cost of sales decreased to 78.2% of net sales in fiscal year 1995, from
78.3%, 84.1% and 81.6% of net sales for the preceding periods, respectively. The
decline in cost of sales as a percentage of net sales for the periods following
the March 18, 1994 acquisition by the current owners was due primarily to price
increases in selected flexible packaging products, elimination of low-margin
business and reduction of waste in the Brooklyn plant, and improved material
efficiencies in foam products.
Gross profit, as a result, increased to 21.8% of net sales in fiscal year
1995 from 21.7%, 15.9% and 18.4% of net sales for the preceding periods,
respectively.
Selling, general and administrative expenses were 10.8% of net sales in
fiscal year 1995, compared to 12.0%, 6.4% and 11.3% of net sales for the
preceding periods, respectively. The change in selling, general and
administrative expenses was due primarily to reorganization of Brooklyn plant
management, and reorganization of the Somerville foam operation. The low
percentage of net sales for the period ended March 18, 1994 was primarily due to
the fact no executive or management bonuses were paid or accrued for such
period.
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Income from operations increased to 11.0% of net sales in fiscal year 1995,
from 9.8%, 9.5% and 7.1% of net sales for the preceding periods, respectively,
for the reasons stated above.
Interest expense increased to 9.7% and 9.0% of net sales in fiscal year
1995 and the period ended July 1, 1994, respectively, from 0.2% and 0.4% of net
sales for the period ended March 18, 1994 and year ended December 31, 1993,
respectively, due primarily to increased borrowings arising from the acquisition
by the current owners on March 18, 1994.
Provision for income taxes was 0.5% of net sales in fiscal year 1995, and
0.1%, 0.6% and 0.6% of net sales for the preceding periods, respectively. The
effective tax rate was 56.0%, 44.9%, 6.8% and 8.8% for the respective periods.
The effective tax rate for the periods prior to March 18, 1994 are not
comparable to subsequent periods due to Tekni-Plex's being taxed as an "S"
Corporation under the prior ownership.
Net income was 0.4% of net sales for fiscal year 1995, and 0.2%, 8.2% and
6.2% of net sales for the preceding periods, respectively, as the increase in
income from operations was more than offset by the increase in interest expense,
following the acquisition in 1994 and other reasons outlined above.
Depreciation and amortization increased to 7.7% and 6.9% of net sales in
fiscal year 1995 and the period ended July 1, 1994, respectively, from 1.5% and
1.4% of net sales for the period ended March 18, 1994 and year ended December
31, 1993, respectively. The increase in depreciation and amortization is due
primarily to the acquisition of Tekni-Plex by the current owners and, to a
lesser extent, due to increased purchases of fixtures and equipment to support
Tekni-Plex's underlying business.
EBITDA increased to 17.7% of net sales in fiscal year 1995 from 15.6%,
10.5% and 8.5% of net sales for the preceding periods, respectively, for the
reasons stated above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of funds since March 1994 consisted of cash
from operations and financing sources. For the nine months ended March 28, 1997,
net cash provided by operating activities was $13.3 million compared to net cash
used in operating activities of $4.3 million for the same period in 1996, and
for the year ended June 28, 1996, net cash provided by operating activities was
$6.6 million compared to $2.4 million for the year ended June 30, 1995.
Working capital at March 28, 1997 was $13.3 million compared to $11.7
million at June 28, 1996 and $3.2 million at June 30, 1995. The increase in
working capital at March 28, 1997 was due primarily to higher accounts
receivable and inventory associated with increased sales. The increase in
working capital at June 28, 1996 compared to the prior fiscal year end was due
primarily to the effects of the Dolco acquisition. The Company has managed its
growth in working capital through a combination of operating cash flow and
borrowings under the Existing Credit Facility (as defined).
As of March 28, 1997, there was no outstanding balance under the $19
million revolving credit line of the Existing Credit Facility. On May 8, 1997,
the Company entered into the New Credit Facility, and the Company has terminated
the Existing Credit Facility. The New Credit Facility includes various covenants
including, but not limited to, minimum levels of EBITDA and net worth. See "Use
of Proceeds" and "Description of New Credit Facility." Annual debt service on
the Notes will be $8.6 million. If the Company were to draw the entire $75.0
million available under the New Credit Facility, annual debt service would
increase by approximately $6.4 million assuming a fixed interest rate of 8.5%.
The Company's capital expenditures for the years ended June 30, 1995 and
June 28, 1996 and the nine months ended March 28, 1997 were $0.6 million, $2.3
million and $2.7 million, respectively. Management expects that annual capital
expenditures will increase from historical levels during the next few years as
the Company makes improvements needed to address air emissions at three of the
Company's manufacturing facilities, and as the Company pursues new development
and cost-reduction opportunities. Management has identified potential capital
investment opportunities of approximately $5.7 million for calendar year 1997 in
addition to approximately $3.0 million of non-discretionary capital expenditures
anticipated during such period.
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Apart from acquisitions, the Company's principal uses of cash for the next
several years will be debt service, capital expenditures and working capital
requirements. Management believes that cash generated from operations plus funds
from the current credit facilities will be sufficient to meet the Company's
expected debt service requirements, planned capital expenditures, and operating
needs. However, there can be no assurance that sufficient funds will be
available from operations or borrowings under the New Credit Facility to meet
the Company's cash needs to the extent management anticipates. The reduction in
debt service requirements resulting from the Transactions will provide the
Company with increased flexibility to make capital expenditures that management
believes will provide an attractive return on investment.
Part of the Company's strategy is to explore possible future acquisitions.
Under the New Credit Facility, the Company will be able to borrow initially up
to $50 million for use in possible acquisitions, with an additional $25 million
upon approval of the lenders thereunder. To the extent the Company pursues
future acquisitions, the Company may be required to obtain additional financing.
There can be no assurance that it will be able to obtain such financing in
amounts and on terms acceptable to it.
SEASONALITY
Although certain different product lines of the Company experience some
seasonality, their effects are generally offsetting, and the Company overall has
not experienced any material seasonality in the periods reflected herein.
EFFECTS OF INFLATION
The Company believes that inflation has not significantly affected its
results of operation in the periods reflected herein.
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INDUSTRY
The packaging industry in the United States has overall annual sales of
over $70 billion with growth prospects in line with Gross Domestic Product
("GDP"). The stability of the packaging industry through economic cycles results
from its central role in the distribution of basic consumer items such as food,
beverages, personal care products, and pharmaceuticals. The industry as a whole
has very diverse products.
A packaging customer's product choice criteria can be grouped into a small
number of categories: overall cost, physical characteristics of the product
being packaged, physical characteristics of the packaging itself, and consumer
preferences. The industry can be broken down into the following seven segments:
flexible and semi-rigid packaging, plastic bottles, metal cans, glass
containers, paper-corrugated, paper-folding, and closures. Several of the market
segments, including the flexible and semi-rigid segment, are highly fragmented
and are undergoing consolidations. The Company competes within the flexible and
semi-rigid segment of the packaging industry which accounts for nearly $15
billion or approximately 20% of total annual industry revenues.
FLEXIBLE AND SEMI-RIGID PACKAGING
The Company believes the flexible and semi-rigid packaging segment is
growing at a higher rate than GDP, driven by both favorable economic factors and
environmental issues. The Company believes that the plastics area of this
segment, which includes most of the Company's products, is growing at a faster
rate than the non-plastics areas because of the generally lower package cost and
broader range of functional characteristics of plastic packaging. The Company
believes that the technologies used to manufacture plastic packaging materials
continue to develop at a faster pace than those used in the more mature paper,
glass, and metal segments.
Source reduction in packaging is a growing focus of environmental
conservation. The term "source reduction" refers to the idea of accomplishing
requisite packaging functions with a minimum of packaging materials. By using
less material to perform the packaging function, the minimum environmental
impact is achieved: greater conservation of the Earth's resources, lower energy
usage in both the production of packaging materials and product distribution
costs, and fewer disposal issues. The Company believes that the flexible and
semi-rigid segment of the packaging industry consistently provides the materials
of choice from a source reduction viewpoint.
Much of the growth in the flexible and semi-rigid packaging segment of the
industry has come at the expense of the more mature metal, glass, and
paper-folding segments. The Company believes that this growth results from
flexible and semi-rigid materials generally offering a lower cost packaging
alternative to the more mature materials. The Company believes that the sheer
diversity of product offerings within the flexible and semi-rigid segment allows
the fine-tuning of materials to meet the customer's needs for product protection
(shelf-life), and marketing impact (customized graphics and package shape) at
the lowest cost.
The Company's primary product lines are discussed below:
High-barrier blister materials. Transparent, high-barrier blister
packaging is primarily used to protect ethical drugs from moisture vapor
infiltration or desiccation. Blister packaging is the preferred packaging form
when dispenser handling can affect shelf life or drug efficacy, or when unit
dose packaging is needed. Unit dose packaging is being used to improve patient
compliance with regard to dosage regimen, and has been identified as the
packaging form of choice in addressing child safety aspects of drug packaging.
The advantages of transparent blisters, as opposed to opaque foil-based
materials, include the ability to visually inspect the contents of the blister
and to present the product with maximum confidence.
Closure liner materials. Closure liners perfect the seal between a
container and its closure, for example, between a bottle and its cap. The liner
material has become an integral part of the container/closure package. Without
the gasketing effect of the liner, most container/closure packages would not be
secure enough to protect the contents from contamination or loss of freshness.
The Company manufacturers a broad line of closure liner materials including some
of the most innovative structures available for tamper protection and special
barrier applications.
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Foamed polystyrene packaging. Foamed polystyrene packaging has been the
material of choice for food packaging cartons and trays for many years. In terms
of economic and functional characteristics, foamed polystyrene products offer a
combination of high strength, minimum material content and superior moisture
barrier performance. Foamed polystyrene products also offer greater dimensional
consistency that enhances the high speed mechanical feeding of cartons and trays
into automated package filling operations.
Entry barriers for the Company's pharmaceutical packaging products are high
due to the lengthy and stringent approval process employed by the FDA. Approval
requires that the drug be tested while packaged in the same packaging materials
intended for commercial use, so that changing materials after approval risks
renewed scrutiny by the FDA. Also, the high manufacturing and audit compliance
standards imposed by the pharmaceutical companies on their suppliers provide a
significant barrier to entry. There are significant disincentives for new
competitors to the Company's egg packaging products including (i) high capital
costs, including high opportunity costs associated with switching assets
presently dedicated to other uses to egg carton production; (ii) the high level
of technical competence required for the associated manufacturing processes; and
(iii) the high cost of meeting required customer order response times in a
job-shop environment.
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BUSINESS
GENERAL
The Company designs, manufactures and markets packaging materials primarily
for the pharmaceutical and food industries. Currently, its products fall into
two categories. The Flexible Packaging Group produces laminated and coated
packaging materials primarily for pharmaceutical end-uses. The Company is the
market leader for clear, high-barrier laminations for pharmaceutical blister
packaging with an estimated greater than 90% share of the market for such
products. These packaging materials are used for fast-acting pharmaceuticals
that are generally highly reactive to moisture. The Foam Products Group produces
foamed polystyrene packaging products such as egg cartons and processor trays
for the poultry and meat industries. The Company produces in excess of 80% of
all foam egg cartons and has approximately 40% of the egg carton market. The
Company has also built a strong presence in the processor tray market, where it
has an estimated share of greater than 20%.
The management of the Company focuses on organizational development,
imparting a results-oriented culture to all areas of its businesses. Management
seeks and implements continual product and process improvements to produce
higher quality products, improve efficiencies, reduce labor and material costs,
and create differentiated products and product line extensions. The Company has
also expanded its product offerings by acquiring synergistic packaging companies
and has significantly reduced costs through product line rationalization and
re-negotiation of supplier agreements. Management believes that this focus will
continue with respect to the Company's on-going business and will be the basis
for successfully integrating future acquisitions.
Since its acquisition by the current owners, the Company has achieved
significant improvements in profitability. For the trailing twelve months ended
March 28, 1997, the Company had revenues of $143.5 million, net income of $4.2
million and EBITDA of $29.7 million for an EBITDA margin of 20.7%, compared with
revenues of $44.9 million, net income of $2.8 million and EBITDA of $3.8 million
for an EBITDA margin of 8.5% for the year ended December 31, 1993. This
improvement has been continuous. For the nine months ended March 28, 1997, the
Company had revenues of $109.8 million, net income of $6.4 million and EBITDA of
$22.9 million for an EBITDA margin of 20.8%, compared with revenues of $47.2
million, net income of $0.2 million and EBITDA of $7.3 million for an EBITDA
margin of 15.5% for the nine months ended March 29, 1996. "EBITDA" is defined as
net income before interest, income taxes, depreciation and amortization. "EBITDA
margin" is calculated as the ratio of EBITDA to net sales for the period.
COMPANY HISTORY
Tekni-Plex was founded as a Delaware corporation in 1967 to acquire the
General Felt Products division of Standard Packaging Corporation. The Company,
then located in Brooklyn, New York, built a reputation for solving difficult
packaging problems and providing customers with high quality, advanced packaging
materials. In 1970, the Company built an additional manufacturing facility in
Somerville, New Jersey, diversifying into the business of producing polystyrene
foam trays for the poultry processing industry. The Somerville facility serves
as the current headquarters of the Company.
1994 -- Acquisition by the Current Owner
In March 1994, Tekni-Plex was acquired by its current controlling
shareholder, and Dr. F. Patrick Smith was appointed its Chief Executive Officer.
Mr. Kenneth W.R. Baker, the current Chief Operating Officer, was appointed in
April 1994. At that time, the principal product lines in the Flexible Packaging
Group consisted of clear, high-barrier laminations for pharmaceutical blister
packaging, and closure (bottle cap) liners, primarily for pharmaceutical
end-uses. The principal product lines in the Foam Products Group consisted of
padded and unpadded foam processor trays primarily for the poultry industry.
At the time of the 1994 acquisition, the current management was faced with
three distinctly different situations in Tekni-Plex's three primary product
lines: (i) the clear, high-barrier blister packaging product
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line, produced in Somerville, had achieved good operating margins, but, because
it was limited to a relatively narrow (but important) range of performance
characteristics, it was not positioned to take full advantage of the trends in
new drug development in the pharmaceutical industry; (ii) the closure liner
products, produced in the Brooklyn plant, had consistently generated operating
losses; and (iii) the foam processor tray market had become intensely
competitive as to price and Tekni-Plex's heavy duty products were too costly and
thus ill-suited to compete in this environment.
In the ensuing months, management changed the Company's culture into a
focused, results-oriented, professional organization capable of managing change
and addressed each of the strategic issues facing the principal product lines as
follows:
Clear, high-barrier laminations. New lines of clear, high-barrier
laminations were developed that extended the range of pharmaceutical
packaging applications and laid the groundwork for future sales growth. By
working with suppliers and reorganizing and improving the production
scheduling function, management substantially reduced order lead times. In
addition, production waste was reduced and productivity was improved.
Closure liner products. In the Brooklyn operation, management
developed and implemented an item-specific, customer-specific-product
costing system. Once the true costs of the 600-plus basic items were
understood, a rational pricing policy was established. As a result,
unprofitable products were pared, simplifying the operation and allowing
further improvements in productivity as well as reduced waste. After five
consecutive years of negative cash flow prior to the 1994 acquisition,
management believed that it had turned around the Brooklyn operation so
that it could sustain on-going positive profit contributions. Nonetheless,
within 16 months the Brooklyn operation was moved and consolidated into the
Flemington operation for further efficiencies, as described below.
Foam processor trays. The foam processor tray operation was
reorganized, primarily to establish a clear delineation of
responsibilities. More cost-effective supply agreements were negotiated. A
new line of material-efficient products was introduced with increased
strength and lower production costs, allowing the Company to participate in
the price competitive market place. The manufacturing operation was
reconfigured to improve material flows, and focus was brought to bear on
the padding operations to reduce waste and inefficiency.
1995 -- Flemington Acquisition
In December 1995, Tekni-Plex acquired the Flemington, New Jersey, plant and
business of Hargro for approximately $7.5 million. The Flemington plant utilizes
lamination and coating technology to produce packaging materials for: (i)
pharmaceutical products (transdermal patches, sutures, iodine and alcohol swabs,
aspirin and other physician samples); (ii) electronics and telecommunications
products (optical fiber and conventional cable shielding, transformer and
ballast insulation); (iii) industrial products (photographic and automotive);
and (iv) food products (snack foods, dry powders). Management believed that the
Flemington acquisition offered significant benefits by providing a modern
facility that increased capacity and removed physical limitations associated
with the older Brooklyn plant, adding new technologies complimentary to
Tekni-Plex's then existing capabilities, and avoiding capital expenditures for
environmental compliance that would have been required at the Brooklyn plant.
Following the Flemington acquisition, management implemented a number of
changes: (i) the salaried workforce was reorganized to establish a clear
delineation of responsibilities; (ii) pricing changes were implemented that
resulted in the paring of unprofitable products with the associated labor and
overhead being eliminated; and (iii) needed capital improvements were made.
The Company relocated the Brooklyn equipment, personnel and business into
the Flemington facility during the quarter ending in June 1996, which was
concurrent with the expiration of the Brooklyn lease. The modern design and
layout of the Flemington plant lowered manufacturing waste levels and reduced
labor requirements in the production of closure liners. Having similar
technologies under one roof led to improved efficiencies as each group learned
the subtle enhancements developed over the years by the other. The merged
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operations benefitted from new economies of scale. The result has been a
combined operation with considerably higher efficiencies and lower costs than
the sum of the stand-alone operations.
1996 -- Dolco Acquisition
In February 1996, as Tekni-Plex was integrating the Flemington acquisition
from eight weeks earlier, it completed its acquisition of Dolco, a
publicly-traded $81 million foam products company which at the time was nearly
twice the size of Tekni-Plex. Dolco had been in the business of producing foam
packaging products since the 1960s and had attained the leading share of foam
egg carton sales in the United States. While Dolco had continued to address
changing market needs by, for example, introducing the use of post-consumer
recycled materials into its products, and had produced calendar year 1995 net
income of $6.8 million and EBITDA of approximately $8.7 million, the Company
believed it was under-performing financially.
Following the acquisition, management closed Dolco's headquarters in
California and absorbed the requisite functions into the Company. The Dolco
research and development facility in Lawrenceville, Georgia, was also closed
and, in part, moved to the nearby Dolco plant also in Lawrenceville. Dolco's
operations in Wenatchee (Washington), Dallas and Lawrenceville were reorganized.
Management negotiated more favorable material supply agreements, instituted
pricing policies consistent with those of the Company, and devised strategies to
address the environmental issues facing the Company.
COMPETITIVE STRENGTHS
The Company believes that its competitive strengths include:
- Producer of high quality, technically sophisticated products. The
Company has a long-standing reputation as a manufacturer of high-quality,
high performance primary packaging products (where the packaging material
comes into direct contact with the end-product). The Company's emphasis
on quality is evidenced by its product lines which address the high-end
of their respective markets. The Company primarily competes in
technically sophisticated areas such as the high-barrier pharmaceutical
blister packaging market where high performance characteristics are
required due to the sensitive nature of the product. A significant
portion of the Company's processor tray product line is aimed at the
high-performance segment of the processor tray market where strength and
durability are essential due to the high speed, automated machinery used
by the processors. As the leading supplier of foam egg cartons, the
Company produces a high quality product with superior performance
characteristics compared to competitive offerings.
- Cost efficient producer. The Company continually focuses on improving
underlying operations and reducing costs. Since the 1994 acquisition,
current management has improved the Company's cost structure from an
EBITDA margin (as defined) of 8.5% and income before income taxes as a
percent of sales of 6.8% on sales of $44.9 million for the year ended
December 31, 1993 to an EBITDA margin (as defined) of 20.7% and income
before income taxes as a percent of sales of 8.0% on sales of $143.5
million for the twelve months ended March 28, 1997.
- Experienced management team. The current management team has been
successful in selecting and integrating strategic acquisitions and in
improving underlying business fundamentals in the regular course of
business. Members of the management team have worked together in the
packaging industry for many years and have a strong track record.
Together, they have integrated acquisitions, effected turnarounds,
provided strategic direction and leadership, increased sales and market
share, improved manufacturing efficiencies and productivity, and
developed new technologies to enhance the competitive strengths of the
companies they have managed. See "Management."
- Strong market share in core businesses. The Company has a strong market
presence in most of its core product lines. The Company produces in
excess of 80% of all foam egg cartons and has approximately 40% of the
overall egg carton market which is split approximately equally between
foam and pulp-based products. The Company has an estimated greater than
90% share of the market for clear, high-barrier laminations for
pharmaceutical blister packaging. The Company has also built a strong
presence in the processor tray market where it has an estimated share of
greater than 20%.
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- Successful integration of acquisitions. The Company has a strong track
record of identifying and integrating both small and large acquisitions.
After significantly improving the business of Tekni-Plex following the
1994 acquisition, management successfully integrated both the Flemington
and Dolco operations, the latter being a public company then nearly twice
the Company's size. During the same period, the Brooklyn and Flemington
operations were merged, substantially improving production efficiencies
and reducing waste.
- Strong customer relationships. The Company has long-standing
relationships with many of its customers. The Company estimates the
average tenure among the Company's top ten customers at more than 14
years. The Company attributes its long relationships with its customers
to the ability to consistently manufacture high quality products and to
consistently provide a superior level of customer service. The Company
routinely wins recognition for its superior products and customer service
including a recent Outstanding Supplier Award from Pharmacia & Upjohn,
and an Outstanding Quality Award from Abbott Laboratories.
BUSINESS STRATEGY
The Company seeks to maximize its growth and profitability and take
advantage of its competitive strengths by pursuing the following business
strategy:
- Ongoing cost reduction through technical process improvement. The
Company has an ongoing program to improve manufacturing and other
processes in order to drive down costs. Examples of cost improvement
programs include: (i) material and energy conservation through enhanced
process controls; (ii) reduction in machine set-up time through the use
of proprietary technology; (iii) continual product line rationalization;
and (iv) development of backward integration opportunities.
- Growth through acquisitions. The Company believes that there is a
significant opportunity to consolidate the highly fragmented packaging
industry in the United States. The Company makes acquisitions based on
the following factors: (i) the Company seeks to acquire product lines
which logically extend its presence in the markets it currently serves,
thereby enhancing the Company's value to its customers; (ii) the Company
seeks add-on acquisitions which increase its market share in a particular
product line, thereby providing opportunity to gain economies of scale
and reduce costs; (iii) the Company seeks opportunities for technology
sharing where acquired and existing operations are enhanced by combining
and sharing complementary technologies; and (iv) the Company seeks
acquisitions that provide opportunity for synergistic cost reduction due
to duplication of effort and acquisitions where imparting the Company's
focused, results-oriented culture will lead to enhanced operating
results.
- Internal growth through product line extension and improvement. The
Company continually seeks to improve and extend its product lines and
leverage its existing technological capabilities in order to increase
market share and improve profitability. Before 1994, the Company's line
of pharmaceutical blister laminations addressed a relatively small
(although important) range of performance requirements, namely the
high-barrier segment of the market. New products developed since that
time have extended the Company's offerings to include the ultra-high
barrier segment (previously confined to foil-based products) and the
low-to-medium barrier segment (previously confined to solution-coated
products). In addition, the Company believes that it has a significant
opportunity to increase sales of its foamed polystyrene packaging
products by focusing on incremental improvements to these products.
- Growth through international expansion. The Company currently exports
approximately ten percent of its pharmaceutical packaging sales. Given
the Company's reputation, its recently expanded product line, and the
multi-national nature of many of its customers, the Company believes
there is significant opportunity to expand international sales.
Accordingly, the Company has hired an international sales manager who has
significant experience in selling to the international pharmaceutical
industry. The Company has also begun to set up a network of agents in
various international markets.
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<PAGE> 36
PRODUCTS
Flexible Packaging Group
The Flexible Packaging Group manufactures printed and unprinted multi-layer
constructions of plastic, paper and metal films and sheets combined with layers
of other materials for particular purposes, with emphasis on pharmaceutical and
telecommunications applications. The principal product lines in this group are
clear, high-barrier laminations for pharmaceutical blister packaging, and
closure (bottle cap) liner products primarily for pharmaceutical end-uses.
The Company's line of pharmaceutical-grade, clear, high-barrier (to
moisture transmission) laminations are high quality, proprietary products which
have superior clarity and moisture-barrier characteristics. Manufacture of these
products uses proprietary adhesive technology to laminate Aclar(R) films, a
material that does not lend itself easily to adhesion onto other plastic films
and sheets.
The Company has a broad range of closure liner products currently available
in the marketplace. The Company's major closure liner products include PS22 (a
pressure sensitive coated polystyrene foam generally used for ethical drugs and
vitamins), VapoSeal(R) (vinyl coated aluminum foil used for highly hygroscopic
products such as antacid), Heat Sealable Innerseals (high-barrier seals for
highly-sensitive products), and Tekniseal(R) 33 (extruded polyethylene liner
used generally as a backing for aqueous applications).
Before 1994, the Company's line of blister laminations addressed a
relatively small (although important) range of performance requirements, namely,
the high-barrier category. New products developed since the 1994 acquisition
have extended the Company's offerings to include the ultra-high barrier
category, previously confined to foil-based (non-transparent) products, and the
low-to-medium barrier category, previously confined to solution-coated products
(as opposed to laminated products). The Flemington acquisition added
strategically important new pharmaceutical products to the Company's line for
the packaging of transdermal patches, sutures, iodine and alcohol swabs, aspirin
and other physician samples. In addition, the Company manufactures food
packaging laminations, optical fiber cable shielding materials, specialty wire
and cable wrap, electrical laminates, and other specialty coating laminates for
industrial applications.
Foam Products Group
The Foam Products Group produces a wide variety of foamed polystyrene
products, including egg packaging, processor trays for the poultry, pork and
sausage industries, apple packaging, mushroom tills, containers for food
products and baked goods, supermarket meat trays, disposable plates, and
hinged-lid containers for the foodservice industry. These products are primarily
used for the sale of food items and are designed for protection, freshness,
insulation, sanitation, and merchandising impact.
The principal product lines in this group are egg cartons and processor
trays. These products may be printed, embossed or laminated to meet customer
specifications. Egg packaging is almost always printed in multiple colors. By
utilizing both the inside and the outside surfaces of the egg cartons the
maximum amount of space can be made available for each customer's unique
advertising requirements. Processor trays are most often sold with an absorbent
pad fixed to the tray bottom. The trays and pads are generally designed to the
customer's specifications to meet functionality requirements.
The Company's Dolco subsidiary is the leading manufacturer of foam egg
packaging products. The precise dimensions of polystyrene foam cartons lend
themselves to automated, high-speed, machine dispensing systems used in the egg
packing industry. Dolco has been the innovator of new packaging concepts and
designs and was the first to manufacture foam egg cartons in eight, twelve, and
eighteen egg configurations. In addition, Dolco was the first to manufacture and
sell foam egg cartons with post-consumer recycle content with the approval of
the FDA.
Processor trays require greater dimensional consistency, strength and
higher resiliency than trays used by supermarkets because of their use in
high-speed automated poultry and meat packaging machines and because of handling
during shipping. The Company's processor trays are widely recognized for their
high performance qualities. Since the 1994 acquisition, the Company, through
proprietary technological advances, has developed
34
<PAGE> 37
a new line of products that have a lower density of polystyrene foam but still
meet all customer requirements for strength and durability.
SALES, MARKETING AND CUSTOMERS
As of March 28, 1997, the Company had a sales team comprised of 41 people,
covering both domestic and international sales. There were 14 salespeople in the
Flexible Packaging Group and 27 in the Foam Products Group. The Company believes
it has earned a solid reputation with its customers for high quality service.
The Company engages in various marketing activities such as participation in
trade shows, mailings of samples, direct calls to potential customers and
advertising. The Company is currently developing its own web-site on the
internet.
The Company's high-barrier, blister laminations are sold directly to the
major pharmaceutical companies (or their designated contract packagers), while
closure liners are sold to the closure (bottle cap) producers who, in turn,
supply these same pharmaceutical companies.
Distribution is accomplished from the manufacturing locations to the
customers via common carrier and/or customer pick up. In the Foam Products
Group, most sales are in full truckload quantities.
The Company has begun to market its full pharmaceutical product line
directly on a worldwide basis and is assembling a global network of sales
personnel (both direct and outside manufacturer's representatives).
The Company's customer base includes most of the major pharmaceutical
manufacturers, most of the egg packagers (including those owned by egg
retailers) and many of the poultry processors. Overall customer concentration is
low with the largest single customer accounting for less than six percent of
total sales and the top ten customers generating approximately 25% of sales.
MANUFACTURING
Flexible Packaging Group
The Company manufactures primary flexible packaging materials in two
locations: Somerville, New Jersey, and Flemington, New Jersey. Both locations
have thermal oxidation devices that provide the controls necessary to meet clean
air emissions standards.
The manufacturing processes involve laminating, coating, printing and
slitting. Raw materials used include plastic films, metal foils, plastic resins,
paper, adhesives, inks and coatings. The Company has what it considers to be
numerous proprietary methods and formulations that are used to produce a wide
variety of multi-layer heterogeneous structures. These structures have specific
sets of functional properties suited for specific packaging end uses.
The packaging materials for pharmaceutical applications require special
documentation of material sources and uses within the manufacturing process as
well as heightened quality assurance measures. See "-- Competition."
Foam Products Group
The Company manufactures foamed polystyrene packaging and foodservice
products in five locations: Somerville, Wenatchee (Washington), Decatur
(Indiana), Dallas (Texas) and Lawrenceville (Georgia).
The manufacturing processes include foam extrusion, thermoforming, printing
and application of absorbent padding. Raw materials used are polystyrene,
blowing agents, color concentrates, inks, tray padding materials and plastic
bags. The beginning step of the manufacturing process is foam extrusion. Solid
plastic pellets are introduced into an extrusion line along with a blowing agent
and a foamed sheet is generated in roll form. The rolls of foam sheet are then
held for a minimum period to allow for equilibration of the plastic and the
blowing agent, and are then thermoformed into various shapes using heat and
pressure. Upon exiting the thermoforming process, the formed articles are
trimmed out of the sheet to become individual products. Post thermoforming
processes can include printing or the application of an absorbent pad to a tray
article.
35
<PAGE> 38
RAW MATERIALS
Polystyrene resin is the Company's largest single raw material component,
accounting for about one-third of total raw material costs. The Company
purchases polystyrene resin from several of the top suppliers. Aclar(R), a
specialty film material produced by Allied Signal and used in high barrier
laminations, is the second largest material component, accounting for roughly
about one-sixth of total material costs. Allied Signal is currently the sole
manufacturer and supplier of Aclar(R) films.
Historically, the Company has been able to pass through substantially all
of the price increases in raw materials to its customers. For example, over the
18 month period from January 1994 to June 1995, polystyrene prices rose by a
total of approximately 49%. Over that same period, the Company's gross margin,
expressed as a percentage of sales, rose from 18.4% to 21.8%. However, there can
be no assurance that the Company will be able to pass on raw material price
increases in the future.
PROPRIETARY TECHNOLOGY AND TRADEMARKS
The Company safeguards its proprietary technology through the filing and
registering of patents and trademarks, the use of confidentiality agreements,
and by restricting access to its plants. The Company does not consider its
patents and trademarks material to its operations.
COMPETITION
Flexible Packaging Group
The Company considers itself to be the market leader in clear, high-barrier
laminated blister materials with a greater than 90% share of the market for
these products. These products primarily compete with solution-coated and
foil-based products manufactured by various competitors including Klockner
Pentaplast. The closure liner market is somewhat fragmented, and it is more
difficult to estimate the Company's share since most cap manufacturers are
privately held, and many produce a portion of their needs internally.
Nonetheless, management, based on its own knowledge of the industry, estimates
that the Company holds about a 10% share of this market.
The Company believes that pharmaceutical packaging products sold in the
United States enjoy a significant barrier to entry due to the stringent approval
process employed by the FDA. The entire process for new drug approval in the
past has averaged approximately 10 years, beginning with clinical trials and
ending with stability testing. The stability step requires that the drug be
tested in the packaging materials intended for commercial use. The cost of
stability testing is substantial. Therefore, when FDA approval is finally
attained, the drug companies are generally compelled, as a practical matter,
either to use the same packaging materials (from the same supplier) or to
re-submit to the stability test phase all over again. If the drug company opts
to re-submit to the stability test phase, it risks the uncertainty of renewed
scrutiny by the FDA. Manufacturers of primary packaging materials for
pharmaceutical products (where the drug is in direct contact with the material)
must maintain a confidential Drug Master File at the FDA that describes each of
its products. Manufacturers of primary packaging materials for pharmaceutical
products must also submit to regular, on-site compliance audits performed by the
major pharmaceutical companies. Pharma-class Good Manufacturing Practices must
be followed, and documentation of each production run must provide an audit
trail to allow the drug companies to identify the genesis of each single package
released to the market. Suppliers that have a long history of consistently
meeting the rigid requirements of the pharmaceutical industry, such as the
Company, are generally considered a valuable asset to their pharmaceutical
customers.
Foam Products Group
The Company believes that competition within the foam processor tray market
is based primarily on customer service, product quality and price. There are two
other domestic companies that are significant in the foam processor tray market,
namely Tenneco Packaging and the Formpac division of W.R. Grace. The Company
estimates, based on its own views of the market, that it has in excess of 20% of
the processor tray market.
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<PAGE> 39
The Company is one of the market leaders in producing egg cartons taking
into account both foam and pulp-based cartons. The Company believes that it
currently produces more than 80% of all foam egg cartons, and has approximately
a 40% share of the overall egg carton market. In this product line, the
Company's primary competitor is Tenneco Packaging which manufactures pulp-based
egg cartons.
The Company believes that, for its foam egg packaging products, there are
significant disincentives for new competitors that include: (i) high capital
costs, including high opportunity costs associated with switching assets
presently dedicated to other uses to egg carton production; (ii) the high level
of technical competence required for the associated manufacturing processes; and
(iii) the high cost of meeting required customer order response times in a
job-shop environment.
ENVIRONMENTAL MATTERS
Like similar companies, the Company's facilities, operations and properties
are subject to federal, state and local laws and regulations relating to, among
other things, emissions to air, discharges to water, the generation, handling,
storage, transportation and disposal of hazardous and nonhazardous materials and
wastes and the health and safety of employees. The Company maintains a primary
commitment to employee health and safety, and environmental responsibility. The
Company's intention and policy are to be at all times a responsible corporate
citizen.
The Company's management includes a Director of Environmental Affairs who
is primarily engaged in making certain that the Company is in compliance in all
material respects with all federal, state and local laws and regulations
relating to the environment, and health and safety. This director performs
internal auditing procedures at all of the Company's facilities and provides
direction to local facility managers in the compliance areas. The Director of
Environmental Affairs and the President of the Company direct outside
environmental counsel and an outside environmental consulting firm to ensure
that regulations are properly interpreted and reporting requirements are met.
With respect to air emissions, in each state where the Company operates a
manufacturing facility, the Company has obtained or is in the process of
obtaining an agreement with the regulatory authorities to ensure that it has
their consent for current operations and, where necessary, to place the Company
on an approved compliance schedule. There are currently no known environmental
improvements required within the Flexible Packaging Group of the Company. Within
the Foam Products Group, the Company expects improvements will be needed to
address air emissions at three of its manufacturing facilities. The Company has
established a capital budget to address such issues.
Although the Company believes that, based on historical experience, the
costs of achieving and maintaining compliance with environmental laws and
regulations are unlikely to have a material adverse effect on the Company's
financial condition or operating results, it is possible that the Company could
incur significant fines, penalties, capital costs or other liabilities
associated with any confirmed noncompliance or cleanup liability at or related
to any of its current or former facilities, the precise nature of which the
Company cannot now predict. 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. See "Risk
Factors -- Environmental Matters."
FACILITIES
The Company operates six manufacturing facilities, including the
Somerville, New Jersey plant where the Company's headquarters are located. The
Company owns all of its manufacturing facilities with the exception of the
Dallas manufacturing facility which is currently leased. The Decatur,
Lawrenceville, and
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<PAGE> 40
Wenatchee plants also lease additional warehousing space. The Company owns or
leases manufacturing, office and warehouse facilities at the locations shown in
the following table:
<TABLE>
<CAPTION>
OWNED/ SIZE (APPROX.
LOCATION LEASED SQUARE FEET) TYPE OF FACILITY (A) PRODUCT CATEGORY (B)
- --------------------------------- ------ ------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Somerville, NJ................... O 122,960 M/W/O P/F
Flemington, NJ................... O 145,000 M/W/O F
Lawrenceville, GA................ O 150,000 M/W/O P
L 31,662 W P
Wenatchee, WA.................... O 99,000 M/W/O P
L 26,400 W P
Decatur, IN...................... O 187,000 M/W/O P
L 3,750 W P
Dallas, TX....................... L 139,000 M/W/O P
</TABLE>
- ---------------
(a) M = Manufacturing; W = Warehouse: O = Office.
(b) P = Foam Products; F = Flexible Packaging.
The Company has closed Dolco's 5,850 square feet office facility in Studio
City, California, and subleased it to a third party. The Company is currently
investigating an option to purchase the manufacturing facility located in
Dallas. The Company believes that its present facilities are adequate for its
current and projected operations.
EMPLOYEES
As of March 28, 1997, the Company employed an average of 757 hourly and 127
salaried persons. The Company provides a competitive employee benefits package
that includes medical insurance, life insurance, holiday pay, vacations and a
401(k) savings plan. There is also a performance based incentive compensation
program for selected managers.
Among the Company's approximately 884 total employees, all are non-union
with the exception of approximately 85 employees in the Flemington, New Jersey,
manufacturing facility who are represented by a collective bargaining agent.
Their collective bargaining agreement will expire on September 30, 1999. The
Company believes that its relations with all of its employees are good.
LEGAL PROCEEDINGS
The Company is regularly involved in legal proceedings arising in the
ordinary course of business, none of which is currently expected to have a
material adverse effect on the Company's businesses or financial condition.
GENERAL
The Company's executive offices are located at 201 Industrial Parkway,
Somerville, New Jersey 08876, and its telephone number is (908) 722-4800.
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<PAGE> 41
MANAGEMENT
The directors and executive officers of Tekni-Plex are listed below. Each
director is elected at the annual meeting of the stockholders of Tekni-Plex to
serve a one year term until the next annual meeting or until a successor is
elected and qualified, or until his earlier resignation. Each executive officer
holds his office until a successor is chosen and qualified or until his earlier
resignation or removal. Pursuant to its by-laws, Tekni-Plex indemnifies its
officers and directors to the fullest extent permitted by the General
Corporation Law of the State of Delaware and Tekni-Plex's certificate of
incorporation.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- --------------------------------------------------------
<S> <C> <C>
Dr. F. Patrick Smith................ 49 Chairman of the Board and Chief Executive Officer
Kenneth W.R. Baker.................. 52 President and Chief Operating Officer
Arthur P. Witt...................... 67 Corporate Secretary and Director
William H. Kaplan................... 46 Controller
Marvin Weintraub.................... 51 Director of Management and Information Systems
J. Andrew McWethy................... 56 Director
Barry A. Solomon.................... 49 Director
Stephen A. Tuttle................... 56 Director
Michael F. Cronin................... 43 Director
</TABLE>
In addition to the foregoing, Dr. Smith serves as Chairman of the Board and
Chief Executive Officer of the Guarantor and Mr. Baker serves as its President,
Corporate Secretary and Director. Dr. Smith and Mr. Baker are the sole directors
of the Guarantor. Directors of the Guarantor are elected at the annual meeting
of stockholders of the Guarantor to serve a one year term until the next annual
meeting or until a successor is elected and qualified, or until his earlier
resignation. Executive officers of the Guarantor are designated from time to
time by the Guarantor's board of directors and serve until a successor is chosen
and qualified or until his earlier resignation or removal. Pursuant to its
by-laws, the Guarantor indemnifies its officers and directors to the fullest
extent permitted by the General Corporation Law of the State of Delaware and the
Guarantor's certificate of incorporation.
Dr. F. Patrick Smith has been Chairman of the Board and Chief Executive
Officer of Tekni-Plex since March 1994. In addition, Dr. Smith has been Chairman
of the Board and Chief Executive Officer of the Guarantor since February 1996.
He received his doctorate degree in chemical engineering from Texas A&M
University in 1975. He served as Senior Chemical Engineer to Texas Eastman
Company, a wholly owned chemical and plastics subsidiary of Eastman Kodak, where
he developed new grades of polyolefin resins and hot melt and pressure sensitive
adhesives. In 1979, he became Technical Manager of the Petrochemicals and
Plastics Division of Cities Service Company, and a Member of the Business
Steering Committee of that division. From 1982 to 1984, Dr. Smith was Vice
President of R&D and Marketing for Guardian Packaging Corporation, a diversified
flexible packaging company. Thereafter, he joined Lily-Tulip, Inc. and managed
their research and marketing functions before becoming Senior Vice President of
Manufacturing and Technology. Following the acquisition of Lily-Tulip by Fort
Howard Corporation in 1986, he became the Corporate Vice President of Fort
Howard, responsible for the manufacturing and technical functions of the
combined Sweetheart Products and Lily-Tulip operations. From 1987 to 1990, Dr.
Smith was Chairman and Chief Executive Officer of WFP Corporation. Since 1990,
Dr. Smith has been a principal of Brazos Financial Group, a business consulting
firm. Dr. Smith is a limited partner of Tekni-Plex Partnership.
Kenneth W.R. Baker has served as Tekni-Plex's Chief Operating Officer since
April 1994 and as President since July 1995. In addition, Mr. Baker has served
as the President and Corporate Secretary of the Guarantor since May 1996 and was
elected to the Guarantor's Board of Directors in July 1996. He joined the Lily
Division of Owens-Illinois, Inc. in 1975, serving as its Manager of Systems
Development from 1975 to 1977 and as its Financial and Planning Manager from
1977 to 1980. Since 1980, he has served in a number of technical and managerial
positions. These include Manager, Industrial Engineering at the Lily Division
from 1980 to 1981, Director, Corporate Technology at Lily-Tulip, Inc. from 1981
to 1986 and Vice President, Operations at Fort Howard Cup Corporation from 1986
to 1987. In 1987, Mr. Baker joined WFP Corporation,
39
<PAGE> 42
Inc. as Senior Vice President, Operations and eventually became the company's
President and CEO before leaving the company in 1992. Thereafter, Mr. Baker
became Vice President, Research and Development at the Molded Products Division
of Carlisle Plastics, Inc. where he stayed until joining the Company.
Concurrently with the Offering, Mr. Baker will become a limited partner of
Tekni-Plex Partnership.
Arthur P. Witt has been a director of Tekni-Plex since March 1994 and was
appointed Secretary in January 1997. Since July 1989, he has been president of
PAJ Investments which is involved in financial consulting and property
management. Over the same period, Mr. Witt also served as a temporary chief
financial officer for WFP Corporation and Flexible Technology. Prior to 1989,
Mr. Witt served in a number of senior management positions for companies such as
Lily-Tulip, Inc., BMC Industries and Fort Howard Paper Co. Mr. Witt is a limited
partner of Tekni-Plex Partnership.
William H. Kaplan joined Tekni-Plex in August 1992 and has been the
Company's Controller since March 1994. From 1977 until 1992, Mr. Kaplan was a
manager with Rich Baker Berman & Co., P.A.
Marvin Weintraub has served as Tekni-Plex's Director of Management and
Information Systems since August 1996. From 1980 until joining the Company, Mr.
Weintraub served as the MIS Director for N. Erlanger Blumgart Inc. where he was
responsible for all of that company's data processing activities.
J. Andrew McWethy has served as a director of Tekni-Plex since March 1994.
He is a co-founder of MST Partners L.P. ("MST L.P.") and MST Offshore Partners,
C.V. (together with MST L.P., the "MST Investment Partnerships"), each of which
was formed in 1989, and is a general partner of MST Management, L.P., a general
partner of MST Investment Partnerships. Prior to 1989, Mr. McWethy was employed
by Irving Trust Company for twelve years. See "Risk Factors -- Control of the
Company."
Barry A. Solomon has served as a director of Tekni-Plex since March 1994.
He is a co-founder of the MST Investment Partnerships and is a general partner
of MST Management, L.P. Prior to 1989, Mr. Solomon was employed by Irving Trust
Company for ten years. See "Risk Factors -- Control of the Company."
Stephen A. Tuttle has served as a director of Tekni-Plex since March 1994.
He is a co-founder of the MST Investment Partnerships and is a general partner
of MST Management, L.P. Prior to 1989, Mr. Tuttle was employed by Irving Trust
Company for four years. See "Risk Factors -- Control of the Company."
Michael F. Cronin has served as a director of Tekni-Plex since March 1994.
He has invested in emerging growth companies and various industrial and service
businesses since 1978. Since June 1991, Mr. Cronin has been a general partner of
Weston Presidio Capital.
