<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 8, 1994
REGISTRATION NO. 33-55609
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
REXENE CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2821 75-2104131
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification
incorporation or Classification Code Number)
organization) Number)
</TABLE>
5005 LBJ FREEWAY
OCCIDENTAL TOWER, SUITE 500
DALLAS, TEXAS 75244
(214) 450-9000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------
BERNARD J. MCNAMEE
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
REXENE CORPORATION
5005 LBJ FREEWAY
OCCIDENTAL TOWER, SUITE 500
DALLAS, TEXAS 75244
(214) 450-9000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
PETER A. LODWICK KIRK A. DAVENPORT
THOMPSON & KNIGHT, LATHAM & WATKINS
A PROFESSIONAL CORPORATION 885 THIRD AVENUE, SUITE 1000
1700 PACIFIC AVENUE, SUITE 3300 NEW YORK, NEW YORK 10022
DALLAS, TEXAS 75201 (212) 906-1200
(214) 969-1700
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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.
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 8, 1994
P R O S P E C T U S
$175,000,000
[LOGO]
% SENIOR NOTES DUE 2004
----------------
The % Senior Notes due 2004 (the "Senior Notes") are being offered hereby
(the "Notes Offering") by Rexene Corporation ("Rexene" or the "Company").
Concurrently with the Notes Offering and in connection with the Recapitalization
described herein, the Company is publicly offering 8,000,000 shares of common
stock of the Company ("Common Stock") pursuant to a separate prospectus (the
"Common Stock Offering" and, together with the Notes Offering, the "Offerings").
The Notes Offering is contingent upon the concurrent consummation of the Common
Stock Offering and the other elements of the Recapitalization, including the
establishment of the New Credit Agreement (as defined herein). See "The
Recapitalization."
Interest on the Senior Notes will be payable semiannually on
and , commencing , 1995. The
Senior Notes will mature on , 2004 and will not be redeemable,
in whole or in part, prior to , except that, at any time prior
to , the Company may redeem up to an aggregate of $ million
principal amount of Senior Notes, at a price equal to % of the principal
amount thereof plus accrued and unpaid interest, if any, to the redemption date
with the net cash proceeds of any future offering or offerings of Common Stock
of the Company; provided, however, that at least $ million aggregate
principal amount of Senior Notes must remain outstanding immediately following
each such redemption; and provided further that each such redemption shall occur
within 60 days of the date of the closing of the applicable offering. On or
after , the Senior Notes will be redeemable, at the Company's
option, in whole or in part, at the prices set forth herein plus accrued and
unpaid interest, if any, to the redemption date. In the event of a Change of
Control (as defined herein), the Company will be required to offer to purchase
all of the Senior Notes at a price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the purchase date.
The Senior Notes will be senior unsecured obligations of the Company that
will rank senior in right of payment to all subordinated Indebtedness (as
defined herein) of the Company. The Senior Notes will rank PARI PASSU in right
of payment with all other existing and future Indebtedness of the Company,
including borrowings under the New Credit Agreement. However, the Senior Notes
will be effectively subordinated to secured Indebtedness of the Company to the
extent of the value of the assets securing such Indebtedness, including
borrowings under the New Credit Agreement which will be secured by substantially
all of the assets of the Company. As of June 30, 1994, on a pro forma basis
after giving effect to the Recapitalization, the Company would have had
outstanding approximately $275 million of senior Indebtedness, consisting of the
Senior Notes and $100 million aggregate principal amount of Indebtedness
pursuant to the New Credit Agreement. The Company has no outstanding
indebtedness which would be subordinate to the Senior Notes and has no current
plans to incur any such subordinated indebtedness.
The Company does not intend to list the Senior Notes on any securities
exchange or any automated quotation system. See "Investment Considerations --
Lack of a Public Market for the Senior Notes."
SEE "INVESTMENT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SENIOR 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.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS
PRICE TO THE DISCOUNTS AND TO THE
PUBLIC(1) COMMISSIONS(2) COMPANY(3)
<S> <C> <C> <C>
Per Senior Note....................... % % %
Total................................. $ $ $
<FN>
(1) Plus accrued interest, if any, from the date of issuance.
(2) See "Underwriting" for indemnification arrangements with the Underwriters.
(3) Before deducting expenses payable by the Company estimated at
$ .
</TABLE>
----------------
The Senior Notes are being offered by the Underwriters, subject to
acceptance by them and to their right to reject any order in whole or in part.
It is expected that delivery of the Senior Notes will be made against payment
therefor at the offices of Smith Barney Inc., 388 Greenwich Street, New York,
New York 10013, on or about , 1994.
----------------
SMITH BARNEY INC. WERTHEIM SCHRODER & CO.
INCORPORATED
November , 1994
<PAGE>
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SENIOR NOTES,
THE COMMON STOCK OR BOTH AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK
EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
[Photos of principal end market products to come]
<PAGE>
[Photos of principal end market products to come]
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY SHOULD BE READ IN CONJUNCTION WITH, AND IS QUALIFIED
IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS,
INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS OR IN
DOCUMENTS INCORPORATED IN THIS PROSPECTUS BY REFERENCE. UNLESS OTHERWISE
INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS'
OVER-ALLOTMENT OPTION TO PURCHASE A TOTAL OF 1,200,000 SHARES OF COMMON STOCK
FROM THE COMPANY IN CONNECTION WITH THE COMMON STOCK OFFERING WILL NOT BE
EXERCISED. UNLESS OTHERWISE INDICATED, ALL INDUSTRY DATA INCLUDED IN THIS
PROSPECTUS ARE DERIVED FROM INFORMATION AVAILABLE FROM OR PROVIDED BY CHEMICAL
MARKETING ASSOCIATES, INC. ("CMAI"), AN INDUSTRY CONSULTANT.
A GLOSSARY OF INDUSTRY TERMS APPEARS ON PAGE 10.
THE COMPANY
Rexene Corporation manufactures and markets a wide variety of products
ranging from value added specialty products, such as customized plastic films,
to commodity petrochemicals, such as styrene. These products are sold to a
diverse customer base and are used in a wide variety of industrial and consumer-
related applications. The Company's principal products are plastic film,
polyethylene, polypropylene and REXTAC-R- amorphous polyalphaolefin ("APAO")
resins and styrene. In addition, the Company manufactures, primarily for its own
consumption, ethylene and propylene, the two basic chemical building blocks of
the Company's principal products. The Company believes this captive olefins
source of supply provides it with an advantage over competitors that do not
produce ethylene and propylene. The Company manufactures plastic film at five
plants located in the U.S. and England and polymers and petrochemicals at an
integrated facility in Odessa, Texas (the "Odessa Facility") which is located
near supplies of most of its feedstocks.
The Company believes that it has built a strong customer base and reputation
for quality primarily due to (i) its focus on a high degree of customer service
and the production of value added specialty products, (ii) its manufacturing and
marketing expertise and (iii) the experience and commitment of its operating
management. In addition, the Company believes that it has developed a strategy
to allow it to compete effectively in its markets against larger competitors in
both periods of rising and declining product prices.
CT FILM. Through its Consolidated Thermoplastics division ("CT Film"), the
Company produces specialty grades of polyethylene films used in disposable
diapers, feminine hygiene products, medical products, tapes, packaging,
lamination and unsupported overwraps and greenhouse and agricultural
applications. CT Film's plants, located in Chippewa Falls, Wisconsin;
Clearfield, Utah; Dalton, Georgia; Harrington, Delaware; and Scunthorpe,
England, have a total rated annual production capacity of approximately 245
million pounds. From January 1, 1992 through September 30, 1994, the weighted
average utilization rate for these facilities (exclusive of Scunthorpe) was 77%.
CT Film's sales increased from $109 million in 1989 to approximately $147
million in 1993, an increase of approximately 35%, while its total rated annual
production capacity expanded by 41%. In September 1994, CT Film, through Rexene
Corporation Limited, a wholly-owned subsidiary of the Company, commenced
operation of its first overseas plant in Scunthorpe, England, which was built
primarily to service a new U.K. facility of CT Film's major customer, Kimberly-
Clark Corporation. In 1993, CT Film had sales of approximately $147 million, or
34% of the Company's net sales.
POLYETHYLENE. Polyethylene, the world's most widely produced polymer, is
used in the manufacture of packaging and nonpackaging films, coatings for paper
products, wire and cable applications, bottles and profile and foam extrusions.
The Company currently produces a variety of grades of high pressure, low density
polyethylene ("HPLDPE") for use in food packaging, industrial packaging, medical
bottles, produce films, laminated structures, paper coatings and other
applications. The Company seeks to compete with larger polyethylene producers by
targeting customers that require smaller lot sizes of specially tailored, high
quality products. This strategy generally affords the Company opportunities for
premium pricing relative to commodity grades of polyethylene. The Company
believes that the Odessa Facility, which has relatively small reactors and a
total rated annual production capacity for polyethylene of approximately 405
million
3
<PAGE>
pounds, is well positioned to compete in these markets. From January 1, 1992
through September 30, 1994, the weighted average utilization rate for the
Company's polyethylene facilities was 97%. In 1993, the Company had polyethylene
sales of approximately $120 million, or 28% of the Company's net sales.
POLYPROPYLENE. Polypropylene is one of the fastest growing major polymers
in the world. The Company manufactures polypropylene for use in specialized
manufacturing applications in the medical, electrical and food packaging
markets. The Company seeks to compete with larger polypropylene producers by
focusing on specialty products that generally afford opportunities for premium
pricing relative to commodity grades of polypropylene. The Odessa Facility has a
total rated annual production capacity for polypropylene of approximately 180
million pounds. From January 1, 1992 through September 30, 1994, the weighted
average utilization rate for the Company's polypropylene facilities was 88%. In
1993, the Company had polypropylene sales of approximately $64 million, or 15%
of the Company's net sales.
APAO. The Company is a major producer of APAO, a special purpose polymer
used in the production of adhesives, sealants, roofing materials, paper
lamination and wire and cable applications. The Company estimates that in 1993
Rexene accounted for approximately 30% of total U.S. market for APAO and atactic
polypropylene. The Odessa Facility has a total rated annual production capacity
for APAO of approximately 45 million pounds. From January 1, 1992 through
September 30, 1994, the weighted average utilization rate for the Company's APAO
facilities was 85%. In 1993, the Company had APAO sales of approximately $15
million, or 4% of the Company's net sales.
STYRENE. Styrene is a raw material used principally in the production of
polymers used to manufacture products such as disposable cups and trays,
luggage, housewares, toys and building products. The Odessa Facility has a total
rated annual production capacity for styrene of approximately 320 million
pounds. From January 1, 1992 through September 30, 1994, the weighted average
utilization rate for the Company's styrene facilities was 88%. In 1993, the
Company had styrene sales of approximately $61 million, or 14% of the Company's
net sales.
The corporate headquarters of Rexene, a Delaware corporation, are located at
5005 LBJ Freeway, Dallas, Texas 75244, and its telephone number is 214/450-9000.
BUSINESS STRATEGY
The Company's operating strategy to market value added specialty products
and to improve its operating costs is designed to allow it to compete
effectively against larger competitors in both periods of rising and declining
product prices. The Company believes that its operating strategy will enable it
to take advantage of improved market conditions in a strong economy and to
lessen the impact of depressed pricing and demand in market downturns. Over the
longer term, Rexene will seek to improve its profitability by (i) maintaining
its customer driven focus to provide value added specialty products and quality
service, (ii) focusing on niche markets which optimize the use of the Odessa
Facility, (iii) continuing to develop its plastic film business, (iv) developing
new products and applications through technological innovation, (v) continuing
to improve operating efficiencies, (vi) continuing to reinvest in its core
plastic film and polymer businesses and (vii) continuing to reduce its balance
sheet leverage.
RECENT INDUSTRY TRENDS
The polyethylene, polypropylene and styrene markets in which Rexene competes
are cyclical markets that are sensitive to relative changes in supply and
demand, which are in turn affected by general economic conditions. Historically,
these markets have experienced alternating periods of tight supply and rising
prices and profit margins, followed by periods of large capacity additions
resulting in oversupply and declining prices and margins. Following a
significant improvement in domestic economic growth since the second half of
1993, these markets experienced increased levels of demand which have resulted
in greater capacity utilization and higher domestic and export prices. According
to CMAI, during the first six months of 1994, domestic demand for low density
polyethylene ("LDPE"), polypropylene and styrene increased by approximately 9%,
14% and 5%, respectively, compared to the first six months of 1993. This
increase in demand has enabled the Company and the petrochemical industry in
general to increase selling prices significantly at a
4
<PAGE>
time when feedstock costs have either not increased or only increased modestly
compared to end product prices. For example, from December 1993 to September
1994, the Company increased the average selling prices of its polyethylene,
polypropylene and styrene by 28%, 18% and 66% per pound, respectively. During
the same period, prices for the Company's major feedstocks, ethane and propane,
were relatively stable, and the price for benzene increased 63%.
THE RECAPITALIZATION
The Notes Offering is part of a recapitalization plan (the
"Recapitalization") designed to increase stockholders' equity, reduce
indebtedness and interest expense and improve the strategic, operating and
financial flexibility of the Company. The Company believes that the
Recapitalization should better position Rexene to continue to reduce its balance
sheet leverage through the use of cash flow from operations. The
Recapitalization includes (i) the Offerings, (ii) the establishment of a new
credit facility (the "New Credit Agreement"), providing the Company with a $100
million term loan (the "Term Loan"), which will be drawn down at the closing of
the Recapitalization, and an $80 million revolving line of credit (the
"Revolving Credit Facility"), which is not expected to be drawn down at such
closing, (iii) the call for redemption of the Company's Increasing Rate Senior
Notes Due 1999 (the "Old Senior Notes") and Increasing Rate Subordinated Notes
Due 2002 (the "Old Subordinated Notes" and, together with the Old Senior Notes,
the "Old Notes"), and (iv) the repayment in full of the outstanding indebtedness
under the Company's existing credit agreement with Transamerica Business Credit
Corporation (the "Old Credit Agreement").
The following table sets forth the estimated sources and uses of funds for
the Recapitalization, assuming consummation as of November 15, 1994. In the
event that the aggregate gross proceeds from the Offerings are less than $291
million, the Company may be required to arrange for alternative sources of cash,
which could include additional borrowings under the New Credit Agreement or
utilizing cash on hand, or a combination thereof. At September 30, 1994, the
Company had unrestricted cash on hand of approximately $50.7 million.
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
SOURCES:
Notes Offering (1).................................................................... $ 175,000
Common Stock Offering (1)............................................................. 116,000
Borrowings under New Credit Agreement................................................. 100,000
--------------
Total sources....................................................................... $ 391,000
--------------
--------------
USES:
Repay Old Senior Notes (2)(3)......................................................... $ 253,000
Repay Old Subordinated Notes(2)(3).................................................... 99,629
Repay borrowings under Old Credit Agreement........................................... 9,000
Estimated fees and expenses (4)....................................................... 16,441
Excess cash (5)....................................................................... 12,930
--------------
Total uses.......................................................................... $ 391,000
--------------
--------------
<FN>
- ------------------------
(1) Represents gross proceeds.
(2) Includes aggregate unamortized discount of approximately $59.9 million for
the Old Notes at November 15, 1994.
(3) Excludes accrued interest of approximately $11.6 million on the Old Senior
Notes and $5.1 million on the Old Subordinated Notes that will be paid from
the Company's existing cash balances on November 15, 1994.
(4) Includes estimated underwriting discounts and commissions and related
expenses of the Offerings; fees and expenses associated with the New Credit
Agreement and termination of the Old Credit Agreement; and other fees and
expenses payable or reimbursable by the Company in connection with the
Recapitalization.
(5) Any excess cash will be used for working capital purposes.
</TABLE>
5
<PAGE>
THE NOTES OFFERING(1)
<TABLE>
<S> <C>
Securities Offered........... $175 million aggregate principal amount of % Senior Notes
due , 2004.
Maturity Date................ , 2004.
Interest Payment Dates....... and , commencing , 1995.
Optional Redemption.......... The Senior Notes will not be redeemable, in whole or in
part, prior to , except that, at any time prior to
, the Company may redeem up to an aggregate of
$ million principal amount of Senior Notes, at a price
equal to % of the principal amount thereof, plus accrued
and unpaid interest, if any, to the redemption date with the
net cash proceeds of any future offering or offerings of
Common Stock of the Company; provided, however, that at
least $ million aggregate principal amount of Senior
Notes must remain outstanding immediately following each
such redemption; and provided further that each such
redemption shall occur within 60 days of the date of the
closing of the applicable offering. On or after ,
the Senior Notes will be redeemable, at the Company's
option, in whole or in part, at the prices set forth herein
plus accrued and unpaid interest, if any, to the date of
redemption. See "Description of Senior Notes -- Optional
Redemption."
Ranking...................... The Senior Notes will be senior unsecured obligations of the
Company that will rank senior in right of payment to all
subordinated Indebtedness of the Company. The Senior Notes
will rank PARI PASSU in right of payment with all other
Indebtedness of the Company. However, the Senior Notes will
be effectively subordinated to secured Indebtedness of the
Company to the extent of the value of the assets securing
such Indebtedness, including borrowings under the New Credit
Agreement entered into in connection with the
Recapitalization. Indebtedness incurred pursuant to the New
Credit Agreement will be secured by substantially all the
assets of the Company. The Company has no outstanding
indebtedness which would be subordinate to the Senior Notes
and has no current plans to incur any such subordinated
indebtedness. See "Investment Considerations -- Secured
Indebtedness" and "Description of New Credit Agreement."
Change of Control............ Upon a Change of Control, the Company will be required to
make an offer to purchase all Senior Notes then outstanding
at a price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the purchase
date. See "Description of Senior Notes -- Change of
Control."
Certain Covenants............ The indenture relating to the Senior Notes (the "Indenture")
will contain certain covenants that, among other things,
limit the ability of the Company and its Subsidiaries to
incur additional Indebtedness and issue Preferred Stock and
limit the ability of the Company and its Restricted
Subsidiaries to repurchase Capital Stock and subordinated
Indebtedness, engage in transactions with its affiliates,
engage in sale and leaseback transactions, incur or suffer
to exist certain liens, pay dividends and other
distributions, make investments, sell assets and engage in
mergers and consolidations. See "Description of Senior Notes
-- Certain Covenants."
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Events of Default and
Remedies.................... The Indenture will contain events of default which will
include, among others, a default for 30 days in the payment
of interest on any Senior Note; a default in payment when
due of the principal or premium on any Senior Note; a
failure by the Company for 30 days to comply with certain
covenants in the Indenture; a failure by the Company for 60
days after notice to comply with any of its other agreements
in the Indenture or the Senior Notes; certain defaults with
respect to indebtedness (other than the Senior Notes) of the
Company or any of its Restricted Subsidiaries; and certain
bankruptcy or insolvency events with respect to the Company
and any Restricted Subsidiary that is a Significant
Subsidiary.
If any event of default under the Indenture occurs and is
continuing, the trustee or the holders of at least 25% in
principal amount of the then outstanding Senior Notes may
declare all Senior Notes to be due and payable immediately.
In the case of an event of default arising from certain
events of bankruptcy or insolvency with respect to the
Company or any Restricted Subsidiary that is a Significant
Subsidiary, all outstanding Senior Notes will become due and
payable without further action or notice.
Governing Law................ The Indenture will be governed by New York law.
Use of Proceeds.............. Repayment of indebtedness. See "Use of Proceeds."
Conditions to the Notes
Offering.................... The Notes Offering is contingent upon the concurrent
consummation of the Common Stock Offering and the other
elements of the Recapitalization, including the
establishment of the New Credit Agreement. See "The
Recapitalization."
<FN>
- ------------------------
(1) All capitalized terms used herein with respect to the Notes Offering and
not otherwise defined herein have the meanings assigned thereto under
"Description of Senior Notes -- Certain Definitions."
</TABLE>
INVESTMENT CONSIDERATIONS
Prospective purchasers of the Senior Notes offered hereby should consider
carefully the matters set forth herein under the caption "Investment
Considerations."
7
<PAGE>
SUMMARY SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
The following table sets forth certain selected historical and pro forma
consolidated financial data for the Company for the periods indicated. In
October 1991, the predecessor corporation of the Company ("Old Rexene") filed a
petition for reorganization under the federal bankruptcy laws from which Old
Rexene emerged on September 18, 1992, pursuant to an amended plan of
reorganization (the "Amended Plan") which provided for the merger of Old Rexene
into a wholly owned subsidiary of Old Rexene to form the Company (the
"Reorganization"). The Company adopted fresh start reporting on September 30,
1992 following consummation of the Reorganization. As a result, results of
operations (other than net sales and EBITDA) for the periods after September 30,
1992 are not comparable to results of operations prior to that date.
<TABLE>
<CAPTION>
OLD REXENE
(PREDECESSOR) THE COMPANY
--------------------------------------- ------------------------------------------------
NINE NINE MONTHS
YEARS ENDED MONTHS THREE MONTHS ENDED
DECEMBER 31, ENDED ENDED YEAR ENDED SEPTEMBER 30,
---------------------------- SEPT. 30, DECEMBER 31, DECEMBER 31, ------------------
1989 1990 1991 1992 1992 1993 1993 1994
-------- -------- -------- --------- ------------ ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL STATEMENT OF OPERATIONS
DATA:(1)
Net sales........................ $608,631 $502,186 $449,728 $316,106 $ 98,854 $429,353 $326,460 $386,153
Gross profit..................... 158,130 133,707 61,671 38,025 12,122 53,744 41,560 77,192
Operating income................. 99,938 81,100 12,028 9,392 1,418 14,504 12,191 46,285
Interest expense (2)............. 61,111 71,732 58,374 -- 12,660 49,834 36,942 37,971
Income (loss) before income taxes
and extraordinary items......... 53,956 18,360 (56,191) (28,840) (10,436) (34,183) (23,954) 10,482
Income tax (expense) benefit..... (43,751) (15,655) 13,444 (2,636) 3,908 8,940 4,319 (4,329)
Net income (loss) before
extraordinary items............. 10,205 2,705 (42,747) (31,476) (6,528) (25,243) (19,635) 6,153
Ratio of earnings to fixed
charges (3) (4)................. -- -- -- 1.23x
OTHER DATA:
Depreciation and amortization.... $ 25,381 $ 22,451 $ 23,852 $ 20,062 $ 4,315 $ 17,446 $ 12,925 $ 13,884
Capital expenditures............. 18,596 28,855 33,464 11,136 3,961 17,008 10,688 21,089
EBITDA (5)....................... 125,319 103,551 35,880 29,454 5,733 31,950 25,116 60,169
Ratio of EBITDA to interest
expense (3) (5)................. -- -- -- 1.58x
PRO FORMA STATEMENT OF OPERATIONS
DATA:(6)
Operating income................. $ 14,504 $ 46,285
Interest expense................. $ 28,384 $ 21,276
Net income (loss)................ $(11,944) $ 16,504
EBITDA (5)....................... $ 31,950 $ 60,169
Ratio of EBITDA to interest
expense (5)..................... 1.13x 2.83x
Ratio of earnings to fixed
charges (4)..................... -- 2.13x
<CAPTION>
AT SEPTEMBER 30, 1994
------------------------
AS ADJUSTED
ACTUAL (6)
--------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents (7).... $ 52,964 $ 53,255
Working capital.................. 125,089 133,331
Total assets..................... 476,781 485,235
Long-term debt (including current
portion):
Face amount.................... 361,629 275,000
Unamortized discount (8)....... (61,120) --
--------- ------------
Net balance.................... 300,509 275,000
Stockholders' equity............. 2,606 86,792
</TABLE>
8
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<FN>
- ------------------------------
(1) The financial results of a manufacturing facility in Bayport, Texas, which
the Company sold in February 1990, are included in the historical statement
of operations data for the years ended December 31, 1989 and 1990. Net
sales and operating income for 1989 were $124.7 million and $4.1 million,
respectively. Net sales and operating income of the Bayport manufacturing
facility for 1990 were $16.3 million and $1.8 million, respectively.
(2) Interest expense on the indebtedness of Old Rexene accrued through October
16, 1991. In addition, interest expense on such indebtedness accrued from
October 16, 1991 to December 31, 1991 in accordance with terms of an
agreement with a noteholders' committee formed as part of the
Reorganization. If the interest expense from October 16, 1991 to December
31, 1991 had been calculated under the term of the indebtedness of Old
Rexene, the interest expense for the year ended December 31, 1991 would
have aggregated $73.8 million. The Amended Plan eliminated post petition
interest requirements through June 30, 1992. Interest expense from July 1,
1992 through September 30, 1992 was not classified as interest expense but
reflected in reorganization expense. See Note 3 of the Notes to the
Consolidated Financial Statements. Non-cash interest expense (income) was
$10.8 million for the year ended December 31, 1989, ($4.6 million) for the
year ended December 31, 1990 (due to the reversal of interest previously
accrued in accordance with Emerging Issues Task Force ("EITF") Issue No.
86-15, "Increasing Rate Debt"), $3.3 million for the year ended December
31, 1991, zero for the nine months ended September 30, 1992 (due to the
Amended Plan previously noted) $6.4 million for the three months ended
December 31, 1992 and $25.4 million for the year ended December 31, 1993.
Non-cash interest expense for the nine months ended September 30, 1993 and
1994 was $18.7 million and $16.2 million, respectively.
(3) The ratio of earnings to fixed charges and the ratio of EBITDA to interest
expense for the periods prior to September 30, 1992 are not presented
because such information is not comparable to the similar information for
the periods after September 30, 1992, the date of the Company's adoption of
"fresh start" reporting.
(4) For the purposes of determining the ratio of earnings to fixed charges,
earnings consist of income before income taxes, extraordinary items and
fixed charges. Fixed charges consist of interest on indebtedness,
including, if any, the amortization of debt issue costs, accretion of debt
discount, interest expense accrued in accordance with EITF Issue No. 86-15
(See Note 10 to the Consolidated Financial Statements) and one-third of
rental expense (which is deemed representative of the interest factor
therein). Earnings were insufficient to cover fixed charges in the
historical periods ended December 31, 1992, December 31, 1993 and September
30, 1993 by $10.7 million, $35.4 million and $25.2 million, respectively.
Earnings were insufficient to cover fixed charges for the pro forma period
ended December 31, 1993 by $13.4 million.
(5) EBITDA means operating income before depreciation and amortization. EBITDA
has been included solely to facilitate consideration of the covenants in
the Indenture that are based, in part, on EBITDA and because the Company
understands that it is used by certain investors as one measure of a
company's historical ability to service its debt. EBITDA is not intended to
represent cash flows for the period nor has it been presented as an
alternative to earnings from operations as an indicator of operating
performance and should not be considered in isolation or as a substitute
for measures of performance prepared in accordance with generally accepted
accounting principles. EBITDA for the periods ended December 31, 1992,
December 31, 1993 and September 30, 1993 was insufficient to cover interest
expense by $6.9 million, $17.9 million and $11.8 million, respectively.
Interest expense for such periods included non-cash interest expense as
described in Note 2 above.
(6) Gives effect to the Recapitalization as described under the caption "Pro
Forma Unaudited Condensed Consolidated Financial Data". See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(7) Includes restricted cash of $2.3 million.
(8) Represents the unamortized discount on the Old Notes.
</TABLE>
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GLOSSARY OF INDUSTRY TERMS
<TABLE>
<S> <C>
"APAO" -- amorphous polyalphaolefins, a special purpose polymer used
primarily in roofing materials and adhesives, manufactured
principally to replace APP.
"APP" -- atactic polypropylene, a by-product of isotatic polypropylene
manufacturing.
"benzene" -- a petrochemical produced primarily from petroleum and used in
the production of styrene.
"CMAI" -- Chemical Marketing Associates, Inc., a Houston, Texas based
industry consultant.
"copolymers" -- a polymer formed from two different chemical building blocks
(monomers).
"CT Film" -- the Company's Consolidated Thermoplastics division, which
produces specialty grades of polyethylene films.
"ethane" -- an NGL component from which ethylene is produced.
"ethylene" -- a principal raw material used by the Company to make
polyethylene and styrene.
"feedstocks" -- ethane, propane and benzene, raw materials used in the
production of ethylene, propylene and styrene.
"film" -- a thin sheet of plastic.
"FPO" -- a flexible polyolefin polymer made from propylene.
"HDPE" -- high density polyethylene resin, a homopolymer produced from
ethylene in a low pressure process.
"homopolymer" -- a polymer produced from a single monomer.
"HPLDPE" -- high pressure low density polyethylene resin.
"LDPE" -- low density polyethylene, resin including HPLDPE and LLDPE.
"liner grade" -- a multi-purpose commodity grade of polyethylene.
"LLDPE" -- linear low density polyethylene resin.
"monomer" -- a chemical building block from which a polymer is formed.
"NGL" -- natural gas liquids which are condensed from "wet" natural gas.
"olefins" -- a particular class of petrochemicals, including ethylene and
propylene.
"operating/utilization -- derived by dividing production by total rated annual production
rate" capacity.
"petrochemicals" -- organic chemicals produced from petroleum or natural gas,
including olefins, benzene and styrene.
"polyethylene" -- a polymer formed from the polymerization of mainly ethylene.
"polymer" -- products, such as polyethylene, polypropylene and APAO, made
from the polymerization of monomers, such as ethylene and
propylene.
"polypropylene" -- a polymer formed from the polymerization of mainly propylene.
"propane" -- an NGL component from which ethylene and propylene are produced.
"propylene" -- a principal raw material used by the Company to make
polypropylene and APAO.
"SPI" -- Society of the Plastics Industry Inc., an industry trade
association.
"styrene" -- a commodity petrochemical produced from ethylene and benzene.
"thermoplastic" -- a polymer which after shaping can be reshaped (within
limitations) by the application of heat.
"total rated annual -- official design capacity of plants at continuous use all year.
production capacity"
"value added specialty -- products with composition and/or performance characteristics
products" different from commodity grade products for which certain
customers are generally willing to pay a premium price.
</TABLE>
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INVESTMENT CONSIDERATIONS
The following factors, as well as the other information contained elsewhere
in this Prospectus, should be carefully considered before investing in the
securities being offered hereby.
INDUSTRY CYCLICALITY
The polyethylene, polypropylene and styrene markets in which the Company
competes are cyclical markets that are sensitive to relative changes in supply
and demand, which are in turn affected by general economic conditions.
Historically, these markets have experienced alternating periods of tight
supply, causing prices and profit margins to increase, followed by periods of
large capacity additions, resulting in oversupply and declining prices and
profit margins. In the early 1980's, overcapacity in the polyethylene and
polypropylene markets and weakened demand for styrene due to general economic
conditions led to poor operating results for the Company and the industry in
general. In the mid 1980's, construction of new production facilities slowed and
increases in production capacities due to technology improvements moderated. At
the same time, domestic demand grew significantly as a result of a stronger U.S.
economy and export sales strengthened due in part to a weaker U.S. dollar. As a
result, during fiscal years 1987 to 1989, the industry experienced increased
levels of demand for its products which resulted in near full capacity
utilization rates, higher domestic and export prices and record earnings.
Feedstock prices were also favorable during this period. In response to this
rapid increase in demand and profits, the U.S. LDPE, polypropylene and styrene
industries increased total rated annual production capacity by approximately
22%, 31% and 34%, respectively, from 1988 to 1993. From 1990 to 1993, the rate
in U.S. demand slowed as a result of general economic conditions, and
significant production capacity was added in some of the traditional export
markets in the Far East. As a consequence, the industry, including the Company,
experienced during this period an overcapacity condition that resulted in a
decline in utilization rates and substantially lower average selling prices and
profit margins.
Economic growth in the United States in late 1993 and 1994 resulted in
significantly increased demand in the petrochemical and polymer markets in which
the Company participates and higher average selling prices and higher profit
margins during 1994. However, Rexene believes that, from late 1994 to 1995,
additional total rated annual production capacity of approximately 1.7 billion
pounds in LDPE (all of which is LLDPE, which the Company does not manufacture or
sell), 230 million pounds in polypropylene and 200 million pounds in styrene
could be added to the industry by the Company's competitors. Approximately one
billion pounds of additional polypropylene capacity has been announced to be
added by the Company's competitors during 1996. During 1993, the United States
industry had total rated annual production capacity of approximately 13.7
billion pounds of LDPE, 9.8 billion pounds of polypropylene and 11.6 billion
pounds of styrene. There can be no assurance that the current growth in demand
for the Company's products will be sustained or that it will keep pace with
anticipated or unanticipated capacity additions or other events. See "--
Competition."
PRICE VOLATILITY OF PETROCHEMICAL FEEDSTOCKS
The Company uses large amounts of petrochemical feedstocks in the
manufacturing of its chemical products. The prices of feedstocks fluctuate
widely based upon the prices of natural gas and oil. During the past four years,
feedstocks accounted for between approximately 24% and 32% of the Company's
total cost of sales. While the Company tries to match cost increases with
corresponding price increases, large increases in the prices of petrochemical
feedstocks could adversely affect the Company's operating margins. There may be
periods of time during which the Company is unable to pass through to customers
increases in feedstock costs because of weakness in demand for, or oversupply
of, the Company's products. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
HIGH LEVERAGE AND SUBSTANTIAL DEBT SERVICE REQUIREMENTS
Following the Recapitalization, the Company will continue to be highly
leveraged and have substantial debt service obligations. As of September 30,
1994, on a pro forma basis after giving effect to the Recapitalization, the
Company's long-term debt would have been $265 million and the Company's
stockholders' equity would have been approximately $87 million, including an
extraordinary loss of approximately $24.2 million (net of income tax benefits)
resulting from the redemption of the Old Notes. On such a pro forma basis, this
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<PAGE>
long-term debt would have included $90 million of borrowings under the Term Loan
and $175 million of Senior Notes. In addition, $10 million of borrowings under
the Term Loan would be reflected as the current portion of long-term debt. See
"Capitalization." The Company may incur additional indebtedness in the future,
subject to certain limitations contained in the instruments governing its
indebtedness. For a description of the Senior Notes and the New Credit
Agreement, see "Description of New Credit Agreement" and "Description of Senior
Notes."
The degree to which the Company is leveraged could have important
consequences to holders of the Senior Notes of the Company, including but not
limited to, the following: (i) the Company's ability to obtain additional
financing in the future for working capital, capital expenditures, acquisitions,
general corporate purposes or other purposes may be impaired; (ii) a significant
portion of the Company's cash flow from operations must be dedicated to the
payment of principal and interest on its indebtedness, thereby reducing the
funds available to the Company; (iii) certain of the Company's borrowings are
and will continue to be at variable rates of interest, which could result in
higher interest expense in the event of increases in interest rates; and (iv)
such indebtedness contains and will contain financial and restrictive covenants,
the failure to comply with which may result in an event of default which, if not
cured or waived, could have a material adverse effect on the Company.
The obligation of the lenders to fund under the New Credit Agreement is
initially contingent upon the receipt by the Company of gross proceeds from the
Common Stock Offering of at least $85 million and of aggregate gross proceeds
from the Offerings of at least $275 million, and, thereafter, availability of
borrowings under the revolving portion of the New Credit Agreement is based upon
a formula related to inventory and accounts receivable. After the
Recapitalization, the Company will have substantial principal repayment
obligations. The Company will be required to make quarterly principal payments
under the Term Loan commencing on March 31, 1995. The first four payments will
each be in the amount of $2.5 million, the next four payments will each be in
the amount of approximately $3.75 million and all payments thereafter will each
be in the amount of $6.25 million, so as to retire such indebtedness in its
entirety by December 31, 1999. In addition, under the New Credit Agreement, the
Company has certain mandatory prepayment obligations that will not exceed $10.0
million in 1995, $20.0 million, less any prior mandatory repayments made from
excess cash flow, in 1996 or $30.0 million, less any prior mandatory repayments
made from excess cash flow, in 1997 in the event annual cash flow exceeds
certain levels. The Senior Notes will mature on , 2004. The Company
believes that following the consummation of the Offerings, based on current
levels of operations and anticipated growth, its cash flow from operations,
together with other available sources of liquidity, including borrowings under
the Revolving Credit Facility, will be adequate for the foreseeable future to
make scheduled payments of principal and interest under the New Credit Agreement
and interest payments on the Senior Notes, to permit anticipated capital
expenditures and to fund working capital requirements. However, the ability of
the Company to satisfy these obligations depends on a number of significant
assumptions, including, among other things, that (i) demand for the Company's
polymers and styrene products will continue at historical levels and demand for
the Company's plastic film products will continue to grow at historical rates,
(ii) the Company will be able to recover any long-term raw material cost
increases through higher selling prices, (iii) the Company will be able to
obtain supplies of key raw materials and retain key material suppliers and key
customers, and (iv) the Company will succeed in implementing its business
strategy. If Rexene is unable to generate sufficient cash flow to service its
indebtedness, or if for any reason borrowings under the New Credit Agreement
become unavailable, it will have to adopt one or more alternatives, such as
reducing or delaying planned capital expenditures, selling assets, restructuring
or refinancing its indebtedness or seeking additional equity capital. There can
be no assurance that any of these strategies could be effected on satisfactory
terms, if at all, particularly in light of the Company's high levels of
indebtedness, the pledge of substantially all of its assets as security for the
New Credit Agreement and the restrictive covenants in the New Credit Agreement
and the Indenture.
In the event that Rexene is unable to generate sufficient cash flow and is
otherwise unable to obtain funds necessary to meet required payments of
principal, premium, if any, and interest on its indebtedness, Rexene would be in
default under the terms of the agreements governing such indebtedness, including
the Indenture and the New Credit Agreement. In the event of such default, the
holders of such indebtedness
12
<PAGE>
could elect to declare all of the funds borrowed thereunder to be due and
payable together with accrued and unpaid interest, and the lenders under the New
Credit Agreement could elect to terminate their commitments thereunder, which
could result in the Company being forced to seek protection under applicable
bankruptcy laws or in an involuntary bankruptcy proceeding being brought against
the Company. In either event, the Company's ability to generate revenues from
operations or asset sales would be limited which could further limit the
Company's ability to repay its obligations under the New Credit Agreement and
the principal, premium, if any, and interest on the Senior Notes. Under such
circumstances, the holders of the Senior Notes could be adversely affected
because secured lenders, including lenders under the New Credit Agreement, would
be entitled to receive payment at least equal to the value of their collateral,
which could exceed the amount recoverable by unsecured creditors, including the
holders of the Senior Notes. See "-- Secured Indebtedness," "Use of Proceeds,"
"Description of New Credit Agreement" and "Description of Senior Notes."
RANKING OF THE SENIOR NOTES
The Senior Notes will be unsecured obligations of the Company ranking PARI
PASSU in right of payment with all other senior indebtedness of Rexene, and will
be senior in right of payment to all existing and future subordinated
indebtedness of Rexene. However, the Senior Notes will be effectively
subordinated to secured indebtedness of the Company, including borrowings under
the New Credit Agreement, to the extent of the value of the assets securing such
indebtedness. In the event of the dissolution, liquidation or reorganization of,
or similar proceedings relating to, Rexene, secured lenders would be entitled to
receive payment at least equal to the value of their collateral, which could
exceed the amount recoverable by unsecured creditors, including the holders of
the Senior Notes. At September 30, 1994, on a pro forma basis after giving
effect to the Recapitalization, Rexene would have had outstanding $100 million
of secured indebtedness, all of which would have been outstanding pursuant to
the New Credit Agreement. The Company has no outstanding indebtedness which
would be subordinate to the Senior Notes and has no current plans to incur any
such subordinated indebtedness. See "Use of Proceeds," "Capitalization,"
"Description of New Credit Agreement" and "Description of Senior Notes."
HISTORY OF NET LOSSES
Excluding the effect of an extraordinary gain in 1992, the Company has
experienced net losses in each of the past three fiscal years, including a net
loss of approximately $25.2 million in 1993. Such net losses were in part due to
the interest expense arising from the substantial indebtedness incurred by the
Company in 1989 to fund a special dividend aggregating approximately $216
million and the payment of approximately $105 million in settlement, including
expenses, of certain litigation arising from the acquisition of Old Rexene by an
investor group in 1988. The Company's interest expense was substantially reduced
as a result of the Company's emergence from bankruptcy on September 18, 1992
pursuant to the Reorganization and will be further reduced as a result of the
Recapitalization. The Company reported net income of approximately $6.2 million
for the nine months ended September 30, 1994. Assuming the redemption of the Old
Notes in 1994, fourth quarter 1994 results will reflect an extraordinary loss of
approximately $24.2 million (net of income tax benefits).There can be no
assurance, however, that the Company will not incur net losses in the future.
See "Pro Forma Unaudited Condensed Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
COMPETITION
The industries in which the Company operates are highly competitive. Many of
the Company's competitors, particularly in the petrochemical industry, are
larger and have substantially greater financial resources than the Company.
Among the Company's competitors are some of the world's largest chemical
companies and major integrated petroleum companies that have their own raw
material resources. In addition, a significant portion of the Company's business
is based upon widely available technology. The entrance of new competitors into
the industry and the addition by existing competitors of additional capacity may
reduce the Company's ability to maintain profit margins in circumstances where
overcapacity develops in the industry or preserve market share in circumstances
where oversupply develops in the industry. Any of these developments would have
a negative impact on the Company's ability to obtain higher profit margins
during periods of increased demand. See "-- Industry Cyclicality."
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<PAGE>
DEPENDENCE ON MANUFACTURING FACILITY
All of the Company's olefins, polymers and styrene are manufactured at the
Odessa Facility. Any significant interruption of operations at the olefins plant
at the Odessa Facility could disrupt or eliminate the supply of ethylene and
propylene to other operations at the Odessa Facility, which could have a
material and adverse effect on the Company's business. See "Business --
Properties."
ENVIRONMENTAL CONSIDERATIONS
The Company and its operations are subject to extensive federal, state,
local and foreign environmental laws, rules, regulations and ordinances relating
to pollution, the protection of the environment or the release or disposal of
materials ("Environmental Laws") and are also subject to other federal, state,
local and foreign laws and regulations regarding health and safety matters. The
operation of any chemical manufacturing plant and the distribution of chemical
products entail risks under Environmental Laws, many of which provide for
substantial fines and criminal sanctions for violations, and there can be no
assurance that material costs or liabilities will not be incurred. In addition,
future developments, such as increasingly strict requirements of environmental
and health and safety laws and regulations and enforcement policies thereunder,
could bring into question the handling, manufacture, use, emission or disposal
of substances or pollutants at the Company's facilities or the manufacture, use
or disposal of certain products made from styrene or plastic resins. Potentially
significant expenditures could be required in order to comply with evolving
Environmental Laws that may be adopted or imposed in the future. To meet
changing licensing and regulatory standards, the Company may be required to make
additional significant site or operational modifications, potentially involving
substantial expenditures and reduction or suspension of certain operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
The Company's operating expenditures for environmental remediation and waste
disposal were approximately $6.4 million in 1993 and are expected to be
approximately $6.0 million in 1994. In 1993, the Company also expended
approximately $5.1 million relating to environmental capital expenditures. In
1994, the Company expects to spend approximately $3.2 million for
environmentally-related capital expenditures, which is lower than historical
levels due to timing of expenditures pertaining to several projects. Thereafter
for the foreseeable future, the Company expects to incur approximately $4.0 to
$5.0 million per year in capital spending to address the requirements of
Environmental Laws. Annual amounts could vary depending on a variety of factors,
such as the control measures or remedial technologies ultimately required and
the time allowed to meet such requirements. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Business -- Environmental and Related Regulation."
The Company also is aware that a number of potential environmental
liabilities exist which relate to contaminated property at its current and
former facilities, and at facilities owned by third parties. The Company has
approximately $23.0 million accrued in the September 30, 1994 balance sheet as a
preliminary estimate of its total potential environmental liability with respect
to remediating known contamination. In addition, as part of its financial
assurance requirements under the Resource Convervation and Recovery Act ("RCRA")
and equivalent Texas law, the Company has deposited $10.6 million in trust to
cover closure and post-closure costs and liability for bodily injury and certain
types of property damages arising from sudden and non-sudden accidental
occurrences at certain of the Odessa Facility's hazardous waste management
units. However, no assurance can be given that all potential liabilities arising
out of the Company's present or past operations have been identified or that
costs required to remediate such conditions will not be significant. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
Further, the Company is currently negotiating with the Texas Natural
Resource Conservation Commission ("TNRCC") for a renewal of its injection well
permits for the disposal of wastewater from the Odessa Facility. TNRCC has
indicated that it intends to renew the Company's injection well permits for an
additional three years, but not thereafter. TNRCC has granted the Company a
permit to drill and operate a new deeper well to provide for wastewater
disposal. Although the Company has not elected to drill such a
14
<PAGE>
well, Company consultants have estimated the cost of installing a new deep well
injection system at approximately $6 million. The Company has also begun
investigating a number of other alternative wastewater disposal systems.
Although no assurances can be given, the Company believes that it will be able
to use its existing wells until it develops a satisfactory alternative waste
water disposal system. However, if before an alternative system is developed,
the Company is forced to cease using such injection wells or the anticipated
renewal permits do not provide for sufficient wastewater disposal capacity, such
loss of capacity could have a material adverse effect on the Company's financial
condition and results of operation. See "Business -- Environmental and Related
Regulation."
FOREIGN OPERATIONS
In September 1994, CT Film commenced operations of the Company's first
overseas plant in Scunthorpe, England, which was built primarily to service a
new U.K. facility to CT Film's major customer, Kimberly-Clark Corporation. The
Scunthorpe plant is expected to contribute less than 3% of the Company's net
sales in 1995. The customer has executed a contract giving the Company a firm
commitment to purchase film through December 2001. Foreign operations are
subject to special risks that can materially affect sales, profits and cash
flows of these operations, including currency exchange rate fluctuations,
inflation, exchange controls and changes in laws or governmental regulations.
LEGAL MATTERS
The Company is the defendant in a number of pending lawsuits. Although there
can be no assurance of the final resolution of any of these matters, the Company
believes that it has meritorious defenses to the various claims made and intends
to defend each suit vigorously. If, however, certain of the litigation matters
described elsewhere in this Prospectus are adversely resolved, they could have a
material adverse effect on the Company's financial position or results of
operations. See "Business -- Litigation."
LACK OF A PUBLIC MARKET FOR THE SENIOR NOTES
The Senior Notes are a new issue of securities, have no established trading
market and may not be widely distributed. Rexene does not intend to have the
Senior Notes listed for trading on any securities exchange or to seek their
admission to trading in any automated quotation system. If the Senior Notes are
traded after their initial issuance, they may trade at a discount from their
initial public offering price depending upon many factors, including among other
things, the Company's results of operations, prevailing interest rates and the
market for similar securities. No assurance can be given that any market for the
Senior Notes will develop, or, if any such market develops, as to the liquidity
of such market. The Company has been informed by Smith Barney Inc. and Wertheim
Schroder & Co. Incorporated that they currently intend to make a market in the
Senior Notes, as permitted by applicable laws and regulations; however, they are
not obligated to make such a market and may discontinue market making at any
time without notice. Accordingly, no assurance can be given as to the liquidity
of, or trading market for, the Senior Notes. See "Underwriting."
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<PAGE>
THE RECAPITALIZATION
BACKGROUND. Following a period of high industry profitability in the late
1980's, Old Rexene in 1989 paid a special dividend aggregating approximately
$216 million and paid approximately $105 million in settlement, including
expenses, of certain litigation arising from the acquisition of Old Rexene by an
investor group in 1988. The dividend and the settlement payments were financed
through the issuance of approximately $500 million of increasing rate notes due
in July 1992. In 1990, a cyclical downturn in the chemical industry began,
reducing industry prices and resulting in a substantial decline in the Company's
operating results and liquidity. Due to a variety of factors, including the then
near-term unfavorable outlook for business conditions in the chemical industry
and the significant contraction of the market for high-yield debt, Old Rexene
was unable to arrange a refinancing of its outstanding indebtedness.
In response to these conditions and the pending maturity of its notes, Old
Rexene met with certain large institutional investors and discussed a voluntary
plan of reorganization. In October 1991, Old Rexene filed a petition for
reorganization under the federal bankruptcy laws. On September 18, 1992, Old
Rexene emerged from bankruptcy in accordance with a plan of reorganization
providing for the merger of Old Rexene into a wholly owned subsidiary of Old
Rexene to form the Company. As a result of the Reorganization, the Company,
among other things, (i) reduced the principal amount of its long-term debt by
approximately $66 million by replacing $403 million of debt, which was scheduled
to mature in July 1992, with $337 million face amount of the Old Notes, (ii)
reduced its annual cash interest requirements from approximately $74 million to
a minimum amount of approximately $24 million through 1994 and (iii) issued
92.5% of the outstanding shares of Common Stock of Rexene to the holders of the
Old Notes.