COMPENSATION OF DIRECTORS
Each of Tekni-Plex and the Guarantor reimburses directors for any
reasonable out-of-pocket expenses incurred by them in connection with services
provided in such capacity. In addition, each of Tekni-Plex and the Guarantor
compensates outside directors for services provided in such capacity of $15,000
or less per fiscal year for each such director. Neither Dr. Smith nor Mr. Baker
receives any compensation from the Guarantor in their capacity as directors of
the Guarantor.
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<PAGE> 43
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the remuneration paid by Tekni-Plex to the
Chief Executive Officer and the next most highly compensated executive officer
of Tekni-Plex whose salary and bonus exceeded $100,000 for the years indicated
in connection with his position with Tekni-Plex:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------
FISCAL OTHER ANNUAL
NAME & PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
----------------------------------------- ------ -------- -------- ------------
<S> <C> <C> <C> <C>
Dr. F. Patrick Smith,.................... 1996 $351,923 $859,248 $ 21,245(c)
Chief Executive Officer 1995 300,000 333,678 6,624(c)
1994 87,692(a) 0 0
Mr. Kenneth W.R. Baker,.................. 1996 $217,308 $429,624 $ 13,870(c)
President and Chief Operating Officer 1995 162,500 166,839 0
1994 31,731(b) 0 0
</TABLE>
- ---------------
(a) Salary earned from March 19, 1994 to July 1, 1994.
(b) Salary earned from April 4, 1994 to July 1, 1994.
(c) Amount reimbursed during the fiscal year for payment of taxes.
Neither Dr. Smith nor Mr. Baker receives any compensation from the
Guarantor in their capacities as executive officers of the Guarantor.
EMPLOYMENT AGREEMENTS
Tekni-Plex recently renewed its employment agreements with Dr. F. Patrick
Smith and Mr. Kenneth W.R. Baker. Both Dr. Smith and Mr. Baker's employment
agreements expire June 30, 2000 and have renewal provisions. The employment
agreements provide, among other things, for (i) payment of a base annual salary
in the amount of $550,000 in the case of Dr. Smith and $275,000 in the case of
Mr. Baker, and that these salaries may be increased (but not decreased) at the
sole discretion of Tekni-Plex's Board of Directors, (ii) payment of bonuses
based on Tekni-Plex's performance, and (iii) certain fringe benefits. Each
employment agreement provides that the executive may be terminated by Tekni-Plex
upon the following bases: (i) for cause or (ii) death or disability of the
executive. Each of Dr. Smith and Mr. Baker are entitled to severance benefits if
he is terminated due to the occurrence of an event specified in the preceding
sentence. The employment agreements also provide that the executives may not
compete with Tekni-Plex or its subsidiaries during the period of employment and
for one year thereafter.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Witt, who is also the corporate secretary of Tekni-Plex, has served as
a member of the compensation committee of Tekni-Plex's board of directors. In
addition, as Chief Executive Officer of Tekni-Plex, Dr. Smith participated in
deliberations concerning the compensation of certain executive officers of
Tekni-Plex (but not the compensation for himself or Mr. Witt).
SECURITY OWNERSHIP
Tekni-Plex Partnership owns 100% of the outstanding shares of Tekni-Plex
and 97.5% of Tekni-Plex on a fully diluted basis.
Tekni-Plex Partnership has one general partner and six limited partners.
Messrs. McWethy, Solomon and Tuttle are affiliated with the general partner of
Tekni-Plex Partnership which owns an aggregate interest in the net profits of
Tekni-Plex Partnership equal to approximately 55% and Dr. Smith owns an interest
in the net profits of Tekni-Plex Partnership equal to approximately 18%, in each
case, subject to certain conditions
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<PAGE> 44
contained in Tekni-Plex Partnership's agreement of limited partnership and after
giving effect to the Transactions and all other transactions occurring
concurrently herewith.
In 1994, Kenneth W.R. Baker was granted options on 2.5% of Tekni-Plex's
common stock, with anti-dilution provisions. Mr. Baker's option has a term of
fifteen years from the date of the grant. The option terminates immediately upon
Mr. Baker's termination for cause from Tekni-Plex. If Mr. Baker for any other
reason ceases to be employed by Tekni-Plex or is terminated by reason of a
disability, the option may be exercised for a period of six months following Mr.
Baker's cessation of employment. The option may be exercised by Mr. Baker's
estate for a year following Mr. Baker's death.
In connection with the Transactions, Tekni-Plex, Tekni-Plex Partnership and
Dr. F. Patrick Smith entered into an agreement pursuant to which: (i) so long as
Tekni-Plex Partnership continues, Dr. Smith has an option to acquire an interest
in Tekni-Plex Partnership representing up to 1.4% of the outstanding equity
interest in Tekni-Plex Partnership; and (ii) if Tekni-Plex Partnership has been
dissolved, Dr. Smith has an option to acquire shares of common stock of
Tekni-Plex representing up to 1.4% (less any options exercised pursuant to
clause (i) above) of the outstanding common stock. These options have a term of
five years from the date of the grant.
Tekni-Plex owns 100% of the outstanding shares of the Guarantor.
CERTAIN TRANSACTIONS
Tekni-Plex has a management consulting agreement with MST Management
Company and MST/TP Holding, Inc., both of whom are affiliated with Tekni-Plex's
controlling shareholder. Pursuant to their respective agreements, MST Management
Company and MST/TP Holding, Inc. provide regular and customary management
consulting services to Tekni-Plex. The terms of each agreement require
Tekni-Plex to pay a monthly management fee to MST Management Company and MST/TP
Holding, Inc. for a period of ten years from March 18, 1994. Consulting service
fees were in the aggregate approximately $274,000 for fiscal year 1996, and will
increase to approximately $400,000 for fiscal year 1997 as a result of the Dolco
acquisition. The Company's policy is not to enter into any significant
transaction with an affiliate of the Company unless a majority of the
disinterested directors of the board of directors of the Company determines, in
such majority's sole discretion (making such assumptions and determinations of
fact as such majority sees fit), that the terms of such transaction are, in all
material respects or taken as a whole, at least as favorable as the terms that
could be obtained by the Company in a comparable transaction made on an
arm's-length basis between unaffiliated parties.
Tekni-Plex has an arrangement with Arthur P. Witt, a director of
Tekni-Plex, whereby Mr. Witt provides customary management consulting services
to Tekni-Plex on an "as needed" basis. Tekni-Plex anticipates that compensation
to Mr. Witt for services rendered on behalf of Tekni-Plex will be roughly
$60,000 for fiscal year 1997.
In connection with the Dolco acquisition, Tekni-Plex loaned to Arthur P.
Witt $100,000, at 8% annual interest, enabling Mr. Witt to acquire a partnership
interest in Tekni-Plex Partnership as a limited partner.
Concurrently with the Transactions, Tekni-Plex loaned to Kenneth W.R. Baker
$100,000, at 8% annual interest, enabling Mr. Baker to acquire a partnership
interest in Tekni-Plex Partnership as a limited partner.
DESCRIPTION OF NEW CREDIT FACILITY
On May 8, 1997, the Company entered into a revolving credit agreement
providing for bank commitments of $75.0 million, which amount may be increased
to $100.0 million (the "New Credit Facility"), of which $15.0 million may be
used for letters of credit.
The available commitments under the Credit Agreement can be used for
permitted acquisitions and general corporate purposes of the Company, including
working capital. Loans will bear interest at a rate based upon LIBOR or the
higher of the administrative agent's prime rate and a federal funds based rate.
The
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Company is required to pay quarterly commitment fees based on the amount of
unused commitments and fees based on the aggregate undrawn amount of all letters
of credit outstanding from time to time. The Credit Agreement will terminate on
the fifth anniversary of the date of execution of the Credit Agreement, unless
terminated sooner upon an event of default (as defined in the Credit Agreement).
Outstanding loans will be payable on such termination date or such earlier date
as may be required following the occurrence of an event of default.
The Credit Agreement contains various covenants customary for agreements of
this type. These covenants include but are not limited to the following:
financial covenants that require the Company to maintain minimum levels of net
worth, minimum levels of earnings before interest, taxes, depreciation,
amortization and other similar non-cash charges, minimum fixed charge coverage
and maximum leverage ratios; restrictions on liens; restrictions on capital
expenditures; limitations on dividends and payments in respect of capital stock
of the Company, including loans or advances to, or guarantees of the obligations
of, other persons; limitations on acquisitions and other investments;
limitations on incurrence and repurchase or voluntary repayment of debt;
limitations on mergers, liquidations, consolidations and the sale and purchase
of assets; limitations on transactions with affiliates; restrictions on changes
in the nature of the Company's business; and limitations on guarantees and other
contingent obligations.
The Credit Agreement contains events of default customary in credit
agreements of this nature including but not limited to the following: failure to
pay amounts due under the Credit Agreement or the related security documents;
failure to perform or observe other covenants; if any of the representations or
warranties of the Company or any subsidiary is incorrect in any material respect
when made or given; the occurrence of a cross-default with respect to certain
other obligations of the Company and its subsidiaries; a default with respect to
ERISA obligations; if a judgment or decree is rendered against the Company or
any subsidiary, subject to certain limitations; certain changes in ownership or
control of the Company; the failure in the validity, perfection or priority of
any lien on any of the collateral securing the indebtedness under the Credit
Agreement; and insolvency, bankruptcy, reorganization or other similar
proceedings of the Company and any of its subsidiaries.
Indebtedness under the Credit Agreement ranks senior to the Exchange Notes
and is secured by a first priority lien on substantially all assets of the
Company, including but not limited to, receivables, inventory, equipment, real
estate, leases, licenses, patents, brand names, trademarks, contracts,
securities, and the proceeds of the foregoing. The Guarantor guarantees the
Company's obligations under the New Credit Facility and any future subsidiaries
of the Company will also be required to guarantee such obligations. Such
guarantees are and will be secured by first priority liens on substantially all
the assets of the respective guarantors.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold on April 4, 1997 to the Initial
Purchaser pursuant to the Purchase Agreement. The Initial Purchaser subsequently
resold the Notes to qualified institutional buyers in reliance on Rule 144A
under the Securities Act and to a limited number of institutional accredited
investors that agreed to comply with certain transfer restrictions and other
conditions. As a condition to the Purchase Agreement, the Company and the
Guarantor entered into the Registration Rights Agreement with the Initial
Purchaser pursuant to which the Company and the Guarantor have agreed, for the
benefit of the holders of the Old Notes, at the Company's cost, to use their
best efforts (i) to file the Exchange Registration Statement (as defined) within
60 days after the Issue Date of the Old Notes (April 4, 1997) with the
Commission with respect to the Exchange Offer for the Exchange Notes and (ii) to
cause the Exchange Registration Statement to be declared effective under the
Securities Act within 135 days after the date of original issuance of the Old
Notes. Upon the Exchange Registration Statement being declared effective, the
Company will offer the Exchange Notes in exchange for surrender of the Old
Notes. The Company will keep the Exchange Offer open for not less than 30
calendar days (or longer if required by applicable law) after the date on which
notice of the Exchange Offer is mailed to the holders of the Old Notes. For each
Old Note surrendered to the Company pursuant to the Exchange Offer, the holder
of such Old Note will receive an Exchange Note having a principal amount equal
to that of the surrendered Old Note. Interest on Exchange Notes will accrue from
the last interest payment date on which interest was paid on the Old Notes so
surrendered, or, if no interest has been paid on such Old Notes, from April 4,
1997. No interest will be paid on the Old Notes accepted for exchange.
Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, the Exchange Notes would in general
be freely tradeable after the Exchange Offer without further registration under
the Securities Act. However, any purchaser of Old Notes who is an "affiliate" of
the Company or who intends to participate in the Exchange Offer for the purpose
of distributing the Exchange Notes (i) will not be able to rely on the
interpretation of the staff of the Commission, (ii) will not be able to tender
its Old Notes in the Exchange Offer and (iii) must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any sale or transfer of the Old Notes, unless such sale or transfer is made
pursuant to an exemption from such requirements.
Each holder of the Old Notes (other than certain specified holders) who
wishes to exchange the Old Notes for Exchange Notes in the Exchange Offer will
be deemed to represent in the Letter of Transmittal that (i) it is not an
affiliate of the Company, (ii) the Exchange Notes to be received by it were
acquired in the ordinary course of its business, (iii) at the time of
commencement of the Exchange Offer, it has no arrangement or understanding with
any person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Notes in violation of the Securities Act and
(iv) such holder has full power and authority to tender the Old Notes in
exchange for the Exchange Notes. In addition, in connection with any resales of
Exchange Notes, any Participating Broker-Dealer who acquired the Old Notes for
its own account as a result of market-making or other trading activities must
deliver a prospectus meeting the requirements of the Securities Act. The
Commission has taken the position that Participating Broker-Dealers may fulfill
their prospectus delivery requirements with respect to the Exchange Notes (other
than a resale of an unsold allotment from the original sale of the Old Notes)
with the prospectus contained in the Exchange Registration Statement. Under the
Registration Rights Agreement, the Company is required to allow Participating
Broker-Dealers and other persons, if any, subject to similar prospectus delivery
requirements to use the prospectus contained in the Exchange Registration
Statement in connection with the resale of such Exchange Notes.
In the event that changes in the law or the applicable interpretations of
the staff of the Commission do not permit the Company to effect such an Exchange
Offer, or if for any other reason the Exchange Offer is not consummated within
165 days after the original issue date of the Old Notes, or if any holder of the
Old Notes (other than an "affiliate" of the Company or the Initial Purchaser) is
not eligible to participate in the Exchange Offer, or upon the request of the
Initial Purchaser under certain circumstances, the Company will,
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at its cost, (a) as promptly as practicable, file the Shelf Registration
Statement covering resales of the Old Notes, (b) use its best efforts to cause
the Shelf Registration Statement to be declared effective under the Securities
Act and (c) use its best efforts to keep effective the Shelf Registration
Statement until the earlier of the date on which the Old Notes are no longer
"restricted securities" (within the meaning of Rule 144 under the Securities
Act) and such time as all of the applicable Old Notes have been sold thereunder.
The Company will, in the event of the filing of the Shelf Registration
Statement, provide to each applicable holder of the Old Notes copies of the
prospectus which is a part of the Shelf Registration Statement, notify each such
holder when the Shelf Registration Statement has become effective and take
certain other actions as are required to permit unrestricted resales of the Old
Notes. A holder of Old Notes that sells such Old Notes pursuant to the Shelf
Registration Statement generally will be required to be named as a selling
securityholder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement which are applicable to such a
holder (including certain indemnification obligations). In addition, each holder
of the Old Notes will be required to deliver information to be used in
connection with the Shelf Registration Statement and to provide comments on the
Shelf Registration Statement within the time periods set forth in the
Registration Rights Agreement in order to have their Old Notes included in the
Shelf Registration Statement and to benefit from the provisions set forth in the
following paragraph.
If the Company fails to comply with the above provisions or if such
registration statement fails to become effective, then, as liquidated damages,
additional interest (the "Additional Interest") shall become payable with
respect to the Old Notes as follows:
(i) if neither the Exchange Registration Statement nor the Shelf
Registration Statement is filed on or prior to the 60th day after the Issue
Date, Additional Interest shall be accrued on the Old Notes over and above
the stated interest at a rate of 0.25% per annum for the first 90 days
commencing on the 61st day after the Issue Date, such Additional Interest
rate increasing by an additional 0.25% per annum at the beginning of each
subsequent 90-day period;
(ii) if neither the Exchange Registration Statement nor Shelf
Registration Statement is declared effective by the Commission on or prior
to the 135th day after the Issue Date, Additional Interest shall be accrued
on the Old Notes over and above the stated interest at a rate of 0.25% per
annum for the first 90 days commencing on the 136th day after the Issue
Date, such Additional Interest rate increasing by an additional 0.25% per
annum at the beginning of each subsequent 90-day period; or
(iii) if (A) the Company has not exchanged Exchange Notes for all Old
Notes validly tendered in accordance with the terms of the Exchange Offer
on or prior to the 165th day after the Issue Date or (B) the Exchange
Registration Statement ceases to be effective at any time prior to the time
that the Exchange Offer is consummated or (C) if applicable, the Shelf
Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time prior to the date
on which the Old Notes are no longer "restricted securities" (within the
meaning of Rule 144 under the Securities Act) (unless all the Old Notes
have been sold thereunder), then Additional Interest shall be accrued on
the Old Notes over and above the stated interest at a rate of 0.25% per
annum for the first 90 days commencing on (x) the 166th day after the Issue
Date with respect to the Old Notes validly tendered and not exchanged by
the Company in the case of (A) above, or (y) the day the Exchange
Registration Statement ceases to be effective or usable for its intended
purpose in the case of (B) above, or (z) the day such Shelf Registration
Statement ceases to be effective in the case of (C) above, such Additional
Interest rate increasing by an additional 0.25% per annum at the beginning
of each subsequent 90-day period;
provided, however, that the Additional Interest rate on the Old Notes may not
exceed at any one time in the aggregate 1.0% per annum; and provided, further,
that (1) upon the filing of the Exchange Registration Statement or a Shelf
Registration Statement (in the case of clause (i) above), (2) upon the
effectiveness of the Exchange Registration Statement or a Shelf Registration
Statement (in the case of clause (ii) above), or (3) upon the exchange of
Exchange Notes for all Old Notes validly tendered (in the case of clause
(iii)(A) above), or upon the effectiveness of the Exchange Registration
Statement which had ceased to remain
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effective (in the case of clause (iii)(B) above), or upon the effectiveness of
the Shelf Registration Statement which had ceased to remain effective (in the
case of clause (iii)(C) above), Additional Interest on the Old Notes as a result
of such clause (or the relevant subclause thereof), as the case may be, shall
cease to accrue.
Any amounts of Additional Interest due pursuant to clauses (i), (ii) or
(iii) above will be payable in cash, on the same original interest payment dates
as the Old Notes. The amount of Additional Interest will be determined by
multiplying the applicable Additional Interest rate by the principal amount of
the Old Notes, multiplied by a fraction, the numerator of which is the number of
days such Additional Interest rate was applicable during such period (determined
on the basis of a 360-day year comprised of twelve 30-day months and, in the
case of a partial month, the actual number of days elapsed), and, the
denominator of which is 360.
The statements made in this Prospectus relating to the Registration Rights
Agreement are intended to be summaries of all material elements of such
agreement in connection with the Exchange Offer and, as such, do not purport to
be complete. Reference is made to the Registration Rights Agreement, a copy of
which is filed as an exhibit to the Exchange Registration Statement of which
this Prospectus is a part, for a more complete description of the agreement or
matter involved.
Following the consummation of the Exchange Offer, holders of the Old Notes
who were eligible to participate in the Exchange Offer but who did not tender
their Old Notes will not have any further registration rights and such Old Notes
will continue to be subject to certain restrictions on transfer. Accordingly,
the liquidity of the market for such Old Notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $1,000 principal amount of Exchange
Notes in exchange for each $1,000 principal amount of outstanding Old Notes
accepted in the Exchange Offer. Holders may tender some or all of their Old
Notes pursuant to the Exchange Offer. However, Old Notes may be tendered only in
integral multiples of $1,000.
The form and terms of the Exchange Notes are substantially identical to the
form and terms of the Old Notes except that (i) the Exchange Notes bear a Series
B designation and a different CUSIP Number from the Old Notes, (ii) the Exchange
Notes have been registered under the Securities Act and hence will not bear
legends restricting the transfer thereof and (iii) the holders of the Exchange
Notes will not be entitled to certain rights under the Registration Rights
Agreement, including the provisions providing for an increase in the interest
rate on the Old Notes in certain circumstances relating to the timing of the
Exchange Offer, all of which rights will terminate when the Exchange Offer is
terminated. The Exchange Notes will evidence the same debt as the Old Notes
(which they replace) and will be entitled to the benefits of the Indenture.
The Exchange Notes will be fully and unconditionally guaranteed on a senior
subordinated basis by the Guarantor. The form and terms of the Exchange
Guarantee is substantially identical to the form and terms of the Old Guarantee.
As of the date of this Prospectus, of the $75,000,000 aggregate principal
amount of Old Notes outstanding, $73,750,000 principal amount of the Old Notes
is registered in the name of Cede & Co., as nominee for DTC, and the remainder
of the Old Notes are registered in the respective names of the holders thereof.
Solely for reasons of administration (and for no other purpose) the Company has
fixed the close of business on , 1997 as the record date for the
Exchange Offer for purposes of determining the persons to whom this Prospectus
and the Letter of Transmittal will be mailed initially. Only a registered holder
of Old Notes (or such holder's legal representative or attorney-in-fact) as
reflected on the records of the Trustee under the Indenture may participate in
the Exchange Offer. There will be no fixed record date for determining
registered holders of Old Notes entitled to participate in the Exchange Offer.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of Delaware or the Indenture in connection with the
Exchange Offer. The Company intends to conduct the
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Exchange Offer in accordance with the applicable requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Old Notes and for the purpose of receiving the Exchange Notes from the
Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Notes will be returned
(or in the case of Old Notes tendered by book-entry transfer through DTC, will
be credited to an account maintained with DTC), without expense, to the
tendering holder thereof as promptly as practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than transfer taxes in certain circumstances, in connection with the
Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended. Notwithstanding the
foregoing, the Company will not extend the Expiration Date beyond September 16,
1997 (which, if extended to such date, would represent a maximum Exchange Offer
period of days).
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders an announcement thereof, each prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled expiration date.
The Company reserves the right, in its reasonable discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "-- Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of the
Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the registered holders.
INTEREST ON THE EXCHANGE NOTES
Interest on Exchange Notes shall accrue from the last interest payment date
on which interest was paid on the Old Notes so surrendered, or, if no interest
has been paid on such Old Notes, from April 4, 1997. No interest will be paid on
the Old Notes accepted for exchange.
PROCEDURES FOR TENDERING
For a holder of Old Notes to tender Old Notes validly pursuant to the
Exchange Offer, a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantee, or (in the case of a
book-entry transfer) an Agent's Message in lieu of the Letter of Transmittal,
and any other required documents, must be received by the Exchange Agent at the
address set forth below under "-- Exchange Agent" prior to 5:00 p.m., New York
City time, on the Expiration Date. In addition, prior to 5:00 p.m., New York
City time, on the Expiration Date, either (a) certificates for tendered Old
Notes must be received by the Exchange Agent at such address or (b) such Old
Notes must be transferred pursuant to the procedures for book-entry transfer
described below (and a confirmation of such tender received by the Exchange
Agent, including an Agent's Message if the tendering holder has not delivered a
Letter of Transmittal).
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The term "Agent's Message" means a message transmitted by DTC, received by
the Exchange Agent and forming part of the confirmation of a book-entry
transfer, which states that DTC has received an express acknowledgment from the
participant in DTC tendering Old Notes which are the subject of such book-entry
confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Company may enforce such
agreement against such participant. In the case of an Agent's Message relating
to guaranteed delivery, the term means a message transmitted by DTC and received
by the Exchange Agent, which states that DTC has received an express
acknowledgment from the participant in DTC tendering Old Notes that such
participant has received and agrees to be bound by the Notice of Guaranteed
Delivery.
By tendering Old Notes pursuant to the procedures set forth above, each
holder will be deemed to make to the Company the representations set forth above
in the third paragraph under the heading "-- Purpose and Effect of the Exchange
Offer."
The tender by a holder of Old Notes and the acceptance thereof by the
Company will constitute agreement between such holder and the Company in
accordance with the terms and subject to the conditions set forth herein and in
the Letter of Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK
OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See "Instruction
to Registered Holder and/or Book-Entry Transfer Facility Participant from Owner"
included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of the
Medallion System (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Old Notes
with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Old Notes at the book-entry transfer facility, The Depository Trust Company
("DTC" or the "Book-Entry Transfer Facility"), for the purpose of facilitating
the Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Old Notes by causing such Book-Entry Transfer
Facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old
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<PAGE> 51
Notes in accordance with the Book-Entry Transfer Facility's procedures for such
transfer. Although delivery of the Old Notes may be effected through book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility,
an appropriate Letter of Transmittal properly completed and duly executed with
any required signature guarantee, or, in the case of a book-entry transfer, an
Agent's Message in lieu of the Letter of Transmittal and all other required
documents must in each case be transmitted to and received or confirmed by the
Exchange Agent at its address set forth below on or prior to the Expiration
Date, or, if the guaranteed delivery procedures described below are complied
with, within the time period provided under such procedures. Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
The Exchange Agent and DTC have confirmed that the Exchange Offer is
eligible for the DTC Automated Tender Offer Program ("ATOP"). Accordingly, DTC
participants may electronically transmit their acceptance of the Exchange Offer
by causing DTC to transfer Old Notes to the Exchange Agent in accordance with
DTC's ATOP procedures for transfer. DTC will then send an Agent's Message to the
Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its reasonable discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Old Notes not properly tendered or any Old Notes the
Company's acceptance of which would, in the opinion of counsel for the Company,
be unlawful. The Company also reserves the right in its reasonable discretion to
waive any defects, irregularities or conditions of tender as to particular Old
Notes. The Company's interpretation of the terms and conditions of the Exchange
Offer (including the instructions in the Letter of Transmittal) will be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Old Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Old Notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any Old Notes received by the Exchange Agent that are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the Expiration
Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within three
New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or facsimile thereof) together with the certificate(s)
representing the Old Notes (or a confirmation of book-entry transfer of
such Old Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility), and any other documents required by the Letter of Transmittal
will be deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (of
facsimile thereof), as well as the certificate(s) representing all tendered
Old Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer
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Facility), and all other documents required by the Letter of Transmittal
are received by the Exchange Agent upon three New York Stock Exchange
trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number(s) and principal amount of such Old Notes, or, in the case of
Old Notes transferred by book-entry transfer, the name and number of the account
at the Book-Entry Transfer Facility to be credited), (iii) be signed by the
holder in the same manner as the original signature on the Letter of Transmittal
by which such Old Notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to have the
Trustee with respect to the Old Notes register the transfer of such Old Notes
into the name of the person withdrawing the tender and (iv) specify the name in
which any such Old Notes are to be registered, if different from that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto unless
the Old Notes so withdrawn are validly retendered. Any Old Notes which have been
tendered but which are not accepted for exchange will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn Old
Notes may be retendered by following one of the procedures described above under
"-- Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange Exchange Notes for, any Old
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Old Notes, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
(or other similar exchange offers) which, in the sole judgment of the
Company, might materially impair the ability of the Company to proceed with
the Exchange Offer or any material adverse development has occurred in any
existing action or proceeding with respect to the Company or any of its
subsidiaries;
(b) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted, which, in the reasonable
judgment of the Company, might materially impair the ability of the Company
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval
the Company shall, in its reasonable discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its reasonable discretion that any of the
conditions are not satisfied, the Company may (i) refuse to accept any Old Notes
and return all tendered Old Notes to the tendering holders, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of the
Exchange Offer, subject, however, to the rights of holders to withdraw such Old
Notes (see "-- Withdrawal of Tenders") or (iii) waive such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Old Notes which have not been withdrawn.
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EXCHANGE AGENT
Marine Midland Bank has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notice of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
<TABLE>
<S> <C>
By Registered or Certified Mail,
Overnight Courier or Hand: By Facsimile:
Marine Midland Bank Marine Midland Bank
140 Broadway -- A Level Attention: Frank Godino
New York, New York 10005-1180 (212) 658-2292
Attention: Corporate Trust
Operations
Tel: (212) 658-5931
</TABLE>
Originals of all documents submitted by facsimile should be sent promptly
by registered or certified mail, overnight courier or hand. Delivery to an
address other than as set forth above will not constitute a valid delivery.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, facsimile, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, which is face value, as reflected in the Company's accounting records on
the date of exchange. Accordingly, no gain or loss for accounting purposes will
be recognized by the Company. The expenses of the Exchange Offer will be
expensed over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Old Notes
may be resold only (i) to the Company (upon redemption thereof or otherwise),
(ii) so long as the Old Notes are eligible for resale pursuant to Rule 144A, to
a person inside the United States whom the seller reasonably believes is a
qualified institutional buyer within the meaning of Rule 144A under the
Securities Act in a transaction meeting the requirements of Rule 144A, in
accordance with Rule 144 under the Securities Act, or pursuant to another
exemption from the registration requirements of the Securities Act (and based
upon an opinion of counsel reasonably acceptable to the Company), (iii) outside
the United States to a foreign person in a transaction meeting the requirements
of Rule 904 under the Securities Act, or (iv) pursuant to an effective
registration statement under the Securities Act, in each case in accordance with
any applicable securities laws of any state of the United States.
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third parties,
the Company believes that a holder or other person who
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<PAGE> 54
receives Exchange Notes, whether or not such person is the holder (other than a
person that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) who receives Exchange Notes in exchange for Old Notes
in the ordinary course of business and who is not participating, does not intend
to participate, and has no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes, will be allowed to
resell the Exchange Notes to the public without further registration under the
Securities Act and without delivering to the purchasers of the Exchange Notes a
prospectus that satisfies the requirements of Section 10 of the Securities Act.
However, if any holder acquires Exchange Notes in the Exchange Offer for the
purpose of distributing or participating in a distribution of the Exchange
Notes, such holder cannot rely on the position of the staff of the Commission
enunciated in such no-action letters or any similar interpretive letters, and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction, unless an exemption
from registration is otherwise available. Further, each Participating
Broker-Dealer that receives Exchange Notes for its own account in exchange for
Old Notes where such Old Notes were acquired by such Participating Broker-Dealer
as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the Exchange Notes are to be
acquired by the holder or the person receiving such Exchange Notes, whether or
not such person is the holder, in the ordinary course of business, (ii) the
holder or any such other person (other than a broker-dealer referred to in the
next sentence) is not engaging and does not intend to engage, in the
distribution of the Exchange Notes, (iii) the holder or any such other person
has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iv) neither the holder nor any such other
person is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, and (v) the holder or any such other person acknowledges that if
such holder or other person participates in the Exchange Offer for the purpose
of distributing the Exchange Notes it must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale of the Exchange Notes and cannot rely on those no-action letters. As
indicated above, each Participating Broker-Dealer that receives an Exchange Note
for its own account in exchange for Old Notes must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. For a
description of the procedures for such resales by Participating Broker-Dealers,
see "Plan of Distribution."
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<PAGE> 55
DESCRIPTION OF EXCHANGE NOTES
As used below in this "Description of Exchange Notes" section, the
"Company" means Tekni-Plex, Inc. but not any of its subsidiaries. The Old Notes
were, and the Exchange Notes will be, issued under the Indenture, dated as of
April 1, 1997 (the "Indenture"), among the Company, the Guarantor and Marine
Midland Bank, as Trustee (the "Trustee"). The terms of the Exchange Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). The Exchange Notes are subject to all such terms, and holders of the
Exchange Notes are referred to the Indenture and the Trust Indenture Act for a
statement thereof. A copy of the Indenture and the Registration Rights Agreement
described below will be made available to holders and prospective investors upon
request. The statements made in this Prospectus relating to the Exchange Notes,
the Indenture and the Registration Rights Agreement are intended to be summaries
of all material elements of such documents in connection with the Exchange Offer
and, as such, do not purport to be complete. Reference is made to each such
document, a copy of which is filed as an exhibit to the Exchange Registration
Statement of which this Prospectus is a part, for a more complete description of
the document or matter involved.
The Old Notes are, and the Exchange Notes will be, general unsecured
obligations of the Company, limited to $150,000,000 aggregate principal amount
of which $75,000,000 aggregate principal amount was issued in the offering of
the Old Notes. Additional amounts may be issued in one or more series from time
to time subject to the limitations set forth under "Covenants -- Limitation on
Indebtedness" and restrictions contained in the Credit Agreement. The Exchange
Notes will be senior subordinated obligations of the Company, subordinated in
right of payment to all Senior Debt of the Company. The Exchange Notes will be
issued only in fully registered form, without coupons, in denominations of
$1,000 and any integral multiple thereof. No service charge will be made for any
registration of transfer or exchange of Exchange Notes, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. Initially, the Trustee will act as
paying agent and registrar for the Exchange Notes. The form and terms of the
Exchange Notes are substantially identical to the form and terms of the Old
Notes except that (i) the Exchange Notes bear a Series B designation, (ii) the
Exchange Notes have been registered under the Securities Act and, therefore,
will not bear legends restricting the transfer thereof, and (iii) the holders of
Exchange Notes will not be entitled to certain rights under the Registration
Rights Agreement, including the provisions providing for an increase in the
interest rate on the Old Notes in certain circumstances relating to the timing
of the Exchange Offer, which rights will terminate when the Exchange Offer is
consummated.
PRINCIPAL, MATURITY AND INTEREST
The Notes will mature on April 1, 2007 and will bear interest at the rate
per annum shown on the cover page hereof from April 4, 1997 or from the most
recent interest payment date to which interest has been paid or provided for.
Interest will be payable semiannually on April 1 and October 1 of each year,
commencing October 1, 1997, to the Person in whose name a Note is registered at
the close of business on the preceding March 15 or September 15 (each, a "Record
Date"), as the case may be. Interest on the Notes will be computed on the basis
of a 360-day year of twelve 30-day months. Holders must surrender the Notes to
the paying agent for the Notes to collect principal payments. The Company will
pay principal and interest by check and may mail interest checks to a holder's
registered address.
OPTIONAL REDEMPTION
The Notes will be subject to redemption, at the option of the Company, in
whole or in part, at any time on or after April 1, 2002 and prior to maturity,
upon not less than 30 nor more than 60 days' notice mailed to each holder of
Notes to be redeemed at his address appearing in the register for the Notes, in
amounts of $1,000 or an integral multiple of $1,000, at the following redemption
prices (expressed as percentages of principal amount) plus accrued interest to
but excluding the date fixed for redemption (subject to the right of holders of
record on the relevant Record Date to receive interest due on an interest
payment date that is on or
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<PAGE> 56
prior to the date fixed for redemption), if redeemed during the 12-month period
beginning April 1 of the years indicated:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
-------------------------------------------------- ----------
<S> <C>
2002.............................................. 105.625%
2003.............................................. 103.750
2004.............................................. 101.875
2005 and thereafter............................... 100.000
</TABLE>
In addition, prior to April 1, 2000, the Company may redeem up to 33% of
the principal amount of the Notes with the net cash proceeds received by the
Company from one or more public offerings of Capital Stock (other than
Disqualified Stock) of the Company, at a redemption price (expressed as a
percentage of the principal amount) of 111.25% of the principal amount thereof,
plus accrued and unpaid interest to the date fixed for redemption; provided,
however, that at least $60.0 million in aggregate principal amount of the Notes
remains outstanding immediately after any such redemption (excluding any Notes
owned by the Company or any of its Affiliates). Notice of redemption pursuant to
this paragraph must be mailed to holders of Notes not later than 60 days
following the consummation of such public offering.
Selection of Notes for any partial redemption shall be made by the Trustee,
in accordance with the rules of any national securities exchange on which the
Notes may be listed or, if the Notes are not so listed, pro rata or by lot or in
such other manner as the Trustee shall deem appropriate and fair. Notes in
denominations larger than $1,000 may be redeemed in part but only in integral
multiples of $1,000. Notice of redemption will be mailed before the date fixed
for redemption to each holder of Notes to be redeemed at his or her registered
address. On and after the date fixed for redemption, interest will cease to
accrue on Notes or portions thereof called for redemption.
The Notes do not, and will not, have the benefit of any sinking fund.
RANKING
The payment of principal, premium, if any, and interest on the Notes and
any claims arising out of or with respect to the Indenture is subordinated and
subject in right of payment, to the extent and in the manner provided in the
Indenture, to the prior payment in full of all Senior Debt of the Company.
Upon any payment or distribution of assets or securities of the Company of
any kind or character, whether in cash, property or securities, upon any
dissolution or winding up or total or partial liquidation or reorganization of
the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become due with respect
to Senior Debt of the Company (including any interest accruing on or after, or
which would accrue but for, an event of bankruptcy, regardless of whether such
interest is an allowed claim enforceable against the debtor under the Bankruptcy
Code) shall first be paid in full, or payment provided for, in either case in
cash or cash equivalents or otherwise in a form satisfactory to the holders of
Senior Debt, before the Holders of the Notes or the Trustee on behalf of such
Holders shall be entitled to receive any payment by the Company of the principal
of, premium, if any, or interest on the Notes, or any payment to acquire any of
the Notes for cash, property or securities, or any distribution with respect to
the Notes of any kind or character, whether in cash, property or securities, by
set-off or otherwise (all such payments and distributions referred to
individually and collectively, as a "Securities Payment"). Before any payment
may be made by, or on behalf of, the Company of the principal of, premium, if
any, or interest on the Notes upon any such dissolution or winding up or
liquidation or reorganization, any payment or distribution of assets or
securities of the Company of any kind or character, whether in cash, property or
securities, to which the Holders of the Notes or the Trustee on their behalf
would be entitled, but for the subordination provisions of the Indenture, shall
be made by the Company or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making such payment or distribution, directly to
the holders of Senior Debt of the Company (pro rata to such holders on the basis
of the respective amounts of Senior Debt held by such holders) or their
representatives or to the trustee or trustees under any indenture pursuant to
which any such Senior Debt may have been issued as their respective interests
may appear, to the extent necessary to pay all
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<PAGE> 57
such Senior Debt in full in cash or cash equivalents or otherwise in a form
satisfactory to the holders of such Senior Debt after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders of
such Senior Debt.
No Securities Payment by or on behalf of the Company, whether pursuant to
the terms of the Notes or upon acceleration or otherwise, will be made if, at
the time of such payment, there exists a default in the payment of all or any
portion of the obligations on any Designated Senior Debt, whether at maturity,
on account of mandatory redemption or prepayment, acceleration or otherwise (but
if the Trustee is otherwise able to make such Securities Payment, only insofar
as the Trustee is concerned, if the Trustee has received written notice of such
default), and such default shall not have been cured or waived or the benefits
of this sentence waived by or on behalf of the holders of such Designated Senior
Debt. In addition, during the continuance of any non-payment default or
non-payment event of default with respect to any Designated Senior Debt pursuant
to which the maturity thereof may be accelerated, and upon receipt by the
Trustee of notice (a "Payment Blockage Notice") from a holder or holders of such
Designated Senior Debt or the trustee or agent acting on behalf of such
Designated Senior Debt, then, unless and until such default or event of default
has been cured or waived or has ceased to exist or such Designated Senior Debt
has been discharged or repaid in full in cash or cash equivalents or otherwise
in a form satisfactory to the holders of such Designated Senior Debt, no
Securities Payment will be made by or on behalf of the Company, except from
those funds held in trust for purposes of defeasance for the benefit of the
Holders of any Notes to such Holders, during a period (a "Payment Blockage
Period") commencing on the date of receipt of such Payment Blockage Notice by
the Trustee and ending 179 days thereafter. Notwithstanding anything herein to
the contrary, (x) in no event will a Payment Blockage Period extend beyond 179
days from the date of the Payment Blockage Notice in respect thereof was given
and (y) there must be 180 days in any 365 day period during which no Payment
Blockage Period is in effect. Not more than one Payment Blockage Period may be
commenced with respect to the Notes during any period of 365 consecutive days.
No default or event of default that existed or was continuing on the date of
commencement of any Payment Blockage Period with respect to the Designated
Senior Debt initiating such Payment Blockage Period may be, or be made, the
basis for the commencement of any other Payment Blockage Period by the holder or
holders of such Designated Senior Debt or the trustee or agent acting on behalf
of such Designated Senior Debt, whether or not within a period of 365
consecutive days, unless such default or event of default has been cured or
waived for a period of not less than 90 consecutive days.
The failure to make any payment or distribution for or on account of the
Notes by reason of the provisions of the Indenture described under this section
will not be construed as preventing the occurrence of an Event of Default
described in clause (a), (b) or (c) of the first paragraph under "-- Events of
Default."
By reason of the subordination provisions described above, in the event of
insolvency of the Company, funds which would otherwise be payable to Holders of
the Notes will be paid to the holders of Senior Debt of the Company to the
extent necessary to repay such Senior Debt in full, and the Company may be
unable to fully meet its obligations with respect to the Notes. Subject to the
restrictions set forth in the Indenture, in the future the Company may incur
additional Senior Debt.
At March 28, 1997, after giving pro forma effect to the Transactions, there
would have been no Senior Debt outstanding. However, the Company could have
borrowed up to $75.0 million of Indebtedness under the Credit Agreement, all of
which would have constituted Senior Debt.
THE GUARANTEE
The Indenture provides that the Guarantors will unconditionally guarantee
on a senior subordinated basis all of the obligations of the Company under the
Indenture, including its obligation to pay principal, premium, if any, and
interest with respect to the Notes. The obligation of each Guarantor is limited
to the maximum amount which, after giving effect to all other contingent and
fixed liabilities of such Guarantor, will result in the obligations of such
Guarantor under the Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. Except as provided in
"-- Covenants" below, the Company is not restricted from selling or otherwise
disposing of a Guarantor.
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<PAGE> 58
The Indenture provides that if the Notes are defeased in accordance with
the terms of the Indenture, or if all or substantially all of the assets of a
Guarantor or all of the Capital Stock of a Guarantor is sold (including by
issuance or otherwise) by the Company or any of its Restricted Subsidiaries in a
transaction constituting an Asset Disposition, and if (x) the Net Available
Proceeds from such Asset Dispositions are used in accordance with the covenant
described under "-- Covenants -- Limitation on Certain Asset Dispositions" or
(y) the Company delivers to the Trustee an Officers' Certificate to the effect
that the Net Available Proceeds from such Asset Disposition shall be used in
accordance with the covenant described under "-- Covenants -- Limitation on
Certain Asset Dispositions" and within the time limits specified by such
covenant, then such Guarantor (in the event of a sale or other disposition of
all or substantially all of its assets) shall be released and discharged from
its Guarantee obligations.
The obligations of each Guarantor under the Guarantee are subordinated to
the prior payment in full of all Senior Debt of such Guarantor on the same basis
as the obligations of the Company on the Notes are subordinated to Senior Debt
of the Company. The Guarantee will be pari passu in right of payment with any
other senior subordinated indebtedness of each Guarantor and senior to any
future Subordinated Indebtedness of each Guarantor.
Other than provided in the financial statements attached hereto, separate
financial statements of the Guarantor are not included herein because the
aggregate net assets, earnings and equity of the Guarantor and Tekni-Plex are
substantially equivalent to the net assets, earnings and equity of Tekni-Plex on
a consolidated basis.
COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, Incur any
Indebtedness (including Acquired Indebtedness), except: (i) Indebtedness of the
Company or any of its Restricted Subsidiaries, if immediately after giving
effect to the Incurrence of such Indebtedness and the receipt and application of
the net proceeds thereof, the Consolidated Cash Flow Ratio of the Company for a
year consisting of the four full fiscal quarters for which quarterly or annual
financial statements are available next preceding the Incurrence of such
Indebtedness (calculated on a pro forma basis in accordance with Article 11 of
Regulation S-X under the Securities Act or any successor provision as if such
Indebtedness had been Incurred on the first day of such year) would be greater
than 2.0 to 1.0; (ii) Indebtedness of the Company and its Restricted
Subsidiaries Incurred under the Credit Agreement in an amount not to exceed
$100.0 million in aggregate principal amount less the amount of any such
Indebtedness that is permanently repaid or, without duplication, the amount by
which commitments thereunder are permanently reduced, in either case, from the
proceeds of Asset Dispositions (it being understood that the amount incurred
under the Credit Agreement may be increased as a result of the operation of
clause (xiii) below); (iii) Indebtedness owed by the Company to any direct or
indirect Wholly Owned Subsidiary of the Company or Indebtedness owed by a direct
or indirect Restricted Subsidiary of the Company to the Company or a direct or
indirect Wholly Owned Subsidiary of the Company; provided, however, upon either
(I) the transfer or other disposition by such direct or indirect Wholly Owned
Subsidiary or the Company of any Indebtedness so permitted under this clause
(iii) to a Person other than the Company or another direct or indirect Wholly
Owned Subsidiary of the Company or (II) the issuance (other than directors'
qualifying shares), sale, transfer or other disposition of shares of Capital
Stock or other ownership interests (including by consolidation or merger) of
such direct or indirect Wholly Owned Subsidiary to a Person other than the
Company or another such Wholly Owned Subsidiary of the Company, the provisions
of this clause (iii) shall no longer be applicable to such Indebtedness and such
Indebtedness shall be deemed to have been Incurred at the time of any such
issuance, sale, transfer or other disposition, as the case may be; (iv)
Indebtedness of the Company or any Restricted Subsidiary under any interest rate
or foreign currency hedge or exchange or other similar agreement to the extent
entered into to hedge any other Indebtedness permitted under the Indenture
(including the Notes); (v) Indebtedness Incurred to defer, renew, extend,
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<PAGE> 59
replace, refinance or refund, whether under any amendment, supplement or
otherwise (collectively for purposes of this clause (v) to "refund") any
Indebtedness outstanding on the Issue Date, any Indebtedness Incurred under the
prior clause (i) above or the Notes and the Guarantee; provided, however, that
(I) such Indebtedness does not exceed the principal amount (or accrual amount,
if less) of Indebtedness so refunded plus the amount of any premium required to
be paid in connection with such refunding pursuant to the terms of the
Indebtedness refunded or the amount of any premium reasonably determined by the
issuer of such Indebtedness as necessary to accomplish such refunding by means
of a tender offer, exchange offer, or privately negotiated repurchase, plus the
expenses of such issuer reasonably incurred in connection therewith and (II)(A)
in the case of any refunding of Indebtedness that is pari passu with the Notes,
such refunding Indebtedness is made pari passu with or subordinate in right of
payment to the Notes, and, in the case of any refunding of Indebtedness that is
subordinate in right of payment to the Notes, such refunding Indebtedness is
subordinate in right of payment to the Notes on terms no less favorable to the
holders of the Notes than those contained in the Indebtedness being refunded,
(B) in either case, the refunding Indebtedness by its terms, or by the terms of
any agreement or instrument pursuant to which such Indebtedness is issued, does
not have an Average Life that is less than the remaining Average Life of the
Indebtedness being refunded and does not permit redemption or other retirement
(including pursuant to any required offer to purchase to be made by the Company
or a Restricted Subsidiary of the Company) of such Indebtedness at the option of
the holder thereof prior to the final stated maturity of the Indebtedness being
refunded, other than a redemption or other retirement at the option of the
holder of such Indebtedness (including pursuant to a required offer to purchase
made by the Company or a Restricted Subsidiary of the Company) which is
conditioned upon a change of control of the Company pursuant to provisions
substantially similar to those contained in the Indenture described under
"-- Change of Control" below and (C) any Indebtedness Incurred to refund any
Indebtedness is Incurred by the obligor on the Indebtedness being refunded or by
the Company; (vi) commodity agreements of the Company or any of its Restricted
Subsidiaries to the extent entered into to protect the Company and its
Restricted Subsidiaries from fluctuations in the prices of raw materials used in
their businesses; (vii) Indebtedness of the Company under the Notes and
Indebtedness of the Guarantors, under the Guarantee incurred in accordance with
the Indenture; (viii) Indebtedness outstanding on the Issue Date; (ix)
guarantees by the Company or its Restricted Subsidiaries of Indebtedness
otherwise permitted to be incurred hereunder; (x) Indebtedness the net proceeds
of which are applied to defease the Notes in their entirety; (xi) Indebtedness
of the Company or any of its Subsidiaries that is an endorsement of bank drafts
and similar negotiable instruments for collection or deposit in the ordinary
course of business; (xii) Indebtedness incurred by the Company or any of its
Restricted Subsidiaries constituting reimbursement obligations with respect to
letters of credit issued in the ordinary course of business, including, without
limitation, letters of credit in respect of workers' compensation claims or
self-insurance, or other Indebtedness with respect to reimbursement type
obligations regarding workers' compensation claims or self-insurance and
obligations in respect of performance and surety bonds and completion guarantees
provided by the Company or any Restricted Subsidiary of the Company in the
ordinary course of business not in excess of $2.0 million; and (xiii)
Indebtedness of the Company or its Restricted Subsidiaries not otherwise
permitted to be Incurred pursuant to clauses (i) through (xii) above which,
together with any other outstanding Indebtedness Incurred pursuant to this
clause (xiii), has an aggregate principal amount not in excess of $20.0 million
at any time outstanding, which Indebtedness may be incurred under the Credit
Agreement or otherwise.
Limitation on Restricted Payments
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, (i) declare or pay
any dividend, or make any distribution of any kind or character (whether in
cash, property or securities), on or in respect of any class of the Capital
Stock of the Company or any of its Restricted Subsidiaries excluding any (x)
dividends or distributions payable solely in shares of Capital Stock of the
Company (other than Disqualified Stock) or in options, warrants or other rights
to acquire Capital Stock of the Company (other than Disqualified Stock), or (y)
in the case of any Restricted Subsidiary of the Company, dividends or
distributions payable to the Company or a Restricted Subsidiary of the Company,
(ii) purchase, redeem, or otherwise acquire or retire for value shares of
Capital Stock of the Company or any of its Restricted Subsidiaries, any options,
warrants or rights to purchase or acquire shares of
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Capital Stock of the Company or any of its Restricted Subsidiaries or any
securities convertible or exchangeable into shares of Capital Stock of the
Company or any of its Restricted Subsidiaries, excluding any such shares of
Capital Stock, options, warrants, rights or securities which are owned by the
Company or a Restricted Subsidiary of the Company, (iii) make any Investment in
(other than a Permitted Investment), or make any payment on a guarantee of any
obligation of, any Person, other than the Company or a direct or indirect Wholly
Owned Subsidiary of the Company, or (iv) redeem, defease, repurchase, retire or
otherwise acquire or retire for value, prior to any scheduled maturity,
repayment or sinking fund payment, Subordinated Indebtedness (each of the
transactions described in clauses (i) through (iv) (other than any exception to
any such clause) being a "Restricted Payment"), if at the time thereof: (1) a
Default or an Event of Default shall have occurred and be continuing, or (2)
upon giving effect to such Restricted Payment, the Company could not Incur at
least $1.00 of additional Indebtedness pursuant to the terms of the Indenture
described in clause (i) of "-- Limitation on Indebtedness" above, or (3) upon
giving effect to such Restricted Payment, the aggregate of all Restricted
Payments made on or after the Issue Date exceeds the sum of: (a) 50% of
cumulative Consolidated Net Income of the Company (or, in the case cumulative
Consolidated Net Income of the Company shall be negative, less 100% of such
deficit) since the Issue Date, plus (b) 100% of the aggregate net proceeds
received after the Issue Date, including the fair market value of property other
than cash (determined in good faith by the Board of Directors of the Company as
evidenced by a resolution of such Board of Directors filed with the Trustee)
from the issuance of, or equity contribution with respect to, Capital Stock
(other than Disqualified Stock) of the Company and warrants, rights or options
on Capital Stock (other than Disqualified Stock) of the Company (other than in
respect of any such issuance to a Restricted Subsidiary of the Company) and the
principal amount of Indebtedness of the Company or any of its Restricted
Subsidiaries that has been converted into or exchanged for Capital Stock of the
Company which Indebtedness was Incurred after the Issue Date; plus (c) the
excess of (x) 100% of the aggregate net cash proceeds received on the Issue Date
from the issuance of, or the equity contribution with respect to, Capital Stock
of the Company over (y) $10,875,000; plus (d) 100% of the aggregate after-tax
net cash proceeds, of the sale or other disposition of any Investment
constituting a Restricted Payment made after the Issue Date; provided that any
gain on the sale or disposition to the extent included in this clause (d) shall
not be included in determining Consolidated Net Income for purposes of clause
(a) above; provided, further, that amounts included in this clause (d) shall not
exceed the Net Investment by the Company in the asset so sold or disposed.
The foregoing provision will not be violated by (i) any dividend on any
class of Capital Stock of the Company or any of its Restricted Subsidiaries paid
within 60 days after the declaration thereof if, on the date when the dividend
was declared, the Company or such Restricted Subsidiary, as the case may be,
could have paid such dividend in accordance with the provisions of the
Indenture, (ii) the renewal, extension, refunding or refinancing of any
Indebtedness otherwise permitted pursuant to the terms of the Indenture
described in clause (v) of "-- Limitation on Indebtedness" above, (iii) the
exchange or conversion of any Indebtedness of the Company or any of its
Restricted Subsidiaries for or into Capital Stock of the Company (other than
Disqualified Stock), (iv) so long as no Default or Event of Default has occurred
and is continuing, any Investment made with the proceeds of a substantially
concurrent sale (other than in respect of any issuance to a Restricted
Subsidiary of the Company) for cash of Capital Stock of the Company (other than
Disqualified Stock); provided, however, that the proceeds of such sale of
Capital Stock, to the extent used in any such Investment, shall not be (and have
not been) included in subclause (b) of clause (3) of the preceding paragraph,
(v) the redemption, repurchase, retirement or other acquisition of any Capital
Stock of the Company in exchange for or out of the net cash proceeds of a
substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of Capital Stock of the Company (other than Disqualified Stock);
provided, however, that the proceeds of such sale of Capital Stock, to the
extent used for such redemption, repurchase, retirement or other acquisition or
retirement, shall not be (and have not been) included in subclause (b) of clause
(3) of the preceding paragraph (vi) payments made to purchase, redeem or
otherwise acquire or retire for value shares of Capital Stock of the Company or
any of its Restricted Subsidiaries at no more than fair market value (determined
in good faith by the Board of Directors of the Company as evidenced by a
resolution of such Board of Directors filed with the Trustee) from present and
former officers and directors of the Company or any such Restricted Subsidiary
(other than F. Patrick Smith, J. Andrew
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McWethy, Barry A. Solomon and Stephen A. Tuttle) in an amount not in excess of
up to $2.0 million for each fiscal year and $5.0 million in the aggregate, (vii)
all payments, not exceeding $600,000 in the aggregate, for each fiscal year,
required to be made to Tekni-Plex Partnership, MST/TP Partners, L.P., MST
Management, L.P., MST Partners L.P. or their respective Affiliates or partners
under the terms of existing agreements and notes, (viii) so long as no Default
or Event of Default has occurred and is continuing, the redemption, repurchase
or retirement of Subordinated Indebtedness of the Company in exchange for, by
conversion into, or out of the net proceeds of, a substantially concurrent sale
or incurrence of Subordinated Indebtedness (other than any Indebtedness owed to
a Subsidiary) of the Company that is contractually subordinated in right of
payment to the Notes to at least the same extent, and which has an Average Life
at least as long, in each case, as the subordinated Indebtedness being redeemed,
repurchased or retired; (ix) so long as no Default or Event of Default has
occurred and is continuing, Investments not otherwise permitted pursuant to the
clauses above up to $10.0 million in the aggregate; and (x) so long as no
Default or Event of Default has occurred and is continuing, Restricted Payments
not otherwise permitted pursuant to the clauses above up to $2.0 million in the
aggregate. Each Restricted Payment described in clauses (i) (to the extent not
already taken into account for purposes of computing the aggregate amount of all
Restricted Payments pursuant to clause 3 above), (iv), (vi), (vii), (ix) and (x)
of the previous sentence shall be taken into account for purposes of computing
the aggregate amount of all Restricted Payments pursuant to clause (3) of the
preceding paragraph.
The Indenture provides that for purposes of this covenant, (i) an
"Investment" shall be deemed to have been made at the time any Restricted
Subsidiary is designated as an Unrestricted Subsidiary in an amount
(proportionate to the Company's equity interest in such Subsidiary) equal to the
net worth of such Restricted Subsidiary at the time that such Restricted
Subsidiary is designated as an Unrestricted Subsidiary; (ii) at any date the
aggregate of all Restricted Payments made as Investments since the Issue Date
shall exclude and be reduced by an amount (proportionate to the Company's equity
interest in such Subsidiary) equal to the net worth of an Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary, not to exceed, in the case of any such redesignation of
an Unrestricted Subsidiary as a Restricted Subsidiary, the amount of Investments
previously made by the Company and the Restricted Subsidiaries in such
Unrestricted Subsidiary (in each case (i) and (ii) "net worth" to be calculated
based upon the fair market value of the assets of such Subsidiary as of any such
date of designation); and (iii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer.
Limitations Concerning Distributions and Transfers by Restricted Subsidiaries
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (i) pay, directly or
indirectly, dividends or make any other distributions in respect of its Capital
Stock or pay any Indebtedness or other obligation owed to the Company or any
Restricted Subsidiary of the Company, (ii) make loans or advances to the Company
or any Restricted Subsidiary of the Company or (iii) transfer any of its
property or assets to the Company or any Restricted Subsidiary of the Company,
except for such encumbrances or restrictions existing under or by reason of (a)
any agreement in effect on the Issue Date as any such agreement is in effect on
such date, (b) the Credit Agreement, (c) any agreement relating to any
Indebtedness Incurred by such Restricted Subsidiary prior to the date on which
such Restricted Subsidiary was acquired by the Company and outstanding on such
date and not Incurred in anticipation or contemplation of becoming a Restricted
Subsidiary and provided such encumbrance or restriction shall not apply to any
assets of the Company or its Restricted Subsidiaries other than such Restricted
Subsidiary, (d) customary provisions contained in an agreement which has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of a Restricted Subsidiary; provided, however, that such
encumbrance or restriction is applicable only to such Restricted Subsidiary or
assets, (e) an agreement effecting a renewal, exchange, refunding, amendment or
extension of Indebtedness Incurred pursuant to an agreement referred to in
clause (a) above; provided, however, that the provisions contained in such
renewal, exchange, refunding, amendment or extension agreement relating to such
encumbrance or restriction are no more restrictive in any material respect than
the provisions contained in the agreement that is the subject thereof in the
reasonable judgment
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of the Board of Directors of the Company as evidenced by a resolution of such
Board of Directors filed with the Trustee, (f) the Indenture, (g) applicable
law, (h) customary provisions restricting subletting or assignment of any lease
governing any leasehold interest of any Restricted Subsidiary of the Company,
(i) restrictions contained in Indebtedness permitted to be incurred subsequent
to the Issue Date pursuant to the provisions of the covenant described under
"-- Limitation on Indebtedness"; provided that any such restrictions are
ordinary and customary with respect to the type of Indebtedness incurred, (j)
purchase money obligations for property acquired in the ordinary course of
business that impose restrictions of the type referred to in clause (iii) of
this covenant or (k) restrictions of the type referred to in clause (iii) of
this covenant contained in security agreements securing Indebtedness of a
Restricted Subsidiary of the Company to the extent that such Liens were
otherwise incurred in accordance with "-- Limitation on Liens" below and
restrict the transfer of property subject to such agreements.
Limitation on Liens
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, incur any Lien on or with respect to any
property or assets of the Company or such Restricted Subsidiary owned on the
Issue Date or thereafter acquired or on the income or profits thereof to secure
Indebtedness, without making, or causing any such Restricted Subsidiary to make,
effective provision for securing the Notes and all other amounts due under the
Indenture (and, if the Company shall so determine, any other Indebtedness of the
Company or such Restricted Subsidiary, including Subordinated Indebtedness;
provided, however, that Liens securing the Notes and any Indebtedness pari passu
with the Notes are senior to such Liens securing such Subordinated Indebtedness)
equally and ratably with such Indebtedness or, in the event such Indebtedness is
subordinate in right of payment to the Notes or the Guarantee, prior to such
Indebtedness, as to such property or assets for so long as such Indebtedness
shall be so secured.
The foregoing restrictions shall not apply to (i) Liens existing on the
Issue Date securing Indebtedness existing on the Issue Date; (ii) Liens securing
Senior Debt (including Liens securing Indebtedness outstanding under the Credit
Agreement) and any guarantees thereof to the extent that the Indebtedness
secured thereby is permitted to be incurred under the covenant described under
"-- Limitation on Indebtedness" above; provided, however, that Indebtedness
under the Credit Agreement shall be deemed not to have been Incurred in
violation of such provisions for purposes of this clause (ii) if the holder(s)
of such Indebtedness or their agent or representative shall have received a
representation from the Company to the effect that the Incurrence of such
Indebtedness does not violate such provision; (iii) Liens securing only the
Notes and the Guarantees; (iv) Liens in favor of the Company or a Guarantor; (v)
Liens to secure Indebtedness Incurred for the purpose of financing all or any
part of the purchase price or the cost of construction or improvement of the
property (or any other capital expenditure financing) subject to such Liens;
provided, however, that (a) the aggregate principal amount of any Indebtedness
secured by such a Lien does not exceed 100% of such purchase price or cost, (b)
such Lien does not extend to or cover any other property other than such item of
property and any improvements on such item, (c) the Indebtedness secured by such
Lien is Incurred by the Company within 180 days of the acquisition, construction
or improvement of such property and (d) the Incurrence of such Indebtedness is
permitted by the provisions of the Indenture described under "-- Limitation on
Indebtedness" above; (vi) Liens on property existing immediately prior to the
time of acquisition thereof (and not created in anticipation or contemplation of
the financing of such acquisition); (vii) Liens on property of a Person existing
at the time such Person is acquired or merged with or into or consolidated with
the Company or any such Restricted Subsidiary (and not created in anticipation
or contemplation thereof); (viii) Liens to secure Indebtedness Incurred to
extend, renew, refinance or refund (or successive extensions, renewals,
refinancings or refundings), in whole or in part, any Indebtedness secured by
Liens referred to in clauses (i)-(vii) and (ix)-(xii) of this paragraph so long
as such Liens do not extend to any other property and the principal amount of
Indebtedness so secured is not increased except for the amount of any premium
required to be paid in connection with such renewal, refinancing or refunding
pursuant to the terms of the Indebtedness renewed, refinanced or refunded or the
amount of any premium reasonably determined by the Company as necessary to
accomplish such renewal, refinancing or refunding by means of a tender offer,
exchange offer or privately negotiated repurchase, plus the expenses of the
issuer of such Indebtedness reasonably incurred in connection with such renewal,
refinancing or refunding; (ix) Liens in
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favor of the Trustee as provided for in the Indenture on money or property held
or collected by the Trustee in its capacity as Trustee (x) Liens securing a tax,
assessment or other governmental charge or levy or the claim of a materialman,
mechanic, carrier, warehouseman or landlord for labor, materials, supplies or
rentals incurred in the ordinary course or business; (xi) Liens consisting of a
deposit or pledge made in the ordinary course of business in connection with, or
to secure payment of, obligations under worker's compensation, unemployment
insurance or similar legislation; (xii) Liens arising pursuant to an order of
attachment, distraint or similar legal process arising in connection with legal
proceedings; and (xiii) Liens incurred in the ordinary course of business
securing assets not having a fair market value in excess of $500,000.
Limitation on Certain Asset Dispositions
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, make one or more
Asset Dispositions unless: (i) the Company or such Restricted Subsidiary, as the
case may be, receives consideration for such Asset Disposition at least equal to
the fair market value of the assets sold or disposed of as determined by the
Board of Directors of the Company in good faith and evidenced by a resolution of
such Board of Directors filed with the Trustee; (ii) not less than 75% of the
consideration for the disposition consists of cash or readily marketable cash
equivalents or the assumption of Indebtedness (other than non-recourse
Indebtedness or any Subordinated Indebtedness) of the Company or such Restricted
Subsidiary or other obligations relating to such assets (and release of the
Company or such Restricted Subsidiary from all liability on the Indebtedness or
other obligations assumed); and (iii) all Net Available Proceeds, less any
amounts invested within 360 days of such Asset Disposition in assets related to
the business of the Company or its Restricted Subsidiaries (including in the
Capital Stock of another Person (other than any Person that is a Restricted
Subsidiary of the Company immediately prior to such investment); provided,
however, that immediately after giving effect to any such investment in Capital
Stock (and not prior thereto) such Person shall be a Restricted Subsidiary of
the Company), are applied, on or prior to the 360th day after such Asset
Disposition, unless and to the extent that the Company shall determine to make
an Offer to Purchase, to the permanent reduction and prepayment of any Senior
Debt of the Company then outstanding (including a permanent reduction of
commitments in respect thereof). Any Net Available Proceeds from any Asset
Disposition which is subject to the immediately preceding sentence that are not
applied as provided in the immediately preceding sentence shall be used promptly
after the expiration of the 360th day after such Asset Disposition, or promptly
after the Company shall have earlier determined to not apply any Net Available
Proceeds therefrom as provided in clause (iii) of the immediately preceding
sentence, to make an Offer to Purchase outstanding Notes at a purchase price in
cash equal to 100% of their principal amount plus accrued interest to the
Purchase Date. Notwithstanding the foregoing, the Company may defer making any
Offer to Purchase outstanding Notes until there are aggregate unutilized Net
Available Proceeds from Asset Dispositions otherwise subject to the two
immediately preceding sentences equal to or in excess of $5.0 million (at which
time, the entire unutilized Net Available Proceeds from Asset Dispositions
otherwise subject to the two immediately preceding sentences, and not just the
amount in excess of $5.0 million, shall be applied as required pursuant to this
paragraph). Any remaining Net Available Proceeds following the completion of the
required Offer to Purchase may be used by the Company for any other purpose
(subject to the other provisions of the Indenture) and the amount of Net
Available Proceeds then required to be otherwise applied in accordance with this
covenant shall be reset to zero, subject to any subsequent Asset Disposition.
These provisions will not apply to a transaction consummated in compliance with
the provisions of the Indenture described under "-- Mergers, Consolidations and
Certain Sales of Assets" below.
In the event that the Company makes an Offer to Purchase the Notes, the
Company shall comply with any applicable securities laws and regulations,
including any applicable requirements of Section 14(e) of, and Rule 14e-1 under,
the Exchange Act.
Limitation on Senior Subordinated Indebtedness
The Indenture provides that the Company will not (i) directly or indirectly
Incur any Indebtedness that by its terms would expressly rank senior in right of
payment to the Notes and expressly rank subordinate in right of payment to any
Senior Debt and (ii) permit a Guarantor to, and no Guarantor will, directly or
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indirectly Incur any Indebtedness that by its terms would expressly rank senior
in right of payment to the Guarantee of such Guarantor and expressly rank
subordinate in right of payment to any Senior Debt of such Guarantor.
Limitation on Issuance and Sale of Capital Stock of Restricted Subsidiaries
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, (a) transfer, convey, sell or otherwise
dispose of any shares of Capital Stock of any Restricted Subsidiary of the
Company (other than to the Company or a Wholly Owned Subsidiary of the Company),
except that the Company and any such Restricted Subsidiary may, in any single
transaction, sell all, but not less than all, of the issued and outstanding
Capital Stock of any such Restricted Subsidiary to any Person, subject to
complying with the provisions of the Indenture described under "-- Limitation on
Certain Asset Dispositions" above and (b) issue shares of Capital Stock of a
Restricted Subsidiary of the Company (other than directors' qualifying shares),
or securities convertible into, or warrants, rights or options to subscribe for
or purchase shares of, Capital Stock of a Restricted Subsidiary of the Company
to any Person other than to the Company or a Wholly Owned Subsidiary of the
Company and other than to the holders of the Capital Stock of such Restricted
Subsidiary made pro rata to the relative amounts of such Capital Stock held by
such holders.
Limitation on Transactions with Affiliates and Related Persons
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, enter into directly or indirectly any
transaction with any of their respective Affiliates or Related Persons (other
than the Company or a Restricted Subsidiary of the Company), including, without
limitation, the purchase, sale, lease or exchange of property, the rendering of
any service, or the making of any guarantee, loan, advance or Investment, either
directly or indirectly, involving aggregate consideration in excess of $1.0
million unless a majority of the disinterested directors of the Board of
Directors of the Company determines, in its good faith judgment evidenced by a
resolution of such Board of Directors filed with the Trustee, that the terms of
such transaction are at least as favorable as the terms that could be obtained
by the Company or such Restricted Subsidiary, as the case may be, in a
comparable transaction made on an arm's-length basis between unaffiliated
parties; provided, however, that if the aggregate consideration is in excess of
$5.0 million the Company shall also obtain, prior to the consummation of the
transaction, the favorable opinion as to the fairness of the transaction to the
Company or such Restricted Subsidiary, from a financial point of view from an
independent financial advisor. The provisions of this covenant shall not apply
to (i) transactions permitted by the provisions of the Indenture described above
under the caption "-- Limitation on Restricted Payments" above and (ii)
reasonable fees and compensation paid to, and indemnity provided on behalf of,
officers, directors and employees of the Company and its Restricted Subsidiaries
as determined in good faith by the Board of Directors or authorized executive
officers, as the case may be, of the Company.
Change of Control
Within 30 days following the date of the consummation of a transaction
resulting in a Change of Control, the Company will commence an Offer to Purchase
all outstanding Notes at a purchase price in cash equal to 101% of their
principal amount plus accrued interest to the Purchase Date. Such Offer to
Purchase will be consummated not earlier than 30 days and not later than 60 days
after the commencement thereof. Each holder shall be entitled to tender all or
any portion of the Notes owned by such holder pursuant to the Offer to Purchase,
subject to the requirement that any portion of a Note tendered must bear an
integral multiple of $1,000 principal amount. A "Change of Control" will be
deemed to have occurred in the event that (whether or not otherwise permitted by
the Indenture), after the Issue Date (a) any Person or any Persons acting
together that would constitute a group (for purposes of Section 13(d) of the
Exchange Act, or any successor provision thereto) (a "Group"), together with any
Affiliates or Related Persons thereof, other than any such Person, Persons,
Affiliates or Related Person who are Permitted Holders, shall "beneficially own"
(as defined in Rule 13d-3 under the Exchange Act, or any successor provision
thereto), directly or indirectly, at least (i) 50% of the voting power of the
outstanding Voting Stock of the Company or (ii) 40% of the voting power
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of the outstanding Voting Stock of the Company, and the Permitted Holders own
less than such Person or Group (in doing the "own less than" comparison in this
clause (ii), the holdings of the Permitted Holders who are members of the new
Group shall not be counted in the shares held in the aggregate by Permitted
Holders); (b) any sale, lease or other transfer (in one transaction or a series
of related transactions) is made by the Company or any of its Restricted
Subsidiaries of all or substantially all of the consolidated assets of the
Company and its Restricted Subsidiaries to any Person; (c) the Company
consolidates with or merges with or into another Person or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which immediately after the consummation thereof
Persons owning a majority of the Voting Stock of the Company immediately prior
to such consummation shall cease to own a majority of the Voting Stock of the
Company or the surviving entity if other than the Company; (d) Continuing
Directors cease to constitute at least a majority of the Board of Directors of
the Company; or (e) the stockholders of the Company approve any plan or proposal
for the liquidation or dissolution of the Company. In no event would the sale of
common stock of the Company to an underwriter or a group of underwriters in
privity of contract with the Company (or anybody in privity of contract with
such underwriters) be deemed to be a Change of Control or be deemed the
acquisition of more than 40% of the voting power of the outstanding Voting Stock
of the Company by a Person or any Group unless such common stock is not held in
an investment account in which case the investment account would be treated
without giving effect to the foregoing part of this sentence.
In the event that the Company makes an Offer to Purchase the Notes, the
Company shall comply with any applicable securities laws and regulations,
including any applicable requirements of Section 14(e) of, and Rule 14e-1 under,
the Exchange Act.
With respect to the sale of assets referred to in the definition of "Change
of Control," the phrase "all or substantially all" of the assets of the Company
will likely be interpreted under applicable law and will be dependent upon
particular facts and circumstances. As a result, there may be a degree of
uncertainty in ascertaining whether a sale or transfer of "all or substantially
all" of the assets of the Company has occurred. In addition, no assurances can
be given that the Company will be able to acquire Notes tendered upon the
occurrence of a Change of Control. The ability of the Company to pay cash to the
holders of Notes upon a Change of Control may be limited by its then existing
financial resources. The Credit Agreement will contain certain covenants
prohibiting, or requiring waiver or consent of the lenders thereunder prior to,
the repurchase of the Notes upon a Change of Control and future debt agreements
of the Company may provide the same. If the Company does not obtain such waiver
or consent to repay such Indebtedness, the Company will remain prohibited from
repurchasing the Notes. In such event, the Company's failure to purchase
tendered Notes would constitute an Event of Default under the Indenture (without
any further grace period) which would in turn constitute a default under the
Credit Agreement and possibly other Indebtedness. If such a cross-default leads
to an acceleration of the obligations under the Credit Agreement or any other
Senior Debt, the payment on the Notes would be effectively subordinated to any
such Senior Debt. None of the provisions relating to a repurchase upon a Change
of Control are waivable by the Board of Directors of the Company or the Trustee.
The foregoing provisions will not prevent the Company from entering into
transactions of the types described above with management or their affiliates.
In addition, such provisions may not necessarily afford the holders of the Notes
protection in the event of a highly leveraged transaction, including a
reorganization, restructuring, merger or similar transaction involving the
Company that may adversely affect the holders because such transactions may not
involve a shift in voting power or beneficial ownership, or even if they do, may
not involve a shift of the magnitude required under the definition of Change of
Control to trigger the provisions. Nonetheless, such provisions may have the
effect of deterring certain mergers, tender offers, takeover attempts or similar
transactions by increasing the cost of such a transaction and may limit the
Company's ability to obtain additional equity financing in the future.
Future Guarantors
The Indenture provides that the Company shall not create or acquire, nor
permit any of its Domestic Restricted Subsidiaries to create or acquire, any
Domestic Restricted Subsidiary after the Issue Date unless, at the time such
Domestic Restricted Subsidiary has either assets or stockholder's equity in
excess of $25,000,
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such Domestic Restricted Subsidiary (a) executes and delivers to the Trustee a
supplemental indenture in form reasonably satisfactory to the Trustee pursuant
to which such Domestic Restricted Subsidiary shall unconditionally guarantee all
of the Company's obligations under the Notes and the Indenture on the terms set
forth in the Indenture and (b) delivers to the Trustee an opinion of counsel
that such supplemental indenture has been duly authorized, executed and
delivered by such Domestic Restricted Subsidiary and constitutes a legal, valid,
binding and enforceable obligation of such Domestic Restricted Subsidiary.
Provision of Financial Information
Whether or not the Company is subject to Section 13(a) or 15(d) of the
Exchange Act, or any successor provision thereto, the Company shall file with
the Commission the annual reports, quarterly reports and other documents which
the Company would have been required to file with the Commission pursuant to
such Section 13(a) or 15(d) or any successor provision thereto if the Company
were so required, such documents to be filed with the Commission on or prior to
the respective dates (the "Required Filing Dates") by which the Company would
have been required so to file such documents if the Company were so required.
The Company shall also in any event (a) within 15 days of each Required Filing
Date (i) transmit by mail to all holders of Notes, as their names and addresses
appear in the Note Register, without cost to such holders, and (ii) file with
the Trustee, copies of the annual reports, quarterly reports and other documents
which the Company is required to file with the Commission pursuant to the
preceding sentence, and (b) if, notwithstanding the preceding sentence, filing
such documents by the Company with the Commission is not permitted under the
Exchange Act, promptly upon written request supply copies of such documents to
any prospective holder of Notes.
Mergers, Consolidations and Certain Sales of Assets
The Company will not consolidate or merge with or into any Person, or sell,
assign, lease, convey or otherwise dispose of (or cause or permit any Restricted
Subsidiary of the Company to consolidate or merge with or into any Person or
sell, assign, lease, convey or otherwise dispose of) all or substantially all of
the Company's assets (determined on a consolidated basis for the Company and its
Restricted Subsidiaries), whether as an entirety or substantially an entirety in
one transaction or a series of related transactions, including by way of
liquidation or dissolution, to any Person unless, in each such case: (i) the
entity formed by or surviving any such consolidation or merger (if other than
the Company or such Restricted Subsidiary, as the case may be), or to which such
sale, assignment, lease, conveyance or other disposition shall have been made
(the "Surviving Entity"), is a corporation organized and existing under the laws
of the United States, any state thereof or the District of Columbia; (ii) if
there is a Surviving Entity, the Surviving Entity assumes by supplemental
indenture all of the obligations of the Company on the Notes and under the
Indenture; (iii) immediately after giving effect to such transaction and the use
of any net proceeds therefrom on a pro forma basis, the Company or the Surviving
Entity, as the case may be, (A) shall have a Consolidated Net Worth equal to or
greater than the Consolidated Net Worth of the Company immediately prior to such
transaction and (B) could Incur at least $1.00 of Indebtedness pursuant to
clause (i) of the provisions of the Indenture described under "-- Limitation on
Indebtedness" above; (iv) immediately before and after giving effect to such
transaction and treating any Indebtedness which becomes an obligation of the
Company or any of its such Restricted Subsidiaries as a result of such
transaction as having been incurred by the Company or such Restricted
Subsidiary, as the case may be, at the time of the transaction, no Default or
Event of Default shall have occurred and be continuing; and (v) if, as a result
of any such transaction, property or assets of the Company or a Restricted
Subsidiary would become subject to a Lien not excepted from the provisions of
the Indenture described under "-- Limitation on Liens" above, the Company,
Restricted Subsidiary or the Surviving Entity, as the case may be, shall have
secured the Notes as required by said covenant. The provisions of this paragraph
shall not apply to any merger of a Restricted Subsidiary of the Company with or
into the Company or a Wholly Owned Subsidiary of the Company or any transaction
pursuant to which a Guarantor, is to be released in accordance with the terms of
the Guarantee and the Indenture in connection with any transaction complying
with the provisions of the Indenture described under "-- Limitation on Certain
Asset Dispositions" above.
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Consequences of a Highly Leveraged Transaction
The covenants in the Indenture are primarily in the nature of incurrence
tests and not maintenance tests and will only work to protect holders of the
Notes when the Company attempts to take action of a sort to which the incurrence
tests of the Indenture apply, such as the incurrence of additional indebtedness
or the making of Restricted Payments, including the making of investments. Even
in such cases, the Indenture provides for various exceptions that do not make
the protections applicable. For example, the incurrence of indebtedness under
the Credit Agreement is permitted without regard to any incurrence test up to a
$100.0 million limit and certain other indebtedness is permitted to the extent
of certain specified dollar limits and the making of Restricted Payments is
permitted in any event to the extent of certain dollar limits specified in the
Indenture. See "-- Covenants" above.
The covenants discussed above may be waived by the Trustee and the holders
of the Notes as discussed in "-- Modification and Waiver" below and may not be
waived in any way by the board of directors of the Company. In addition, the
covenants are fully applicable in the event of a leveraged buyout initiated or
supported by the Company, the Company's management or any affiliate of either
party.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a) failure to
pay principal of (or premium, if any, on) any Note when due (whether or not
prohibited by the provisions of the Indenture described under "-- Ranking"
above); (b) failure to pay any interest on any Note when due, and the default
continues for 30 days (whether or not prohibited by the provisions of the
Indenture described under "-- Ranking" above); (c) default in the payment of
principal of and interest on Notes required to be purchased pursuant to an Offer
to Purchase as described under "-- Covenants -- Change of Control" and
"-- Covenants -- Limitation on Certain Asset Dispositions" above when due and
payable (whether or not prohibited by the provisions of the Indenture described
under "-- Ranking" above); (d) failure to perform or comply with any of the
provisions described under "-- Covenants -- Mergers, Consolidations and Certain
Sales of Assets" above; (e) failure to perform any other covenant or agreement
of the Company under the Indenture or the Notes and the default continues for 30
days after written notice to the Company by the Trustee or holders of at least
25% in aggregate principal amount of outstanding Notes; (f) default under the
terms of one or more instruments evidencing or securing Indebtedness of the
Company or any of its Restricted Subsidiaries having an outstanding principal
amount of $5 million or more individually or in the aggregate that has resulted
in the acceleration of the payment of such Indebtedness or failure to pay
principal when due at the stated maturity of any such Indebtedness; (g) the
rendering of a final judgment or judgments (not subject to appeal) against the
Company or any of its Restricted Subsidiaries in an amount of $5 million or more
which remains undischarged or unstayed for a period of 60 days after the date on
which the right to appeal has expired; (h) certain events of bankruptcy,
insolvency or reorganization affecting the Company or any of its Material
Subsidiaries; and (i) any Guarantee ceases to be in full force and effect or is
declared null and void and unenforceable or is found to be invalid or a
Guarantor denies its liability under the Guarantee (other than by reason of a
release of such Guarantor from the Guarantee in accordance with the terms of the
Indenture and the Guarantee).
If an Event of Default (other than an Event of Default with respect to the
Company described in clause (h) of the preceding paragraph) shall occur and be
continuing, either the Trustee or the holders of at least 25% in aggregate
principal amount of the outstanding Notes may accelerate the maturity of all
Notes; provided, however, that after such acceleration, but before a judgment or
decree based on acceleration, the holders of a majority in aggregate principal
amount of outstanding Notes may, under certain circumstances, rescind and annul
such acceleration if all Events of Default, other than the non-payment of
accelerated principal, have been cured or waived as provided in the Indenture;
and provided, further, that so long as the Credit Agreement shall be in full
force and effect, if an Event of Default shall have occurred and be continuing
(other than as specified under clause (h) above), the Notes shall not become due
and payable until the earlier to occur of (x) five business days following
delivery of a written notice of such acceleration of the Notes to the agent
under the Credit Agreement, if such Event of Default has not been cured prior to
such fifth business day, and (y) the acceleration of any Indebtedness under the
Credit Agreement. If an Event of Default specified in clause (h) of the
preceding paragraph with respect to the Company occurs, the outstanding Notes
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will ipso facto become immediately due and payable without any declaration or
other act on the part of the Trustee or any holder. For information as to waiver
of defaults, see "-- Modification and Waiver."
The Indenture provides that the Trustee shall, within 30 days after the
occurrence of any Default or Event of Default with respect to the Notes, give
the holders thereof notice of all uncured Defaults or Events of Default known to
it; provided, however, that, except in the case of an Event of Default or a
Default in payment with respect to the Notes or a Default or Event of Default in
complying with "-- Covenants -- Mergers, Consolidations and Certain Sales of
Assets," the Trustee shall be protected in withholding such notice if and so
long as the Board of Directors or responsible officers of the Trustee in good
faith determine that the withholding of such notice is in the interest of the
holders of the Notes.
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless the holders of at least 25% in aggregate principal amount of
the outstanding Notes shall have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as Trustee, and the
Trustee shall not have received from the holders of a majority in aggregate
principal amount of the outstanding Notes a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days.
However, such limitations do not apply to a suit instituted by a holder of a
Note for enforcement of payment of the principal of and premium, if any, or
interest on such Note on or after the respective due dates expressed in such
Note.
The Company will be required to furnish to the Trustee annually a statement
as to its performance of certain of its obligations under the Indenture and as
to any default in such performance.
SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
The Company may terminate its substantive obligations and the substantive
obligations of the Guarantors in respect of the Notes and the Guarantees by
delivering all outstanding Notes to the Trustee for cancellation and paying all
sums payable by the Company on account of principal of, premium, if any, and
interest on all Notes or otherwise. In addition to the foregoing, the Company
may, provided that no Default or Event of Default has occurred and is continuing
or would arise therefrom (or, with respect to a Default or Event of Default
specified in clause (h) of "-- Events of Default" above, any time on or prior to
the 91st calendar day after the date of such deposit (it being understood that
this condition shall not be deemed satisfied until after such 91st day)) and
provided that no default under any Senior Debt would result therefrom, terminate
its substantive obligations and the substantive obligations of the Guarantors in
respect of the Notes and the Guarantees (except for the Company's obligation to
pay the principal of (and premium, if any, on) and the interest on the Notes and
such Guarantors' guarantee thereof) by (i) depositing with the Trustee, under
the terms of an irrevocable trust agreement, money or United States Government
Obligations sufficient (without reinvestment) to pay all remaining indebtedness
on the Notes, (ii) delivering to the Trustee either an Opinion of Counsel or a
ruling directed to the Trustee from the Internal Revenue Service to the effect
that the holders of the Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and termination of
obligations, (iii) delivering to the Trustee an Opinion of Counsel to the effect
that the Company's exercise of its option under this paragraph will not result
in the Company, the Trustee or the trust created by the Company's deposit of
funds pursuant to this provision becoming or being deemed to be an "investment
company" under the Investment Company Act of 1940, as amended, and (iv)
complying with certain other requirements set forth in the Indenture. In
addition, the Company may, provided that no Default or Event of Default has
occurred, and is continuing or would arise therefrom (or, with respect to a
Default or Event of Default specified in clause (h) of "-- Events of Default"
above, any time on or prior to the 91st calendar day after the date of such
deposit (it being understood that this condition shall not be deemed satisfied
until after such 91st day)) and provided that no default under any Senior Debt
would result therefrom, terminate all of its substantive obligations and all of
the substantive obligations of the Guarantors in respect of the Notes and the
Guarantees (including the Company's obligation to pay the principal of (and
premium, if any, on) and interest on the Notes and such Guarantors' guarantee
thereof by (i) depositing with the Trustee, under the terms of an irrevocable
trust agreement, money or United States Government Obligations sufficient
(without reinvestment) to pay all remaining indebtedness on the Notes, (ii)
delivering
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to the Trustee either a ruling directed to the Trustee from the Internal Revenue
Service to the effect that the holders of the Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such deposit and
termination of obligations or an Opinion of Counsel based upon such a ruling
addressed to the Trustee or a change in the applicable Federal tax law since the
date of the Indenture, to such effect, (iii) delivering to the Trustee an
Opinion of Counsel to the effect that the Company's exercise of its option under
this paragraph will not result in the Company, the Trustee or the trust created
by the Company's deposit of funds pursuant to this provision becoming or being
deemed to be an "investment company" under the Investment Company Act of 1940,
as amended, and (iv) complying with certain other requirements set forth in the
Indenture.
The Company may make an irrevocable deposit pursuant to this provision only
if at such time it is not prohibited from doing so under the subordination
provisions of the Indenture or certain covenants in the instruments governing
Senior Debt and the Company has delivered to the Trustee and any Paying Agent an
Officers' Certificate to that effect.
GOVERNING LAW
The Indenture, the Notes and the Guarantee will be governed by the laws of
the State of New York without regard to principles of conflicts of laws.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the holders of a majority in aggregate
principal amount of the outstanding Notes; provided, however, that no such
modification or amendment may, without the consent of the holder of each Note
affected thereby, (a) change the Stated Maturity of the principal of or any
installment of interest on any Note or alter the optional redemption or
repurchase provisions of any Note or the Indenture in a manner adverse to the
holders of the Notes, (b) reduce the principal amount of (or the premium) of any
Note, (c) reduce the rate of or extend the time for payment of interest on any
Note, (d) change the place or currency of payment of principal of (or premium)
or interest on any Note, (e) modify any provisions of the Indenture relating to
the waiver of past defaults (other than to add sections of the Indenture subject
thereto) or the right of the holders to institute suit for the enforcement of
any payment on or with respect to any Note or the Guarantee, or the modification
and amendment of the Indenture and the Notes (other than to add sections of the
Indenture or the Notes which may not be amended, supplemented or waived without
the consent of each holder affected), (f) reduce the percentage of the principal
amount of outstanding Notes necessary for amendment to or waiver of compliance
with any provision of the Indenture or the Notes or for waiver of any Default,
(g) waive a default in the payment of principal of, interest on, or redemption
payment with respect to, any Note (except a recision of acceleration of the
Notes by the holders as provided in the Indenture and a waiver of the payment
default that resulted from such acceleration), (h) modify the ranking or
priority of the Notes or the Guarantee, or modify the definition of Senior Debt
or Designated Senior Debt or amend or modify the subordination provisions of the
Indenture in any manner adverse to the Holders, (i) release the Guarantors from
any of their respective obligations under the Guarantee or the Indenture
otherwise than in accordance with the Indenture, or (j) modify the provisions
relating to any Offer to Purchase required under the covenants described under
"-- Covenants -- Limitation on Certain Asset Dispositions" or "-- Covenants --
Change of Control" in a manner materially adverse to the holders of Notes with
respect to any Asset Disposition that has been consummated or Change of Control
that has occurred.
The holders of a majority in aggregate principal amount of the outstanding
Notes, on behalf of all holders of Notes, may waive compliance by the Company
with certain restrictive provisions of the Indenture. Subject to certain rights
of the Trustee, as provided in the Indenture, the holders of a majority in
aggregate principal amount of the outstanding Notes, on behalf of all holders of
Notes, may waive any past default under the Indenture, except a default in the
payment of principal, premium or interest or a default arising from failure to
purchase any Note tendered pursuant to an Offer to Purchase, or a default in
respect of a provision that under the Indenture cannot be modified or amended
without the consent of the holder of each outstanding Note affected.
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THE TRUSTEE
The Indenture provides that, except during the continuance of a Default,
the Trustee will perform only such duties as are specifically set forth in the
Indenture. During the existence of a Default, the Trustee will exercise such
rights and powers vested in it under the Indenture and use the same degree of
care and skill in their exercise as a prudent person would exercise under the
circumstances in the conduct of such person's own affairs. The Indenture and
provisions of the Trust Indenture Act incorporated by reference therein contain
limitations on the rights of the Trustee, should it become a creditor of the
Company, the Guarantors, or any other obligor upon the Notes, to obtain payment
of claims in certain cases or to realize on certain property received by it in
respect of any such claim as security or otherwise. The Trustee is permitted to
engage in other transactions with the Company or an Affiliate of the Company;
provided, however, that if it acquires any conflicting interest (as defined in
the Indenture or in the Trust Indenture Act), it must eliminate such conflict or
resign.
BOOK-ENTRY; DELIVERY AND FORM
The Exchange Notes will initially be represented by one or more global
Notes in definitive, fully registered form without interest coupons
(collectively, the "Global Note") and will be deposited with the Trustee as
custodian for the Depositary and registered in the name of a nominee of the
Depository.
Upon the issuance of the Global Note, the Depositary or its custodian will
credit, on its internal system, the respective principal amount of the
individual beneficial interests represented by such Global Note to the accounts
of persons who have accounts with such depositary. Ownership of beneficial
interests in the Global Note will be limited to persons who have accounts with
the Depositary ("participants") or persons who hold interests through
participants. Ownership of beneficial interests in the Global Note will be shown
on, and the transfer of that ownership will be effected only through, records
maintained by the Depositary or its nominee (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants).
So long as the Depositary, or its nominee, is the registered holder of the
Global Note, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Exchange Notes represented by such
Global Note for all purposes under the Indenture and the Exchange Notes. No
beneficial owner of an interest in the Global Note will be able to transfer that
interest except in accordance with the Depositary's applicable procedures.