RECAPITALIZATION. The Notes Offering is part of the Recapitalization, which
is designed to increase stockholders' equity, reduce indebtedness and interest
expense and improve the strategic, operating and financial flexibility of the
Company. The Company believes that the Recapitalization should better position
the Company to continue to reduce its balance sheet leverage through the use of
cash flow from operations.
The principal elements of the Recapitalization, each of which is contingent
upon the concurrent consummation of the others, are:
(i) the issuance and sale by the Company of $175 million aggregate principal
amount of the Senior Notes pursuant to the Notes Offering;
(ii) the issuance and sale by the Company of 8,000,000 shares of Common
Stock pursuant to the Common Stock Offering (the gross proceeds of
which are estimated to be $114 million based on an assumed offering
price of $14.25 per share, the closing price of the Common Stock on
September 14, 1994);
(iii) the establishment of the New Credit Agreement providing the Company
with the Term Loan of up to $100 million, which will be drawn down at
the closing of the Recapitalization, and the $80 million Revolving
Credit Facility, which is not expected to be drawn down at the closing
of the Recapitalization, pursuant to a commitment letter (the
"Commitment Letter") received from a bank (the "Bank"); and
(iv) the call for the redemption of the Old Senior Notes and the Old
Subordinated Notes and the repayment in full of the outstanding
indebtedness under the Old Credit Agreement.
Contemporaneously with the closing of the Offerings, the Company will
terminate its obligations under the Old Notes and the indentures (the "Old
Indentures") which govern the Old Notes pursuant to the terms thereof by
irrevocably depositing with the trustee under each of the Old Indentures that
amount necessary to redeem the Old Notes. Concurrently with such deposit,
redemption notices will be issued to the trustee under each of the Old
Indentures and to the holders of the Old Notes. These redemption notices will
set the date of redemption at the earliest allowable date, which is 30 days
after such notice.
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USE OF PROCEEDS
The net proceeds to the Company from the Notes Offering are estimated to be
approximately $170 million, after deducting underwriting discounts and
commissions and estimated expenses of the Notes Offering. The net proceeds to
the Company from the Common Stock Offering, after deducting underwriting
discounts and commissions and estimated expenses, are estimated (based on an
assumed offering price of $14.50 per share, the closing price of the Common
Stock on October 19, 1994) to be approximately $109.6 million ($126.0 million if
the Underwriters' over-allotment option in connection with the Common Stock
Offering is exercised in full).
The net proceeds of the Offerings, together with approximately $100 million
of borrowings under the Term Loan, will be used by the Company to redeem the Old
Notes and to repay in full the outstanding indebtedness under the Old Credit
Agreement. Any excess proceeds will be used by the Company for working capital
purposes. In the event that the gross proceeds from the Offerings are less than
$291 million, the Company may be required to arrange for alternative sources of
cash, which could include additional borrowings under the New Credit Agreement
or utilizing cash on hand, or a combination thereof. At September 30, 1994, the
Company had unrestricted cash on hand of approximately $50.7 million.
Interest rates on the Old Senior Notes and Old Subordinated Notes increase
beginning in 1995 and 1996, respectively. The annual interest rate on the Old
Senior Notes is 9% through November 14, 1995, 12% from November 15, 1995 through
November 14, 1996 and 14% thereafter. The annual interest rate on the Old
Subordinated Notes is 10% through November 14, 1996, 12% from November 15, 1996
to November 14, 1997, and 14% thereafter. For each interest period ending on or
prior to November 15, 1994, the Company may pay up to 90% of the interest due on
the Old Subordinated Notes by delivering additional Old Subordinated Notes in
lieu of cash through a pay-in-kind feature. To date, the Company has issued an
aggregate principal amount of $15.2 million in additional Old Subordinated Notes
in lieu of paying interest. Upon the expiration of the pay-in-kind feature on
November 15, 1994, and absent the completion of the Recapitalization, the
Company's annual cash interest obligations on the Old Subordinated Notes will
increase approximately $9.5 million, commencing with the semi-annual interest
payment due on May 15, 1995. The Company has elected not to exercise the
pay-in-kind feature for its November 15, 1994 interest payment. Interest accrues
on amounts outstanding under the Old Credit Agreement at an annual rate equal to
the lender's prime rate plus 1.5% (9.25% at September 30, 1994).
17
<PAGE>
CAPITALIZATION
The following table sets forth the cash and cash equivalents, the current
portion of long-term debt and the total capitalization of the Company as of
September 30, 1994, and as adjusted to give effect to the Recapitalization. See
"Use of Proceeds," "Selected Historical Consolidated Financial Data" and "Pro
Forma Unaudited Condensed Consolidated Financial Data."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
----------------------------
ACTUAL AS ADJUSTED
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............................................................ $ 52,964 $ 53,255
------------- -------------
------------- -------------
Current portion of long-term debt.................................................... $ -- $ 10,000(1)
------------- -------------
------------- -------------
Long-term debt:
Old Credit Agreement............................................................... $ 9,000 $ --
Term Loan.......................................................................... -- 90,000
Old Senior Notes................................................................... 253,000 --
Old Subordinated Notes............................................................. 99,629 --
Senior Notes....................................................................... -- 175,000
Less: unamortized discount......................................................... (61,120)(2) --
------------- -------------
Total long-term debt............................................................. 300,509 265,000
------------- -------------
Stockholders' equity:
Common stock....................................................................... 106 186
Paid-in capital.................................................................... 27,486 136,966
Accumulated deficit (3)............................................................ (25,618) (50,992)
Foreign currency translation adjustment............................................ 632 632
------------- -------------
Total stockholders' equity....................................................... 2,606 86,792
------------- -------------
Total capitalization............................................................. $ 303,115 $ 351,792
------------- -------------
------------- -------------
<FN>
- ------------------------
(1) Represents current portion of the Term Loan.
(2) Represents the unamortized discount on the Old Notes.
(3) The change in accumulated deficit is due to recording the extraordinary
loss of approximately $24.2 million (net of income tax benefits) and other
costs (approximately $1.1 million net of income tax benefits) resulting
from the redemption of the Old Notes. Such losses will be recognized upon
consummation of the Recapitalization.
</TABLE>
18
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
The following table sets forth certain selected historical consolidated
financial data for the Company for the periods indicated. Information should be
read in conjunction with the Company's Consolidated Financial Statements and
Notes thereto included elsewhere in this Prospectus. The historical data
presented below as of September 30, 1993 and September 30, 1994 and for the nine
months then ended have been derived from the interim Condensed Consolidated
Financial Statements of the Company as of such dates, and the historical
consolidated financial data presented below for the periods ended December 31,
1989, 1990, 1991, 1992 and 1993, and the nine months ended September 30, 1992,
were derived from the Consolidated Financial Statements of the Company and Old
Rexene. The Company adopted fresh start reporting on September 30, 1992
following consummation of the Reorganization. As a result, results of operations
(other than net sales and EBITDA) for the periods after September 30, 1992 are
not comparable to results of operations prior to that date.
<TABLE>
<CAPTION>
OLD REXENE
(PREDECESSOR) THE COMPANY
--------------------------------------- ------------------------------------------------
NINE THREE NINE MONTHS
YEAR ENDED MONTHS MONTHS YEAR ENDED ENDED
DECEMBER 31, ENDED ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- SEPT. 30, DECEMBER 31, ------------ ------------------
1989 1990 1991 1992 1992 1993 1993 1994
-------- -------- -------- --------- ------------ ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: (1)
Net sales........................ $608,631 $502,186 $449,728 $316,106 $ 98,854 $429,353 $326,640 $386,153
Gross profit..................... 158,130 133,707 61,671 38,025 12,122 53,744 41,560 77,192
Operating income................. 99,938 81,100 12,028 9,392 1,418 14,504 12,191 46,285
Interest expense (2)............. 61,111 71,732 58,374 -- 12,660 49,834 36,942 37,971
Income (loss) before income taxes
and extraordinary items......... 53,956 18,360 (56,191) (28,840) (10,436) (34,183) (23,954) 10,482
Income tax (expense) benefit..... (43,751) (15,655) 13,444 (2,636) 3,908 8,940 4,319 (4,329)
Net income (loss) before
extraordinary items............. 10,205 2,705 (42,747) (31,476) (6,528) (25,243) (19,635) 6,153
Ratio of earnings to fixed
charges (3)(4).................. -- -- -- 1.23x
OTHER DATA:
Depreciation and amortization.... $ 25,381 $ 22,451 $ 23,852 $ 20,062 $ 4,315 $ 17,446 $ 12,925 $ 13,884
Capital expenditures............. 18,596 28,855 33,464 11,136 3,961 17,008 10,688 21,089
EBITDA (5)....................... 125,319 103,551 35,880 29,454 5,733 31,950 25,116 60,169
Ratio of EBITDA to interest
expense (3)(5).................. -- -- -- 1.58x
NET SALES DATA:
Plastic film..................... $108,660 $125,506 $135,923 $104,264 $ 34,140 $147,468 $108,514 $124,792
Polyethylene (1)................. 169,483 141,795 131,044 90,799 32,250 120,060 94,167 104,094
Polypropylene (1)................ 167,593 83,353 73,625 51,989 13,213 64,459 49,810 56,107
APAO............................. 9,292 10,590 13,001 10,997 2,649 15,084 12,297 14,649
Styrene.......................... 132,140 126,019 80,409 49,392 13,705 61,372 47,048 63,295
Other............................ 21,463 14,923 15,726 8,665 2,897 20,910 14,624 23,216
-------- -------- -------- --------- ------------ ------------ -------- --------
Total........................ $608,631 $502,186 $449,728 $316,106 $ 98,854 $429,353 $326,460 $386,153
-------- -------- -------- --------- ------------ ------------ -------- --------
-------- -------- -------- --------- ------------ ------------ -------- --------
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------- AT SEPTEMBER
1989 1990 1991 1992 1993 30, 1994
--------- --------- --------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents (6)................... $ 61,744 $ 64,294 $ 48,169 $ 34,202 $ 30,535 $ 52,964
Working capital................................. 119,053 133,051 109,777 104,824 105,110 125,089
Total assets.................................... 555,679 461,152 440,665 423,591 430,036 476,781
Long-term debt (including current portion)
Face amount................................... 416,000 403,000 -- 340,249 350,342 361,629
Unamortized discount (7)...................... -- -- -- (78,523) (68,578) (61,120)
Net amount.................................... 416,000 403,000 -- 261,726 281,764 300,509
Liabilities subject to compromise............... -- -- 428,297 -- -- --
Other noncurrent liabilities.................... 48,418 51,096 57,410 105,601 111,056 113,802
Stockholders' equity (deficit).................. (81,376) (55,936) (94,813) 20,106 (5,137) 2,606
</TABLE>
19
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
<FN>
- ------------------------------
(1) The financial results of a manufacturing facility in Bayport, Texas, which
the Company sold in February 1990, are included in the statement of
operations data for the years ended December 31, 1989 and 1990. Net sales
and operating income for 1989 were $124.7 million and $4.1 million,
respectively. In addition, the assets and liabilities of this facility are
included in the Balance Sheet Data at December 31, 1989. Net sales and
operating income of the Bayport manufacturing facility for 1990 were $16.3
million and $1.8 million, respectively.
(2) Interest expense on the indebtedness of Old Rexene accrued through October
16, 1991. In addition, interest expense on such indebtedness accrued from
October 16, 1991 to December 31, 1991 in accordance with terms of an
agreement with a noteholders' committee formed as part of the
Reorganization. If the interest expense from October 16, 1991 to December
31, 1991 had been calculated under the term of the indebtedness of Old
Rexene, the interest expense for the year ended December 31, 1991 would
have aggregated $73.8 million. The Amended Plan eliminated post petition
interest requirements through June 30, 1992. Interest expense from July 1,
1992 through September 30, 1992 was not classified as interest expense but
reflected as a reorganization expense. See Note 3 to the Consolidated
Financial Statements. Non-cash interest expense (income) was $10.8 million
for the year ended December 31, 1989, ($4.6 million) for the year ended
December 31, 1990 (due to the reversal of interest previously accrued in
accordance with EITF Issue No. 86-15, "Increasing Rate Debt"), $3.3 million
for the year ended December 31, 1991, zero for the nine months ended
September 30, 1992 (due to the Amended Plan previously noted), $6.4 million
for the three months ended December 31, 1992 and $25.4 million for the year
ended December 31, 1993. Non-cash interest expense for the nine months
ended September 30, 1993 and 1994 was $18.7 million and $16.2 million,
respectively.
(3) The ratio of earnings to fixed charges and the ratio of EBITDA to interest
expense for the periods prior to September 30, 1992 are not presented
because such information is not comparable to the similar information for
the periods after September 30, 1992, the date of the Company's adoption of
"fresh start" reporting.
(4) For the purposes of determining the ratio of earnings to fixed charges,
earnings consist of income before income taxes, extraordinary items and
fixed charges. Fixed charges consist of interest on indebtedness,
including, if any, the amortization of debt issue costs, accretion of debt
discount, interest expense accrued in accordance with EITF Issue No. 86-15,
"Increasing Rate Debt" (See Note 10 to the Consolidated Financial
Statements) and one-third of rental expense (which is deemed representative
of the interest factor therein). Earnings were insufficient to cover fixed
charges in the periods ended December 31, 1992, December 31, 1993 and
September 30, 1993 by $10.7 million, $35.4 million and $25.2 million,
respectively.
(5) EBITDA means operating income before depreciation and amortization. EBITDA
has been included solely to facilitate consideration of the covenants in
the Indenture that are based, in part, on EBITDA and because the Company
understands that it is used by certain investors as one measure of a
company's historical ability to service its debt. EBITDA is not intended to
represent cash flows for the period nor has it been presented as an
alternative to earnings from operations as an indicator of operating
performance and should not be considered in isolation or as a substitute
for measures of performance prepared in accordance with generally accepted
accounting principles. EBITDA for the periods ended December 31, 1992,
December 31, 1993 and September 30, 1993 were insufficient to cover
interest expense by $6.9 million, $17.9 million and $11.8 million,
respectively. Interest expense for such periods included non-cash interest
expense as described in Note 2 above.
(6) Includes restricted cash of $3.7 million, $2.2 million and $2.3 million at
December 31, 1992, December 31, 1993 and September 30, 1994, respectively.
(7) Represents the unamortized discount on the Old Notes.
</TABLE>
20
<PAGE>
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED FINANCIAL DATA
The following Pro Forma Unaudited Condensed Consolidated Statements of
Operations for the nine months ended September 30, 1994 and the year ended
December 31, 1993 present pro forma operating results as if the Recapitalization
had occurred as of January 1, 1993. The Pro Forma Unaudited Consolidated Balance
Sheet as of September 30, 1994 gives effect to the Recapitalization as if it had
occurred on that date. The pro forma adjustments are described in the notes
thereto.
The Pro Forma Unaudited Condensed Consolidated Financial Data should be read
in conjunction with the Company's Consolidated Financial Statements and Notes
thereto included elsewhere in this Prospectus. The Pro Forma Unaudited Condensed
Consolidated Financial Data does not purport to represent either future results
or the results that would have occurred if the Recapitalization had occurred on
the dates indicated, nor does it give effect to any matters other than those
described in the notes thereto.
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales....................................................................... $ 429,353 $ 429,353
Operating expense............................................................... 414,849 414,849
---------- -----------
Operating income................................................................ 14,504 14,504
Interest expense................................................................ (49,834) $ 21,450(1) (28,384)
Interest income................................................................. 1,392 1,392
Other, net...................................................................... (245) (245)
---------- ------------- -----------
Income (loss) before income taxes............................................... (34,183) 21,450 (12,733)
Income tax (expense) benefit.................................................... 8,940 (8,151)(2) 789
---------- ------------- -----------
Net loss(3)..................................................................... $ (25,243) $ 13,299 $ (11,944)
---------- ------------- -----------
---------- ------------- -----------
</TABLE>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales....................................................................... $ 386,153 $ 386,153
Operating expense............................................................... 339,868 339,868
---------- -----------
Operating income................................................................ 46,285 46,285
Interest expense................................................................ (37,971) $ 16,695(1) (21,276)
Interest income................................................................. 1,522 1,522
Other, net...................................................................... 646 646
---------- ------------- -----------
Income before income taxes...................................................... 10,482 16,695 27,177
Income tax expense.............................................................. (4,329) (6,344)(2) (10,673)
---------- ------------- -----------
Net income(3)................................................................... $ 6,153 $ 10,351 $ 16,504
---------- ------------- -----------
---------- ------------- -----------
</TABLE>
21
<PAGE>
PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1994
ASSETS
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- -------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents...................................................... $ 52,964 $ 109,560(4) $ 53,255
100,000(5)
175,000(6)
(374,268)(7)
(8,163)(8)
(1,838)(9)
Accounts receivable, net....................................................... 75,566 75,566
Inventories.................................................................... 55,347 55,347
Prepaid expenses and other..................................................... 1,076 1,076
---------- -------------- -----------
Total current assets......................................................... 184,953 291 185,244
Property, plant and equipment, net............................................. 253,115 253,115
Reorganization value in excess of amounts allocable to identifiable assets,
net........................................................................... 3,460 3,460
Intangible assets, net......................................................... 3,326 8,163(8) 11,489
Other noncurrent assets........................................................ 31,927 31,927
---------- -------------- -----------
$ 476,781 $ 8,454 $ 485,235
---------- -------------- -----------
---------- -------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt.............................................. $ 10,000(5) $ 10,000
Accounts payable............................................................... $ 27,976 $ 27,976
Accrued liabilities............................................................ 8,053 8,053
Accrued interest............................................................... 12,639 (12,639)(7) --
Income taxes payable........................................................... 5,312 (5,312)(3) --
Employee benefits payable...................................................... 5,884 5,884
---------- -------------- -----------
Total current liabilities.................................................... 59,864 (7,951) 51,913
Long-term debt................................................................. 300,509 90,000(5) 265,000
175,000(6)
(361,629)(7)
61,120(3)
Other noncurrent liabilities................................................... 71,077 (17,074)(3) 54,003
Deferred income taxes.......................................................... 42,725 (14,500)(3) 27,527
(698)(9)
---------- -------------- -----------
Total liabilities............................................................ 474,175 (75,732) 398,443
Commitments and contingencies.................................................. -- --
Stockholders' equity........................................................... 2,606 109,560(4) 86,792
(24,234)(3)
(1,140)(9)
---------- -------------- -----------
$ 476,781 $ 8,454 $ 485,235
---------- -------------- -----------
---------- -------------- -----------
</TABLE>
22
<PAGE>
<TABLE>
<S> <C> <C> <C>
<FN>
NOTES TO PRO FORMA UNAUDITED CONDENSED CONSOLIDATED FINANCIAL DATA
(1) Adjustment to eliminate cash and non-cash interest expense on the Old Notes
and to record (i) interest expense associated with the Senior Notes (at an
assumed rate of 11 1/2%) and Term Loan, (ii) fees under the New Credit
Agreement, and (iii) amortization of debt issue costs resulting from the
Recapitalization, net of pro forma capitalized interest. Each one half of
one percent change in the assumed interest rates for both the Senior Notes
and the Term Loan changes pro forma annual interest expense by $1.4
million.
(2) Adjustment to reflect the federal and state income tax impact related to
the changes in interest expenses discussed above.
(3) Pro forma net income (loss) does not include the extraordinary loss that
will result from the redemption of the Old Notes. This extraordinary loss
is $24.2 million (net of income tax benefits) if the Recapitalization had
occurred as of September 30, 1994. Such loss has been reflected in the pro
forma stockholders' equity and will be reflected in the Company's
historical income statement in the period during which the Old Notes are
redeemed. The pro forma balance sheet adjustments also reflect the
recognition of unamortized discount on the Old Notes and the reversal of
non-cash interest accrued in accordance with EITF Issue No. 86-15,
"Increasing Rate Debt" resulting from the redemption of the Old Notes and
the recording of related income tax benefits.
(4) Adjustment giving effect to the issuance of 8 million shares of Common
Stock pursuant to the Common Stock Offering at an assumed offering price
per share of $14.50 (the closing price on the New York Stock Exchange on
October 19, 1994), net of estimated issuance costs of $6.4 million.
(5) Adjustment giving effect to the proceeds from the New Credit Agreement.
(6) Adjustment giving effect to the issuance of the Senior Notes.
(7) Adjustment giving effect to the repayment of the Old Notes and related
accrued interest and borrowings under the Old Credit Agreement.
(8) Adjustment to reflect the financing fees related to the New Credit
Agreement and the Senior Notes.
(9) Adjustment to reflect the payment of net interest expense on the Old Notes
during the redemption notice period of 30 days in compliance with the Old
Indentures and payment of the termination fee related to the Old Credit
Agreement. This non-recurring adjustment has not been reflected in pro
forma net income and has been reflected in pro forma stockholders' equity.
</TABLE>
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The polyethylene, polypropylene and styrene markets in which Rexene competes
are cyclical markets that are sensitive to relative changes in supply and
demand, which are in turn affected by general economic conditions. Rexene's
plastic film and APAO businesses are generally less sensitive to the economic
cycles. Historically, the cyclical segments have experienced alternating periods
of tight supply and rising prices and profit margins, followed by periods of
large capacity additions resulting in oversupply and declining prices and profit
margins. Following a significant improvement in domestic economic growth since
the second half of 1993, these markets experienced increased levels of demand
which have resulted in greater capacity utilization and higher domestic and
export prices. According to CMAI, during the first six months of 1994, domestic
demand for LDPE, polypropylene and styrene increased by approximately 9%, 14%
and 5%, respectively, compared to the first six months of 1993. This increase in
demand has enabled the Company and the petrochemical industry in general to
increase selling prices significantly at a time when feedstock costs have either
not increased or only increased modestly compared to end product prices. For
example, from December 1993 to September 1994, the Company increased the average
selling prices of its polyethylene, polypropylene and styrene by 28%, 18% and
66% per pound, respectively. During the same period, prices for the Company's
major feedstocks, ethane and propane, were relatively stable, and the price for
benzene increased 63%.
Principal raw materials purchased by the Company consist of ethane, propane
(extracted from natural gas liquids), propylene and benzene for the polymer and
styrene businesses and polyethylene resins for the film business. The prices of
feedstocks fluctuate widely based on the prices of natural gas and oil. During
the past four years, feedstocks accounted for between approximately 24% and 32%
of the Company's total cost of sales. As a result, the Company's ability to pass
on increases in raw material costs to customers has a significant impact on
operating results. Current market conditions for the Company's products indicate
that increases in feedstock costs may be passed on to customers, but an adverse
change in market conditions for such products could reduce pricing flexibility,
including the ability to pass on any such increase.
RESULTS OF OPERATIONS
In connection with the Reorganization, the Company adopted as of September
30, 1992, the American Institute of Certified Public Accountants' Statement of
Position No. 90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code" (the "Reorganization SOP"). The Company's basis of accounting
for financial reporting purposes changed as a result of adopting the
Reorganization SOP. Specifically, the Reorganization SOP required (i) the
adjustment of the Company's assets and liabilities to reflect a reorganization
value generally approximating the fair value of the Company as a going concern
on an unleveraged basis, (ii) the elimination of its accumulated deficit, and
(iii) adjustments to its capital structure to reflect consummation of the
Amended Plan. Accordingly, the results of operations (other than net sales)
after September 30, 1992 are not comparable to results of operations prior to
such date, and the results of operations for the nine months ended September 30,
1992 and the three months ended December 31, 1992 have not been aggregated.
The Company will record an extraordinary non-cash loss from the redemption
of the Old Notes. Such loss will be recognized in the period during which the
Old Notes are redeemed. See Note 3 of the Notes to the Pro Forma Unaudited
Condensed Consolidated Financial Data appearing elsewhere herein.
24
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1994 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1993
Results of operations for the nine months ended September 30, 1993 and
September 30, 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1993 1994
---------- ----------
<S> <C> <C>
Net sales............................................................. $ 326,460 $ 386,153
Operating expenses:
Cost of sales....................................................... 284,900 308,961
Marketing, general and administrative............................... 24,494 25,971
Research and development............................................ 4,875 4,936
---------- ----------
314,269 339,868
---------- ----------
Operating income...................................................... 12,191 46,285
Interest expense...................................................... (36,942) (37,971)
Interest income....................................................... 1,005 1,522
Other, net............................................................ (208) 646
---------- ----------
Income (loss) before income taxes..................................... (23,954) 10,482
Income tax (expense) benefit.......................................... 4,319 (4,329)
---------- ----------
Net income (loss)..................................................... $ (19,635) $ 6,153
---------- ----------
---------- ----------
</TABLE>
Growth in the United States economy resulted in the strengthening of the
petrochemical and polymer markets in which the Company participated during the
nine months ended September 30, 1994. This resulted in increased volumes, prices
and margins for the Company in most of its major product lines. Net sales
increased $59.7 million (or 18%) from $326.5 million for the nine months ended
September 30, 1993 to $386.2 million for the nine months ended September 30,
1994 due to a general increase in demand for all product lines. Plastic film
sales increased $16.3 million (or 15%) in the first nine months of 1994 as
compared to the first nine months of 1993 principally due to a volume increase
of 20.0 million pounds (or 18%). Styrene sales increased $16.2 million (or 35%)
in the first nine months of 1994 as compared to the first nine months of 1993
due to a volume increase of 37.6 million pounds (or 19%) and a price increase of
3 cents per pound (or 15%). Polyethylene sales increased $9.9 million (or 11%)
in the first nine months of 1994 as compared to the first nine months of 1993,
principally due to a volume increase of 24.4 million pounds (or 10%).
Polypropylene sales increased $6.3 million (or 13%) in the first nine months of
1994 as compared to the first nine months of 1993 due to a volume increase of
7.9 million pounds (or 7%). APAO sales increased $2.4 million (or 19%) in the
first nine months of 1994 as compared to the first nine months of 1993,
principally due to a volume increase of 5.1 million pounds (or 22%). Excess
feedstock sales increased $8.2 million (or 136%) in the first nine months of
1994 as compared to the first nine months of 1993.
The Company's gross profit percentage increased from 13% for the nine months
ended September 30, 1993 to 20% for the same period in 1994 principally due to
the increase in selling prices and sales volumes discussed above.
Marketing, general and administrative expenses increased $1.5 million (or
6%) for the first nine months of 1994 as compared to the same period in 1993
principally due to higher employee benefits that are related to the Company's
improved operating performance, partially offset by lower marketing and bad debt
expenses. Research and development expenses for the first nine months of 1994
remained relatively stable compared to the first nine months of 1993.
Due primarily to the factors described above, operating income increased
$34.1 million (or 280%) for the nine months ended September 30, 1994 as compared
to the corresponding period in 1993.
25
<PAGE>
Cash interest expense increased $3.5 million (or 19%) and non-cash interest
expense decreased $2.5 million (or 13%) principally due to the decision not to
exercise the pay-in-kind feature on the Old Subordinated Notes for the interest
payment that will be due on November 15, 1994.
Other, net increased $.9 million for the nine months ended September 30,
1994 as compared to the nine months ended September 30, 1993, principally due to
the receipt of approximately $1.0 million of insurance proceeds received in
settlement of a claim related to a prior lawsuit.
The income tax expense of $4.3 million for the first nine months of 1994
reflects current income taxes payable of $6.8 million, partially offset by
deferred income tax benefits of $2.5 million. The income tax benefit for the
same period in 1993 reflects the current income tax benefits from the carryback
of 1993 pre-tax losses to prior years and the effect of deferred income taxes.
Due primarily to the factors discussed above, for the first nine months of
1994, the Company earned net income of $6.2 million as compared to a net loss of
$19.6 million for the first nine months of 1993.
1993 COMPARED TO 1992 (PRO FORMA)
As previously discussed, as a result of the Reorganization and the Company's
adoption of "fresh start" accounting principles in connection therewith, the
Company's results of operations (other than net sales) subsequent to September
30, 1992 are not comparable to those of prior periods. Therefore, the following
analysis compares the results for the year ended December 31, 1993 to the pro
forma results for the year ended December 31, 1992. The pro forma information
gives effect to the Reorganization as though it had occurred on September 30,
1991. The adjustments relate primarily to (i) the recording of interest expense
in accordance with the terms of the Old Notes, (ii) the recording of
depreciation of property, plant and equipment in accordance with their restated
values, (iii) the recording of amortization of reorganization value in excess of
amounts allocable to identifiable assets, (iv) the elimination of goodwill
amortization, reorganization items and the extraordinary gain, and (v) the
income tax effects for adjustments (i) through (iv) above.
Results of operations for the year ended December 31, 1993 and the year
ended December 31, 1992 (pro forma) are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1992 1993
----------- --------
(PRO FORMA)
<S> <C> <C>
Net sales..................................................... $414,960 $429,353
Operating expenses:
Cost of sales............................................... 360,257 375,609
Marketing, general and administrative....................... 30,629 32,641
Research and development.................................... 6,374 6,599
----------- --------
397,260 414,849
----------- --------
Operating income.............................................. 17,700 14,504
Interest expense.............................................. (49,572) (49,834)
Interest income............................................... 1,377 1,392
Other, net.................................................... (6,818) (245)
----------- --------
Loss before income taxes...................................... (37,313) (34,183)
----------- --------
Income tax benefit............................................ 8,116 8,940
----------- --------
Net loss...................................................... $(29,197) $(25,243)
----------- --------
----------- --------
</TABLE>
Net sales increased $14.4 million (or 3%) for the year ended December 31,
1993 as compared to 1992 principally due to an increase in plastic film sales.
Plastic film sales increased $11.8 million (or 9%) primarily due to a volume
increase of 11.2 million pounds (or 7%) principally due to higher sales to the
disposable diaper market and the blown coextrusion film market. APAO and excess
propane and ethylene sales also contributed to the increase in sales. APAO sales
increased $3.3 million (or 20%) from 1992 to 1993
26
<PAGE>
principally due to an increase in sales of product purchased from the Ube Rexene
Corporation joint venture located in Japan. Excess ethylene and propane sales
increased $5 million due to changes in the feedstock mix at the olefin plant.
These increases were partially offset by a $3 million (or 2%) decrease in
polyethylene sales and a $3.1 million (or 5%) decrease in styrene sales.
Polyethylene and styrene sales declined in 1993 as compared to 1992 primarily as
a result of continuous pricing pressure due to an overcapacity in the industry.
The Company's gross profit percentage remained constant at 13% in 1993 as
compared to 1992. Gross profit for 1993 decreased $1.0 million (or 2%) as
compared to 1992 principally due to a decrease in polyethylene gross profits of
$4.4 million as a result of lower margins, partially offset by lower
environmental remediation charges in 1993. Gross profit for 1992 reflected a
charge to increase the Company's environmental remediation accrual. Polyethylene
margins for 1993 were lower than 1992 margins principally as a result of higher
ethylene transfer prices and lower selling prices for polyethylene.
Marketing, general and administrative expenses increased $2.0 million (or
7%) from $30.6 million in 1992 to $32.6 million in 1993 principally due to an
increase in marketing and related expenditures incurred to address growth
opportunities for plastic film and APAO. In addition, the increase in 1993 is
due to unusually low expenses in 1992 as a result of changes in estimates of
incentive and benefit plan expenses and lower legal fees for general litigation
resulting from the automatic stay provision of the Bankruptcy Code.
Due primarily to the factors described above, operating income decreased
$3.2 million (or 18%) from $17.7 million in 1992 to $14.5 million in 1993.
Other, net decreased $6.6 million (or 96%) from $6.8 million in 1992 to $.2
million in 1993 principally due to a $7.4 million accrual in 1992 relating to
the adverse judgment (including estimated attorneys' fees) on the Izzarelli
class action lawsuit, partially offset by $1.5 million of business interruption
insurance proceeds received in 1992 for an electrical outage at the Odessa
Facility in May 1991. See "Business -- Litigation."
The 1993 results include an income tax benefit of $8.9 million as compared
to a benefit of $8.1 million for 1992. As a result of adoption of Statement of
Financial Accounting Standards 109, "Accounting for Income Taxes" on September
30, 1992, the income tax benefit for 1993 is not comparable to the income tax
benefit for 1992.
Due primarily to the factors described above, the net loss decreased $4.0
million (or 14%) from $29.2 million in 1992 to $25.2 million in 1993.
1992 COMPARED TO 1991
As previously discussed, as a result of the Reorganization and the Company's
adoption of "fresh start" accounting principles in connection therewith, the
Company's results of operations (other than net sales) subsequent to September
30, 1992 are not comparable to those of prior periods. Therefore, the following
analysis compares the results for the three months ended December 31, 1992 to
the results for the three months ended December 31, 1991 on a pro forma basis as
described in the following sentence, and compares the results for the nine
months ended September 30, 1992 to the nine months ended September 30, 1991. The
pro forma information for the three months ended December 31, 1991 gives effect
to the Reorganization as though it had occurred on September 30, 1991. The
adjustments relate primarily to (i) the recording of interest expense in
accordance with the terms of the Old Notes, (ii) the recording of depreciation
of property, plant and equipment in accordance with their restated values, (iii)
the recording of amortization of reorganization value in excess of amounts
allocable to identifiable assets, and (iv) the income tax effects for
adjustments (i) through (iii) above.
27
<PAGE>
Results of operations for the three months ended December 31, 1992 and the
three months ended December 31, 1991 (pro forma), and the results of operations
for the nine months ended September 30, 1992 and the nine months ended September
30, 1991 are as follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31,
-------------------- ----------------------
1991 1992 1991 1992
--------- --------- ----------- ---------
(PRO FORMA)
<S> <C> <C> <C> <C>
Net sales................................... $ 350,902 $ 316,106 $ 98,826 $ 98,854
Operating expenses:
Cost of sales............................. 299,356 278,081 87,523 86,732
Marketing, general and administrative..... 32,446 23,918 10,132 9,045
Research and development.................. 4,546 4,715 1,709 1,659
--------- --------- ----------- ---------
336,348 306,714 99,364 97,436
--------- --------- ----------- ---------
Operating income (loss)..................... 14,554 9,392 (538) 1,418
Interest expense............................ (49,397) -- (12,660) (12,660)
Other, net.................................. 4,402 282 (651) 806
Debt restructuring costs.................... (9,786) -- -- --
Reorganization items........................ -- (38,514) -- --
--------- --------- ----------- ---------
Loss before income taxes and extraordinary
gain....................................... (40,227) (28,840) (13,849) (10,436)
--------- --------- ----------- ---------
Income tax (expense) benefit................ 8,567 (2,636) 3,352 3,908
--------- --------- ----------- ---------
Loss before extraordinary gain.............. (31,660) (31,476) (10,497) (6,528)
Extraordinary gain.......................... -- 123,672 -- --
--------- --------- ----------- ---------
Net income (loss)........................... $ (31,660) $ 92,196 $ (10,497) $ (6,528)
--------- --------- ----------- ---------
--------- --------- ----------- ---------
</TABLE>
THREE MONTHS ENDED DECEMBER 31, 1992 COMPARED TO THREE MONTHS ENDED DECEMBER
31, 1991
(PRO FORMA)
Net sales remained constant for the three months ended December 31, 1992 as
compared to the three months ended December 31, 1991. Polyethylene sales
increased $2.7 million (or 9%) principally due to an increase in average selling
prices of 4 cents per pound (or 12%). The increase in average selling prices was
due to high capacity utilization in the HPLDPE resin industry. The polyethylene
sales increase was offset by a decrease in polypropylene sales of $2.7 million
(or 17%) for the three months ended December 31, 1992 compared to the same
period in 1991 principally due to a decrease in sales volumes of 3.1 million
pounds (or 9%) and a decrease in average selling prices of 4 cents per pound (or
9%). The decreased polypropylene sales volume was primarily due to lower demand
resulting from overall economic conditions and oversupply in the global
polypropylene markets.
The Company's gross profit percentage increased from 11% in the three months
ended December 31, 1991 to 12% in the 1992 period principally due to the 4 cents
per pound polyethylene price increase.
Marketing, general and administrative expenses decreased $1.1 million (or
11%) from $10.1 million for the three months ended December 31, 1991 to $9.0
million for the three months ended December 31, 1992 principally due to cost
reduction and containment efforts.
Due primarily to the factors described above, operating income was $1.4
million for the three months ended December 31, 1992 as compared, on a pro forma
basis, to an operating loss of $.5 million for the corresponding period in 1991.
Other, net increased $1.5 million for the three months ended December 31,
1992 as compared to the same period in 1991 principally because of a
reimbursement from an escrow account established during a merger of the Company
in 1988 of approximately $1.0 million for the net cost, plus interest thereon,
of defending certain lawsuits.
28
<PAGE>
Due primarily to the factors described above, the net loss for the three
months ended December 31, 1992 decreased by $4.0 million (or 38%) to $6.5
million, as compared, on a pro forma basis, to $10.5 million for the
corresponding period in 1991.
NINE MONTHS ENDED SEPTEMBER 30, 1992 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1991
Net sales decreased $34.8 million (or 10%) from $350.9 million for the nine
months ended September 30, 1991 to $316.1 million for the nine months ended
September 30, 1992 principally due to lower styrene, polyethylene and
polypropylene sales. Styrene sales decreased $16.1 million (or 25%) in the first
nine months of 1992 as compared to the first nine months of 1991 due to a volume
decrease of 20.3 million pounds (or 9%) and a price decrease of 4.9 cents per
pound (or 17%). The decrease in styrene volumes was primarily due to lower plant
utilization rates which were implemented to minimize operating losses and to
focus on key customers. Polyethylene sales decreased $10.6 million (or 10%) in
the first nine months of 1992 as compared to the first nine months of 1991 due
to a volume decrease of 22.1 million pounds (or 8%) and a price decrease of 1.0
cent per pound (or 3%). The polyethylene volume decrease was primarily due to
lower demand resulting from sluggish economic conditions during the early part
of the year. Polypropylene sales decreased $5.5 million (or 10%) in the first
nine months of 1992 as compared to the first nine months of 1991 due to a price
decrease of 2.1 cents per pound (or 5%) and a volume decrease of 6.5 million
pounds (or 5%). The decrease in polypropylene volumes was due to a variety of
factors including lower plant utilization rates and overall economic conditions.
Plastic film sales for the first nine months of 1992 remained relatively stable
as compared to the comparable period in 1991.
The Company's gross profit percentage decreased from 15% for the nine months
ended September 30, 1991 to 12% for the same period in 1992 principally due to
the lower average selling prices discussed above and due to an increase to the
Company's environmental remediation accrual.
Marketing, general and administrative expenses decreased $8.5 million (or
26%) from $32.4 million for the nine months ended September 30, 1991 to $23.9
million for the nine months ended September 30, 1992 principally due to cost
containment efforts and lower legal fees for general litigation because of the
automatic stay provision of the federal bankruptcy laws. (Also see professional
fees associated with the Reorganization discussed below). Due primarily to the
factors described above, operating income for the nine months ended September
30, 1992 decreased $5.2 million (or 35%) to $9.4 million, as compared to $14.6
million for the corresponding period in 1991.
Interest expense on the senior and subordinated notes of Old Rexene was
accrued through October 18, 1991. In addition, interest expense was accrued from
October 18, 1991 to December 31, 1991 in accordance with an agreement in
principle between the Company and the holders of senior and subordinated notes
of Old Rexene prior to the approval of the Amended Plan. The Amended Plan
eliminated postpetition interest requirements through June 30, 1992. Therefore,
postpetition interest of $6.8 million accrued as of December 31, 1991 was
reversed in the first quarter of 1992 and is included in other, net on the
condensed consolidated statement of operations for the nine months ended
September 30, 1992. Interest expense from July 1, 1992 through September 30,
1992 is included in reorganization items.
Other, net for the nine months ended September 30, 1992, includes a $7.4
million accrual relating to the adverse judgment (including estimated attorneys'
fees) on the Izzarelli class action lawsuit, partially offset by the reversal of
postpetition interest of $6.8 million accrued as of December 31, 1991 discussed
above, and $1.5 million of business interruption insurance proceeds received for
an electrical outage at the Odessa Facility in May 1991. See "Business --
Litigation."
The Reorganization items for the nine months ended September 30, 1992 are
described in Note 3 to the Consolidated Financial Statements. In the first nine
months of 1992, the Company incurred $12.6 million of professional fees
associated with the Reorganization. In the first nine months of 1991, the
Company incurred $9.8 million of debt restructuring costs.
The Company recorded income tax expense of $2.6 million on a loss before
income taxes of $28.8 million for the nine months ended September 30, 1992.
There are permanent differences between the Company's income for financial
reporting purposes and tax purposes resulting principally from the lower tax
basis
29
<PAGE>
for assets purchased when the Company was sold in 1988. These permanent
differences cause the effective income tax rate to be higher than the statutory
income tax rate for federal and state income taxes with the effective rate being
greater in periods of lower taxable income.
In the third quarter of 1992, the Company recorded an extraordinary gain of
$123.7 million as a result of exchanging the senior and subordinated notes of
Old Rexene for the Old Notes and Common Stock under the Amended Plan.
Due primarily to the factors described above, the Company had net income of
$92.2 million for the nine months ended September 30, 1992 (or a net loss before
extraordinary gain of $31.5 million) compared to a net loss of $31.7 million for
the corresponding period in 1991.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 1994, cash generated from
operations increased $26.2 million as compared to the comparable period in 1993.
This increase was principally due to higher operating income and receipt of $5.5
million of federal income tax refunds, partially offset by the effect of
increased accounts receivable resulting principally from higher sales.
The New Credit Agreement provides for up to $100 million of term loans and
up to $80 million of revolving credit loans for working capital and for letters
of credit. The Company will be required to repay a portion of its borrowings
under the Term Loan each year, commencing in 1995, so as to retire such
indebtedness in its entirety by December 31, 1999. Availability of borrowings
under the Revolving Credit Facility will be based upon a formula related to
inventory and accounts receivable and is contingent upon the receipt by the
Company of gross proceeds from the Common Stock Offering of at least $85 million
and of aggregate gross proceeds from the Offerings of at least $275 million. See
"Description of New Credit Agreement."
After the Recapitalization, the Company will have substantial principal
repayment obligations. The Company will be required to make quarterly principal
payments under the Term Loan commencing on March 31, 1995. The first four
payments will each be in the amount of $2.5 million, the next four payments will
each be in the amount of approximately $3.75 million and all payments thereafter
will each be in the amount of $6.25 million, so as to retire such indebtedness
in its entirety by December 31, 1999. In addition, under the New Credit
Agreement, the Company has certain mandatory prepayment obligations that will
not exceed $10.0 million in 1995, $20.0 million, less any prior mandatory
repayments made from excess cash flow, in 1996 or $30.0 million, less any prior
mandatory repayments made from excess cash flow, in 1997 in the event annual
cash flow exceeds certain levels. The Senior Notes will mature on ,
2004. The Company believes that following the consummation of the Offerings,
based on current levels of operations and anticipated growth, its cash flow from
operations, together with other available sources of liquidity, including
borrowings under the Revolving Credit Facility, will be adequate for the
foreseeable future to make scheduled payments of principal and interest under
the New Credit Agreement and interest payments on the Senior Notes, to permit
anticipated capital expenditures and to fund working capital requirements.
However, the ability of the Company to satisfy these obligations depends on a
number of significant assumptions regarding the demand for the Company's
products, raw material costs and other factors. See "Investment Considerations
- -- High Leverage and Substantial Debt Service Requirements."
The Indenture and the New Credit Agreement will contain covenants which,
among other things, restrict the ability of the Company to incur additional
indebtedness, create or permit liens, effect certain asset sales and engage in
certain mergers or similar transactions. The New Credit Agreement will also
contain certain financial covenants relating to the financial condition of the
Company, including covenants relating to the ratio of its earnings to its
interest expense, the ratio of its earnings to its fixed charges and a leverage
ratio. These covenants could limit the Company's ability to obtain additional
financing and engage in certain corporate activities. Continued compliance with
such covenants will depend upon a variety of factors, including general economic
conditions and other factors beyond the control of the Company. See "Investment
Considerations," "Description of New Credit Agreement" and "Description of
Senior Notes."
30
<PAGE>
During 1992 and 1993, the Company expended approximately $15.1 and $17.0
million, respectively, for capital expenditures. For 1994, the Company has
budgeted $31.0 million for capital expenditures, of which approximately $21.1
million had been spent through September 1994. For 1995, the Company has
budgeted approximately $30.0 million for proposed capital expenditures. In
addition, the Company is exploring a number of possible product development
opportunities which would require additional capital expenditures. For example,
the Company has announced the development of a new polyolefin polymer,
REXFLEX-TM- FPO. The Company is currently producing experimental quantities of
this product in a small-scale pilot plant at the Odessa Facility and is in the
process of developing process technology for a commercial plant. At this time,
however, no budgeting decision has been made regarding this or other similar
projects.
A number of potential environmental liabilities exist which relate to
contaminated property. In addition, a number of potential environmental costs
relate to pending or proposed environmental regulations. No assurance can be
given that all of the potential liabilities arising out of the Company's present
or past operations have been identified or that the amounts that might be
required to remediate such sites or comply with pending or proposed
environmental regulations can be accurately estimated. The Company has
approximately $23.0 million accrued in the September 30, 1994 balance sheet as a
preliminary estimate of its total potential environmental liability with respect
to remediating known contamination. If, however, additional liabilities with
respect to environmental contamination are identified, there is no assurance
that additional amounts that might be required to remediate such potential sites
would not have a material adverse effect on the financial condition of the
Company. In addition, future regulatory developments could restrict or possibly
prohibit existing methods of environmental compliance, such as the disposal of
waste water in deep injection wells. At this time, the Company is unable to
determine the potential consequences such possible future regulatory
developments would have on its financial condition. Management continually
reviews on an on-going basis its estimates of potential environmental
liabilities. The Company does not currently carry environmental impairment
liability insurance to protect it against such contingencies because such
coverage is available only at great cost and with broad exclusions. As part of
its financial assurance requirements under RCRA and equivalent Texas law, the
Company has deposited $10.6 million in trust to cover closure and post-closure
costs and liability for bodily injury and certain types of property damage
arising from sudden and non-sudden accidental occurrences at certain of the
Odessa Facility's hazardous waste management units. This deposit is included in
other noncurrent assets in the September 30, 1994 balance sheet. This amount
deposited in trust does not cover the costs of addressing existing contamination
at the Odessa Facility.
The Company's operating expenditures for environmental remediation and waste
disposal were approximately $6.4 million in 1993 and are expected to be
approximately $6.0 million in 1994. In 1993 the Company also expended
approximately $5.1 million relating to environmental capital expenditures. In
1994, the Company expects to spend approximately $3.2 million for
environmentally-related capital expenditures, which is lower than historical
levels due to timing of expenditures pertaining to several projects. Thereafter
for the foreseeable future, the Company expects to incur approximately $4.0 to
$5.0 million per year in capital spending to address the requirements of
Environmental Laws. Annual amounts could vary depending on a variety of factors,
such as the control measures or remedial technologies ultimately required and
the time allowed to meet such requirements. See "Business -- Environmental and
Related Regulation."
31
<PAGE>
BUSINESS
INDUSTRY
The polyethylene, polypropylene and styrene markets in which Rexene competes
are cyclical markets that are sensitive to relative changes in supply and
demand, which are in turn affected by general economic conditions. Rexene's
plastic film and APAO businesses are generally less sensitive to economic
cycles. Historically, the cyclical segments have experienced alternating periods
of tight supply and rising prices and profit margins, followed by periods of
large capacity additions resulting in oversupply and declining prices and profit
margins. In the early 1980's, overcapacity in the polyethylene and polypropylene
markets and weakened demand for styrene due to general economic conditions led
to poor operating results for the Company and the industry in general. In the
mid 1980's, construction of new production facilities slowed and increases in
production capacities due to technology improvements moderated. At the same
time, domestic demand grew significantly as a result of a stronger U.S. economy
and export sales strengthened due in part to a weaker U.S. dollar. As a result,
during fiscal years 1987 to 1989, the industry experienced increased levels of
demand for its products which resulted in near full capacity utilization rates,
higher domestic and export prices and record earnings. Feedstock prices were
also favorable during this period. In response to this rapid increase in demand
and profits, the U.S. LDPE, polypropylene and styrene industries increased total
rated annual production capacity by approximately 22%, 31% and 34%,
respectively, from 1988 to 1993. During the period 1990 to 1993, the rate in
U.S. demand slowed as a result of the general economic conditions, and
significant production capacity was added in some of the traditional export
markets in the Far East. As a consequence, the industry, including the Company,
experienced during this period an overcapacity condition that resulted in a
decline in utilization rates and substantially lower average selling prices and
margins.