Payments of the principal of, and interest on, the Global Note will be made
to the Depositary or its nominee, as the case may be, as the registered owner
thereof. None of the Company, the Trustee or any Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company expects that the Depositary or its nominee, upon receipt of any
payment of principal or interest in respect of the Global Note will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note as
shown on the records of the Depositary or its nominee. The Company also expects
that payments by participants to owners of beneficial interests in such Global
Note held through such participants will be governed by standing instructions
and customary practices, as is now the case with securities held for the
accounts of customers registered in the name of nominees for such customers.
Such payments will be the responsibility of such participants. Transfers between
participants in the Depositary will be effected in the ordinary way in
accordance with the Depositary rules and will be settled in same-day funds.
The Depositary has advised the Company that it will take any action
permitted to be taken by a holder of Exchange Notes only at the direction of one
or more participants to whose accounts an interest in the Global Note is
credited and only in respect of such portion of the aggregate principal amount
of Exchange Notes as to which such participant or participants has or have given
such direction.
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The Depositary has advised the Company as follows: the Depositary is a
limited purpose trust company organized under the laws of the State of New York,
a "banking organization" within the meaning of New York Banking Law, a member of
the Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. The Depositary was created to
hold securities for its participants and facilitate the clearance and settlement
of securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the Depositary system is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly ("indirect participants").
Although the Depositary has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among participants of the
Depositary, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Company nor the Trustee will have any responsibility for the performance by the
Depositary or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
CERTIFICATED EXCHANGE NOTES
If the Depositary is at any time unwilling or unable to continue as a
depositary for the Global Note and a successor depositary is not appointed by
the Company within 90 days, the Company will issue certificated notes in
exchange for the Global Note.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture or the Registration Rights Agreement. Reference is made to the
Indenture or the Registration Rights Agreement for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means, with respect to any Person, Indebtedness of
such Person (i) existing at the time such Person becomes a Restricted Subsidiary
or (ii) assumed in connection with the acquisition of assets from another
Person, including Indebtedness Incurred in connection with, or in contemplation
of, such Person becoming a Restricted Subsidiary or such acquisition, as the
case may be.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with any specified Person. For purposes of this definition, "control"
when used with respect to any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Disposition" means any sale, transfer or other disposition
(including, without limitation, by merger, consolidation or sale-and-leaseback
transaction) of (i) shares of Capital Stock of a Subsidiary of the Company
(other than directors' qualifying shares) or (ii) property or assets of the
Company or any Restricted Subsidiary of the Company other than in the ordinary
course of business; provided, however, that an Asset Disposition shall not
include (a) any sale, transfer or other disposition of shares of Capital Stock,
property or assets by a Restricted Subsidiary of the Company to the Company or
to any Wholly Owned Subsidiary of the Company, (b) any sale, transfer or other
disposition of defaulted receivables for collection or any sale, transfer or
other disposition of property or assets in the ordinary course of business, (c)
any isolated sale, transfer or other disposition that does not involve aggregate
consideration in excess of $1 million individually, (d) the grant in the
ordinary course of business of any non-exclusive license of patents, trademarks,
registrations therefor and other similar intellectual property, (e) any Lien (or
foreclosure thereon) securing Indebtedness to the extent that such Lien is
granted in compliance with "-- Covenants -- Limitation on Liens" above, (f) any
Restricted Payment permitted by "-- Covenants -- Limitation on Restricted
Payments" above, (g) any disposition of assets or property in the ordinary
course of business to the extent such property or assets
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are obsolete, worn-out or no longer useful in the Company's or any of its
Restricted Subsidiaries' business, (h) the sale, lease, conveyance or
disposition or other transfer of all or substantially all of the assets of the
Company as permitted under "-- Covenants -- Mergers, Consolidations and Certain
Sales of Assets" above; provided, that the assets not so sold, leased, conveyed,
disposed of or otherwise transferred shall be deemed an Asset Disposition, or
(i) any disposition that constitutes a Change of Control.
"Average Life" means, as of the date of determination, with respect to any
Indebtedness for borrowed money or Preferred Stock, the quotient obtained by
dividing (i) the sum of the products of the number of years from the date of
determination to the dates of each successive scheduled principal or liquidation
value payments of such Indebtedness or Preferred Stock, respectively, and the
amount of such principal or liquidation value payments, by (ii) the sum of all
such principal or liquidation value payments.
"Capital Lease Obligations" of any Person means the obligations to pay rent
or other amounts under a lease of (or other Indebtedness arrangements conveying
the right to use) real or personal property of such Person which are required to
be classified and accounted for as a capital lease or liability on the face of a
balance sheet of such Person in accordance with GAAP. The amount of such
obligations shall be the capitalized amount thereof in accordance with GAAP and
the stated maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock of
such Person.
"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Consolidated Cash Flow Available for Fixed Charges" of any Person means
for any period the Consolidated Net Income of such Person for such period
increased (to the extent Consolidated Net Income for such period has been
reduced thereby) by the sum of (without duplication) (i) Consolidated Interest
Expense of such Person for such period, plus (ii) Consolidated Income Tax
Expense of such Person for such period, plus (iii) the consolidated depreciation
and amortization expense included in the income statement of such Person
prepared in accordance with GAAP for such period, plus (iv) any other non-cash
charges to the extent deducted from or reflected in Consolidated Net Income
except for any non-cash charges that represent accruals of, or reserves for,
cash disbursements to be made in any future accounting period.
"Consolidated Cash Flow Ratio" of any Person means for any period the ratio
of (i) Consolidated Cash Flow Available for Fixed Charges of such Person for
such period to (ii) the sum of (A) Consolidated Interest Expense of such Person
for such period, plus (B) the annual interest expense with respect to any
Indebtedness proposed to be Incurred by such Person or its Restricted
Subsidiaries, minus (C) Consolidated Interest Expense of such Person to the
extent included in clause (ii)(A) with respect to any Indebtedness that will no
longer be outstanding as a result of the Incurrence of the Indebtedness proposed
to be Incurred, plus (D) the annual interest expense with respect to any other
Indebtedness Incurred by such Person or its Restricted Subsidiaries since the
end of such period to the extent not included in clause (ii)(A), minus (E)
Consolidated Interest Expense of such Person to the extent included in clause
(ii)(A) with respect to any Indebtedness that no longer is outstanding as a
result of the Incurrence of the Indebtedness referred to in clause (ii)(D);
provided, however, that in making such computation, the Consolidated Interest
Expense of such Person attributable to interest on any Indebtedness bearing a
floating interest rate shall be computed on a pro forma basis as if the rate in
effect on the date of computation (after giving effect to any hedge in respect
of such Indebtedness that will, by its terms, remain in effect until the earlier
of the maturity of such Indebtedness or the date one year after the date of such
determination) had been the applicable rate for the entire period; provided,
further, however, that, in the event such Person or any of its Restricted
Subsidiaries has made any Asset Dispositions or acquisitions of assets not in
the ordinary course of business (including acquisitions of other Persons by
merger, consolidation or purchase of Capital Stock) during or after such period
and on or prior to the date of measurement, such computation shall be made on a
pro forma basis as if the Asset Dispositions or acquisitions had taken place on
the first day of such period. Calculations of pro forma amounts
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in accordance with this definition shall be done in accordance with Article 11
of Regulation S-X under the Securities Act or any successor provision and may
include reasonably ascertainable cost savings.
"Consolidated Income Tax Expense" of any Person means for any period the
consolidated provision for income taxes of such Person and its Restricted
Subsidiaries for such period calculated on a consolidated basis in accordance
with GAAP.
"Consolidated Interest Expense" for any Person means for any period,
without duplication, (a) the consolidated interest expense included in a
consolidated income statement (without deduction of interest or finance charge
income) of such Person and its Restricted Subsidiaries for such period
calculated on a consolidated basis in accordance with GAAP and (b) dividend
requirements of such Person and its Restricted Subsidiaries with respect to
Disqualified Stock and with respect to all other Preferred Stock of Restricted
Subsidiaries of such Person (in each case whether in cash or otherwise (except
dividends payable solely in shares of Capital Stock of such Person or such
Restricted Subsidiary)) paid, accrued or accumulated during such period times a
fraction the numerator of which is one and the denominator of which is one minus
the then effective consolidated Federal, state and local tax rate of such
Person, expressed as a decimal.
"Consolidated Net Income" of any Person means for any period the
consolidated net income (or loss) of such Person and its Restricted Subsidiaries
for such period determined on a consolidated basis in accordance with GAAP;
provided, however, that there shall be excluded therefrom (a) the net income (or
loss) of any Person acquired by such Person or a Restricted Subsidiary of such
Person in a pooling-of-interests transaction for any period prior to the date of
such transaction, (b) the net income (but not net loss) of any Restricted
Subsidiary of such Person which is subject to restrictions which prevent or
limit the payment of dividends or the making of distributions to such Person to
the extent of such restrictions (regardless of any waiver thereof), (c) non-cash
gains and losses due solely to fluctuations in currency values, (d) the net
income of any Person that is not a Restricted Subsidiary of such Person, except
to the extent of the amount of dividends or other distributions representing
such Person's proportionate share of such other Person's net income for such
period actually paid in cash to such Person by such other Person during such
period, (e) gains but not losses on Asset Dispositions by such Person or its
Restricted Subsidiaries, (f) all extraordinary gains and losses determined in
accordance with GAAP and (g) in the case of a successor to the referent Person
by consolidation or merger or as a transferee of the referent Person's assets,
any earnings (or losses) of the successor corporation prior to such
consolidation, merger or transfer of assets.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Capital
Stock of such Person.
"Continuing Director" means a director who either was a member of the Board
of Directors of the Company on the Issue Date or who became a director of the
Company subsequent to the Issue Date and whose election, or nomination for
election by the Company's stockholders, was duly approved by a majority of the
Continuing Directors then on the Board of Directors of the Company, either by a
specific vote or by approval of the proxy statement issued by the Company on
behalf of the entire Board of Directors of the Company in which such individual
is named as nominee for director.
"Credit Agreement" means the Credit Agreement among the Company as borrower
thereunder, and Morgan Guaranty Trust Company of New York, as agent on behalf of
itself and the others named therein, and any deferrals, renewals, extensions,
replacements, refinancings or refundings thereof, or amendments, modifications
or supplements thereto or replacements thereof (including, without limitation,
any amendment increasing the amount borrowed thereunder) and any agreement
providing therefor whether by or with the same or any other lender, creditors,
or group of creditors and including related notes, guarantee agreements,
security agreements and other instruments and agreements executed in connection
therewith.
"Default" means any event that is, or after notice or lapse of time or both
would become, an Event of Default.
"Designated Senior Debt" means (i) so long as the Credit Agreement is in
effect, the Senior Debt incurred thereunder and (ii) thereafter, any other
Senior Debt which has at the time of initial issuance an
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aggregate outstanding principal amount in excess of $25.0 million which has been
so designated as Designated Senior Debt by the Board of Directors of the Company
at the time of initial issuance in a resolution delivered to the Trustee.
"Disqualified Stock" of any Person means any Capital Stock of such Person
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof,
in whole or in part, on or prior to the final maturity of the Notes.
"Domestic Restricted Subsidiary" means any Restricted Subsidiary of the
Company organized and existing under the laws of the United States, any state
thereof or the District of Columbia.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the Commission thereunder.
"GAAP" means generally accepted accounting principles, consistently
applied, as in effect on the Issue Date in the United States of America, as set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as is approved by a significant segment of the
accounting profession in the United States.
"Guarantee" means the guarantee of the Senior Subordinated Notes by each
Guarantor under the Indenture.
"Guarantor" means (i) each Restricted Subsidiary on the Issue Date and (ii)
each Restricted Subsidiary, if any, of the Company formed or acquired after the
Issue Date, which pursuant to the terms of the Indenture executes a supplement
to the Indenture as a Guarantor.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "Incurrence," "Incurred" and "Incurring" shall have meanings
correlative to the foregoing). Indebtedness of any Person or any of its
Restricted Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary of the Company (or is merged into or consolidates with the Company or
any of its Restricted Subsidiaries), whether or not such Indebtedness was
incurred in connection with, or in contemplation of, such Person becoming a
Restricted Subsidiary of the Company (or being merged into or consolidated with
the Company or any of its Restricted Subsidiaries), shall be deemed Incurred at
the time any such Person becomes a Restricted Subsidiary of the Company or
merges into or consolidates with the Company or any of its Restricted
Subsidiaries.
"Indebtedness" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (i) every obligation of such Person for money borrowed, (ii)
every obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses, (iii) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person, (iv)
every obligation of such Person issued or assumed as the deferred purchase price
of property or services (but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business which are not overdue or
which are being contested in good faith), (v) every Capital Lease Obligation of
such Person, (vi) every net obligation under interest rate swap or similar
agreements or foreign currency hedge, exchange or similar agreements of such
Person and (vii) every obligation of the type referred to in clauses (i) through
(vi) of another Person and all dividends of another Person the payment of which,
in either case, such Person has guaranteed or is responsible or liable for,
directly or indirectly, as obligor, guarantor or otherwise. Indebtedness shall
include the liquidation preference and any mandatory redemption payment
obligations in respect of any Disqualified Stock of the Company owned by any
Person other than the Company or a Restricted Subsidiary of the Company, and any
Preferred Stock of a Restricted Subsidiary of the Company. Indebtedness shall
never be calculated taking into account any cash
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and cash equivalents held by such Person. Indebtedness shall not include
obligations arising from agreements of the Company or a Restricted Subsidiary of
the Company to provide for indemnification, adjustment of purchase price,
earn-out, or other similar obligations, in each case, incurred or assumed in
connection with the disposition of any business or assets of a Restricted
Subsidiary of the Company.
"Investment" by any Person means any direct or indirect loan, advance,
guarantee or other extension of credit (excluding credit balances in bank
accounts or similar accounts with other financial institutions) or capital
contribution to (by means of transfers of cash or other property to others or
payments for property or services for the account or use of others, or
otherwise), or purchase or acquisition of Capital Stock, bonds, notes,
debentures or other securities or evidence of Indebtedness issued by any other
Person.
"Issue Date" means the original issue date of the Notes.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, security interest, lien, charge,
easement (other than any easement not materially impairing usefulness or
marketability), encumbrance, preference, priority or other security agreement
with respect to such property or assets (including, without limitation, any
conditional sale or other title retention agreement having substantially the
same economic effect as any of the foregoing).
"Material Subsidiary" means, at any date of determination, any Subsidiary
that, together with its Subsidiaries, (i) for the most recent fiscal year of the
Company accounted for more than 5% of the consolidated revenues of the Company
or (ii) as of the end of such fiscal year, was the owner of more than 5% of the
consolidated assets of the Company, all as set forth on the most recently
available consolidated financial statements of the Company for such fiscal year
prepared in conformity with GAAP.
"Net Available Proceeds" from any Asset Disposition by any Person means
cash or readily marketable cash equivalents received (including by way of sale
or discounting of a note, installment receivable or other receivable, but
excluding any other consideration received in the form of assumption by the
acquiror of Indebtedness or other obligations relating to such properties or
assets or received in any other non-cash form) therefrom by such Person,
including any cash received by way of deferred payment or upon the monetization
or other disposition of any non-cash consideration (including notes or other
securities) received in connection with such Asset Disposition, net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred and all federal, state, foreign and local taxes required to be accrued
as a liability as a consequence of such Asset Disposition, (ii) all payments
made by such Person or its Restricted Subsidiaries on any Indebtedness which is
secured by such assets in accordance with the terms of any Lien upon or with
respect to such assets or which must by the terms of such Lien, or in order to
obtain a necessary consent to such Asset Disposition or by applicable law, be
repaid out of the proceeds from such Asset Disposition, (iii) all payments made
with respect to liabilities associated with the assets which are the subject of
the Asset Disposition, including, without limitation, trade payables and other
accrued liabilities, (iv) appropriate amounts to be provided by such Person or
any Restricted Subsidiary thereof, as the case may be, as a reserve in
accordance with GAAP against any liabilities associated with such assets and
retained by such Person or any Restricted Subsidiary thereof, as the case may
be, after such Asset Disposition, including, without limitation, liabilities
under any indemnification obligations and severance and other employee
termination costs associated with such Asset Disposition, until such time as
such amounts are no longer reserved or such reserve is no longer necessary (at
which time any remaining amounts will become Net Available Proceeds to be
allocated in accordance with the provisions of clause (iii) of the covenant of
the Indenture described under "-- Covenants -- Limitation on Certain Asset
Dispositions") and (v) all distributions and other payments made to minority
interest holders in Restricted Subsidiaries of such Person or joint ventures as
a result of such Asset Disposition.
"Net Investment" means the excess of (i) the aggregate amount of all
Investments in Unrestricted Subsidiaries or joint ventures made by the Company
or any Restricted Subsidiary on or after the Issue Date (in the case of an
Investment made other than in cash, the amount shall be the fair market value of
such Investment as determined in good faith by the Board of Directors of the
Company or such Restricted Subsidiary) over (ii) the aggregate amount returned
in cash on or with respect to such Investments whether through interest
payments, principal payments, dividends or other distributions or payments;
provided,
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however that such payments or distributions shall not be (and have not been)
included in subclause (b) of clause (3) of the first paragraph described under
"-- Covenants -- Limitation on Restricted Payments;" provided, further that with
respect to all Investments made in any Unrestricted Subsidiary or joint venture
the amounts referred to in clause (ii) above with respect to such Investments
shall not exceed the aggregate amount of all such Investments made in such
Unrestricted Subsidiary or joint venture.
"Offer to Purchase" means a written offer (the "Offer") sent by the Company
by first class mail, postage prepaid, to each holder at his address appearing in
the register for the Notes on the date of the Offer offering to purchase up to
the principal amount of Notes specified in such Offer at the purchase price
specified in such Offer (as determined pursuant to the Indenture). Unless
otherwise required by applicable law, the Offer shall specify an expiration date
(the "Expiration Date") of the Offer to Purchase which shall be not less than 30
days nor more than 60 days after the date of such Offer and a settlement date
(the "Purchase Date") for purchase of Notes within five Business Days after the
Expiration Date. The Company shall notify the Trustee at least 15 Business Days
(or such shorter period as is acceptable to the Trustee) prior to the mailing of
the Offer of the Company's obligation to make an Offer to Purchase, and the
Offer shall be mailed by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company. The Offer shall contain
all the information required by applicable law to be included therein. The Offer
shall contain all instructions and materials necessary to enable such holders to
tender Notes pursuant to the Offer to Purchase. The Offer shall also state:
(1) the Section of the Indenture pursuant to which the Offer to Purchase is
being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the outstanding Notes offered to be
purchased by the Company pursuant to the Offer to Purchase (including, if
less than 100%, the manner by which such amount has been determined
pursuant to the Section of the Indenture requiring the Offer to Purchase)
(the "Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000 aggregate
principal amount of Notes accepted for payment (as specified pursuant to
the Indenture) (the "Purchase Price");
(5) that the holder may tender all or any portion of the Notes registered in
the name of such holder and that any portion of a Note tendered must be
tendered in an integral multiple of $1,000 principal amount;
(6) the place or places where Notes are to be surrendered for tender pursuant
to the Offer to Purchase;
(7) that interest on any Note not tendered or tendered but not purchased by the
Company pursuant to the Offer to Purchase will continue to accrue;
(8) that on the Purchase Date the Purchase Price will become due and payable
upon each Note being accepted for payment pursuant to the Offer to Purchase
and that interest thereon shall cease to accrue on and after the Purchase
Date;
(9) that each holder electing to tender all or any portion of a Note pursuant
to the Offer to Purchase will be required to surrender such Note at the
place or places specified in the Offer prior to the close of business on
the Expiration Date (such Note being, if the Company or the Trustee so
requires, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Trustee duly executed
by, the holder thereof or his attorney duly authorized in writing);
(10) that holders will be entitled to withdraw all or any portion of Notes
tendered if the Company (or its Paying Agent) receives, not later than the
close of business on the fifth Business Day next preceding the Expiration
Date, a telegram, telex, facsimile transmission or letter setting forth the
name of the holder, the principal amount of the Note the holder tendered,
the certificate number of the Note the holder tendered and a statement that
such holder is withdrawing all or a portion of his tender;
(11) that (a) if Notes in an aggregate principal amount less than or equal to
the Purchase Amount are duly tendered and not withdrawn pursuant to the
Offer to Purchase, the Company shall purchase all such Notes and (b) if
Notes in an aggregate principal amount in excess of the Purchase Amount are
tendered
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and not withdrawn pursuant to the Offer to Purchase, the Company shall
purchase Notes having an aggregate principal amount equal to the Purchase
Amount on a pro rata basis (with such adjustments as may be deemed
appropriate so that only Notes in denominations of $1,000 or integral
multiples thereof shall be purchased); and
(12) that in the case of any holder whose Note is purchased only in part, the
Company shall execute and the Trustee shall authenticate and deliver to the
holder of such Note without service charge, a new Note or Notes, of any
authorized denomination as requested by such holder, in an aggregate
principal amount equal to and in exchange for the unpurchased portion of
the Note so tendered.
An Offer to Purchase shall be governed by and effected in accordance with
the provisions above pertaining to any Offer.
"Permitted Holder" means any of any member of the Board of Directors of the
Company as of the Issue Date, Tekni-Plex Partnership, MST/TP Partners, L.P., MST
Management, L.P., MST Partners L.P., any Affiliate of or partner in any of the
foregoing (including any Person receiving common stock of the Company upon a
distribution by any of the foregoing partnerships, whether a partner or
designated by a partner for purposes of estate or similar personal planning), or
any group if the majority of the shares of Common Stock of the Company owned by
such group are beneficially owned by any or all of the foregoing and their
Related Persons and Affiliates.
"Permitted Investments" means (i) Investments in marketable, direct
obligations issued or guaranteed by the United States of America, or any
governmental entity or agency or political subdivision thereof (provided, that
the full faith and credit of the United States of America is pledged in support
thereof), maturing within one year of the date of purchase; (ii) Investments in
commercial paper issued by corporations or financial institutions maturing
within 180 days from the date of the original issue thereof, and rated "P-1" or
better by Moody's Investors Service or "A-1" or better by Standard & Poor's
Corporation or an equivalent rating or better by any other nationally recognized
securities rating agency; (iii) Investments in certificates of deposit issued or
acceptances accepted by or guaranteed by any bank or trust company organized
under the laws of the United States of America, any state thereof, the District
of Columbia, Canada or any province thereof, in each case having a combined
capital, surplus and undivided profits totalling more than $500,000,000,
maturing within one year of the date of purchase; (iv) Investments representing
Capital Stock or obligations issued or otherwise transferred to the Company or
any of its Restricted Subsidiaries in the course of the good faith settlement of
claims against any other Person or by reason of a composition or readjustment of
debt or a reorganization of any debtor of the Company or any of its Restricted
Subsidiaries; (v) deposits, including interest-bearing deposits, maintained in
the ordinary course of business in banks; (vi) any acquisition of the Capital
Stock of any Person; provided, however, that after giving effect to any such
acquisition such Person shall become a Restricted Subsidiary of the Company;
(vii) receivables and prepaid expenses, in each case arising in the ordinary
course of business; provided, however, that such receivables and prepaid
expenses would be recorded as assets of such Person in accordance with GAAP;
(viii) endorsements for collection or deposit in the ordinary course of business
by such Person of bank drafts and similar negotiable instruments of such other
Person received as payment for ordinary course of business trade receivables;
(ix) any interest swap or hedging obligation with an unaffiliated Person
otherwise permitted by the Indenture; (x) Investments received as consideration
for an Asset Disposition in compliance with the provisions of the Indenture
described under "-- Covenants -- Limitation on Certain Asset Dispositions"
above, (xi) Investments in Restricted Subsidiaries or by virtue of which a
person becomes a Restricted Subsidiary; and (xii) loans and advances to
employees of the Company or any of its Restricted Subsidiaries in the ordinary
course of business.
"Person" means any individual, corporation, limited or general partnership,
joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of such Person of any class or classes (however designated) that
ranks prior, as to the payment of dividends or as to the distribution of assets
upon any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of such Person.
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"Purchase Date" has the meaning set forth in the definition of "Offer to
Purchase" above.
"Related Person" of any Person means any other Person directly or
indirectly owning (a) 5% or more of the outstanding Common Stock of such Person
(or, in the case of a Person that is not a corporation, 5% or more of the equity
interest in such Person) or (b) 5% or more of the combined voting power of the
Voting Stock of such Person.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Senior Debt" means, with respect to any Person at any date, (i) in the
case of the Company or the Guarantor, all Indebtedness and other obligations
under the Credit Agreement, including, without limitation, principal, premium,
if any, and interest on such Indebtedness and all other amounts due on or in
connection with such Indebtedness including all charges, fees and expenses, (ii)
all other Indebtedness of such Person for money borrowed, including principal,
premium, if any, and interest on such Indebtedness, unless the instrument under
which such Indebtedness for money borrowed is created, incurred, assumed or
guaranteed expressly provides that such Indebtedness for money borrowed is not
senior or superior in right of payment to the Notes, and all renewals,
extensions, modifications, amendments, refinancing or replacements thereof and
all other Indebtedness of such Person of the types referred to in clauses (iii),
(iv) (not including obligations issued or assumed as the deferred purchase price
of services) and (vi) of the definition of Indebtedness and (iii) all interest
on any Indebtedness referred to in clauses (i) and (ii) accruing during, or
which would accrue but for, the pendency of any bankruptcy or insolvency
proceeding, whether or not allowed thereunder. Notwithstanding the foregoing,
Senior Debt shall not include (a) Indebtedness which is pursuant to its terms or
any agreement relating thereto or by operation of law subordinated or junior in
right of payment or otherwise to any other Indebtedness of such Person;
provided, however, that no Indebtedness shall be deemed to be subordinate or
junior in right of payment or otherwise to any other Indebtedness of a Person
solely by reason of such other Indebtedness being secured and such Indebtedness
not being secured, (b) the Notes, (c) any Indebtedness of such Person to any of
its Subsidiaries, (d) Indebtedness Incurred in violation of the provisions of
the Indenture described under "-- Covenants -- Limitation on Indebtedness";
provided, however, that Indebtedness under the Credit Agreement shall be deemed
not to have been Incurred in violation of such provisions for purposes of this
clause (d) if the holder(s) of such Indebtedness or their agent or
representative shall have received a representation from the Company to the
effect that the Incurrence of such Indebtedness does not violate such provision
and (e) any Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of the Bankruptcy Code, is without recourse to
the Company.
"Subordinated Indebtedness" means any Indebtedness (whether outstanding on
the date hereof or hereafter incurred) which is by its terms expressly
subordinate or junior in right of payment to the Notes.
"Subsidiary" of any Person means (i) a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person or by such Person and
one or more other Subsidiaries thereof or (ii) any other Person (other than a
corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, have at least a majority ownership and voting power relating to the
policies, management and affairs thereof.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company formed or
acquired after the Issue Date that at the time of determination is designated an
Unrestricted Subsidiary by the Board of Directors in the manner provided below
and (ii) any Subsidiary of an Unrestricted Subsidiary. Any such designation by
the Board of Directors will be evidenced to the Trustee by promptly filing with
the Trustee a copy of the board resolution giving effect to such designation and
an officers' certificate certifying that such designation complied with the
foregoing provisions. The Board of Directors of the Company may not designate
any Subsidiary of the Company to be an Unrestricted Subsidiary if, after such
designation, (a) the Company or any other Restricted Subsidiary (i) provides
credit support for, or a guarantee of, any Indebtedness of such Subsidiary
(including any undertaking, agreement or instrument evidencing such
Indebtedness) or (ii) is directly or indirectly liable for any Indebtedness of
such Subsidiary, (b) a default with respect to any Indebtedness of such
Subsidiary (including any right which the holders thereof may have to take
enforcement action against such Subsidiary)
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would permit (upon notice, lapse of time or both) any holder of any other
Indebtedness of the Company or any Restricted Subsidiary to declare a default on
such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its final scheduled maturity or (c) such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, any Restricted
Subsidiary which is not a Subsidiary of the Subsidiary to be so designated.
"Voting Stock" of any Person means the Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly Owned Subsidiary" of any Person means a Restricted Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of certain material United States federal
income tax consequences of the Exchange Offer to holders of Old Notes. Unless
otherwise stated, this discussion addresses the United States federal income tax
consequences to persons that hold Old Notes as capital assets, and that are (i)
citizens or residents of the United States, (ii) corporations, partnerships or
other entities created or organized in or under the laws of the United States or
any political subdivision thereof or therein, (iii) estates the income of which
is subject to United States federal income tax regardless of its source, or (iv)
trusts the administration of which is subject to the primary supervision of a
court within the United States and for which one or more United States
fiduciaries have the authority to control all substantial decisions ("U.S.
Holders"). This discussion does not purport to address specific tax consequences
that may be relevant to particular persons (including, for example, financial
institutions, broker-dealers, insurance companies, tax-exempt organizations, and
persons in special situations, such as those who hold Old Notes or Exchange
Notes as part of a straddle, hedge, conversion transaction, or other integrated
investment). This discussion does not address the tax consequences to persons
that have a "functional currency" other than the U.S. dollar. In addition, this
discussion does not address United States federal alternative minimum tax
consequences or any aspect of state, local or foreign taxation. This discussion
is based upon the Internal Revenue Code of 1986, as amended (the "Code"), the
Treasury Department regulations promulgated thereunder, and administrative and
judicial interpretations thereof, all as of the date hereof and all of which are
subject to change, possibly on a retroactive basis.
HOLDERS OF NOTES ARE URGED TO CONSULT THEIR TAX ADVISORS CONCERNING THE
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND
DISPOSING OF THE EXCHANGE NOTES, AS WELL AS THE APPLICATION OF STATE, LOCAL AND
FOREIGN INCOME AND OTHER TAX LAWS.
THE EXCHANGE
The exchange of an Old Note for an Exchange Note pursuant to the Exchange
Offer should not be treated as an exchange or otherwise as a taxable event for
U.S. federal income tax purposes. Accordingly, the Exchange Notes should have
the same issue price as the Old Notes and each holder should have the same
adjusted basis and holding period in the Exchange Notes as it had in the Old
Notes immediately before the Exchange Offer. It is assumed, for purposes of the
following discussion, that the consummation of the Exchange Offer will not be
treated as a taxable event and that the Exchange Notes and the Old Notes will be
treated as the same instruments for U.S. federal income tax purposes.
DISPOSITION OF EXCHANGE NOTES
If a U.S. Holder sells an Exchange Note between interest payment dates, the
U.S. Holder will recognize gain or loss equal to the difference between the
amount realized on the sale (except to the extent such amount is attributable to
accrued but previously unrecognized interest, which is taxable as ordinary
interest income) and the U.S. Holder's adjusted tax basis in the Exchange Note.
A U.S. Holder's adjusted tax basis in an Exchange Note will be equal to the
amount the U.S. Holder paid to purchase the Old Note, (i) increased by any
interest that has accrued since the last interest payment date, any "original
issue discount" within the meaning of Section 1273 of the Code, and any market
discount, in each case that has previously been included by such U.S. Holder in
taxable income with respect to such Note, and (ii) decreased by any bond premium
previously amortized and any principal payments previously received by such U.S.
Holder with respect to such Note. Subject to the market discount rules, any such
gain or loss will be capital gain or loss, long-term or short-term depending
upon whether the Holder has held such Note for more than one year. Subject to
certain limited exceptions, capital losses cannot be used to offset ordinary
income.
FOREIGN HOLDERS
For purposes of this discussion, a "Foreign Holder" is any noteholder other
than a U.S. Holder.
A Foreign Holder generally will not be subject to United States federal
withholding tax on interest paid on the Exchange Notes so long as the Foreign
Holder (i) is not actually or constructively a "10 percent
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shareholder" of the Company or a "controlled foreign corporation" with respect
to which the Company is a "related person" within the meaning of the Code, and
(ii) provides an appropriate statement, signed under penalties of perjury,
certifying that the beneficial owner of the Exchange Note is a foreign person
and providing that foreign person's name and address. If the information
provided in this statement changes, the foreign person must so inform the
Company within 30 days of such change. The statement generally must be provided
in the year a payment occurs or in either of the two preceding years. If the
foregoing conditions are not satisfied, then interest paid on the Exchange Notes
will be subject to United States withholding tax at a rate of 30%, unless such
rate is reduced or eliminated pursuant to an applicable tax treaty.
Any capital gain a Foreign Holder realizes on the sale, redemption,
retirement or other taxable disposition of an Exchange Note will be exempt from
United States federal income and withholding tax, provided that (i) the gain is
not effectively connected with the Foreign Holder's conduct of a trade or
business in the United States, (ii) in the case of a Foreign Holder that is an
individual, the Foreign Holder is not present in the United States for 183 days
or more in the taxable year of the disposition and (iii) the Foreign Holder is
not subject to tax pursuant to the provisions of U.S. tax law applicable to
certain U.S. expatriates.
If the interest, gain or other income a Foreign Holder recognizes on an
Exchange Note is effectively connected with the Foreign Holder's conduct of a
trade or business in the United States, the Foreign Holder (although exempt from
the withholding tax previously discussed if an appropriate statement is
furnished) generally will be subject to United States federal income tax on the
interest, gain or other income at regular federal income tax rates. In addition,
if the Foreign Holder is a foreign corporation, it may be subject to a branch
profits tax equal to 30% of its "effectively connected earnings and profits," as
adjusted for certain items, unless it qualifies for a lower rate under an
applicable tax treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company will be required to report annually to the IRS, and to each
U.S. Holder of record, the amount of interest paid on the Exchange Notes (and
the amount, if any, withheld) for each calendar year, except as to exempt
holders (generally, corporations, tax-exempt organizations, qualified pension
and profit-sharing trusts, individual retirement accounts, or non-resident
aliens that provide certification as to their status). Each U.S. Holder (other
than holders, including, among others, corporations, that are not subject to the
reporting requirements) will be required to provide to the Company, under
penalties of perjury, a certificate containing the U.S. Holder's name, address,
correct federal taxpayer identification number and a statement that the U.S.
Holder is not subject to backup withholding. Should a nonexempt U.S. Holder fail
to provide the required certificate, the Company will be required to withhold
31% of the interest otherwise payable to the U.S. Holder and to remit the
withheld amount to the IRS as a credit against the U.S. Holder's federal income
tax liability.
PLAN OF DISTRIBUTION
Prior to the Exchange Offer, there has been no market for any of the
Exchange Notes. The Old Notes are eligible for trading in the Private Offerings,
Resales and Trading through Automatic Linkages ("PORTAL") market. There can be
no assurance that an active trading market will develop for, or as to the
liquidity of, any of the Notes.
Each Participating Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of Exchange Notes
received in exchange for Old Notes where such Old Notes were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that for a period of 180 days after the Expiration Date, the Company will
make this Prospectus, as amended or supplemented, available to any Participating
Broker-Dealer for use in connection with any such resale. In addition, until
, 1997, all dealers effecting transactions in the Exchange Notes may
be required to deliver a prospectus.
79
<PAGE> 82
The Company will not receive any proceeds from any sales of the Exchange
Notes by Participating Broker-Dealers. Exchange Notes received by Participating
Broker-Dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchaser or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such Participating Broker-Dealer and/or the purchasers of
any such Exchange Notes. Any Participating Broker-Dealer that resells the
Exchange Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such Exchange Notes may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any such resale of Exchange Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Participating Broker-Dealer that requests
such documents in the Letter of Transmittal.
LEGAL MATTERS
Certain legal matters relating to the Exchange Notes offered hereby will be
passed upon for the Company by Winthrop, Stimson, Putnam & Roberts, New York,
New York.
EXPERTS
The consolidated financial statements of Tekni-Plex included in this
Prospectus have been audited by BDO Seidman, LLP, independent certified public
accountants, to the extent and for the periods set forth in their report
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of said firm as experts in auditing and accounting.
The financial statements of Tekni-Plex included in this Prospectus have
been audited by Rich Baker Berman & Co., P.A., independent certified public
accountants, to the extent and for the period set forth in their report
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of said firm as experts in auditing and accounting.
The financial statements of Dolco included in this Prospectus have been
audited by Coopers & Lybrand L.L.P., independent certified public accountants,
to the extent and for the periods set forth in their report appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
Tekni-Plex and the Guarantor have filed with the Commission a Registration
Statement on Form S-4 (the "Exchange Registration Statement," which term shall
encompass all amendments, exhibits, annexes and schedules thereto) pursuant to
the Securities Act, and the rules and regulations promulgated thereunder,
covering the securities being offered hereby. This Prospectus does not contain
all the information set forth in the Exchange Registration Statement. For
further information with respect to Tekni-Plex, the Guarantor and the Exchange
Offer, reference is made to the Exchange Registration Statement. Statements made
in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Exchange
Registration Statement, reference is made to the exhibit for a more complete
description of the document or matter involved. The Exchange Registration
Statement, including the exhibits thereto, can be
80
<PAGE> 83
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at the
Regional Offices of the Commission at 75 Park Place, New York, New York 10007
and at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates.
Additionally, the Commission maintains a web site (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
As a result of the filing of the Exchange Registration Statement with the
Commission, the Company will become subject to the informational requirements of
the Exchange Act, and in accordance therewith will be required to file periodic
reports and other information with the Commission. The obligation of the Company
to file periodic reports and other information with the Commission will be
suspended if the Exchange Notes are held of record by fewer than 300 holders as
of the beginning of any fiscal year of the Company other than the fiscal year in
which the Exchange Registration Statement is declared effective. The Company
will nevertheless be required to continue to file reports with the Commission if
the Exchange Notes are listed on a national securities exchange. In the event
the Company ceases to be subject to the informational requirements of the
Exchange Act, the Company will be required under the Indenture to continue to
file with the Commission the annual and quarterly reports, information,
documents or other reports, including, without limitation, reports on Forms
10-K, 10-Q and 8-K, which would be required pursuant to the informational
requirements of the Exchange Act. Under the Indenture, the Company shall file
with the Trustee annual, quarterly and other reports within fifteen days after
it files such reports with the Commission. Further, to the extent that annual,
quarterly or other financial reports are furnished by the Company to
stockholders generally it will mail such reports to holders of Exchange Notes.
The Company will furnish annual and quarterly financial reports to stockholders
of the Company and will mail such reports to holders of Exchange Notes pursuant
to the Indenture, thus holders of Exchange Notes will receive financial reports
every quarter. Annual reports delivered to the Trustee and the holders of
Exchange Notes will contain financial information that has been examined and
reported upon, with an opinion expressed by an independent public or certified
public accountant. The Company will also furnish such other reports as may be
required by law.
81
<PAGE> 84
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
TEKNI-PLEX, INC.
Report of Independent Certified Public Accountants.................................... F-2
Independent Auditors' Report.......................................................... F-3
Financial Statements:
Consolidated balance sheets as of June 30, 1995, June 28, 1996 and March 28, 1997
(unaudited)...................................................................... F-4
Consolidated statements of operations for the year ended December 31, 1993, the
periods ended March 18, 1994 and July 1, 1994, the years ended June 30, 1995 and
June 28, 1996, and the nine months ended March 29, 1996 (unaudited), and March
28, 1997 (unaudited)............................................................. F-5
Statements of consolidated stockholders' equity for the year ended December 31,
1993, the periods ended March 18, 1994 and July 1, 1994, the years ended June 30,
1995 and June 28, 1996, and the nine months ended March 29, 1996 (unaudited), and
March 28, 1997 (unaudited)....................................................... F-6
Consolidated statements of cash flows for the year ended December 31, 1993, the
periods ended March 18, 1994 and July 1, 1994, the years ended June 30, 1995 and
June 28, 1996, and the nine months ended March 29, 1996 (unaudited), and March
28, 1997 (unaudited)............................................................. F-7
Notes to consolidated financial statements.......................................... F-8
Report of Independent Certified Public Accountants on Financial Statement Schedule.... F-18
Independent Auditors' Report on Financial Statement Schedule.......................... F-19
Financial Statement Schedule II....................................................... F-20
DOLCO PACKAGING CORP.
Report of Independent Accountants..................................................... F-21
Financial Statements:
Balance sheets as of December 31, 1994 and December 31, 1995........................ F-22
Statements of income for the years ended December 31, 1993, 1994 and 1995........... F-23
Statements of changes in stockholders' equity for the years ended December 31, 1993,
1994 and 1995.................................................................... F-24
Statements of cash flows for the years ended December 31, 1993, 1994 and 1995....... F-25
Notes to financial statements....................................................... F-26
</TABLE>
F-1
<PAGE> 85
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Tekni-Plex, Inc.
Somerville, New Jersey
We have audited the accompanying consolidated balance sheets of Tekni-Plex,
Inc. and its wholly owned subsidiary (the "Company") as of June 28, 1996 and
June 30, 1995, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended June 28, 1996 and June
30, 1995 and the periods March 19, 1994 through July 1, 1994 and January 1, 1994
through March 18, 1994. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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.
As discussed in Note 1, on March 18, 1994, Tekni-Plex was acquired in a
transaction accounted for under the purchase method of accounting. The financial
statements for the period January 1, 1994 through March 18, 1994 referred to
above are presented on the predecessors' basis of accounting and accordingly,
are not comparable to the financial statements presented for periods subsequent
to March 18, 1994.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Tekni-Plex,
Inc. and its wholly owned subsidiary as of June 28, 1996 and June 30, 1995, and
the results of their operations and their cash flows for the years ended June
28, 1996 and June 30, 1995 and the periods March 19, 1994 through July 1, 1994
and January 1, 1994 through March 18, 1994, in conformity with generally
accepted accounting principles.
BDO SEIDMAN, LLP
September 20, 1996
Woodbridge, NJ
F-2
<PAGE> 86
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Tekni-Plex, Inc.
Brooklyn, New York 11232
We have audited the accompanying statements of income and retained
earnings, and cash flows of Tekni-Plex, Inc. for the year ended December 31,
1993. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of its operations and cash flows for the
year ended December 31, 1993 of Tekni-Plex, Inc. in conformity with generally
accepted accounting principles.
RICH BAKER BERMAN & CO., P.A.
Maplewood, New Jersey
February 18, 1994
F-3
<PAGE> 87
TEKNI-PLEX, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 28,
1997
JUNE 30, JUNE 28, ------------
1995 1996
----------- ------------ (UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash............................................ $ 333,380 $ 1,048,287 $ 1,828,840
Accounts Receivable, net of an allowance of
$93,000 $565,000 and $791,000 for possible
losses....................................... 5,413,725 12,955,647 13,771,881
Inventory....................................... 4,671,765 12,954,993 13,493,073
Deferred income taxes........................... 300,000 2,900,000 1,615,000
Prepaid and other current assets................ 418,867 1,738,009 1,971,048
----------- ------------ ------------
Total current assets.................... 11,137,737 31,596,936 32,679,842
----------- ------------ ------------
Property, plant and equipment, net................ 11,507,481 44,506,233 42,678,024
Intangible assets, net of accumulated amortization
of $2,646,500, $4,821,400 and $6,945,600........ 28,418,524 40,751,682 37,656,620
Deferred charges, net of accumulated amortization
of $346,800, $496,200 and $968,700.............. 2,206,696 4,515,045 4,241,687
Other assets...................................... 144,579 400,142 422,156
----------- ------------ ------------
$53,415,017 $121,770,038 $117,678,329
=========== ============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long term debt............... $ 2,591,655 $ 3,226,149 $ 3,500,000
Accounts payable-trade.......................... 2,305,155 5,480,514 5,729,868
Accrued payroll and benefits.................... 858,866 3,917,404 2,337,194
Accrued interest................................ 580,526 1,068,690 1,044,931
Accrued liabilities-other....................... 1,628,982 5,448,782 6,081,960
Income taxes payable............................ -- 795,000 695,938
----------- ------------ ------------
Total current liabilities............... 7,965,184 19,936,539 19,389,891
----------- ------------ ------------
Long-term debt.................................... 32,412,101 67,209,889 57,300,753
Deferred income taxes............................. 510,000 7,655,000 7,450,000
Other liabilities................................. -- 1,135,869 701,985
Redeemable Warrants............................... 841,100 1,670,374 2,226,774
Commitments and contingencies
Stockholder's equity:
Common Stock, $.01 par value, authorized 20,000
Shares, issued and outstanding 850 shares at
June 30, 1995 and 1,707 shares at June 28,
1996 and March 28, 1997...................... 9 17 17
Additional paid-in capital...................... 11,499,991 22,999,983 22,999,983
Retained earnings............................... 186,632 1,162,367 7,608,926
----------- ------------ ------------
Total stockholder's equity.............. 11,686,632 24,162,367 30,608,926
----------- ------------ ------------
$53,415,017 $121,770,038 $117,678,329
=========== ============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
F-4
<PAGE> 88
TEKNI-PLEX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIODS
YEAR ENDED ------------------------- YEARS ENDED NINE MONTHS ENDED
------------ JANUARY 1 TO MARCH 19 TO ------------------------ -------------------------
DECEMBER 31, MARCH 18, JULY 1, JUNE 30, JUNE 28, MARCH 29, MARCH 28,
1993 1994 1994 1995 1996 1996 1997
------------ ------------ ----------- ----------- ----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $44,878,265 $9,417,813 $12,722,716 $44,688,453 $80,917,205 $47,248,463 $109,827,847
Cost of Sales........... 36,604,570 7,923,516 9,960,280 34,941,442 62,335,102 37,579,649 81,239,224
----------- ---------- ----------- ----------- ----------- ----------- -----------
Gross Profit........ 8,273,695 1,494,297 2,762,436 9,747,011 18,582,103 9,668,814 28,588,623
Operating expenses:
Selling, general and
administrative...... 5,075,592 602,545 1,521,067 4,813,583 10,338,632 5,313,636 11,994,825
----------- ---------- ----------- ----------- ----------- ----------- -----------
Income from
operations........ 3,198,103 891,752 1,241,369 4,933,428 8,243,471 4,355,178 16,593,798
Other expenses:
Interest.............. 160,405 21,522 1,140,758 4,321,979 5,816,166 3,662,990 6,067,873
Other................. 6,201 45,102 62,685 234,743 469,370 252,276 524,366
----------- ---------- ----------- ----------- ----------- ----------- -----------
Income before
provision for
income taxes...... 3,031,497 825,128 37,926 376,706 1,957,935 439,912 10,001,559
Provision for income
taxes................. 267,058 56,000 17,000 211,000 982,200 220,000 3,555,000
----------- ---------- ----------- ----------- ----------- ----------- -----------
Net income.............. $ 2,764,439 $ 769,128 $ 20,926 $ 165,706 $ 975,735 $ 219,912 $ 6,446,559
=========== ========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-5
<PAGE> 89
TEKNI-PLEX, INC.
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL MINIMUM
COMMON PAID-IN PENSION RETAINED TREASURY
STOCK CAPITAL LIABILITY EARNINGS STOCK TOTAL
--------- ------------ --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993.......... $ 250,000 $ -- $(487,057) $13,597,299 $(5,795,000) $ 7,565,242
Net Income........................ 2,764,439 2,764,439
Change in pension liability....... (243,878) -- -- (243,878)
-------- ----------- --------- ----------- ----------- -----------
Balance, December 31, 1993........ 250,000 -- (730,935) 16,361,738 (5,795,000) 10,085,803
Net Income........................ 769,128 769,128
Change in pension liability....... 730,935 (730,935) --
-------- ----------- --------- ----------- ----------- -----------
Balance, March 18, 1994........... $ 250,000 $ -- $ -- $16,399,931 $(5,795,000) $10,854,931
======== =========== ========= =========== =========== ===========
- ----------------------------------------------------------------------------------------------------------------
Balance, March 19, 1994........... $ 9 $ 11,499,991 $ -- $11,500,000
Net Income........................ 20,926 20,926
-------- ----------- --------- ----------- ----------- -----------
Balance, July 1, 1994............. 9 11,499,991 -- 20,926 -- 11,520,926
Net Income........................ 165,706 165,706
-------- ----------- --------- ----------- ----------- -----------
Balance, June 30, 1995............ 9 11,499,991 -- 186,632 -- 11,686,632
Proceeds from capital
contribution.................... 8 11,499,992 11,500,000
Net Income........................ 975,735 975,735
-------- ----------- --------- ----------- ----------- -----------
Balance, June 28, 1996............ 17 22,999,983 -- 1,162,367 -- 24,162,367
Net Income (unaudited)............ 6,446,559 6,446,559
-------- ----------- --------- ----------- ----------- -----------
Balance, March 28, 1997
(unaudited)..................... $ 17 $ 22,999,983 $ -- $ 7,608,926 $ -- $30,608,926
======== =========== ========= =========== =========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-6
<PAGE> 90
TEKNI-PLEX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIODS YEARS ENDED NINE MONTHS ENDED
YEAR ENDED ----------------------------- -------------------------- ---------------------------
DECEMBER 31, JANUARY 1 TO MARCH 19 TO JUNE 30, JUNE 28, MARCH 29, MARCH 28,
1993 MARCH 18, 1994 JULY 1, 1994 1995 1996 1996 1997
------------ -------------- ------------ ----------- ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income............ $ 2,764,439 $ 769,128 $ 20,926 $ 165,706 $ 975,735 $ 219,912 $ 6,446,559
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation........ 608,032 137,988 196,455 1,018,157 3,247,239 1,488,033 4,579,247
Amortization........ -- -- 682,482 2,444,222 3,573,592 1,905,065 2,679,262
Deferred income
taxes............. 39,909 -- 17,000 210,000 63,700 51,773 1,080,000
Allowance for
doubtful
accounts.......... -- (59) 51,349 -- 120,614 127,063 226,091
Amortization of
redeemable
warrants.......... -- -- -- 391,100 379,274 684,000 556,400
Gain on sale of
property, plant
and equipment..... (40,000) -- -- -- -- -- --
Loss on marketable
securities........ 119,302 57,123 -- -- -- -- --
(Increase) decrease,
net of the effect
of acquired
companies:
Accounts
receivable...... 292,081 (862,308) 484,248 (1,005,933) 1,160,960 (1,921,834) (1,042,325)
Inventories....... (377,886) (298,108) 389,889 (801,591) 1,394,980 698,351 (538,080)
Prepaid and other
current
assets.......... (115,571) (38,808) (11,425) (128,978) (791,519) (320,011) (233,039)
Deferred charges
and other
assets.......... (284,619) 136,374 (85,268) 44,637 163,146 (180,272) --
Increase (decrease),
net of effect of
acquired
companies:
Accounts payable
and other
current
liabilities..... 607,190 (465,621) (598,797) 16,681 (4,516,499) (7,318,231) (364,821)
Income taxes
payable......... (100,976) -- -- -- 796,343 237,004 (99,062)
----------- ----------- ------------ ----------- ------------ ------------ ------------
Net cash
provided by
(used in)
operating
activities.... 3,511,901 (564,291) 1,146,859 2,354,001 6,567,565 (4,329,147) 13,290,232
----------- ----------- ------------ ----------- ------------ ------------ ------------
Cash flows from
investing activities:
Acquisitions of net
assets including
acquisition costs,
net of cash
acquired............ -- -- (45,268,917) -- (47,246,686) (47,246,686) --
Capital
expenditures........ (1,422,897) (419,670) (157,372) (614,344) (2,275,215) (1,025,671) (2,751,048)
Proceeds from sale of
property, plant and
equipment........... 40,000 -- -- -- -- -- --
Purchase of marketable
securities.......... (442,510) -- -- -- -- -- --
Proceeds from sale of
marketable
securities.......... 333,597 877,538 -- -- -- -- --
Increase (decrease) in
deposits............ (378,832) (142,894) (140,922) -- -- -- (22,014)
----------- ----------- ------------ ----------- ------------ ------------ ------------
Net cash
provided by
(used in)
investing
activities.... (1,870,642) 314,974 (45,567,211) (614,344) (49,521,901) (48,272,357) (2,773,052)
----------- ----------- ------------ ----------- ------------ ------------ ------------
Cash flow from financing
activities:
Proceeds from
long-term debt...... -- -- 32,350,000 -- 51,614,974 51,614,974 --
Repayments of
long-term debt...... (295,000) (1,617,500) (533,072) (1,500,000) (19,550,000) (18,050,000) (3,125,000)
Borrowings/payments on
line of credit,
net................. 100,000 (100,000) 3,266,212 131,969 3,459,324 9,000,891 (6,583,654)
Proceeds from note
payable-officer..... 596,196 -- -- -- -- --
Repayment of notes
payable............. (375,000) -- (1,182,576) (83,380) (92,016) -- --
Proceeds from capital
contribution........ -- -- 11,500,000 -- 11,500,000 11,500,000 --
Debt financing
costs............... -- -- (1,385,078) -- (3,713,039) (2,227,228) (28,000)
Proceeds from issuance
of warrants......... -- -- 450,000 -- 450,000 450,000 --
----------- ----------- ------------ ----------- ------------ ------------ ------------
Net cash
provided by
(used in)
financing
activities.... (570,000) (1,121,304) 44,465,486 (1,451,411) 43,669,243 52,288,637 (9,736,627)
----------- ----------- ------------ ----------- ------------ ------------ ------------
Net increase (decrease)
in cash............... 1,071,259 (1,370,621) 45,134 288,246 714,907 (312,867) 780,553
Cash, beginning of
period................ 367,767 1,439,026 -- 45,134 333,380 333,380 1,048,287
----------- ----------- ------------ ----------- ------------ ------------ ------------
Cash, end of period..... $ 1,439,026 $ 68,405 $ 45,134 $ 333,380 $ 1,048,287 $ 20,513 $ 1,828,840
=========== =========== ============ =========== ============ ============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
F-7
<PAGE> 91
TEKNI-PLEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING POLICIES
Nature of Business
Tekni-Plex, Inc. is a New Jersey based manufacturer of primary packaging
materials for the pharmaceutical, food, foodservice disposables and
telecommunications industries. The Company is organized into two operating
groups. The Flexible Packaging Group produces printed and unprinted multi-layer
constructions of plastic, paper and metal films and sheets, with emphasis on
pharmaceutical and telecommunications applications. The Foam Products Group
primarily produces polystyrene foam packaging products for the food and
foodservice disposables industries.
The Company operates six manufacturing plants in New Jersey (2), Indiana,
Washington, Georgia and Texas. All facilities are owned with the exception of
the Texas plant. The Company's products are sold to both domestic and
international customers.
On March 18, 1994, T.P. Acquisition Company, Inc., acquired Tekni-Plex,
Inc. for approximately $43,775,000. The companies were merged. The acquisition
was accounted for using the purchase method of accounting and, accordingly, the
purchase price was allocated to assets acquired and liabilities assumed based on
their fair market value on the closing date. The excess of cost over the fair
value of net assets acquired amounted to $31,035,000 after providing for certain
restructuring costs. The Company also entered into a long-term consulting
agreement including a covenant not to compete with former management (the
"Consulting Agreement") totaling $2,000,000.
The accompanying consolidated financial statements for periods prior to
March 18, 1994 are separated by a black line from periods after March 18, 1994
due to the periods not being comparable as a result of the purchase accounting
adjustments.
Consolidation Policy
The consolidated financial statements include the financial statements of
Tekni-Plex, Inc. and its wholly-owned subsidiary, Dolco Packaging Corp.
("Dolco"). All intercompany transactions and balances have been eliminated in
consolidation.
Interim Financial Information
The unaudited balance sheet as of March 28, 1997, the unaudited
consolidated statements of earnings for the nine month periods ended March 29,
1996 and March 28, 1997 and the unaudited consolidated statements of cash flows
for the nine month periods ended March 29, 1996 and March 28, 1997, and the
unaudited statement of stockholders' equity for the nine month period ended
March 28, 1997 have been prepared in accordance with generally accepted
accounting principles for interim financial information. In the opinion of
management, all adjustments (which include normal recurring accruals) necessary
to present fairly the financial position, results of operations and cash flows
at March 29, 1996 and March 28, 1997 and for the nine month periods presented,
have been included.
The results of operations for the nine months ended March 28, 1997 are not
necessarily indicative of the results to be expected for the entire fiscal year.
Inventories
Inventories are stated at the lower of cost (weighted average) or market.
F-8
<PAGE> 92
TEKNI-PLEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation and
amortization are computed over the estimated useful lives of the assets by the
straight-line method for financial reporting purposes and by accelerated methods
for income tax purposes.
Intangible Assets
The Company amortizes the excess of cost over the fair value of net assets
acquired on a straight-line basis over 15 years, and the cost of acquiring
certain patents and trademarks, over seventeen and ten years, respectively.
Recoverability is evaluated periodically based on the expected undiscounted net
cash flows of the related businesses.
Deferred Charges
The Company amortizes the deferred financing costs incurred in connection
with the Company's borrowings over the life of the related indebtedness (5-8
years). The covenant not to compete portion of the Consulting Agreement with
former management is amortized over its related term of 10 years. (See Note 10).
Income Taxes
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes." Deferred income tax assets and liabilities are recognized for
differences between the financial statement and income tax basis of assets and
liabilities based upon statutory rates enacted for future periods. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.
Statement of Cash Flows
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments with a maturity of three months or less to be
cash equivalents.
Fiscal Year-End
The Company utilizes a 52/53 week fiscal year ending on the Friday closest
to June 30.
Significant Risks and Uncertainties
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.
The Company purchases polystyrene resin ("resin"), the raw material used in
the foam products line from two suppliers. Resin represents approximately 33% of
the Company's raw material purchases. The Company currently has contracts with
these suppliers for minimum quantities.
Aclar(R), a specialty material used in high barrier laminations, represents
approximately 17% of the Company's raw material purchases. This product is
currently manufactured by only one company. The inability to timely obtain
sufficient quantities of Aclar(R) could have a material adverse effect on the
Company's operating results.
F-9
<PAGE> 93
TEKNI-PLEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
New Accounting Pronouncements
Effective June 29, 1996, the Company adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets Being Disposed Of,"
which provides guidance on how and when impairment losses are recognized on
long-lived assets. This statement did not have a material impact on the
financial position or results of operations of the Company.
Effective June 29, 1996, the Company adopted SFAS No. 123 "Accounting for
Stock-Based Compensation." The Company chose to apply APB Opinion 25 and related
interpretations in accounting for its stock options. As a result, this statement
did not have an effect on the financial position or results of operations of the
Company.
2. ACQUISITIONS
On February 22, 1996, the Company purchased 100% of the common stock of
Dolco for approximately $40,000,000. Dolco is the nation's leading producer of
foamed egg cartons and various grocery store containers for meat, poultry, baked
goods and produce. The acquisition was recorded under the purchase method and
Dolco's operations have been reflected in the statement of operations since that
date. As a result of the acquisition, goodwill of approximately $14,044,000 has
been recorded, which is being amortized over 15 years.
In connection with this acquisition, a reserve of $5,000,000 was
established for the costs to integrate Dolco's operations with the Company and
to eliminate duplicate personnel. At June 28, 1996, the Company had
approximately $4,200,000 remaining in this reserve. During the nine months ended
March 28, 1997, the Company reduced its estimate of these costs and,
accordingly, reduced this reserve and goodwill by $790,000. At March 28, 1997,
the remaining balance in this reserve was approximately $1,857,000.
The following table presents the unaudited pro forma results of operations
as though the acquisition of Dolco occurred on July 2, 1994:
<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
Net sales............................................... $ 117,920,000 $ 135,800,000
Income from operations.................................. 10,748,000 11,753,000
Net income.............................................. 1,623,000 1,848,000
</TABLE>
The pro forma results are not necessarily indicative of what actually would
have occurred if the acquisition had been in effect for the entire periods
presented. In addition, they are not intended to be a projection of future
results and do not reflect any synergies that might be achieved from combined
operations.
On December 22, 1995, the Company purchased certain assets and assumed
certain liabilities of Hargro Flexible Packaging Corporation in Flemington, NJ,
for approximately $7,500,000, which approximated the fair value of the net
assets acquired. The acquisition was recorded under the purchase method. As a
result of this acquisition, the former Brooklyn, New York Closure Liners
Operation of Tekni-Plex was closed on May 31, 1996. The machinery and equipment
along with many of the employees have been relocated to the Flemington facility.
Pro forma results of operations, assuming the Hargro acquisition had been made
on July 2, 1994, would not be materially different from the unaudited pro forma
results presented above.
F-10
<PAGE> 94
TEKNI-PLEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
JUNE 30, JUNE 28, MARCH 28,
1995 1996 1997
----------- ------------ ------------
<S> <C> <C> <C>
Raw materials................................ $ 2,532,000 $ 3,642,000 $ 6,160,000
Work-in-process.............................. 1,320,000 4,038,000 3,259,000
Finished goods............................... 820,000 5,275,000 4,074,000
---------- ----------- -----------
$ 4,672,000 $ 12,955,000 $ 13,493,000
========== =========== ===========
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
JUNE 30, JUNE 28, MARCH 28, ESTIMATED
1995 1996 1997 USEFUL LIVES
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Land.......................... $ 610,000 $ 1,886,000 $ 1,901,000
Building and improvements..... 2,676,000 10,209,000 10,265,000 30-40 years
Machinery and equipment....... 9,240,000 35,837,000 36,603,000 5-10 years
Furniture and fixtures........ 157,000 338,000 341,000 5-10 years
Construction in progress...... -- 660,000 2,563,000
------------ ------------ ------------
12,683,000 48,930,000 51,673,000
Less: Accumulated
depreciation................ 1,176,000 4,424,000 8,995,000
------------ ------------ ------------
$ 11,507,000 $ 44,506,000 $ 42,678,000
============ ============ ============
</TABLE>
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30, JUNE 28, MARCH 28,
1995 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
Revolving line of credit(a)................. $ 3,398,000 $ 6,858,000 $ --
Term loans(a)............................... 18,800,000 39,250,000 36,500,000
Subordinated note payable I (less
unamortized discount of $376,000, $330,000
and $297,000)(b).......................... 11,624,000 11,670,000 11,703,000
Subordinated note payable II (less
unamortized discount of $432,000 and
$391,000)(c).............................. -- 11,568,000 11,609,000
Notes payable --covenant not to compete
(less unamortized discount of $560,000,
$443,000 and $383,000)(d)................. 1,182,000 1,090,000 989,000
----------- ----------- ------------
35,004,000 70,436,000 60,801,000
Less: Current maturities.................... 2,592,000 3,226,000 3,500,000
----------- ----------- ------------
$32,412,000 $67,210,000 $ 57,301,000
========== ========== ==========
</TABLE>
The recorded value of long-term debt approximates fair value based on
current rates available to the Company for debt of the same remaining
maturities.
F-11
<PAGE> 95
TEKNI-PLEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(a) The Company maintains a revolving line of credit and two term notes with a
bank, expiring February 21, 2002. Advances under the revolving line are
limited to the sum of eligible accounts receivable and inventory, not to
exceed $19,000,000. Outstanding borrowings under the revolving loan bear
interest, payable monthly, at the bank's prime rate plus 1 1/2% (9 1/2% at
June 28, 1996) or LIBOR plus 2 3/4% (8.2% at June 28, 1996). At June 28,
1996, the Company had approximately $12,142,000 available for borrowing
under this line of credit. The maximum amount outstanding was $3,266,000 for
the period March 19 through July 1, 1994 and $4,525,000 and $11,771,000 for
the years ended June 30, 1995 and June 28, 1996, respectively. The average
amount outstanding and average rate of interest were $2,733,000 at 8.1% for
the period March 19 through July 1, 1994, $3,664,000 at 9.8% for the year
ended June 30, 1995 and $5,389,000 at 7.6% for the year ended June 28, 1996.
The average amount outstanding and average interest rate were $50,000 at 6%
for the year ended December 27, 1993 and for the period ended January 1,
1994 through March 18, 1994.
The term loans are payable in increasing quarterly principal installments
commencing May 31, 1996 with a final payment of $2,500,000 due on August 1,
2002. The term loans bear interest, payable monthly, at LIBOR plus 2 3/4%
and 3% (8.195% and 8.281% at June 28, 1996).
The loan agreement contains, among other things, provisions for maximum
capital expenditures, and requires the Company to comply with certain
financial ratios. The loans are secured by substantially all of the
Company's assets, including a first mortgage on the Company's facilities.
(b) Subordinated note payable I in the original principal amount of $12,000,000
was amended on February 21, 1996 and is due in two annual principal
installments of $6,000,000 on February 21 in 2003 and 2004, with interest
payable quarterly at 12 1/2%. In connection with this note, the Company
issued warrants for the purchase of 150 shares of the Company's common
stock, exercisable at par value. The warrants are effective as of March 18,
1994 and expire on February 21, 2004.
(c) Subordinated note payable II in the original principal amount of
$12,000,000, issued on February 21, 1996 is due in two annual principal
installments of $6,000,000 in February 21 in 2003 and 2004, with interest
payable quarterly at 12 1/2%. In connection with this note, the Company
issued warrants for the purchase of 150 shares of the Company's common
stock, exercisable at par value. The warrants are effective as of February
21, 1996 and expire February 21, 2004.
Each of the subordinated notes were discounted by $450,000, representing the
estimated fair market value of the warrants at the time of issuance. The
discounts are being amortized on the interest method over the terms of the
notes. The note agreements contain, among other things, provisions for
maximum capital expenditures and require the Company to comply with certain
financial ratios. The notes are subordinated to the aforementioned bank
revolver and term loans.
The Company entered into a put option agreement ("agreement") with the
warrant holders that may require the Company to acquire all or a portion of
shares of the Company's common stock issuable in connection with the
warrants at a price equal to, approximately, the greater of book value or
fair market value per share of common stock as of the end of the month
immediately preceding the date notice is given of the put option exercise.
The put options are exercisable from March 18, 2001 through February 21,
2004 or immediately after the occurrence of specific events prescribed in
the agreement. At March 28, 1997, the estimated value of the put option was
$5,438,000. The difference between the calculated value and the recorded
value is being accreted, as a charge to interest expense, over the remaining
life of the put option.
(d) The Company entered into a Consulting Agreement with former management, the
terms of which call for 120 monthly payments of $16,667 through the year
2004, the total of such payments being $2,000,000. The Company is amortizing
the covenant not to compete portion over 10 years. The net present value was
calculated using an implied interest rate of 9 1/2% (see Note 10).
F-12
<PAGE> 96
TEKNI-PLEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Maturities of long term debt obligations are as follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 28, AMOUNT
-------------------------------------------------------------- -----------
<S> <C>
1997.......................................................... $ 3,226,000
1998.......................................................... 4,075,000
1999.......................................................... 5,575,000
2000.......................................................... 6,825,000
2001.......................................................... 7,950,000
Thereafter.................................................... 43,961,000
-----------
71,612,000
Less: Unamortized discount.................................... 1,176,000
-----------
$70,436,000
===========
</TABLE>
(e) Subsequent Events -- On April 4, 1997, the Company issued $75,000,000 of
11 1/4% ten year notes. Interest on the notes is payable semi-annually. The
Company also received $18,248,000 in additional capital contribution. These
proceeds were used to repay the balance of $36,500,000 on the credit
facility, repay the senior subordinated notes of $25,200,000, including a
prepayment penalty of $1,200,000 and repurchase the redeemable warrants for
$20,000,000. These transactions resulted in an extraordinary loss of
approximately $21,000,000. Note that the fair value of the warrants was
determined pursuant to the contractually agreed value among the relevant
parties.
6. INCOME TAXES
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
JANUARY
1, MARCH 19, YEARS ENDED NINE MONTHS ENDED
YEAR ENDED 1994 TO 1994 TO ------------------- ---------------------------
DECEMBER 31, MARCH 18, JULY 1, JUNE 30, JUNE 28, MARCH 29, MARCH 28,
1993 1994 1994 1995 1996 1996 1997
------------ --------- --------- -------- -------- ------------ ------------
(IN 000'S)
<S> <C> <C> <C> <C> <C> <C> <C>
Current:
Federal....... $ -- $-- $-- $ -- $735 $165 $2,248
State and
local...... 227 56 -- 1 183 40 227
---- --- --- ---- ---- ---- ------
227 56 -- 1 918 205 2,475
Deferred........ 40 -- 17 210 64 15 1,080
---- --- --- ---- ---- ---- ------
Provision for
income
taxes......... $267 $56 $17 $211 $982 $220 $3,555
========= ====== ====== ======= ======= ========= =========
</TABLE>
The provision for income taxes differs from the amounts computed by
applying the applicable Federal statutory rates due to the following:
<TABLE>
<CAPTION>
JANUARY
1, MARCH 19, YEARS ENDED NINE MONTHS ENDED
YEAR ENDED 1994 TO 1994 TO ------------------- ---------------------------
DECEMBER 31, MARCH 18, JULY 1, JUNE 30, JUNE 28, MARCH 29, MARCH 28,
1993 1994 1994 1995 1996 1996 1997
------------ --------- --------- -------- -------- ------------ ------------
(IN 000'S)
<S> <C> <C> <C> <C> <C> <C> <C>
Provision for
Federal income
taxes at the
statutory rate.... $1,031 $ 281 $13 $128 $666 $150 $3,401
State and local
income taxes, net
of Federal
benefit........... 176 37 2 81 305 70 144
S Corporation
earnings not
subject to Federal
income taxes...... (940) (262) -- -- -- -- --
Other, net.......... -- -- 2 2 11 -- 10
--------- ------ ------ ------ ------ ------- ---------
Provision for income
taxes............. $ 267 $ 56 $17 $211 $982 $220 $3,555
========= ======= ====== ====== ====== ======== =========
</TABLE>
F-13
<PAGE> 97
TEKNI-PLEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
JUNE 30, JUNE 28, MARCH 28,
1995 1996 1996
--------- ----------- -----------
<S> <C> <C> <C>
Current deferred taxes:
Allowance for doubtful accounts............ $ 37,000 $ 226,000 $ 313,000
Inventory.................................. 195,000 338,000 412,000
Tax credit and net operating loss
carryforwards........................... -- 1,002,000 --
Accrued expenses........................... 68,000 1,334,000 890,000
--------- ----------- -----------
Total current deferred taxes................. 300,000 2,900,000 1,615,000
--------- ----------- -----------
Long-term deferred taxes:
Net operating loss carryforwards........... 322,000 325,000 --
Difference in book vs tax basis of
assets.................................. (832,000) (7,980,000) (7,450,000)
--------- ----------- -----------
Total deferred tax liabilities............... (510,000) (7,655,000) (7,450,000)
--------- ----------- -----------
$(210,000) $(4,755,000) $(5,835,000)
========= =========== ===========
</TABLE>
Before March 18, 1994, the prior stockholders of the Company elected to
treat the Company as an S Corporation under the provisions of the Internal
Revenue Code. Under these provisions, all earnings and losses of the Company
were reported on the federal income tax returns of the stockholders.
Accordingly, no provision for federal income taxes was made prior to March 18,
1994. In connection with the acquisition of the Company by the present owners,
the Company was converted to a C Corporation.
7. EMPLOYEE BENEFIT PLANS
The Company maintains a discretionary profit sharing plan covering all
eligible employees, excluding those employed by Dolco, with at least one year of
service. Contributions to the plan are determined annually by the Board of
Directors. There was no contribution for the period March 19 through July 1,
1994 or for the years ended June 30, 1995 and June 28, 1996 or for the nine
months ended March 28, 1997.
The Company has a defined contribution profit sharing plan for the benefit
of all employees having completed one year of service with Dolco Packaging Corp.
The Company contributes 3% of each participant's compensation on a weekly basis.
In 1993, the plan was amended to reintroduce the company matching contribution
of up to 1% when an employee contributes 3% of compensation. Contributions
totaled approximately $188,232 for the period February 22, 1996 to June 28,
1996.
The Company had a defined benefit pension plan covering all eligible
non-union employees. Benefit accruals under the plan ceased as of May 31, 1992.
On May 18, 1994, the Company began proceedings to terminate the plan and as of
June 28, 1996, the plan was terminated and all assets were distributed.
The Company also has a defined benefit pension plan for the benefit of all
employees having completed one year of service with Dolco. The Company's policy
is to fund the minimum amounts required by applicable regulations. Dolco's Board
of Directors approved a plan to freeze the pension plan on June 30, 1987, at
which time benefits ceased to accrue. Dolco has not been required to contribute
to the plan since 1990.
8. RELATED PARTY TRANSACTIONS
The Company has a management consulting agreement with an affiliate of a
stockholder. The terms of the agreement require the Company to pay a fee of
approximately $30,000 per month for a period of ten years. Consulting service
fees were approximately $150,000 and $270,000 for the nine months ended March
29, 1996 and March 28, 1997. Consulting service fees were approximately $58,000
for the period March 19, 1994 to July 1, 1994 and $203,000 and $274,000 for the
year ending June 30, 1995 and June 28, 1996, respectively.
F-14
<PAGE> 98
TEKNI-PLEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
There were no such fees for the period January 1, 1994 to March 18, 1994 or for
the year ended December 31, 1993.
9. STOCK OPTIONS
In April 1994, the Company granted options to an employee to acquire 2.5%
of the outstanding common stock, with anti-dilution provisions. The options are
exercisable as to 33 1/3% of the shares on the first, second and third
anniversary dates of the original grant.
The Company applies APB Opinion 25 and related Interpretations in
accounting for these options. Accordingly, no compensation cost has been
recognized. Had compensation cost been determined based on the fair value at the
grant dates for these awards consistent with the method of SFAS Statement 123,
the Company's net income (loss) would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
MARCH 19, YEARS ENDED NINE MONTHS ENDED
1994 TO --------------------- -----------------------------
JULY 1, JUNE 30, JUNE 28, MARCH 29, MARCH 28,
1994 1995 1996 1996 1997
--------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net income (loss):
As reported......... $ 20,900 $165,700 $975,700 $ 220,000 $ 6,447,000
Pro forma........... 11,400 127,600 904,100 183,040 6,342,932
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
Commitments
(a) During the year ended June 28, 1996, the Company rented building space
in New York on a month to month basis. The Company also leases building space in
Texas, California, Georgia and Washington. At June 28, 1996, the Company's
future minimum lease payments are as follows:
<TABLE>
<S> <C>
1997..................................................................... $ 676,000
1998..................................................................... 667,000
1999..................................................................... 649,000
2000..................................................................... 591,000
2001..................................................................... 122,000
----------
$2,705,000
==========
</TABLE>
Rent expense including escalation charges amounted to approximately
$337,000 for the year ended December 31, 1993, $68,000 for the period January 1,
1994 to March 18, 1994, $95,000 for the period March 19, 1994 to July 1, 1994,
$343,000 and $614,000 for the years ended June 30, 1995 and June 28, 1996 and
$393,000 and $405,000 for the nine months ended March 29, 1996 and March 28,
1997.
(b) The Company has employment contracts with two employees. These
contracts provide aggregate minimum annual compensation for the years ended June
30 as follows: 1997 -- $700,000; 1998 -- $825,000; 1999 -- $825,000.
Contingencies
(a) The Company had received notification from the New York Department of
Environmental Conservation (NYDEC) regarding violations of certain regulations
concerning air emissions. The settlement with NYDEC required the Company to pay
an insignificant fine which was paid in January 1995 and to bring the facility
into compliance regarding air emissions. The Company has complied with all
environmental regulations in the state of New York attendant to the closing of
its former Brooklyn, New York Closure Liners manufacturing facility.
F-15
<PAGE> 99
TEKNI-PLEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(b) The Company filed an action under the arbitration provisions of the
Merger and Acquisition Agreement, dated March 18, 1994 (the "Merger Agreement")
demanding a reduction in the purchase price paid due to a breach of that
agreement. In the arbitration, the Company pursued claims for damages resulting
from misrepresentations and omissions in the representations and warranties made
by the former shareholder. In the above action, the Company also sought to
nullify its obligation under the Consulting Agreement. (See Note 3).
The former shareholder answered the Company's claim and asserted two
counterclaims, demanding the Company to fulfill certain tax obligations under
the Merger Agreement and specific performance under the Consulting Agreement.
On April 18, 1997, the Company and the former shareholder reached a
settlement in arbitration (the "Settlement"). All obligations of each party to
the other were nullified. This Settlement did not have a material impact on the
financial condition or results of operations of the Company.
(c) The Company is a party to various other legal proceedings arising in
the normal conduct of business. Management believes that the final outcome of
these proceedings will not have a material adverse effect on the Company's
financial position.
11. CONCENTRATIONS OF CREDIT RISKS
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash deposits and trade
accounts receivable.
The Company provides credit to customers on an unsecured basis after
evaluating customer credit worthiness. Since the Company sells to a broad range
of customers concentrations of credit risk are limited. The Company provides an
allowance for bad debts where there is a possibility for loss.
The Company maintains demand deposits at several major banks throughout the
United States. As part of its cash management process, the Company periodically
reviews the credit standing of these banks.
12. SUPPLEMENTAL CASH FLOW INFORMATION
(a) Cash paid
<TABLE>
<CAPTION>
JANUARY 1, MARCH 19, YEARS ENDED NINE MONTHS ENDED
YEAR ENDED 1994 TO 1994 TO ------------------- ---------------------------
DECEMBER 31, MARCH 18, JULY 1, JUNE 30, JUNE 28, MARCH 29, MARCH 28,
1993 1994 1994 1995 1996 1996 1997
------------ ---------- --------- -------- -------- ------------ ------------
(IN 000'S)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest........ $167 $20 $1,056 $3,502 $4,730 $2,620 $5,273
Income taxes.... 372 -- -- 467 188 80 2,556
</TABLE>
(b) Acquisitions
The Company purchased certain assets and assumed certain liabilities of
Hargro Flexible Packaging Corporation, effective December 22, 1995, for
approximately $7,500,000 in cash. In conjunction with the acquisition,
liabilities were assumed as follows:
<TABLE>
<S> <C>
Fair value of assets acquired........................................... $10,592,000
Cash paid............................................................... (7,543,000)
-----------
Liabilities assumed..................................................... $ 3,049,000
===========
</TABLE>
F-16
<PAGE> 100
TEKNI-PLEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company purchased all of the outstanding common and preferred stock of
Dolco, effective February 22, 1996, for approximately $40,000,000 in cash. In
conjunction with the acquisition, liabilities were assumed as follows:
<TABLE>
<S> <C>
Fair value of assets acquired.......................................... $ 46,293,000
Goodwill............................................................... 14,044,000
Cash paid.............................................................. (39,434,000)
------------
Liabilities assumed.................................................... $ 20,903,000
============
</TABLE>
F-17
<PAGE> 101
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
Board of Directors
Tekni-Plex, Inc.
Somerville, New Jersey
The audits referred to in our report dated September 20, 1996 relating to
the consolidated financial statements of Tekni-Plex, Inc. and Subsidiary, which
is contained in this Form S-4, included the audits of the financial statement
schedule for the years ended June 28, 1996 and June 30, 1995 and for the periods
March 19, 1994 through July 1, 1994 and January 1, 1994 through March 18, 1994
listed in the accompanying index. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statement schedule based upon our audits.
In our opinion, such financial statement schedule presents fairly, in all
material respects, the information set forth therein.
BDO SEIDMAN, LLP
Woodbridge, New Jersey
September 20, 1996
F-18
<PAGE> 102
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
Board of Directors
Tekni-Plex, Inc.
Somerville, New Jersey
The audits referred to in our report dated February 18, 1994 relating to
the financial statements of Tekni-Plex, Inc., which is contained in this Form
S-4, included the audit of the financial statement schedule for the year ended
December 31, 1993 listed in the accompanying index. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion on the financial statement schedule based upon our
audit.
In our opinion, such financial statement schedule presents fairly, in all
material respects, the information set forth therein.
RICH BAKER BERMAN & CO., P.A.
Maplewood, New Jersey
February 18, 1994
F-19
<PAGE> 103
FINANCIAL STATEMENT SCHEDULE II
TEKNI-PLEX, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEAR ENDED DECEMBER 31, 1993, PERIODS JANUARY 1 TO
MARCH 18, 1994 AND MARCH 19 TO JULY 1, 1994 AND THE
YEARS ENDED JUNE 30, 1995 AND JUNE 28, 1996
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
DESCRIPTION PERIOD EXPENSES(1) ACCOUNTS(3) DEDUCTIONS(2) PERIOD
- -------------------------------------- ------------ ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
January 1 to December 31, 1993
Accounts receivable allowance....... $ 32,000 $ 29,000 $ -- $27,000 $ 34,000
======== ======== ======== ======= ========
January 1 to March 18, 1994
Accounts receivable allowance....... 34,000 49,000 -- -- 83,000
======== ======== ======== ======= ========
March 19 to July 1, 1994
Accounts receivable allowance....... 83,000 51,000 -- -- 134,000
======== ======== ======== ======= ========
Year ended June 30, 1995
Accounts receivable allowance....... 134,000 -- -- 41,000 93,000
======== ======== ======== ======= ========
Year ended June 28, 1996
Accounts receivable allowance....... 93,000 121,000 351,000 -- 565,000
======== ======== ======== ======= ========
</TABLE>
- ---------------
(1) To increase accounts receivable allowance.
(2) Uncollectible accounts written off, net of recoveries.
(3) Balance related to Dolco acquisition.
F-20
<PAGE> 104
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Dolco Packaging Corp.
We have audited the balance sheets of Dolco Packaging Corp. as of December
31, 1995 and 1994, and the related statements of income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on 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 Dolco Packaging Corp. as of
December 31, 1995 and 1994, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Sherman Oaks, California
February 21, 1996
F-21
<PAGE> 105
DOLCO PACKAGING CORP.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................................. $ 2,258,299 $ 811,236
Accounts receivable (less allowance for doubtful accounts:
1995 -- $128,797, and 1994 -- $220,979)................................. 6,830,633 5,720,703
Inventories............................................................... 5,917,383 6,418,534
Deferred tax asset........................................................ 1,071,969
Prepaid expenses and other................................................ 353,017 424,572
----------- -----------
Total current assets............................................... 16,431,301 13,375,045
Property, Plant and Equipment:
Buildings and improvements................................................ 8,280,809 6,221,953
Machinery and equipment................................................... 32,521,891 30,822,887
Molds and dies............................................................ 6,194,194 7,089,604
Furniture and fixtures.................................................... 334,352 375,153
Assets under capital leases............................................... 48,356 48,356
----------- -----------
47,379,602 44,557,953
Less accumulated depreciation and amortization.......................... 34,523,392 35,260,996
----------- -----------
12,856,210 9,296,957
Construction in progress.................................................. 641,902 2,092,218
Land...................................................................... 668,294 668,294
----------- -----------
Net property, plant and equipment..................................... 14,166,406 12,057,469
Deferred tax asset........................................................ 649,242
Other assets.............................................................. 430,569 341,876
----------- -----------
Total assets....................................................... $31,677,518 $25,774,390
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term note payable to bank........................................... $ $ 800,000
Current maturities of long-term debt (includes $818,923 payable to
stockholder in 1994).................................................... 645,528 1,200,179
Accounts payable.......................................................... 2,783,184 2,123,875
Accounts payable to stockholders.......................................... 713,203 799,324
Accrued payroll and benefits.............................................. 1,021,218 818,140
Accrued liabilities....................................................... 1,006,453 1,316,328
----------- -----------
Total current liabilities.......................................... 6,169,586 7,057,846
Long-term debt, less current maturities (includes $699,787 payable to
stockholder in 1994)...................................................... 2,675,100 1,561,596
Minimum pension liaibility.................................................. 572,000
Deferred items.............................................................. 1,243,454 986,100
Commitments and contingencies
Stockholders' equity:
Preferred stock -- $.01 par value; 2,500,000 shares authorized; 1,824,923
and 2,074,995 shares outstanding in 1995 and 1994, respectively, stated
at aggregate liquidation preference..................................... 7,299,692 8,299,980
Common stock -- $.01 par value; 3,000,000 shares authorized; 1,468,145
outstanding in 1995 and 1,459,520 outstanding in 1994................... 14,681 14,595
Additional paid-in capital................................................ 6,675,714 6,621,737
Minimum pension liability, net of deferred income tax benefit of
$222,000................................................................ (350,000)
Retained earnings......................................................... 7,377,291 1,232,536
----------- -----------
Total stockholders' equity......................................... 21,017,378 16,168,848
----------- -----------
Total liabilities and stockholders' equity......................... $31,677,518 $25,774,390
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-22
<PAGE> 106
DOLCO PACKAGING CORP.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net sales........................................... $81,492,144 $66,988,257 $62,531,009
Cost of sales....................................... 65,205,346 52,137,665 49,066,585
----------- ----------- -----------
Gross profit................................... 16,286,798 14,850,592 13,464,424
Selling, general and administrative expenses........ 10,518,344 9,832,641 8,999,235
----------- ----------- -----------
Operating income............................... 5,768,454 5,017,951 4,465,189
Other income (expense):
Interest.......................................... (342,412) (221,406) (364,761)
Loss on disposition and write-off of property,
plant and equipment............................ (75,886) (37,527) (180,742)
Other, net........................................ 247,373 158,315 156,161
----------- ----------- -----------
Income before income taxes..................... 5,597,529 4,917,333 4,075,847
Provision for (benefit from) income taxes........... (1,249,211) 150,000 150,000
----------- ----------- -----------
Net income.......................................... $ 6,846,740 $ 4,767,333 $ 3,925,847
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-23
<PAGE> 107
DOLCO PACKAGING CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
-----------------------------------------------------------------------------------------------------
PREFERRED STOCK COMMON STOCK ADDITIONAL MINIMUM EARNINGS
STATED PAR PAID-IN PENSION (ACCUMULATED STOCKHOLDERS'
SHARES VALUE SHARES VALUE CAPITAL LIABILITY DEFICIT) EQUITY
--------- ----------- --------- ------- ---------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1992.................. 2,500,000 $10,000,000 1,409,081 $14,091 $6,481,475 $(5,827,906) $ 10,667,660
Common stock issued from
exercise of stock
options............... 22,500 225 50,400 50,625
Redemption of preferred
stock................. (175,036) (700,144) (700,144)
Preferred stock
dividends............. (863,242) (863,242)
Net income for the
year.................. 3,925,847 3,925,847
---------- ---------- ---------- ------- ---------- --------- ---------- -----------
Balance at December 31,
1993.................. 2,324,964 9,299,856 1,431,581 14,316 6,531,875 (2,765,301) 13,080,746
Common stock issued from
exercise of stock
options............... 28,875 288 91,775 92,063
Retirement of fractional
shares................ (936) (9) (1,913) (1,922)
Redemption of preferred
stock................. (249,969) (999,876) (999,876)
Preferred stock
dividends............. (769,496) (769,496)
Net income for the
year.................. 4,767,333 4,767,333
---------- ---------- ---------- ------- ---------- --------- ---------- -----------
Balance at December 31,
1994.................. 2,074,995 8,299,980 1,459,520 14,595 6,621,737 1,232,536 16,168,848
Common stock issued from
exercise of stock
options............... 8,625 86 53,977 54,063
Redemption of preferred
stock................. (250,072) (1,000,288) (1,000,288)
Preferred stock
dividends............. (701,985) (701,985)
Minimum pension
liability, net of
deferred income tax
benefit of $222,000... $(350,000) (350,000)
Net income for the
year.................. 6,846,740 6,846,740
---------- ---------- ---------- ------- ---------- --------- ---------- -----------
Balance at December 31,
1995.................. 1,824,923 $ 7,299,692 1,468,145 $14,681 $6,675,714 $(350,000) $ 7,377,291 $ 21,017,378
========== ========== ========== ======= ========== ========= ========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-24
<PAGE> 108
DOLCO PACKAGING CORP.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Operating Activities:
Net income........................................ $ 6,846,740 $ 4,767,333 $ 3,925,847
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 2,749,372 2,393,398 2,239,408
Provision for losses on receivables............ 85,304 40,837 173,911
Loss on disposition and write-off of property,
plant and equipment.......................... 75,886 37,527 180,742
Change in assets and liabilities:
Accounts receivable............................ (1,195,234) (979,977) 221,448
Inventories.................................... 501,151 (1,469,665) 246,402
Deferred tax asset............................. (1,499,211)
Prepaid expenses and other assets.............. (42,138) (42,994) (74,981)
Accounts payable............................... 573,188 703,937 (186,211)
Accrued and other long-term liabilities........ 173,062 151,267 409,392
----------- ----------- -----------
Net cash provided by operating
activities.............................. 8,268,120 5,601,663 7,135,958
----------- ----------- -----------
Investing Activities:
Additions to property, plant and equipment........ (4,914,194) (3,660,460) (1,614,510)
Proceeds from disposition of property, plant and
equipment...................................... 5,000 9,736 118,644
----------- ----------- -----------
Net cash used for investing activities.... (4,909,194) (3,650,724) (1,495,866)
----------- ----------- -----------
Financing Activities:
Proceeds from current and long-term debt.......... 1,900,000 -- --
Payments of current and long-term debt............ (1,341,147) (1,700,587) (1,744,555)
Net increase (decrease) of short-term note payable
to bank........................................ (800,000) 800,000 (1,300,000)
Redemption of preferred stock..................... (1,000,288) (999,876) (700,144)
Payment of dividends.............................. (724,491) (791,993) (878,996)
Proceeds from exercise of stock options........... 54,063 92,063 50,625
Retirement of common stock........................ -- (1,922) --
----------- ----------- -----------
Net cash used for financing activities.... (1,911,863) (2,602,315) (4,573,069)
----------- ----------- -----------
Net increase (decrease) in cash..................... 1,447,063 (651,376) 1,067,023
Cash and cash equivalents at beginning of year...... 811,236 1,462,612 395,589
----------- ----------- -----------
Cash and cash equivalents at end of year............ $ 2,258,299 $ 811,236 $ 1,462,612
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash disbursed during the year for:
Interest, net of amount capitalized............ $ 333,450 $ 253,284 $ 389,211
Income taxes................................... 255,878 155,763 162,044
Noncash investing and financing activities:
Additions to property, plant and equipment
under capital leases......................... -- -- 34,420
Declaration of dividend........................ 164,243 186,750 209,247
</TABLE>
The accompanying notes are an integral part of these statements.