Following a significant improvement in domestic economic growth since the
second half of 1993, these markets experienced increased levels of demand which
have resulted in greater capacity utilization and higher domestic and export
prices. According to CMAI, during the first six months of 1994, domestic demand
for LDPE, polypropylene and styrene increased by approximately 9%, 14% and 5%,
respectively, compared to the first six months of 1993. This increase in demand
has enabled the Company and the petrochemical industry in general to increase
selling prices significantly at a time when feedstock costs have either not
increased or only increased modestly compared to end product prices. For
example, from December 1993 to September 1994, the Company increased the average
selling prices on its polyethylene, polypropylene and styrene by 28%, 18% and
66% per pound, respectively. During the same period, prices for the Company's
major feedstocks, ethane and propane, were relatively stable, and the price for
benzene increased 63%.
POLYMERS
POLYETHYLENE. The chart below details the average domestic selling prices
(for liner grade HPLDPE) and capacity utilization rates for the U.S. LDPE
industry during the period 1981 through September 30, 1994. Utilization rates
are derived by dividing production by total rated annual production capacity.
LDPE utilization rates are used because HPLDPE industry utilization rate data
are unavailable. However, the Company believes that since 1988 historical HPLDPE
utilization rates have equalled or exceeded historical LDPE utilization rates.
32
<PAGE>
[LOGO]
Source: CMAI
Industry utilization rates based on LDPE
Price cents/pound based on HPLDPE
1994 third quarter estimated by CMAI
Polyethylene is the largest volume polymer in the world and is consumed in a
wide variety of consumer and industrial applications. In 1993, according to
CMAI, the total U.S. demand (including exports) for LDPE was approximately 13.2
billion pounds, consisting of 7.4 billion pounds of high pressure low density
polyethylene ("HPLDPE") and 5.8 billion pounds of linear low density
polyethylene ("LLDPE"). LDPE can be extruded or molded alone or with other
resins and additives into a wide variety of industrial and consumer products,
including film products (e.g., food packaging and pallet stretch wrap, coatings,
bags, grocery sacks, toys and bottles). Although both types of LDPE are used to
make the foregoing types of products, LLDPE has some physical properties,
including film strength, that make it more suitable for some uses (e.g., trash
bags and stretch wrap) than HPLDPE. In contrast, HPLDPE is easier to extrude and
has the advantage of higher clarity. Rexene currently only participates in the
HPLDPE segment. According to the Society of the Plastics Industry, Inc. ("SPI"),
an industry trade association, total U.S. consumption of LDPE grew at an average
annual rate of approximately 4.3% from 1988 to 1993.
According to CMAI, in 1993 the U.S. LDPE market was comprised of 14
producers, with a total rated annual production capacity for HPLDPE of
approximately 8.1 billion pounds and an annual production capacity dedicated
exclusively for the production of LLDPE of approximately 5.6 billion pounds.
According to CMAI, the LDPE industry operated at a utilization rate of
approximately 88.1% in 1993. With LDPE demand projected to grow by approximately
6.5% in 1994 over the previous year, CMAI estimates the overall LDPE industry's
utilization rate will increase to approximately 92.5% in 1994, with both the
HPLDPE and LLDPE industries operating at a rate of approximately 93.6% and
91.1%, respectively. The LDPE industry is projected by CMAI to have a
utilization rate of approximately 92% during 1995.
33
<PAGE>
POLYPROPYLENE. The chart below details the average selling prices (general
purpose, injection molding homopolymer grade) and capacity utilization rates for
the U.S. polypropylene industry during 1981 through September 30, 1994.
Utilization rates are derived by dividing production by total rated annual
production capacity.
[LOGO]
Source: CMAI
1994 third quarter estimated by CMAI
Polypropylene is by volume sales one of the fastest growing major polymers.
According to CMAI, demand (including exports) for this polymer was approximately
8.9 billion pounds in 1993. Polypropylene is consumed in a variety of
applications, including automotive, appliance, housing, packaging, consumer
products, medical and electrical/electronic. According to SPI, domestic
consumption of polypropylene grew at an average annual rate of approximately
6.7% from 1988 to 1993.
According to CMAI, in 1993 the U.S. polypropylene market consisted of 17
producers with a total rated annual production capacity of approximately 9.8
billion pounds. CMAI estimated the industry operating rate to have been
approximately 88% in 1993. With industry capacity expected to increase by
approximately 550 million pounds in 1994 and total demand (net of an
approximately 13% decline in export sales) expected to grow by approximately
8.9%, CMAI estimates the industry's utilization rate will be approximately 92%
during 1994. Since no material change in annual production capacity has been
announced for 1995, CMAI estimates that a 4.9% growth in total demand should
result in an increase in the industry's utilization rate to 95% in 1995. In
addition, approximately one billion pounds of additional capacity increases have
been announced for 1996.
AMORPHOUS POLYALPHAOLEFINS (APAO). APAO is used in a variety of
applications including adhesives, sealants, roofing materials, paper lamination
and wire and cable applications. While no definitive volume figures are
available for this industry, Rexene's management estimates the total U.S market
(including
34
<PAGE>
exports and imports) demand for APAO and atactic polypropylene ("APP") was
approximately 150 million pounds in 1993. In addition to the APAO supplied by
Rexene and one other producer in the U.S., customers also obtain a portion of
their needs from the supply of APP. APP is produced as a by-product material in
polypropylene processes that use a standard catalyst. The supply of the
by-product APP is declining as the remaining U.S. and global polypropylene
producers shift their production to more economical high activity catalyst
systems that produce no by-product APP.
STYRENE
The chart below details the average selling prices and capacity utilization
rates for the U.S. styrene industry during the period 1981 through September 30,
1994. Utilization rates are derived by dividing production by total rated annual
production capacity.
[LOGO]
Source: CMAI
1994 third quarter estimated by CMAI
Styrene is a basic petrochemical used in a variety of applications,
including packaging, housing, automotive and appliances. In 1993, U.S. demand
(including exports) totaled approximately 10.9 billion pounds. According to
CMAI, domestic consumption of styrene grew at an average annual rate of 1.3%
from 1988 to 1993. Following the record results in 1988, demand for styrene in
the U.S. declined each year through 1991 due primarily to sluggish economic
growth and environmental concerns related to the use of polystyrene, its largest
volume derivative. According to CMAI, growth in domestic demand has improved
since 1992 with increases of approximately 8.7% and 5.4% in 1992 and 1993,
respectively. CMAI estimates that domestic demand will increase by approximately
4.2% in 1994.
In 1993, the U.S. styrene market consisted of 10 producers with total annual
rated production capacity of approximately 11.6 billion pounds. According to
CMAI, the industry operated at a utilization rate of
35
<PAGE>
approximately 87.4% in 1993. The U.S. supply is currently supplemented by
approximately 600 million pounds of imports, primarily from Canada. Based on the
estimated growth in styrene demand, CMAI estimates that domestic operating rates
for the industry will be approximately 95% in 1994.
PLASTIC FILM
The U.S. polyethylene film industry is highly fragmented, with over 450
producers ranging from a few large national producers such as CT Film to many
small, regional producers. Polyethylene films are used for a variety of
packaging and non-packaging applications for consumer and industrial uses,
including trash bags, carry-out/retail bags, food and non-food packaging,
personal care, medical uses, agricultural and horticultural uses, greenhouse,
construction uses, stretch films for industrial uses and shrink films for
consumer and industrial packaging.
According to SPI, on the basis of polyethylene resins sold into the film
market, the size of the U.S. market was estimated to be approximately 8 billion
pounds in 1993. According to SPI, domestic demand for polyethylene films has
grown at an average annual rate of approximately 5.6% from 1988 to 1993.
BUSINESS STRATEGY
The Company's operating strategy to market value added specialty products
and to improve its operating costs is designed to allow it to compete
effectively against larger competitors in both periods of rising and declining
prices. The Company believes that its operating strategy will enable it to take
advantage of improved market conditions in a strong economy and to lessen the
impact of depressed pricing and demand in market downturns. However, there can
be no assurance that the Company will be able to succeed in implementing its
business strategy. See "Investment Considerations."
The following factors are central to the Company's operating strategy:
- MAINTAIN CUSTOMER DRIVEN FOCUS TO PROVIDE VALUE ADDED SPECIALTY PRODUCTS
AND QUALITY SERVICE: The Company seeks to be the premier provider of
specialty polymers, tailored with tight performance specifications and
high quality standards to the customer's specific applications. The
Company believes that this focus distinguishes it from larger competitors,
many of which focus primarily on customers that require large quantity,
commodity grade products where competition is based primarily on price.
The Company believes that its focus on the production of higher-margin,
specialty polymers will enable the Company to maintain premium pricing
relative to commodity grades of these products and preserve market share
during periods of oversupply in the industry.
- FOCUS ON NICHE MARKETS WHICH OPTIMIZE USE OF THE ODESSA FACILITY: The
Odessa Facility has smaller polymer reactors than many of its competitors.
For example, each of the polyethylene reactors at the Odessa Facility has
a total rated annual production capacity of 75 million pounds or less, as
compared to some of the Company's competitors which have polyethylene
reactors with total rated annual production capacity ranging from 200
million to 500 million pounds. The Company believes, therefore, that it is
in a better position than such competitors to respond efficiently and with
greater flexibility to customer requirements for specially tailored, high
quality products in small lot sizes. The Company currently produces over
300 different grades of polymers, and is one of only two domestic
producers of a super clean grade of polypropylene utilized for medical
applications and one of only two domestic on-purpose producers of APAO.
Because of their added value, the Company's specialty polymers are
generally priced as performance resins, thus yielding profit margins for
Rexene generally higher than those that it otherwise would realize from
the sale of commodity grade products.
- CONTINUE TO DEVELOP PLASTIC FILM BUSINESS: CT Film sales increased from
approximately $109 million in 1989 to approximately $147 million in 1993,
an increase of approximately 35%. During the same period, the Company
increased its total rated annual film production capacity from
approximately 160 million pounds to approximately 225 million pounds. In
September 1994 the Company commenced operation of a new film production
plant with an annual rated production capacity of 20 million pounds in
Scunthorpe, England. The Company intends to continue to grow its plastic
film business through increased capacity utilization and, when
appropriate, capacity expansions and
36
<PAGE>
selected acquisitions. The Company believes that such growth may reduce
its sensitivity to the commodity chemical cycle, because demand and profit
margins in the plastic film markets in which Rexene competes tend to be
relatively stable.
- DEVELOP NEW PRODUCTS AND APPLICATIONS THROUGH TECHNOLOGICAL INNOVATION:
The Company continually seeks to enhance and expand its portfolio of
specialty polymers through sustained in-house research and development and
licensing arrangements. For example, APAO, a special purpose polymer used
primarily in roofing materials and adhesives, was developed by the Company
in 1986. This polymer was developed principally to replace APP, a
by-product of polypropylene manufacturing, with an on-purpose higher
quality polymer. The Company's latest product development is a new
polyolefin polymer, REXFLEX-TM- FPO. The Company believes that FPO has the
potential for use in a wide variety of applications, including in
automotive components, containers for personal care products and medical
devices. Although the Company has made no budgeting decision with respect
to the development of any specific new product, the Company is currently
producing experimental quantities of FPO in a pilot plant at the Odessa
Facility and is currently developing the process technology for a
commercial plant. See "New Product Development."
- CONTINUE TO IMPROVE OPERATING EFFICIENCIES: The Company's operating
strategy includes making selective capital expenditures designed to
modernize and upgrade its facilities, reduce its production costs and
enable it to continue to produce technologically advanced products. For
example, the Company has recently approved capital expenditures of
approximately $4 million to upgrade portions of the olefins plant at the
Odessa Facility, which should lower unit costs for olefin production. In
addition, the Company has begun a program to selectively modernize and
upgrade both cast and blown equipment at its plastic film production
facilities to improve capacity. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
- CONTINUE TO REINVEST IN CORE BUSINESSES AND REDUCE BALANCE SHEET LEVERAGE:
The polyethylene, polypropylene and styrene markets in which Rexene
competes are highly cyclical. The market is currently experiencing a
period of price escalation; industry capacity utilization rates are
increasing and firming while demand continues to grow. Recent price
increases announced by major domestic polymer and styrene producers,
including the Company, have made it likely that average prices will
continue at or above current levels during 1994 and 1995. The Company's
strategy is to take advantage of periods of market upturns by using cash
flow generated during these periods to make capital expenditures and other
reinvestments in its businesses and to continue to reduce the balance
sheet leverage of the Company. Although no assurance can be given, based
upon announced expansions to date, the Company does not believe that
additional capacity from competitors will materially affect the Company's
operating strategy through 1996. In addition, the Company intends to grow
its polymer and plastic film businesses, internally and through selected
strategic acquisitions and joint ventures.
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<PAGE>
PRINCIPAL PRODUCTS
Plastic film, polyethylene, polypropylene, APAO and styrene are used by the
Company's customers in different industrial processes to manufacture many
diverse finished goods. Examples of these processes and principal end market
products are set forth below:
<TABLE>
<CAPTION>
PRODUCT INDUSTRIAL PROCESS PRINCIPAL END MARKET PRODUCTS
- ---------------- ------------------------------------ ---------------------------------------------------------
<S> <C> <C>
Plastic film Lamination and other processes Disposable diapers, feminine hygiene products, medical
products, tapes, packaging, lamination and unsupported
overwraps and greenhouse and agricultural applications
Polyethylene Extrusion, injection or blow molding CT Film division, food packaging, industrial packaging,
medical bottles, produce films, laminated structures and
paper coatings
Polypropylene Extrusion, injection, thermoforming Capacitor film, electronic packaging, sterile medical
or blow molding products, automotive durables, eye care products, rigid
food containers, housewares and furniture
APAO Extrusion or blending Adhesives, sealants, roofing materials, paper lamination
and wire and cable applications
Styrene Through various intermediate Disposable cups and trays, luggage, housewares, toys and
products building products
</TABLE>
The following chart presents the net sales, excluding intercompany sales,
contributed by the Company's products during the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, % OF SEPTEMBER 30, % OF
1993 NET SALES 1994 NET SALES
------------ ----------- ------------- -----------
<S> <C> <C> <C> <C>
Plastic film............................................... $ 147,468 34.3 $ 124,792 32.3
Polyethylene............................................... 120,060 28.0 104,094 27.0
Polypropylene.............................................. 64,459 15.0 56,107 14.5
APAO....................................................... 15,084 3.5 14,649 3.8
Styrene.................................................... 61,372 14.3 63,295 16.4
Other...................................................... 20,910 4.9 23,216 6.0
------------ ----- ------------- -----
Total...................................................... $ 429,353 100.0 $ 386,153 100.0
------------ ----- ------------- -----
------------ ----- ------------- -----
</TABLE>
Except for one customer that accounted for approximately 9% and 10% of net
sales for the year ended December 31, 1993 and the nine months ended September
30, 1994, respectively, no customer accounted for more than 4% of the Company's
consolidated net sales for the year ended December 31, 1993 or the nine months
ended September 30, 1994.
PLASTIC FILM
THE PRODUCT
The Company, through CT Film, is a major participant in the specialty market
for polyethylene films. Product applications for these films include disposable
diapers, feminine hygiene products, tapes, packaging, lamination and unsupported
overwraps and greenhouse and agricultural applications. CT Film's products are
manufactured principally with its own proprietary processes.
CT Film develops specialty formulations of films to meet customer
specifications for various highly specific and value added applications.
Examples include a recycle film containing a minimum of 25% recycled materials,
low gel film developed for photo-resistant applications, MAXILENE-R- lamination
film and thin gauge barrier film for feminine hygiene products and medical
applications. CT Film produces films for coextruded forming webs, linear tear
films, and elastomeric films for surgical products. The Company currently
manufactures over 1,500 different plastic film products.
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<PAGE>
MARKETING
Domestically, CT Film ships film from its plants in Chippewa Falls,
Wisconsin; Clearfield, Utah; Dalton, Georgia; and Harrington, Delaware. The
Company sold plastic film to over 450 customers in 1993, of which approximately
180 have been customers of CT Film for more than the past five years. The
Company's customers include a number of Fortune 500 companies. Products are sold
primarily through the Company's plastic film sales staff, which, as of September
14, 1994, consisted of 29 persons, supported by 50 technical service personnel
(including research and development personnel) dedicated to plastic film.
COMPETITION
CT Film's domestic plants have a total rated annual production capacity of
approximately 225 million pounds. From January 1, 1992 through September 30,
1994, the weighted average utilization rate for these facilities was 77%. CT
Film's principal competitors include Tredegar Industries, Exxon Chemical
Americas, Clopay Corporation, Blessings Company, Deerfield Plastics Company,
Inc., DuPont of Canada, and James River Corporation. The plastic film business
is based on custom formulations to meet customer needs. Competition is based on
the quality and properties of the film as well as price. CT Film seeks to
develop innovative products to meet customer needs and seeks to compete by
segmenting market niches and being responsive to customers' specific
requirements.
EUROPEAN OPERATIONS
In 1993, the Company formed a wholly-owned subsidiary in England, Rexene
Corporation Limited ("RCL"), to produce plastic film principally for European
customers. In 1993, Kimberly-Clark Limited ("KCL") executed a contract providing
for a firm commitment to purchase plastic film backsheet from RCL through
December 2001. Film backsheet is used in the production of disposable diapers
and training pants. RCL will be an Unrestricted Subsidiary for purposes of, and
as defined in, the Indenture and, accordingly, will not be subject to the
restrictive covenants contained therein. See "Description of Senior Notes."
RCL recently completed construction of a manufacturing facility in
Scunthorpe, England at a cost of $12.2 million. The plant, which will supply KCL
and other potential customers in Europe, commenced operations in September 1994
and has a total rated annual production capacity of 20 million pounds.
POLYETHYLENE
THE PRODUCT
The majority of polyethylene produced in the United States is LDPE resin. In
1993, approximately 59% of LDPE capacity in the United States was used to make
HPLDPE and the balance to make LLDPE. The Company currently only participates in
the HPLDPE market.
The Company currently produces over 200 different grades of HPLDPE. Many of
these grades are combined with other polymers to meet specific customer
requirements. Examples of the Company's differentiated resins are ethylene-vinyl
acetate (EVA) resins used in film applications that require high clarity,
toughness and sealability, and specialty low-gel resins used in computer circuit
board production. The Company focuses on producing high performance, specially
tailored resins designed to meet the customer's specific requirements.
MARKETING
The Company participates in every principal market for HPLDPE, selling its
HPLDPE resins under the REXENE-R- name. Prime grade products are sold
domestically directly to customers primarily through the Company's sales and
technical service staffs. Most wide specification products are sold to dealers
for resale. Export sales are made through international trading companies or
agents. Approximately 60% of the Company's polyethylene sales during the nine
months ended September 30, 1994 were made to customers (other than CT Film) who
have been customers of the Company for more than the past five years.
Approximately 14% of the Company's polyethylene production in 1993 was shipped
to CT Film. As of September 14, 1994, the Company's sales staff for its
polyethylene, polypropylene and APAO products consisted of 37 persons, supported
by 90 technical service personnel (including research and development personnel)
dedicated to such products.
39
<PAGE>
COMPETITION
There are currently 15 domestic producers of LDPE, some of which produce
both HPLDPE and LLDPE. The largest manufacturer of LDPE is Quantum Chemical
Corporation. The other five largest domestic producers of LDPE include Dow
Chemical U.S.A., Union Carbide Corporation, Chevron Chemical Company, Exxon
Chemical Company and Mobil Chemical Company. In 1993, Rexene accounted for
approximately 3% of the U.S. capacity for LDPE and approximately 5% of the U.S.
capacity for HPLDPE. The Odessa Facility has a total rated annual production
capacity for polyethylene of approximately 405 million pounds. From January 1,
1992 through September 30, 1994, the weighted average utilization rate for the
Company's polyethylene facilities was 97%. Competition for sales is generally
based on price for less specialized products and on price, product performance
and customer service for more specialized products. The Company seeks to compete
with larger polyethylene producers by providing a high level of customer service
and developing resins which are responsive to customers' specific requirements.
POLYPROPYLENE
THE PRODUCT
The Company currently produces over 100 different grades of polypropylene
resins, including several types of general purpose polypropylene for industrial
use and a variety of more differentiated types of polypropylene which have
properties or characteristics specifically tailored for special uses. The
Company emphasizes the manufacturing of polypropylene resins for specialty
segments of the polypropylene market such as medical, electrical and food
packaging applications. The Company is one of only two domestic producers of a
super clean grade of polypropylene utilized for medical applications, and is a
key supplier of this grade for electrical capacitor film uses. The Company's
line of impact copolymer polypropylene products is used primarily for automotive
components and rigid packaging. Other products include radiation resistant
resins for medical applications requiring radiation sterilization, capacitor
resins for premium electrical grade film, and premium copolymer blow-molding
resins for medical and food applications. The Company has been active in making
technology improvements in process and catalyst technology and works closely
with customers in developing new products to meet their specific needs.
MARKETING
The Company sells its polypropylene products under the REXENE-R- name.
Domestic and Canadian sales of products are sold primarily through the Company's
sales and technical service staffs. Most wide-specification products are sold to
brokers for resale. Export sales are made directly and through trading
companies. Approximately 65% of the Company's polypropylene sales during the
nine months ended September 30, 1994 were made to customers who have been
customers of the Company for more than the past five years. As of September 14,
1994, the Company's sales staff and technical services staff for its
polyethylene, polypropylene and APAO products consisted of 37 and 90 persons,
respectively.
COMPETITION
In 1993, there were 17 domestic producers of polypropylene, with an
estimated combined rated annual production capacity of approximately 9.8 billion
pounds. In 1993, the four largest domestic producers of polypropylene were
Himont Incorporated, Amoco Chemicals Corporation, Fina, Inc. and Exxon Chemical
Company. Competition for sales is dependent upon a variety of factors, including
product price, technical support and customer service, the degree of
specialization of various grades of polypropylene and the extent to which
substitute materials such as wood, glass, metals and other plastics are
available on a cost-effective basis. General purpose polypropylene ordinarily
competes principally on the basis of price, while more differentiated
polypropylene competes principally on the basis of product quality, performance
specifications and price. In 1993, Rexene accounted for approximately 2% of U.S.
production capacity for polypropylene. The Odessa Facility has a total rated
annual production capacity for polypropylene of approximately 180 million
pounds. From January 1, 1992 through September 30, 1994, the weighted average
utilization rate for the Company's polypropylene facilities was 88%. The Company
seeks to compete effectively with larger competitors by focusing on specialty
products responsive to customers' specific requirements.
40
<PAGE>
APAO
THE PRODUCT
The Company is one of only two U.S. on-purpose producers of APAO. APAO is
used primarily in the production of adhesives, sealants, roofing materials,
paper lamination and wire and cable applications.
MARKETING
The Company sells APAO under the REXTAC-R- name. APAO is sold domestically
through the Company's sales and technical service staffs. The Company
supplements its sales of APAO with purchases from Ube Rexene Corporation
("URC"), a joint venture company located in Japan in which the Company holds a
50% equity interest. In 1993, purchases from URC were approximately 4.3 million
pounds. The Company expects to purchase similar quantities from URC in 1994.
COMPETITION
The Company and Eastman Chemical Company are currently the only domestic
on-purpose producers of APAO. In addition, a few producers of polypropylene also
produce APP, which competes with APAO for some less performance driven uses.
Based on management estimates, in 1993 Rexene accounted for approximately 30% of
the United States capacity for APAO and APP. The Company has a total rated
annual production capacity of approximately 45 million pounds per year. From
January 1, 1992 through September 30, 1994, the weighted average utilization
rate for the Company's APAO facilities was 85%. The Company seeks to compete by
providing a high level of customer service and developing products which are
responsive to customers' specific requirements.
STYRENE
THE PRODUCT
Styrene is a petrochemical commodity with a variety of applications. Styrene
is made from ethylene and benzene and is principally used in the manufacture of
intermediate products such as polystyrene, latex, acrylonitrile butadiene
styrene (ABS) resins, synthetic rubbers and unsaturated polyester resins.
Through these products, styrene can be found in consumer products, including
disposable cups and trays, luggage, housewares, toys and building products such
as roof insulation, pipes and fittings.
MARKETING
The Company sells the vast majority of its styrene directly to a small
number of domestic customers under year to year contracts, and handles export
sales through international trading companies.
COMPETITION
The total rated annual production capacity of the Odessa Facility for
styrene is approximately 320 million pounds, which, in 1993, represented
approximately 3% of the total rated domestic production capacity for styrene
during such period. From January 1, 1992 through September 30, 1994, the
weighted average utilization rate for the Company's styrene facilities was 88%.
The six largest domestic producers of styrene are Arco Chemical Company,
Huntsman Chemicals Corporation, Amoco Chemicals Corporation, Sterling Chemicals,
Inc., Dow Chemical U.S.A. and Chevron Chemical Company. Competition for sales of
styrene is generally based on price.
EXPORT SALES
The Company had total export sales in 1993 of approximately $30.5 million,
or 7.1% of the Company's total sales. During the first nine months of 1994, the
Company had total export sales of approximately $32.6 million, or 8.5% of the
Company's total sales. The export sales percentage increased during the nine
months ended September 30, 1994 principally due to exports of plastic film to
KCL, pending start-up of the Company's plant in Scunthorpe, England. The Company
is decreasing its emphasis on this market to reduce the effect of wide price
fluctuations in periods of tight demand and industry overcapacity. See Note 15
of the Notes to the Consolidated Financial Statements included elsewhere herein.
41
<PAGE>
NEW PRODUCT DEVELOPMENT
The Company continually seeks to enhance and expand its portfolio of
specialty polymers through sustained in-house research and development and
licensing arrangements. For example, in 1993 the Company developed a new
polyolefin polymer, REXFLEX-TM- FPO. The Company believes that FPO has the
potential for use in a wide variety of applications, including in automotive
components, containers for personal care products and medical devices. Although
the Company has made no budgeting decision with respect to the development of
any specific new product, the Company is currently producing experimental
quantities of FPO in a small-scale pilot plant at the Odessa Facility and is
developing the process technology for a commercial plant. Commercial production
of FPO is subject to the successful development of such technology, the
completion of a commercial plant and necessary governmental approvals.
RAW MATERIALS FOR PRINCIPAL PRODUCTS
Principal raw materials purchased by the Company consist of ethane, propane
(extracted from natural gas liquids), propylene and benzene for the polymer and
styrene businesses and polyethylene resins for the film business. The prices of
feedstocks fluctuate widely based upon the prices of natural gas and oil. During
the past four years, feedstocks accounted for between approximately 24% and 32%
of the Company's total cost of sales. As a result, the Company's ability to pass
on increases in raw material costs to customers has a significant impact on
operating results. Current market conditions for the Company's products indicate
that increases in feedstock costs may be passed on to customers, but an adverse
change in market conditions for such products could reduce pricing flexibility,
including the ability to pass on any such increase.
The Odessa Facility obtains a combination of pure and mixed streams of
natural gas liquids from NGL pipelines and NGL extraction plants located in West
Texas and uses such streams to obtain ethane and propane feedstocks for the
Company's olefins plant. In 1993, the Company consumed approximately 526 million
pounds of ethane and 422 million pounds of propane, and during the first three
quarters of 1994, the Odessa Facility consumed ethane and propane at an annual
rate of 562 million and 472 million pounds, respectively. In 1993 and the first
three quarters of 1994, the Company produced all of its ethylene and 53% of its
propylene requirements for the Odessa Facility. The Company's feedstock supplies
are currently adequate for its requirements. The Company has storage capacity
for an approximately ten-day supply of feedstocks.
The Odessa Facility uses benzene and ethylene to produce styrene. In 1993,
approximately 62% of the Company's benzene purchases were under contracts from
Gulf Coast producers and approximately 16% was purchased from Midwest producers
at prevailing contract prices, with the balance of its needs being filled with
purchases on the spot market. The Odessa Facility has historically served as its
own source of ethylene.
The principal feedstocks for the Company's captive ethylene and propylene
production of the Odessa facility are ethane and propane. Ethane and propane
prices are established in Mont Belvieu, Texas (Gulf Coast) according to
prevailing market conditions, but the Company is able to purchase natural gas
liquids containing ethane and propane in West Texas at prices discounted from
the prevailing reported average Mont Belvieu, Texas prices. These discounts
reflect a significant portion of the cost for the producers to transport natural
gas liquids containing ethane and propane to Mont Belvieu, Texas and to
fractionate them into pure ethane and propane. In 1993, the Company acquired all
of the Odessa Facility's requirements for ethane and propane under such
arrangements.
CT Film raw materials consist principally of polyethylene resins and
additives. CT Film obtains its raw materials from a variety of sources
(including the Odessa Facility) and has been able to order these materials in
advance as its needs dictate. CT Film has adequate storage capabilities for its
raw materials.
EMPLOYEES AND LABOR RELATIONS
As of September 14, 1994, the Company employed domestically approximately
1,280 persons and utilized approximately 120 contract workers. Approximately 520
(in addition to the contract workers) are employed at the Odessa Facility in the
development and production of olefins, polyethylene, polypropylene, APAO and
styrene. In addition, approximately 90 employees at the Odessa Facility are
involved in various technical support activities to the manufacturing
operations. Also, approximately 40 employees located in
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<PAGE>
Odessa, Dallas and field sales locations are involved in sales, marketing and
distribution of the Company's products. Approximately 580 people are employed by
CT Film, including 520 who are directly involved in the manufacture of plastic
film products at various manufacturing locations in the U.S. Approximately 80
people are employed by CT Film in sales, marketing, engineering and technical
support positions. Also, approximately 80 people are employed in various
corporate staff positions in Dallas, which support all business activities of
the Company. In addition, the Company employs approximately 30 people at its
Scunthorpe, England facility. None of the Company's employees are unionized,
except for approximately 120 employees at the CT Film facility in Chippewa
Falls, Wisconsin. The Company and the union are parties to a collective
bargaining agreement through February 28, 1997. The Company believes its
relationship with its employees is satisfactory.
TRADEMARKS AND PATENTS
The Company is the owner of many United States and foreign patents and uses
trade secrets, including substantial know-how, which relate to its polyethylene,
polypropylene, APAO and plastic film products. The Company has spent over $6
million for research and development during each of the last three fiscal years
and anticipates spending a similar amount in 1994. Although patents and trade
secrets are important to the Company, permitting it to retain ownership and use
of its technological advances, the Company does not believe that the loss of any
patent would have a material adverse effect on its financial condition. The
Company also uses the technology of others under license agreements in certain
of its manufacturing operations.
REXENE-R- and REXTAC-R- are important trademarks for the Company's resins
and are widely known among purchasers of these products. The Company is the
owner of other trademarks used on or in connection with its products.
The Company has been sued by Phillips Petroleum Company in two separate
proceedings for alleged infringement of its crystalline and block copolymer
polypropylene patents. The Company believes that, based upon its current
knowledge of the facts of each case, the Company has meritorious defenses to the
claims made and intends to defend each lawsuit vigorously. See "-- Litigation."
PROPERTIES
The Company manufactures its polymers and petrochemicals at the Odessa
Facility. The Odessa Facility is located on an approximately 875-acre site in
West Texas which contains plants producing polyethylene, polypropylene, APAO and
styrene, as well as ethylene and propylene primarily for captive use. The Odessa
Facility is located near four NGL pipelines from which it derives its supply. CT
Film has five manufacturing facilities for the production of blown and cast
plastic film, located in Chippewa Falls, Wisconsin; Clearfield, Utah; Dalton,
Georgia; Harrington, Delaware and Scunthorpe, England.
The polyethylene plant in Odessa, Texas has been in operation since 1961 and
has a total rated annual production capacity of approximately 405 million
pounds. The plant is capable of producing a wide range of products including
film, injection molding, extrusion coating and blow molding resins, such as
ethylene homopolymers and ethylene vinyl acetate copolymers.
The polypropylene plant in Odessa, Texas has been in operation since 1964
and has a total rated annual production capacity of approximately 180 million
pounds. APAO is produced in a former polypropylene plant that was converted in
1986 and has a total rated annual production capacity, including expansions in
1994, of approximately 45 million pounds.
The styrene plant in Odessa, Texas has been in operation since 1958 and has
a total rated annual production capacity of approximately 320 million pounds.
The olefins plant at the Odessa Facility has been in operation since 1961
and has a total rated annual production capacity for ethylene of approximately
540 million pounds and for propylene of approximately 210 million pounds.
CT Film's Chippewa Falls plant began operations in 1948 and contains 24
production lines. The total rated annual production capacity is approximately 76
million pounds.
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<PAGE>
The Clearfield plant began operations in 1991 and contains seven production
lines. The total rated annual production capacity is approximately 44 million
pounds.
The Dalton plant began operations in 1966 and contains eleven production
lines. In addition there are three printing presses, five slitter rewinders and
six bag machines in the converting area. The total rated annual production
capacity is approximately 38 million pounds.
The Harrington plant began operations in 1972 and contains 12 production
lines. The total rated annual production capacity is approximately 67 million
pounds.
In September 1994, CT Film commenced operations at a 62,000 square foot film
production plant in Scunthorpe, England. The plant includes one production line
with a total rated annual production capacity of approximately 20 million
pounds.
The Company's executive offices are located in Dallas, Texas in leased
office space aggregating approximately 45,500 square feet. Additionally, the
Company owns an off-site warehouse in Odessa, Texas and parcels of land held for
sale in the La Porte and Pasadena industrial districts near Houston, Texas.
ENVIRONMENTAL AND RELATED REGULATION
GENERAL
The Company (and the industry in which it competes) is subject to extensive
environmental laws and regulations and is also subject to other federal, state
and local laws and regulations regarding health and safety matters. The Company
believes that its business, operations and facilities generally have been and
are being operated in compliance in all material respects with applicable
environmental and health and safety laws and regulations, many of which provide
for substantial fines, criminal sanctions, and in certain extreme circumstances,
temporary or permanent plant closures for violations. Nevertheless, from time to
time the Company has received notices of alleged violations of certain
environmental laws, and has endeavored promptly to remedy such alleged
violations. The ongoing operations of chemical manufacturing plants entail risks
in these areas and there can be no assurance that material costs or liabilities
will not be incurred in the future. Further, existing groundwater and/or soil
contamination at the Odessa Facility may require remediation that could involve
significant expenditures.
In addition, future developments, such as increasingly strict requirements
of environmental and health and safety laws and regulations and enforcement
policies thereunder could bring into question the handling, manufacture, use,
emission or disposal of substances or pollutants at the Company's facilities.
Changes to or reinterpretations of existing laws could materially and adversely
affect the Company's business and results of operations.
The Company's operating expenditures for environmental remediation and waste
disposal were approximately $6.4 million in 1993 and are expected to be
approximately $6.0 million in 1994. In 1993 the Company also expended
approximately $5.1 million relating to environmental capital expenditures. In
1994, the Company expects to spend approximately $3.2 million for environmental
related capital expenditures, which is lower than historical levels due to
timing of expenditures pertaining to several projects. Thereafter for the
foreseeable future, the Company expects to incur approximately $4.0 to $5.0
million per year in capital spending to address the requirements of
environmental laws. Annual amounts could vary depending on a variety of factors,
such as the control measures or remedial technologies ultimately required and
the time allowed to meet such requirements.
The Company believes that, in light of its historical expenditures and
expected future results of operations, it will have adequate resources to
conduct its operations in compliance with currently applicable environmental and
health and safety laws and regulations. However, in order to comply with
changing licensing and regulatory standards, the Company may be required to make
additional significant site or operational modifications that are not currently
contemplated. Further, the Company has incurred and may in the future incur
liability to clean up waste or contamination at its current or former
facilities, or which it may have disposed of at facilities operated by third
parties. The Company has approximately $23.0 million
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<PAGE>
accrued in the September 30, 1994 balance sheet as a preliminary estimate of its
total potential environmental liability with respect to remediating known site
contamination. In addition, as part of its financial assurance requirements
under RCRA and equivalent Texas law, the Company has deposited $10.6 million in
trust to cover closure and post-closure costs and liability for bodily injury
and certain types of property damage arising from sudden and non-sudden
accidental occurrences at certain of the Odessa Facility's hazardous waste
management units. However no assurance can be given that all potential
liabilities arising out of the Company's present or past operations have been
identified or that the amounts that might be required to remediate such
conditions will not be significant to the Company. The Company continually
reviews its estimates of potential environmental liabilities. The Company does
not currently carry environmental impairment liability insurance to protect it
against such contingencies because the Company has found such coverage available
only at great cost and with broad exclusions.
WASTEWATER
The Company currently disposes of wastewater from the Odessa Facility
through injection wells operated under permits from the Texas Natural Resource
Conservation Commission ("TNRCC"). These permits expired in 1990, but the
Company has been working with TNRCC since before their expiration to develop
renewal permits. TNRCC has indicated that it intends to renew the Company's
current injection well permits for an additional three years, but it has stated
that it does not intend to renew the permits again after the expiration of the
proposed three-year renewal period. Further, TNRCC may order the Company to
cease using one or more of the wells if certain periodic testing results
indicate that continued injection cannot be conducted safely. TNRCC has also
granted the Company a permit to drill and operate a new deeper well to provide
for wastewater disposal. Company consultants have estimated the cost of
installing a new deep well injection system at approximately $6 million, but the
Company has not elected to drill such a well unless and until its other
alternatives become unavailable. The Company, with neighboring industrial
facilities, has begun investigating the possibility of entering into an
agreement with a quasi-governmental authority to acquire, modify and operate a
publicly-owned wastewater treatment plant (the "South Dixie Plant") to dispose
of industrial waste water. Although no assurances can be given, the Company
believes that it will be able to use its existing wells until it develops a
satisfactory alternative waste water disposal system. If the Company is forced
to cease using such injection wells before an alternative system is developed or
the anticipated renewal permits do not provide for sufficient wastewater
disposal capacity, there could be a material adverse effect on the Company's
financial condition and results of operations.
SOLID WASTES
In March 1994, TNRCC granted the Company a permit to operate three of its
hazardous waste management units at the Odessa Facility as
treatment/storage/disposal facilities under RCRA. This permit includes a
compliance plan requiring the Company to take corrective action with regard to
existing contamination at the Odessa Facility. Pursuant to this compliance plan,
the Company must complete an investigation into the extent of onsite
contamination, conduct a risk assessment to determine the level of risk it
presents to human health and the environment, develop a corrective measures
study on the ways to remediate the contamination, and implement a remediation
plan approved by TNRCC. During the investigations of contamination at the Odessa
Facility, the Company discovered, and reported to TNRCC, the presence of low
levels of contaminants in an intermittently-flowing stream adjacent to the
Odessa Facility. The Company is continuing its investigations as to the source,
extent and effect of contaminants in this stream.
Based upon the results of its investigations of onsite contamination, the
Company does not believe that implementation of a corrective action plan will
have a material adverse effect on its financial condition. However, no assurance
can be given that all conditions any corrective action plan may be required to
address have been identified, or that the amounts that might be required to
implement that plan will not be significant to the Company.
AIR EMISSIONS
In 1990, Congress amended the federal Clean Air Act, as amended (the "Clean
Air Act"), to require control of certain emissions not previously regulated,
some of which are emitted by the Company's facilities. This legislation will
require the Company (and others in the industry with such emissions) to
implement certain pollution control measures in addition to those currently
used. The Company cannot determine the
45
<PAGE>
full impact of such legislation on its operations until all the implementing
regulations are adopted, and can give no assurance at this time that the costs
it may incur to comply with those regulations will not be significant.
The Company operates its styrene plant under an air permit that was first
issued in 1979. The permit has been amended several times, and it currently
covers both the styrene plant and the styrene loading facilities. During the
current renewal process, two parties requested a public hearing on the permit.
One of the requesting parties is the law firm representing the plaintiffs in the
Odessa Residents Tort Litigation. See "Litigation -- Odessa Residents' Tort
Litigation." If a public hearing is allowed by TNRCC, the process would probably
take from six to thirteen months to complete. During the pendency of the public
hearing process, the Company would continue to operate under its existing
permit. While there can be no assurance, the Company expects TNRCC to renew its
styrene air permit, although the renewal permit may contain additional modeling
or monitoring requirements.
ADDITIONAL ENVIRONMENTAL ISSUES
The Federal Comprehensive Environmental Response Compensation and Liability
Act, as amended ("CERCLA"), and similar laws in many states, impose liability
for the clean-up of certain waste sites and for related natural resource
damages, without regard to fault or the legality of the waste disposal. Liable
persons generally include the site owner or operator, former site owners, and
persons that disposed or arranged for the disposal of hazardous substances found
at those sites. The Company has sent wastes from its operations to various
third-party waste disposal sites. From time to time the Company receives notices
from representatives of governmental agencies and private parties contending
that the Company is potentially liable for a portion of the remediation at such
third-party and formerly-owned sites. Although there can be no assurance, the
Company does not believe that its liabilities for remediation of such sites,
either individually or in the aggregate, will have a material adverse effect on
the Company.
The Odessa Facility is located near the South Dixie Plant owned by the City
of Odessa ("Odessa"). Odessa is implementing a plan to expand a second water
treatment plant and abandon the South Dixie Plant. Odessa has alleged that the
Company has contributed to groundwater contamination at the South Dixie Plant.
If Odessa's allegations are correct, then the Company could be liable for some
or all of the remediation at the site. Although there can be no assurance, the
Company does not believe that any such costs will have a material adverse effect
on the Company.
LITIGATION
BANKRUPTCY
On October 18, 1991, and pursuant to an agreement in principle detailing the
terms for Old Rexene's recapitalization, Old Rexene and its wholly-owned
subsidiaries, Rexene Products Company ("Products") and Poly-Pac, Inc., filed
voluntary petitions for reorganization under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"), case numbers 91-1058, 91-1057 and 91-1059,
respectively. Pursuant to an Order Providing for Joint Administration entered by
the Bankruptcy Court on October 21, 1991, the Old Rexene and Poly-Pac, Inc.
cases were consolidated with the Products case for administrative purposes only.
On July 7, 1992, the Bankruptcy Court entered an order confirming the Amended
Plan, which, among other things, provided for the merger of Old Rexene with and
into Products to form the Company (the "1992 Merger"). Thereafter, all
conditions to the effectiveness of the 1992 Merger and the Amended Plan were
either satisfied or waived. The 1992 Merger and the Amended Plan were then
consummated on September 11, 1992 and September 18, 1992 (the "Effective Date"),
respectively. Substantially all distributions contemplated by the Amended Plan
have been made. Certain matters, including the Izzarelli Class (as defined
below) claims, remain pending before the Bankruptcy Court.
STOCKHOLDER CLASS ACTION LITIGATION
In January 1990, a purported class action was filed in the United States
District Court, Northern District of Texas, by an alleged stockholder of Old
Rexene on behalf of purchasers of Old Rexene common stock between October 23,
1989 and December 27, 1989. The defendants in this action presently include
Rexene,
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<PAGE>
one of its current directors and certain of its former directors. The class has
been certified with an intervenor as the class representative. The intervenor's
complaint asserts claims under Rule 10b-5 under the Securities Exchange Act of
1934, and state common law grounds. The plaintiff alleges that public statements
made by certain directors of Old Rexene created a misleading impression of Old
Rexene's financial condition thereby artificially inflating the price of the
common stock of Old Rexene. The plaintiff seeks compensatory damages,
prejudgment interest, a recovery of costs and attorneys' fees, and such other
relief as may be deemed just and proper. Discovery is ongoing.
In Old Rexene's Chapter 11 bankruptcy proceeding, the intervening plaintiff
filed a proof of claim on behalf of herself and the purported class seeking in
excess of $10 million based upon the allegations in the litigation. The Company
objected to the claim and elected to leave the legal, equitable and contractual
rights of the plaintiff unaltered, thereby allowing this litigation to proceed
as of the Effective Date without regard to the bankruptcy proceeding.
IZZARELLI STOCK BONUS PLAN CLASS ACTION LITIGATION
In February 1991, a class action lawsuit was filed in the United States
District Court for the Western District of Texas-Midland Division against the
Company, the El Paso Products Company Stock Bonus Plan (the "Stock Bonus Plan")
and Texas Commerce Bank -- Odessa (the former trustee for the Stock Bonus Plan)
by two former participants in the Stock Bonus Plan on behalf of the 1986
participants in the Stock Bonus Plan (the "Izzarelli Class"). The complaint
alleged that the Company amended the Stock Bonus Plan in 1987 and 1988 to
deprive the Izzarelli Class of benefits to which they would have been entitled
had the Stock Bonus Plan not been amended. The Izzarelli Class asserts claims
under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
for alleged breach of fiduciary duties to the participants and for alleged
violation of ERISA's provision prohibiting amendments to the Stock Bonus Plan
after benefits had accrued to participants. The plaintiffs seek actual damages,
attorneys' fees, costs and expenses, prejudgment interest and such further
relief as may be deemed appropriate. After a trial, the trial court in July 1992
entered a judgment against the Company in the amount of $6.6 million (as
subsequently amended) plus court costs. In November 1992, the trial court
awarded the Izzarelli Class $595,000 for attorneys' fees and out-of-pocket
expenses. The Company has recorded an accrual of $7.4 million to reflect this
judgment.
The Company appealed the judgment to the United States Court of Appeals for
the Fifth Circuit. The Izzarelli Class also filed an appeal with respect to the
amount of damages awarded and the judgment in favor of Texas Commerce Bank --
Odessa. On June 22, 1994, the appeals court reversed the trial court and held
that Rexene did not violate ERISA or any fiduciary duty in amending the Stock
Bonus Plan. It also affirmed the trial court's judgment that the trustee was not
liable to the plaintiffs. On August 11, 1994, the appeals court refused the
plaintiffs' request that it reconsider its decision.
In Old Rexene's bankruptcy proceeding, the Izzarelli Class filed proofs of
claim for $27.7 million. The Izzarelli Class has pending before the Bankruptcy
Court a motion to alter or amend the Confirmation Order and a motion to allow
their claim based upon the judgment entered by the trial court. The Bankruptcy
Court has deferred ruling on these motions until resolution of all appeals
arising from the trial court's judgment.
Pursuant to an agreement in December 1992 regarding the distribution of the
remaining balance in an escrow account established in connection with a 1988
merger involving the Company, $2 million is being retained in the escrow account
which will be available to the Company to pay up to 50% of any portion of a
final judgment or settlement in the Izzarelli litigation which is not paid by
insurance, should the judgment be reinstated. The Company intends to pursue
claims for recovery of the amount of any final judgment or settlement against
its insurance carrier subject to policy limits of $10 million. Although the
insurance carrier has been paying the Company's attorneys' fees in the Izzarelli
litigation, it has otherwise denied coverage and reserved all rights.
PHILLIPS BLOCK COPOLYMER LITIGATION
In March 1984, Phillips Petroleum Company ("Phillips") filed a lawsuit
against the Company in the United States District Court for the Northern
District of Illinois, Eastern Division, seeking injunctive relief, an
unspecified amount of compensatory damages and treble damages. The complaint
alleges that the
47
<PAGE>
Company's copolymer process for polypropylene infringes Phillips' two "block"
copolymer patents. This action has been transferred to the United States
District Court for the Southern District of Texas, Houston Division. Discovery
in this case has been completed. The Company has filed a motion for summary
judgment. Phillips has filed a motion for partial summary judgment. Pursuant to
an agreement among the parties, the court appointed a special master who
conducted a hearing on these motions and thereafter recommended to the court
that the Company's motion be granted and Phillips' motion be denied. Thereafter,
Phillips filed motions to disqualify the special master, to reject the
recommendation of the special master and to enter partial summary judgment for
Phillips. The court has entered an order denying Phillips' motion to disqualify
the special master. The summary judgment motions are still pending. In Old
Rexene's Chapter 11 bankrupcty proceeding, Phillips filed a proof of claim
seeking in excess of $108 million based upon the allegations in this litigation.
The Company objected to the claim and elected to leave the legal, equitable and
contractual rights of Phillips unaltered, thereby allowing this litigation to
proceed as of the Effective Date without regard to the bankruptcy proceeding.