F-25
<PAGE> 109
DOLCO PACKAGING CORP.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Dolco Packaging Corp. ("Dolco") was established in 1966 and was the first
company to manufacture foam egg cartons in the United States. In addition to egg
cartons, Dolco's largest product line, Dolco also develops, manufactures and
sells high volumes of various grocery store containers for meat, poultry, baked
goods and produce as well as specialty items for food service and industrial
uses.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect 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 reported
period. Actual results could differ from those estimates.
Fiscal Year
Dolco's fiscal year ends on the Saturday nearest December 31. The fiscal
years ended December 31, 1995, 1994 and 1993 are comprised of 52 weeks each.
Cash and Cash Equivalents
Dolco considers all highly liquid instruments purchased with an original
maturity of three months or less to be cash equivalents.
Concentration of Risk
Dolco places its temporary cash investments with high credit quality
financial institutions. At times, such investments may be in excess of the FDIC
insurance limit. At Dolco's year end, $2,300,000 was invested overnight in
commercial paper.
Dolco performs periodic credit evaluations of its customer's financial
condition and generally does not require collateral. Receivables generally are
due in 30 days. Credit losses have consistently been within management's
expectations.
Inventories
Inventories are valued at the lower of cost or market with cost determined
on the first-in first-out (FIFO) basis.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is provided
on the straight-line method at rates based on estimated useful lives of
individual assets or classes of assets. Leasehold improvements are amortized
over the estimated useful life or period of lease, whichever is shorter.
Estimated useful lives include:
<TABLE>
<S> <C>
Buildings and improvements..................................... 5 to 30 years
Machinery and equipment........................................ 3 to 8 years
Furniture and fixtures......................................... 5 years
Assets under capital lease..................................... 3 to 5 years
</TABLE>
F-26
<PAGE> 110
DOLCO PACKAGING CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Repairs and maintenance are charged to operations in the year incurred.
Repairs and maintenance approximated $6,279,000, $5,614,000 and $5,180,000 in
1995, 1994 and 1993, respectively. Major renewals or betterments are capitalized
and depreciated over estimated useful lives. When assets are disposed of, any
resulting gain or loss on disposition is included in operations.
Capitalized Interest
Interest incurred in conjunction with property additions is capitalized as
part of the asset cost. Interest of approximately $54,000, $60,000 and $47,000
was capitalized during 1995, 1994 and 1993, respectively.
Impairment of Long-Lived Assets
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 121. "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of ". SFAS No. 121
requires companies to adopt its provisions for fiscal years beginning after
December 15, 1995. SFAS No. 121 requires an entity to review long-lived assets
and certain identifiable intangibles whenever events or changes in circumstances
indicate the carrying amount of assets may not be recoverable. Impairment losses
are recognized when the carrying amount of the asset exceeds the estimated fair
value of the assets. Dolco expects to adopt the provisions of SFAS No. 121
beginning with its fiscal year ending December 31, 1996. At this time, it is not
expected that the adoption of the provisions of SFAS No. 121 will have any
significant impact on Dolco.
Revenue Recognition
Dolco recognizes revenue when product is shipped.
Research and Development
Research and development costs are expensed as incurred and are included in
selling, general and administrative expenses. Dolco incurred approximately
$1,096,000, $1,029,100 and $812,000 of research and development expense for the
years ended December 31, 1995, 1994 and 1993, respectively.
Income Taxes
During 1993, Dolco adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" ("Statement 109"). Statement 109 requires the
liability method in accounting for income taxes. Adoption of this statement had
no effect on Dolco's net income for 1993. (See Note 5 to the Financial
Statements.)
Stock Split
A three-for-two stock split of Dolco's Common Stock in the form of a 50%
stock dividend was paid on September 30, 1994. Prior year information pertaining
to Common Stock in the accompanying financial statements has been restated to
reflect this transaction.
Reclassification
Certain reclassifications have been made to the 1994 and 1993 financial
statements to conform to the presentation used in 1995.
F-27
<PAGE> 111
DOLCO PACKAGING CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. INVENTORIES
Dolco's inventories at December 31, 1995 and 1994 comprise the following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Finished goods...................................... $1,628,449 $2,025,187
Raw materials....................................... 2,821,028 2,726,851
Work-in-process..................................... 1,467,906 1,666,496
----------- -----------
Total..................................... $5,917,383.. $6,418,534
=========== ===========
</TABLE>
3. FINANCING
Dolco had a $4,000,000 revolving line of credit which was due to expire in
May 1996 and bore interest at a rate equal to the bank's prime rate. At December
31, 1995, there was no balance outstanding on this line of credit. The prime
rate was 8.5% at December 31, 1995 and 1994. This line was canceled as a result
of the merger described in Note 11.
4. LONG-TERM DEBT
Dolco's long-term debt at December 31, 1995 and 1994 consists of:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Bank term loan, due in monthly principal payments of $47,461
per month through July 31, 1998, with interest at 1/4%
above the prime rate paid monthly......................... $ 1,471,292 $ 2,040,824
Bank term loan, due in monthly principal payments of $6,333
per month through March 1, 2000, with final installment of
all unpaid principal payable on April 1, 2000 and interest
at 1.25% above the prime rate paid monthly................ 1,849,336 --
Notes payable to a related party, collateralized by
equipment, with interest at 1.5% above the prime rate due
in monthly installments of $55,022, paid in full in
December 1995............................................. -- 707,228
Present value of capital lease obligations.................. -- 13,723
---------- ----------
3,320,628 2,761,775
Less current maturities..................................... 645,528 1,200,179
---------- ----------
Total long-term debt.............................. $ 2,675,100 $ 1,561,596
========== ==========
</TABLE>
The bank term loans and line of credit were collateralized by accounts
receivable, inventory, certain equipment and the first mortgage on the
Wenatchee, Washington property. The credit agreement covering the term loan and
the revolving line of credit contained certain covenants which provided, among
other things, requirements for the maintenance of certain measures of liquidity
and equity at the end of each fiscal quarter. The line of credit was canceled
and the bank term loans were repaid during February of 1996 as a result of the
merger discussed in Note 11.
Assets Under Capital Leases
Dolco had a lease agreement with the Gwinnett County Industrial Building
Authority, Georgia, for use of facilities that have been constructed with funds
provided from proceeds of an Industrial Revenue Bond. The bond was due serially
in annual payments of $250,000 with the final payment due on May 1, 1995 and had
an interest rate of 9.25%. The balance due on this lease was paid in full during
1994.
F-28
<PAGE> 112
DOLCO PACKAGING CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Dolco also leases transportation and manufacturing equipment under various
lease agreements accounted for as capital leases.
The following summarizes leased property under capital leases:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Machinery and equipment.......................................... $ 48,356 $ 48,356
Accumulated amortization......................................... 34,427 24,756
------- -------
$ 13,929 $ 23,600
======= =======
</TABLE>
5. INCOME TAXES
During 1993, Dolco adopted Statement of Financial Accounting Standards No.
109. Under Statement 109, the liability method is used in accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities; and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
Components of the provision for (benefit from) income taxes are:
<TABLE>
<CAPTION>
1995 1994 1993
----------- -------- --------
<S> <C> <C> <C>
Currently payable:
Federal........................................ $217,662.... $117,395 $121,793
State.......................................... 32,338 32,605 28,207
---------- -------- --------
250,000 150,000 150,000
Deferred:
Federal........................................ (1,499,211) -- --
---------- -------- --------
$(1,249,211) $150,000 $150,000
========== ======== ========
</TABLE>
The differences between the expected U. S. federal income taxes and the
actual taxes are:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Expected tax on pre-tax earnings............ $ 1,903,160 $ 1,671,893 $ 1,385,787
State taxes................................. 32,338 32,605 28,207
Effect of alternative minimum tax on current
liability................................. 250,782 104,163 96,811
Utilization of net operating loss
carryforwards............................. (2,027,023) (1,548,867) (1,420,040)
Reversal of valuation allowance............. (1,499,211) -- --
Other-net................................... 90,743 (109,794) 59,235
---------- -------- --------
$(1,249,211) $ 150,000 $ 150,000
========== ======== ========
</TABLE>
F-29
<PAGE> 113
DOLCO PACKAGING CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The major components of deferred tax assets (liabilities) at December 31,
1995 and 1994 are:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Inventory-uniform capitalization........................ $ 101,218 $ 112,843
Accrued expenses........................................ 110,279 318,186
Deferred rent........................................... 318,819 281,379
Net operating loss carryforwards........................ 364,198 2,354,350
ITC credit carryforwards................................ 1,052,608 995,139
Other credit carryforwards.............................. 419,284 229,692
Depreciation and amortization........................... (1,075,023) (1,388,730)
Pension liability....................................... 222,000
Other................................................... 207,828 210,591
----------- -----------
1,721,211 3,113,450
Valuation allowance..................................... -- (3,113,450)
----------- -----------
$ 1,721,211 $ --
=========== ===========
</TABLE>
At December 31, 1995, Dolco had net operating loss carryforwards for
federal income tax purposes of approximately $930,000 which expire in 2005; and
for California state purposes of approximately $940,000, of which $160,000
expires in 1997 and $780,000 in 2000. In 1995 and 1994, Dolco utilized
approximately $5,961,000 and $4,556,000, respectively, of net operating loss
carryforwards. Tax credit carryforwards of approximately $1,472,000 are
available to reduce future federal income taxes. If not used, these
carryforwards will expire in 1996 through 2002.
The Internal Revenue Code of 1986, as amended, contains provisions which
might limit Dolco's utilization of its net operating loss and credit
carryforwards in any year upon and after the occurrence of certain events,
including a substantial change in the ownership of its stock over a period of up
to three years (an "ownership change").
6. PENSION PLAN AND PROFIT SHARING PLAN
Dolco has a defined contribution profit sharing plan for the benefit of all
employees having completed one year of service. Dolco contributed 3% of each
participant's compensation on a weekly basis for 1993, 1994 and 1995. In 1993,
the plan was amended to reintroduce the company matching contribution of up to
1% when an employee contributes 3%. Contributions totaled approximately $536,000
in 1995, $410,000 in 1994 and $347,000 in 1993.
Dolco also has a defined benefit pension plan for the benefit of all
employees having completed one year of service. Dolco's policy is to fund the
minimum amounts required by applicable regulations. Dolco's Board of Directors
approved a plan to freeze the pension plan on June 30, 1987, at which time
benefits ceased to accrue. Dolco has not been required to contribute to the plan
since 1990.
F-30
<PAGE> 114
DOLCO PACKAGING CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Net pension cost for the pension plan includes the following assumptions
and components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Assumptions:
Discount rate................................. 7.0% 8.5% 7.0%
Expected rate of return on assets............. 8.5% 8.5% 7.5%
Components:
Interest cost................................. $ 217,089 $ 228,780 $ 232,356
-------- -------- --------
Actual return................................. (442,861) (30,971) (183,372)
Deferred gain (loss).......................... 227,744 (176,660) (32,561)
-------- -------- --------
(215,117) (207,631) (215,933)
Amortization of transition asset................ -- -- --
-------- -------- --------
Net periodic pension cost....................... $ 1,972 $ 21,149 $ 16,423
======== ======== ========
</TABLE>
There is no service cost for 1995 or 1994 since the pension plan was frozen
on June 30, 1987. The following table sets forth the funded status of the plan
and amounts recognized in Dolco's balance sheets at December 31:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Actuarial present value of accumulated vested benefit
obligations............................................... $3,473,181 $2,570,019
---------- ----------
Projected benefit obligation for services rendered to
date...................................................... $3,473,181 $2,570,019
Plan assets at fair value................................... 2,901,181 2,552,878
---------- ----------
Projected benefit obligation in excess of plan assets....... (572,000) (17,141)
Unrecognized net assets..................................... (51,114) (59,634)
Unrecognized net loss from past experience different from
that assumed and effects of changes in assumptions........ 51,114 76,775
---------- ----------
Accrued pension cost recognized on balance sheet............ $ (572,000) $ --
========== ==========
</TABLE>
Assets of the pension plan consist of an immediate participation guarantee
contract and various mutual funds.
During 1995 the Company recorded $572,000 to recognize the minimum pension
liability required by the provisions of Statement of Financial Accounting
Standards No. 87, "Employers' Accounting for Pensions." The additional minimum
liability at December 31, 1995 represents the excess of the accumulated benefit
obligation over the fair value of plan assets and accrued pension liability. The
transaction, which had no effect on income, was recorded by reducing equity by
$350,000, which is net of a deferred tax asset of $222,000.
F-31
<PAGE> 115
DOLCO PACKAGING CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. COMMITMENTS AND CONTINGENCIES
Dolco is obligated under operating lease agreements with minimum annual
rents as summarized below:
<TABLE>
<CAPTION>
YEAR
------------------------------------------------------------------------
<S> <C>
1996.................................................................... $ 791,438
1997.................................................................... 819,893
1998.................................................................... 811,373
1999.................................................................... 758,250
2000.................................................................... 605,147
Thereafter.............................................................. 7,053,263
-----------
$10,839,364
===========
</TABLE>
Dolco's operating leases are primarily for equipment and the Dallas
manufacturing facility. Rent expense was approximately $1,734,000 in 1995,
$1,988,000 in 1994 and $2,134,000 in 1993.
8. STOCK OPTIONS
In 1992, the Board of Directors and stockholders of Dolco adopted and
approved a Stock Option Plan under which 150,000 shares of Common Stock are
reserved for issuance on exercise of options or nonstatutory options to
employees and nonstatutory options to directors who are not employees. The
exercise price of an option may not be less than the fair market value of the
shares of Common Stock on the date of grant. No option may be exercised during
the first year or more than ten years from the date of grant.
The following is a summary of the options outstanding as of December 31,
1995; the number of shares and the exercise price have been restated to reflect
the three-for-two stock split in the form of a 50% stock dividend which was paid
on September 30, 1994:
<TABLE>
<CAPTION>
NUMBER EXERCISE
OF SHARES PRICE
--------- --------------
<S> <C> <C>
Balance at December 31, 1992.............................. 69,000 $2.25
Options granted........................................... 45,000.. 6.50 - 12.75
Stock options exercised................................... (22,500) 2.25
-------
Balance at December 31, 1993.............................. 91,500 2.25 - 12.75
Canceled options.......................................... (17,250) 2.25 - 12.75
Options granted........................................... 33,000 13.00 - 13.833
Stock options exercised................................... (28,875) 2.25 - 6.50
-------
Balance at December 31, 1994.............................. 78,375 2.25 - 13.833
Options granted........................................... 6,000 13.00 - 13.60
Stock options exercised................................... (8,625) 2.25 - 13.00
-------
75,750 2.25 - 13.833
=======
</TABLE>
These options terminate five years from the date of grant and 50% may be
exercised after the first anniversary and 100% after the second anniversary. The
times at which options may be exercised can be accelerated under certain
circumstances. At December 31, 1995, 53,625 options were exercisable.
9. CAPITAL STOCK
Dolco Preferred Stock has stated, redemption and liquidation values of
$4.00 per share. Holders of Dolco's Preferred Stock are entitled to receive a
cash dividend of 9% per annum of the stated value when and
F-32
<PAGE> 116
DOLCO PACKAGING CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
if declared by Dolco. Dividends accrue and are payable quarterly in arrears. The
dividends cumulate without interest. Preferred stock dividends of $.36 per share
were declared during 1995, 1994 and 1993.
Dolco Preferred Stock is redeemable for a cash price of $4.00 per share
plus any accrued but unpaid dividends at Dolco's discretion subject to
limitations determined by a formula set forth in Dolco's Certificate of
Incorporation. In the event of a partial redemption, the shares will be redeemed
on a pro rata basis. Preferred stockholders are entitled to one vote for each
share of Dolco Preferred Stock held.
Holders of Dolco Common Stock will not be entitled to receive dividends
until all shares of Dolco Preferred Stock have been redeemed in full.
Thereafter, holders of Dolco Common Stock will be entitled to receive dividends,
when and if declared by the Board of Directors, out of funds legally available.
Common stockholders are entitled to one vote for each share of Dolco Common
Stock held.
10. RELATED PARTY TRANSACTIONS
Payments to major stockholders consist of raw material purchases under
normal trade terms totaling approximately $24,799,000 for 1995, $18,769,000 for
1994 and $17,392,000 for 1993 and interest payments on a note to stockholder for
equipment financing for approximately $45,000, $86,000 and $128,000 for 1995,
1994 and 1993 respectively.
11. SUBSEQUENT EVENTS
On November 7, 1995, Dolco signed an Agreement and Plan of Merger pursuant
to which Packaging Acquisition Corp., a newly-formed corporation owned by MST
Partners, L.P. and MST Offshore Partners C.V. will merge with and into Dolco,
which would remain in existence. According to the Agreement and Plan of Merger,
holders of the outstanding shares of Dolco's Common Stock and Preferred Stock
will, upon effectiveness of the merger, be entitled to receive $21 in cash for
each outstanding share of Common Stock and $4 in cash plus the amount of any
dividends accrued and unpaid as of the effective date of the merger for each
outstanding share of Preferred Stock. The merger was approved by Dolco's
stockholders during a special meeting of the stockholders held on February 20,
1996. Subsequent (unaudited) events are as follows : On February 21, 1996, MST
Partners, L.P. and MST Offshore Partners, C.V. assigned all of the stock of
Packaging Acquisition Corporation and all rights under the Agreement and Plan of
Merger to Tekni-Plex, Inc., an entity that they collectively control. On
February 21, 1996, Packaging Acquisition Corporation was merged with and into
Dolco, with Dolco the surviving entity. As a result, Dolco became a wholly owned
subsidiary of Tekni-Plex, Inc.
F-33
<PAGE> 117
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Tekni-Plex and the Guarantor are both incorporated under the laws of the
State of Delaware. Section 145 of the Delaware General Corporation Law (as the
same exists or may thereafter be amended, the "DGCL") provides that a Delaware
corporation may indemnify any persons who were, are or are threatened to be
made, parties to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of such corporation), by reason of the fact that
such person is or was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or other enterprise.
The indemnity may include expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, provided such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the corporation's best interests and, with respect to any criminal
action or proceeding, had no reasonable cause to believe that such person's
conduct was unlawful. A Delaware corporation may indemnify any persons who are,
were or are threatened to be made, a party to any threatened, pending or
completed action or suit by or in the right of the corporation by reason of the
fact that such person is or was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or other enterprise.
The indemnity may include expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit, provided such person acted in good faith and in a manner
such person reasonably believed to be in or not opposed to the corporation's
best interests, provided that no indemnification is permitted without judicial
approval if such person is adjudged to be liable to the corporation. Where a
director, officer, employee or agent is successful on the merits or otherwise in
the defense of any such action, suit or proceeding, the corporation must
indemnify such person against the expenses which such person has actually and
reasonably incurred. In addition, Section 145 of the DGCL allows, subject to
specified conditions and exclusions, the advancement of expenses incurred in
defending against such action, suit or proceeding, and permits the corporation
to purchase and maintain insurance on behalf of such persons, whether or not the
corporation would otherwise have the power to indemnify such person under
Section 145. The indemnification and advancement of expenses provided by Section
145 are not exclusive of any other rights to which those seeking indemnification
or advancement may be entitled under any by-laws, agreement, vote of
stockholders or otherwise.
Tekni-Plex's Certificate of Incorporation (the "Certificate") provides that
a director of the Company will not be liable to the Company or its stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL, which concerns unlawful payments of dividends, stock purchases or
redemptions, or (iv) for any transactions from which the director derived an
improper personal benefit. While the Certificate provides directors with
protection from awards for monetary damages for breach of their fiduciary duty,
it does not eliminate such duty. Accordingly, the Certificate will have no
effect on the availability of equitable remedies such as an injunction or
rescission based on a director's breach of his or her duty of care. The
Guarantor's certificate of incorporation contains provisions substantially
similar to those described in this paragraph.
The Certificate as well as Tekni-Plex's By-laws (the "By-laws") provide for
the indemnification of directors and officers of the Company on substantially
similar terms and conditions as Section 145 of the DGCL. The By-laws provide for
the advancement of expenses reasonably incurred by a director or officer in
defending a civil or criminal action, suit or proceeding on substantially
similar terms and conditions as Section 145, and that all rights to
indemnification and to the advancement of expenses under the By-laws shall be
deemed to be provided by a contract between the Company and the director or
officer who serves in such capacity at any time while the By-Laws and any other
relevant provisions of the DGCL and any other
II-1
<PAGE> 118
applicable law, if any, are in effect. The By-laws further provide that
references to "the Company" in the above described section of the By-laws shall
be deemed to include any subsidiary of the Company now or hereafter organized
under the laws of the State of Delaware.
The by-laws of the Guarantor contain provisions substantially similar to
the by-laws of Tekni-Plex.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<S> <C>
**3.1 Restated Certificate of Incorporation of Tekni-Plex, Inc.
**3.2 Restated Certificate of Incorporation of Dolco Packaging Corp.
*3.3 Amended and Restated By-laws of Tekni-Plex, Inc.
*3.4 Amended and Restated By-laws of Dolco Packaging Corp.
**4.1 Indenture dated as of April 1, 1997 among Tekni-Plex, Inc., Dolco Packaging Corp.
and Marine Midland Bank, as Trustee.
**4.2 Senior Subordinated Note and Guarantee (original not included; form of Note and
Guarantee included in Exhibit 4.1).
**4.3 Purchase Agreement dated as of April 1, 1997 among Tekni-Plex, Inc., Dolco
Packaging Corp., and J.P. Morgan Securities Inc.
**4.4 Registration Right Agreement, dated as of April 4, 1997 among Tekni-Plex, Inc.,
Dolco Packaging Corp. and J.P. Morgan Securities, Inc. as the Initial Purchaser.
*5.1 Opinion of Winthrop, Stimson, Putnam & Roberts.
**10.1 Credit Agreement, dated as of May 8, 1997, among Tekni-Plex, Inc., Dolco Packaging
Corp., the Banks party thereto, the LC Issuing Banks referred to therein and Morgan
Guaranty Trust Company of New York, as Agent.
**10.2 Note (original not included; form of Note included in Exhibit 10.1).
**10.3 Security Agreement, dated as of May 8, 1997, among Tekni-Plex, Inc., Dolco
Packaging Corp. and Morgan Guaranty Trust Company of New York, as Agent (original
not included; form of Security Agreement included in Exhibit 10.1).
**10.4 Pledge Agreement, dated as of May 8, 1997, between Tekni-Plex, Inc. and Morgan
Guaranty Trust Company of New York, as Agent (original not included; form of Pledge
Agreement included in Exhibit 10.1).
**10.5 Form of Mortgage, dated as of May 8, 1997, made by Tekni-Plex, Inc. or Dolco
Packaging Corp. in favor of Morgan Guaranty Trust Company, as Agent (originals not
included; form of Mortgage included in Exhibit 10.1).
**10.6 Employment Agreement, dated as of January 30, 1997, between Dr. F. Patrick Smith
and Tekni-Plex, Inc.
**10.7 Employment Agreement, dated as of April 4, 1997, between Mr. Kenneth W.R. Baker and
Tekni-Plex, Inc.
+10.8 Form of Amended and Restated Option Agreement, dated as of April 4, 1997, among
Tekni-Plex, Inc., Tekni-Plex Partners L.P. and F. Patrick Smith.
*10.9 Form of Amended and Restated Stock Option Agreement, dated as of April 4, 1997,
between Tekni-Plex, Inc. and Kenneth W.R. Baker.
**10.10 Management Fee Agreement, dated as of April 4, 1997, between Tekni-Plex, Inc. and
MST Management Company, Inc.
+10.11 Management Fee Agreement, dated as of April 4, 1997, between Tekni-Plex, Inc. and
MST/TP Holding, Inc.
**12.1 Statement regarding Computation of Ratios.
**21.1 Subsidiaries of Tekni-Plex, Inc.
**21.2 Subsidiaries of Dolco Packaging Corp.
*23.1 Consent of BDO Seidman LLP.
*23.2 Consent of Coopers & Lybrand L.L.P.
*23.3 Consent of Rosenberg Rich Baker Berman & Co., P.A.
*23.4 Consent of Winthrop, Stimson, Putnam & Roberts (included in Exhibit 5.1).
</TABLE>
II-2
<PAGE> 119
<TABLE>
<C> <S>
**25.1 Statement of Eligibility of Trustee, Marine Midland Bank, on Form T-1.
**27.1 Financial Data Schedule.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Tender Instructions.
*99.4 Form of Exchange Agent Agreement.
</TABLE>
- ---------------
*Filed herewith.
**Previously filed.
+To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES
Schedule II - Valuation and Qualifying Accounts.
Other schedules required are not applicable.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1993, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrants hereby undertake as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuers undertake that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(c) The registrants undertake that every prospectus: (i) that is filed
pursuant to paragraph (b) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE> 120
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrants pursuant to the foregoing provisions or otherwise, the
registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrants of expenses
incurred or paid by a director, officer or controlling person in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, each
of the registrants will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(e) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(f) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not subject of and included in
the registration statement when it became effective.
II-4
<PAGE> 121
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Tekni-Plex, Inc., a Delaware corporation, has duly caused this Amendment No. 1
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in Somerville, New Jersey on July 17, 1997.
TEKNI-PLEX, INC.
By: /s/ F. PATRICK SMITH
------------------------------------
F. Patrick Smith
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below on the 17th day of
July, 1997 by the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------ -----------------------------------------------
<C> <S>
/s/ F. PATRICK SMITH Chairman of the Board and Chief Executive
- ------------------------------------------ Officer
F. Patrick Smith
/s/ KENNETH W.R. BAKER President and Chief Operating Officer
- ------------------------------------------
Kenneth W.R. Baker
/s/ WILLIAM H. KAPLAN Controller (and principal financial officer)
- ------------------------------------------
William H. Kaplan
/s/ ARTHUR P. WITT Corporate Secretary and Director
- ------------------------------------------
Arthur P. Witt
/s/ J. ANDREW MCWETHY Director
- ------------------------------------------
J. Andrew McWethy
/s/ BARRY A. SOLOMON Director
- ------------------------------------------
Barry A. Solomon
/s/ STEPHEN A. TUTTLE Director
- ------------------------------------------
Stephen A. Tuttle
/s/ MICHAEL F. CRONIN Director
- ------------------------------------------
Michael F. Cronin
</TABLE>
II-5
<PAGE> 122
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Dolco Packaging Corp., a Delaware corporation, has duly caused this Amendment
No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in Somerville, New Jersey on July 17,
1997.
DOLCO PACKAGING CORP.
By: /s/ F. PATRICK SMITH
------------------------------------
F. Patrick Smith
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below on the 17th day of
July, 1997 by the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------ -----------------------------------------------
<C> <S>
/s/ F. PATRICK SMITH Chairman of the Board and Chief Executive
- ------------------------------------------ Officer
F. Patrick Smith
/s/ KENNETH W.R. BAKER President, Corporate Secretary and Director
- ------------------------------------------
Kenneth W.R. Baker
</TABLE>
II-6
<PAGE> 123
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
- -------- ------------------------------------------------------------------------ ------------
<S> <C> <C>
**3.1 Restated Certificate of Incorporation of Tekni-Plex, Inc................
**3.2 Restated Certificate of Incorporation of Dolco Packaging Corp. .........
*3.3 Amended and Restated By-laws of Tekni-Plex, Inc. .......................
*3.4 Amended and Restated By-laws of Dolco Packaging Corp. ..................
**4.1 Indenture dated as of April 1, 1997 among Tekni-Plex, Inc., Dolco
Packaging Corp. and Marine Midland Bank, as Trustee. ...................
**4.2 Senior Subordinated Note and Guarantee (original not included; form of
Note and Guarantee included in Exhibit 4.1). ...........................
**4.3 Purchase Agreement dated as of April 1, 1997 among Tekni-Plex, Inc.,
Dolco Packaging Corp., and J.P. Morgan Securities Inc. .................
**4.4 Registration Right Agreement, dated as of April 4, 1997 among
Tekni-Plex, Inc., Dolco Packaging Corp. and J.P. Morgan Securities, Inc.
as the Initial Purchaser. ..............................................
*5.1 Opinion of Winthrop, Stimson, Putnam & Roberts. ........................
**10.1 Credit Agreement, dated as of May 8, 1997, among Tekni-Plex, Inc., Dolco
Packaging Corp., the Banks party thereto, the LC Issuing Banks referred
to therein and Morgan Guaranty Trust Company of New York, as Agent. ....
**10.2 Note (original not included; form of Note included in Exhibit 10.1). ...
**10.3 Security Agreement, dated as of May 8, 1997, among Tekni-Plex, Inc.,
Dolco Packaging Corp. and Morgan Guaranty Trust Company of New York, as
Agent (original not included; form of Security Agreement included in
Exhibit 10.1). .........................................................
**10.4 Pledge Agreement, dated as of May 8, 1997, between Tekni-Plex, Inc. and
Morgan Guaranty Trust Company of New York, as Agent (original not
included; form of Pledge Agreement included in Exhibit 10.1). ..........
**10.5 Form of Mortgage, dated as of May 8, 1997, made by Tekni-Plex, Inc. or
Dolco Packaging Corp. in favor of Morgan Guaranty Trust Company, as
Agent (originals not included; form of Mortgage included in Exhibit
10.1). .................................................................
**10.6 Employment Agreement, dated as of January 30, 1997, between Dr. F.
Patrick Smith and Tekni-Plex, Inc. .....................................
**10.7 Employment Agreement, dated as of April 4, 1997, between Mr. Kenneth
W.R. Baker and Tekni-Plex, Inc. ........................................
+10.8 Form of Amended and Restated Option Agreement, dated as of April 4,
1997, among Tekni-Plex, Inc., Tekni-Plex Partners L.P. and F. Patrick
Smith. .................................................................
*10.9 Form of Amended and Restated Stock Option Agreement, dated as of April
4, 1997, between Tekni-Plex, Inc. and Kenneth W.R. Baker. ..............
**10.10 Management Fee Agreement, dated as of April 4, 1997, between Tekni-Plex,
Inc. and MST Management Company, Inc. ..................................
+10.11 Management Fee Agreement, dated as of April 4, 1997, between Tekni-Plex,
Inc. and MST/TP Holding, Inc. ..........................................
**12.1 Statement regarding Computation of Ratios. .............................
**21.1 Subsidiaries of Tekni-Plex, Inc. .......................................
**21.2 Subsidiaries of Dolco Packaging Corp. ..................................
*23.1 Consent of BDO Seidman LLP. ............................................
*23.2 Consent of Coopers & Lybrand L.L.P. ....................................
*23.3 Consent of Rosenberg Rich Baker Berman & Co., P.A. .....................
*23.4 Consent of Winthrop, Stimson, Putnam & Roberts (included in Exhibit
5.1). ..................................................................
**25.1 Statement of Eligibility of Trustee, Marine Midland Bank, on Form
T-1. ...................................................................
**27.1 Financial Data Schedule. ...............................................
*99.1 Form of Letter of Transmittal. .........................................
</TABLE>
<PAGE> 124
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
- -------- ------------------------------------------------------------------------ ------------
<S> <C> <C>
*99.2 Form of Notice of Guaranteed Delivery. .................................
*99.3 Form of Tender Instructions. ...........................................
*99.4 Form of Exchange Agent Agreement. ......................................
</TABLE>
- ---------------
* Filed herewith.
**Previously filed.
+ To be filed by amendment.
<PAGE> 1
EXHIBIT 3.3
AMENDED AND RESTATED BY-LAWS
OF
TEKNI-PLEX, INC.
ARTICLE I
Shareholders' Meetings; Voting
Section 1.1. Annual Meetings. An annual meeting of shareholders shall
be held for the election of directors on the first Monday in November of each
year, if not a legal holiday, and, if a legal holiday, then on the next day not
a legal holiday, at 10:00 A.M. or at such other time and place either within or
without the State of Delaware as may be designated by the Board of Directors
from time to time. Any other proper business may be transacted at the annual
meeting.
Section 1.2. Special Meetings. Special meetings of shareholders may be
called at any time by the Chairman of the Board, the Chief Executive Officer,
the President, or the Board of Directors, to be held at such date, time and
place either within or without the State of Delaware as may be stated in the
notice of the meeting. A special meeting of shareholders shall be called by the
Secretary upon the written request, stating the purpose of the meeting, of
shareholders who together own of record at least ten percent (10%) of the
outstanding shares of stock entitled to vote at such meeting.
Section 1.3. Notice of Meetings. Whenever shareholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by law, the written notice of any meeting
shall be given not less than ten nor more than sixty days before the date of the
meeting to each shareholder entitled to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the United States mail,
postage prepaid, directed to the shareholder at his address as it appears on the
records of the Corporation. The Corporation shall, at the written request of any
shareholder, cause such notice to such shareholder to be confirmed to such other
address and/or by such other means as such shareholder may reasonably request,
provided that if such written request is received after the date any such notice
is mailed, such request shall be effective for subsequent notices only.
<PAGE> 2
Section 1.4. Adjournments. Any meeting of shareholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each shareholder of record entitled to vote at the meeting.
Section 1.5. Quorum. At each meeting of shareholders, except where
otherwise provided by law or the certificate of incorporation or these by-laws,
the holders of a majority of the outstanding shares of each class of stock
entitled to vote at the meeting shall constitute a quorum. With respect to any
matter on which shareholders vote separately as a class, the holders of a
majority of the outstanding shares of such class shall constitute a quorum for a
meeting with respect to such matter. Two or more classes or series of stock
shall be considered a single class for purposes of determining existence of a
quorum for any matter to be acted on if the holders thereof are entitled or
required to vote together as a single class at the meeting on such matter. In
the absence of a quorum the shareholders so present may, by majority vote,
adjourn the meeting from time to time in the manner provided by Section 1.4 of
these by-laws until a quorum shall attend.
Section 1.6. Organization. Meetings of shareholders shall be presided
over by the Chairman of the Board, or in his absence by the Chief Executive
Officer, or in his absence by the President, or in his absence by a Vice
President, or in the absence of the foregoing persons by a chairman designated
by the Board of Directors, or in the absence of such designation by a chairman
chosen at the meeting. The Secretary shall act as secretary of the meeting, but
in his absence the chairman of the meeting may appoint any person to act as
secretary of the meeting.
Section 1.7. Voting; Proxies. Unless otherwise provided in the
certificate of incorporation, each shareholder entitled to vote at any meeting
of shareholders shall be entitled to one vote for each share of stock held by
him which has voting power upon the matter in question. Each shareholder
entitled to vote at a meeting of shareholders or to express consent or dissent
to corporate action in writing without a meeting may authorize another person or
persons to act for him by proxy, but no such proxy shall be voted or acted upon
after three years from its date, unless the proxy provides for a longer period.
A duly executed proxy shall be irrevocable if it states that it is irrevocable
and if, and only as long as, it is coupled with an interest sufficient in law to
support an irrevocable power. A
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shareholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or another duly executed proxy bearing a later date with the Secretary of
the Corporation. Voting at meetings of shareholders need not be by written
ballot and need not be conducted by inspectors unless the holders of a majority
of the outstanding shares of any class of stock entitled to vote thereon present
in person or by proxy at such meeting shall so determine. At all meetings of
shareholders for the election of directors, such election and all other
elections and questions shall, unless otherwise provided by law or by the
certificate of incorporation or these by-laws, be decided by the vote of the
holders of a majority of the outstanding shares of all classes of stock entitled
to vote thereon present in person or by proxy at the meeting, voting as a single
class.
Section 1.8. Fixing Date for Determination of Shareholders of Record.
In order that the Corporation may determine the shareholders entitled to notice
of or to vote at any meeting of shareholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be more than sixty
nor less than ten days before the date of such meeting, nor more than sixty days
prior to any other action. If no record date is fixed: (1) the record date for
determining shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; (2) the record date
for determining shareholders entitled to express consent to corporate action in
writing without a meeting, when no prior action by the Board is necessary, shall
be the day on which the first written consent is expressed; and (3) the record
date for determining shareholders for any other purpose shall be at the close of
business on the day on which the Board adopts the resolution relating thereto. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting; provided,
however, that the Board may fix a new record date for the adjourned meeting.
Section 1.9. List of Shareholders Entitled to Vote. The Secretary shall
prepare and make, at least ten days before every meeting of shareholders, a
complete list of the shareholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each shareholder and the number
of shares registered in the name of each shareholder. Such list shall be open to
the examination of any shareholder, for any purpose germane to the meeting,
during
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ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof and may be
inspected by any shareholder who is present.
Section 1.10. Consent of Shareholders in Lieu of Meeting. To the extent
provided by any statute at the time in force, whenever the vote of shareholders
at a meeting thereof is required or permitted to be taken for or in connection
with any corporate action, by any statute, by the certificate of incorporation
or by these bylaws, the meeting and prior notice thereof and vote of
shareholders may be dispensed with if the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted shall consent in writing to such corporate action without
a meeting by less than unanimous written consent and notice thereof shall be
given to those shareholders who have not consent in writing.
ARTICLE II
Board of Directors
Section 2.1. Powers; Number; Qualifications. The business and affairs
of the Corporation shall be managed by or under the direction of the Board of
Directors, except as may be otherwise provided by law or in the certificate of
incorporation. The number of Directors which shall constitute the whole Board of
Directors shall not be less than one (1) nor more than nine (9). Within such
limits, the number of directors may be fixed from time to time by vote of the
shareholders, or of the Board of Directors, at any regular or special meeting,
subject to the provisions of the certificate of incorporation.
Section 2.2. Election; Term of Office; Resignation; Removal; Vacancies;
Special Elections. Except as otherwise provided in this Section 2.2, the
directors shall be elected annually at the annual meeting of the shareholders.
Each director (whenever elected) shall hold office until the annual meeting of
shareholders or any special meeting of shareholders called to elect directors
next succeeding his election and until his successor is elected and qualified or
until his earlier resignation or removal, except as provided in the certificate
of incorporation. Any director may resign at any time upon written notice to the
Board of Directors, Chairman of the Board, Chief Executive Officer or President
of the Corporation. Such resignation shall take effect at the time specified
therein, and unless otherwise specified therein no acceptance of such
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resignation shall be necessary to make it effective. Any director may be removed
with or without cause at any time upon the affirmative vote of the holders of a
majority of the outstanding shares of stock of the Corporation entitled to vote
for the election of such director, given at a special meeting of such
shareholders called for the purpose. If any vacancies shall occur in the Board
of Directors, by reason of death, resignation, removal or otherwise, or if the
authorized number of directors shall be increased, the directors then in office
shall continue to act, and such vacancies may be filled by a majority of the
directors then in office, though less than a quorum; provided, however, that
whenever the holders of any class or classes of stock or series thereof are
entitled to elect one or more directors by the provisions of the certificate of
incorporation, vacancies and newly created directorships of such class or
classes or series shall be filled by a majority of the directors elected by such
class or classes or series thereof then in office though less than a quorum or
by a sole remaining director so elected. Any such vacancies or newly created
directorships may also be filled upon the affirmative vote of the holders of a
majority of the outstanding shares of stock of the Corporation entitled to vote
for the election of directors, given at a special meeting of the shareholders
called for the purpose.
Section 2.3. Regular Meetings. Regular meetings of the Board of
Directors may be held at such places within or without the State of Delaware and
at such times as the Board may from time to time determine, and if so determined
notice thereof need not be given.
Section 2.4. Special Meetings. Special meetings of the Board of
Directors may be held at any time or place within or without the State of
Delaware whenever called by the Chairman of the Board, Chief Executive Officer,
President or any two directors. Reasonable notice thereof shall be given by the
person or persons calling the meeting.
Section 2.5. Telephonic Meetings Permitted. Unless otherwise restricted
by the certificate of incorporation or these by-laws, any member of the Board of
Directors, or any committee designated by the Board, may participate in a
meeting of the Board or of such committee, as the case may be, by means of a
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this by-law shall constitute presence in person at such
meeting.
Section 2.6. Quorum; Vote Required for Action. At all meetings of the
Board of Directors the presence of a majority of the total number of directors
shall constitute a quorum for the transaction of business. The vote of at least
a majority of the directors present at any meeting at which a quorum is present
shall be necessary to constitute and shall be the act of the Board unless the
certificate of incorporation or these by-laws
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shall otherwise provide. In case at any meeting of the Board a quorum shall not
be present, the members of the Board present may adjourn the meeting from time
to time until a quorum shall attend.
Section 2.7. Organization. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board, or in his absence by the Chief
Executive Officer or President, or in their absence by a chairman chosen at the
meeting. The Secretary shall act as secretary of the meeting, but in his absence
the chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 2.8. Action by Directors Without a Meeting. Unless otherwise
restricted by the certificate of incorporation or these by-laws, any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board or such committee, as the case may be, consents thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
or committee.
ARTICLE III
Committees
Section 3.1. Committees. The Board of Directors may, by resolution
passed by a majority of the total number of directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. Any such committee, to the extent provided in the resolution of the
Board, and unless otherwise restricted by the certificate of incorporation or
these by-laws, shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation, to the
full extent permitted by law.
Section 3.2. Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board may adopt, amend and repeal
rules for the conduct of its business. In the absence of a provision by the
Board or a provision in the rules of such committee to the contrary, the entire
authorized number of members of such committee shall constitute a quorum for the
transaction of business, the vote of all such members present at a meeting shall
be the act of such committee, and in other respects each committee shall conduct
its business pursuant to Article II of these by-laws.
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ARTICLE IV
Officers
Section 4.1. Election and Appointment. The elected officers of the
Corporation shall consist of a Chief Executive Officer, a President, a Secretary
and such other elected officers as shall from time to time be designated and
elected by the Board of Directors. The Board of Directors may, if it so
determines, choose a Chairman of the Board and a Vice Chairman of the Board from
among its members to preside at meetings of the Board of Directors and the
Executive Committee, if any, and with such other authority as the Board of
Directors may determine. The Board or the Chief Executive Officer may also
appoint, or provide for the appointment of, Vice Presidents and such other
officers, employees and agents as may from time to time appear necessary or
advisable in the conduct of the affairs of the Corporation. Any number of
offices may be held by the same person.
Section 4.2. Duties of Chief Executive Officer. The Chief Executive
Officer of the Corporation shall preside at all meetings of stockholders and,
subject to the control of the Board, shall have such authority as is customary
for the chief executive officer of an enterprise similar to the Corporation,
general authority to execute any and all documents in the name of the
Corporation and responsibility for the operation and management of the business
and affairs of the Corporation, including, without limitation, the right to hire
and terminate employees of the Corporation. In the absence of the Chief
Executive Officer, his duties shall be performed and his powers may be exercised
by the President or by such other officer as shall be designated either by the
Chief Executive Officer in writing or (failing such designation) by the Board of
Directors.
Section 4.3. Duties of President. The President of the Corporation
shall, subject to control of the Board and the control and direction of the
Chief Executive Officer, be the chief operating officer of the Corporation.
Section 4.4. Duties of Other Officers. The other officers of the
Corporation shall have such powers and duties not inconsistent with these
by-laws as may from time to time be conferred upon them in or pursuant to
resolutions of the Board of Directors, and shall have such additional powers and
duties not inconsistent with such resolutions as may from time to time be
assigned to them by any competent superior officer. The Board shall assign, to
one or more of the officers of the Corporation, the duty to record the
proceedings of the meetings of the stockholders and the Board of Directors in a
book to be kept for that purpose.
Section 4.5. Term of Office and Vacancies. So far as practicable, the
elected officers shall be elected by the Board as provided in Section 4.1 and,
subject to Section 4.6 and such
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officer's rights under any contract of employment, shall serve at the pleasure
of the Board. If a vacancy shall occur in any elected office, the Board of
Directors may elect a successor. Appointed officers shall hold office at the
pleasure of the Board and the Chief Executive Officer. Any officer may resign by
written notice to the Corporation.
Section 4.6. Removal of Elected Officers. Elected officers may be
removed at any time, either for or without cause, by the affirmative vote of a
majority of the whole Board of Directors, except provided that removal of the
Chief Executive Officer shall require the vote of three-fourths or more of the
Board of Directors excluding the Chief Executive Officer if he is a member of
the Board of Directors.
ARTICLE V
Stock
Section 5.1. Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate signed by or in the name of the
Corporation by the Chairman of the Board of Directors, Chief Executive Officer,
President or a Vice President, and by the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary, of the Corporation, certifying the
number of shares owned by him in the Corporation. If such certificate is
manually signed by one officer or manually countersigned by a transfer agent or
by a registrar, any other signature on the certificate may be a facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
Section 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of
New Certificates. The Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or his legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE VI
Miscellaneous
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Section 6.1. Seal. The Corporation may have a corporate seal which
shall have the name of the Corporation inscribed thereon and shall be in such
form as may be approved from time to time by the Board of Directors. The
corporate seal may be used by causing it or a facsimile thereof to be impressed
or affixed or in any other manner reproduced.
Section 6.2. Waiver of Notice of Meetings of Shareholders, Directors
and Committees. Whenever notice is required to be given by law or under any
provision of the certificate of incorporation or these by-laws, a written waiver
thereof, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the shareholders,
directors, or members of a committee of directors need be specified in any
written waiver of notice unless so required by the certificate of incorporation
or these by-laws.
Section 6.3. Form of Records. Any records maintained by the Corporation
in the regular course of its business, including its stock ledger, books of
account and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
Section 6.4. Dividends. Dividends upon the stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, bonds, in property, or in shares of
stock, subject to the provisions of the Certificate of Incorporation.
Section 6.5. Reserves. Before the payment of any dividend, there may be
set aside out of any funds of the Corporation available for dividends such sum
or sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purposes as the directors shall think conducive to the interest
of the Corporation, and the directors may modify or abolish any such reserve.
Section 6.6. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or
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officers or such other person or persons as the Board of Directors may from time
to time designate.
Section 6.7. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 6.8. Offices. The registered office of the Corporation shall be
in the City of Wilmington, County of New Castle, State of Delaware. The
Corporation may also have offices at such other places within or outside the
State of Delaware as the Board of Directors may from time to time determine or
the business of the Corporation may require.
ARTICLE VII
Amendments
Section 7.1. Amendments. These by-laws may be altered, amended or
repealed at any regular meeting of the shareholders or of the Board of Directors
or at any special meeting of the shareholders or of the Board of Directors if
notice of such alteration, amendment or repeal be contained in the notice of
such special meeting; provided that Section 4.6 may only be altered, amended or
repealed by a three-fourths vote of the outstanding shares of each class of
stock entitled to vote thereon or by a three-fourths vote of the entire Board of
Directors.
ARTICLE VIII
Indemnification
Section 8.1. Indemnification. The Corporation shall indemnify to the
fullest extent permitted by law any person made or threatened to be made a party
to any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person, or a person of whom he or
she is the legal representative, is or was a director, officer, employee or
agent of the Corporation or any predecessor of the Corporation, or serves or
served any other enterprise as a director, officer, employee or agent at the
request of the Corporation or any predecessor of the Corporation.
The Corporation shall pay any expenses reasonably incurred by a
director or officer in defending a civil or criminal action, suit or proceeding
in advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such director or officer to repay
such amount if it shall ultimately be determined that he or she is not entitled
to be indemnified by the Corporation under this Article or otherwise. The
Corporation may, by action of its
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Board of Directors, provide for the payment of such expenses incurred by
employees and agents of the Corporation as it deems appropriate.
The rights conferred on any person under this Article shall not be
deemed exclusive of any other rights that such person may have or hereafter
acquire under any statute, provision of the Corporation's Certificate of
Incorporation, by-law, agreement, vote of shareholders or disinterested
directors or otherwise. All rights to indemnification and to the advancement of
expenses under this Article shall be deemed to be provided by a contract between
the Corporation and the director, officer, employee or agent who serves in such
capacity at any time while these By-Laws and any other relevant provisions of
the Delaware General Corporation Law and any other applicable law, if any, are
in effect. Any repeal or modification thereof shall not affect any rights or
obligations then existing.
For purposes of this Article, references to "the Corporation" shall be
deemed to include any subsidiary of the Corporation now or hereafter organized
under the laws of the State of Delaware.
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EXHIBIT 3.4
AMENDED AND RESTATED BY-LAWS
OF
DOLCO PACKAGING CORP.
ARTICLE I
Shareholders' Meetings; Voting
Section 1.1. Annual Meetings. An annual meeting of shareholders shall
be held for the election of directors on the first Monday in November of each
year, if not a legal holiday, and, if a legal holiday, then on the next day not
a legal holiday, at 10:00 A.M. or at such other time and place either within or
without the State of Delaware as may be designated by the Board of Directors
from time to time. Any other proper business may be transacted at the annual
meeting.
Section 1.2. Special Meetings. Special meetings of shareholders may be
called at any time by the Chairman of the Board, the Chief Executive Officer,
the President, or the Board of Directors, to be held at such date, time and
place either within or without the State of Delaware as may be stated in the
notice of the meeting. A special meeting of shareholders shall be called by the
Secretary upon the written request, stating the purpose of the meeting, of
shareholders who together own of record at least ten percent (10%) of the
outstanding shares of stock entitled to vote at such meeting.
Section 1.3. Notice of Meetings. Whenever shareholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by law, the written notice of any meeting
shall be given not less than ten nor more than sixty days before the date of the
meeting to each shareholder entitled to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the United States mail,
postage prepaid, directed to the shareholder at his address as it appears on the
records of the Corporation. The Corporation shall, at the written request of any
shareholder, cause such notice to such shareholder to be confirmed to such other
address and/or by such other means as such shareholder may reasonably request,
provided that if such written request is received after the date any such notice
is mailed, such request shall be effective for subsequent notices only.
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Section 1.4. Adjournments. Any meeting of shareholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each shareholder of record entitled to vote at the meeting.
Section 1.5. Quorum. At each meeting of shareholders, except where
otherwise provided by law or the certificate of incorporation or these by-laws,
the holders of a majority of the outstanding shares of each class of stock
entitled to vote at the meeting shall constitute a quorum. With respect to any
matter on which shareholders vote separately as a class, the holders of a
majority of the outstanding shares of such class shall constitute a quorum for a
meeting with respect to such matter. Two or more classes or series of stock
shall be considered a single class for purposes of determining existence of a
quorum for any matter to be acted on if the holders thereof are entitled or
required to vote together as a single class at the meeting on such matter. In
the absence of a quorum the shareholders so present may, by majority vote,
adjourn the meeting from time to time in the manner provided by Section 1.4 of
these by-laws until a quorum shall attend.
Section 1.6. Organization. Meetings of shareholders shall be presided
over by the Chairman of the Board, or in his absence by the Chief Executive
Officer, or in his absence by the President, or in his absence by a Vice
President, or in the absence of the foregoing persons by a chairman designated
by the Board of Directors, or in the absence of such designation by a chairman
chosen at the meeting. The Secretary shall act as secretary of the meeting, but
in his absence the chairman of the meeting may appoint any person to act as
secretary of the meeting.
Section 1.7. Voting; Proxies. Unless otherwise provided in the
certificate of incorporation, each shareholder entitled to vote at any meeting
of shareholders shall be entitled to one vote for each share of stock held by
him which has voting power upon the matter in question. Each shareholder
entitled to vote at a meeting of shareholders or to express consent or dissent
to corporate action in writing without a meeting may authorize another person or
persons to act for him by proxy, but no such proxy shall be voted or acted upon
after three years from its date, unless the proxy provides for a longer period.
A duly executed proxy shall be irrevocable if it states that it is irrevocable
and if, and only as long as, it is coupled with an interest sufficient in law to
support an irrevocable power. A
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shareholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or another duly executed proxy bearing a later date with the Secretary of
the Corporation. Voting at meetings of shareholders need not be by written
ballot and need not be conducted by inspectors unless the holders of a majority
of the outstanding shares of any class of stock entitled to vote thereon present
in person or by proxy at such meeting shall so determine. At all meetings of
shareholders for the election of directors, such election and all other
elections and questions shall, unless otherwise provided by law or by the
certificate of incorporation or these by-laws, be decided by the vote of the
holders of a majority of the outstanding shares of all classes of stock entitled
to vote thereon present in person or by proxy at the meeting, voting as a single
class.
Section 1.8. Fixing Date for Determination of Shareholders of Record.
In order that the Corporation may determine the shareholders entitled to notice
of or to vote at any meeting of shareholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be more than sixty
nor less than ten days before the date of such meeting, nor more than sixty days
prior to any other action. If no record date is fixed: (1) the record date for
determining shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; (2) the record date
for determining shareholders entitled to express consent to corporate action in
writing without a meeting, when no prior action by the Board is necessary, shall
be the day on which the first written consent is expressed; and (3) the record
date for determining shareholders for any other purpose shall be at the close of
business on the day on which the Board adopts the resolution relating thereto. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting; provided,
however, that the Board may fix a new record date for the adjourned meeting.
Section 1.9. List of Shareholders Entitled to Vote. The Secretary shall
prepare and make, at least ten days before every meeting of shareholders, a
complete list of the shareholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each shareholder and the number
of shares registered in the name of each shareholder. Such list shall be open to
the examination of any shareholder, for any purpose germane to the meeting,
during
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ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof and may be
inspected by any shareholder who is present.
Section 1.10. Consent of Shareholders in Lieu of Meeting. To the extent
provided by any statute at the time in force, whenever the vote of shareholders
at a meeting thereof is required or permitted to be taken for or in connection
with any corporate action, by any statute, by the certificate of incorporation
or by these bylaws, the meeting and prior notice thereof and vote of
shareholders may be dispensed with if the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted shall consent in writing to such corporate action without
a meeting by less than unanimous written consent and notice thereof shall be
given to those shareholders who have not consent in writing.
ARTICLE II
Board of Directors
Section 2.1. Powers; Number; Qualifications. The business and affairs
of the Corporation shall be managed by or under the direction of the Board of
Directors, except as may be otherwise provided by law or in the certificate of
incorporation. The number of Directors which shall constitute the whole Board of
Directors shall not be less than one (1) nor more than nine (9). Within such
limits, the number of directors may be fixed from time to time by vote of the
shareholders, or of the Board of Directors, at any regular or special meeting,
subject to the provisions of the certificate of incorporation.
Section 2.2. Election; Term of Office; Resignation; Removal; Vacancies;
Special Elections. Except as otherwise provided in this Section 2.2, the
directors shall be elected annually at the annual meeting of the shareholders.
Each director (whenever elected) shall hold office until the annual meeting of
shareholders or any special meeting of shareholders called to elect directors
next succeeding his election and until his successor is elected and qualified or
until his earlier resignation or removal, except as provided in the certificate
of incorporation. Any director may resign at any time upon written notice to the
Board of Directors, Chairman of the Board, Chief Executive Officer or President
of the Corporation. Such resignation shall take effect at the time specified
therein, and unless otherwise specified therein no acceptance of such
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resignation shall be necessary to make it effective. Any director may be removed
with or without cause at any time upon the affirmative vote of the holders of a
majority of the outstanding shares of stock of the Corporation entitled to vote
for the election of such director, given at a special meeting of such
shareholders called for the purpose. If any vacancies shall occur in the Board
of Directors, by reason of death, resignation, removal or otherwise, or if the
authorized number of directors shall be increased, the directors then in office
shall continue to act, and such vacancies may be filled by a majority of the
directors then in office, though less than a quorum; provided, however, that
whenever the holders of any class or classes of stock or series thereof are
entitled to elect one or more directors by the provisions of the certificate of
incorporation, vacancies and newly created directorships of such class or
classes or series shall be filled by a majority of the directors elected by such
class or classes or series thereof then in office though less than a quorum or
by a sole remaining director so elected. Any such vacancies or newly created
directorships may also be filled upon the affirmative vote of the holders of a
majority of the outstanding shares of stock of the Corporation entitled to vote
for the election of directors, given at a special meeting of the shareholders
called for the purpose.
Section 2.3. Regular Meetings. Regular meetings of the Board of
Directors may be held at such places within or without the State of Delaware and
at such times as the Board may from time to time determine, and if so determined
notice thereof need not be given.
Section 2.4. Special Meetings. Special meetings of the Board of
Directors may be held at any time or place within or without the State of
Delaware whenever called by the Chairman of the Board, Chief Executive Officer,
President or any two directors. Reasonable notice thereof shall be given by the
person or persons calling the meeting.
Section 2.5. Telephonic Meetings Permitted. Unless otherwise restricted
by the certificate of incorporation or these by-laws, any member of the Board of
Directors, or any committee designated by the Board, may participate in a
meeting of the Board or of such committee, as the case may be, by means of a
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this by-law shall constitute presence in person at such
meeting.
Section 2.6. Quorum; Vote Required for Action. At all meetings of the
Board of Directors the presence of a majority of the total number of directors
shall constitute a quorum for the transaction of business. The vote of at least
a majority of the directors present at any meeting at which a quorum is present
shall be necessary to constitute and shall be the act of the Board unless the
certificate of incorporation or these by-laws
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shall otherwise provide. In case at any meeting of the Board a quorum shall not
be present, the members of the Board present may adjourn the meeting from time
to time until a quorum shall attend.
Section 2.7. Organization. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board, or in his absence by the Chief
Executive Officer or President, or in their absence by a chairman chosen at the
meeting. The Secretary shall act as secretary of the meeting, but in his absence
the chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 2.8. Action by Directors Without a Meeting. Unless otherwise
restricted by the certificate of incorporation or these by-laws, any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board or such committee, as the case may be, consents thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
or committee.
ARTICLE III
Committees
Section 3.1. Committees. The Board of Directors may, by resolution
passed by a majority of the total number of directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. Any such committee, to the extent provided in the resolution of the
Board, and unless otherwise restricted by the certificate of incorporation or
these by-laws, shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation, to the
full extent permitted by law.
Section 3.2. Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board may adopt, amend and repeal
rules for the conduct of its business. In the absence of a provision by the
Board or a provision in the rules of such committee to the contrary, the entire
authorized number of members of such committee shall constitute a quorum for the
transaction of business, the vote of all such members present at a meeting shall
be the act of such committee, and in other respects each committee shall conduct
its business pursuant to Article II of these by-laws.
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ARTICLE IV
Officers
Section 4.1. Election and Appointment. The elected officers of the
Corporation shall consist of a Chief Executive Officer, a President, a Secretary
and such other elected officers as shall from time to time be designated and
elected by the Board of Directors. The Board of Directors may, if it so
determines, choose a Chairman of the Board and a Vice Chairman of the Board from
among its members to preside at meetings of the Board of Directors and the
Executive Committee, if any, and with such other authority as the Board of
Directors may determine. The Board or the Chief Executive Officer may also
appoint, or provide for the appointment of, Vice Presidents and such other
officers, employees and agents as may from time to time appear necessary or
advisable in the conduct of the affairs of the Corporation. Any number of
offices may be held by the same person.
Section 4.2. Duties of Chief Executive Officer. The Chief Executive
Officer of the Corporation shall preside at all meetings of stockholders and,
subject to the control of the Board, shall have such authority as is customary
for the chief executive officer of an enterprise similar to the Corporation,
general authority to execute any and all documents in the name of the
Corporation and responsibility for the operation and management of the business
and affairs of the Corporation, including, without limitation, the right to hire
and terminate employees of the Corporation. In the absence of the Chief
Executive Officer, his duties shall be performed and his powers may be exercised
by the President or by such other officer as shall be designated either by the
Chief Executive Officer in writing or (failing such designation) by the Board of
Directors.
Section 4.3. Duties of President. The President of the Corporation
shall, subject to control of the Board and the control and direction of the
Chief Executive Officer, be the chief operating officer of the Corporation.
Section 4.4. Duties of Other Officers. The other officers of the
Corporation shall have such powers and duties not inconsistent with these
by-laws as may from time to time be conferred upon them in or pursuant to
resolutions of the Board of Directors, and shall have such additional powers and
duties not inconsistent with such resolutions as may from time to time be
assigned to them by any competent superior officer. The Board shall assign, to
one or more of the officers of the Corporation, the duty to record the
proceedings of the meetings of the stockholders and the Board of Directors in a
book to be kept for that purpose.
Section 4.5. Term of Office and Vacancies. So far as practicable, the
elected officers shall be elected by the Board as provided in Section 4.1 and,
subject to Section 4.6 and such
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officer's rights under any contract of employment, shall serve at the pleasure
of the Board. If a vacancy shall occur in any elected office, the Board of
Directors may elect a successor. Appointed officers shall hold office at the
pleasure of the Board and the Chief Executive Officer. Any officer may resign by
written notice to the Corporation.
Section 4.6. Removal of Elected Officers. Elected officers may be
removed at any time, either for or without cause, by the affirmative vote of a
majority of the whole Board of Directors, except provided that removal of the
Chief Executive Officer shall require the vote of three-fourths or more of the
Board of Directors excluding the Chief Executive Officer if he is a member of
the Board of Directors.
ARTICLE V
Stock
Section 5.1. Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate signed by or in the name of the
Corporation by the Chairman of the Board of Directors, Chief Executive Officer,
President or a Vice President, and by the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary, of the Corporation, certifying the
number of shares owned by him in the Corporation. If such certificate is
manually signed by one officer or manually countersigned by a transfer agent or
by a registrar, any other signature on the certificate may be a facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
Section 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of
New Certificates. The Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or his legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE VI
Miscellaneous
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Section 6.1. Seal. The Corporation may have a corporate seal which
shall have the name of the Corporation inscribed thereon and shall be in such
form as may be approved from time to time by the Board of Directors. The
corporate seal may be used by causing it or a facsimile thereof to be impressed
or affixed or in any other manner reproduced.
Section 6.2. Waiver of Notice of Meetings of Shareholders, Directors
and Committees. Whenever notice is required to be given by law or under any
provision of the certificate of incorporation or these by-laws, a written waiver
thereof, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the shareholders,
directors, or members of a committee of directors need be specified in any
written waiver of notice unless so required by the certificate of incorporation
or these by-laws.
Section 6.3. Form of Records. Any records maintained by the Corporation
in the regular course of its business, including its stock ledger, books of
account and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
Section 6.4. Dividends. Dividends upon the stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, bonds, in property, or in shares of
stock, subject to the provisions of the Certificate of Incorporation.
Section 6.5. Reserves. Before the payment of any dividend, there may be
set aside out of any funds of the Corporation available for dividends such sum
or sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purposes as the directors shall think conducive to the interest
of the Corporation, and the directors may modify or abolish any such reserve.
Section 6.6. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or
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officers or such other person or persons as the Board of Directors may from time
to time designate.
Section 6.7. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 6.8. Offices. The registered office of the Corporation shall be
in the City of Wilmington, County of New Castle, State of Delaware. The
Corporation may also have offices at such other places within or outside the
State of Delaware as the Board of Directors may from time to time determine or
the business of the Corporation may require.
ARTICLE VII
Amendments
Section 7.1. Amendments. These by-laws may be altered, amended or
repealed at any regular meeting of the shareholders or at any special meeting of
the shareholders if notice of such alteration, amendment or repeal be contained
in the notice of such special meeting; provided that Section 4.6 may only be
altered, amended or repealed by a three-fourths vote of the outstanding shares
of each class of stock entitled to vote thereon.
ARTICLE VIII
Indemnification
Section 8.1. Indemnification. The Corporation shall indemnify to the
fullest extent permitted by law any person made or threatened to be made a party
to any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person, or a person of whom he or
she is the legal representative, is or was a director, officer, employee or
agent of the Corporation or any predecessor of the Corporation, or serves or
served any other enterprise as a director, officer, employee or agent at the
request of the Corporation or any predecessor of the Corporation.
The Corporation shall pay any expenses reasonably incurred by a
director or officer in defending a civil or criminal action, suit or proceeding
in advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such director or officer to repay
such amount if it shall ultimately be determined that he or she is not entitled
to be indemnified by the Corporation under this Article or otherwise. The
Corporation may, by action of its Board of Directors, provide for the payment of
such expenses
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incurred by employees and agents of the Corporation as it deems appropriate.
The rights conferred on any person under this Article shall not be
deemed exclusive of any other rights that such person may have or hereafter
acquire under any statute, provision of the Corporation's Certificate of
Incorporation, by-law, agreement, vote of shareholders or disinterested
directors or otherwise. All rights to indemnification and to the advancement of
expenses under this Article shall be deemed to be provided by a contract between
the Corporation and the director, officer, employee or agent who serves in such
capacity at any time while these By-Laws and any other relevant provisions of
the Delaware General Corporation Law and any other applicable law, if any, are
in effect. Any repeal or modification thereof shall not affect any rights or
obligations then existing.
For purposes of this Article, references to "the Corporation" shall be
deemed to include any subsidiary of the Corporation now or hereafter organized
under the laws of the State of Delaware.
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EXHIBIT 5.1
[LETTERHEAD OF WINTHROP, STIMSON, PUTNAM & ROBERTS]
July 17, 1997
Tekni-Plex, Inc.
Dolco Packaging Corp.
201 Industrial Parkway
Somerville, NJ 08876
Ladies and Gentlemen:
We have acted as counsel to Tekni-Plex, Inc. (the "Company"),
a corporation organized and existing under the laws of the State of Delaware, in
connection with the proposed registration by the Company of up to $75,000,000 in
aggregate principal amount of the Company's Series B 11 1/4% Senior Subordinated
Notes due 2007 (the "Exchange Notes") pursuant to a Registration Statement on
Form S-4 (Reg. No. 333-28157) filed with the Securities and Exchange Commission
(the "Commission") on May 30, 1997, under the Securities Act of 1933, as amended
(the "Securities Act") (such Registration Statement, as amended or supplemented,
is hereinafter referred to as the "Registration Statement"), for the purpose of
effecting an exchange offer (the "Exchange Offer") for the Company's 11 1/4%
Senior Subordinated Notes due 2007 (the "Old Notes"). The Exchange Notes are to
be issued pursuant to the Indenture (the "Indenture"), dated as of April 1,
1997, among the Company, Dolco Packaging Corp. (the "Guarantor"), a corporation
organized and existing under the laws of the State of Delaware, and Marine
Midland Bank, as Trustee, in exchange for and in replacement of the Company's
outstanding Old Notes, of which $75,000,000 in aggregate principal amount is
outstanding.
In addition, at the request of the Company, we have acted as
counsel to the Guarantor in connection with this opinion. The Guarantor
guaranteed payments of principal of and interest on the Old Notes ("Old
Guarantees") and will guarantee payments of principal of and interest on the
Exchange Notes (the "Guarantees of the Exchange Notes").
For purposes of this opinion, we have (i) examined copies of
the Registration Statement and exhibits thereto, the Indenture and such board
resolutions, corporate documents, records and other instruments as we have
deemed necessary for the purposes of this opinion and (ii) assumed the
authenticity of all
<PAGE> 2
documents submitted to us as originals, the conformity to the originals of all
documents submitted to us as copies and the authenticity of the originals of all
documents submitted to us as copies. For such purposes, we have also assumed the
genuineness of all signatures, the legal capacity of natural persons, the
authority of such persons signing on behalf of the parties thereto, and the due
authorization, execution and delivery of all documents by the parties thereto
(including the Company and the Guarantor). In rendering this opinion, we have
assumed the validity of, and relied upon, the representations of the Company and
the Guarantor as to certain factual matters relevant hereto.
Based upon and subject to the foregoing qualifications,
assumptions and limitations and the further limitations set forth below, we are
of the opinion that:
1. When, as and if (i) the Registration Statement
shall have become effective, (ii) the Indenture shall have been
qualified pursuant to the provisions of the Trust Indenture Act of
1939, as amended, (iii) the Exchange Notes are duly executed and
delivered on behalf of the Company in accordance with the Indenture in
exchange for Old Notes pursuant to the terms of the offer to exchange
set forth in the prospectus forming a part of the Registration
Statement and the accompanying letter of transmittal and (iv) the
Exchange Notes are duly authenticated by the Trustee pursuant to the
terms of the Indenture, then the Exchange Notes will constitute valid
and legally binding obligations of the Company, enforceable against the
Company in accordance with their terms, subject to bankruptcy,
insolvency, reorganization, fraudulent transfer or conveyance,
moratorium and other laws relating to or affecting generally the
enforcement of creditors' rights and subject to general principles of
equity, public policy considerations, requirements of reasonableness,
good faith and fair dealing and the discretion of courts generally in
controlling their own dockets and matters before them.
2. When, as and if (i) the Registration Statement
shall have become effective, (ii) the Indenture shall have been
qualified pursuant to the provisions of the Trust Indenture Act of
1939, as amended, and (iii) the Exchange Notes (including the
Guarantees of the Exchange Notes) are duly executed, delivered and
authenticated in accordance with the Indenture, then the Guarantees of
the Exchange Notes will constitute valid and legally binding
obligations of the Guarantor, enforceable against the Guarantor in
accordance with their terms, subject to bankruptcy, insolvency,
reorganization, fraudulent transfer or conveyance, moratorium and other
laws relating to or affecting generally the enforcement of creditors'
rights and subject to general principles of equity, public policy
considerations, requirements of reasonableness, good faith
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and fair dealing and the discretion of courts generally in controlling
their own dockets and matters before them.
We are members of the bar of the State of New York and do not
express any opinion herein as to any laws other than the laws of the State of
New York. We advise you that issues addressed by this letter may be governed in
whole or in part by other laws, but we express no opinion as to whether any
relevant difference exists between the laws upon which our opinions are based
and any other laws which may actually govern.
We hereby consent to the filing of this opinion as Exhibit 5.1
to the Registration Statement. We also consent to the reference to our firm
under the heading "Legal Matters" in the Registration Statement. In giving these
consents, we do not thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act or the rules and
regulations of the Commission.
We do not pass upon the application of the federal laws of the
United States nor the securities or "Blue Sky" laws of the various states to the
issuance of the Exchange Notes and the Guarantees of the Exchange Notes.
This opinion is limited to the specific issues addressed
herein, and no opinion may be inferred or implied beyond that expressly stated
herein. We assume no obligation to opine on any other matter, or to revise or
supplement this opinion should any applicable laws be changed by legislative
action, judicial decision or otherwise.
Very truly yours,
/s/ WINTHROP, STIMSON, PUTNAM & ROBERTS
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EXHIBIT 10.9
AMENDED AND RESTATED
STOCK OPTION AGREEMENT
This AMENDED AND RESTATED STOCK OPTION AGREEMENT is dated as
of April 4, 1997 (actually executed on July __, 1997) (this "Agreement") between
TEKNI-PLEX, INC., a Delaware corporation (the "Company"), and KENNETH W.R.
BAKER, residing at 25 Sutton Farm Road, Flemington, New Jersey 08822 (the
"Executive").
WHEREAS, the Company desires, in connection with the
employment of the Executive, to provide the Executive with the opportunity to
acquire common stock, par value $.01 per share (the "Common Stock"), of the
Company on favorable terms and thereby provide additional incentive for the
Executive to promote the success of the business of the Company; and
WHEREAS, the Company and the Executive wish to amend the Stock
Option Agreement dated as of April 4, 1994, as previously amended and restated
as of February 21, 1996, and to restate it in its entirety.
NOW, THEREFORE, in consideration of the premises and the
covenants herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:
1. Confirmation of Grant of Option. Pursuant to a
determination of the Board of Directors of the Company originally made on April
4, 1994 (the "Date of Grant") and hereby ratified and confirmed as of the actual
date of execution hereof, the Company, subject to the terms of this Agreement,
hereby confirms that the Executive has been granted, as a matter of separate
inducement and agreement, and in addition to and not in lieu of salary or other
compensation for services, the right to purchase (the "Option") all or part of
an aggregate of 21.795 shares of Common Stock representing two and one-half
percent (2.5%) of the outstanding Common Stock of the Company, on a fully
diluted basis, as of the actual date of execution hereof, on the terms and
conditions herein set forth, subject to adjustment as provided in Section 9
hereof.
2. Purchase Price. The purchase price for each share of Common
Stock covered by the Option will be equal to (A) the total dollar amount of the
capital contributions in Tekni-Plex Partners, L.P.("TPPLP") by the partners
therein, divided by (B) the number of shares of Common Stock held by TPPLP, in
each case
<PAGE> 2
as of the actual date of execution hereof, which price is subject to adjustment
as provided in Section 9 hereof.
3. Exercise of Option. The Option shall be exercisable on the
terms and conditions hereinafter set forth:
(a) The Option shall become fully exercisable as to 100% of
the shares subject thereto as of the date hereof.
(b) The Executive or permitted holder of the Option will not
have any rights to dividends or any other rights of a stockholder with respect
to any shares of Common Stock subject to the Option until such shares shall have
been issued to him (as evidenced by the appropriate entry on the books of a duly
authorized transfer agent of the Company) provided that the date of issuance
shall not be earlier than the Closing Date (as hereinafter defined) with respect
to such shares.
(c) The Option may be exercised by notice and payment to the
Company as provided in Sections 11 and 16 hereof.
4. Term of Option. The term of the Option shall be a period of
fifteen (15) years from the Date of Grant, subject to earlier termination or
cancellation as provided in this Agreement (the "Term"). Except as otherwise
provided in Sections 6 and 7 hereof, the Option will not be exercisable unless
the Executive shall, at the time of exercise, be an employee of the Company or
of an Affiliate (as hereinafter defined) of the Company. As used in this
Agreement, the term "Affiliate" refers to and includes each entity which
directly or indirectly, owns or controls, is under common ownership or control
with or is owned or controlled by, the Company, including each "subsidiary
corporation" within the meaning of the term as defined in Section 425(f) of the
Internal Revenue Code of 1986, as amended (the "Code").
5. Non-transferability of Option. The Option will not be
transferable otherwise than by will or by the laws of descent and distribution,
and the Option may be exercised during the lifetime of the Executive only by
him. More particularly, but without limiting the generality of the foregoing,
the Option may not be assigned, transferred or otherwise disposed of, or pledged
or hypothecated in any way (whether by operation of law or otherwise), and shall
not be subject to execution, attachment or other process. Any assignment,
transfer, pledge, hypothecation or other disposition of the Option attempted
contrary to the provisions of this Agreement, or any levy of execution,
attachment or other process attempted upon the Option, will be null and void and
without effect. Any attempt to make any such assignment, transfer, pledge,
hypothecation or other disposition of the Option or any attempt to make any such
levy of execution, attachment or other process will cause the Option to
terminate immediately upon the happening of any such event if the Board of
Directors of the Company, at any time, should in its sole discretion, so elect,
by written notice to the Executive or
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to the person or persons then entitled to exercise the Option under the
provisions of Section 7 hereof; provided, however, that any such termination of
the Option under the foregoing provisions of this Section 5 will not prejudice
any rights or remedies which the Company or any Affiliate thereof may have under
this Agreement or otherwise.
6. Exercise Upon Cessation of Employment.
(a) If the Executive ceases to be employed by the Company or
any of its subsidiaries by reason of his discharge for cause, the Option shall
forthwith terminate. If, however, the Executive for any other reason (other than
death or disability) ceases to be so employed, the Option may, subject to the
provisions of Sections 5 and 8 hereof, be exercised to the same extent the
Executive would have been entitled under Section 3 hereof to exercise the Option
on the day immediately preceding the date of such cessation of employment, at
any time within six months after such cessation of employment, at the end of
which period the Option shall terminate. In any event the Option may not be
exercised after the expiration of the term provided in Section 4 hereof.
(b) The Option will not be affected by any change of duties or
position of the Executive as long as he continues to be employed by the Company
or any Affiliate thereof. If the Executive is granted a temporary leave of
absence, such leave of absence will be deemed a continuation of his employment
by the Company or any Affiliate thereof for the purposes of this Agreement, but
only if and so long as the employing corporation consents thereto. Retirement,
whether or not pursuant to any retirement or pension plan of the Company or any
Affiliate thereof, will be deemed to be a cessation of employment with written
consent for all purposes of this Agreement.
(c) Any termination of the Option by reason of cessation of
employment shall be without prejudice to any rights or remedies which the
Company or any of its Affiliates may have against the Executive or which the
Executive may have against the Company or any of its Affiliates under this
Agreement or otherwise.
7. Exercise Upon Death; Disability.
(a) If the Executive dies while he is employed by the Company
or any Affiliate thereof (other than by suicide in which case the Option shall
terminate) or within three months after he has ceased to be an employee
(provided such cessation was not due to the Executive having been discharged for
cause), during which period he would have been entitled to exercise the Option
under the provisions of Section 6 hereof, the Option may, subject to the
provisions of Sections 5 and 8 hereof, be exercised, to the extent the Executive
would have been entitled under Section 3 hereof to exercise the Option on the
day
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immediately preceding the date of his death, by the estate of the Executive or
by the person or persons (including the estate of any such parson or persons who
have died) who acquire the right to exercise the Option by bequest or
inheritance at any time within the period ending one year after the death of the
Executive, at the end of which period the Option shall terminate. In any event,
the Option may not be exercised after the expiration of the term provided in
Section 4 hereof.
(b) In the event that the employment of the Executive, by the
Company or any Affiliate thereof is terminated by reason of the "disability" of
the Executive, the Option may, subject to the provisions of Sections 5 and 8
hereof, be exercised, to the extent the Executive would have been entitled under
Section 3 hereof to exercise the Option on the day immediately preceding the
date of the termination of the Executive's employment, at any time within the
period ending six months after the date of such termination of employment, at
the end of which period the Option shall terminate. In any event, the Option may
not be exercised after the expiration of the term provided in Section 4 hereof.
For purposes of this Agreement, the term "disability" shall mean a physical or
mental disability as defined in Section 105 of the Code.
8. Employment. The Executive will serve the Company or an
Affiliate of the Company in good faith and use his best efforts to promote its
interest. Upon written notice from the Company to Executive that the Executive
has materially breached the provisions of this Section 8 and such breach is not
remedied within 30 days after such notice, the Option will thereupon terminate
without prejudice to any rights or remedies which the Company or such Affiliate
may have against the Executive under this Agreement or otherwise
9. Adjustments.
(a) For so long as TPPLP continues to own substantially all of
the outstanding Common Stock of the Company, the Option shall not be subject to
dilution by reason of additional issuances of Common Stock by the Company to
TPPLP, but shall continue to comprise that number of shares of the Company's
Common Stock as will result, upon exercise of the Option in full, in a 2 1/2%
interest in the Company's Common Stock. In the event of a stock dividend,
issuance of additional shares, stock split-up, share combination, share
redemption or retirement, exchange of shares, recapitalization, merger,
consolidation, acquisition or disposition of property or shares, reorganization,
liquidation or other similar changes or transactions of or by the Company, or
additional capital contributions to TPPLP, the Board of Directors of the Company
shall make (or shall undertake to have the Board of Directors of any corporation
which merges with, or acquires the stock or assets of, the Company make) such
adjustment of (whether by increasing or decreasing) the percentage, the number
or class of shares then covered by the Option, or of the option
-4-
<PAGE> 5
price, or both, as it shall, in its sole discretion, deem appropriate to give
proper effect to such event.
(b) At the time that TPPLP liquidates or otherwise distributes
at least a majority of the shares of the Company's Common Stock, the Option
will, as to the number of shares of Common Stock covered thereby, and the
purchase price for such shares, be fixed. Subsequent adjustment to the
percentage, number or class of shares then covered by the Option, or of the
option price, or both, shall be made by the Board of Directors of the Company as
it shall, in its sole discretion, deem appropriate to give proper effect to any
stock dividend, stock split-up, share combination, share redemption or
retirement, exchange of shares, recapitalization, merger, consolidation,
acquisition or disposition of property or shares, reorganization, liquidation or
other similar changes of or by the Company, as if the Option were fully
exercised at the then option price immediately prior to any such event.
10. Registration. The shares of Common Stock subject hereto
and issuable upon the exercise hereof have not been registered under the
Securities Act of 1933, as amended, and, if required upon the request of counsel
to the Company, the Executive will give a representation as to his investment
intent with respect to such shares prior to their issuance as set forth in
Section 11 hereof. The Company may register or quality the shares covered by the
Option for sale pursuant to the Securities Act of 1933, as amended, at any time
prior to or after the exercise in whole or in part of the Option.
11. Method of Exercise of Option.
(a) Subject to the terms and conditions of this Agreement, the
Option shall be exercisable by notice and payment to the Company in accordance
with the procedure prescribed herein. Each such notice shall:
(i) State the election to exercise the Option and the
number of shares in respect of which it is being exercised;
(ii) Contain a representation and agreement as to
investment intent, if required by counsel to the Company with respect
to such shares, in form satisfactory to counsel for the Company;
(iii) Be signed by the person or persons entitled to
exercise the Option and, if the Option is being exercised by any person
or persons other than the Executive, be accompanied by proof,
satisfactory to counsel for the Company, of the right of such person or
persons to exercise the Option; and
-5-
<PAGE> 6
(iv) Contain an undertaking to become a party to any
shareholders agreement among the Company and its other stockholders.
(b) Upon receipt of the notice specified in Section 11(a)
above, the Company will specify, by written notice to the Executive, a date and
time (such date and time being herein called the "Closing Date") and place for
payment of the full purchase price of such shares. The Closing Date will be not
more than fifteen days from the date the notice of exercise is received by the
Company unless another date is agreed upon by the Company and the Executive or
is required upon advice of counsel for the Company in order to meet the
requirements of Section 12 hereof.
(c) Payment of the purchase price of any shares of Common
Stock, in respect of which the Option shall be exercised, will be made by the
Executive at the place specified by the Company on or before the Closing Date by
delivering to the Company a certified or bank cashier's check payable to the
order of the Company. The Option will be deemed to have been exercised with
respect to any particular shares of Common Stock if, and only if, the preceding
provisions of this Section 11 and the provisions of Section 12 hereof shall have
been complied with, in which event the Option will be deemed to have been
exercised on the Closing Date. Anything in this Agreement to the contrary
notwithstanding, any notice of exercise given pursuant to the provisions of this
Section 11 will be void and of no effect if all the preceding provisions of this
Section 11 and the provisions of Section 12 shall not have been complied with.
The certificate or certificates for shares of Common Stock as to which the
Option shall be exercised will be registered in the name of the Executive or, if
the Executive so requests in the notice exercising the Option, will be
registered in the name of the Executive and another person jointly, with right
of survivorship, and will be delivered on the Closing Date to the Executive at
the place specified for the closing, but only upon compliance with all of the
provisions of this Agreement. If the Executive fails to accept delivery of and
pay for all or any part of the number of shares specified in such notice upon
tender or delivery thereof on the Closing Date, his right to exercise the Option
with respect to such undelivered shares may be terminated in the sole discretion
of the Board of Directors of the Company, which discretion shall be exercised in
good faith.
12. Approval of Counsel. The exercise of the Option and the
issuance and delivery of shares of Common Stock pursuant thereto shall be
subject to approval by the Company's counsel of all legal matters in connection
therewith, including compliance with the requirements of the Securities Act of
1933, as amended, and the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder, and the requirements of any stock exchange
upon which the Common Stock may then be listed.
-6-
<PAGE> 7
13. Resale of Common Stock.
(a) Upon any sale or transfer of the Common Stock purchased
upon exercise of the Option, the Executive shall deliver to the Company an
opinion of counsel satisfactory to the Company to the effect that either (i) the
Common Stock to be so sold or transferred has been registered under the
Securities Act of 1933, as amended, and that there is in effect a current
prospectus meeting the requirements of Subsection 10(a) of said Act which is
being or will be delivered to the purchaser or transferee at or prior to the
time of delivery of the certificates evidencing the Common Stock to be sold or
transferred, or (ii) such Common Stock may then be sold without violating
Section 5 of said Act.
(b) The Common Stock issued upon exercise of the Option shall
bear the following legend if required by counsel for the Company:
THE SHARES EVIDENCED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE FIRST
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNLESS, IN THE OPINION OF COUNSEL FOR THE COMPANY, SUCH REGISTRATION IS
NOT REQUIRED.
14. Reservation of Shares. The Company shall at all times
during the term of the Option reserve and keep available such number of shares
of the class of stock then subject to the Option as will be sufficient to
satisfy the requirements of this Agreement.
15. Limitation of Action. The Executive and the Company each
acknowledges that every right of action accruing to him or it, as the case may
be, and arising out of or in connection with this Agreement against the Company
or an Affiliate thereof, on the one hand, or against the Executive, on the other
hand, will, irrespective of the place where an action may be brought, cease and
be barred by the expiration of three years from the date of the act or omission
in respect of which such right of action arises.
16. Notices. Each notice relating to this Agreement shall be
in writing and delivered in person or by certified mail to the proper address.
All notices to the Company shall be addressed to it at its then principal
office, Attention: Chief Executive Officer, with a copy to MST Partners, L.P.
841 Broadway, Suite 504, New York, New York 10003, Attention: J. Andrew McWethy.
All notices to the Executive shall be addressed to the Executive at the
Executive's address above specified. Anyone to whom a notice may be given under
this Agreement may designate a new address by notice to that effect.
-7-
<PAGE> 8
17. Benefits of Agreement. This Agreement shall inure to the
benefit of and be binding upon each successor and assign of the Company. All
obligations imposed upon the Executive and all rights granted to the Company
under this Agreement shall be binding upon the Executive's heirs, legal
representatives and successors
18. Severability. In the event that any one or more provisions
of this Agreement shall be deemed to be illegal or unenforceable, such
illegality or unenforceability shall not affect the validity and enforceability
of the remaining legal and enforceable provisions hereof, which shall be
construed as if such illegal or unenforceable provision or provisions had not
been inserted.
19. Governing Law. THIS AGREEMENT WILL BE CONSTRUED AND
GOVERNED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
20. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
21. Integration. This Agreement constitutes the entire
understanding of the parties hereto and shall supersede all prior agreements,
representations and understandings of the parties hereto related to the subject
matter hereof and without limiting the generality of the foregoing shall
supersede the stock option agreement dated as of April 4, 1994, as previously
amended and restated as of February 21, 1996.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this
Amended and Restated Stock Option Agreement to be executed as of the date and
year first above written.
TEKNI-PLEX, INC.
By:______________________________
Name: F. Patrick Smith
Title: Chief Executive Officer
_________________________________
KENNETH W.R. BAKER
_________________________________
Social Security Number
-9-
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Tekni-Plex, Inc.
Somerville, New Jersey
We hereby consent to the inclusion in this Registration Statement of
Tekni-Plex, Inc. on Form S-4 of our reports dated September 20, 1996, on our
audits of the consolidated financial statements of Tekni-Plex, Inc. and
subsidiary as of June 28, 1996 and June 30, 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for the years
ended June 28, 1996 and June 30, 1995 and the periods March 19, 1994 through
July 1, 1994 and January 1, 1994 through March 18, 1994, which reports included
an explanatory paragraph related to the predecessors' basis of accounting for
the period January 1, 1994 through March 18, 1994, which reports are included in
this Form S-4 and of our report dated September 20, 1996 relating to the
financial statement schedules appearing elsewhere in this Form S-4.
We also consent to the reference to our firm under the heading "Experts" in
the Registration Statement.
/s/ BDO SEIDMAN, LLP
BDO Seidman, LLP
Woodbridge, New Jersey
July 16, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 (File
No. 333-28157) of our report dated February 21, 1996, on our audits of the
financial statements of Dolco Packaging Corp. We also consent to the reference
to our Firm under the caption "Experts."
/s/ COOPERS & LYBRAND L.L.P.
Sherman Oaks, California
July 16, 1997
<PAGE> 1
EXHIBIT 23.3
[ROSENBERG RICH BAKER BERMAN & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors
Tekni-Plex, Inc.
201 Industrial Parkway
Somerville, NJ 08876
We consent to the use in this Registration Statement, Form S-4, of
Tekni-Plex, Inc. of our report dated February 18, 1994 which is part of this
Registration Statement, and of our report dated February 18, 1994 relating to
the financial statement schedules appearing elsewhere in this Registration
Statement.
We also consent to the reference to us under the headings "Selected
Historical Financial Information" and "Experts" in such Registration.
/s/ ROSENBERG RICH BAKER BERMAN & CO.
ROSENBERG RICH BAKER BERMAN & CO.
July 16, 1997
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TEKNI-PLEX, INC.
OFFER TO EXCHANGE
ITS
SERIES B 11 1/4% SENIOR SUBORDINATED NOTES DUE 2007
FOR ANY AND ALL OF ITS OUTSTANDING
11 1/4% SENIOR SUBORDINATED NOTES DUE 2007
PURSUANT TO THE PROSPECTUS DATED , 1997
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1997 UNLESS EXTENDED (THE "EXPIRATION
DATE").
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS.
If you desire to accept the Exchange Offer (as defined below), this Letter
of Transmittal should be completed, signed, and submitted to Marine Midland Bank
as the Exchange Agent:
<TABLE>
<S> <C>
By Registered or Certified Mail, By Facsimile:
Overnight Courier or Hand: Marine Midland Bank
Marine Midland Bank Attn: Frank Godino
140 Broadway -- A Level (212) 658-2292
New York, New York 10005-1180
Attn: Corporate Trust Operations
Tel: (212) 658-5931
</TABLE>
Originals of this Letter of Transmittal and all other documents submitted
by facsimile must be sent promptly by registered or certified mail, overnight
courier or hand delivery. DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY
ADDITIONAL INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT.
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1997 (the "Prospectus") of Tekni-Plex, Inc., a Delaware
corporation (the "Company"), and this Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer") to exchange $1,000 in principal amount of its Series B 11 1/4% Senior
Subordinated Notes due 2007 (the "Exchange Notes"), which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to
a Registration Statement, for each $1,000 in principal amount of its outstanding
11 1/4% Senior Subordinated Notes due 2007 (the "Old Notes"), of which
$75,000,000 aggregate principal amount is outstanding. The Exchange Notes will
be fully and unconditionally guaranteed on a senior subordinated basis by Dolco
Packaging Corp. (the "Guarantor"). Capitalized terms used but not defined herein
have the meanings ascribed to them in the Prospectus.
This Letter of Transmittal is to be used if certificates for the Old Notes
are to be forwarded herewith. If delivery of the Old Notes is to be made through
book-entry transfer into the Exchange Agent's account at The Depository Trust
Company, this Letter of Transmittal need not be delivered; provided, however,
that tenders of the Old Notes must be effected in accordance with The Depository
Trust Company's Automated Tender Offer Program ("ATOP") procedures and the
procedures described under the caption "The Exchange Offer -- Procedures for
Tendering" in the Prospectus, including the delivery of an Agent's Message in
lieu of this Letter of Transmittal.