PHILLIPS CRYSTALLINE LICENSE LITIGATION
In May 1990, Phillips filed a lawsuit against the Company in the United
States District Court for the District of Delaware seeking injunctive relief, an
unspecified amount of compensatory damages, treble damages and attorneys' fees,
costs and expenses. The complaint alleges that the Company is infringing
Phillips' Patent No. 4,376,851 (the "'851 Patent") for crystalline
polypropylene. Pursuant to a License Agreement dated as of May 15, 1983, as
amended, (the "License Agreement"), Phillips granted the Company a non-exclusive
license to make, use and sell crystalline polypropylene covered by the '851
Patent. The complaint alleges that effective April 21, 1990, Phillips terminated
the License Agreement because it believed that, by the terms of the License
Agreement, all conditions precedent to such termination had occurred. The
complaint further alleges that, without an effective License Agreement, the
Company's continuing use of the '851 Patent constitutes an infringing use. An
amended complaint filed in May 1990 further alleges that the Company made a
material misrepresentation that induced Phillips to enter into the License
Agreement and that Phillips entered into the License Agreement as a consequence
of a mutual mistake of the parties. The amended complaint therefore alleges that
the License Agreement is void AB INITIO. The Company filed a motion to dismiss
Phillips' amended complaint for failure to state a claim. On December 30, 1993,
the court entered an order dismissing Phillips' claim that the License Agreement
was void AB INITIO, and ordered that the 1990 license termination issue be
resolved at trial. Trial is scheduled for October 19, 1994. In Old Rexene's
Chapter 11 bankruptcy proceeding, Phillips filed a proof of claim seeking in
excess of $147 million based upon the allegations in this litigation. The
Company objected to the claim and elected to leave the legal, equitable and
contractual rights of Phillips unaltered thereby allowing this litigation to
proceed as of the Effective Date without regard to the bankruptcy proceeding.
ODESSA RESIDENTS' TORT LITIGATION
On April 15, 1994, the national and state chapters of the NAACP and
approximately 770 residents of a neighborhood approximately one mile northwest
of the Shell Oil Company ("Shell"), Rexene and Dynagen, Inc. ("Dynagen") plants
in Odessa, Texas petitioned the State District Court in Odessa, Texas to
intervene in a previously existing lawsuit against Dynagen to (a) add as
additional defendants Rexene, Shell and General Tire Corporation (the parent of
Dynagen) and (b) have the litigation certified as a class action. The
plaintiffs' petition seeks an unspecified amount of money damages for past,
present and future injuries to plaintiffs' health, wrongful death, loss of
consortium and reduction in property values; the conduct and payment of property
clean up, remediation and relocation costs; payment of expenses for medical
testing and monitoring; funding of pollution and health studies; attorney's
fees; punitive damages and injunctive relief. Plaintiffs' petition specified
alleged pollution from air emissions from the three plants as a basis for their
claims. The trial court has allowed intervention and severed the action from the
original lawsuit against Dynagen. Plaintiffs have withdrawn their motion to have
the litigation certified as a class claim. This litigation is in the early
stages of pretrial discovery. Plaintiff's attorneys have also requested a public
hearing in connection with the renewal of the Company's air permit for its
styrene plant. See
"-- Environmental and Related Regulation -- Air Emissions."
48
<PAGE>
Although there can be no assurance of the final resolution of any of these
matters, the Company believes that, based upon its current knowledge of the
facts of each case, it has meritorious defenses to the various claims made and
intends to defend each suit vigorously. Although there can be no assurance of
the final resolution of any of these litigation matters, the Company does not
believe that the outcome of any of these lawsuits will have a material adverse
effect on the Company's financial position or results of operations.
With respect to certain pending or threatened proceedings involving the
discharge of materials into or protection of the environment, see "--
Environmental and Related Regulation". The Company is also a party to various
lawsuits arising in the ordinary course of business and does not believe that
the outcome of any of these lawsuits will have a material adverse effect on the
Company's financial position or results of operations.
49
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The table set forth below provides certain information with respect to those
persons who are currently serving as directors and executive officers of the
Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------ --- ---------------------------------------------
<S> <C> <C>
Arthur L. Goeschel 72 Chairman of the Board
Andrew J. Smith 54 Director, Chief Executive Officer
Lavon N. Anderson 59 Director, President and Chief Operating
Officer
Kevin N. Clowe 43 Director
William B. Hewitt 56 Director
Ilan Kaufthal 47 Director
Fred P. Rullo, Jr. 54 Director
Phillip Siegel 52 Director
Heinn F. Tomfohrde, III 60 Director
Kevin W. McAleer 44 Executive Vice President and Chief Financial
Officer
Jack E. Knott 40 Executive Vice President -- Sales and Market
Development
James M. Ruberto 47 Executive Vice President and President -- CT
Film
Jonathan R. Wheeler 43 Senior Vice President -- Administration
Bernard J. McNamee 59 Vice President, Secretary and General Counsel
Geff Perera 41 Vice President and Controller
</TABLE>
Mr. Goeschel has been Chairman of the Board of the Company since March 1992.
He also was a director of Old Rexene from April 1988 to May 1989. Mr. Goeschel
is presently retired. He was Chairman of the Board of Tetra Technologies, Inc.,
a company which recycles and treats environmentally sensitive by-product and
wastewater streams, and then markets end-use chemicals extracted from such
streams, from November 1992 to October 1993. He is a director of Calgon Carbon
Corporation, a manufacturer of activated carbon, and National Picture Frame
Company, a manufacturer of picture frames. He is also a member of the board of
trustees of the Laurel Mutual Funds.
Mr. Smith has been Chief Executive Officer and a director of the Company
since March 1992. From December 1991 to March 1992, he was a private consultant.
From June 1991 to December 1991, he was President and Chief Operating Officer of
Itex Enterprises, Inc., an environmental remediation company. Mr. Smith also
served as a consultant to Old Rexene from January 1991 to June 1991. Immediately
prior thereto, he had been a director of Old Rexene since May 1988 and the
President and Chief Executive Officer of Old Rexene since June 1988. Prior
thereto he had held various positions with Old Rexene since 1976.
Dr. Anderson has been President and Chief Operating Officer of the Company
since January 1991 and a director since February 1990. From May 1988 to January
1991 Dr. Anderson was Executive Vice President -- Manufacturing and Technical of
Old Rexene. Prior thereto he had held various engineering, manufacturing and
research and development positions with Old Rexene since 1972.
Mr. Clowe has served as a director of the Company since September 1992. He
has served as Assistant Treasurer and Corporate Officer of American
International Group, Inc., an international insurance and financial services
company, since January 1988, as Vice President and Corporate Officer of American
International Group Capital Corporation since 1987, and as President and
Director of American International Fund Distributors, Inc. since 1988. Mr. Clowe
is also a director of Concurrent Computer Corporation.
Mr. Hewitt has served as a director of the Company since February 1990. He
has been Chairman of the Board and Chief Executive Officer of Capital Credit
Corporation, a receivables management company, since
50
<PAGE>
September 1991 and Executive Vice President of Union Corporation since March
1994. Mr. Hewitt was Executive Vice President of First Manhattan Consulting
Group, a management consulting firm, from 1980 to September 1991. He is also a
director of the Union Corporation.
Mr. Kaufthal has served as a director of the Company since September 1992.
He has been a managing director of Wertheim Schroder & Co. Incorporated, an
investment banking firm, since 1987. He is also a director of Formica
Corporation, United Retail Group, Inc. and Cambrex Corporation.
Mr. Rullo has served as a director of the Company since September 1992. He
has been President and Chief Executive Officer of Freedom Chemical Company, a
specialty chemical company, since October 1991. He was President of ABB
Combustion Engineering Systems and Service Inc., a manufacturer of power plants
for utilities and industrial concerns, from September 1989 through September
1991.
Mr. Siegel has served as a director of the Company since September 1992. He
is an independent business consultant. From December 1989 to February 1993, Mr.
Siegel served as Senior Vice President of Presidential Life Insurance Company, a
company involved in the sale of life and annuity products. During 1989, Mr.
Siegel was an independent consultant with respect to mergers and acquisitions.
Mr. Siegel is a director of West Point Stevens, Inc. and Bally's Grand, Inc.
Mr. Tomfohrde has served as a director of the Company since September 1992.
He is currently retired. From January 1987 to his retirement in December 1991,
Mr. Tomfohrde served as President and Chief Operating Officer and a director of
GAF Chemicals Corp. and its successor company, International Specialty Products,
Inc., a specialty chemicals company. He is also a director of Sybron Chemicals
Corp., Creative Technologies Group, Inc., OSI Specialties, Inc. and McWhorter
Technologies, Inc.
Mr. McAleer has been Executive Vice President and Chief Financial Officer of
the Company since July 1990. From 1985 to 1990, Mr. McAleer was Chief Financial
Officer of Varo, Inc., a manufacturer of specialty electronics equipment.
Mr. Knott has been Executive Vice President -- Sales and Market Development
of the Company since March 1992. Prior thereto, Mr. Knott was an Executive Vice
President of Old Rexene since January 1991 and President of CT Film since
February 1989. Mr. Knott held various positions with CT Film from 1985 to
February 1989.
Mr. Ruberto has been Executive Vice President of the Company and President
of CT Film since March 1992. Prior thereto, Mr. Ruberto had been Executive Vice
President -- Sales and Market Development of Rexene since January 1991. From
April 1989 to January 1991, Mr. Ruberto was Executive Vice President --
Marketing and Business Planning of Old Rexene. From October 1987 through March
1989, Mr. Ruberto was Vice President -- Strategic Planning of Plicon Corp., a
manufacturer of flexible packaging materials.
Mr. Wheeler has been Senior Vice President -- Administration of the Company
since December 1990. Prior thereto, Mr. Wheeler had been Vice President -- Human
Resources and Administration of Old Rexene since September 1988.
Mr. McNamee has been Vice President, Secretary and General Counsel of the
Company since May 1993. From September 1989 to November 1992, Mr. McNamee was
Vice President and General Counsel of Ferro Corporation, a multinational
manufacturer of specialty materials. From July 1985 to August 1989, Mr. McNamee
was Associate General Counsel of Chevron Chemical Company, a manufacturer of
petrochemicals, polymers and other chemical products.
Mr. Perera has been Vice President of the Company since January 1991 and
Controller since February 1989. From October 1988 to February 1989, Mr. Perera
was Director of External Reporting of Old Rexene.
In October 1991, Old Rexene filed a petition for reorganization under the
federal bankruptcy laws from which the Company emerged on September 18, 1992,
pursuant to the Reorganization. At the time Old Rexene filed its petition for
reorganization, Dr. Anderson and Mr. Hewitt served as directors. In addition, in
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<PAGE>
connection with the Reorganization, Messrs. Clowe, Kaufthal, Rullo, Siegel and
Tomfohrde were appointed to serve on the Company's board at the request of the
committee of creditors participating in the Reorganization. Messrs. Goeschel and
Smith, who served as directors of Old Rexene prior to the filing of its petition
for reorganization, returned to Old Rexene's board after the petition was filed.
Dr. Anderson and Messrs. Smith, McAleer, Knott, Ruberto, Wheeler and Perera each
served as executive officers of Old Rexene at some time within two years before
the filing by Old Rexene of its petition for reorganization.
Ilan Kaufthal, a director of the Company, is a managing director of Wertheim
Schroder & Co. Incorporated, a managing underwriter of the Offerings. See
"Underwriting."
RECENT ADOPTION OF MANAGEMENT INCENTIVE PLANS
In October 1994, the Management Development and Compensation Committee of
the Board of Directors of the Company (the "Committee") adopted the Rexene
Corporation 1994 Long-Term Incentive Plan (the "Incentive Plan"). The Incentive
Plan is intended to replace the Company's 1988 Stock Incentive Plan and 1993
Non-Qualified Stock Option Plan. The effectiveness of the Incentive Plan is
subject to and conditioned upon the approval thereof by the stockholders of the
Company at the 1995 annual meeting of stockholders. The Company has reserved for
issuance under the Incentive Plan 882,000 shares of Common Stock, plus up to an
additional 103,920 shares of Common Stock if the Underwriter's over-allotment
option in connection with the Common Stock Offering is exercised in full.
The purpose of the Incentive Plan is to encourage and enable key salaried
employees of the Company and its subsidiaries to acquire a proprietary interest
in the Company through the ownership of Common Stock and other rights with
respect to Common Stock and to more closely align management incentives with
appreciation in the value of the Common Stock. The Incentive Plan will be
administered by the Committee, which has full power in its discretion to grant
awards under the Incentive Plan, to determine the terms of such awards (which
may be in any one or a combination of the following forms: (a) non-qualified
stock options; (b) stock appreciation rights; (c) restricted shares; (d)
performance shares; and (e) performance units), to interpret the provisions of
the Incentive Plan and to take such other action as it deems necessary or
advisable for the administration of the Incentive Plan.
In October 1994, the Committee adopted the Rexene Corporation Supplemental
Executive Retirement Plan (the "SERP"). The purpose of the SERP is to provide
supplemental retirement and survivor benefits for a certain select group of
management or highly compensated employees who complete a specified period of
service and otherwise become eligible under the SERP. The Company intends to
fund the SERP from time to time at the discretion of the Committee or the Board
of Directors.
52
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following tabulation sets forth as of October 1, 1994, information with
respect to each person who was known by Rexene to be the beneficial owner of
more than five percent of the Common Stock.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
---------------------------
NUMBER OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES (1) CLASS
- ------------------------------------------------------------------------------ -------------- -----------
<S> <C> <C>
Executive Life Insurance Company of New York ................................. 1,047,144(2) 9.9%
390 North Broadway
Jericho, New York 11753-2167
Energy Management Corporation ................................................ 921,174(3) 8.8
1733 Woodstead Court
The Woodlands, Texas 77380
M.D. Sass Investors Services, Inc. ........................................... 633,293(4) 6.0
1133 Avenue of the Americas
New York, New York 10036
The Prudential Insurance Company of America .................................. 567,455(5) 5.4
Prudential Plaza
Newark, New Jersey 07102-3777
Household Commercial of California, Inc. ..................................... 539,682(6) 5.1
2700 Sanders Road
Prospect Heights, Illinois 60070
<FN>
- ------------------------
(1) All shares listed are directly held with sole voting and investment power
unless otherwise indicated.
(2) Based upon information reported in a Schedule 13G filed with the Securities
and Exchange Commission (the "Commission") by Kevin E. Foley, Deputy
Superintendent of Insurance of the State of New York, as Rehabilitator of
Executive Life Insurance Company of New York, on November 25, 1992, as
amended by an amendment filed with the Commission on October 11, 1994.
(3) Based upon information reported in a Schedule 13D filed with the Commission
by Energy Management Corporation ("EMC") and John W. Adams on June 14,
1994. EMC is a Colorado corporation whose principal business is the
purchase and sale of publicly and privately traded securities, accounts
receivable and other claims against distressed and troubled debtors. Does
not include 4,656 shares of Common Stock beneficially owned by John W.
Adams, a director of EMC whose business address is 767 Third Avenue, New
York, New York 10017.
(4) Based upon information reported in a Schedule 13G filed with the Commission
by M. D. Sass Investors Services, Inc. ("Sass") dated February 10, 1994.
Sass has sole investment power with respect to 124,700 of such shares and
shared investment power with respect to 508,593 of such shares.
(5) Based upon information reported in a Schedule 13G filed with the Commission
by The Prudential Insurance Company of America ("Prudential") on or about
February 11, 1993, as amended by an amendment thereto dated January 31,
1994. Includes 1,709 shares as to which Prudential has sole voting and
investment power, and 565,746 shares as to which Prudential has shared
voting and investment power, which are held for the benefit of its clients.
(6) Based upon information reported in a Schedule 13D filed with the Commission
by Household Commercial of California, Inc. on October 13, 1992, as amended
by an amendment thereto filed on October 22, 1992.
</TABLE>
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<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following tabulation sets forth information with respect to the
beneficial ownership of the Common Stock as of October 17, 1994 by each director
and executive officer of the Company and by all directors and executive officers
of the Company as a group.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
-------------------------
NUMBER OF PERCENT OF
NAME SHARES (1) CLASS
- ---------------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
DIRECTORS
Lavon N. Anderson........................................................... 7,916 *
Kevin N. Clowe.............................................................. 6,250 *
Arthur L. Goeschel.......................................................... 37,333(2) 0.4%
William B. Hewitt........................................................... 6,250 *
Ilan Kaufthal............................................................... 6,250 *
Fred P. Rullo, Jr........................................................... 6,250 *
Phillip Siegel.............................................................. 9,250 *
Andrew J. Smith............................................................. 14,845 0.1%
Heinn F. Tomfohrde, III..................................................... 6,250 *
EXECUTIVE OFFICERS (EXCLUDING ANY DIRECTOR NAMED ABOVE)
Kevin W. McAleer............................................................ 5,000 *
Jack E. Knott............................................................... 7,000(3) *
James M. Ruberto............................................................ 4,000 *
Jonathan R. Wheeler......................................................... 4,000 *
Bernard J. McNamee.......................................................... 4,000 *
Geff Perera................................................................. 2,333 *
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (15 PERSONS)................ 126,927(4) 1.2%
<FN>
- ------------------------
* Less than .1%
(1) All shares listed are directly held with sole voting and investment power
unless otherwise indicated.
(2) Includes 1,000 shares held by Mr. Goeschel's spouse.
(3) Includes 3,000 shares held by Mr. Knott's spouse in a custodial capacity
under the Uniform Gift to Minors Act.
(4) Includes 69,832 shares subject to stock options which are exercisable
within 60 days.
</TABLE>
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<PAGE>
DESCRIPTION OF NEW CREDIT AGREEMENT
The following is a summary of the terms of the New Credit Agreement. For
more complete information regarding such indebtedness, reference is made to the
New Credit Agreement, a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part and which is
incorporated by reference herein.
The Company has received the Commitment Letter from the Bank with respect to
the New Credit Agreement, which provides for up to $100 million of term loans
and $80 million of revolving borrowings, which include letters of credit not to
exceed $15 million, for working capital and general corporate purposes.
Revolving borrowings under the Revolving Credit Facility will be limited to 65%
of eligible inventory consisting of liquid commodity products, 50% of all other
eligible inventory and 85% of eligible accounts receivable. The Company will be
required to make quarterly principal payments under the Term Loan commencing on
March 31, 1995. The first four payments will each be in the amount of $2.5
million, the next four payments will each be in the amount of approximately
$3.75 million and all payments thereafter will each be in the amount of $6.25
million, so as to retire such indebtedness in its entirety by December 31, 1999.
In addition, under the New Credit Agreement, the Company has certain mandatory
prepayment obligations that will not exceed $10.0 million in 1995, $20.0
million, less any prior mandatory repayments made from excess cash flow, in 1996
or $30.0 million, less any prior mandatory repayments made from excess cash
flow, in 1997 in the event annual cash flow exceeds certain levels. Availability
of borrowings under the New Credit Agreement is initially contingent upon the
receipt by the Company of gross proceeds from the Common Stock Offering of at
least $85 million and of aggregate gross proceeds from the Offerings of at least
$275 million. The Company estimates it will be necessary for it to make initial
borrowings of approximately $100 million under the Term Loan in connection with
the Recapitalization. See "The Recapitalization". Borrowings under the New
Credit Agreement will bear interest at a floating rate based on the Bank's prime
rate or, at the Company's option, on the Bank's reserve-adjusted LIBO rate plus,
in each case, a margin which will be adjusted quarterly after the first
anniversary of the closing date of the New Credit Agreement based on the ratio
of the Company's consolidated Indebtedness to Adjusted EBITDA (as defined
therein) and will be secured by the pledge of substantially all of the assets of
the Company, including inventory and accounts receivable and the proceeds
thereof. The New Credit Agreement will require the Company to pay a commitment
fee on the daily average unadvanced portion of the Revolving Credit Facility and
the aggregate unadvanced portion of the Term Loan at a rate of one-half of one
percent or three-eighth of one percent depending upon the ratio of the Company's
consolidated Indebtedness to Adjusted EBITDA. The New Credit Agreement will also
require the Company to pay with respect to each Letter of Credit a fee on the
daily average outstanding amount of such Letter of Credit at a rate per annum
equal to one-eighth of one percent plus a margin which will depend on the ratio
of the Company's consolidated Indebtedness to Adjusted EBITDA.
The New Credit Agreement will contain covenants which restrict, among other
things, the incurrence of additional indebtedness by the Company, the payment of
dividends and other distributions in respect of the capital stock of the
Company, the creation of liens on the assets of the Company, the making of
investments by the Company, certain mergers, sales of assets and similar
transfers and the prepayment of the Senior Notes. The New Credit Agreement will
also contain certain financial covenants relating to the financial condition of
the Company, including covenants relating to the ratio of its earnings to its
interest expense, the ratio of its earnings to its fixed charges and a leverage
ratio.
The New Credit Agreement will specify a number of events of default
including, among others, the failure to make timely payments of principal, fees,
and interest, the failure to perform the covenants contained therein, the
failure of representations and warranties to be true, the occurrence of a
"change of control" (as defined in the New Credit Agreement, to include, among
other things, the ownership by any person or group of more than 50% of the total
voting securities of the Company), and certain impairments of the security for
the New Credit Agreement. The New Credit Agreement also contains a cross-default
to other indebtedness of the Company aggregating more than $5,000,000 and
certain customary bankruptcy, insolvency and similar defaults. Upon the
occurrence of an event of default under the New Credit Agreement, the lenders
holding at least 51% in amount of the principal indebtedness outstanding under
the New
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<PAGE>
Credit Facility may declare all amounts thereunder immediately due and payable,
except that such amounts automatically become immediately due and payable in the
event of certain bankruptcy, insolvency or similar defaults.
The New Credit Agreement generally prohibits the Company from prepaying the
Senior Notes, whether the prepayment would result from the redemption of the
Senior Notes, an offer by the Company to purchase the Senior Notes following a
change of control or a sale or other disposition of assets, or the acceleration
of the due date for payment of the Senior Notes.
DESCRIPTION OF SENIOR NOTES
GENERAL
The Senior Notes will be issued pursuant to an Indenture (the "Indenture")
between the Company and , as trustee (the "Trustee"). The terms of the
Senior Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (the "Trust Indenture
Act"). The Senior Notes are subject to all such terms, and Holders of Senior
Notes are referred to the Indenture and the Trust Indenture Act for a statement
thereof. The following summary of certain provisions of the Indenture does not
purport to be complete and is qualified in its entirety by reference to the
Indenture, including the definitions therein of certain terms used below. A copy
of the proposed form of Indenture has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part and is available as
set forth under "Available Information." The definitions of certain of the terms
used in the following summary are set forth below under "Certain Definitions."
The Senior Notes will rank senior in right of payment to all future
subordinated Indebtedness of the Company. The Senior Notes will rank PARI PASSU
in right of payment with all senior borrowings, including borrowings under the
New Credit Agreement. However, borrowings under the New Credit Agreement will be
secured by substantially all of the assets of the Company. The Company has no
outstanding indebtedness which would be subordinate to the Senior Notes and has
no current plans to incur any such subordinated indebtedness.
As of the date of the Indenture, none of the Company's domestic operations
are conducted through Subsidiaries and none of the Company's Subsidiaries has
any operations or material assets or liabilities, other than a foreign sales
corporation and RCL. RCL was formed in late 1993 to operate the Company's
European film operations. As of September 30, 1994, the aggregate total assets
and total liabilities of RCL and the foreign sales corporation were $16.5
million and $13.5 million, respectively, and for the year ended December 31,
1993 and the nine months ended September 30, 1994, RCL and the foreign sales
corporation had no cash flow from operations and net losses of $1,000 and
$303,000, respectively (all of the preceding amounts are approximate). As of the
date of the Indenture, all of the Company's Subsidiaries will be Unrestricted
Subsidiaries. Under certain circumstances, the Company will be able to designate
future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries will
not be subject to any of the restrictive covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Senior Notes will be limited in aggregate principal amount to $175
million and will mature on , 2004. Interest on the Senior Notes will
accrue at the rate of % per annum and will be payable semi-annually in
arrears on and , commencing on , 1995, to
Holders of record on the immediately preceding and .
Interest on the Senior Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. Principal, premium, if any, and interest on
the Senior Notes will be payable at the office or agency of the Company
maintained for such purpose within the City and State of New York, or at the
option of the Company, payment of interest may be made by check mailed to the
Holders of the Senior Notes at their respective addresses set forth in the
register of Holders of Senior Notes; PROVIDED that all payments with respect to
Senior Notes the Holders of which have given wire transfer instructions to the
Company will be required to be made by wire transfer of immediately available
funds to the accounts
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<PAGE>
specified by the Holders thereof. Until otherwise designated by the Company, the
Company's office or agency in New York will be the office of the Trustee
maintained for such purpose. The Senior Notes will be issued in denominations of
$1,000 and integral multiples thereof.
OPTIONAL REDEMPTION
The Senior Notes will not be redeemable at the Company's option prior to
. Thereafter, the Senior Notes will be subject to redemption at
the option of the Company, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest thereon to
the applicable redemption date, if redeemed during the twelve-month period
beginning on of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ------------------------------------------------------------------------ -------------
<S> <C>
%
</TABLE>
Notwithstanding the foregoing, during the first 36 months after the date of
this Prospectus, the Company may, from time to time, redeem up to $ million
in aggregate principal amount of Senior Notes, upon not less than 30 nor more
than 60 days' notice, at a redemption price of % of the principal amount
thereof plus accrued and unpaid interest thereon to the redemption date, with
the net proceeds of an offering or offerings of common stock of the Company;
PROVIDED that at least $100 million in aggregate principal amount of Senior
Notes remains outstanding immediately after the occurrence of such redemption;
and PROVIDED, FURTHER, that each such redemption shall occur within 60 days of
the date of the closing of the related offering of common stock of the Company.
MANDATORY REDEMPTION
Except as set forth below under "Repurchase at the Option of Holders," the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Senior Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Senior Notes will
have the right to require the Company to purchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Senior Notes pursuant
to the offer described below (the "Change of Control Offer") at an offer price
in cash equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest thereon to the date of purchase (the "Change of Control
Payment"). Within ten days following any Change of Control, the Company will
mail a notice to each Holder stating: (1) that the Change of Control Offer is
being made pursuant to the covenant entitled "Change of Control" and that all
Senior Notes properly tendered will be accepted for payment; (2) the purchase
price and the purchase date, which will be no earlier than 30 days nor later
than 40 days from the date such notice is mailed (the "Change of Control Payment
Date"); (3) that any Senior Note not properly tendered will continue to accrue
interest; (4) that, unless the Company defaults in the payment of the Change of
Control Payment, all Senior Notes accepted for payment pursuant to the Change of
Control Offer will cease to accrue interest after the Change of Control Payment
Date; (5) that Holders electing to have any Senior Notes purchased pursuant to a
Change of Control Offer will be required to surrender the Senior Notes, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the Senior
Notes completed, or transfer by book-entry, to the Payment Agent at the address
specified in the notice prior to the close of business on the third Business Day
preceding the Change of Control Payment Date; (6) that Holders will be entitled
to withdraw their election if the Paying Agent receives, not later than the
close of business on the second Business Day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of
57
<PAGE>
Senior Notes delivered for purchase, and a statement that such Holder is
withdrawing his election to have such Senior Notes purchased; and (7) that
Holders whose Senior Notes are being purchased only in part will be issued new
Senior Notes equal in principal amount to the unpurchased portion of the Senior
Notes surrendered (or transferred by book-entry), which unpurchased portion must
be equal to $1,000 in principal amount or an integral multiple thereof. The
Company will comply with the requirements of Rule 14e-1 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and any other securities
laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Senior Notes in connection
with a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Senior Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Senior
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the Senior Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Senior Notes so tendered
and the Change of Control Payment for such Senior Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Senior Note equal in principal amount to any unpurchased
portion of the Senior Notes surrendered, if any; PROVIDED that each such new
Senior Note will be in a principal amount of $1,000 or an integral multiple
thereof. The Company will publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Payment Date.
Except as described above with respect to a Change of Control, the Indenture
does not contain provisions that permit the Holders of the Senior Notes to
require that the Company repurchase or redeem the Senior Notes in the event of a
takeover, recapitalization or similar restructuring.
The New Credit Agreement contains prohibitions of certain events that would
constitute a Change of Control. In addition, the exercise by the Holders of the
Senior Notes of their right to require the Company to repurchase the Senior
Notes upon the occurrence of a Change of Control or an Asset Sale is prohibited
by the New Credit Agreement. Finally, the Company's ability to pay cash to the
Holders of Senior Notes upon such an event may be limited by the Company's then
existing financial resources.
The definition of Change of Control includes the sale, lease, transfer,
conveyance or other disposition of "all or substantially all" of the assets of
the Company and its Restricted Subsidiaries taken as a whole. Although there is
a developing body of case law interpreting the phrase "substantially all," there
is no precise established definition of the phrase under applicable law.
Accordingly, the ability of a Holder of Senior Notes to require the Company to
repurchase such Senior Notes as a result of a sale, lease, transfer, conveyance
or other disposition of less than all of the assets of the Company and its
Restricted Subsidiaries taken as a whole to another Person or group may be
uncertain.
ASSET SALES
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, engage in an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued, sold or otherwise disposed of in such Asset Sale less the
amount of liabilities (as shown on the Company's or such Restricted Subsidiary's
most recent balance sheet or in the notes thereto) and obligations assumed in
connection with such Asset Sale by the transferee of any such assets or on
behalf of such transferee by a third party and (ii) except with respect to Asset
Sales involving Obsolete Plants, at least 80% of the consideration therefor
received by the Company or such Restricted Subsidiary (after deducting expenses
associated with such Asset Sale) is in the form of cash or Cash Equivalents;
PROVIDED that the amount of (x) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet or in the notes thereto)
of the Company or such Restricted Subsidiary that are assumed in connection with
such Asset Sale by the transferee of any such assets or on behalf of such
transferee by a third party and (y) any notes or other obligations received by
the Company or any such
58
<PAGE>
Restricted Subsidiary from such transferee that are immediately converted by the
Company or such Restricted Subsidiary into cash or Cash Equivalents and (z) with
respect to any Asset Sale for consideration not exceeding $10 million, up to $10
million principal amount of notes or other obligations received by the Company
or such Restricted Subsidiary from such transferee that are repaid in cash or
Cash Equivalents to the Company or such Restricted Subsidiary within 360 days
after consummation of such Asset Sale (to the extent of the cash or Cash
Equivalents received), shall be deemed to be cash for purposes of this
provision.
Within 360 days after the consummation of any Asset Sale, the Company may
apply the Net Proceeds from such Asset Sale, at its option, (a) to reduce Senior
Term Debt, (b) to reduce Senior Revolving Debt or (c) to an acquisition of a
Permitted Business, the making of capital expenditures or the acquisition of
other fixed assets, in each case, engaged or used in a Permitted Business. At
any time on or prior to 360 days following consummation of any Asset Sale, the
Company may designate all or any portion of the Net Proceeds from such Asset
Sale as "Excess Proceeds." Pending the final application of any such Net
Proceeds in accordance with the first sentence of this paragraph or to an Asset
Sale Offer, the Company may invest such Net Proceeds in any manner that is not
prohibited by the Indenture and may temporarily repay Senior Revolving Debt. Any
Net Proceeds from Asset Sales that are not applied or invested as provided in
the first sentence of this paragraph or which are designated "Excess Proceeds"
as provided above in this paragraph will constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $25 million, the Company will be
required to make an offer to all Holders of Senior Notes (an "Asset Sale Offer")
to purchase the maximum principal amount of Senior Notes that may be purchased
out of the Excess Proceeds, at an offer price in cash equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon to the date of
purchase in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate amount of Senior Notes tendered pursuant to an Asset
Sale Offer is less than the Excess Proceeds, the Company may use any remaining
Excess Proceeds for general corporate purposes. If the aggregate principal
amount of Senior Notes tendered pursuant to an Asset Sale Offer exceeds the
amount of Excess Proceeds, the Trustee shall select the Senior Notes to be
purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
SELECTION AND NOTICE
If less than all of the Senior Notes are to be redeemed at any time,
selection of Senior Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Senior Notes are listed, or, if the Senior Notes are not so
listed, on a pro rata basis, by lot or by such method as the Trustee shall deem
fair and appropriate; PROVIDED that no Senior Notes of $1,000 or less shall be
redeemed in part. Notices of redemption shall be mailed by First Class mail at
least 30 but not more than 60 days before the redemption date to each Holder of
Senior Notes to be redeemed at its registered address. If any Senior Note is to
be redeemed in part only, the notice of redemption that relates to such Senior
Note shall state the portion of the principal amount thereof to be redeemed. A
new Senior Note in principal amount equal to the unredeemed portion thereof will
be issued in the name of the Holder thereof upon cancellation of the original
Senior Note. On and after the redemption date, interest ceases to accrue on
Senior Notes or portions of them called for redemption.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture will provide 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 on account of the Company's Equity
Interests (other than dividends or distributions payable to any Wholly Owned
Restricted Subsidiary of the Company); (ii) purchase, redeem or otherwise
acquire or retire for value any Equity Interests of the Company; (iii) purchase,
redeem or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Senior Notes, except at final maturity thereof as set forth
in the original documentation governing such Indebtedness; or (iv) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (iv) above being collectively referred to as "Restricted Payments"),
unless, at the time of such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
59
<PAGE>
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
entitled "Incurrence of Indebtedness and Issuance of Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of the Indenture (including Restricted Payments permitted by
clauses (v), (w) and (y) of the next succeeding paragraph), is less than the
sum of (w) 50% of the Consolidated Net Income of the Company (excluding the
amount of all cash payments received by the Company and its Wholly Owned
Restricted Subsidiaries from URC or the APAO Joint Venture after the date of
the Indenture as fees for licensing of intellectual property rights or other
proprietary technology that are applied to an Investment in either such
joint venture pursuant to clause (d) of the definition of "Permitted
Investments") for the period (taken as one accounting period) from the
beginning of the first month commencing after the date of the Indenture to
the end of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a deficit,
less 100% of such deficit), PLUS (x) 100% of the aggregate net cash proceeds
received by the Company from the issue or sale since the date of the
Indenture of Equity Interests of the Company or of debt securities of the
Company that have been converted into such Equity Interests (other than
Equity Interests (or convertible debt securities) sold to a Subsidiary of
the Company and other than Disqualified Stock or debt securities that have
been converted into Disqualified Stock), PLUS (y) to the extent that any
Restricted Investment that was made after the date of the Indenture is sold
for cash or otherwise liquidated or repaid for cash, the lesser of (A) the
cash return of capital with respect to such Restricted Investment (less the
cost of disposition if any) and (B) the initial amount of such Restricted
Investment.
The foregoing provisions will not prohibit (v) the payment of any dividend
within 60 days after the date of declaration thereof if, at said date of
declaration, such payment would have complied with the provisions of the
Indenture; (w) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company in exchange for, or out of the proceeds of,
the substantially concurrent sale (other than to a Restricted Subsidiary of the
Company or a Designated Unrestricted Subsidiary) of other Equity Interests of
the Company (other than any Disqualified Stock); (x) the defeasance, redemption
or repurchase of subordinated Indebtedness with the net proceeds from an
incurrence of Permitted Refinancing Indebtedness; (y) the repurchase, redemption
or other acquisitions or retirement for value of any Equity Interests of the
Company or any Restricted Subsidiary of the Company held by any member of the
Company's (or any of its Restricted Subsidiaries') management pursuant to any
management equity subscription agreement or stock option agreement; PROVIDED
that (1) the aggregate price paid for all such repurchased, redeemed, acquired
or retired Equity Interests shall not exceed $1.0 million in any twelve-month
period plus the aggregate cash proceeds received by the Company during such
twelve-month period from any reissuance of Equity Interests by the Company to
members of management of the Company and its Restricted Subsidiaries and (2) no
Default or Event of Default shall have occurred and be continuing immediately
after such transaction; or (z) Restricted Payments to the extent made with
Equity Interests (other than Disqualified Stock) of the Company.
In no event will the Company or any Restricted Subsidiary of the Company
make an Investment after the date of the Indenture in any Person in which it has
an Equity Interest on the date of the Indenture but which is not a Subsidiary of
the Company on the date of the Indenture, including any Guarantee of
Indebtedness of such Person, in excess of the aggregate cash received from such
Person after the date of the Indenture by the Company and its Wholly Owned
Restricted Subsidiaries as fees for the licensing of any intellectual property
rights or other proprietary technology.
Not later than the thirtieth day after the end of each calendar quarter in
which any Restricted Payment is made, the Company shall deliver to the Trustee
an Officers' Certificate stating that such Restricted
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<PAGE>
Payment was permitted and setting forth the basis upon which the calculations
required by the covenant entitled "-- Restricted Payments" were computed, which
calculations may be based upon the Company's latest available financial
statements at the time such Officers' Certificate is delivered.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if (x) the Company would, at the time of such
designation and after giving pro forma effect thereto as if such designation had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described below under the caption "-- Incurrence of Indebtedness and
Issuance of Preferred Stock" and (y) such designation would not cause a Default.
For purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries in the Subsidiary so designated will be
deemed to be Restricted Payments at the time of such designation and will reduce
the amount available for Restricted Payments under the first paragraph of this
covenant. All such outstanding Investments will be deemed to constitute
Investments in an amount equal to the greater of (y) the net book value of such
Investments at the time of such designation or (z) the fair market value of such
Investments at the time of such designation. Such designation will only be
permitted if such Restricted Payment would be permitted at such time and if such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, create, incur, issue, assume, guarantee
or otherwise become liable with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that the Company will not issue any
Disqualified Stock and will not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock; PROVIDED, HOWEVER, that the Company and any
Subsidiary Guarantor may incur Indebtedness (including Acquired Debt) or the
Company may issue shares of Disqualified Stock if the Fixed Charge Coverage
Ratio for the Company's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such Disqualified Stock is
issued would have been at least 2.0 to 1, with respect to any such Indebtedness
incurred, or Disqualified Stock issued, on or prior to , 1997, and at
least 2.25 to 1, with respect to any such Indebtedness incurred, or Disqualified
Stock issued, after , determined on a pro forma basis (including a
pro forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued, as
the case may be, at the beginning of such four-quarter period.
The restrictions imposed in the foregoing paragraph will not apply to:
(i) the incurrence by the Company and any Subsidiary Guarantor of Senior
Term Debt in an aggregate principal amount outstanding at any time not to
exceed $100 million LESS the aggregate amount of all repayments after the
date of the Indenture, optional or mandatory, of the principal of such
Indebtedness, including, without limitation, pursuant to the covenant
entitled "-- Asset Sales";
(ii) the incurrence by the Company and any Subsidiary Guarantor of
Senior Revolving Debt and letters of credit (and any Guarantees thereof by
the Company and any Subsidiary Guarantor) in an aggregate principal amount
at any time outstanding (with letters of credit and Guarantees being deemed
to have a principal amount equal to the maximum potential liability of the
Company and its Restricted Subsidiaries thereunder) not to exceed the
Borrowing Base LESS the aggregate amount of all permanent repayments of
Senior Revolving Debt made pursuant to clause (b) of the first sentence of
the second paragraph of the covenant entitled "Asset Sales";
(iii) the incurrence by the Company and any Subsidiary Guarantor of
Acquisition Debt, if the Fixed Charge Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such
Acquisition Debt is incurred, determined on a pro forma basis as if the
Acquisition Debt had been incurred and the related acquisition had been
consummated at the beginning of such four-quarter period, would be greater
than the actual Fixed Charge Coverage Ratio of the Company for such
four-quarter period;
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<PAGE>
(iv) the incurrence by the Company and any Subsidiary Guarantor of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, decrease or refund
Indebtedness that was permitted by the Indenture to be incurred;
(v) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Restricted Subsidiaries;
(vi) the incurrence in the ordinary course of business by the Company
and any Subsidiary Guarantor of Hedging Obligations;
(vii) the incurrence by the Company and any Subsidiary Guarantor of
Indebtedness pursuant to letters of credit issued in the ordinary course of
business to support payment by the Company and such Subsidiary Guarantors of
insurance premiums;
(viii) the incurrence by the Company of Existing Debt;
(ix) the incurrence of Indebtedness which also constitutes Investments,
to the extent permitted by the covenant entitled "-- Restricted Payments";
(x) the incurrence of Indebtedness for general corporate purposes by any
Foreign Subsidiary that is a Restricted Subsidiary and not a Subsidiary
Guarantor in an aggregate principal amount outstanding at any time not
exceeding such Foreign Subsidiary's Foreign Subsidiary Borrowing Base; and
(xi) the incurrence by the Company and any Subsidiary Guarantor of
additional Indebtedness in an aggregate principal amount outstanding at any
one time not exceeding $35 million.
LIENS
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or suffer to exist any Lien on any asset now owned or hereafter acquired,
or any income or profits therefrom, or assign or convey any right to receive any
income or profits therefrom, except Permitted Liens.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
The Indenture will provide 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 or become effective any contractual
encumbrance or other restriction on the ability of any Restricted Subsidiary to
(i) (a) pay dividends or make any other distributions to the Company or any of
its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any
other interest or participation in, or measured by, its profits or (b) pay any
Indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii)
make loans or advances to the Company or any of its Restricted Subsidiaries or
(iii) transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries, in each case, except for such encumbrances or
restrictions existing under or by reason of (a) applicable law, (b) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired,
provided that the Consolidated Cash Flow of such Person is not taken into
account in determining whether such acquisition was permitted by the terms of
the Indenture, (c) any Bank Credit Agreement, PROVIDED that such encumbrances
and restrictions are no more restrictive than such encumbrances and restrictions
under the New Credit Agreement as in effect on the date of the Indenture, (d) by
reason of customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices or (e) purchase
money obligations and Capital Lease Obligations for property acquired in the
ordinary course of business that impose restrictions of the nature described in
clause (iii) above on the property so acquired.
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MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture will provide that the Company may not consolidate or merge
with or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia, (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Senior Notes and the Indenture pursuant to a supplemental
Indenture in a form reasonably satisfactory to the Trustee; (iii) immediately
after such transaction no Default or Event of Default exists; and (iv) the
Company or the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company), or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made (A) will have
Consolidated Net Worth (immediately after the transaction but prior to any
purchase accounting adjustments resulting from the transaction) equal to or
greater than the Consolidated Net Worth of the Company immediately preceding the
transaction and (B) will, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of the covenant described above under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock."
TRANSACTIONS WITH AFFILIATES
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make any contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each of the
foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is
on terms that are no less favorable to the Company or the relevant Restricted
Subsidiary than those that would have been obtained in a comparable transaction
by the Company or such Restricted Subsidiary with an unrelated Person and (ii)
the Company delivers to the Trustee (a) with respect to any Affiliate
Transaction involving aggregate consideration in excess of $1 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction involving aggregate consideration in excess of $10
million, an opinion as to the fairness to the Company or such Restricted
Subsidiary of such Affiliate Transaction from a financial point of view issued
by an investment banking firm of national standing; PROVIDED, HOWEVER, that (x)
any contract, agreement, understanding, payment, loan, advance or guarantee
(each a "Compensation Benefit") with, for the benefit of, or to an executive
officer of the Company as compensation for employment by the Company, whether
pursuant to an employment agreement, an employee benefit plan or other
compensation arrangement if either (1) such Compensation Benefit is less than $1
million or (2) is approved by the Compensation Committee or the Board of
Directors of the Company, (y) transactions between or among the Company and/or
its Restricted Subsidiaries and (z) transactions permitted by the covenant
entitled "-- Restricted Payments," in each case, shall not be deemed Affiliate
Transactions.
LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY OWNED
RESTRICTED SUBSIDIARIES
The Indenture will provide that the Company (i) will not, and will not
permit any Wholly Owned Restricted Subsidiary of the Company to, transfer,
convey or sell any Capital Stock of any Wholly Owned Restricted Subsidiary of
the Company to any Person (other than the Company or a Wholly Owned Restricted
Subsidiary of the Company), unless (a) such transfer, conveyance or sale is of
all the Capital Stock of such Wholly Owned Restricted Subsidiary and (b) the
cash Net Proceeds from such transfer, conveyance or sale are applied in
accordance with the covenant described above under the caption "-- Asset Sales,"
and
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(ii) will not permit any Wholly Owned Restricted Subsidiary of the Company to
issue any of its Equity Interests (other than, if necessary, shares of its
Capital Stock constituting directors' qualifying shares) to any Person other
than to the Company or a Wholly Owned Restricted Subsidiary of the Company.
SUBSIDIARY GUARANTEES
The Indenture will provide that the Company will cause all Subsidiaries of
the Company that are designated or are otherwise deemed to be Restricted
Subsidiaries after the date of the Indenture (other than Foreign Subsidiaries)
to execute Subsidiary Guarantees. The Company may, at its option, cause any
Restricted Subsidiary that is a Foreign Subsidiary to execute a Subsidiary
Guarantee.
LIMITATION ON APPLICABILITY OF CERTAIN COVENANTS
During any period of time that (i) the ratings assigned to the Senior Notes
by each of Standard & Poor's Ratings Group and Moody's Investors Services
(collectively, the "Rating Agencies") are higher than BBB- and Baa3,
respectively (the "Investment Grade Ratings") and (ii) no Default or Event of
Default has occurred and is continuing, the Company and its Restricted
Subsidiaries will not be subject to the covenants entitled "Assets Sales,"
"Restricted Payments" and "Incurrence of Indebtedness and Issuance of Preferred
Stock" (collectively, the "Suspended Covenants"). If one or both Rating Agencies
withdraws its rating or downgrades its Investment Grade Rating, then thereafter
the Company and its Restricted Subsidiaries will be subject to the Suspended
Covenants (until the Rating Agencies have again assigned Investment Grade
Ratings to the Senior Notes) and compliance with the Suspended Covenants with
respect to Restricted Payments made after the time of such withdrawal or
downgrade will be calculated in accordance with the covenant entitled
"Restricted Payments" as if such covenant had been in effect at all times after
the date of the Indenture.
REPORTS
The Indenture will provide that, whether or not required by the federal
securities laws or the rules and regulations of the Securities and Exchange
Commission (the "Commission"), so long as any Senior Notes are outstanding, the
Company will furnish to the Holders of Senior Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms including, in addition to the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" with respect to the Company and
its Subsidiaries required pursuant to such Forms with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all current reports that would be required to be filed with
the Commission on Form 8-K if the Company were required to file such reports. If
at any time during the period presented in such quarterly or annual financial
information, the Company has one or more Unrestricted Subsidiaries that singly
or together would constitute a Significant Subsidiary, all such quarterly and
annual financial information shall also include a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" with respect to the
Company and its Restricted Subsidiaries (if any) for such period. In addition,
whether or not required by the federal securities laws or the rules and
regulations of the Commission, the Company will file a copy of all such
information and reports with the Commission for public availability and make
such information available to securities analysts and prospective investors upon
request.
EVENTS OF DEFAULT AND REMEDIES
The Indenture will provide that each of the following constitutes an Event
of Default: (i) default for 30 days in the payment when due of interest on any
Senior Note; (ii) default in payment when due of the principal of or premium, if
any, on any Senior Note; (iii) failure by the Company for 30 days to comply with
any of the provisions described under the captions "Certain Covenants -- Change
of Control," "-- Asset Sales," "-- Restricted Payments" or "-- Incurrence of
Indebtedness and Issuance of Preferred Stock"; (iv) failure by the Company for
60 days after notice to comply with any of its other agreements in the Indenture
or the Senior Notes; (v) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or
is created after the date
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of the Indenture, which default (a) is caused by a failure to pay principal of
or premium, if any, or interest on such Indebtedness prior to the expiration of
a period of ten days after expiration of any grace period provided in such
Indebtedness (as amended from time to time) (a "Payment Default") or (b) results
in the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates $10
million or more (excluding the principal amount of the Senior Notes); (vi)
failure by the Company or any of its Restricted Subsidiaries to pay final
judgments aggregating in excess of $5 million, which judgments are not paid,
discharged or stayed for a period of 60 days; (vii) except as permitted by the
Indenture or if, at the time thereof, the obligor under such Subsidiary
Guarantee is and is permitted to be designated as an Unrestricted Subsidiary
without causing a Default, any Subsidiary Guarantee of a Significant Subsidiary
shall be held in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any Subsidiary Guarantor
that is a Significant Subsidiary, or any Person acting on behalf of any such
Subsidiary Guarantor, shall deny or disaffirm, in writing, its obligation under
its Subsidiary Guarantee; and (viii) certain events of bankruptcy or insolvency
with respect to the Company or any Restricted Subsidiary that is a Significant
Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Senior Notes may
declare all the Senior Notes to be due and payable immediately. Notwithstanding
the foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company or any Restricted
Subsidiary that is a Significant Subsidiary, all outstanding Senior Notes will
become due and payable without further action or notice. Holders of the Senior
Notes may not enforce the Indenture or the Senior Notes except as provided in
the Indenture. Subject to certain limitations, Holders of a majority in
principal amount of the then outstanding Senior Notes may direct the Trustee in
its exercise of any trust or power. The Trustee may withhold from Holders of the
Senior Notes notice of any continuing Default or Event of Default (except a
Default or event of Default relating to the payment of principal, premium or
interest) if it determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Senior Notes pursuant to
the optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Senior Notes. If an Event of Default occurs prior
to by reason of any willful action (or inaction) taken (or not taken)
by or on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Senior Notes prior to such date, then the Make-whole Premium
shall also become immediately due and payable to the extent permitted by law
upon the acceleration of the Senior Notes.