The undersigned hereby tenders the Old Notes described in Box 1 below (the
"Tendered Notes") pursuant to the terms and subject to the conditions described
in the Prospectus and this Letter of Transmittal. The undersigned is the
registered owner of all the Tendered Notes and the undersigned represents that
it has received from each beneficial owner of the Tendered Notes ("Beneficial
Owners") a duly completed and executed form of "Instruction to Registered Holder
and/or Book-Entry Transfer Facility Participant from Beneficial Owner"
accompanying this Letter of Transmittal, instructing the undersigned to take the
action described in this Letter of Transmittal.
<PAGE> 2
Subject to, and effective upon, the acceptance for exchange of the Tendered
Notes, the undersigned hereby exchanges, assigns, and transfers to, or upon the
order of, the Company, all right, title, and interest in, to, and under the
Tendered Notes.
Please issue the Exchange Notes exchanged for Tendered Notes in the name(s)
of the undersigned. Unless otherwise indicated under "Special Delivery
Instructions" below (Box 3), please send or cause to be sent the certificates
for the Exchange Notes (and accompanying documents, as appropriate) to the
undersigned at the address shown below in Box 1.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney-in-fact of the undersigned with
respect to the Tendered Notes, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to
(i) deliver the Tendered Notes to the Company or cause ownership of the Tendered
Notes to be transferred to, or upon the order of, the Company, on the books of
the registrar for the Old Notes and deliver all accompanying evidences of
transfer and authenticity to, or upon the order of, the Company upon receipt by
the Exchange Agent, as the undersigned's agent, of the Exchange Notes to which
the undersigned is entitled upon acceptance by the Company of the Tendered Notes
pursuant to the Exchange Offer, and (ii) receive all benefits and otherwise
exercise all rights of beneficial ownership of the Tendered Notes, all in
accordance with the terms of the Exchange Offer.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer" in the Prospectus
and in the instructions hereto will constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of the
Exchange Offer, subject only to withdrawal of such tenders on the terms set
forth in the Prospectus under the caption "The Exchange Offer -- Withdrawal of
Tenders." All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and any Beneficial Owner(s), and
every obligation of the undersigned or any Beneficial Owner hereunder shall be
binding upon the heirs, representatives, successors, and assigns of the
undersigned and such Beneficial Owner(s).
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign, and transfer the Tendered
Notes and that the Company will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges, encumbrances, and adverse
claims when the Tendered Notes are acquired by the Company as contemplated
herein. The undersigned and each Beneficial Owner will, upon request, execute
and deliver any additional documents reasonably requested by the Company or the
Exchange Agent as necessary or desirable to complete and give effect to the
transactions contemplated hereby.
The undersigned hereby represents and warrants that the information set
forth in this Letter of Transmittal is true and correct.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that (i) the Exchange Notes to be acquired by the undersigned and any
Beneficial Owner(s) in connection with the Exchange Offer are being acquired by
the undersigned and any Beneficial Owner(s) in the ordinary course of business
of the undersigned and any Beneficial Owner(s), (ii) the undersigned and each
Beneficial Owner are not participating, do not intend to participate, and have
no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes, (iii) except as otherwise disclosed in
writing herewith, neither the undersigned nor any Beneficial Owner is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company,
and (iv) the undersigned and each Beneficial Owner acknowledge and agree that
any person participating in the Exchange Offer with the intention or for the
purpose of distributing the Exchange Notes must comply with the registration and
prospectus delivery requirements of the Securities Act of 1933, as amended
(together with the rules and regulations promulgated thereunder, the "Securities
Act"), in connection with a secondary resale of the Exchange Notes acquired by
such person and cannot rely on the position of the staff of the Securities and
Exchange Commission (the "Commission") set forth in the no-action letters that
are discussed under the caption "The Exchange Offer" in the Prospectus. In
addition, by accepting the Exchange Offer, the undersigned hereby (i) represents
and warrants that, if the undersigned or any Beneficial Owner of the Old Notes
is a Participating Broker-Dealer, such Participating Broker-Dealer acquired the
Old Notes for its own account as a result of market-making activities or other
trading activities and has not entered into any arrangement or understanding
with the Company or any affiliate of the Company (within the meaning of Rule 405
under the Securities Act) to distribute the Exchange Notes to be received in the
Exchange Offer, and (ii) acknowledges that, by receiving Exchange Notes for its
own account in exchange for Old Notes, where such Old Notes were acquired as a
result of market-making activities or other trading activities, such
Participating Broker-Dealer will deliver a prospectus meeting the requirements
of the Securities Act in connection with any resale of such Exchange Notes.
<PAGE> 3
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH.
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE
"USE OF GUARANTEED DELIVERY" BELOW (BOX 4).
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE "USE OF BOOK-ENTRY TRANSFER" BELOW (BOX 5).
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING
THE BOXES.
ALL TENDERING HOLDERS COMPLETE THIS BOX 1:
- --------------------------------------------------------------------------------
BOX 1
DESCRIPTION OF OLD NOTES TENDERED
(ATTACH ADDITIONAL SIGNED PAGES, IF NECESSARY)
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
AGGREGATE
PRINCIPAL AGGREGATE
NAME(S) AND ADDRESS(ES) OF REGISTERED NOTE HOLDER(S), EXACTLY CERTIFICATE AMOUNT PRINCIPAL
AS NAME(S) APPEAR(S) ON OLD NOTE CERTIFICATE(S) NUMBER(S) OF REPRESENTED BY AMOUNT
(PLEASE FILL IN, IF BLANK): OLD NOTES* CERTIFICATE(S) TENDERED**
------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Total: $ Total: $
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by persons tendering by book-entry transfer.
** The minimum permitted tender is $1,000 in principal amount of Old Notes.
All other tenders must be in integral multiples of $1,000 of principal
amount. Unless otherwise indicated in this column, the principal amount of
all Old Note certificates identified in this Box 1 or delivered to the
Exchange Agent herewith shall be deemed tendered. See Instruction 4.
================================================================================
- --------------------------------------------------------------------------------
BOX 2
BENEFICIAL OWNER(S)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------
STATE OF PRINCIPAL RESIDENCE OF EACH BENEFICIAL OWNER OF PRINCIPAL AMOUNT OF TENDERED OLD NOTES HELD FOR ACCOUNT
TENDERED OLD NOTES OF BENEFICIAL OWNER
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
==============================================================================================================================
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
- -------------------------------------------------------
BOX 3
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if Exchange Notes
exchanged for Old Notes and/or untendered Old
Notes are to be sent to someone other than the
undersigned, or to the undersigned at an
address other than that shown above.
Mail Exchange Notes and any untendered Old
Notes to:
Name(s):
--------------------------------------------
(please print)
Address:
----------------------------------------------
===============================================
(include Zip Code)
-----------------------------------------------
Tax Identification or Social Security No.:
=======================================================
BOX 4
USE OF GUARANTEED DELIVERY
(SEE INSTRUCTION 2)
To be completed ONLY if Old Notes are being
tendered by means of a Notice of Guaranteed
Delivery.
Name(s) of Registered
Holder(s):
-------------------------------------------
Date of Execution of Notice of Guaranteed
Delivery:
---------------------------------------------
Name of Institution which Guaranteed
Delivery:
---------------------------------------------
- -------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
BOX 5
USE OF BOOK-ENTRY TRANSFER
(SEE INSTRUCTION 1)
To be completed ONLY if delivery of tendered Old Notes is to be made by book-entry transfer.
Name of Tendering Institution:
---------------------------------------------------------------------------------------
Account Number:
----------------------------------------------------------------------------------------------------
Transaction Code Number:
--------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 5
BOX 6
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5)
IN ADDITION, COMPLETE SUBSTITUTE FORM W-9
<TABLE>
<S> <C>
x Signature Guarantee
- ---------------------------------------- :
x (If required by Instruction 5)
- ---------------------------------------- :
(SIGNATURE OF REGISTERED HOLDER(S) OR
AUTHORIZED SIGNATORY)
</TABLE>
Note: The above lines must be signed by the registered holder(s) of Old Notes as
their name(s) appear(s) on the Old Notes or by person(s) authorized to become
registered holder(s) (evidence of which authorization must be transmitted with
this Letter of Transmittal). If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer, or other person acting in a
fiduciary or representative capacity, such person must set forth his or her full
title below. See Instruction 5.
Name(s):
- ------------------------------------------------------------------------
---------------------------------------------------------------------
Capacity:
- -------------------------------------------------------------------------
Street Address:
- -------------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
- ---------------------------------------------
Tax Identification or
Social Security Number:
- ---------------------------------------------------------
Authorized Signature
- ------------------------------------------------------------
Name:
- ----------------------------------------------------------------------------
(PLEASE PRINT)
Title:
- -----------------------------------------------------------------------------
Name of Firm:
- -------------------------------------------------------------------
(MUST BE AN ELIGIBLE INSTITUTION AS DEFINED IN INSTRUCTION 2)
Address:
- --------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
- ---------------------------------------------
Dated:
- ------------------------------------
BOX 7
BROKER-DEALER STATUS
[ ] Check this box if the Beneficial Owner of the Old Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Old Notes
for its own account as a result of market-making activities or other trading
activities.
<PAGE> 6
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: TEKNI-PLEX, INC.
- --------------------------------------------------------------------------------------------------------------
SUBSTITUTE Name (If joint names, list first and circle the
FORM W-9 name of the person or entity whose number you --------------------------
DEPARTMENT OF THE TREASURY enter in Part 1 below. See instructions if your Social Security Number
INTERNAL REVENUE SERVICE name has changed.)
----------------------------------------------- or
Address
-----------------------------------------------
City, State and ZIP Code TIN
List account number(s) here (optional)
-----------------------------------------------
-------------------------------------------------------------------------------
PART 1 -- PLEASE PROVIDE YOUR TAXPAYER
IDENTIFICATION NUMBER ("TIN") IN THE BOX AT
RIGHT AND CERTIFY BY SIGNING AND DATING BELOW
PART 2 -- Check the box if you are NOT subject
to backup withholding under the provisions of PART 3 --
section 3406(a)(1)(C) of the Internal Revenue Awaiting TIN
Code because (1) you have not been notified [ ]
that you are subject to backup withholding as
a result of failure to report all interest or
dividends or (2) the Internal Revenue Service
has notified you that you are no longer
subject to backup withholding. [ ]
-------------------------------------------------------------------------------
CERTIFICATION -- UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE
INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE.
- --------------------------------------------------------------------------------------------------------------
Signature Date
--------------------------------------------------------------------- ------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE> 7
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Notes. A properly completed
and duly executed copy of this Letter of Transmittal, including Substitute Form
W-9, and any other documents required by this Letter of Transmittal must be
received by the Exchange Agent at its address set forth herein, and either
certificates for Tendered Notes must be received by the Exchange Agent at its
address set forth herein or such Tendered Notes must be transferred pursuant to
the procedures for book-entry transfer described in the Prospectus under the
caption "The Exchange Offer -- Procedures for Tendering" (and a confirmation of
such transfer received by the Exchange Agent), in each case prior to 5:00 p.m.,
New York City time, on the Expiration Date. The method of delivery of
certificates for Tendered Notes, this Letter of Transmittal and all other
required documents to the Exchange Agent is at the election and risk of the
tendering holder and the delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended. Instead of delivery
by mail, it is recommended that the holder of Old Notes use an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. No Letter of Transmittal or Old Notes should be sent to the
Company. Neither the Company nor the Exchange Agent is under any obligation to
notify any tendering holder of the Company's acceptance of Tendered Notes prior
to the Expiration Date.
2. Guaranteed Delivery Procedures. Holders who wish to tender their Old
Notes but whose Old Notes are not immediately available, and who cannot deliver
their Old Notes, this Letter of Transmittal or any other documents required
hereby to the Exchange Agent prior to the Expiration Date must tender their Old
Notes according to the guaranteed delivery procedures set forth below, including
completion of Box 4. Pursuant to such procedures: (i) such tender must be made
by or through a firm which is a member of a recognized Medallion Program
approved by the Securities Transfer Association Inc. (an "Eligible Institution")
and the Notice of Guaranteed Delivery must be signed by the holder; (ii) prior
to the Expiration Date, the Exchange Agent must have received from the holder
and the Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by registered or certified mail, overnight courier or hand
delivery) setting forth the name and address of the holder, the certificate
number(s) of the Tendered Notes and the principal amount of Tendered Notes,
stating that the tender is being made thereby and guaranteeing that, within
three New York Stock Exchange trading days after the Expiration Date, this
Letter of Transmittal together with the certificate(s) representing the Old
Notes and any other required documents will be deposited by the Eligible
Institution with the Exchange Agent; and (iii) such properly completed and
executed Letter of Transmittal, as well as all other documents required by this
Letter of Transmittal and the certificate(s) representing all Tendered Notes in
proper form for transfer, must be received by the Exchange Agent within three
New York Stock Exchange trading days after the Expiration Date. Any holder who
wishes to tender Old Notes pursuant to the guaranteed delivery procedures
described above must ensure that the Exchange Agent receives the Notice of
Guaranteed Delivery relating to such Old Notes prior to 5:00 p.m., New York City
time, on the Expiration Date. Failure to complete the guaranteed delivery
procedures outlined above will not, of itself, affect the validity or effect a
revocation of any Letter of Transmittal form properly completed and executed by
an eligible holder who attempted to use the guaranteed delivery process.
3. Beneficial Owner Instructions to Registered Holders. Only a holder in
whose name Tendered Notes are registered on the books of the registrar (or the
legal representative or attorney-in-fact of such registered holder) may execute
and deliver this Letter of Transmittal. Any Beneficial Owner of Tendered Notes
who is not the registered holder must arrange promptly with the registered
holder to execute and deliver this Letter of Transmittal on his or her behalf
through the execution and delivery to the registered holder of the "Instructions
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner" form accompanying this Letter of Transmittal.
4. Partial Tenders. Tenders of Old Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Old Notes held by the holder is tendered, the tendering holder should
fill in the principal amount tendered in the column labeled "Aggregate Principal
Amount Tendered" of the box entitled "Description of Old Notes Tendered" (Box 1)
above. The entire principal amount of Old Notes delivered to the Exchange Agent
will be deemed to have been tendered unless
<PAGE> 8
otherwise indicated. If the entire principal amount of all Old Notes held by the
holder is not tendered, then Old Notes for the principal amount of Old Notes not
tendered and Exchange Notes issued in exchange for any Old Notes tendered and
accepted will be sent to the holder at his or her registered address, unless a
different address is provided in the appropriate box on this Letter of
Transmittal, as soon as practicable following the Expiration Date.
5. Signatures on the Letter of Transmittal; Bond Powers and Endorsements;
Guarantee of Signatures. If this Letter of Transmittal is signed by the
registered holder(s) of the Tendered Notes, the signature must correspond with
the name(s) as written on the face of the Tendered Notes without alteration,
enlargement or any change whatsoever.
If any of the Tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Notes are held in different names, it will be necessary to complete, sign and
submit as many separate copies of the Letter of Transmittal as there are
different names in which Tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of
Tendered Notes, and Exchange Notes issued in exchange therefor are to be issued
(and any untendered principal amount of Old Notes is to be reissued) in the name
of the registered holder(s), then such registered holder(s) need not and should
not endorse any Tendered Notes, nor provide a separate bond power. In any other
case, such registered holder(s) must either properly endorse the Tendered Notes
or transmit a properly completed separate bond power with this Letter of
Transmittal, with the signature(s) on the endorsement or bond power guaranteed
by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any Tendered Notes, such Tendered Notes must be endorsed
or accompanied by appropriate bond powers, in each case, signed as the name(s)
of the registered holder(s) appear(s) on the Tendered Notes, with the
signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Tendered Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with this Letter of Transmittal.
Endorsements on Tendered Notes or signatures on bond powers required by
this Instruction 5 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution unless the Tendered Notes are tendered (i) by a registered holder
who has not completed the box set forth herein entitled "Special Delivery
Instructions" (Box 3) or (ii) by an Eligible Institution.
6. Special Delivery Instructions. Tendering holders should indicate, in
the applicable box (Box 3), the name and address to which the Exchange Notes
and/or substitute Old Notes for principal amounts not tendered or not accepted
for exchange are to be sent, if different from the name and address of the
person signing this Letter of Transmittal. In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated.
7. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Tendered Notes pursuant to the Exchange Offer. If,
however, a transfer tax is imposed for any reason other than the transfer and
exchange of Tendered Notes pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or on any
other person) will be payable by the tendering holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted with this
Letter of Transmittal, the amount of such transfer taxes will be billed directly
to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Tendered Notes listed in this Letter of
Transmittal.
<PAGE> 9
8. Tax Identification Number. Federal income tax law requires that the
holder(s) of any Tendered Notes which are accepted for exchange must provide the
Company (as payor) with its correct taxpayer identification number ("TIN"),
which, in the case of a holder who is an individual, is his or her social
security number. If the Company is not provided with the correct TIN, the holder
may be subject to backup withholding and a $50 penalty imposed by the Internal
Revenue Service (if withholding results in an over-payment of taxes, a refund
may be obtained). Certain holders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional
instructions.
To prevent backup withholding, each holder of Tendered Notes must provide
such holder's correct TIN by completing the Substitute Form W-9 set forth
herein, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN), and that (i) the holder has not been notified by the Internal
Revenue Service that such holder is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) the Internal Revenue Service
has notified the holder that such holder is no longer subject to backup
withholding. If the Tendered Notes are registered in more than one name or are
not in the name of the actual owner, consult the "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for information on
which TIN to report.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligation regarding backup
withholding.
9. Validity of Tenders. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of Tendered
Notes will be determined by the Company in its reasonable discretion, which
determination will be final and binding. The Company reserves the right to
reject any and all Old Notes not validly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of the Company or their counsel, be
unlawful. The Company also reserves the right to waive any conditions of the
Exchange Offer or defects or irregularities in tenders of Old Notes as to any
ineligibility of any holder who seeks to tender Old Notes in the Exchange Offer.
The interpretation of the terms and conditions of the Exchange Offer (including
this Letter of Transmittal and the instructions hereto) by the Company shall be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Neither the Company, the Exchange Agent nor any other
person shall be under any duty to give notification of defects or irregularities
with respect to tenders of Old Notes, nor shall any of them incur any liability
for failure to give such notification. Tenders of Old Notes will not be deemed
to have been made until such defects or irregularities have been cured or
waived. Any Old Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering holders, unless
otherwise provided in this Letter of Transmittal or the Prospectus, as soon as
practicable following the Expiration Date.
10. Waiver of Conditions. The Company reserves the absolute right to
amend, waive or modify any of the conditions in the Exchange Offer in the case
of any Tendered Notes.
11. No Conditional Tender. No alternative, conditional, irregular, or
contingent tender of Old Notes or transmittal of this Letter of Transmittal will
be accepted.
12. Mutilated, Lost, Stolen or Destroyed Notes. Any tendering holder whose
Old Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated herein for further instructions.
13. Requests for Assistance or Additional Copies. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at the address
indicated herein. Holders may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
14. Acceptance of Tendered Notes and Issuance of Notes; Return of
Notes. Subject to the terms and conditions of the Exchange Offer, the Company
will accept for exchange all validly tendered Old Notes as
<PAGE> 10
soon as practicable after the Expiration Date and will issue Exchange Notes
therefor as soon as practicable thereafter. For purposes of the Exchange Offer,
the Company shall be deemed to have accepted tendered Old Notes when, as and if
the Company has given written or oral notice (immediately followed in writing)
thereof to the Exchange Agent. If any Tendered Notes are not exchanged pursuant
to the Exchange Offer for any reason, such unexchanged Old Notes will be
returned, without expense, to the undersigned at the address shown in Box 1 or
at a different address as may be indicated herein under "Special Delivery
Instructions" (Box 3).
15. Withdrawal. Tenders may be withdrawn only pursuant to the procedures
set forth in the Prospectus under the caption "The Exchange Offer -- Withdrawal
of Tenders."
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
TO BE USED IN CONNECTION WITH
TEKNI-PLEX, INC.
OFFER TO EXCHANGE
ITS
SERIES B 11 1/4% SENIOR SUBORDINATED NOTES DUE 2007
FOR ANY AND ALL OF ITS OUTSTANDING
11 1/4% SENIOR SUBORDINATED NOTES DUE 2007
This form must be used by a holder of 11 1/4% Senior Subordinated Notes due
2007 (the "Old Notes") of Tekni-Plex, Inc., a Delaware corporation (the
"Company"), who wishes to tender Old Notes to the Exchange Agent pursuant to the
guaranteed delivery procedures described under the caption "The Exchange
Offer -- Guaranteed Delivery Procedures" in the Prospectus, dated
, 1997 (the "Prospectus") and in Instruction 2 to the related
Letter of Transmittal (the "Letter of Transmittal"). Any holder who wishes to
tender Old Notes pursuant to such guaranteed delivery procedures must ensure
that the Exchange Agent receives this Notice of Guaranteed Delivery, properly
completed and executed, prior to the Expiration Date of the Exchange Offer.
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Letter of Transmittal.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON , 1997,
UNLESS EXTENDED (THE "EXPIRATION DATE").
MARINE MIDLAND BANK
(THE "EXCHANGE AGENT")
<TABLE>
<S> <C>
By Registered or Certified Mail, By Facsimile:
Overnight Courier or Hand:
Marine Midland Bank Marine Midland Bank
140 Broadway -- A Level Attn: Frank Godino
New York, New York 10005-1180 (212) 658-2292
Attn: Corporate Trust Operations
Tel: (212) 658-5931
</TABLE>
Originals of this instrument and all other documents submitted by facsimile
must be sent promptly by registered or certified mail, overnight courier or hand
delivery. DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE> 2
LADIES AND GENTLEMEN:
Upon the terms and subject to the conditions set forth in the Prospectus
and the Letter of Transmittal, receipt of which is hereby acknowledged, the
undersigned hereby tenders to the Company the principal amount of Old Notes set
forth below pursuant to the guaranteed delivery procedures set forth in the
Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Old Notes listed below:
<TABLE>
<S> <C> <C>
------------------------------------------------------------------------------------------------------------------
CERTIFICATE NUMBER(S)
(IF KNOWN) OF OLD NOTES OR ACCOUNT NUMBER AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED*
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
==================================================================================================================
</TABLE>
- ---------------
* Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
<PAGE> 3
PLEASE SIGN AND COMPLETE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) OF REGISTERED HOLDER(S) OR AUTHORIZED SIGNATORY:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NAME(S) OF REGISTERED HOLDER(S):
Date: , 1997
----------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ADDRESS(ES):
- --------------------------------------------------------------------------------
AREA CODE AND TELEPHONE NO(S):
This Notice of Guaranteed Delivery must be signed by the holder(s) exactly as
their name(s) appear on certificates for Old Notes or on a security position
listing as the owner of Old Notes, or by person(s) authorized to become
holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capacity:
-----------------------------------------------------------------------
Address(es):
--------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., or is a
commercial bank or trust company having an office or correspondent in the United
States, or is otherwise an "eligible guarantor institution" within the meaning
of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended,
guarantees deposit with the Exchange Agent of the Letter of Transmittal (or
facsimile thereof), together with the Old Notes tendered hereby in proper form
for transfer (or confirmation of the book-entry transfer of such Old Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility described in
the prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures" and in the Letter of Transmittal) and any other required documents,
all by 5:00 p.m., New York City time, on the third New York Stock Exchange
trading day following the Expiration Date.
Authorized Signature
------------------------------------------------------------
Name:
---------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Title:
--------------------------------------------------------------------------
Name of Firm:
-------------------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Tel. No.: ( )
---------------------------------------------------------
Dated: , 1995
---------------------
DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF
CERTIFICATES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER
OF TRANSMITTAL.
<PAGE> 4
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of This Notice of Guaranteed Delivery. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at its address set forth herein prior to the Expiration Date. The
method of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and sole risk of the holder,
and the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. As an alternative to delivery by mail, the
holders may wish to consider using an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. For a
description of the guaranteed delivery procedures, see Instruction 2 of the
Letter of Transmittal.
2. Signatures on This Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Old Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Old Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of
the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of the Old Notes, the signature must correspond with the
name shown on the security position listing as the owner of the Old Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Old Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s) appears
on the Old Notes or signed as the name of the participant shown on the
Book-Entry Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
<PAGE> 1
EXHIBIT 99.3
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
TEKNI-PLEX, INC.
11 1/4% SENIOR SUBORDINATED NOTES DUE 2007
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledge(s) receipt of the Prospectus, dated
_____________, 1997 (the "Prospectus") of Tekni-Plex, Inc., a Delaware
corporation (the "Company"), and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Letter of Transmittal.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to action to be taken by you relating to the Exchange
Offer with respect to the 11 1/4% Senior Subordinated Notes due 2007 (the "Old
Notes") held by you for the account of the undersigned.
The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (FILL IN AMOUNT):
$
- ------------------------------ of 11 1/4% Senior Subordinated Notes due 2007.
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[ ] TO TENDER the following Old Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF OLD NOTES TO BE TENDERED, IF
ANY):
$
- ------------------------------
[ ] NOT TO TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instruct(s) you to tender the Old Notes held by you for
the account of the undersigned, it is understood that you are authorized:
(a) to make, on behalf of the undersigned (and the undersigned, by its
signature below, hereby makes to you), the representation and warranties
contained in the Letter of Transmittal that are to be made with respect to the
undersigned as a beneficial owner, including but not limited to the
representations that:
(i) the undersigned's principal residence is in the state of (FILL IN
STATE)
- ------------------------------ ;
(ii) the undersigned is acquiring the Exchange Notes in the ordinary
course of business of the undersigned;
(iii) the undersigned is not participating, does not participate, and
has no arrangement or understanding with any person to participate in, the
distribution of the Exchange Notes;
(iv) the undersigned acknowledges that any person participating in the
Exchange Offer for the purpose of distributing the Exchange Notes must
comply with the registration and prospectus delivery requirements of the
Securities Act of 1933, as amended (the "Securities Act"), in connection
with a secondary resale transaction of the Exchange Notes acquired by such
person and cannot rely on the position of the staff of the Securities and
Exchange Commission set forth in no-action letters that are
<PAGE> 2
discussed under the caption "The Exchange Offer -- Resale of the Exchange
Notes" in the Prospectus; and
(v) the undersigned is not an "affiliate," as defined in Rule 405
under the Securities Act, of the Company;
(b) to agree, on behalf of the undersigned, as set forth in the Letter of
Transmittal; and
(c) to take such other action as necessary under the Prospectus or the
Letter of Transmittal to effect the valid tender of such Old Notes.
SIGN HERE
Name of Beneficial Owner(s):
- --------------------------------------------------------------------------
Signature(s):
- --------------------------------------------------------------------------------
Name(s) (please print):
- --------------------------------------------------------------------------------
Address(es):
- --------------------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Telephone Number(s):
- --------------------------------------------------------------------------------
Taxpayer Identification or Social Security Number(s):
- -------------------------------------------------
Date:
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 99.4
EXCHANGE AGENT AGREEMENT
______, 1997
Marine Midland Bank
140 Broadway, 12th Floor
New York, NY 10005-1180
Ladies and Gentlemen:
Tekni-Plex, Inc., a Delaware corporation (the "Company"), is offering to
issue, upon the terms and subject to the conditions set forth in the Prospectus
dated (the "Prospectus") and the related Letter of Transmittal
(which together constitute the "Offer"), $1,000 principal amount of the
Company's Series B 11 1/4% Senior Subordinated Notes due 2007 (the "Exchange
Notes"), in exchange for each outstanding $1,000 principal amount of its 11 1/4%
Senior Subordinated Notes due 2007 (the "Old Notes" and together with the
Exchange Notes, the "Notes"). Exchange Notes will be issued only in minimum
denominations of $1,000 and integral multiples thereof to each tendering holder
of Old Notes whose Old Notes are accepted in the Offer.
You are hereby appointed and authorized to act as agent (the "Exchange
Agent") to effectuate the exchange of Old Notes for Exchange Notes, on the terms
and subject to the conditions of this agreement (the "Agreement"). In that
regard, the following documents have been delivered to you:
(i) the Prospectus;
(ii) the Letter of Transmittal to be used by the
registered holders of the Old Notes, including
instructions;
(iii) the Notice of Guaranteed Delivery to be used by any
registered holder of the Old Notes when the Old
Notes are not immediately available or when the
holder cannot deliver the Old Notes and other
required documents to the Exchange Agent or cannot
complete the procedure for book-entry transfer
prior to the Expiration Date;
(iv) the Instructions to Registered Holder and/or
Book-Entry Transfer Facility Participant from
Beneficial Owner to be used by any beneficial owner
of the Old Notes;
(v) the cover letter from the Company to brokers,
dealers, commercial banks, trust companies and
other nominees generally describing the Offer; and
(vi) the form of cover letter from brokers, dealers,
commercial banks, trust companies and other
nominees to their respective clients generally
describing the Offer.
The Offer shall expire at the time and on the date specified in the Prospectus
(the "Initial Expiration Date") or at any subsequent time and date to which the
Company, in its sole discretion, may extend the Offer. The later of the Initial
Expiration Date and the latest time and date to which the Offer is so extended
is referred to herein as "Expiration Date."
<PAGE> 2
You are hereby requested, and you hereby agree, to act as follows:
1. You are to accept, subject to any withdrawal rights, Old Notes that
are accompanied by a Letter of Transmittal (or facsimile thereof), properly
completed and duly executed in accordance with the instructions thereon and any
requisite related collateral documents and all other instruments and
communications submitted to you in connection with the Offer and to hold the
same upon the terms and conditions set forth in this Agreement. You shall advise
the Company with respect to any Old Notes received subsequent to the Expiration
Date and accept the instructions of the Company with respect to disposition of
such Old Notes.
2. You are to examine the Letters of Transmittal, the Old Notes, and the
other documents delivered or mailed to you by or for the holders of the Old
Notes as soon as practicable after receipt to ascertain whether (i) the Letters
of Transmittal are properly completed and duly executed in accordance with the
instructions set forth therein, (ii) the Old Notes have otherwise been properly
tendered and (iii), if applicable, the other documents are properly completed
and duly executed. You need not pass on the legal sufficiency of any signature
or verify any signature guarantee.
3. In the event any Letter of Transmittal or other document has been
improperly executed or completed or any of the Old Notes are not in proper form
or have been improperly tendered, or if some other irregularity in connection
with the delivery of Old Notes by a registered holder thereof exists, you shall
promptly report such information to the Company and you are authorized, upon
consultation with the Company and its counsel, to endeavor to take such action
as may be necessary to cause such irregularity to be corrected. You are
authorized, upon consultation with the Company or one of its representatives, to
request from any person tendering Old Notes such additional documents or
undertakings as you may deem appropriate. All questions as to the form of all
documents and the validity, form, eligibility (including time of receipt),
acceptance and withdrawal of tendered Old Notes will be determined by the
Company, in its reasonable discretion, whose determinations will be final and
binding. The Company reserves the absolute right to reject any or all tenders
that are not in proper form or to refuse the acceptance of any particular Old
Notes that would, in the opinion of the Company's counsel, be unlawful. The
Company also reserves the absolute right to waive any of the conditions of the
Offer or any defect or irregularity in the tender of any Old Notes, and the
Company's interpretation of the terms and conditions of the Offer (including the
Letter of Transmittal and the instructions set forth therein) will be final and
binding; provided, however, that any direction by the Company to accept a
nonconforming Old Note, Letter of Transmittal or other document, or to reject an
Old Note, Letter of Transmittal or other document believed by you to be
conforming, shall be set forth in writing by an Officer of the Company.
4. In carrying out your duties as Exchange Agent, you have established
an account with respect to the Old Notes at each of The Depository Trust Company
("DTC"), the Midwest Securities Trust Company and the Philadelphia Depository
Trust Company (collectively referred to as the "Book-Entry Facilities") for
purposes of the Offer, and any financial institution that is a participant in
the Book-Entry Facilities system may make book-entry delivery of the Old Notes
into your account in accordance with each such Book-Entry Facility's procedure
for such transfer. You have confirmed with DTC that any financial institution
that is a participant in DTC's system (a "Participant") may utilize DTC's
Automated Tender Offer Program ("ATOP") to tender the Old Notes for exchange in
the Offer. You will request that DTC establish an account with respect to the
Old Notes for purposes of the Offer within two business days after the date on
which the Offer commences. Any Participant may make book-entry delivery of Old
Notes by causing DTC to transfer such Old Notes into such account in accordance
with DTC's ATOP transfer procedures. However, the acceptance for exchange of the
Old Notes so tendered will only be made after timely confirmation (a "Book-Entry
Confirmation") of such book-entry transfer of Old Notes into such account, and
timely receipt by you of an Agent's Message (as such term is defined in the next
sentence) and any other documents required by the Letter of Transmittal or the
Prospectus. The term "Agent's Message" means a message, transmitted by DTC and
received by you and forming part of a Book-Entry Confirmation, which states that
DTC has received an express acknowledgment from a Participant tendering for
exchange Old Notes which are the subject of such Book-Entry Confirmation that
such Participant has received and agrees to be bound by the terms of the Letter
of Transmittal, and that the Company may enforce such agreement against such
Participant. No tender of Old Notes will be deemed to have been properly made
until all defects and irregularities have been cured or waived.
2
<PAGE> 3
5. Tender of Old Notes shall be made only as set forth in the Prospectus
and the Letter of Transmittal, and Old Notes shall be considered properly
tendered to you only when:
(a) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantee and any other required
documents, are received by you at your address set forth in the Prospectus or in
the Letter of Transmittal and Old Notes are received by you at such address or
pursuant to book-entry delivery at your account at DTC; or a properly completed
and duly executed Notice of Guaranteed Delivery substantially in the form
provided by the Company, with an appropriate guarantee of signature and delivery
from an Eligible Guarantor Institution within the meaning of Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is
received by you at or prior to the Expiration Date. For purposes of this
Agreement, an "Eligible Guarantor Institution" within the meaning of Rule
17Ad-15 under the Exchange Act shall mean a bank, broker, dealer, credit union,
savings association, clearing agency or other institution that is a member of a
recognized signature guarantee medallion program (i.e. Securities Transfer
Agents Medallion Program, Stock Exchange Medallion Program or New York Stock
Exchange Medallion Signature Program). The Notice of Guaranteed Delivery may be
delivered to you by hand or transmitted by telegram, facsimile transmission or
letter;
(b) Old Notes (in respect of which there has been delivered to you prior
to the Expiration Date a properly completed and duly executed Notice of
Guaranteed Delivery) in proper form for transfer together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), and
any other required documents, are received by you within three (3) trading days
of The New York Stock Exchange, Inc. after the Expiration Date; and
(c) the adequacy of the items relating to Old Notes, and the Letters of
Transmittal therefor and any Notice of Guaranteed Delivery has been favorably
passed upon as above provided.
Notwithstanding the provisions of the preceding paragraph, Old
Notes that the Company shall approve as having been properly tendered shall be
considered to be properly tendered.
6. (a) A tendering holder of Old Notes may withdraw tendered Old Notes
in accordance with the procedures set forth in the Prospectus at any time on or
prior to 5:00 p.m. New York City time on the Expiration Date, in which event,
except as may be otherwise specified in the holder's notice of withdrawal, all
items in your possession that shall have been received from such holder with
respect to those Old Notes shall be returned to or upon the order of the holder
as soon as practicable and the Old Notes covered by those items shall no longer
be considered to be properly tendered.
(b) A withdrawal of tender of Old Notes may not be rescinded and any
Old Notes withdrawn will thereafter be deemed not validly tendered for purposes
of the Offer, provided, however, that withdrawn Old Notes may be retendered by
again following one of the procedures therefor described in the Prospectus at
any time on or prior to the Expiration Date.
(c) All questions as to the validity (including time of receipt) of
notices of withdrawal will be determined by the Company, whose determination
will be final and binding.
7. You are to record and to hold all tenders received by you and to
promptly notify by telephone (with confirmation by facsimile transmission) Dr.
F. Patrick Smith of the Company (telephone 908-722-4800 and facsimile
908-722-4967 on a weekly basis or more frequently if so requested by the
Company, as to the total number of Old Notes tendered during such week (or other
period) and the cumulative numbers with respect to the Old Notes received and
not withdrawn through the time of such notice. Each such report should be
divided into the Old Notes represented by (i) book-entry delivery and/or
certificates and (ii) Notices of Guaranteed Delivery actually received by you
through the time of the report. The foregoing information should also be sent to
the Company in a weekly written report. Each report should also indicate the
number of Old Notes tendered in good form and the number of Old Notes tendered
with a defect or irregularity (as well as the name of the beneficial owner of
each such Old Note, if such information has been provided to you and a brief
description of the nature of each such defect or irregularity). In addition, you
will also provide, and cooperate in making available to the Company, such other
information as it may reasonably request and access to those persons on your
staff who are responsible for receiving tenders of Old Notes in order to insure
that
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immediately prior to the Expiration Date, the Company shall have received
information in sufficient detail to enable it to decide whether to extend the
Offer.
8. Each Letter of Transmittal, Old Note, Notice of Guaranteed Delivery
and any other document received by you in connection with the Offer shall be
noted by you as to the date and time of receipt and, if defective, the date and
time the last defect was waived by the Company or was cured. Each Letter of
Transmittal and Old Note that is accepted by the Company shall be retained in
your possession until the Expiration Date. As promptly as practicable
thereafter, you will deliver by registered mail with proper insurance those
items, together with all properly tendered and cancelled Old Notes, to the
Company, Attention Dr. F. Patrick Smith.
9. You are to satisfy requests of brokers, dealers, commercial banks,
trust companies and other persons for copies of the documents and other
materials specified in items (i) through (vi) of the introduction to this
Agreement and such other forms as may be approved in writing from time to time
by the Company. You are not authorized to offer any concessions or to pay any
commissions to any brokers, banks or other persons or to engage or to utilize
any persons to solicit tenders.
10. You are to follow up and act upon any amendments, modifications or
supplements to these instructions and upon any further information in connection
with the terms of the Offer, any of which may be given to you by the Company,
including instructions with respect to any extension of or the modification of
the Offer and the cancellation of the Offer.
11. Unless otherwise instructed by the Company no exchange shall be made
as to any Old Notes held in certificated form until you physically receive a
certificate or certificates representing those Old Notes, a properly completed
and duly executed Letter of Transmittal (or facsimile thereof) and any other
required documents. Promptly after the Expiration Date, the Company will notify
you (such notice if given orally, to be confirmed in writing) of the tendered
Old Notes which it has accepted and you, on behalf of the Company, will exchange
such Old Notes for Exchange Notes and cause such Old Notes to be canceled all in
accordance with this Agreement, the Prospectus and the Letter of Transmittal.
12. For performing your services hereunder, you shall be entitled to
receive from the Company a fee in accordance with the Schedule of Fees attached
hereto. You shall also be reimbursed by the Company for all reasonable expenses,
including, but not limited to, reasonable counsel fees and expenses, if any, you
may incur in connection with the performance of your duties hereunder. This
paragraph will survive any termination of this Agreement.
13. As Exchange Agent hereunder, you:
(a) shall not have duties or obligations other that those
specifically set forth herein or as may subsequently be agreed to by you and the
Company in writing;
(b) shall not be obligated to take any legal action hereunder
that might in your reasonable judgment involve any expense or liability unless
you have been furnished with indemnification from the Company reasonably
satisfactory to you;
(c) may rely on and shall be protected and fully indemnified
pursuant to paragraph 16 in acting in reliance upon any instruction, direction,
officers' certificate, instrument, opinion, notice, letter, facsimile
transmission, telex, telegram or other document delivered to you and reasonably
believed by you to be genuine and to have been signed by the proper party or
parties;
(d) will be regarded as making no representations and having no
responsibilities in respect to the validity, sufficiency, value or genuineness
of any Prospectus, Letter of Transmittal, Notice of Guaranteed Delivery or any
other disclosure materials delivered in connection therewith, or certificates
deposited with you hereunder, and will not make any representation as to the
validity, value or genuineness of the Offer;
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(e) may rely on and shall be protected and fully indemnified
pursuant to Paragraph 16 in acting upon the terms and conditions of (i) this
Agreement, and (ii) the documents relating to the Offer, and (iii) any
instructions given to you in writing by the Company by Dr. F. Patrick Smith or
Mr. Kenneth W. R. Baker of the Company, with respect to any matters relating to
your activities as Exchange Agent covered by this Agreement, and
(f) may consult with counsel satisfactory to you (including
counsel to the Company), and the opinion of such counsel shall be full and
complete authorization and protection with respect to any action taken,
suffered, or omitted by you in reliance upon such opinion, provided that you
shall promptly notify the Company of any actions taken or omitted by you in
reliance upon such opinion.
14. You undertake the duties and obligations imposed herein upon the
following additional terms and conditions:
(a) you shall perform your duties and obligations hereunder with
due care; and
(b) you are not authorized to and shall not make any
recommendation on behalf of the Company as to whether a holder of Old Notes of
the Company should or should not participate in the Offer.
15. All Exchange Notes shall be forwarded by you to the persons at the
addresses so indicated in the Letter of Transmittal by (i) first-class mail
under, a blanket surety bond protecting you and the Company from loss or
liability arising out of the nonreceipt or nondelivery of such certificate, or
(ii) registered mail, insured separately for the replacement value of such
certificates.
16. The Company shall indemnify and hold you (which for purposes of this
paragraph shall include your directors, officers, agents and employees) harmless
from and against any and all costs, damages, actions, losses, liabilities,
expenses and claims (including, but not limited to, the reasonable fees and
expenses of counsel) ("Losses") incurred by you as a result of, in connection
with or arising out of the performance by you of your duties under this
Agreement or the compliance by you with the instructions set forth herein or
delivered hereunder, other than those Losses resulting from your bad faith,
negligence, or willful misconduct. You shall notify the Company of the written
assertion of a claim against you or of any action commenced against you,
promptly after you shall have received any such written assertion of a claim or
shall have been served with the summons or other first legal process, giving
information as to the nature and basis of the claim; provided, however, that
your failure to so notify shall not affect the Company's obligations hereunder
so long as such failure to notify the Company does not adversely affect any
defense that would have been available to the Company. The Company shall be
entitled to participate in the defense of any such claim or legal action and if
the Company so elects at any time after receipt of such notice, the Company may
assume the defense of any suit brought to enforce any such claim.
Notwithstanding anything to the contrary set forth herein, you shall be entitled
to retain a single counsel of your choice in any such suit and the Company shall
pay the reasonable fees, expenses and disbursements of such counsel if (i) the
Company has failed within a reasonable time to retain counsel reasonably
satisfactory to you or (ii) the representation of you and the Company by the
same counsel would be inappropriate due to actual or potential differing
interests. The Company will not be liable for any settlement of any proceedings
effected without its written consent (which consent shall not be unreasonably
withheld). This paragraph shall survive any termination of this Agreement.
17. You hereby acknowledge receipt of each of the documents listed in
items (i) through (vi) of the introduction of this Agreement and further
acknowledge that you have examined the same. Any inconsistency between this
Agreement on the one hand and the Prospectus and Letter of Transmittal, as they
may from time to time be amended, on the other, shall be resolved in favor of
the latter, except with respect to the duties, liabilities and indemnification
of you as Exchange Agent, which shall be governed exclusively by this Agreement.
18. In the event that any of the terms of the Offer are amended, the
Company shall give you prompt written notice thereof describing such amendment.
The parties shall amend this Agreement to the extent necessary to reflect any
material changes to the terms hereof caused by any amendment of the Offer.
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19. You shall preserve, and shall provide the Company access to, all
records pertaining to the Offer and shall permit it to make reproductions of the
same, at its expense during normal business hours, for a period of five (5)
years following the Expiration Date.
20. This Agreement is effective as of the date hereof and is binding
upon and inures to the benefit of the parties' respective successors. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York.
21. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same document.
22. All notices and communications hereunder shall be in writing and
shall be deemed to be duly given if delivered or mailed first class certified or
registered mail, postage prepaid, or telecopied as follows:
If to Company: Tekni-Plex, Inc.
201 Industrial Parkway
Somerville, NJ 08876
Attn: Dr. F. Patrick Smith
Telephone: (908) 722-4800
Fax: (908) 722-4967
and a copy to: Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004-1490
Attn: Robert W. Gray
Telephone: (212) 858-1412
Fax: (212) 858-1500
if to you: Marine Midland Bank
Corporate Trust Administration
140 Broadway - 12th floor
New York, NY 10005-1180
Attn: Frank J. Godino
Telephone: (212) 658-6433
Fax: (212) 658-6425
23. These instructions may be reasonably modified or supplemented by the
Company or by any officer thereof authorized to give notice, approval or waiver
on its behalf.
If the foregoing is acceptable to you, please countersign below to
acknowledge receipt of this letter and to confirm your agreement to the
arrangements herein provided.
Very truly yours,
Tekni-Plex, Inc.
By:______________________________
Name:
Accepted: Title:
MARINE MIDLAND BANK,
As Exchange Agent
By:______________________________
Name: Frank J. Godino
Title: Assistant Vice President
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