The Holders of a majority in aggregate principal amount of the Senior Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Senior Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest or premium on, or the principal of, the Senior Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OR DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
or any Subsidiary Guarantor, as such, shall have any liability for any
obligations of the Company or any Subsidiary Guarantor under the Senior Notes,
the Indenture or any Subsidiary Guarantee, or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of Senior
Notes by accepting a Senior Note waives
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and releases all such liability. The waiver and release are part of the
consideration for issuance of the Senior Notes. Such waiver may not be effective
to waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Senior Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Senior Notes to
receive payments in respect of the principal of, premium, if any, and interest
on such Senior Notes when such payments are due solely out of the trust funds
deposited pursuant to the following paragraph, (ii) the Company's obligations
with respect to the Senior Notes concerning issuing temporary Senior Notes,
registration of Senior Notes, mutilated, destroyed, lost or stolen Senior Notes
and the maintenance of an office or agency for payment and money for security
payments held in trust, and (iii) the rights, powers, trusts, duties and
immunities of the Trustee, and the Company's obligations in connection
therewith. In addition, the Company may, at its option and at any time, elect to
have the obligations of the Company released with respect to certain covenants
that are described in the Indenture ("Covenant Defeasance") and thereafter any
omission to comply with such covenants shall not constitute a Default or Event
of Default with respect to the Senior Notes. In the event Covenant Defeasance
occurs, certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Senior Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Senior Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on the outstanding Senior
Notes on the stated maturity or on the applicable redemption date, as the case
may be, and the Company must specify whether the Senior Notes are being defeased
to maturity or to a particular redemption date; (ii) in the case of Legal
Defeasance, the Company shall have delivered to the Trustee an Opinion of
Counsel in the United States reasonably acceptable to the Trustee confirming
that (A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of the Indenture, there
has been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such Opinion of Counsel shall confirm that,
the Holders of the outstanding Senior Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal Defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal Defeasance had
not occurred; (iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the outstanding Senior
Notes will not recognize income, gain or loss for federal income tax purposes as
a result of such Covenant Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred; (iv) no Default or Event
of Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of funds
to be applied to such deposit) or insofar as Events of Default from bankruptcy
or insolvency events are concerned, at any time in the period ending on the 91st
day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance
will not result in a breach or violation of, or constitute a default under any
material agreement or instrument (other than the Indenture) to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound; (vi) the Company must have delivered to the Trustee an
Opinion of Counsel to the effect that after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (vii) the Company must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of Senior Notes over the other creditors of the
Company with the intent of defeasing, hindering, delaying or defrauding
creditors of
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the Company or others; and (viii) the Company must deliver to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Senior Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any Senior Note selected for redemption. Also, the Company is not required to
transfer or exchange any Senior Note for a period of 15 days before a selection
of Senior Notes to be redeemed.
The registered Holder of a Senior Note will be treated as the owner of it
for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Senior Notes may be amended or supplemented with the consent of the Holders
of at least a majority in principal amount of the Senior Notes then outstanding
(including waivers obtained in connection with a tender offer or exchange offer
for Senior Notes), and any existing default or compliance with any provision of
the Indenture or the Senior Notes may be waived with the consent of the Holders
of a majority in principal amount of the then outstanding Senior Notes
(including consents obtained in connection with the tender offer or exchange
offer for Senior Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Senior Notes held by a non-consenting Holder): (i) reduce
the principal amount of Senior Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Senior Note or alter the provisions with respect to the redemption of the
Senior Notes (other than provisions relating to the covenants described above
under the captions "-- Repurchase at the Option of Holders"), (iii) reduce the
rate of or change the time for payment of interest on any Senior Note, (iv)
waive a Default or Event of Default in the payment of principal of or premium,
if any, or interest on the Senior Notes (except a rescission of acceleration of
the Senior Notes by the Holders of at least a majority in aggregate principal
amount of the Senior Notes and a waiver of the payment default that resulted
from such acceleration), (v) make any Senior Note payable in money other than
that stated in the Senior Notes, (vi) make any change in the provisions of the
Indenture relating to waivers of past Defaults or the rights of Holders of
Senior Notes to receive payments of principal of or premium, if any, or interest
on the Senior Notes, (vii) waive a redemption payment with respect to any Senior
Note (other than a payment required by one of the covenants described above
under the caption "-- Repurchase at the Option of Holders") or (viii) make any
change in the foregoing amendment and waiver provisions.
Without the consent of any Holder of Senior Notes, the Company and the
Trustee may amend or supplement the Indenture or the Senior Notes to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Senior Notes
in addition to or in place of certificated Senior Notes, to provide for the
assumption of the Company's obligations to Holders of Senior Notes in the case
of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of Senior Notes or that does not
materially adversely affect the legal rights under the Indenture of any such
Holder, or to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act. The
Trustee may, without the consent of any Holders of the Senior Notes, waive any
Event of Default that relates to untimely or incomplete reports or information
if the legal rights of the Holders would not be materially adversely affected
thereby and may waive any other defaults the effect of which would not
materially adversely affect the rights of the Holders under the Indenture.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in
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respect of any such claim as security or otherwise. The Trustee will be
permitted to engage in other transactions; however, if it acquires any
conflicting interest it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding Senior
Notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent person in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Senior Notes, unless such Holder shall have
provided to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"ACQUIRED DEBT" means, with respect to the Company or any Restricted
Subsidiary of the Company, (i) Indebtedness of any other Person existing at the
time such other Person is merged with or into the Company or any such Restricted
Subsidiary or became a Restricted Subsidiary of the Company, including, without
limitation, Indebtedness incurred by such other Person in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of the Company, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such other Person prior to the date on which
the Company or any Restricted Subsidiary acquires such Person.
"ACQUISITION DEBT" means (i) Indebtedness incurred substantially
simultaneously with, and for the purpose of financing all or any part of the
purchase price or cost of, any acquisition of a Permitted Business, which
acquisition is permitted pursuant to the covenant entitled "-- Restricted
Payments" and (ii) Acquired Debt of the Person which is acquired.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control; and PROVIDED FURTHER, that no employee or group of
employees of the Company (other than executive officers and directors) shall by
reason of their employment be deemed to be an Affiliate.
"APAO JOINT VENTURE" means a joint venture between the Company and any other
Person, other than URC, providing for the manufacture and sale of APAO outside
of the United States and Canada in geographic regions in which URC does not do
business.
"APAO VENTURE INVESTMENT" means each of the following Investments by the
Company and its Restricted Subsidiaries in the APAO Joint Venture: (i)
Investments of cash in an aggregate amount outstanding at any time (measured by
their fair market value as of the date made) not in excess of the aggregate cash
received after the date of the Indenture by the Company and its Restricted
Subsidiaries from the APAO Joint Venture as fees for the licensing to the APAO
Joint Venture of any intellectual property rights or other proprietary
technology relating to the manufacture of APAO and (ii) the Guarantee by the
Company and any Subsidiary Guarantor of Indebtedness of the APAO Joint Venture
in a principal amount not exceeding $15 million less all Investments made by the
Company and the Subsidiary Guarantors to satisfy their obligations under any
such Guarantee.
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"ASSET SALE" means (i) the sale, lease, transfer or conveyance of any assets
of the Company or any Restricted Subsidiary (including, without limitation, by
way of a sale and leaseback, but specifically excluding a sale and leaseback of
an asset occurring within 150 days after the completion of construction or
acquisition of such asset) other than in the ordinary course of business
(PROVIDED that the sale, lease, transfer or conveyance of all or substantially
all of the assets of the Company and its Restricted Subsidiaries taken as a
whole will be governed by the covenant entitled "-- Change of Control" and/or
the covenant entitled "-- Merger, Consolidation or Sale of Assets" and not by
the covenant entitled "Asset Sale"), (ii) the issuance by any Restricted
Subsidiary of the Company of Equity Interests of any of the Company's Restricted
Subsidiaries to any Person other than the Company or a Restricted Subsidiary,
and (iii) the sale by the Company or its Restricted Subsidiaries of Equity
Interests of any Restricted Subsidiary of the Company, in each case (a) whether
in a single transaction or a series of related transactions and (b) that have a
fair market value, as determined by the Board of Directors of the Company, in
excess of $1 million. Notwithstanding the foregoing: (i) a transfer of assets by
the Company to a Restricted Subsidiary or by a Restricted Subsidiary to the
Company or to another Restricted Subsidiary, (ii) a transfer of up to 375 acres
of undeveloped land located in Bayport, Texas, and owned by the Company on the
date of the Indenture, (iii) a disposition of any machinery, equipment,
furniture, apparatus, tools, implements, materials, supplies or other similar
property which have become worn out or obsolete, (iv) a Restricted Payment that
is permitted by the covenant entitled "-- Restricted Payments" or (v) a sale,
transfer or conveyance of any intellectual property rights of the Company (other
than those used in the CT Film division) to manufacture a product in any country
in which neither the Company nor any Restricted Subsidiary is manufacturing the
same product at the time of such sale, transfer or conveyance will not be deemed
to be an Asset Sale. In no event shall any sale, lease, transfer or conveyance
of (i) all or substantially all of the capital stock or assets of any of the
styrene, polymer or film businesses of the Company or (ii) all or substantially
all of the capital stock or assets of any Restricted Subsidiary or group of
Restricted Subsidiaries that singly or together would constitute a Significant
Subsidiary or (iii) assets which account for (A) at least 10% of the
consolidated assets of the Company and its Restricted Subsidiaries as of the end
of the most recently ended fiscal quarter of the Company or (B) at least 10% of
the Consolidated Cash Flow of the Company for the four full fiscal quarters
immediately preceding such sale, lease or conveyance be deemed to be made in the
ordinary course of business.
"BANK CREDIT AGREEMENTS" means one or more credit agreements between the
Company and lenders thereunder providing for term borrowings and/or revolving
borrowings, including all related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, in each case as
amended, modified, renewed, refunded, replaced or refinanced, in whole or in
part, from time to time (and regardless of the number of lenders thereunder and
whether Indebtedness thereunder would constitute Permitted Refinancing
Indebtedness) and including, but not limited to, the New Credit Agreement.
"BORROWING BASE" means the greater of (i) $80 million and (ii) the sum of
(A) 80% of the net book value of all accounts receivable of the Company that are
not more than 60 days past due and (B) 60% of the net book value of all
inventory of the Company.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participation, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"CASH EQUIVALENTS" means (i) United States dollars, pounds sterling and any
other freely convertible currency, (ii) securities issued or directly and fully
guaranteed or insured by the United States government or any agency or
instrumentality thereof, having maturities of not more than six months from the
date of acquisition, (iii) certificates of deposit and eurodollar time deposits,
with maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight
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bank deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500 million and a Keefe Bank Watch Rating of "B" or
better, (iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above and (v) commercial paper having the highest rating
obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation
and in each case maturing within six months after the date of acquisition.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition in one or a series of
related transactions, by merger or consolidation or otherwise, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any Person or Group (as such term is used in Sections
13(d)(3) and 14(d)(2) of the Exchange Act), (ii) the adoption of a plan relating
to the liquidation or dissolution of the Company unless such plan is abandoned
within 30 days after the date of adoption of such plan, (iii) the acquisition by
any Person or Group (as defined above) of a direct or indirect interest in more
than 50% of the voting power of the voting stock of the Company, by way of
merger or consolidation or otherwise, or (iv) the first day on which a majority
of the members of the Board of Directors of the Company are not Continuing
Directors. For purposes of this definition, any transfer of an Equity Interest
of an entity that was formed for the purpose of acquiring voting stock of the
Company will be deemed to be a transfer of such portion of such voting stock as
corresponds to the portion of the equity of such entity that has been so
transferred, and the acquisition of voting power of the voting stock of the
Company by any Subsidiary of the Company shall be disregarded.
"COGEN ASSETS" means (i) feasibility studies and other similar developmental
items related to one or more joint ventures to produce steam and power for the
Odessa Facility; PROVIDED, HOWEVER, that the aggregate cost thereof does not
exceed $3.0 million and (ii) up to ten acres of unused land at the Odessa
Facility which is owned by the Company as of the date of the Indenture.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period PLUS (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), PLUS (ii) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such Consolidated
Net Income PLUS (iii) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations), to the extent that any
such expense was deducted in computing such Consolidated Net Income, PLUS (iv)
depreciation and amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) of such Person and its Restricted Subsidiaries for such
period to the extent that such depreciation and amortization were deducted in
computing such Consolidated Net Income PLUS (v) any other non-cash charges that
were deducted in computing such Consolidated Net Income less all non-cash income
that was included in computing such Consolidated Net Income. Notwithstanding the
foregoing, the provision for taxes on the income or profits of, and the
depreciation and amortization of, a Subsidiary of the referent person shall be
added to Consolidated Net Income to compute Consolidated Cash Flow only to the
extent (and in same proportion) that the Net Income of such Subsidiary was
included in calculating the Consolidated Net Income of such Person and only if a
corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Subsidiary without prior approval, pursuant to
the terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to that
Subsidiary or its stockholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
PROVIDED that (i) the Net Income of any Person that is not a Restricted
Subsidiary or
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that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash to the
referent Person or a Wholly Owned Restricted Subsidiary thereof, (ii) the Net
Income of any Restricted Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Restricted
Subsidiary of that Net Income is not at the date of determination permitted
without any prior governmental approval (which has not been obtained) or,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders, (iii)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, LESS (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the affirmative vote of a majority of
the Continuing Directors who were members of such Board at the time of such
nomination or election.
"CONTRACT OBLIGATIONS" means contractual obligations of the Company and any
Subsidiary Guarantor to repay or credit to a third party amounts advanced by
such third party (or its Affiliates) to the Company or any Subsidiary Guarantor,
which obligations to repay or credit are secured by a lien on the assets of the
Company and/or any Subsidiary Guarantor. The amount of Contract Obligations
outstanding as of any date shall be equal to the aggregate amount of remaining
payments required to be made by, and credits required to be given by, the
Company and/or the Subsidiary Guarantors under the agreements related to such
Contractual Obligations at such time.
"CURRENCY AGREEMENT" means the obligation of any Person pursuant to any
foreign exchange contract, currency swap agreement or other similar agreement or
arrangement designed to protect such Person against fluctuations in currency
values.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DESIGNATED UNRESTRICTED SUBSIDIARY" means, as of any date, any Unrestricted
Subsidiary of the Company from which the Company and its Wholly Owned Restricted
Subsidiaries have received, as of the date of determination, cash distributions
in an amount less than the Investments made by the Company and its Restricted
Subsidiaries in such Unrestricted Subsidiary.
"DISQUALIFIED STOCK" means any Capital Stock that, 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 redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Senior Notes mature.
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"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXISTING DEBT" means all Indebtedness outstanding on the date of the
Indenture.
"FIXED CHARGES" means, with respect to any Person for any period, the sum of
(i) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued, to the extent that such
expense was deducted in computing Consolidated Net Income (excluding all
non-cash amortization of financing fees incurred in connection with the
Recapitalization and including, without limitation, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations) and (ii)
the consolidated interest expense of such Person and its Restricted Subsidiaries
that was capitalized during such period, and (iii) any interest expense on
Indebtedness of another Person that is Guaranteed by such Person or any of its
Restricted Subsidiaries or secured by a Lien on assets of such Person or any of
its Restricted Subsidiaries (whether or not such Guarantee or Lien is called
upon) and (iv) the product of (a) all cash dividend payments (and non-cash
dividend payments in the case of a Person that is a Restricted Subsidiary) on
any series of preferred stock of such Person, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis and in accordance
with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues
preferred stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee or redemption
of Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. For purposes of making the computation referred to above, (i)
acquisitions that have been made by the Company or any of its Restricted
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period, and (ii) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, and (iii) the
Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
"FOREIGN SUBSIDIARY" means any Subsidiary of the Company organized under the
laws of a jurisdiction outside of the United States.
"FOREIGN SUBSIDIARY BORROWING BASE" means, with respect to any Foreign
Subsidiary that is a Restricted Subsidiary and not a Subsidiary Guarantor, the
sum of (A) 80% of the net book value of all accounts receivable of such Foreign
Subsidiary that are not more than 60 days past due and (B) 60% of the net book
value of all inventory of such Foreign Subsidiary.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in
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effect on the date of the Indenture; provided, however, that for purposes of all
information and other reports required to be delivered pursuant to the covenant
described under the caption "Reports", GAAP shall mean such generally accepted
accounting principles as are in effect from time to time.
"GUARANTEE" means, with respect to any Person, a guarantee (other than by
endorsement of negotiable instruments for collection in the ordinary course of
business), direct or indirect, in any manner (including, without limitation,
letters of credit and reimbursement agreements in respect thereof), of all or
any part of any Indebtedness that is owed by any other Person.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) Currency Agreements, (ii) Interest Rate Agreements and
(iii) agreements to protect against fluctuations in the price of feedstocks.
"HOLDER" means a Person in whose name a Senior Note is registered.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or indebtedness representing
Hedging Obligations, Capital Lease Obligations or the balance of the deferred
and unpaid portion of the purchase price of any property, except any such
balance that constitutes an accrued expense or trade payable, if and to the
extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all Indebtedness of others
secured by a Lien on any asset of such Person (whether or not such Indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any indebtedness of any other Person other than a
Restricted Subsidiary of such Person.
"INTEREST RATE AGREEMENT" means the obligations of any person pursuant to
any interest rate swap agreement, interest rate collar agreement or other
similar agreement or arrangement designed to protect such Person against
fluctuations in interest rates.
"INVESTMENT" means, with respect to the Company and its Restricted
Subsidiaries, any investment by the Company or any of its Restricted
Subsidiaries in other Persons (including Affiliates) in the form of loans
(including Guarantees of Indebtedness), advances (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), capital contributions, purchases or other acquisitions from such
other Persons for consideration of Indebtedness, Equity Interests, cash or other
property, and all other items that are or would be classified as investments on
a balance sheet prepared in accordance with GAAP; PROVIDED, HOWEVER, that
Investments do not include purchases and sales of goods and services in the
ordinary course of business on arms' length terms.
"LIEN" means, with respect to any asset owned by the Company or its
Restricted Subsidiaries, any mortgage, lien, pledge, charge, security interest
or encumbrance of any kind in respect of such asset, whether or not filed,
recorded or otherwise perfected under applicable law (including any conditional
sale or other title retention agreement, any option or other agreement to sell
or give a security interest in and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction).
"MAKE-WHOLE PREMIUM" means, as of any date of determination, the greater of
(a) 1.0% of the then outstanding principal amount of the Senior Notes or (b) the
excess of (A) the present value of all required interest and principal payments
due on such Senior Notes from and after such date to the first date that the
Senior Notes may be redeemed at the option of the Company assuming all such
Senior Notes so redeemed and computed using a discount rate equal to the
Treasury Rate on such date plus 100 basis points compounded semi-annually over
(B) the then outstanding principal amount of the Senior Notes.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation dispositions pursuant to sale and leaseback
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transactions) or (b) the disposition of any securities by such Person or any of
its Restricted Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Restricted Subsidiaries and (ii) any extraordinary gain
(but not loss), together with any related provision for taxes on such
extraordinary gain (but not loss).
"NET PROCEEDS" means the aggregate proceeds of cash and Cash Equivalents
received by the Company or any of its Restricted Subsidiaries in respect of any
Asset Sale (including, without limitation, any cash received upon the sale or
other disposition of any non-cash consideration received in any Asset Sale), net
of the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements) and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance with
GAAP.
"NEW CREDIT AGREEMENT" means the Credit Agreement, dated as of
, between the Company, the Bank of Nova Scotia and the lenders
party thereto.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OBSOLETE PLANTS" means plant and equipment, together with land on which
such plant and equipment is situated, at the Odessa Facility that, as of the
date of the Indenture, has been shut down (other than plant or equipment that
has been temporarily shut down for repairs or maintenance); PROVIDED, HOWEVER,
that the aggregate net book value of all such Obsolete Plants on the date of the
Indenture shall not exceed $2.0 million.
"PERMITTED BUSINESS" means any business that is not unrelated to the
businesses in which the Company is engaged on the date of the Indenture.
"PERMITTED INVESTMENTS" means (a) Investments in the Company or in a Wholly
Owned Restricted Subsidiary of the Company; (b) Investments in Cash Equivalents;
(c) Investments by the Company or any Restricted Subsidiary of the Company in a
Person, if as a result of such Investment (i) such Person becomes a Wholly Owned
Restricted Subsidiary of the Company or (ii) such Person is merged, consolidated
or amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Wholly Owned Restricted
Subsidiary of the Company; (d) the APAO Venture Investments and the URC Venture
Investments; (e) Investments received as consideration for Asset Sales permitted
under the Indenture; (f) Investments by the Company and its Restricted
Subsidiaries in RCL not exceeding the amount of such Investment on the date of
the Indenture, calculated as of the date of each such Investment, (g) the
transfer by the Company of the Cogen Assets to one or more joint ventures; and
(h) other Investments in joint ventures or Unrestricted Subsidiaries of the
Company that are engaged in a Permitted Business in an aggregate amount
outstanding at any time (measured by their fair market value as of the date
made) not exceeding $15 million.
"PERMITTED LIENS" means:
(i) Liens on assets of the Company and the Subsidiary Guarantors securing
Indebtedness permitted to be incurred pursuant to clauses (i) and (ii) of the
second paragraph of the covenant entitled "-- Incurrence of Indebtedness and
Issuance of Preferred Stock";
(ii) Liens in favor of the Company or any Subsidiary Guarantor;
(iii) first priority Liens (other than Liens permitted pursuant to any other
clause of this definition) securing Indebtedness of the Company and any
Subsidiary Guarantor that is not subordinated to any other Indebtedness of the
Company or such Subsidiary Guarantor and/or Contract Obligations of the Company
or such Subsidiary Guarantor, PROVIDED that the sum of the aggregate principal
amount of such Indebtedness and the total amount of such Contract Obligations
outstanding from time to time does not exceed $100 million LESS the principal
amount of Senior Term Debt (and Permitted Refinancing Indebtedness with respect
thereto) outstanding as of such time;
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(iv) Liens existing on the property of any Person at the time such Person
becomes a Restricted Subsidiary of the Company (excluding Liens which were
incurred in connection with, or in contemplation of, such Person becoming a
Restricted Subsidiary of the Company) that do not extend to any other property
of the Company or its Restricted Subsidiaries;
(v) Liens on the shares of URC stock now owned or hereafter acquired by the
Company and on patents of the Company licensed to URC, in each case, to the
extent required pursuant to the agreements governing the URC Venture Investment,
as amended from time to time;
(vi) Liens on (x) the Company's Equity Interest in the APAO Joint Venture
and (y) intellectual property rights permitted by the Indenture to be licensed
and licensed to the APAO Joint Venture required pursuant to the agreements
governing the APAO Investments;
(vii) Liens to secure Acquisition Debt permitted to be incurred pursuant to
the covenant entitled "-- Incurrence of Indebtedness and Issuance of Preferred
Stock"; PROVIDED, HOWEVER, that (a) such Liens shall either (1) extend only to
the assets acquired with the proceeds of such Acquisition Debt or (2) otherwise
be permitted by clause (iv) or (xvii) of this definition, (b) the Acquisition
Debt secured thereby shall not exceed the fair market value of the assets
acquired with the proceeds of such Acquisition Debt and (c) except with respect
to Acquired Debt, such Lien shall be created simultaneously with the incurrence
of such Acquisition Debt;
(viii) Liens for taxes, assessments or governmental charges or claims that are
not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor;
(ix) landlords', carriers', vendors', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising by operating of law in
the ordinary course of business;
(x) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(xi) deposits to secure the performance of bids, trade contracts, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
like nature incurred in the ordinary course of business;
(xii) easements, rights of way, restrictions, licenses, consignments and
other similar encumbrances on any property of the Company or of any Restricted
Subsidiary, including Liens constituting leases or subleases to third parties
granted by the Company or any Restricted Subsidiary, in each case to the extent
incurred in the ordinary course of business;
(xiii) judgment Liens that do not constitute a Default;
(xiv) Liens on unearned premiums of insurance policies that secure the
financing of such premiums for such policies;
(xv) Liens arising pursuant to authority granted under CERCLA, RCRA or
analogous state statutes, PROVIDED that the aggregate of all obligations in
respect of which the Company is required to record a reserve in accordance with
GAAP that are secured by such Liens shall not exceed $40 million at any time;
(xvi) Liens existing on the date of the Indenture;
(xvii) Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company; PROVIDED that such Liens
were in existence prior to contemplation of such acquisition;
(xviii) Liens on assets of any Person which is not a Restricted Subsidiary;
(xix) Liens incurred to secure (A) Purchase Money Financings or (B) Capital
Lease Obligations but only, in the case of (A) and (B), if such Liens do not
extend to any assets other than the assets purchased with
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the proceeds of the corresponding Purchase Money Financing or which are the
subject of such Capital Lease Obligation, and in each case to the extent the
Indebtedness secured thereby is permitted to be incurred pursuant to the
covenant entitled "-- Incurrence of Indebtedness and Issuance of Preferred
Stock";
(xx) Liens on accounts receivable and inventory of Foreign Subsidiaries that
are Restricted Subsidiaries and not Subsidiary Guarantors to secure Indebtedness
permitted to be incurred pursuant to clause (x) of the second paragraph of the
covenant entitled "-- Incurrence of Indebtedness and Issuance of Preferred
Stock"; and
(xxi) Liens securing any extension, renewal or refunding of any obligations
secured by the foregoing Liens that do not increase the obligations secured
thereby and do not extend such Lien to any assets other than those previously
securing such obligations.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness issued in
exchange for, or the net proceeds of which are used to extend, refinance, renew,
replace, defease or refund Indebtedness (other than the Senior Notes); PROVIDED
that: (i) the principal amount of such Permitted Refinancing Indebtedness does
not exceed the principal amount of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of reasonable expenses
incurred in connection therewith), (ii) such Permitted Refinancing Indebtedness
has a final maturity date later than the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iii) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated in right of
payment to the Senior Notes or any Subsidiary Guarantee, such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and is subordinated in right of payment to, the Senior Notes and the
Subsidiary Guarantee on terms at least as favorable to the Holders of Senior
Notes as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"PERSON" means an individual, corporation, limited liability company,
partnership, association, joint stock company, trust or trustee thereof, estate
or executor thereof, unincorporated organization or joint venture.
"PURCHASE MONEY FINANCING" means, with respect to any Person, Indebtedness
incurred to finance the purchase of any assets of such Person (within 90 days of
such purchase) to the extent (i) the amount of Indebtedness thereunder shall not
exceed 95% of the purchase cost of such assets, (ii) the purchase cost for such
assets is or should be included in "additions to property plant and equipment"
in accordance with GAAP and (iii) the purchase of such assets is not part of an
acquisition of any Person.
"RCL" means Rexene Corporation Limited, an English company.
"RECAPITALIZATION" shall have the meaning ascribed to such term in the
Registration Statement on Form S-3 relating to the Senior Notes.
"RESTRICTED INVESTMENT" means any Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of the Company means any Subsidiary of the Company
that is designated as a Restricted Subsidiary by the Board of Directors or
otherwise fails to meet the requirement set forth in the definition of
Unrestricted Subsidiary.
"SENIOR REVOLVING DEBT" means revolving credit borrowings under the Bank
Credit Agreements.
"SENIOR TERM DEBT" means term borrowings under the Bank Credit Agreements.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time
76
<PAGE>
owned or controlled, directly or indirectly, by such Person or one or more
Subsidiaries of that Person (or a combination thereof) and (ii) any partnership
(a) the sole general partner or the managing general partner of which is such
Person or a Subsidiary of such Person or (b) the only general partners of which
are such Person or of one or more Subsidiaries of such Person (or any
combination thereof).
"SUBSIDIARY GUARANTEE" means (i) the full and unconditional guarantee by a
Restricted Subsidiary (other than a Foreign Subsidiary) of all of the Company's
obligations under the Indenture and the Senior Notes delivered pursuant to the
covenant entitled "Subsidiary Guarantees" and (ii) the full and unconditional
guarantee of all of the Company's obligations under the Indenture and the Senior
Notes by any Foreign Subsidiary that is a Restricted Subsidiary that elects to
so guarantee such obligations, in each case, in the form required by the
Indenture.
"SUBSIDIARY GUARANTOR" means any Restricted Subsidiary that has executed a
Subsidiary Guarantee.
"UNRESTRICTED SUBSIDIARY" means (i) each of the Subsidiaries of the Company
in existence on the date of the Indenture, (ii) any Subsidiary of the Company
designated as an Unrestricted Subsidiary pursuant to the provisions described
above under the caption "Certain Covenants -- Restricted Payments" and (iii) any
Subsidiary formed or acquired by the Company after the date of the Indenture,
but only to the extent that such Subsidiary: (a) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (b) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation to maintain or preserve such Person's financial condition or
to cause such Person to achieve any specified levels of operating results; (c)
has not guaranteed or otherwise directly or indirectly provided credit support
for any Indebtedness of the Company or any of its Restricted Subsidiaries; and
(d) has at least one director on its board of directors that is not a director
or executive officer of the Company or any of its Restricted Subsidiaries and
has at least one executive officer that is not a director or executive officer
of the Company or any of its Restricted Subsidiaries. Any designation of a
Subsidiary as an Unrestricted Subsidiary pursuant to the provisions of clause
(ii) above by the Board of Directors shall be evidenced to the Trustee by filing
with the Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by the covenant
described above under the caption "Certain Covenants -- Restricted Payments."
If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock," the Company shall
be in default of such covenant unless such default shall have been cured within
a period of 30 days thereafter). The Board of Directors of the Company may at
any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
PROVIDED that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under the covenant described
under the caption "Certain Covenants -- Incurrence of Indebtedness and Issuance
of Preferred Stock," (ii) no Default or Event of Default would be in existence
following such designation and (iii) unless such Subsidiary is a Foreign
Subsidiary, such Subsidiary executes a Subsidiary Guarantee.
"URC VENTURE INVESTMENT" means (i) all Investments by the Company in URC
outstanding as of the date of the Indenture PLUS (ii) all Investments made by
the Company and its Restricted Subsidiaries in URC after the date of the
Indenture; PROVIDED, HOWEVER, that the aggregate amount of all such Investments
made after the date of the Indenture (measured by their fair market value as of
the date made) shall not exceed the aggregate amount of the cash received after
the date of the Indenture by the Company and its Restricted Subsidiaries as fees
for the licensing of any intellectual property rights or other proprietary
technology to URC PLUS (iii) the Guaranty (as defined in the Joint Venture
Modification Agreement dated as of (and as in effect on) February 25, 1992
between the Company and UBE Industries Inc.); PROVIDED that at no time shall
77
<PAGE>
the Guaranty made by the Company and its Restricted Subsidiaries (A) be with
recourse to the Company or any of its Subsidiaries or (B) be secured by any
Liens on the property of the Company or any of its Subsidiaries (other than
Liens permitted pursuant to clause (v) of the definition of Permitted Liens);
and PROVIDED FURTHER that the amount of the obligations guaranteed pursuant to
such Guaranty shall be reduced by the amount of all Investments made to satisfy
the Company's obligations under such Guaranty.
"URC" means Ube Rexene Corporation, a Japanese corporation.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED 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 Restricted
Subsidiaries of such Person or a combination thereof.
78
<PAGE>
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
The authorized capital stock of the Company consists of 1,000,000 shares of
preferred stock, par value $0.01 per share ("Preferred Stock"), and 100,000,000
shares of Common Stock, par value $0.01 per share. Upon the consummation of the
Common Stock Offering, 18,624,306 shares of Common Stock and no shares of
Preferred Stock will be outstanding. The following summary description of the
capital stock of the Company is qualified in its entirety by reference to the
Company's Restated Certificate of Incorporation, a copy of which is filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to the stockholders, including the election of
directors. There is no cumulative voting with respect to the election of
directors. As a result, in an election of directors the holders of record of
more than 50% of the outstanding shares of Common Stock can elect all of the
directors then standing for election if such holders choose to do so. Subject to
preferences that may be applicable to any Preferred Stock that may from time to
time be outstanding, the holders of Common Stock are entitled to receive
dividends when and if declared by the Board of Directors out of legally
available funds. In the event of a liquidation, dissolution or winding up of the
affairs of the Company, the holders of the Common Stock are entitled to share
ratably in all assets which are available for distribution to them after payment
of liabilities and after provision has been made for each class of stock, if
any, having preference over the Common Stock. Holders of shares of Common Stock,
as such, have no conversion, pre-emptive or other subscription rights and there
are no redemption provisions applicable to the Common Stock. All of the
outstanding shares of Common Stock are, and the shares of Common Stock offered
hereby will be, when issued for consideration as set forth in this Prospectus,
validly issued, fully paid and nonassessable.
The Common Stock is traded on the New York Stock Exchange under the symbol
"RXN." The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company.
PREFERRED STOCK
The Company's Restated Certificate of Incorporation authorizes the Board of
Directors to establish one or more series of Preferred Stock and to determine,
with respect to any series of Preferred Stock, the terms, rights and preferences
of such series, including voting, dividend, liquidation, conversion and other
rights. The authorized shares of Preferred Stock will be available for issuance
without further action by the Company's stockholders, unless such action is
required by applicable law or any stock exchange or automated quotation system
on which the Company's securities may be listed or traded. The issuance of
Preferred Stock could adversely affect the voting power of holders of Common
Stock and the likelihood that such holders will receive dividend payments and
payments upon liquidation and could have the effect of delaying, deferring or
preventing a change in control of the Company. The Company has no present plans
to issue any shares of Preferred Stock.
CERTAIN CORPORATE GOVERNANCE PROVISIONS
STOCKHOLDER ACTION BY WRITTEN CONSENT
The Restated Certificate of Incorporation provides that no action required
or permitted to be taken at any annual or special meeting of the stockholders of
the Company may be taken without a meeting unless a consent or consents in
writing, setting forth the action to be taken is signed by at least 66 2/3% of
the stockholders entitled to vote with respect to the subject matter thereof.
This provision may make it difficult for stockholders to effect actions
requiring a vote of stockholders.
SPECIAL MEETINGS OF STOCKHOLDERS
The Amended and Restated Bylaws provide that a special meeting of
stockholders of the Company may be called only by a majority of the Board of
Directors, a committee of the Board of Directors that has been duly designated
by the Board of Directors to have the power to call such meetings, or any holder
or holders of at least 50% of the then outstanding Common Stock of the Company.
This provision may make it difficult for stockholders to take action opposed by
the Board of Directors.
79
<PAGE>
COMMON STOCK PURCHASE RIGHTS
In January 1993, the Company declared a dividend distribution of one Common
Stock Purchase Right (a "Right") for each outstanding share of Common Stock of
the Company. The Rights are exercisable only if a person or group acquires 15%
or more of Common Stock or announces a tender offer, the consummation of which
would result in ownership by a person or group of 15% or more of the Common
Stock. Each Right entitles stockholders to purchase such number of shares of
Common Stock at an exercise price of $60.00 (as amended by the Board of
Directors on August 29, 1994) as determined under formulas set out in the
agreement providing for the Rights. The existence of the Rights may, under
certain circumstances, render more difficult or discourage attempts to acquire
the Company.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Company is covered by Section 203 of the Delaware General Corporation
Law. Generally, Section 203 prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless (i) prior to such date the board of
directors of the corporation approved the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder, (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owns
at least 85% of the outstanding voting stock or (iii) on or after such date the
business combination is approved by the board and by the affirmative vote of at
least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder. A "business combination" includes a merger, asset sale
or certain other transactions resulting in a financial benefit to the
stockholder. An "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years, did own) 15% or more of
the corporation's voting stock. For purposes of determining whether an
interested stockholder owns at least 85% of the outstanding voting stock, shares
held by persons who are both directors and officers and shares held by employee
stock ownership plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender offer or exchange offer are excluded.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Amended and Restated Bylaws provide that the Company shall
indemnify all directors and officers of the Company to the fullest extent now or
hereafter permitted by the Delaware General Corporation Law. Under such
provisions, any director or officer who, in his capacity as such, is made or
threatened to be made a party to any suit or proceeding, shall be indemnified if
such director or officer acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the Company and,
with respect to any criminal proceeding, had no reasonable cause to believe his
conduct was unlawful. The Amended and Restated Bylaws and the Delaware General
Corporation Law further provide that such indemnification is not exclusive of
any other rights to which such individuals may be entitled under any bylaws,
agreement, vote of stockholders or disinterested directors or otherwise.
In addition, the Company's Restated Certificate of Incorporation provides
that to the fullest extent now or hereafter permitted by Delaware law, the
Company's directors will not be liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director. This provision in
the Restated Certificate of Incorporation does not eliminate the directors'
fiduciary duty of care, and in appropriate circumstances, equitable remedies
such as an injunction or other forms of non-monetary relief would remain
available under Delaware law. Furthermore, each director will continue to be
subject to liability for (i) breach of the director's duty of loyalty to the
Company and its stockholders, (ii) acts or omissions not in good faith or
involving intentional misconduct or knowing violations of law, (iii) liability
arising under Section 174 of the Delaware General Corporation Law (relating to
unlawful payment of dividends and unlawful purchases or redemptions of the
Company's stock) or (iv) any transaction from which the director derived an
improper personal benefit. This provision does not affect a director's
responsibilities under any other laws, including the federal securities laws and
state or federal environmental laws.
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<PAGE>
UNDERWRITING
Smith Barney Inc. and Wertheim Schroder & Co. Incorporated (the
"Underwriters") have severally agreed, subject to the terms and conditions of
the Underwriting Agreement (a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part), to purchase from the
Company the respective principal amount of Senior Notes as set forth below:
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITERS AMOUNT
- ---------------------------------------------------------------------------------------- --------------
<S> <C>
Smith Barney Inc. ...................................................................... $
Wertheim Schroder & Co. Incorporated....................................................
--------------
Total................................................................................. $ 175,000,000
</TABLE>
The Company has been advised by the Underwriters that they propose to offer
the Senior Notes initially to the public at the offering price set forth on the
cover page of this Prospectus. After the initial public offering, the offering
price and other selling terms may be changed.
The Company has agreed to indemnify the Underwriters and any person who
controls the Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended.
The Senior Notes are a new issue of securities, have no established trading
market and may not be widely distributed. The Company does not intend to have
the Senior Notes listed for trading on any securities exchange or to seek their
admission to trading in any automated quotation system. If the Senior Notes are
traded after their initial issuance, they may trade at a discount from their
initial public offering price depending on many factors, including among other
things, the Company's results of operations, prevailing interest rates and the
market for similar securities. No assurance can be given that any market for the
Senior Notes will develop, or, if any such market develops, as to the liquidity
of such market. The Company has been informed by the Underwriters that they
currently intend to make a market in the Senior Notes, as permitted by
applicable laws and regulations; however, the Underwriters are not obligated to
make such a market and may discontinue market making at any time without notice.
Accordingly, no assurance can be given as to the liquidity of, or trading market
for, the Senior Notes.
The Underwriters are acting as underwriters in connection with the Common
Stock Offering and will receive customary underwriting discounts and commissions
in connection therewith.
LEGAL OPINIONS
The validity of the Senior Notes offered hereby will be passed upon for the
Company by Thompson & Knight, A Professional Corporation, Dallas, Texas. Certain
legal matters in connection with this offering will be passed upon for the
Underwriters by Latham & Watkins, New York, New York.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1992
and 1993, and for the year ended December 31, 1991, the nine months ended
September 30, 1992, the three months ended December 31, 1992 and the year ended
December 31, 1993 included in this Prospectus and the financial statement
schedules included in the Registration Statement have been so included in
reliance on the reports of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith, files reports, proxy and information
statements, and other information with the Commission. These reports, proxy and
information statements, and other information concerning the Company, may be
inspected, without charge, at the offices of the Commission at 450 Fifth Street,
N.W, Washington, D.C. 20549 and at its regional offices at 7 World Trade Center,
New York, New York 10048 and Northwestern Atrium
81
<PAGE>
Center, 500 West Madison Street, Chicago, Illinois 60661-2551. Copies of such
materials may also be obtained by mail at prescribed rates from the Public
Reference Section of the Commission at its principal office at 450 Fifth Street,
N.W, Washington, D.C. 20549. In addition, the Company's Common Stock is listed
on the New York Stock Exchange, 20 Broad Street, New York, New York 10005, where
reports, proxy statements and other information concerning the Company can be
inspected.
The Company has filed with the Commission a registration statement on Form
S-3 (as amended and together with all exhibits and schedules thereto, the
"Registration Statement") under the Securities Act of 1933 with respect to the
Senior Notes offered hereby. As permitted by the rules and regulations of the
Commission, this Prospectus does not contain all of the information set forth in
the Registration Statement. For further information with respect to the Company
and the Senior Notes offered hereby, reference is made to the Registration
Statement. Statements contained in this Prospectus concerning the provisions of
any contract, agreement or other document may not be complete. With respect to
each contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for the complete
contents of the exhibit, and each statement concerning its provisions is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed by the Company with the
Commission (File No. 1-9988) pursuant to the Exchange Act, are incorporated
herein by reference and made a part of this Prospectus: (i) the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993; and (ii) the
Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994,
June 30, 1994 and September 30, 1994.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the Notes Offering shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained in a document or information
incorporated or deemed to be incorporated herein by reference shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any subsequently filed document that also is,
or is deemed to be, incorporated herein by reference, modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
THE COMPANY UNDERTAKES TO PROVIDE, WITHOUT CHARGE, TO EACH PERSON, INCLUDING
ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS IS DELIVERED, UPON THE
WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY AND ALL OF THE DOCUMENTS
OR INFORMATION REFERRED TO ABOVE THAT HAS BEEN OR MAY BE INCORPORATED BY
REFERENCE IN THIS PROSPECTUS (EXCLUDING EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE). REQUESTS SHOULD BE
DIRECTED TO NEIL DEVROY, DIRECTOR COMMUNICATIONS AND PUBLIC AFFAIRS, REXENE
CORPORATION, 5005 LBJ FREEWAY, OCCIDENTAL TOWER, SUITE 500, DALLAS, TEXAS 75244
(THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY), TELEPHONE (214) 450-9000.
82
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----------
<S> <C>
Report of Independent Accountants:
Post-emergence Consolidated Financial Statements.................................................... F-2
Pre-emergence Consolidated Financial Statements..................................................... F-3
Audited Consolidated Financial Statements:
Consolidated Statements of Operations for the year ended December 31, 1991, the nine months ended
September 30, 1992, the three months ended December 31, 1992 and the year ended December 31,
1993............................................................................................... F-4
Consolidated Balance Sheets as of December 31, 1992 and 1993........................................ F-5
Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the year ended December 31,
1991, the nine months ended September 30, 1992, the three months ended December 31, 1992 and the
year ended December 31, 1993....................................................................... F-6
Consolidated Statements of Cash Flows for the year ended December 31, 1991, the nine months ended
September 30, 1992, the three months ended December 31, 1992 and the year ended December 31,
1993............................................................................................... F-7
Notes to Consolidated Financial Statements.......................................................... F-9
Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Statements of Operations for the Nine Months Ended September 30, 1993 and
1994............................................................................................... F-27
Condensed Consolidated Balance Sheet as of September 30, 1994....................................... F-28
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1993 and
1994............................................................................................... F-29
Notes to Condensed Consolidated Financial Statements................................................ F-30
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS -- POST-EMERGENCE
CONSOLIDATED FINANCIAL STATEMENTS
To the Board of Directors and Stockholders of
Rexene Corporation
In our opinion, the accompanying consolidated financial statements as listed
on the Index on page F-1, present fairly, in all material respects, the
financial position of Rexene Corporation and its subsidiaries (the Company) at
December 31, 1992 and 1993, and the results of their operations and their cash
flows for the three months ended December 31, 1992 and the year ended December
31, 1993 in conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in notes 2 and 3 to the consolidated financial statements, on
September 18, 1992 the Company's Plan of Reorganization was consummated.
Effective September 30, 1992, the Company accounted for the Chapter 11
reorganization using "fresh-start" reporting as set forth in the American
Institute of Certified Public Accountants' Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization under the Bankruptcy Code."
Accordingly, the financial statements subsequent to the emergence from Chapter
11 have been prepared using a different basis of accounting and are therefore
not comparable to the pre-emergence consolidated financial statements.
PRICE WATERHOUSE LLP
Dallas, Texas
February 10, 1994
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS -- PRE-EMERGENCE
CONSOLIDATED FINANCIAL STATEMENTS
To the Board of Directors and Stockholders of
Rexene Corporation
In our opinion, the accompanying consolidated financial statements as listed
on the Index on page F-1, present fairly, in all material respects, the results
of Rexene Corporation and its subsidiaries' (the Company) operations and their
cash flows for the year ended December 31, 1991 and the nine months ended
September 30, 1992, in conformity with generally accepted accounting principles.
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 of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in notes 2 and 3 to the consolidated financial statements, on
October 18, 1991 the Company filed a voluntary petition for reorganization under
Chapter 11 of the United States Bankruptcy Code. The Company's Plan of
Reorganization was consummated on September 18, 1992 and, effective September
30, 1992, the Company accounted for the reorganization using "fresh-start"
reporting as set forth in the American Institute of Certified Public
Accountants' Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code."
PRICE WATERHOUSE LLP
Dallas, Texas
April 12, 1993
F-3
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRE-EMERGENCE POST-EMERGENCE
--------------------------- ---------------------------
NINE MONTHS THREE MONTHS
YEAR ENDED ENDED ENDED YEAR ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1991 1992 1992 1993
------------ ------------- ------------- ------------
<S> <C> <C> <C> <C>
Net sales............................................. $ 449,728 $ 316,106 $ 98,854 $ 429,353
------------ ------------- ------------- ------------
Operating expenses:
Cost of sales....................................... 388,057 278,081 86,732 375,609
Marketing, general and administrative............... 43,388 23,918 9,045 32,641
Research and development............................ 6,255 4,715 1,659 6,599
------------ ------------- ------------- ------------
437,700 306,714 97,436 414,849
------------ ------------- ------------- ------------
Operating income...................................... 12,028 9,392 1,418 14,504
Interest expense:
Cash................................................ (55,029) -- (6,215) (24,446)
Non-cash............................................ (3,345) -- (6,445) (25,388)
Interest income....................................... 2,750 740 637 1,392
Debt restructuring costs.............................. (7,866) -- -- --
Other, net............................................ 1,001 (458) 169 (245)
------------ ------------- ------------- ------------
Income (loss) before reorganization items, income
taxes and extraordinary gain......................... (50,461) 9,674 (10,436) (34,183)
Reorganization items.................................. (5,730) (38,514) -- --
------------ ------------- ------------- ------------
Loss before income taxes and extraordinary gain....... (56,191) (28,840) (10,436) (34,183)
Income tax (expense) benefit.......................... 13,444 (2,636) 3,908 8,940
------------ ------------- ------------- ------------
Loss before extraordinary gain........................ (42,747) (31,476) (6,528) (25,243)
Extraordinary gain.................................... -- 123,672 -- --
------------ ------------- ------------- ------------
Net income (loss)..................................... $ (42,747) $ 92,196 $ (6,528) $ (25,243)
------------ ------------- ------------- ------------
------------ ------------- ------------- ------------
Weighted average shares outstanding................... 10,501 10,501
------------- ------------
------------- ------------
Net loss per share.................................... $ (.62) $ (2.40 )
------------- ------------
------------- ------------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1992 1993
---------- ----------
<S> <C> <C>
Cash and cash equivalents:
Unrestricted............................................................................ $ 30,444 $ 28,288
Restricted.............................................................................. 3,758 2,247
Accounts receivable, net.................................................................. 51,771 57,820
Inventories............................................................................... 53,692 52,621
Income taxes receivable................................................................... 71 4,965
Prepaid expenses and other................................................................ 1,246 1,522
---------- ----------
Total current assets.................................................................. 140,982 147,463
---------- ----------
Property, plant and equipment, net........................................................ 243,621 244,346
Reorganization value in excess of amounts allocable to identifiable assets, net........... 3,928 3,660
Intangible assets, net.................................................................... 5,317 4,198
Other noncurrent assets................................................................... 29,743 30,369
---------- ----------
$ 423,591 $ 430,036
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable.......................................................................... $ 20,387 $ 27,386
Accrued liabilities....................................................................... 9,719 8,116
Accrued interest.......................................................................... 3,145 3,097
Employee benefits payable................................................................. 2,907 3,754
---------- ----------
Total current liabilities............................................................. 36,158 42,353
---------- ----------
Long-term debt............................................................................ 261,726 281,764
Other noncurrent liabilities.............................................................. 56,225 65,840
Deferred income taxes..................................................................... 49,376 45,216
Commitments and contingencies............................................................. -- --
Stockholders' equity (deficit):
Common stock, par value $.01 per share; 100 million shares authorized; 10.5 million
shares issued and outstanding.......................................................... 105 105
Paid-in capital......................................................................... 26,529 26,529
Accumulated deficit..................................................................... (6,528) (31,771)
---------- ----------
Total stockholders' equity (deficit).................................................... 20,106 (5,137)
---------- ----------
$ 423,591 $ 430,036
---------- ----------
---------- ----------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
--------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------- ------ --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1990.............. 31,239 $ 312 $ 147,543 $(203,791) $ (55,936)
Issuance of common stock................ 180 2 3,868 -- 3,870
Net loss................................ -- -- -- (42,747) (42,747)
------- ------ --------- ----------- ---------
Balance, December 31, 1991.............. 31,419 314 151,411 (246,538) (94,813)
Net loss -- pre-emergence............... -- -- -- (5,602) (5,602)
------- ------ --------- ----------- ---------
Balance, September 30, 1992 --
pre-emergence.......................... 31,419 314 151,411 (252,140) (100,415)
Adjustments for reorganization:
Extraordinary gain on debt exchange... -- -- -- 123,672 123,672
Fresh start reporting adjustments..... (31,419) (314) (151,411) 128,468 (23,257)
Issuance of common stock.............. 10,501 105 26,529 -- 26,634
------- ------ --------- ----------- ---------
Balance, September 30, 1992 -- post-
emergence.............................. 10,501 $ 105 $ 26,529 $ -- $ 26,634
------- ------ --------- ----------- ---------
------- ------ --------- ----------- ---------
Balance, September 30, 1992............. 10,501 $ 105 $ 26,529 $ -- $ 26,634
Net loss................................ -- -- -- (6,528) (6,528)
------- ------ --------- ----------- ---------
Balance, December 31, 1992.............. 10,501 105 26,529 (6,528) 20,106
Net loss................................ -- -- -- (25,243) (25,243)
------- ------ --------- ----------- ---------
Balance, December 31, 1993.............. 10,501 $ 105 $ 26,529 $ (31,771) $ (5,137)
------- ------ --------- ----------- ---------
------- ------ --------- ----------- ---------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRE-EMERGENCE POST-EMERGENCE
--------------------------- ---------------------------
YEAR NINE MONTHS THREE MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1991 1992 1992 1993
------------ ------------- ------------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................... $ (42,747) $ 92,196 $ (6,528) $ (25,243)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization..................... 23,852 20,062 4,315 17,446
Reorganization items.............................. 5,730 38,514 -- --
Reversal of accrued interest...................... -- (6,831) -- --
Debt restructuring costs.......................... 7,866 -- -- --
Extraordinary gain................................ -- (123,672) -- --
Non-cash interest expense......................... -- -- 6,445 25,388
Deferred income taxes............................. 2,262 525 (3,690) (4,160)
Change in:
Accounts receivable............................. 11,080 (9,343) 5,756 (6,049)
Inventories..................................... 20,983 182 (3,030) 1,071
Prepaid expenses and other...................... (446) 727 (940) (276)
Income taxes.................................... (12,856) 17,441 (408) (4,894)
Accounts payable................................ 5,549 1,139 2,517 6,999
Accrued interest................................ 11,312 -- (2,914) (48)
Employee benefits payable and accrued
liabilities.................................... -- (1,552) 612 (756)
Prepetition liabilities paid:
Accounts payable................................ -- (15,834) (1,093) --
Accrued interest................................ -- (14,737) -- --
Increase in other noncurrent liabilities.......... 2,259 12,518 985 1,006
Other............................................. 844 (456) 782 857
------------ ------------- ------------- ------------
Total adjustments............................. 78,435 (81,317) 9,337 36,584
------------ ------------- ------------- ------------
Net cash provided by operating activities before
reorganization items paid............................ 35,688 10,879 2,809 11,341
Reorganization items paid........................... (3,396) (10,180) (2,053) --
------------ ------------- ------------- ------------
Net cash provided by operating activities............. 32,292 699 756 11,341
------------ ------------- ------------- ------------
(continued on page F-8)
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRE-EMERGENCE POST-EMERGENCE
--------------------------- ---------------------------
YEAR NINE MONTHS THREE MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1991 1992 1992 1993
------------ ------------- ------------- ------------
<S> <C> <C> <C> <C>
Cash flows from investing activities:
Capital expenditures................................ (33,464) (11,136) (3,961) (17,008)
Investment in joint venture......................... (733) -- (325) --
Proceeds from sale of property, plant and
equipment.......................................... 2,491 -- -- --
Deposits held in trust for the Texas Water
Commission......................................... (10,255) -- -- --
------------ ------------- ------------- ------------
Net cash used for investing activities................ (41,961) (11,136) (4,286) (17,008)
------------ ------------- ------------- ------------
Cash flows from financing activities:
Bank borrowings..................................... -- -- -- 2,000
Debt restructuring costs............................ (6,501) -- -- --
Proceeds from issuance of common stock, net......... 45 -- -- --
------------ ------------- ------------- ------------
Net cash provided by (used for) financing
activities........................................... (6,456) -- -- 2,000
------------ ------------- ------------- ------------
Net decrease in cash and cash equivalents............. (16,125) (10,437) (3,530) (3,667)
Cash and cash equivalents at beginning of period.... 64,294 48,169 37,732 34,202
------------ ------------- ------------- ------------
Cash and cash equivalents at end of period.......... $ 48,169 $ 37,732 $ 34,202 $ 30,535
------------ ------------- ------------- ------------
------------ ------------- ------------- ------------
Supplemental cash flow information:
Cash paid for interest.............................. $ 50,745 $ 14,737 $ 9,002 $ 24,039
Cash paid for income taxes.......................... $ -- $ 1,703 $ -- $ 114
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
IDENTITY OF REGISTRANT
Rexene Corporation ("Old Rexene") was merged into its wholly-owned operating
subsidiary, Rexene Products Company, on September 11, 1992 pursuant to a First
Amended Plan of Reorganization (the "Amended Plan") under Chapter 11 of the
United States Bankruptcy Code (the "Bankruptcy Code") (see note 2). Upon
completion of the merger, Rexene Products Company changed its name to Rexene
Corporation ("New Rexene"). Old Rexene, Rexene Products Company and New Rexene
are hereinafter sometimes collectively or separately referred to as the
"Company".
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include its
wholly-owned direct and indirect subsidiaries.
CASH AND CASH EQUIVALENTS
Cash equivalents represent short-term investments with original maturities
of three months or less. Restricted cash is held in a reserve account under the
Amended Plan for payment of disputed claims and administrative expenses.
INVENTORIES
Inventories are stated at the lower of cost or market using the first-in,
first-out method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation is provided
utilizing the straight-line method over the estimated useful lives of the
assets, ranging from 3 to 20 years. Improvements are capitalized, while repair
and maintenance costs are charged to operations as incurred. Certain interest
costs are capitalized as part of major construction projects. Upon disposal of
assets, the cost and related accumulated depreciation are removed from the
accounts and the resulting gain or loss is included in income.
REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCABLE TO IDENTIFIABLE ASSETS
Reorganization value in excess of amounts allocable to identifiable assets
is amortized on a straight-line basis over fifteen years.
INTANGIBLE ASSETS
Intangible assets are stated at cost and consist primarily of licensing
agreements and patents which are amortized on a straight-line basis over five
years.
DEFERRED PRE-OPERATING COSTS
The incremental costs of establishing a plant in the United Kingdom have
been deferred. This plant is scheduled to begin production in late 1994. These
deferred pre-operating costs will be amortized on a straight-line basis over
five years, after commencement of production.
INCOME TAXES
Concurrent with fresh start reporting (see note 3), on September 30, 1992
the Company adopted Statement of Financial Accounting Standard ("SFAS") 109,
"Accounting for Income Taxes", which requires an asset and liability approach to
financial accounting and reporting of income taxes. Prior to September 30, 1992,
the Company accounted for income taxes under the deferred method, as prescribed
under Accounting Principles Board ("APB") Opinion No. 11, "Accounting for Income
Taxes".
FOREIGN CURRENCY TRANSLATION
Operations of the foreign subsidiary use the local currency of the country
of operation as the functional currency. The resulting translation adjustments
are not significant in 1993.
F-9
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET LOSS PER SHARE
Net loss per share is based on the weighted average number of common stock
shares outstanding. The per share amount for the pre-emergence periods is not
presented since such information is not comparable with the post-emergence
periods.
RECLASSIFICATIONS
Certain amounts in the 1992 and 1991 consolidated financial statements have
been reclassified to conform with the 1993 presentation.
2. CHAPTER 11 REORGANIZATION
As a result of its reorganization under Chapter 11 of the Bankruptcy Code
and the confirmation of the Amended Plan by the United States Bankruptcy Court
for the District of Delaware (the "Bankruptcy Court"), the Company, among other
things, (i) reduced the principal amount of its long-term debt by replacing $403
million of outstanding senior and subordinated notes of Old Rexene, which was
scheduled to mature in July 1992, with $337 million of debt that becomes due in
1999 and 2002, (ii) reduced its annual cash interest requirements from
approximately $74 million to a minimum amount of approximately $24 million
through 1994, and (iii) issued 92.5% of the common stock of New Rexene to the
holders of such debt. The Amended Plan was consummated on September 18, 1992
(the "Effective Date"). Under the Amended Plan, the holders of outstanding
senior notes of Old Rexene received, pro rata as a class, (i) an equal principal
amount of Increasing Rate First Priority Notes due 1999 of New Rexene at an
initial interest rate of 9% per year (the "Old Senior Notes"), (ii) 26% of the
common stock of New Rexene to be outstanding after giving effect to the Amended
Plan, and (iii) $11.7 million in cash representing the prepetition interest
accrued on the outstanding senior notes of Old Rexene plus interest on the
prepetition interest during the reorganization under Chapter 11 of the
Bankruptcy Code proceedings. The holders of outstanding subordinated notes of
Old Rexene received, pro rata as a class, (i) $84.375 million aggregate
principal amount of Increasing Rate Second Priority Notes due 2002 (with certain
sinking fund requirements in 2001) at an initial interest rate of 10% per year
(the "Old Subordinated Notes", and together with the Old Senior Notes, the "Old
Notes"), (ii) 66.5% of the common stock in New Rexene to be outstanding after
giving effect to the Amended Plan, and (iii) $3.1 million in cash for settlement
of prepetition interest. Holders of the common stock of Old Rexene became
entitled to receive 7.5% of the common stock of New Rexene to be outstanding
after giving effect to the Amended Plan. The Company recorded an extraordinary
gain of $123.7 million as a result of exchanging the outstanding senior and
subordinated debt of Old Rexene for the Old Notes and the common stock of New
Rexene under the Amended Plan.
3. FRESH START REPORTING
In connection with the reorganization under Chapter 11 of the Bankruptcy
Code described in note 2, the Company adopted as of September 30, 1992, the
American Institute of Certified Public Accountants' Statement of Position No.
90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code" (the "Reorganization SOP"). The Company's basis of accounting for
financial reporting purposes changed as a result of adopting the Reorganization
SOP. Specifically, the Reorganization SOP required (i) the adjustment of the
Company's assets and liabilities to reflect a reorganization value (the
"Reorganization Value") generally approximating the fair value of the Company as
a going concern on an unleveraged basis, (ii) the elimination of its accumulated
deficit, and (iii) adjustments to its capital structure to reflect consummation
of the Amended Plan. Accordingly, the results of operations after September 30,
1992 are not comparable to results of operations prior to such date, and the
results of operations for the nine months ended September 30, 1992 and the three
months ended December 31, 1992 have not been aggregated.
F-10
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. FRESH START REPORTING (CONTINUED)
The Reorganization Value was determined by independent financial advisors.
At September 30, 1992, the Reorganization Value of $291 million was allocated to
assets and liabilities as follows (in thousands):
<TABLE>
<S> <C>
Working capital (excluding accrued interest).............. $ 112,860
Property, plant and equipment............................. 243,498
Reorganization value in excess of amounts allocable to
identifiable assets...................................... 4,298
Intangible assets......................................... 5,598
Other noncurrent assets................................... 30,031
Deferred income taxes..................................... (53,066)
Other noncurrent liabilities.............................. (52,219)
---------
$ 291,000
---------
---------
</TABLE>
Current assets and liabilities were recorded at their book value, which
approximated fair value. Property, plant and equipment was recorded at
reorganization value, which approximated fair value in continued use, based on
an independent appraisal. Intangible assets and other noncurrent assets were
recorded at their net book value, which approximated fair value. Long-term debt
was recorded at present values as determined by independent financial advisors.
Based on the allocation of the Reorganization Value in conformity with the
procedures specified by the Reorganization SOP, the portion of the
Reorganization Value which was not attributed to specific tangible or
identifiable intangible assets of the reorganized Company was reported as
"reorganization value in excess of amounts allocable to identifiable assets".
The Company recorded the following reorganization expenses and adjustments
to assets and liabilities to reflect fresh start reporting in its statement of
operations for the nine months ended September 30, 1992 (in thousands):
<TABLE>
<S> <C>
Professional fees......................................... $ (12,600)
Interest expense -- cash.................................. (6,059)
Interest expense -- non-cash.............................. (1,941)
Revaluation of assets and liabilities to fair values:
Property, plant and equipment........................... 50,535
Goodwill................................................ (16,604)
Reorganization value in excess of amounts allocable to
identifiable assets.................................... 4,298
Other noncurrent assets................................. (11,904)
Deferred income taxes................................... (50,346)
Pension liability....................................... 7,067
Other..................................................... (960)
---------
$ (38,514)
---------
---------
</TABLE>
F-11
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1992 1993
--------- ---------
<S> <C> <C>
Trade................................................................... $ 52,137 $ 57,697
Other................................................................... 4,143 3,930
--------- ---------
56,280 61,627
Less allowances......................................................... (4,509) (3,807)
--------- ---------
$ 51,771 $ 57,820
--------- ---------
--------- ---------
</TABLE>
Bad debt expense for the year ended December 31, 1991, the nine months ended
September 30, 1992, the three months ended December 31, 1992 and the year ended
December 31, 1993 is $1,175,000, $327,000, $300,000 and $223,000, respectively.
5. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1992 1993
--------- ---------
<S> <C> <C>
Raw materials........................................................... $ 14,971 $ 11,313
Work in progress........................................................ 7,481 6,694
Finished goods.......................................................... 31,240 34,614
--------- ---------
$ 53,692 $ 52,621
--------- ---------
--------- ---------
</TABLE>
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1992 1993
---------- ----------
<S> <C> <C>
Land.................................................................. $ 5,276 $ 5,738
Buildings............................................................. 13,841 17,758
Plant and equipment................................................... 216,440 230,026
Construction in progress.............................................. 11,728 10,530
---------- ----------
247,285 264,052
Less accumulated depreciation......................................... (3,664) (19,706)
---------- ----------
$ 243,621 $ 244,346
---------- ----------
---------- ----------
</TABLE>
Depreciation expense for the year ended December 31, 1991, the nine months
ended September 30, 1992, the three months ended December 31, 1992 and the year
ended December 31, 1993 is $20,656,000, $17,689,000, $3,664,000 and $16,059,000,
respectively. During the year ended December 31, 1991, the three months ended
December 31, 1992 and the year ended December 31, 1993, $4,685,000, $312,000 and
$1,259,000, respectively, of interest was capitalized in connection with
construction projects. No interest was capitalized during the nine months ended
September 30, 1992.
F-12
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCABLE TO IDENTIFIABLE ASSETS
AND INTANGIBLE ASSETS
Reorganization value in excess of amounts allocable to identifiable assets
and intangible assets, net of accumulated amortization are (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1992 1993
--------- ---------
<S> <C> <C>
Reorganization value in excess of amounts allocable to identifiable
assets................................................................... $ 4,298 $ 4,298
Less accumulated amortization............................................. (370) (638)
--------- ---------
$ 3,928 $ 3,660
--------- ---------
--------- ---------
Intangible assets......................................................... $ 5,598 $ 5,598
Less accumulated amortization............................................. (281) (1,400)
--------- ---------
$ 5,317 $ 4,198
--------- ---------
--------- ---------
</TABLE>
8. OTHER NONCURRENT ASSETS
Other noncurrent assets consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1992 1993
--------- ---------
<S> <C> <C>
Spare parts inventories................................................. $ 18,107 $ 16,654
Deposits held in trusts................................................. 10,428 10,523
Deferred pre-operating costs............................................ -- 1,322
Other................................................................... 1,208 1,870
--------- ---------
$ 29,743 $ 30,369
--------- ---------
--------- ---------
</TABLE>
The deposits held in trusts for the benefit of the Texas Water Commission
were established and funded to comply with the financial assurance requirements
of the Resource Conservation and Recovery Act.
9. ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1992 1993
--------- ---------
<S> <C> <C>
Accrued taxes, other than income.......................................... $ 3,122 $ 2,555
Accrued reorganization costs and disputed claims.......................... 2,422 435
Other accrued expenses.................................................... 4,175 5,126
--------- ---------
$ 9,719 $ 8,116
--------- ---------
--------- ---------
</TABLE>
10. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1992 1993
---------- ----------
<S> <C> <C>
Old Senior Notes...................................................... $ 253,000 $ 253,000
Old Subordinated Notes................................................ 87,249 95,342
Less: unamortized discount............................................ (78,523) (68,578)
---------- ----------
261,726 279,764
Bank borrowings under the Old Credit Agreement........................ -- 2,000
---------- ----------
$ 261,726 $ 281,764
---------- ----------
---------- ----------
</TABLE>
F-13
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. LONG-TERM DEBT (CONTINUED)
The long-term debt was recorded at its fair market value at the Effective
Date. The resulting discount from the face amount is accreted to interest
expense over the term of the Notes. The Company believes, based on its
understanding of the bid and ask prices at December 31, 1993, that the aggregate
fair market value of the long-term debt is approximately $36 million greater
than its net book value.
The Old Senior Notes are secured by a first lien on all of the assets of the
Company and its subsidiaries, other than (i) accounts receivable, other than
intercompany receivables, (ii) inventory, (iii) cash and cash equivalents, and
(iv) certain nonmaterial excluded assets (the "Collateral").
Interest is payable on the Old Notes semiannually on May 15 and November 15.
In addition, the interest rates on the Old Senior and Old Subordinated Notes
increase beginning in 1995 and 1996, respectively. The annual interest rate on
the Old Senior Notes is 9% through November 14, 1995, 12% from November 15, 1995
through November 14, 1996 and 14% thereafter. The Old Subordinated Notes are
secured by a second lien on the Collateral. The annual interest rate on the Old
Subordinated Notes is 10% through November 14, 1996, 12% from November 15, 1996
through November 14, 1997 and 14% thereafter.
For each interest period ending on or prior to November 15, 1994, the
Company may pay up to 90% of the interest due on the Old Subordinated Notes by
delivering additional Old Subordinated Notes in lieu of cash ("Pay-in-Kind"), if
certain financial tests are met. In 1993 and 1992, the Board of Directors
exercised the Pay-in-Kind feature and issued $8.1 million and $2.9 million,
respectively, of Old Subordinated Notes.
The Pay-in-Kind feature expires on November 15, 1994, and the Company's
annual cash interest requirements will increase approximately $10.0 million,
commencing with the semi-annual interest payment due on May 15, 1995.
The Old Senior Notes, and after all Old Senior Notes are redeemed, the Old
Subordinated Notes, are redeemable at the option of the Company, at any time in
whole or from time to time in part, at a price equal to 100% of the principal
amount to be redeemed plus accrued interest to the redemption date. In addition
the Company may at any time purchase Old Senior Notes in the open market. In the
event the Company generates "excess cash flow" from operations (as defined in
the indenture governing the Old Senior Notes) in any fiscal year, the Company is
required to make an offer to purchase Old Senior Notes at par in an amount equal
to such excess cash flow. However, the cash purchase price of Old Senior Notes
acquired in the open market (not previously applied as a credit) may be credited
towards the excess cash flow offer requirement. In addition, in the event of
asset sales exceeding $8 million in the aggregate during any four consecutive
fiscal quarters, the Company is required to make an offer to purchase Old Senior
Notes and thereafter, if applicable, Old Subordinated Notes at par in an amount
equal to the net proceeds (as defined in the indentures governing the Notes (the
"Indentures")) of such asset sales. Open market purchases cannot be credited
towards the asset sale redemption requirement. The Indentures contain covenants
which, among other things (i) limit the Company's ability to incur additional
indebtedness, (ii) limit restricted payments (e.g. dividends, purchases or
redemption of subordinated indebtedness, purchases or redemption of capital
stock and certain investments), (iii) limit the incurrence of liens other than
certain permitted liens, (iv) restrict transactions with stockholders and
affiliates, (v) require the maintenance of a minimum stockholders' equity, and
(vi) limit certain investments.
The Company entered into a loan agreement dated September 18, 1992 (the "Old
Credit Agreement") as subsequently amended, with Transamerica Business Credit
Corporation providing for a credit facility for general corporate purposes of up
to $35 million, $15 million of which may be used for financing the operations of
a subsidiary in the United Kingdom. The Old Credit Agreement includes a
sub-facility of $15 million for stand-by letters of credit. The Old Credit
Agreement terminates December 31, 1996. The Company pays interest on borrowed
funds at 1.5% above the prime rate. At December 31, 1993, the Company had
borrowed $2.0 million under the Old Credit Agreement at an annual interest rate
of 7%.
F-14
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. LONG-TERM DEBT (CONTINUED)
There were no borrowings under the Old Credit Agreement in 1992. At December 31,
1993 and 1992 approximately $2.9 million and $1.1 million, respectively, of
stand-by letters of credit were outstanding under the Old Credit Agreement.
Funds advanced under the Old Credit Agreement are secured by a first lien on the
Company's (i) inventory, (ii) accounts receivable, other than intercompany
receivables, (iii) letters of credit and (iv) the proceeds of the above. The Old
Credit Agreement also contains certain continuing obligations, such as the
maintenance of a minimum cash flow coverage ratio, as well as restrictions or
prohibitions covering, among other things, the incurrence of other indebtedness,
asset sales, investments, dividend payments, mergers and acquisitions.
11. OTHER NONCURRENT LIABILITIES
Other noncurrent liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1992 1993
--------- ---------
<S> <C> <C>
Accrued environmental remediation costs................................. $ 24,298 $ 23,357
Accumulated postretirement benefit obligation (note 16)................. 13,152 14,729
Noncurrent interest payable............................................. 3,021 11,630
Lawsuit accrual (note 19)............................................... 7,400 7,400
Other................................................................... 8,354 8,724
--------- ---------
$ 56,225 $ 65,840
--------- ---------
--------- ---------
</TABLE>
Noncurrent interest payable represents non-cash interest accrued in
accordance with Emerging Issues Task Force ("EITF") Issue No. 86-15, "Increasing
Rate Debt". Under EITF Issue No. 86-15, aggregate interest expense is charged in
equal amounts over the estimated term of the Old Notes (see note 14).
12. COMMITMENTS
The future payments of rentals on buildings, computers, office equipment and
transportation equipment under the terms of noncancellable operating lease
agreements are as follows (in thousands):
<TABLE>
<S> <C>
For the years ending December 31,
1994............................................................... $ 7,721
1995............................................................... 6,255
1996............................................................... 3,786
1997............................................................... 1,581
1998............................................................... 512
1999 and thereafter................................................ 4,517
---------
Total minimum lease payments....................................... $ 24,372
---------
---------
</TABLE>
Rental expense under operating leases for the year ended December 31, 1991,
the nine months ended September 30, 1992, the three months ended December 31,
1992 and the year ended December 31, 1993, approximated $7,810,000, $6,451,000,
$2,024,000 and $7,630,000, respectively.
13. INCOME TAXES
At September 30, 1992, the Company adopted SFAS 109, "Accounting for Income
Taxes", concurrent with its adoption of fresh start reporting. For periods prior
to the three months ended December 31, 1992, the Company accounted for income
taxes under principles provided in APB 11. Therefore, the income tax benefit for
the three months ended December 31, 1992 and the year ended December 31, 1993 is
not comparable with the income tax expense (benefit) for the year ended December
31, 1991 and the nine months ended September 30, 1992.
F-15
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. INCOME TAXES (CONTINUED)
The current income tax benefit for the year ended December 31, 1993 includes
a federal income tax benefit of $4.0 million, relating primarily to the
carryback of the Company's 1993 net operating loss to the year ended December
31, 1990. The income tax benefit for the nine months ended September 30, 1992 is
principally for alternative minimum taxes. During the bankruptcy proceedings in
1992, all federal income tax matters through the 1991 tax year were resolved
which resulted in, among other things, a refund of $17.2 million from the
Internal Revenue Service.
The Company has unused net operating loss carryforwards of $1.2 million at
December 31, 1993 that expire in the year 2004 and an alternative minimum tax
credit carryforward of approximately $1.6 million. The utilization of the net
operating loss carryforwards and tax credit carryforwards is shown as a charge
equivalent to federal income taxes in 1991.
Income tax (expense) benefit consists of the following (in thousands):
<TABLE>
<CAPTION>
YEAR NINE MONTHS THREE MONTHS
ENDED ENDED ENDED YEAR ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1991 1992 1992 1993
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Current:
State............ $ 220 $ 683 $ 177 $ (610)
Federal.......... 16,399 (2,794) 41 5,390
Deferred income
taxes............. (2,262) (525) 3,690 4,160
Charge equivalent
to federal income
taxes............. (913) -- -- --
------------ ------------- ------ ------
$13,444 $(2,636) $3,908 $8,940
------------ ------------- ------ ------
------------ ------------- ------ ------
</TABLE>
Deferred income tax provisions under SFAS 109 result from temporary
differences between the basis of assets and liabilities for financial reporting
purposes. Under APB 11 the deferred income tax provisions result from timing
differences in the recognition of revenues and expenses for tax and financial
reporting purposes. The deferred income tax benefit for the year ended December
31, 1993 is net of a charge of $1.3 million to record the effect of the Omnibus
Budget Reconciliation Act of 1993, which increased the corporate federal tax
rate from 34% to 35%, retroactive from January 1, 1993. The nature of the
temporary differences under SFAS 109 and timing differences under APB 11 and the
tax effects are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR NINE MONTHS THREE MONTHS
ENDED ENDED ENDED YEAR ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1991 1992 1992 1993
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Depreciation and
amortization...... $(2,708) $(3,010) $1,571 $(5,119)
Non-cash
interest.......... -- -- 2,096 10,700
Non-qualified
executive stock
option plan....... (970) -- -- --
Effect of change in
federal statutory
income tax
rates............. -- -- -- (1,333)
Accrual for
lawsuit........... -- 2,504 -- --
Capitalized
inventory costs... 312 -- -- --
Other, net......... 1,104 (19) 23 (88)
------------ ------------- ------ ------------
$(2,262) $ (525) $3,690 $ 4,160
------------ ------------- ------ ------------
------------ ------------- ------ ------------
</TABLE>
F-16
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. INCOME TAXES (CONTINUED)
Deferred income taxes consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1992 1993
---------- ----------
<S> <C> <C>
Excess financial over tax basis of property, plant and equipment................ $ 63,962 $ 69,533
Excess tax over financial basis of the Notes.................................... 16,396 9,168
---------- ----------
Gross deferred tax liabilities.............................................. 80,358 78,701
Accounts receivable............................................................. (2,188) (1,639)
Inventories..................................................................... (2,485) (666)
Intangible assets............................................................... (2,780) (1,140)
Other noncurrent assets......................................................... (3,180) (4,474)
Other noncurrent liabilities.................................................... (19,982) (23,600)
Other........................................................................... (367) (1,966)
---------- ----------
$ 49,376 $ 45,216
---------- ----------
---------- ----------
</TABLE>
The effective income tax rate differs from the amount computed by applying
the federal income tax rate to income before income taxes. The federal income
tax rate was 34% for the year ended December 31, 1991, the nine months ended
September 30, 1992 and the three months ended December 31, 1992 and 35% for the
year ended December 31, 1993. The reasons for these differences are as follows
(in thousands):
<TABLE>
<CAPTION>
NINE MONTHS THREE MONTHS
YEAR ENDED ENDED ENDED YEAR ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1991 1992 1992 1993
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Tax computed at
federal statutory
tax rate.......... $19,104 $ 9,806 $3,549 $11,964
State income
taxes............. 168 461 116 (397)
Differences in
financial and tax
bases of assets
and liabilities... (4,496) (3,893) -- --
Non-deductible
amortization...... -- -- -- (493)
Non-cash
interest.......... -- -- -- (728)
Effect of change in
federal statutory
income tax rate... -- -- -- (1,333)
Reorganization
items............. -- (8,133) 325 --
Non-qualified
executive stock
option plan....... (1,180) -- -- --
Other, net......... (152) (877) (82) (73)
------------ ------------- ------ ------------
Income tax
(expense)
benefit........... $13,444 $(2,636) $3,908 $ 8,940
------------ ------------- ------ ------------
------------ ------------- ------ ------------
</TABLE>
14. INTEREST EXPENSE
Cash interest for the three months ended December 31, 1992 and the year
ended December 31, 1993 consists of interest on the Old Senior Notes and 10% of
the interest on the Old Subordinated Notes. The remaining 90% of the interest on
the Old Subordinated Notes is included as non-cash interest in accordance with
the Pay-in-Kind feature (see note 10). In addition, non-cash interest includes
(i) accretion on the Old Notes (see note 10), (ii) an adjustment for EITF Issue
No. 86-15 (see note 11), and (iii) an adjustment for interest capitalized in
connection with construction projects (see note 6).
15. OTHER STATEMENT OF OPERATIONS INFORMATION
During 1991 the Company incurred $7.9 million of debt restructuring costs.
Included in other income for the year ended December 31, 1991 is approximately
$1 million in license fees from a joint venture with Ube Industries, Ltd.
F-17
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. OTHER STATEMENT OF OPERATIONS INFORMATION (CONTINUED)
Other, net for the nine months ended September 30, 1992 includes an accrual
of $7.4 million relating to the adverse judgment in the class action lawsuit
discussed in note 19 which was partially offset by a reversal of postpetition
interest of $6.8 million accrued as of December 31, 1991 and $1.5 million of
business interruption insurance proceeds received in 1992 for an electrical
outage at the Odessa, Texas facility in May 1991.
Export sales of the Company were $71,570,000, $33,806,000, $9,295,000 and
$30,495,000 for the year ended December 31, 1991, the nine months ended
September 30, 1992, the three months ended December 31, 1992 and the year ended
December 31, 1993, respectively. The majority of export sales were to foreign
companies through agents and domestic offices of foreign companies, which are
responsible for the actual export of the product to a variety of locations.
Accordingly, amounts of export sales to specific geographic locations are not
available.
Maintenance and repair expenses were $26,665,000, $18,244,000, $6,221,000
and $27,017,000 for the year ended December 31, 1991, the nine months ended
September 30, 1992, the three months ended December 31, 1992 and the year ended
December 31, 1993, respectively.
16. EMPLOYEE BENEFITS
SAVINGS PLAN
The Company sponsors an employee savings plan (the "Savings Plan") that is
intended to provide participating employees with additional income upon
retirement. Employees may contribute between 1% and 10% of their base salary up
to a maximum of $8,994 annually to the Savings Plan. The Company matches a
minimum of 25% of the employee's aggregate contributions up to 6% of the
employee's base salary. Employee contributions are fully vested. Employer
contributions are fully vested upon retirement or after five years of service.
For 1991, 1992 and 1993, the Company matched 25% of the employee contributions
up to the 6% limit. The Company contributed approximately $351,000, $275,000,
$96,000 and $351,000 to the Savings Plan during the year ended December 31,
1991, the nine months ended September 30, 1992, the three months ended December
31, 1992 and the year ended December 31, 1993, respectively.
PENSION PLANS
The Company has two noncontributory defined benefit plans (the "Pension
Plans") covering substantially all full time employees. Benefits provided under
the Pension Plans are primarily based on years of service and the employee's
final average earnings. The Company's funding policy is to contribute annually
an amount based upon actuarial and economic assumptions designed to achieve
adequate funding of projected benefit obligations.
Net pension expense consists of the following (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS THREE MONTHS
YEAR ENDED ENDED ENDED YEAR ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1991 1992 1992 1993
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Service cost....... $ 1,601 $1,108 $ 369 $ 1,279
Interest accrued on
pension
obligations....... 1,064 717 239 976
Actual cash return
on plan assets.... (1,565) (446) (137) (1,278)
Net amortization
and deferral...... 726 (540) -- 162
------------ ------ ----- ------------
Net pension
expense........... $ 1,826 $ 839 $ 471 $ 1,139
------------ ------ ----- ------------
------------ ------ ----- ------------
</TABLE>
F-18
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. EMPLOYEE BENEFITS (CONTINUED)
The following table sets forth the funded status of the Pension Plan (in
thousands):
<TABLE>
<CAPTION>
1992 1993
---------- ----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits............................................................... $ 9,476 $ 11,924
---------- ----------
---------- ----------
Accumulated benefit obligation................................................ $ 10,820 $ 13,822
---------- ----------
---------- ----------
Projected benefit obligation.................................................... $ 13,161 $ 16,518
Plan assets at fair value....................................................... (12,109) (14,238)
---------- ----------
Excess of projected benefit obligations over plan assets........................ 1,052 2,280
Unrecognized net loss........................................................... -- (1,392)
Prior service cost.............................................................. -- 125
Other........................................................................... -- 100
---------- ----------
Pension liability included in other noncurrent liabilities...................... $ 1,052 $ 1,113
---------- ----------
---------- ----------
</TABLE>
At December 31, 1992 and 1993, in determining the present value of benefit
obligations, a discount rate of 7.5% and 7.0% was used, respectively. The
assumption for the increase in future compensation levels was 4.5% at December
31, 1992 and 1993. At December 31, 1992 and 1993, the expected long-term rate of
return on assets used in determining future service costs was 9.0%.
POSTEMPLOYMENT BENEFITS
Concurrent with fresh start reporting (see note 3), on September 30, 1992
the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment
Benefits", which generally requires an employer to recognize the obligation to
provide postemployment benefits. The obligation for postemployment benefits at
December 31, 1992 and 1993 approximated $1.2 million and is included in other
noncurrent liabilities.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company sponsors life and health welfare benefits plans for its current
and future retirees. Concurrent with fresh start reporting (see note 3), on
September 30, 1992 the Company adopted SFAS 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions", which requires an accrual method
of accounting for certain postretirement benefits. Adoption of SFAS 106 did not
have a material effect on the September 30, 1992 financial statements since the
Company had recorded an estimated liability for these benefits as part of
purchase accounting entries recorded in 1988. Prior to September 30, 1992, the
cost of net postretirement benefits other than pensions were recognized using
the pay-as-you-go basis.
Net postretirement benefit cost consists of the following (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1992 1993
------------ ------------
<S> <C> <C>
Service cost...................................... $175 $ 760
Interest cost..................................... 234 1,070
----- ------
$409 $1,830
----- ------
----- ------
</TABLE>
F-19
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. EMPLOYEE BENEFITS (CONTINUED)
The actuarial value of postretirement benefit obligations consists of (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1992 1993
--------- ---------
<S> <C> <C>
Active participants eligible for retirement....................................... $ 3,025 $ 3,016
Active participants not yet eligible for retirement............................... 5,655 3,736
Retired participants.............................................................. 4,472 3,154
Prior service cost................................................................ -- 914
Net unrecognized gain............................................................. -- 3,909
--------- ---------
Accumulated postretirement benefit obligation..................................... $ 13,152 $ 14,729
--------- ---------
--------- ---------
</TABLE>
In 1992 and 1993, in determining the value of postretirement benefit
obligations, a discount rate of 8.25% and 7.0%, respectively, was used, and in
1993 the health care trend rate used to measure the expected increase in cost of
benefits was assumed to be 15% in 1994, and descending to 6.5% in 2006 and
thereafter. A one percentage-point increase in the assumed health care cost
trend rate for each year would increase the accumulated postretirement benefit
obligation as of December 31, 1993 by approximately $800,000 and would increase
the net postretirement benefit cost for the year ended December 31, 1993 by
approximately $90,000.
STOCK OPTION PLANS FOR EMPLOYEES
In July 1988, the Company adopted a stock incentive plan (the "Stock
Incentive Plan") providing for the granting of stock options for, stock
appreciation rights in, and the sale of restricted shares of, common stock. The
number of shares of common stock issuable under the Stock Incentive Plan is
limited to 87,500 shares in the aggregate.
In 1993, the Company adopted a non-qualified stock option plan (the
"Employee Plan") providing for the granting of 700,000 stock options for common
stock to key salaried employees of the Company.
Changes in stock options during the year ended December 31, 1991, the nine
months ended September 30, 1992, the three months ended December 31, 1992 and
the year ended December 31, 1993, are summarized as follows:
<TABLE>
<CAPTION>
OPTIONS PRICE RANGE
OUTSTANDING PER SHARE
----------- ----------------
<S> <C> <C>
Balance at December 31, 1990............................................ 21,975 $10.00-$304.00
Granted................................................................. 20,125 93.60
Exercised............................................................... (4,500) 10.00
Cancelled............................................................... (2,350) 93.60- 304.00
-----------
Balance at December 31, 1991............................................ 35,250 10.00- 304.00
Cancelled............................................................... (3,250) 65.20- 304.00
-----------
Balance at December 31, 1992............................................ 32,000 10.00- 304.00
Granted................................................................. 207,000 3.43
Cancelled............................................................... (18,700) 93.60- 304.00
-----------
Balance at December 31, 1993............................................ 220,300 $ 3.43-$304.00
-----------
-----------
</TABLE>
All of the data above has been adjusted to reflect a 40-for-1 reverse stock
split effected in connection with the merger of Old Rexene into Rexene Products
Company as described in note 1. Of the employee options outstanding at December
31, 1993, 12,500 are exercisable.
F-20
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. EMPLOYEE BENEFITS (CONTINUED)
NON-QUALIFIED STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
In 1993, the Company adopted a non-qualified stock option plan for outside
directors (the "Directors Plan") providing for the granting of 225,000 stock
options for common stock. The Directors Plan provided for the automatic grant as
of January 1, 1993 and January 1, 1994 to each non-employee director of options
to purchase 12,500 shares of common stock, other than the Chairman of the Board
for whom an award on each grant date of options to purchase 16,667 shares of
common stock was provided. The exercise price of the options to purchase 104,167
shares of common stock granted in each year under the Directors Plan as of
January 1, 1993 and 1994 was $0.63 and $0.43 per share, respectively.
STOCK OPTION FOR FORMER OFFICER
In 1992, the Company granted a stock option to purchase at an aggregate
exercise price of $901,120, for a five-year period, an amount equal to one
percent of the common stock outstanding from the Effective Date, giving effect
to the Amended Plan and other adjustments.
STOCK BONUS PLAN
During 1985, the Company established an employee stock bonus plan (the
"Stock Bonus Plan") for the benefit of its employees. Contributions were made at
the discretion of the Company. Effective January 1, 1992, all participants (as
defined) became 100% vested and participation in the Stock Bonus Plan was
frozen. The Company does not intend to make further contributions to the Stock
Bonus Plan (see note 19).
17. SHARE PURCHASE RIGHTS PLAN
In January 1993, the Company adopted a share purchase rights plan ("Share
Rights Plan") by declaring a dividend distribution on February 8, 1993 of one
Common Stock Purchase Right ("Right") on each outstanding share of common stock.
The Rights are exercisable only if a person or group acquires 15% or more of
common stock or announces a tender offer, the consummation of which would result
in ownership by a person or group of 15% or more of the common stock. Each Right
entitles stockholders to purchase such number of shares of common stock at an
exercise price of $25.00 as determined under formulas set out in the Share
Rights Plan.
If the Company is acquired in a merger or other business combination, each
Right will entitle its holder to purchase, at the Rights' then-current exercise
price, a number of shares of the acquiring Company's common stock having a
market value of twice such price. In addition, if a person or group acquires 15%
or more of the Company's common stock, each Right will entitle its holder (other
than the acquiring person or group) to purchase, at the Right's then-current
exercise price, a number of shares of common stock having a market value of
twice such price.
Following the acquisition by a person of beneficial ownership of 15% or more
of the Company's common stock and prior to an acquisition of 50% or more of the
common stock, the Board of Directors may exchange the Rights (other than Rights
owned by the acquiring person or group), in whole or in part, at an exchange
ratio of one share of common stock per Right.
The Company can terminate the Rights at no cost any time prior to the
acquisition of a 15% position. The termination period can be extended by the
Board of Directors. The rights expire February 8, 2003.
18. RELATED PARTY TRANSACTIONS
Pursuant to a letter agreement dated March 16, 1992 between the Company and
its Chairman of the Board, Arthur L. Goeschel, the Company agreed to pay Mr.
Goeschel, in addition to his normal director fees, a sum of $2,750 per day plus
expenses for each day over five days per quarter that he spends on Company
matters. Under this letter agreement, the Company paid Mr. Goeschel $137,500,
$60,500 and $107,250 in additional fees for the nine months ended September 30,
1992, the three months ended December 31, 1992 and the year ended December 31,
1993 respectively. Mr. Goeschel is also a director of
F-21
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. RELATED PARTY TRANSACTIONS (CONTINUED)
Calgon Carbon Corporation ("Calgon"). During the year ended December 31, 1991,
the nine months ended September 30, 1992, the three months ended December 31,
1992 and the year ended December 31, 1993, the Company purchased approximately
$126,000, $54,000, $36,000 and $44,000, respectively, of materials from Calgon
in the ordinary course of business.
A son of Mr. Andrew J. Smith, the Chief Executive Officer and a director of
the Company, became a Vice President in 1990 and a stockholder in 1993 of Orion
Pacific, Inc. ("Orion"). In August 1993 the son of Mr. Smith resigned as an
officer and employee of Orion. Pursuant to contractual arrangements originated
in 1988, (i) the Company sells to Orion certain (a) discarded by-products which
Orion extracts from Company landfills and (b) scrap products, and (ii) Orion
packages and processes a portion of the Rextac-R- amorphous polyalphaolefins
("APAO") manufactured by the Company at its plant in Odessa, Texas. During the
year ended December 31, 1991, the nine months ended September 30, 1992, the
three months ended December 31, 1992 and the year ended December 31, 1993, the
Company sold approximately $1,005,000, $671,000, $241,000 and $283,000,
respectively, of such by-product and scrap products to Orion in the ordinary
course of business.
For the same periods, the Company purchased approximately $1,087,000,
$1,033,000, $302,000 and $1,551,000, respectively, of APAO processing and
packaging services and miscellaneous materials from Orion. At December 31, 1992,
the net receivable from Orion was approximately $332,000 and at December 31,
1993, the net payable to Orion was approximately $55,000. In 1990, Orion sold
its APAO processing and packaging technology to the Company for $750,000. The
Company has also agreed to pay Orion an additional $250,000 per plant for each
APAO plant utilizing the technology which the Company builds outside the United
States (excluding a certain joint venture plant in Japan). The Company currently
licenses this technology to Orion so that Orion can continue providing these
services to the Company.
Mr. Ilan Kaufthal, a director of the Company, is a managing director of
Wertheim Schroder & Co. Incorporated ("Wertheim"). In February 1991, an
unofficial committee of holders of debt securities of the Company retained
Wertheim as its financial advisor at the Company's expense. In November 1991,
the official committee of unsecured creditors in the Company's bankruptcy
proceeding also retained Wertheim as its financial advisor at the Company's
expense. Pursuant to these engagements, the Company paid Wertheim fees of
$1,075,000 and $860,000 for the year ended December 31, 1991 and the nine months
ended September 30, 1992, respectively. In December 1992, the Company retained
Wertheim as its financial advisor with respect to the adoption of a share
purchase rights plan (see note 17) for approximately $78,000.
The American International Group, Inc. ("AIG") of which Mr. Kevin Clowe, a
director of the Company, is a corporate officer provides various types of
insurance for the Company. During 1993, the Company paid approximately $2.8
million in premiums and fees to subsidiaries of AIG. In addition, a subsidiary
of AIG is the beneficiary of a standby letter of credit of $1.2 million to
ensure payment of premiums.
On March 2, 1992, Mr. William Gilliam resigned as Chairman of the Board and
Chief Executive Officer of the Company. In connection with Mr. Gilliam's
resignation, the Company, Mr. Gilliam, and Gilliam and Company, Inc., a
corporation of which Mr. Gilliam was the sole shareholder ("GCI"), with the
approval of the Bankruptcy Court, entered into an agreement which, among other
things, (i) terminated a management agreement (the "Management Agreement")
between the Company and GCI which had been suspended during the Chapter 11
proceedings, (ii) granted to Mr. Gilliam a stock option (see note 16), and (iii)
paid $500,000 to Mr. Gilliam.
Under the Management Agreement, as consideration for advisory and consulting
services, the Company agreed to pay GCI a fee of $1 million per year plus
reimbursement of expenses. For the year ended
F-22
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. RELATED PARTY TRANSACTIONS (CONTINUED)
December 31, 1991, the Company paid GCI approximately $800,000. In addition, the
Company reimbursed GCI approximately $653,000 in such year for expenses
primarily consisting of the operating costs for GCI aircraft used in connection
with Company business.
In April 1988, the Company was sold (the "1988 Merger") by its then current
stockholders (the "Selling Stockholders"). Pursuant to the merger agreement for
the 1988 Merger (the "1988 Merger Agreement") and a related escrow agreement,
$30 million of the purchase price was deposited into an escrow account (the
"Escrow Account") on behalf of the Selling Stockholders to indemnify the Company
against certain contingencies. In December 1992, the Company entered into a
memorandum agreement (the "Escrow Settlement Agreement") for the disposition of
the principal balance of the Escrow Account and accrued interest thereon (less
certain prior distributions). Pursuant to the Escrow Settlement Agreement, the
Escrow Account, among other things, (i) distributed approximately $32.1 million
to the Selling Stockholders, (ii) paid approximately $1 million to reimburse the
Company for its net expenses (plus interest thereon) in defending certain
lawsuits, (iii) retained $2.25 million as a reserve to pay certain potential
expenses of the Escrow Account and (iv) retained $2 million which will be
available to the Company to pay up to 50% of any portion of a final judgment or
settlement in the Izzarelli litigation (as hereafter described in note 19) which
is not paid by insurance. As a result of the Escrow Settlement Agreement, Mr.
Smith, Dr. Lavon N. Anderson, the president and chief operating officer and a
director of the Company, and Mr. Jack E. Knott, executive vice president of
sales and market development of the Company, received approximately $660,000,
$85,000 and $71,000 from the Escrow Account, respectively in 1992. Any amounts
being reserved by the Escrow Account which are not utilized for their intended
purpose will be available for future distribution to the Selling Stockholders.
In all negotiations concerning the Escrow Account, the Selling Stockholders were
represented by a committee appointed under the 1988 Merger Agreement and by
counsel to such committee. Mr. Smith, Dr. Anderson and Mr. Knott were not
members of such committee and did not participate in any of the negotiations
between the Company and the committee.
19. CONTINGENCIES
The Company is subject to extensive environmental laws and regulations
concerning, for example, emissions to the air, discharges to surface and
subsurface waters and the generation, handling, storage, transportation,
treatment and disposal of waste and other materials. The Company believes that,
in light of its historical expenditures, it will have adequate resources to
conduct its operations in compliance with currently applicable environmental and
health and safety laws and regulations. However, in order to comply with
changing licensing and regulatory standards, the Company may be required to make
additional significant site or operational modifications. Further, the Company
has incurred and may in the future incur liability to clean up waste or
contamination at its current or former facilities, or which it may have disposed
of at facilities operated by third parties. Company management believes that the
$23.4 million accrued in the December 31, 1993 balance sheet is adequate for the
total potential environmental liability with respect to remediating site
contamination. However, no assurance can be given that all potential liabilities
arising out of the Company's present or past operations have been identified or
that the amounts that might be required to remediate such conditions will not be
significant to the Company. The Company continually reviews its estimates of
potential environmental liabilities.
STOCKHOLDER CLASS ACTION LITIGATION
In January 1990, a purported class action was filed in the United States
District Court, Northern District of Texas, by an alleged stockholder of the
Company on behalf of purchasers of common stock of Old Rexene between October
23, 1989 and December 27, 1989. The defendants in this action presently include
the Company, one of its current directors and certain of its former directors.
The class has been certified with an intervenor as the class representative. The
intervenor's complaint asserts claims under Section 10b-5 of the Securities
Exchange Act of 1934, and state common law grounds. The plaintiff alleges that
public statements made by certain directors of the Company created a misleading
impression of the Company's financial
F-23
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONTINGENCIES (CONTINUED)
condition thereby artificially inflating the price of the common stock of Old
Rexene. The plaintiff seeks compensatory damages, prejudgment interest, a
recovery of costs and attorneys' fees, and such other relief as may be deemed
just and proper. Discovery is ongoing.
In the Company's Chapter 11 proceeding, the intervening plaintiff filed a
proof of claim on behalf of herself and the purported class seeking in excess of
$10 million based upon the allegations in the litigation. The Company objected
to the claim and elected to leave the legal, equitable and contractual rights of
the plaintiff unaltered thereby allowing this litigation to proceed as of the
Effective Date without regard to the bankruptcy proceeding.
IZZARELLI STOCK BONUS PLAN CLASS ACTION LITIGATION
In February 1991, a class action lawsuit was filed in the United States
District Court for the Western District of Texas -- Midland Division (the "Trial
Court") against the Company, the Stock Bonus Plan and Texas Commerce Bank --
Odessa (the former trustee for the Stock Bonus Plan) by two former employees of
the Company on behalf of themselves and all other 1986 participants in the Stock
Bonus Plan (the "Izzarelli Class"). The complaint alleges that the Company
amended the Stock Bonus Plan in 1987 and 1988 to deprive the Izzarelli Class of
stock benefits to which they would have been entitled had the Stock Bonus Plan
not been amended. The plaintiffs assert claims under the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") for breach of fiduciary duties
to the participants and for violation of ERISA's provision prohibiting
amendments to the Stock Bonus Plan after benefits have accrued to participants.
The plaintiffs seek actual damages, attorneys' fees, costs and expenses, and
such further relief as may be deemed appropriate. After a trial, the Trial Court
in July 1992 entered a judgment against the Company in the amount of $6.6
million (as subsequently amended) plus costs of court. In November 1992, the
Trial Court awarded the Izzarelli Class $595,000 for attorneys' fees and
out-of-pocket expenses. The Company has recorded an accrual of $7.4 million to
reflect this judgment. The Company has appealed the judgment to the United
States Court of Appeals for the Fifth Circuit. The Izzarelli Class has also
filed an appeal with respect to the amount of damages awarded and the judgment
in favor of Texas Commerce Bank -- Odessa. These appeals are pending.
In the Bankruptcy Court, the Izzarelli Class filed proofs of claim for $27.7
million. The Izzarelli Class has pending before the Bankruptcy Court a motion to
alter or amend the order confirming the Amended Plan and a motion to allow their
claim based upon the judgment entered by the Trial Court. The Company believes
that if the Bankruptcy Court granted these motions, the Izzarelli Class would be
allowed to enforce its judgment unless the Company posted a bond or other
security. Pursuant to a request by the Company, the Bankruptcy Court on November
4, 1992 entered an order continuing such motions until the resolution of the
appeals pending in the Fifth Circuit Court of Appeals. The Izzarelli Class has
appealed the Bankruptcy Court's continuation order to the United States District
Court for the District of Delaware, which dismissed the appeal on September 29,
1993. The Izzarelli Class then filed an appeal with the United States Court of
Appeals for the Third Circuit. This appeal is pending.
Pursuant to an agreement in December 1992 regarding the distribution of the
remaining balance in an escrow account established in connection with a 1988
merger involving the Company, there is $2 million being retained in the escrow
account which will be available to the Company to pay up to 50% of any portion
of a final judgment or settlement in this matter which is not paid by insurance.
The Company intends to pursue claims for recovery of the amount of any final
judgment or settlement against its insurance carrier subject to policy limits of
$10 million. Although the insurance carrier has been paying the Company's
attorneys' fees, it has otherwise denied coverage and reserved all rights.
PHILLIPS BLOCK COPOLYMER LITIGATION
In March 1984, Phillips Petroleum Company ("Phillips") filed a lawsuit
against the Company in the United States District Court for the Northern
District of Illinois, Eastern Division, seeking injunctive relief,
F-24
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONTINGENCIES (CONTINUED)
an unspecified amount of compensatory damages and treble damages. The complaint
alleges that the Company's copolymer process for polypropylene infringes
Phillips' two "block" copolymer patents. This action has been transferred to the
United States District Court for the Southern District of Texas, Houston
Division. Discovery proceedings in this case have been completed. The Company
has filed a motion for summary judgment. Phillips has filed a motion for partial
summary judgment. Pursuant to an agreement among the parties, the Court
appointed a Special Master who conducted a hearing on these motions and
thereafter recommended to the Court that the Company's motion be granted and
Phillips' motion be denied. Thereafter, Phillips filed motions to disqualify the
Special Master, to reject the recommendation of the Special Master and to enter
partial summary judgment for Phillips. The Court has entered an order denying
Phillips' motion to disqualify the Special Master. The summary judgment motions
are still pending. In the Company's Chapter 11 proceedings, Phillips filed
proofs of claim seeking in excess of $108 million based upon the allegations in
this litigation. The Company objected to the claims and elected to leave the
legal, equitable and contractual rights of Phillips unaltered thereby allowing
this litigation to proceed as of the Effective Date without regard to the
bankruptcy proceeding.
PHILLIPS CRYSTALLINE LICENSE LITIGATION
In May 1990, Phillips filed a lawsuit against the Company in the United
States District Court for the District of Delaware seeking injunctive relief, an
unspecified amount of compensatory damages, treble damages and attorneys' fees,
costs and expenses. The complaint alleges that the Company is infringing
Phillips' Patent No. 4,376,851 (the "851 Patent") for crystalline polypropylene.
Pursuant to a License Agreement dated as of May 15, 1983 (the "License
Agreement"), Phillips granted the Company a non-exclusive license to make, use
and sell crystalline polypropylene covered by the '851 Patent. The complaint
alleges that effective April 21, 1990, Phillips terminated the License Agreement
because it believed that, by the terms of the License Agreement, all conditions
precedent to such termination had occurred. The complaint further alleges that,
without an effective License Agreement, the Company's continuing use of the '851
Patent constitutes an infringing use. An amended complaint filed in May 1990
further alleges that the Company made a material misrepresentation that induced
Phillips to enter into the License Agreement and that Phillips entered into the
License Agreement as a consequence of a mutual mistake of the parties. The
amended complaint therefore alleges that the License Agreement is void AB
INITIO. The Company filed a motion to dismiss Phillips' amended complaint for
failure to state a claim. On December 30, 1993, the Court entered an order
dismissing Phillips' claim that the License Agreement was void AB INITIO, and
ordered that the 1990 license termination issue be resolved at trial. Trial has
been scheduled for October 19, 1994. In the Company's Chapter 11 proceedings,
Phillips filed proofs of claim seeking in excess of $147 million based upon the
allegations in this litigation. The Company objected to the claims and elected
to leave the legal, equitable and contractual rights of Phillips unaltered
thereby allowing this litigation to proceed as of the Effective Date without
regard to the bankruptcy proceeding.
With respect to each of the litigation matters described above, the Company
believes that, based upon its current knowledge of the facts of each case, the
Company has meritorious defenses to the various claims made and intends to
defend each such suit vigorously. Although there can be no assurance of the
final resolution of any of these litigation matters, the Company does not
believe that the outcome of any of these lawsuits will have a material adverse
effect on the Company's financial position or results of operations.
The Company is also a party to various lawsuits arising in the ordinary
course of business and does not believe that the outcome of any of these
lawsuits will have a material adverse effect on the Company's financial position
or results of operations.
F-25
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Summarized quarterly financial information for the year ended December 31,
1993, the three months ended December 31, 1992 and the nine months ended
September 30, 1992 is as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
PRE-EMERGENCE POST-EMERGENCE
----------------------------------- -----------------------------------------------------------------
FOR THE QUARTERS ENDED
-------------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1992 1992 1992 1992 1993 1993 1993 1993
--------- -------- ------------- ------------ --------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................ $103,703 $102,763 $109,640 $98,854 $109,274 $105,998 $111,188 $102,893
Gross profit............. 9,351 16,288 12,386 12,122 13,410 13,613 14,537 12,184
Loss before extraordinary
gain.................... (237) (3,258) (27,981) (6,528) (8,153) (3,656) (7,826) (5,608)
Extraordinary gain....... -- -- 123,672 -- -- -- -- --
Net income (loss)........ (237) (3,258) 95,691 (6,528) (8,153) (3,656) (7,826) (5,608)
Loss per share........... (.62) (.78) (.35) (.75) (.53)
</TABLE>
The per share amount for the pre-emergence periods is not presented because
such information is not comparable with the post-emergence periods.
F-26
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1993 1994
---------- ----------
<S> <C> <C>
Net sales................................................................................. $ 326,460 $ 386,153
---------- ----------
Operating expenses:
Cost of sales........................................................................... 284,900 308,961
Marketing, general and administrative................................................... 24,494 25,971
Research and development................................................................ 4,875 4,936
---------- ----------
314,269 339,868
---------- ----------
Operating income.......................................................................... 12,191 46,285
Interest expense:
Cash.................................................................................... (18,261) (21,763)
Non-cash................................................................................ (18,681) (16,208)
Interest income........................................................................... 1,005 1,522
Other, net................................................................................ (208) 646
---------- ----------
Income (loss) before income taxes......................................................... (23,954) 10,482
Income tax expense (benefit).............................................................. (4,319) 4,329
---------- ----------
Net income (loss)......................................................................... $ (19,635) $ 6,153
---------- ----------
---------- ----------
Weighted average shares outstanding....................................................... 10,501 10,886
---------- ----------
---------- ----------
Net income (loss) per share............................................................... $ (1.87) $ 0.57
---------- ----------
---------- ----------
</TABLE>
See notes to condensed consolidated financial statements.
F-27
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
1994
-------------
<S> <C>
Cash and cash equivalents:
Unrestricted..................................................................................... $ 50,658
Restricted....................................................................................... 2,306
Accounts receivable, net........................................................................... 75,566
Inventories........................................................................................ 55,347
Prepaid expenses and other......................................................................... 1,076
-------------
Total current assets........................................................................... 184,953
Property, plant and equipment, net................................................................. 253,115
Reorganization value in excess of amounts allocable to identifiable assets, net.................... 3,460
Intangible assets, net............................................................................. 3,326
Other noncurrent assets............................................................................ 31,927
-------------
$ 476,781
-------------
-------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable................................................................................... $ 27,976
Accrued liabilities................................................................................ 8,053
Accrued interest................................................................................... 12,639
Income taxes payable............................................................................... 5,312
Employee benefits payable.......................................................................... 5,884
-------------
Total current liabilities...................................................................... 59,864
Long-term debt..................................................................................... 300,509
Other noncurrent liabilities....................................................................... 71,077
Deferred income taxes.............................................................................. 42,725
-------------
Total liabilities.............................................................................. 474,175
Commitments and contingencies...................................................................... --
Stockholders' equity:
Common stock, par value $0.01 per share; 100 million shares authorized; 10.6 million shares
issued and outstanding.......................................................................... 106
Paid-in capital.................................................................................. 27,486
Accumulated deficit.............................................................................. (25,618)
Foreign currency translation adjustment.......................................................... 632
-------------
Total stockholders' equity..................................................................... 2,606
-------------
$ 476,781
-------------
-------------
</TABLE>
See notes to condensed consolidated financial statements.
F-28
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1993 1994
---------- ----------
<S> <C> <C>
Cash flow from operating activities:
Net income (loss)......................................................................... $ (19,635) $ 6,153
---------- ----------
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization........................................................... 12,925 13,884
Non-cash interest expense............................................................... 18,681 16,208
Deferred income taxes................................................................... (2,687) (2,491)
Change in:
Accounts receivable................................................................... (12,027) (17,710)
Inventories........................................................................... 4,288 (2,720)
Prepaid expenses and other............................................................ 379 435
Income taxes.......................................................................... (1,683) 10,277
Accounts payable...................................................................... 3,002 568
Accrued interest...................................................................... 5,999 9,542
Employee benefits payable and accrued liabilities..................................... (865) 2,066
Increase (decrease) in other noncurrent liabilities..................................... 1,721 (208)
Other................................................................................... (764) (506)
---------- ----------
Total adjustments....................................................................... 28,969 29,345
---------- ----------
Net cash provided by operating activities................................................. 9,334 35,498
---------- ----------
Cash flows from investing activities:
Capital expenditures.................................................................... (10,688) (21,089)
Proceeds from issuance of common stock, net............................................. -- 958
---------- ----------
Net cash used for investing activities.................................................... (10,688) (20,131)
---------- ----------
Cash flows from financing activities:
Bank borrowings......................................................................... -- 7,000
---------- ----------
Net cash provided by financing activities................................................. -- 7,000
---------- ----------
Effect of exchange rate changes on cash................................................... -- 62
---------- ----------
Net increase (decrease) in cash and cash equivalents...................................... (1,354) 22,429
Cash and cash equivalents at beginning of period.......................................... 34,202 30,535
---------- ----------
Cash and cash equivalents at end of period................................................ $ 32,848 $ 52,964
---------- ----------
---------- ----------
Supplemental cash flow information:
Cash paid for interest.................................................................. $ 11,910 $ 11,955
Cash paid for income taxes.............................................................. $ -- $ 203
</TABLE>
See notes to condensed consolidated financial statements.
F-29
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
Rexene Corporation manufactures and markets thermoplastic and petrochemical
products, including low density polyethylene and polypropylene resins, plastic
films and styrene, which are integral elements in the manufacture of a wide
variety of industrial and consumer products. Rexene Corporation and its
subsidiaries are hereinafter sometimes collectively or separately referred to as
the "Company".
The accompanying condensed consolidated financial statements are unaudited;
however, in management's opinion, all adjustments, consisting only of normal
recurring adjustments necessary for a fair presentation of the results of
operations, financial position, and cash flows for the periods shown have been
made. Results for interim periods are not necessarily indicative of those to be
expected for the full year. The interim condensed consolidated financial
statements should be read in conjunction with the Consolidated Financial
Statements and Notes thereto included elsewhere in this Prospectus.
2. INCOME TAXES
The income tax expense (benefit) is composed of (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1993 1994
--------- ---------
<S> <C> <C>
Current:
Federal.......................................................................... $ (2,174) $ 6,632
State............................................................................ 542 188
Deferred income taxes.............................................................. (2,687) (2,491)
--------- ---------
$ (4,319) $ 4,329
--------- ---------
--------- ---------
</TABLE>
3. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
1994
-------------
<S> <C>
Raw materials.................................................................. $ 18,202
Work in progress............................................................... 7,016
Finished goods................................................................. 30,129
-------------
$ 55,347
-------------
-------------
</TABLE>
F-30
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. NONCURRENT ASSETS
The cost and accumulated depreciation of property, plant and equipment and
cost and accumulated amortization of reorganization value in excess of amounts
allocable to identifiable assets and intangible assets are as follows (in
thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
1994
-------------
<S> <C>
Property, plant and equipment.................................................. $ 285,633
Accumulated depreciation....................................................... (32,518)
-------------
$ 253,115
-------------
-------------
Reorganization value in excess of amounts allocable to identifiable assets..... $ 4,298
Accumulated amortization....................................................... (838)
-------------
$ 3,460
-------------
-------------
Intangible assets.............................................................. $ 5,544
Accumulated amortization....................................................... (2,218)
-------------
$ 3,326
-------------
-------------
</TABLE>
5. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
1994
-------------
<S> <C>
Old Senior Notes............................................................... $ 253,000
Old Subordinated Notes......................................................... 99,629
Less: unamortized discount..................................................... (61,120)
-------------
291,509
Bank borrowings under the Old Credit Agreement................................. 9,000
-------------
$ 300,509
-------------
-------------
</TABLE>
6. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
In October 1994, the Compensation Committee of the Board of Directors
adopted a noncontributory defined benefit Supplemental Executive Retirement Plan
("SERP") covering certain key employees of the Company. The Company intends to
fund the SERP from time to time at the discretion of the Compensation Committee
or the Board of Directors.
The projected benefit obligation under this plan as of October 3, 1994 was
approximately $3.2 million and the annual periodic cost is approximately
$950,000 beginning with the fourth quarter of 1994.
7. CONTINGENCIES
The Company is subject to extensive environmental laws and regulations
concerning, for example, emissions to the air, discharges to surface and
subsurface waters and the generation, handling, storage, transportation,
treatment and disposal of waste and other materials. The Company believes that,
in light of its historical expenditures, it will have adequate resources to
conduct its operations in compliance with currently applicable environmental and
health and safety laws and regulations. However, in order to comply with
changing licensing and regulatory standards, the Company may be required to make
additional significant site or operational modifications. Further, the Company
has incurred and may in the future incur liability to clean up waste or
contamination at its current or former facilities, or which it may have disposed
F-31
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
7. CONTINGENCIES (CONTINUED)
of at facilities operated by third parties. On the basis of reasonable
investigation and analysis, management believes that the approximately $23.0
million accrued in the September 30, 1994 balance sheet is adequate for the
total potential environmental remediation liability with respect of contaminated
sites. However, no assurance can be given that all potential liabilities arising
out of the Company's present or past operations have been identified or that the
amounts that might be required to remediate such conditions will not be
significant to the Company. The Company continually reviews its estimates of
potential environmental liabilities.
The Company is a party to various lawsuits arising in the ordinary course of
business and to certain other lawsuits which are set forth in Note 19 to the
Consolidated Financial Statements included in this Prospectus. There have been
no material changes to the certain other lawsuits described in the
aforementioned Note 19, except as described in the Litigation section of this
Prospectus.
With respect to each of the litigation matters filed against the Company,
the Company believes that, based upon its current knowledge of the facts of each
case, the Company has meritorious defenses to the various claims made and
intends to defend each such suit vigorously. Although there can be no assurance
of the final resolution of any of these litigation matters, the Company does not
believe that the outcome of any of these lawsuits will have a material adverse
effect on the Company's financial position or results of operations.
F-32
<PAGE>
[Inside Back Cover]
[Photos of Odessa, Texas facility and Scunthorpe, England plant to come]
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES OR IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Prospectus Summary.................................................... 3
Investment Considerations............................................. 11
The Recapitalization.................................................. 16
Use of Proceeds....................................................... 17
Capitalization........................................................ 18
Selected Historical Consolidated Financial Data....................... 19
Pro Forma Unaudited Condensed Consolidated Financial Data............. 21
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 24
Business.............................................................. 32
Management............................................................ 50
Security Ownership of Certain Beneficial Owners and Management........ 53
Description of New Credit Agreement................................... 55
Description of Senior Notes........................................... 56
Description of Capital Stock.......................................... 79
Underwriting.......................................................... 81
Legal Opinions........................................................ 81
Experts............................................................... 81
Available Information................................................. 81
Incorporation of Certain Documents by Reference....................... 82
Index to Consolidated Financial Statements............................ F-1
</TABLE>
$175,000,000
[LOGO]
% SENIOR NOTES
DUE 2004
---------
P R O S P E C T U S
NOVEMBER , 1994
---------
SMITH BARNEY INC.
WERTHEIM SCHRODER & CO.
INCORPORATED
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, incurred or to be incurred in connection
with the sale of the Senior Notes being registered (all amounts are being
estimated except the SEC Registration Fee and the NASD Filing Fee), all of which
will be paid by the Registrant:
<TABLE>
<S> <C>
SEC Registration Fee...................................................... $ 60,345
NASD Filing Fee........................................................... 18,000
Printing and Engraving Expenses........................................... *
Fees and Expenses of Counsel.............................................. *
Accounting Fees........................................................... *
Blue Sky Qualification Fees and Expenses.................................. *
Trustee's Fees and Expenses............................................... *
Rating Agencies' Fees..................................................... *
Miscellaneous............................................................. *
---------
Total................................................................. $ *
---------
---------
<FN>
- ------------------------
* To be provided by amendment.
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
STATUTORY PROVISIONS
Section 102(b)(7) of the Delaware General Corporation Law enables a
corporation to include in its certification of incorporation a provision
eliminating or limiting the personal liability of members of its board of
directors to the corporation or its stockholders for monetary damages for
violations of a director's fiduciary duty as a director. Such a provision does
not have any effect on the availability of equitable remedies, such as an
injunction or rescission, for breach of fiduciary duty. In addition, such a
provision may not eliminate or limit the liability of a director for breaching
his duty of loyalty to the corporation or its stockholders, failing to act in
good faith, engaging in intentional misconduct or knowingly violating a law,
paying an unlawful dividend or approving an illegal stock repurchase, or
executing any transaction from which the director obtained an improper personal
benefit.
Section 145 of the Delaware General Corporation Law empowers a corporation
to indemnify any person who was or is a party to or is threatened to be made a
party 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 the corporation), by reason of the fact that he is or was
a director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful and except that no
indemnification may be made in respect of any claim, issue or matter as to which
such person has been adjudged to be liable to the corporation unless and only to
the extent that the Delaware Court of Chancery or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses as the
court deems proper. With respect to actions or suits by or in the right of the
corporation, such indemnification is limited to expenses (including attorney's
fees) actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit. To the extent that such directors
or officers have been successful on the merits or otherwise in defense of any
II-1
<PAGE>
action, suit or proceeding referred to above or in defense of any claim, issue
or matter therein a corporation is required to indemnify its directors and
officers against expenses (including attorneys fees) actually and reasonably
incurred by such officers and directors in connection therewith.
Indemnification can be made by the corporation only upon a determination
made in the manner prescribed by the statute that indemnification is proper in
the circumstances because the party seeking indemnification has met the
applicable standard of conduct as set forth in the Delaware General Corporation
Law. The indemnification provided by the Delaware General Corporation Law is not
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors, or otherwise. Unless otherwise provided when authorized or ratified,
the indemnification provided by the Delaware General Corporation Law continues
as to a person who has ceased to be a director, officer, employee or agent and
inures to the benefit of the heirs, executors and administrators of such a
person.
A corporation also has the power to purchase and maintain insurance on
behalf of any person covering any liability incurred by such person in his
capacity as a director, officer, employee or agent of the corporation, or
arising out of his status as such, whether or not the corporation has the power
to indemnify him against such liability.
THE REGISTRANT'S CHARTER AND BYLAW PROVISIONS
Article VI, Section 6.1 of the Registrant's Amended and Restated Bylaws
provides that the Registrant shall indemnify all directors and officers of the
Company to the fullest extent now or hereafter permitted by the Delaware General
Corporation Law. Under such provisions, any director or officer, who in his
capacity as such, is made or threatened to be made a party to any suit or
proceeding, shall be indemnified if such director or officer acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Registrant and, with respect to any criminal proceeding, had no
reasonable cause to believe his conduct was unlawful. The Amended and Restated
Bylaws and the Delaware General Corporation Law further provide that such
indemnification is not exclusive of any other rights to which such individuals
may be entitled under any bylaws, agreement, vote of stockholders or
disinterested directors or otherwise.
In addition, Article VII of the Registrant's Restated Certificate of
Incorporation provides that to the fullest extent now or hereafter permitted by
Delaware law, the Registrant's directors will not be liable to the Registrant
and its stockholders for monetary damages for breach of fiduciary duty as a
director.
UNDERWRITING AGREEMENT PROVISIONS
The form of Underwriting Agreement contained in Exhibit 1.1 provides for
indemnification of the directors and officers signing the Registration Statement
and certain controlling persons of the Company against certain liabilities,
including certain liabilities under the Securities Act of 1933, in certain
instances by the Underwriters.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
NUMBER EXHIBIT
- --------- -----------------------------------------------------------------------------------------------------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement.
2.1 -- First Amended Plan of Reorganization of Rexene Products Company, et al., dated April 29, 1992 (filed
as Exhibit 2.1 to the Registrant's Form 8-K Current Report dated July 7, 1992 and incorporated herein
by reference).
2.2 -- Order Confirming First Amended Plan of Reorganization dated April 29, 1992 (filed as Exhibit 2.2 to
the Registrant's Form 10-K for the fiscal year ended December 31, 1992 and incorporated herein by
reference).
2.3 -- Plan and Agreement of Merger between the Registrant and Rexene Products Company dated as of September
11, 1992 (filed as Exhibit 2.3 to the Registrant's Form 10-K for the fiscal year ended December 31,
1992 and incorporated herein by reference.)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
NUMBER EXHIBIT
- --------- -----------------------------------------------------------------------------------------------------
<C> <C> <S>
3.1.1 -- Restated Certificate of Incorporation of Rexene Products Company (a/k/a Rexene Corporation) dated
September 11, 1992 (filed as Exhibit 3.1 to the Registrant's Form 10-K for the fiscal year ended
December 31, 1992 and incorporated herein by reference.)
3.1.2 -- Amendment to Certificate of Incorporation dated June 9, 1993 (filed as Exhibit 3.1.2 to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein
by reference).
3.2.1 -- Amendments to By-Laws adopted May 24, 1994, together with a restatement of the Registrant's By-Laws
incorporating all amendments through May 24, 1994 (filed as Exhibit 3.2.3 to the Registrant's Form
10-Q Quarterly Report for the three months ended June 30, 1994 and incorporated herein by reference).
4.1 -- Form of Indenture governing the Senior Notes (including form of Senior Notes).
4.2 -- Indenture dated as of September 18, 1992 between the Registrant, as Issuer, and Chemical Bank, as
Trustee, for Increasing Rate First Priority Notes Due 1999 (filed as Exhibit 4.1 to the Registrant's
Form 10-Q Quarterly Report for the three months ended September 30, 1992 and incorporated herein by
reference).
4.3 -- Indenture dated as of September 18, 1992 between the Registrant, as Issuer, and United States Trust
Company of New York, as Trustee, for Increasing Rate Second Priority Notes Due 2002 (filed as Exhibit
4.2 to the Registrant's Form 10-Q Quarterly Report for the three months ended September 30, 1992 and
incorporated herein by reference).
4.4 -- Intercreditor and Collateral Trust Agreement dated as of September 18, 1992 by and among the
Registrant and Poly-Pac, Inc. as Grantors, Chemical Bank as Collateral Agent, Chemical Bank as
Trustee, and United States Trust Company, as Trustee (filed as Exhibit 4.3 to the Registrant's Form
10-Q Quarterly Report for the three months ended September 30, 1992 and incorporated herein by
reference).
4.5 -- Company First Priority Security and Pledge Agreement dated as of September 18, 1992 made by the
Registrant, as Grantor, in favor of Chemical Bank, as Collateral Agent (filed as Exhibit 4.4 to the
Registrant's Form 10-Q Quarterly Report for the three months ended September 30, 1992 and
incorporated herein by reference).
4.6 -- Company Second Priority Security and Pledge Agreement dated as of September 18, 1992 made by the
Registrant, as Grantor, in favor of Chemical Bank, as Collateral Agent (filed as Exhibit 4.5 to the
Registrant's Form 10-Q Quarterly Report for the three months ended September 30, 1992 and
incorporated herein by reference).
4.7 -- Subsidiary First Priority Security and Pledge Agreement dated as of September 18, 1992 made by
Poly-Pac, Inc., as Grantor, in favor of Chemical Bank, as Collateral Agent (filed as Exhibit 4.6 to
the Registrant's Form 10-Q Quarterly Report for the three months ended September 30, 1992 and
incorporated herein by reference).
4.8 -- Subsidiary Second Priority Security and Pledge Agreement dated as of September 18, 1992 made by
Poly-Pac, Inc., as Grantor, in favor of Chemical Bank, as Collateral Agent (filed as Exhibit 4.7 to
the Registrant's Form 10-Q Quarterly Report for the three months ended September 30, 1992 and
incorporated herein by reference).
4.9 -- First Priority Deed of Trust and Security Agreement dated as of September 18, 1992 from the
Registrant, as Grantor, to Phillip D. Weller, as Trustee for the benefit of Chemical Bank, as
Beneficiary, for certain property located in Odessa, Texas (filed as Exhibit 4.8 to the Registrant's
Form 10-Q Quarterly Report for the three months ended September 30, 1992 and incorporated herein by
reference).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
NUMBER EXHIBIT
- --------- -----------------------------------------------------------------------------------------------------
<C> <C> <S>
4.10 -- Second Priority Deed of Trust and Security Agreement dated as of September 18, 1992 from the
Registrant, as Grantor, to Phillip D. Weller, as Trustee for the benefit of Chemical Bank, as
Beneficiary, for certain property located in Odessa, Texas (filed as Exhibit 4.9 to the Registrant's
Form 10-Q Quarterly Report for the three months ended September 30, 1992 and incorporated herein by
reference).
4.11 -- First Priority Deed of Trust and Security Agreement dated as of September 18, 1992 from the
Registrant, as Grantor, to Phillip D. Weller, as Trustee for the benefit of Chemical Bank, as
Beneficiary, for certain property located in Pasadena, Texas (filed as Exhibit 4.10 to the
Registrant's Form 10-Q Quarterly Report for the three months ended September 30, 1992 and
incorporated herein by reference).
4.12 -- Second Priority Deed of Trust and Security Agreement dated as of September 18, 1992 from the
Registrant, as Grantor, to Phillip D. Weller, as Trustee for the benefit of Chemical Bank, as
Beneficiary, for certain property located in Pasadena, Texas (filed as Exhibit 4.11 to the
Registrant's Form 10-Q Quarterly Report for the three months ended September 30, 1992 and
incorporated herein by reference).
4.13 -- First Priority Mortgage, Fixture Filing and Security Agreement dated as of September 18, 1992 from
the Registrant, as Mortgagor, to Chemical Bank, as Collateral Agent, Mortgagee, for certain property
located in Chippewa Falls, Wisconsin (filed as Exhibit 4.12 to the Registrant's Form 10-Q Quarterly
Report for the three months ended September 30, 1992 and incorporated herein by reference).
4.14 -- Second Priority Mortgage, Fixture Filing and Security Agreement dated as of September 18, 1992 from
the Registrant, as Mortgagor, to Chemical Bank, as Collateral Agent, Mortgagee, for certain property
located in Chippewa Falls, Wisconsin (filed as Exhibit 4.13 to the Registrant's Form 10-Q Quarterly
Report for the three months ended September 30, 1992 and incorporated herein by reference).
4.15 -- First Priority Mortgage and Security Agreement dated as of September 18, 1992 from the Registrant, as
Mortgagor, to Chemical Bank, as Collateral Agent, Mortgagee, for certain property located in
Harrington, Delaware (filed as Exhibit 4.14 to the Registrant's Form 10-Q Quarterly Report for the
three months ended September 30, 1992 and incorporated herein by reference).
4.16 -- Second Priority Mortgage and Security Agreement dated as of September 18, 1992 from the Registrant,
as Mortgagor, to Chemical Bank, as Collateral Agent, Mortgagee, for certain property located in
Harrington, Delaware (filed as Exhibit 4.15 to the Registrant's Form 10-Q Quarterly Report for the
three months ended September 30, 1992 and incorporated herein by reference).
4.17 -- First Priority Leasehold Deed of Trust, Fixture Filing and Security Agreement dated as of September
18, 1992 from the Registrant, Trustor, to Founders Title Company, Trustee for the use and benefit of
Chemical Bank, as Collateral Agent, Beneficiary, for certain property located in Clearfield, Utah
(filed as Exhibit 4.16 to the Registrant's Form 10-Q Quarterly Report for the three months ended
September 30, 1992 and incorporated herein by reference).
4.18 -- Second Priority Leasehold Deed of Trust, Fixture Filing and Security Agreement dated as of September
18, 1992 from the Registrant, Trustor, to Founders Title Company, Trustee for the use and benefit of
Chemical Bank, as Collateral Agent, Beneficiary, for certain property located in Clearfield, Utah
(filed as Exhibit 4.17 to the Registrant's Form 10-Q Quarterly Report for the three months ended
September 30, 1992 and incorporated herein by reference).
4.19 -- First Priority Deed to Secure Debt and Security Agreement dated as of September 18, 1992 from
Poly-Pac, Inc., Grantor, to Chemical Bank, as Collateral Agent, Grantee, for certain property located
in Dalton, Georgia (filed as Exhibit 4.18 to the Registrant's Form 10-Q Quarterly Report for the
three months ended September 30, 1992 and incorporated herein by reference).
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
NUMBER EXHIBIT
- --------- -----------------------------------------------------------------------------------------------------
<C> <C> <S>
4.20 -- Second Priority Deed to Secure Debt and Security Agreement dated as of September 18, 1992 from
Poly-Pac, Inc., Grantor, to Chemical Bank, as Collateral Agent, Grantee, for certain property located
in Dalton, Georgia (filed as Exhibit 4.19 to the Registrant's Form 10-Q Quarterly Report for the
three months ended September 30, 1992 and incorporated herein by reference).
4.21.1 -- Stockholder Rights Agreement between the Registrant and American Stock Transfer & Trust Company, as
Rights Agent, dated as of January 26, 1993 (filed as Exhibit 4.20 to the Registrant's Form 10-K for
the fiscal year ended December 31, 1992 and incorporated herein by reference).
4.21.2 -- Amendment No. 1 to Stockholder Rights Agreement (filed as Exhibit 1 to the Registrant's Form 8-A/A
filed on October 21, 1994 and incorporated herein by reference).
5.1 -- Opinion of Thompson & Knight, A Professional Corporation.
10.1.1 -- Loan Agreement dated as of September 18, 1992 between the Registrant and Transamerica Business Credit
Corporation (filed as Exhibit 28 to the Registrant's Form 10-Q Quarterly Report for the quarter ended
September 30, 1992 and incorporated herein by reference).
10.1.2 -- First Amendment to Loan Agreement dated as of February 10, 1993 between the Registrant and
Transamerica Business Credit Corporation (filed as Exhibit 28.2 to the Registrant's Form 10-K for the
fiscal year ended December 31, 1992 and incorporated herein by reference).
10.1.3 -- Fourth Amendment to Loan Agreement dated as of December 22, 1993 between Rexene Corporation and
Transamerica Business Credit Corporation (filed as Exhibit 10.17.3 to the Registrant's Form 10-K for
the fiscal year ended December 31, 1993 and incorporated herein by reference).
10.2 -- Rexene Corporation 1994 Long-Term Incentive Plan (filed as Exhibit 10.2 to Amendment No. 1 to the
Registrant's Registration Statement on Form S-3 (SEC File No. 33-55507) as filed on October 21, 1994
and incorporated herein by reference).
10.3 -- Rexene Corporation Supplemental Executive Retirement Plan (filed as Exhibit 10.3 to Amendment No. 1
to the Registrant's Registration Statement on Form S-3 (SEC File No. 33-55507) as filed on October
21, 1994 and incorporated herein by reference).
10.4* -- Form of New Credit Agreement.
12.1 -- Statement of Computation of Ratio of Earnings to Fixed Charges (filed as Exhibit 12.1 to the
Registrant's Registration Statement on Form S-3 (SEC File No. 33-55507) as filed on September 16,
1994).
23.1 -- Consent of Price Waterhouse LLP (contained on page II-9 of this Registration Statement).
24.1+ -- Power of Attorney (included on page II-7 of the original Registration Statement).
25.1 -- Statement of Eligibility and Qualification of Trustee under the Trust Indenture Act of 1939 on Form
T-1.
27 -- Financial Data Schedule (filed as Exhibit 27 to Amendment No. 1 to the Registrant's Registration
Statement on Form S-3 (SEC File No. 33-55507) as filed on October 21, 1994).
<FN>
- ------------------------
* To be filed by amendment.
+ Previously filed.
</TABLE>
Financial Statement Schedules:
Consolidated Schedules for the year ended December 31, 1991, the nine months
ended September 30, 1992, the three months ended December 31, 1992 and the year
ended December 31, 1993:
<TABLE>
<S> <C> <C> <C>
V -- Property, Plant and Equipment................................................ S-1
VI -- Accumulated Depreciation of Property, Plant and Equipment.................... S-2
VIII -- Valuation and Qualifying Accounts............................................ S-3
</TABLE>
II-5
<PAGE>
All other schedules have been omitted since the required information is not
present in amounts sufficient to require submission of the schedule, or because
the information required is included in the Consolidated Financial Statements or
the notes thereto.
ITEM. 17 UNDERTAKINGS
A. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offerer therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
B. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14 of this Registration
Statement, or otherwise, the Registrant certifies that it has reasonable grounds
to believe that it meets all of the requirements for filing on Form S-3 and has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
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, the Registrant 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 Securities Act and will be governed by the final
adjudication of such issue.
C. The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus 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-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Dallas, State of Texas, on November 8, 1994.
REXENE CORPORATION
By: /s/ KEVIN W. MCALEER
-----------------------------------
Kevin W. McAleer
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- -------------------------------- ----------------------- ------------------
/s/ ARTHUR L. GOESCHEL*
- -------------------------------- Chairman of the Board November 8, 1994
Arthur L. Goeschel
/s/ ANDREW J. SMITH*
- -------------------------------- Chief Executive Officer November 8, 1994
Andrew J. Smith and Director
/s/ LAVON N. ANDERSON* President, Chief
- -------------------------------- Operating Officer and November 8, 1994
Lavon N. Anderson Director
/s/ KEVIN W. MCALEER Executive Vice
- -------------------------------- President and Chief November 8, 1994
Kevin W. McAleer Financial Officer
/s/ GEFF PERERA*
- -------------------------------- Vice President and November 8, 1994
Geff Perera Controller
II-7
<PAGE>
SIGNATURE TITLE DATE
- ----------------------------------- ----------------------- ------------------
/s/ KEVIN N. CLOWE*
- ----------------------------------- Director November 8, 1994
Kevin N. Clowe
/s/ WILLIAM B. HEWITT*
- ----------------------------------- Director November 8, 1994
William B. Hewitt
/s/ ILAN KAUFTHAL*
- ----------------------------------- Director November 8, 1994
Ilan Kaufthal
/s/ FRED P. RULLO, JR.*
- ----------------------------------- Director November 8, 1994
Fred P. Rullo, Jr.
/s/ PHILLIP SIEGEL*
- ----------------------------------- Director November 8, 1994
Phillip Siegel
/s/ HEINN F. TOMFOHRDE, III*
- ----------------------------------- Director November 8, 1994
Heinn F. Tomfohrde, III
*By: /s/ KEVIN W. MCALEER
- -----------------------------------
Kevin W. McAleer
ATTORNEY-IN-FACT
II-8
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Prospectus constituting part of
Registration Statement No. 33-55609 on Form S-3 of our reports dated February
10, 1994 and April 12, 1993 relating to the consolidated financial statements of
Rexene Corporation, which appear in such Prospectus. We also consent to the
incorporation by reference of our reports dated February 10, 1994 and April 12,
1993 appearing on pages F-2 and F-3 of Rexene Corporation's Annual Report on
Form 10-K for the year ended December 31, 1993. We also consent to the reference
to us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Dallas, Texas
November 8, 1994
II-9
<PAGE>
SCHEDULE V
REXENE CORPORATION AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING ADDITIONS RETIREMENTS END OF
DESCRIPTION OF PERIOD AT COST OR SALE OTHER CHARGES PERIOD
- ------------------------------------------------- ---------- ----------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
PRE-EMERGENCE
Year ended December 31, 1991:
Land......................................... $ 3,536 $ -- $ (1,194) $ -- $ 2,342
Buildings.................................... 20,316 1,965 (1,707) -- 20,574
Plant and equipment.......................... 190,832 30,301 (183) -- 220,950
Construction in progress..................... 19,916 1,198 (34) -- 21,080
---------- ----------- ----------- ------------- ----------
$ 234,600 $ 33,464 $ (3,118) $ -- $ 264,946
---------- ----------- ----------- ------------- ----------
---------- ----------- ----------- ------------- ----------
Nine months ended September 30, 1992:
Land......................................... $ 2,342 $ -- $ -- $ 2,934(A) $ 5,276
Buildings.................................... 20,574 57 -- (6,758)(A) 13,873
Plant and equipment.......................... 220,950 18,846 -- (28,760)(A) 211,036
Construction in progress..................... 21,080 (7,767) -- -- 13,313
---------- ----------- ----------- ------------- ----------
$ 264,946 $ 11,136 $ -- $ (32,584) $ 243,498
---------- ----------- ----------- ------------- ----------
---------- ----------- ----------- ------------- ----------
POST-EMERGENCE
Three months ended December 31, 1992:
Land......................................... $ 5,276 $ -- $ -- $ -- $ 5,276
Buildings.................................... 13,873 32 (64) -- 13,841
Plant and equipment.......................... 211,036 5,514 (110) -- 216,440
Construction in progress..................... 13,313 (1,585) -- -- 11,728
---------- ----------- ----------- ------------- ----------
$ 243,498 $ 3,961 $ (174) $ -- $ 247,285
---------- ----------- ----------- ------------- ----------
---------- ----------- ----------- ------------- ----------
Year ended December 31, 1993:
Land......................................... $ 5,276 $ 462 $ -- $ -- $ 5,738
Buildings.................................... 13,841 3,917 -- -- 17,758
Plant and equipment.......................... 216,440 13,827 (241) -- 230,026
Construction in progress..................... 11,728 (1,198) -- -- 10,530
---------- ----------- ----------- ------------- ----------
$ 247,285 $ 17,008 $ (241) $ -- $ 264,052
---------- ----------- ----------- ------------- ----------
---------- ----------- ----------- ------------- ----------
<FN>
- ------------------------
(A) Other charges reflect the effect of fresh start reporting (see note 3 to
the consolidated financial statements).
</TABLE>
S-1
<PAGE>
SCHEDULE VI
REXENE CORPORATION AND SUBSIDIARIES
ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END OF
DESCRIPTION OF PERIOD EXPENSES RETIREMENTS OTHER CHARGES PERIOD
- ------------------------------------------------ ----------- ----------- ------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
PRE-EMERGENCE
Year ended December 31, 1991:
Buildings................................... $ 1,793 $ 1,013 $ (288) $ -- $ 2,518
Plant and equipment......................... 43,322 19,643 (53) -- 62,912
----------- ----------- ----- -------------- ---------
$ 45,115 $ 20,656 $ (341) $ -- $ 65,430
----------- ----------- ----- -------------- ---------
----------- ----------- ----- -------------- ---------
Nine months ended September 30, 1992:
Buildings................................... $ 2,518 $ 779 $ -- $ (3,297 )(A) $ --
Plant and equipment......................... 62,912 16,910 -- (79,822 )(A) --
----------- ----------- ----- -------------- ---------
$ 65,430 $ 17,689 $ -- $ (83,119 ) $ --
----------- ----------- ----- -------------- ---------
----------- ----------- ----- -------------- ---------
POST-EMERGENCE
Three months ended December 31, 1992:
Buildings................................... $ -- $ 216 $ -- $ -- $ 216
Plant and equipment......................... -- 3,448 -- -- 3,448
----------- ----------- ----- -------------- ---------
$ -- $ 3,664 $ -- $ -- $ 3,664
----------- ----------- ----- -------------- ---------
----------- ----------- ----- -------------- ---------
Year ended December 31, 1993:
Buildings................................... $ 216 $ 883 $ -- $ -- $ 1,099
Plant and equipment......................... 3,448 15,176 (17) -- 18,607
----------- ----------- ----- -------------- ---------
$ 3,664 $ 16,059 $ (17) $ -- $ 19,706
----------- ----------- ----- -------------- ---------
----------- ----------- ----- -------------- ---------
<FN>
- ------------------------
(A) Other charges reflect the effect of fresh start reporting (see note 3 to
the consolidated financial statements).
</TABLE>
S-2
<PAGE>
SCHEDULE VIII
REXENE CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO UNCOLLECTIBLE BALANCE
BEGINNING COSTS AND ACCOUNTS AT END OF
OF PERIOD EXPENSES WRITTEN OFF PERIOD
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
PRE-EMERGENCE
Year ended December 31, 1991:
Allowance for doubtful accounts............................. $ 4,703 $ 1,175 $ (1,778) $ 4,100
Nine months ended September 30, 1992:
Allowance for doubtful accounts............................. $ 4,100 $ 327 $ -- $ 4,427
POST-EMERGENCE
Three months ended December 31, 1992:
Allowance for doubtful accounts............................. $ 4,427 $ 300 $ (218) $ 4,509
Year ended December 31, 1993:
Allowance for doubtful accounts............................. $ 4,509 $ 223 $ (925) $ 3,807
</TABLE>
S-3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
- --------- ----------------------------------------------------------------------------------------- ---------------
<C> <C> <S> <C>
1.1 -- Form of Underwriting Agreement.
2.1 -- First Amended Plan of Reorganization of Rexene Products Company, et al., dated April 29,
1992 (filed as Exhibit 2.1 to the Registrant's Form 8-K Current Report dated July 7, 1992
and incorporated herein by reference).
2.2 -- Order Confirming First Amended Plan of Reorganization dated April 29, 1992 (filed as
Exhibit 2.2 to the Registrant's Form 10-K for the fiscal year ended December 31, 1992 and
incorporated herein by reference).
2.3 -- Plan and Agreement of Merger between the Registrant and Rexene Products Company dated as
of September 11, 1992 (filed as Exhibit 2.3 to the Registrant's Form 10-K for the fiscal
year ended December 31, 1992 and incorporated herein by reference.)
3.1.1 -- Restated Certificate of Incorporation of Rexene Products Company (a/k/a Rexene
Corporation) dated September 11, 1992 (filed as Exhibit 3.1 to the Registrant's Form 10-K
for the fiscal year ended December 31, 1992 and incorporated herein by reference.)
3.1.2 -- Amendment to Certificate of Incorporation dated June 9, 1993 (filed as Exhibit 3.1.2 to
the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 and
incorporated herein by reference).
3.2.1 -- Amendments to By-Laws adopted May 24, 1994, together with a restatement of the
Registrant's By-Laws incorporating all amendments through May 24, 1994 (filed as Exhibit
3.2.3 to the Registrant's Form 10-Q Quarterly Report for the three months ended June 30,
1994 and incorporated herein by reference).
4.1 -- Form of Indenture governing the Senior Notes (including form of Senior Notes).
4.2 -- Indenture dated as of September 18, 1992 between the Registrant, as Issuer, and Chemical
Bank, as Trustee, for Increasing Rate First Priority Notes Due 1999 (filed as Exhibit 4.1
to the Registrant's Form 10-Q Quarterly Report for the three months ended September 30,
1992 and incorporated herein by reference).
4.3 -- Indenture dated as of September 18, 1992 between the Registrant, as Issuer, and United
States Trust Company of New York, as Trustee, for Increasing Rate Second Priority Notes
Due 2002 (filed as Exhibit 4.2 to the Registrant's Form 10-Q Quarterly Report for the
three months ended September 30, 1992 and incorporated herein by reference).
4.4 -- Intercreditor and Collateral Trust Agreement dated as of September 18, 1992 by and among
the Registrant and Poly-Pac, Inc. as Grantors, Chemical Bank as Collateral Agent,
Chemical Bank as Trustee, and United States Trust Company, as Trustee (filed as Exhibit
4.3 to the Registrant's Form 10-Q Quarterly Report for the three months ended September
30, 1992 and incorporated herein by reference).
4.5 -- Company First Priority Security and Pledge Agreement dated as of September 18, 1992 made
by the Registrant, as Grantor, in favor of Chemical Bank, as Collateral Agent (filed as
Exhibit 4.4 to the Registrant's Form 10-Q Quarterly Report for the three months ended
September 30, 1992 and incorporated herein by reference).
4.6 -- Company Second Priority Security and Pledge Agreement dated as of September 18, 1992 made
by the Registrant, as Grantor, in favor of Chemical Bank, as Collateral Agent (filed as
Exhibit 4.5 to the Registrant's Form 10-Q Quarterly Report for the three months ended
September 30, 1992 and incorporated herein by reference).
4.7 -- Subsidiary First Priority Security and Pledge Agreement dated as of September 18, 1992
made by Poly-Pac, Inc., as Grantor, in favor of Chemical Bank, as Collateral Agent (filed
as Exhibit 4.6 to the Registrant's Form 10-Q Quarterly Report for the three months ended
September 30, 1992 and incorporated herein by reference).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
- --------- ----------------------------------------------------------------------------------------- ---------------
<C> <C> <S> <C>
4.8 -- Subsidiary Second Priority Security and Pledge Agreement dated as of September 18, 1992
made by Poly-Pac, Inc., as Grantor, in favor of Chemical Bank, as Collateral Agent (filed
as Exhibit 4.7 to the Registrant's Form 10-Q Quarterly Report for the three months ended
September 30, 1992 and incorporated herein by reference).
4.9 -- First Priority Deed of Trust and Security Agreement dated as of September 18, 1992 from
the Registrant, as Grantor, to Phillip D. Weller, as Trustee for the benefit of Chemical
Bank, as Beneficiary, for certain property located in Odessa, Texas (filed as Exhibit 4.8
to the Registrant's Form 10-Q Quarterly Report for the three months ended September 30,
1992 and incorporated herein by reference).
4.10 -- Second Priority Deed of Trust and Security Agreement dated as of September 18, 1992 from
the Registrant, as Grantor, to Phillip D. Weller, as Trustee for the benefit of Chemical
Bank, as Beneficiary, for certain property located in Odessa, Texas (filed as Exhibit 4.9
to the Registrant's Form 10-Q Quarterly Report for the three months ended September 30,
1992 and incorporated herein by reference).
4.11 -- First Priority Deed of Trust and Security Agreement dated as of September 18, 1992 from
the Registrant, as Grantor, to Phillip D. Weller, as Trustee for the benefit of Chemical
Bank, as Beneficiary, for certain property located in Pasadena, Texas (filed as Exhibit
4.10 to the Registrant's Form 10-Q Quarterly Report for the three months ended September
30, 1992 and incorporated herein by reference).
4.12 -- Second Priority Deed of Trust and Security Agreement dated as of September 18, 1992 from
the Registrant, as Grantor, to Phillip D. Weller, as Trustee for the benefit of Chemical
Bank, as Beneficiary, for certain property located in Pasadena, Texas (filed as Exhibit
4.11 to the Registrant's Form 10-Q Quarterly Report for the three months ended September
30, 1992 and incorporated herein by reference).
4.13 -- First Priority Mortgage, Fixture Filing and Security Agreement dated as of September 18,
1992 from the Registrant, as Mortgagor, to Chemical Bank, as Collateral Agent, Mortgagee,
for certain property located in Chippewa Falls, Wisconsin (filed as Exhibit 4.12 to the
Registrant's Form 10-Q Quarterly Report for the three months ended September 30, 1992 and
incorporated herein by reference).
4.14 -- Second Priority Mortgage, Fixture Filing and Security Agreement dated as of September 18,
1992 from the Registrant, as Mortgagor, to Chemical Bank, as Collateral Agent, Mortgagee,
for certain property located in Chippewa Falls, Wisconsin (filed as Exhibit 4.13 to the
Registrant's Form 10-Q Quarterly Report for the three months ended September 30, 1992 and
incorporated herein by reference).
4.15 -- First Priority Mortgage and Security Agreement dated as of September 18, 1992 from the
Registrant, as Mortgagor, to Chemical Bank, as Collateral Agent, Mortgagee, for certain
property located in Harrington, Delaware (filed as Exhibit 4.14 to the Registrant's Form
10-Q Quarterly Report for the three months ended September 30, 1992 and incorporated
herein by reference).
4.16 -- Second Priority Mortgage and Security Agreement dated as of September 18, 1992 from the
Registrant, as Mortgagor, to Chemical Bank, as Collateral Agent, Mortgagee, for certain
property located in Harrington, Delaware (filed as Exhibit 4.15 to the Registrant's Form
10-Q Quarterly Report for the three months ended September 30, 1992 and incorporated
herein by reference).
4.17 -- First Priority Leasehold Deed of Trust, Fixture Filing and Security Agreement dated as of
September 18, 1992 from the Registrant, Trustor, to Founders Title Company, Trustee for
the use and benefit of Chemical Bank, as Collateral Agent, Beneficiary, for certain
property located in Clearfield, Utah (filed as Exhibit 4.16 to the Registrant's Form 10-Q
Quarterly Report for the three months ended September 30, 1992 and incorporated herein by
reference).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
- --------- ----------------------------------------------------------------------------------------- ---------------
<C> <C> <S> <C>
4.18 -- Second Priority Leasehold Deed of Trust, Fixture Filing and Security Agreement dated as
of September 18, 1992 from the Registrant, Trustor, to Founders Title Company, Trustee
for the use and benefit of Chemical Bank, as Collateral Agent, Beneficiary, for certain
property located in Clearfield, Utah (filed as Exhibit 4.17 to the Registrant's Form 10-Q
Quarterly Report for the three months ended September 30, 1992 and incorporated herein by
reference).
4.19 -- First Priority Deed to Secure Debt and Security Agreement dated as of September 18, 1992
from Poly-Pac, Inc., Grantor, to Chemical Bank, as Collateral Agent, Grantee, for certain
property located in Dalton, Georgia (filed as Exhibit 4.18 to the Registrant's Form 10-Q
Quarterly Report for the three months ended September 30, 1992 and incorporated herein by
reference).
4.20 -- Second Priority Deed to Secure Debt and Security Agreement dated as of September 18, 1992
from Poly-Pac, Inc., Grantor, to Chemical Bank, as Collateral Agent, Grantee, for certain
property located in Dalton, Georgia (filed as Exhibit 4.19 to the Registrant's Form 10-Q
Quarterly Report for the three months ended September 30, 1992 and incorporated herein by
reference).
4.21 -- Stockholder Rights Agreement between the Registrant and American Stock Transfer & Trust
Company, as Rights Agent, dated as of January 26, 1993 (filed as Exhibit 4.20 to the
Registrant's Form 10-K for the fiscal year ended December 31, 1992 and incorporated
herein by reference).
5.1 -- Opinion of Thompson & Knight, A Professional Corporation.
10.1.1 -- Loan Agreement dated as of September 18, 1992 between the Registrant and Transamerica
Business Credit Corporation (filed as Exhibit 28 to the Registrant's Form 10-Q Quarterly
Report for the quarter ended September 30, 1992 and incorporated herein by reference).
10.1.2 -- First Amendment to Loan Agreement dated as of February 10, 1993 between the Registrant
and Transamerica Business Credit Corporation (filed as Exhibit 28.2 to the Registrant's
Form 10-K for the fiscal year ended December 31, 1992 and incorporated herein by
reference).
10.1.3 -- Fourth Amendment to Loan Agreement dated as of December 22, 1993 between Rexene
Corporation and Transamerica Business Credit Corporation (filed as Exhibit 10.17.3 to the
Registrant's Form 10-K for the fiscal year ended December 31, 1993 and incorporated
herein by reference).
10.4* -- Form of New Credit Agreement.
12.1 -- Statement of Computation of Ratio of Earnings to Fixed Charges (filed as Exhibit 12.1 to
the Registrant's Registration Statement on Form S-3 (SEC File No. 33-55507) as filed on
September 16, 1994).
23.1 -- Consent of Price Waterhouse LLP (contained on page II-9 of this Registration Statement).
24.1 -- Power of Attorney (included on the signature page of this Registration Statement).
25.1 -- Statement of Eligibility and Qualification of Trustee under the Trust Indenture Act of
1939 on Form T-1.
27 -- Financial Data Schedule (filed as Exhibit 27 to Amendment No. 1 to the Registrant's
Registration Statement on Form S-3 (SEC File No. 33-55507) as filed on October 21, 1994).
<FN>
- ------------------------
* To be filed by amendment.
</TABLE>
<PAGE>
L&W DRAFT 11/3/94
$175,000,000
REXENE CORPORATION
% Senior Notes due 2004
UNDERWRITING AGREEMENT
November , 1994
SMITH BARNEY INC.
WERTHEIM SCHRODER & CO. INCORPORATED
c/o SMITH BARNEY INC.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
Rexene Corporation, a Delaware corporation (the "Company"), proposes to
issue and sell $175,000,000 aggregate principal amount of its % Senior Notes
due 2004 (the "Senior Notes") to Smith Barney Inc. and Wertheim Schroder & Co.
Incorporated (each an "Underwriter," and together, the "Underwriters"). The
Senior Notes will be issued pursuant to the provisions of an Indenture to be
dated as of , 1994 (the "Indenture") between the Company and
, as Trustee (the "Trustee").
The Senior Notes are being issued as part of a recapitalization plan (the
"Recapitalization") that includes (i) the public offering (the "Common Stock
Offering") by the Company of 8,000,000 shares of its common stock, $0.01 par
value per share (the "Shares"), of which 6,400,000 shares will be offered in the
United States or Canada and 1,600,000 shares will be offered outside of the
United States and Canada, (ii) the establishment by the Company of a bank credit
facility pursuant to the Credit Agreement (the "Credit Agreement"), to be dated
________________, 1994, among the Company, The Bank of Nova Scotia and the
lenders party thereto providing for a term loan of up to $100 million and a
revolving line of credit of up to $80 million, (iii) an initial term borrowing
of $100 million under the Credit Agreement, (iv) the call for redemption and
defeasance of the Company's outstanding Increasing Rate First Priority Notes due
1999 (the "Old Senior Notes") and the Company's Increasing Rate Second Priority
Notes due 2002 (the "Old Subordinated Notes" and, together with the Old Senior
Notes, the "Old Notes") and (v) the repayment by the Company of all obligations
outstanding pursuant to the credit agreement, dated September 17, 1992, between
the Company and Transamerica Business Credit Corporation (the "Existing Credit
Agreement").
<PAGE>
The Company wishes to confirm as follows its agreement with you in
connection with the purchase of the Senior Notes by the Underwriters.
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-3 under the Act (the "registration
statement"), including a prospectus subject to completion relating to the Senior
Notes. The term "Registration Statement" as used in this Agreement means the
registration statement (including all financial schedules and exhibits), as
amended at the time it becomes effective or, if the registration statement
became effective prior to the execution of this Agreement, as supplemented or
amended prior to the execution of this Agreement, and including the information
(if any) contained in a prospectus subsequently filed with the Commission
pursuant to Rule 424(b) under the Act and deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the Act. If
it is contemplated, at the time this Agreement is executed, that a
post-effective amendment to the registration statement will be filed and must be
declared effective before the offering of the Senior Notes may commence, the
term "Registration Statement" as used in this Agreement means the registration
statement as amended by said post-effective amendment. The term "Prospectus" as
used in this Agreement means the prospectus in the form included in the
Registration Statement or, if the prospectus included in the Registration
Statement omits information in reliance on Rule 430A under the Act and such
information is included in a prospectus filed with the Commission pursuant to
Rule 424(b) under the Act, the term "Prospectus" as used in this Agreement means
the prospectus in the form included in the Registration Statement as
supplemented by the addition of the Rule 430A information contained in the
prospectus filed with the Commission pursuant to Rule 424(b). The term
"Prepricing Prospectus" as used in this Agreement means the prospectus subject
to completion in the form included in the registration statement at the time of
the initial filing of the registration statement with the Commission, and as
such prospectus shall have been amended from time to time prior to the date of
the Prospectus. Any reference in this Agreement to the registration statement,
the Registration Statement, any Prepricing Prospectus or the Prospectus shall be
deemed to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Act, as of the date of the
registration statement, the Registration Statement, such Prepricing Prospectus
or the Prospectus, as the case may be, and any reference to any amendment or
supplement to the registration statement, the Registration Statement, any
Prepricing Prospectus or the Prospectus shall be deemed to refer to and include
any documents filed after such date under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") which, upon filing, are incorporated by
reference therein, as required by paragraph (b) of Item 12 of Form S-3. As used
herein,
- 2 -
<PAGE>
the term "Incorporated Documents" means the documents which at the time are
incorporated by reference in the registration statement, the Registration
Statement, any Prepricing Prospectus, the Prospectus, or any amendment or
supplement thereto.
2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees, subject
to all the terms and conditions set forth herein, to issue and sell to each of
you and, upon the basis of the representations, warranties and agreements of the
Company herein contained and subject to all the terms and conditions set forth
herein, each of you agrees, severally and not jointly, to purchase from the
Company, at a purchase price of % of the principal amount thereof, the
principal amount of Senior Notes set forth opposite each of your names in
Schedule I hereto (or such principal amount of Senior Notes increased as set
forth in Section 10 hereof).
3. TERMS OF PUBLIC OFFERING. The Company has been advised by you that
you propose to make a public offering of the Senior Notes as soon after the
Registration Statement and this Agreement have become effective as in your
judgment is advisable and initially to offer the Senior Notes upon the terms set
forth in the Prospectus. In such proposed public offering, each Underwriter
shall observe all applicable laws and regulations in any jurisdiction in which
it may offer, sell, resell or deliver any of the Senior Notes.
4. DELIVERY OF THE SENIOR NOTES AND PAYMENT THEREFOR. Delivery to you of
and payment for the Senior Notes shall be made at the office of Smith Barney
Inc., 1345 Avenue of the Americas, New York, NY 10105, at 10:00 A.M., New York
City time, on , 1994 (the "Closing Date"). The place of
closing for the Senior Notes and the Closing Date may be varied by agreement
between you and the Company.
The Senior Notes will be delivered to you for your accounts against payment
of the purchase price therefor by certified or official bank check or checks
payable in New York Clearing House (next day) funds to the order of the Company
and registered in such names and in such denominations as you shall request
prior to 1:00 P.M., New York City time, on the third business day preceding the
Closing Date. The Senior Notes to be delivered to you shall be made available
to you in New York City for inspection and packaging not later than 9:30 A.M.,
New York City time, on the business day next preceding the Closing Date.
5. AGREEMENTS OF THE COMPANY. The Company agrees with you as follows:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective before the offering of the Senior Notes may commence,
the Company will endeavor to cause the Registration Statement or such
post-effective
- 3 -
<PAGE>
amendment to become effective as soon as possible and will advise you promptly
and, if requested by you, will confirm such advice in writing, when the
Registration Statement or such post-effective amendment has become effective.
(b) The Company will advise you promptly and, if requested by you,
will confirm such advice in writing: (i) of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prepricing
Prospectus or the Prospectus or for additional information; (ii) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Senior Notes
for offering or sale in any jurisdiction or the initiation of any proceeding for
such purpose; (iii) of the receipt of any comments from the Commission or any
state securities commission or regulatory authority that relate to the
Registration Statement or requests by any state securities commission or
regulatory authority for amendments to the Registration Statement or amendments
or supplements to the Prospectus or for additional information; and (iv) within
the period of time referred to in paragraph (f) below, of any change in the
Company's condition (financial or other), business, prospects, properties, net
worth or results of operations, or of the happening of any event, which makes
any statement of a material fact made in the Registration Statement or the
Prospectus (as then amended or supplemented) untrue or which requires the making
of any additions to or changes in the Registration Statement or the Prospectus
(as then amended or supplemented) in order to state a material fact required by
the Act or the regulations thereunder to be stated therein or necessary in order
to make the statements therein not misleading, or of the necessity to amend or
supplement the Prospectus (as then amended or supplemented) to comply with the
Act or any other law. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, the Company will
make every reasonable effort to obtain the withdrawal of such order at the
earliest possible time.
(c) The Company will furnish to you, without charge (i) three signed
copies of the registration statement as originally filed with the Commission and
of each amendment thereto, including financial statements and all exhibits
thereto, (ii) such number of conformed copies of the registration statement as
originally filed and of each amendment thereto, but without exhibits, as you may
reasonably request, (iii) such number of copies of the Incorporated Documents,
without exhibits, as you may reasonably request, and (iv) three copies of the
exhibits to the Incorporated Documents.
(d) The Company will not file any amendment to the Registration
Statement or make any amendment or supplement to the Prospectus or, prior to the
end of the period of time referred to in the first sentence in subsection (f)
below, file any document which, upon filing becomes an Incorporated Document, of
which you shall not previously have been advised and provided a copy within such
reasonable amount of time as is necessitated by the exigency
- 4 -
<PAGE>
of such amendment or supplement or to which, after you shall have been so
advised and provided a copy, you shall reasonably object.
(e) Prior to the execution and delivery of this Agreement, the
Company has delivered to you, without charge, in such quantities as you have
reasonably requested, copies of each form of the Prepricing Prospectus. The
Company consents to the use, in accordance with the provisions of the Act and
with the securities or Blue Sky laws of the jurisdictions in which the Senior
Notes are offered by you and by dealers, prior to the date of the Prospectus, of
each Prepricing Prospectus so furnished by the Company.
(f) As soon after the execution and delivery of this Agreement as
practicable and thereafter from time to time for such period as in the opinion
of counsel for the Underwriters a Prospectus is required by the Act to be
delivered in connection with sales of the Senior Notes by you or any dealer, the
Company will expeditiously deliver to you and each dealer, without charge, as
many copies of the Prospectus (and of any amendment or supplement thereto) as
you may reasonably request. The Company consents to the use of the Prospectus
(and of any amendment or supplement thereto) in accordance with the provisions
of the Act and with the securities or Blue Sky laws of the jurisdictions in
which the Senior Notes are offered by you and by all dealers to whom Senior
Notes may be sold, both in connection with the offering and sale of the Senior
Notes and for such period of time thereafter as the Prospectus is required by
the Act to be delivered in connection with sales of the Senior Notes by you or
any dealer (the "Prospectus Delivery Period"). If during such period of time
any event shall occur that in the judgment of the Company or in the opinion of
counsel for the Underwriters is required to be set forth in the Prospectus (as
then amended or supplemented) or should be set forth therein in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary to supplement or amend the
Prospectus (or to file under the Exchange Act any document which, upon filing,
becomes an Incorporated Document) in order to comply with the Act or any other
law, the Company will forthwith prepare and, subject to the provisions of
paragraph (d) above, file with the Commission an appropriate supplement or
amendment thereto (or to such document), and will expeditiously furnish to you
and the dealers a reasonable number of copies thereof. In the event that the
Company and you agree that the Prospectus should be amended or supplemented, the
Company, if requested by you, will promptly issue a press release announcing or
disclosing the matters to be covered by the proposed amendment or supplement.
(g) The Company will cooperate with you and with counsel for the
Underwriters in connection with the registration or qualification of the Senior
Notes for offering and sale by you and by dealers under the securities or Blue
Sky laws of such jurisdictions as you may designate and will file such consents
to service of process or other documents necessary or appropriate in
- 5 -
<PAGE>
order to effect such registration or qualification; provided that in no event
shall the Company be obligated to qualify to do business in any jurisdiction
where it is not now so qualified or to take any action which would subject it to
service of process in suits, other than those arising out of the offering or
sale of the Senior Notes, in any jurisdiction where it is not now so subject.
(h) The Company will make generally available to its security holders
a consolidated earnings statement, which need not be audited, covering a
twelve-month period commencing after the effective date of the Registration
Statement and ending not later than 15 months thereafter, as soon as practicable
after the end of such period, which consolidated earnings statement shall
satisfy the provisions of Section 11(a) of the Act.
(i) The Company will furnish to you (i) so long as any of the Senior
Notes are outstanding, as soon as available, a copy of each report of the
Company mailed to securityholders or filed with the Commission and (ii) from
time to time during the Prospectus Delivery Period, such other information
concerning the Company as you may reasonably request.
(j) If this Agreement shall terminate or shall be terminated after
execution pursuant to any provisions hereof (otherwise than pursuant to the
second paragraph of Section 10 hereof or by notice given by you terminating this
Agreement pursuant to Section 10 or Section 11 hereof) or if this Agreement
shall be terminated by the Underwriters because of any failure or refusal on the
part of the Company to comply with the terms or fulfill any of the conditions of
this Agreement, the Company agrees to reimburse you for all out-of-pocket
expenses (including fees and expenses of counsel for the Underwriters)
reasonably incurred by you in connection herewith.
(k) The Company will apply the net proceeds from the sale of the
Senior Notes substantially in accordance with the description set forth in the
Prospectus.
(l) If Rule 430A of the Act is employed, the Company will timely file
the Prospectus pursuant to Rule 424(b) under the Act and will advise you of the
time and manner of such filing.
(m) Except as stated in this Agreement and in the Prepricing
Prospectus and Prospectus, the Company has not taken, nor will it take, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Senior Notes. Except as
permitted by the Act, the Company will not distribute any registration
statement, preliminary prospectus or prospectus or other offering material in
connection with the offering and sale of the Senior Notes.
- 6 -
<PAGE>
(n) The Company will do and perform all things required or necessary
to be done and performed by it under this Agreement prior to the Closing Date
and to satisfy all conditions precedent to the delivery of the Senior Notes.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to each Underwriter that:
(a) Each Prepricing Prospectus included as part of the registration
statement as originally filed or as part of any amendment or supplement thereto,
or filed pursuant to Rule 424 under the Act, complied when so filed in all
material respects with the provisions of the Act. The Commission has not issued
any order preventing or suspending the use of any Prepricing Prospectus.
(b) The Company and the transactions contemplated by this Agreement
meet the requirements for using Form S-3 under the Act. The Registration
Statement, in the form in which it became or becomes effective, in such form as
it may be when any post-effective amendment thereto shall become effective, and
the Prospectus and any supplement or amendment thereto when filed with the
Commission under Rule 424(b) under the Act, complied or will comply in all
material respects with the provisions of the Act and did not or will not at any
such times contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except that this representation and warranty does not
apply to statements in or omissions from the Registration Statement or the
Prospectus made in reliance upon and in conformity with (i) information relating
to any Underwriter furnished to the Company in writing by or on behalf of such
Underwriter through you expressly for use therein or (ii) the Trustee's
Statement of Eligibility and Qualification (Form T-1) under the Trust Indenture
Act of 1939, as amended (the "1939 Act").
(c) The Incorporated Documents heretofore filed with the Commission,
when they were filed (or, if any amendment with respect to any such document was
filed, when such amendment was filed), conformed in all material respects with
the requirements of the Exchange Act and the rules and regulations thereunder,
any further Incorporated Documents so filed will, when they are filed, conform
in all material respects with the requirements of the Exchange Act and the rules
and regulations thereunder; no such document when it was filed (or, if an
amendment with respect to any such document was filed, when such amendment was
filed), contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading; and no such further document, when it is
filed, will contain an untrue statement of a material fact or will omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading.
- 7 -
<PAGE>
(d) The execution and delivery of, and the performance by the Company
of its obligations under, this Agreement have been duly and validly authorized
by the Company, and this Agreement has been duly executed and delivered by the
Company and constitutes the valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as rights
to indemnity and contribution hereunder may be limited by federal or state
securities laws.
(e) The Indenture has been duly and validly authorized and, upon its
execution and delivery by the Company and assuming due execution and delivery by
the Trustee, will be a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency or other similar
laws affecting creditors' rights generally, and has been (or will have been)
duly qualified under the 1939 Act and conforms to the description thereof in the
Registration Statement and the Prospectus.
(f) The Senior Notes have been duly authorized and, when executed by
the Company and authenticated by the Trustee in accordance with the Indenture
and delivered to you against payment therefor in accordance with the terms
hereof, will have been validly issued and delivered, and will constitute valid
and legally binding obligations of the Company entitled to the benefits of the
Indenture and enforceable against the Company in accordance with their terms,
except as enforcement thereof may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally, and the
Senior Notes will conform to the description thereof in the Registration
Statement and the Prospectus.
(g) The authorized and outstanding capital stock of the Company,
after giving effect to the Recapitalization, is as set forth under the caption
"Description of Capital Stock" in the Prospectus. After giving effect to the
Recapitalization, all outstanding shares of capital stock of the Company will be
duly authorized and validly issued and will be fully paid and non-assessable and
free of any preemptive or similar rights.
(h) The Company is a corporation duly organized and validly existing
in good standing under the laws of the State of Delaware with full corporate
power and authority to own, lease and operate its properties and to conduct its
business as described in the Registration Statement and the Prospectus, and is
duly registered and qualified to conduct its business and is in good standing in
each jurisdiction or place where the nature of its properties or the conduct of
its business requires such registration or qualification, except where the
failure so to register or qualify does not have, individually or in the
aggregate with other such failures, a material adverse effect on the condition
(financial or other), business, properties, net worth, results of operations or
prospects of the Company and the
- 8 -
<PAGE>
Subsidiaries (as hereinafter defined) taken as a whole (a "Material Adverse
Effect").
(i) No subsidiary of the Company constitutes a "Significant
Subsidiary" under Regulation S-X under the Act (a "Significant Subsidiary").
Rexene Corporation Limited, an English company ("RCL") is a corporation duly
organized, validly existing and in good standing in the jurisdiction of its
incorporation, with full corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Registration
Statement and the Prospectus, and is duly registered and qualified to conduct
its business and is in good standing in each jurisdiction or place where the
nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify does not have, individually or in the aggregate with other such
failures, a material adverse effect on the condition (financial or other),
business, properties, net worth or results of operations of RCL; all the
outstanding shares of capital stock of RCL have been duly authorized and validly
issued, are fully paid and nonassessable and free of any preemptive or similar
rights, and are owned by the Company directly, or indirectly through one of the
other Subsidiaries, free and clear of any lien (other than liens under the
agreements governing the Old Notes), adverse claim, security interest, equity or
other encumbrance.
(j) There are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened, against the Company or any of its
subsidiaries (the "Subsidiaries"), or to which the Company or any of the
Subsidiaries, or to which any of their respective properties is subject, that
are required to be described in the Registration Statement or the Prospectus but
are not described as required, and there are no agreements, contracts,
indentures, leases or other instruments that are required to be described in the
Registration Statement or any Incorporated Document or the Prospectus or to be
filed as an exhibit to the Registration Statement or any Incorporated Document
that are not described or filed as required by the Act or the Exchange Act.
(k) Neither the Company nor any of the Subsidiaries is in violation
of its certificate or articles of incorporation or by-laws, or other
organizational documents, or of any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or any of the
Subsidiaries or of any decree of any court or governmental agency or body having
jurisdiction over the Company or any of the Subsidiaries, or in default in any
respect in any bond, debenture, note or any other evidence of indebtedness or in
the performance of any obligation, agreement or condition contained in any
agreement, indenture, lease or other instrument to which the Company or any of
the Subsidiaries is a party or by which any of them or any of their respective
properties may be bound, except such violations or defaults as will not have,
individually or in the aggregate, a Material Adverse Effect.
- 9 -
<PAGE>
(l) Neither the Company nor any of the Subsidiaries is in default in
the payment of principal, interest or any other amounts due and owing under any
bond, debenture, note or any other evidence of indebtedness, and no holder of
indebtedness of the Company or any Subsidiary has declared, or threatened to
declare, any such indebtedness (or part thereof) to be due and owing prior to
its express maturity.
(m) Neither the offer, sale or delivery of the Senior Notes, the
execution, delivery or performance of this Agreement or the Indenture by the
Company, the consummation of the Recapitalization, nor the consummation by the
Company of the transactions contemplated hereby and thereby (A) requires or will
require any consent, approval, authorization or other order of or registration
or filing with, any court, regulatory body, administrative agency or other
governmental body, agency or official (except such as may be required for the
registration of the Shares and the Senior Notes under the Act and the Exchange
Act, qualification of the Indenture under the 1939 Act, and compliance with the
securities or Blue Sky laws of various jurisdictions, all of which have been or
will be effected in accordance with this Agreement, and except for all filings
required to perfect the lenders' security interests under the Credit Agreement)
or conflicts or will conflict with or constitutes or will constitute a breach
of, or a default under, the certificate or articles of incorporation or bylaws,
or other organizational documents, of the Company or any of the Subsidiaries or
(B) conflicts or will conflict with or constitutes or will constitute a breach
of, or a default under, any agreement, indenture, lease or other instrument to
which the Company or any of the Subsidiaries is a party or by which any of them
or any of their respective properties may be bound, or violates or will violate
any statute, law, regulation or filing or judgment, injunction, order or decree
applicable to the Company or any of the Subsidiaries or any of their respective
properties, or will result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of the
Subsidiaries pursuant to the terms of any agreement or instrument to which any
of them is a party or by which any of them may be bound or to which any of the
property or assets of any of them is subject (other than any lien created
pursuant to the Credit Agreement), except where the failure to obtain or make
such consents, approvals, authorizations, orders, registrations or filings or
where such conflicts or violations will not have, individually or in the
aggregate, a Material Adverse Effect.
(n) The accountants, Price Waterhouse LLP, who have certified or
shall certify the financial statements included or incorporated by reference in
the Registration Statement and the Prospectus (or any amendment or supplement
thereto) are independent public accountants as required by the Act.
(o) The historical financial statements, together with related
schedules and notes, included or incorporated by reference in the Registration
Statement and the Prospectus (and any amendment
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or supplement thereto), present fairly the consolidated financial position,
results of operations and changes in financial position of the Company and the
Subsidiaries on the basis stated in the Registration Statement at the respective
dates or for the respective periods to which they apply; such statements and
related schedules and notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as disclosed therein; and the other financial and statistical
information and data included or incorporated by reference in the Registration
Statement and the Prospectus (and any amendment or supplement thereto) are
accurately presented and (other than the industry information included therein)
prepared on a basis consistent with such financial statements and the books and
records of the Company and the Subsidiaries.
(p) The pro forma financial information and the related notes thereto
included in the Registration Statement (and any amendment or supplement thereto)
have been prepared in accordance with the applicable requirements of the Act,
include all adjustments necessary to present fairly the pro forma financial
condition and results of operations at the respective dates and for the
respective periods indicated and are based upon good faith estimates and
assumptions believed by the Company to be reasonable.
(q) Except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement thereto), subsequent to the
respective dates as of which such information is given in the Registration
Statement and the Prospectus (or any amendment or supplement thereto), neither
the Company nor any of the Subsidiaries has incurred any liability or
obligation, direct or contingent, or entered into any transaction, not in the
ordinary course of business, that is or, after giving effect to the
Recapitalization, would be material to the Company and the Subsidiaries taken as
a whole, and there has not been any change in the capital stock, or material
increase in the short-term debt or long-term debt, of the Company or any of the
Subsidiaries, or any material adverse change, or any development involving or
which may reasonably be expected to involve, a prospective material adverse
change, in the condition (financial or other), business, net worth or results of
operations of the Company and the Subsidiaries taken as a whole.
(r) Except as is not material to the condition (financial or other)
business, properties, net worth, results of operations or prospects of the
Company, each of the Company and the Subsidiaries has good and marketable title
to all property (real and personal) described in the Prospectus as being owned
by it, free and clear of all liens, claims, security interests or other
encumbrances except such as are described in the Registration Statement and the
Prospectus or in a document filed as an exhibit to the Registration Statement
and all the property described in the Prospectus as being held under lease by
each of the Company and the
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Subsidiaries is held by it under valid, subsisting and enforceable leases.
(s) The Company has reviewed the effect of Environmental Laws (as
defined below) and the disposal of hazardous or toxic substances, wastes,
pollutants and contaminants on the business, assets, operations and properties
of the Company and each of the Subsidiaries and has used its best efforts to
identify and evaluate associated costs and liabilities (including, without
limitation, all material capital and operating expenditures required for clean
up, closure of properties and compliance with Environmental Laws, all permits,
licenses and approvals, all related constraints on operating activities and all
potential liabilities to third parties). On the basis of such reviews, the
Company has reasonably concluded that such associated costs and liabilities
would not have, individually or in the aggregate, a Material Adverse Effect.
Except as described in the Prospectus, neither the Company nor the Subsidiaries
has violated any environmental, safety or similar law or regulation applicable
to it or its business or property relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants ("Environmental Laws"), lacks any permit, license or other
approval required of it under applicable Environmental Laws or is violating any
term or condition of such permit, license or approval which could reasonably be
expected, either individually or in the aggregate, to have a Material Adverse
Effect.
(t) The Company has not distributed and, prior to the later to occur
of (i) the Closing Date and (ii) completion of the distribution of the Senior
Notes, will not distribute any offering material in connection with the offering
and sale of the Senior Notes other than the Registration Statement, the
Prepricing Prospectus, the Prospectus or other materials, if any, permitted by
the Act.
(u) Each of the Company and the Subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("permits") as are necessary to own its respective properties and to
conduct its business in the manner described in the Prospectus, subject to such
qualifications as may be set forth in the Prospectus and except where the
failure to have such permits would not have, individually or in the aggregate, a
Material Adverse Effect; the Company and each of the Subsidiaries has fulfilled
and performed all its material obligations with respect to such permits and no
event has occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other impairment of the
rights of the holder of any such permit which might have, individually or in the
aggregate, a Material Adverse Effect, subject in each case to such qualification
as may be set forth in the Prospectus; and, except as described in the
Prospectus, none of such permits contains any restriction that is materially
burdensome to the Company or any of the Subsidiaries.
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(v) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(w) To the Company's knowledge, neither the Company nor any of the
Subsidiaries nor any employee or agent of the Company or any Subsidiary has made
any payment of funds of the Company or any Subsidiary or received or retained
any funds in violation of any law, rule or regulation, which payment, receipt or
retention of funds is of a character required to be disclosed in the Prospectus.
(x) The Company and each of the Subsidiaries have filed all tax
returns required to be filed, which returns are complete and correct, and
neither the Company nor any Subsidiary is in default in the payment of any taxes
which were payable pursuant to said returns or any assessments with respect
thereto, except where the failure to file such tax returns, the failure of such
tax returns to be complete and correct or the default in payment of such taxes
or assessments will not have, individually or in the aggregate, a Material
Adverse Effect.
(y) No holder of any security of the Company has or, after giving
effect to the Recapitalization, will have any right to require registration of
any securities of the Company because of the filing of the Registration
Statement or consummation of the transactions contemplated by this Agreement or
the Recapitalization.
(z) The Company and the Subsidiaries own or possess all patents,
trademarks, trademark registrations, service marks, service mark registrations,
trade names, copyrights, licenses, inventions, trade secrets and rights
described in the Prospectus as being owned by them or any of them or necessary
for the conduct of their respective businesses, except where the failure so to
own or possess will not have, individually or in the aggregate, a Material
Adverse Effect, and the Company is not aware of any claim to the contrary or any
challenge by any other person to the rights of the Company and the Subsidiaries
with respect to the foregoing, except as otherwise disclosed in the Prospectus.
(aa) The Company is not now, and after sale of the Senior Notes to be
sold by it hereunder and application of the net proceeds from such sale as
described in the Prospectus under the caption "Use of Proceeds" will not be, an
"investment company" or a company "controlled" by an investment company within
the meaning of the Investment Company Act of 1940, as amended.
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(bb) Since June 30, 1993, the Company has filed in a timely manner
each document or report required to be filed by it pursuant to the Exchange Act
and the rules and regulations thereunder; each such document or report at the
time it was filed conformed to the requirements of the Exchange Act and the
rules and regulations thereunder; and none of such documents or reports
contained an untrue statement of any material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading.
(cc) The Company has complied with all provisions of Florida
Statutes, SECTION 517.075, relating to issuers doing business with Cuba.
(dd) The Company has delivered to the Underwriters true and correct
executed copies of the Credit Agreement, and there have been no amendments,
alterations, modifications or waivers thereto or in the exhibits or schedules
thereto other than those as to which the Underwriters previously shall have been
advised and shall not have reasonably objected after being furnished a copy
thereof. The Credit Agreement is the valid and legally binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally. The
representations and warranties of the Company set forth in Section VII of the
Credit Agreement are true and correct as of the date hereof, and will be true
and correct as of the Closing Date, except to the extent any such representation
or warranty was expressly made as of any other date, in which case such
representation and warranty was true and correct as of such date. The Credit
Agreement conforms in all material respects to the descriptions thereof in the
Registration Statement and the Prospectus.
(ee) There is (i) no material unfair labor practice complaint pending
against the Company or any Subsidiary nor, to the best knowledge of the Company,
threatened against any of them, before the National Labor Relations Board or any
state or local labor relations board, and no significant grievance or
significant arbitration proceeding arising out of or under any collective
bargaining agreement is so pending against the Company or any Subsidiary or, to
the best knowledge of the Company, threatened against any of them, (ii) no
material strike, labor dispute, slowdown or stoppage pending against the Company
or any Subsidiary nor, to the best knowledge of the Company, threatened against
the Company or any Subsidiary and (iii) to the best knowledge of the Company, no
union representation question existing with respect to the employees of the
Company and the Subsidiaries and, to the best knowledge of the Company, no union
organizing activities are taking place. Neither the Company nor any Subsidiary
is in violation of or has received notice that it is or was in violation of any
federal, state or local law relating to discrimination in hiring, promotion or
pay of employees, nor any applicable wage or hour laws, nor any provision or the
Employee Retirement Income Security
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<PAGE>
Act of 1974, as amended, or the rules and regulations thereunder, except for
such violations as will not have, individually or in the aggregate, a Material
Adverse Effect.
(ff) Neither the Company nor any of its Subsidiaries has (i) taken,
directly or indirectly, any action designed to, or that might be reasonably be
expected to, cause or result in stabilization or manipulation of the price of
any security of the Company or any of its Subsidiaries to facilitate the sale or
resale of the Senior Notes or (ii) since the initial filing of the Registration
Statement (A) sold, bid for, purchased or paid any person any compensation for
soliciting purchases of, the Senior Notes or (B) paid or agreed to pay to any
person any compensation for soliciting another to purchase any other securities
of the Company.
(gg) Neither the Company nor any of its Subsidiaries is a "holding
company" or a "subsidiary company" or an "affiliate" of a holding company within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
(hh) None of the Company, its Subsidiaries or any agent thereof
acting on the behalf of any of them has taken, and none of them will take, any
action that might cause this Agreement or the issuance or sale of the Senior
Notes to violate Regulation G (12 C.F.R. Part 207), Regulation T (12 C.F.R. Part
220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of
the Board of Governors of the Federal Reserve System.
7. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to indemnify
and hold harmless each of the Underwriters and each person, if any, who controls
any Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act from and against any and all losses, claims, damages, liabilities
and expenses (including reasonable costs of investigation) arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in any Prepricing Prospectus or in the Registration Statement or the
Prospectus or in any amendment or supplement thereto, or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any untrue statement or omission or alleged untrue
statement or omission which has been made therein or omitted therefrom in
reliance upon and in conformity with the information relating to such
Underwriter furnished in writing to the Company by or on behalf of such
Underwriter expressly for use in connection therewith; PROVIDED, HOWEVER, that
the indemnification contained in this paragraph (a) with respect to any
Prepricing Prospectus shall not inure to the benefit of any Underwriter (or to
the benefit of any person controlling such Underwriter) on account of any such
loss, claim, damage, liability or expense arising from the sale of the Senior
Notes by such Underwriter to any person if a copy of the Prospectus
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<PAGE>
shall not have been delivered or sent to such person within the time required by
the Act and the regulations thereunder, and the untrue statement or alleged
untrue statement or omission or alleged omission of a material fact contained in
such Prepricing Prospectus was corrected in all material respects in the
Prospectus, provided that the Company has delivered the Prospectus to the
Underwriters in requisite quantity on a timely basis to permit such delivery or
sending. The foregoing indemnity agreement shall be in addition to any
liability which the Company may otherwise have.
(b) If any action, suit or proceeding shall be brought against any of
the Underwriters or any person controlling any of the Underwriters in respect of
which indemnity may be sought against the Company, such Underwriter or such
controlling person shall promptly notify the Company in writing and the Company
shall assume the defense thereof, including the employment of counsel and
payment of all fees and expenses. Such Underwriter or any such controlling
person shall have the right to employ separate counsel in any such action, suit
or proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Underwriter or such
controlling person unless (i) the Company has agreed in writing to pay such fees
and expenses, (ii) the Company has failed to assume the defense and employ
counsel, or (iii) the named parties to any such action, suit or proceeding
(including any impleaded parties) include both such Underwriter or such
controlling person and the Company and such Underwriter or such controlling
person shall have been advised by its counsel that representation of such
indemnified party and the Company by the same counsel would be inappropriate
under applicable standards of professional conduct (whether or not such
representation by the same counsel has been proposed) due to actual or potential
differing interests between them (in which case the Company shall not have the
right to assume the defense of such action, suit or proceeding on behalf of such
Underwriter or such controlling person). It is understood, however, that the
Company shall, in connection with any one such action, suit or proceeding or
separate but substantially similar or related actions, suits or proceedings in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
the Underwriters and controlling persons not having actual or potential
differing interests with you or among themselves, which firm shall be designated
in writing by Smith Barney Inc., and that all such fees and expenses shall be
reimbursed as they are incurred. The Company shall not be liable for any
settlement of any such action, suit or proceeding effected without its written
consent, but if settled with such written consent, or if there be a final
judgment for the plaintiff in any such action, suit or proceeding, the Company
agrees to indemnify and hold harmless each of the Underwriters, to the extent
provided in the preceding paragraph, and any such controlling person from and
against any loss, claim, damage, liability or expense by reason of such
settlement or judgment.
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<PAGE>
(c) Each of the Underwriters agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement, and any person who controls the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the same
extent as the foregoing indemnity from the Company to each of the Underwriters,
but only with respect to information relating to such Underwriter furnished in
writing by or on behalf of such Underwriter expressly for use in the
Registration Statement, the Prospectus or any Prepricing Prospectus, or any
amendment or supplement thereto. If any action, suit or proceeding shall be
brought against the Company, any of its directors, any such officer, or any such
controlling person, based on the Registration Statement, the Prospectus or any
Prepricing Prospectus, or any amendment or supplement thereto, and in respect of
which indemnity may be sought against any Underwriter pursuant to this paragraph
(c), such Underwriter shall have the rights and duties given to the Company by
paragraph (b) above (except that if the Company shall have assumed the defense
thereof such Underwriter shall not be required to do so, but may employ separate
counsel therein and participate in the defense thereof, but the fees and
expenses of such counsel shall be at such Underwriter's expense), and the
Company, its directors, any such officer, and any such controlling person, shall
have the rights and duties given to the Underwriters by paragraph (b) above.
The foregoing indemnity agreement shall be in addition to any liability which
the Underwriters may otherwise have.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the offering
of the Senior Notes, or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and the Underwriters on the other
hand in connection with the statements or omissions that resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other hand shall be deemed to be in the
same proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault of the Company on the
one hand and the Underwriters on the other hand shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged
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omission to state a material fact relates to information supplied by the Company
on the one hand or by the Underwriters on the other hand and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(e) The Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by a
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in paragraph (d) above. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities and expenses referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating any claim or defending any such action, suit or proceeding.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price of the Senior Notes underwritten by it and distributed to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section 7 are several
in proportion to the respective principal amounts of Senior Notes set forth
opposite their names in Schedule I hereto (or such principal amounts of Senior
Notes increased as set forth in Section 10 hereof) and not joint.
(f) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 7 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any of the Underwriters or any person
controlling any of the Underwriters, the Company, its directors or officers or
any person controlling
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the Company, (ii) acceptance of any Senior Notes and payment therefor hereunder,
and (iii) any termination of this Agreement. A successor to any of the
Underwriters or any person controlling any of the Underwriters, or to the
Company, its directors or officers, or any person controlling the Company, shall
be entitled to the benefits of the indemnity, contribution, and reimbursement
agreements contained in this Section 7.
8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of the
Underwriters to purchase the Senior Notes hereunder are subject to the following
conditions:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective before the offering of the Senior Notes may commence,
the Registration Statement or such post-effective amendment shall have become
effective not later than 5:30 P.M., New York City time, on the date hereof, or
at such later date and time as shall be consented to in writing by you, and all
filings, if any, required by Rules 424 and 430A under the Act shall have been
timely made; no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceeding for that purpose shall have
been instituted or, to the knowledge of the Company or any of the Underwriters,
threatened by the Commission, and any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise) shall have been complied with to your satisfaction.
(b) Subsequent to the effective date of this Agreement, there shall
not have occurred (i) any change, or any development involving a prospective
change, in or affecting the condition (financial or other), business,
properties, net worth, or results of operations of the Company or the
Subsidiaries not contemplated by the Prospectus, which in your opinion would
materially, adversely affect the market for the Senior Notes, or (ii) any event
or development relating to or involving the Company, the Subsidiaries or any
officer or director of the Company or the Subsidiaries which makes any statement
made in the Prospectus untrue or which, in the opinion of the Company and its
counsel or the Underwriters and their counsel, requires the making of any
addition to or change in the Prospectus in order to state a material fact
required by the Act or any other law to be stated therein or necessary in order
to make the statements therein not misleading, if amending or supplementing the
Prospectus to reflect such event or development would, in your opinion,
materially adversely affect the market for the Senior Notes.
(c) You shall have received on the Closing Date, an opinion of
Thompson & Knight, special counsel for the Company, dated the Closing Date and
addressed to you to the effect that:
(i) The Company is a corporation duly incorporated and
validly existing in good standing under the laws
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of the State of Delaware with full corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto);
(ii) After giving effect to the Recapitalization, the
authorized and outstanding capital stock of the Company is as set forth, and
conforms in all material respects as to legal matters to the description
thereof, under the caption "Description of Capital Stock" in the Prospectus;
(iii) The Company has the corporate power and authority to
execute, deliver and perform this Agreement and to issue sell and deliver the
Senior Notes to the Underwriters as provided herein, and this Agreement has been
duly authorized, executed and delivered by the Company;
(iv) The Company has the corporate power and authority to
execute, deliver and perform its obligations under the Indenture, and the
Indenture has been duly and validly authorized, executed and delivered by the
Company, and has been duly qualified under the 1939 Act;
(v) The Company has the corporate power and authority to
execute, deliver and perform its obligations under the Senior Notes, and the
Senior Notes have been duly and validly authorized, executed and delivered by
the Company;
(vi) The Registration Statement and all post-effective
amendments, if any, have become effective under the Act and, to the best
knowledge of such counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose are
pending before or contemplated by the Commission; and any required filing of the
Prospectus pursuant to Rule 424(b) has been made in accordance with Rule 424(b);
(vii) Neither the Company nor any of the Subsidiaries is in
violation of its respective certificate or articles of incorporation or bylaws,
or other organizational documents;
(viii) Neither the offer, sale or delivery of the Senior
Notes, the execution, delivery or performance of this Agreement or the
Indenture, compliance by the Company with the provisions hereof and thereof, the
consummation of the Recapitalization nor consummation by the Company of the
transactions contemplated hereby and thereby, conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, the certificate
or articles of incorporation or bylaws, or other organizational documents, of
the Company or any of the Subsidiaries, nor will any such action result in any
violation of any existing law, regulation or ruling (assuming compliance with
all applicable state securities and Blue Sky laws) which, in such
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counsel's experience, is normally applicable to transactions such as those
contemplated by this Agreement, or any judgment, injunction, order or decree
known to such counsel after reasonable inquiry, applicable to the Company, the
Subsidiaries or any of their respective properties, except where the conflict,
breach, default or violation will not have, individually or in the aggregate, a
Material Adverse Effect;
(ix) No consent, approval, authorization or other order of,
or registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency, or official is required on the part
of the Company (except as have been obtained under the Act, the Exchange Act or
the 1939 Act, and such as may be required under state securities or Blue Sky
laws governing the purchase and distribution of the Shares and the Senior Notes)
for the valid issuance and sale of the Senior Notes to the Underwriters as
contemplated by this Agreement;
(x) The Registration Statement and the Prospectus and any
supplements or amendments thereto (except for the financial statements and the
notes thereto and the schedules and other financial and statistical data
included therein, as to which such counsel need not express any opinion) comply
as to form in all material respects with the requirements of the Act and the
rules and regulations thereunder; and each of the Incorporated Documents (except
for the financial statements and the notes thereto and the schedules and other
financial and statistical data included therein, as to which counsel need not
express any opinion) complies as to form in all material respects with the
Exchange Act and the rules and regulations of the Commission thereunder;
(xi) (a) Other than as described or contemplated in the
Prospectus (or any supplement thereto), there are no legal or governmental
proceedings pending or threatened against the Company or any of the
Subsidiaries, or to which the Company or any of the Subsidiaries, or any of
their property, is subject, known to such counsel, which are required to be
described in the Registration Statement or Prospectus (or any amendment or
supplement thereto) and (b) there are no agreements, contracts, indentures,
leases or other instruments known to such counsel, that are required to be
described in the Registration Statement or the Prospectus (or any amendment or
supplement thereto) or to be filed as an exhibit to the Registration Statement
or any Incorporated Document that are not described or filed as required, as the
case may be;
(xii) The statements in the Registration Statement and
Prospectus under "INVESTMENT CONSIDERATIONS -- Tax Consequences," the second,
third and fourth paragraphs under "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Liquidity and Capital
Resources," "BUSINESS -- Litigation -- Odessa Residents' Tort Litigation,"
"MANAGEMENT -- Recent Adoption of Management Incentive Plans," "DESCRIPTION OF
NEW CREDIT AGREEMENT," "DESCRIPTION OF SENIOR NOTES," "DESCRIPTION OF
- 21 -
<PAGE>
CAPITAL STOCK," and "CERTAIN U.S. TAX CONSEQUENCES TO NON-U.S. STOCKHOLDERS,"
insofar as they are descriptions of contracts, agreements or other legal
documents, or refer to statements of law or legal conclusions, are accurate and
present fairly the information required to be shown, to the extent governed by
the federal laws and the laws of jurisdictions on which such counsel expresses
an opinion;
(xiii) Assuming that (A) the Company has deposited with the
trustee under the indenture governing the Old Senior Notes (the "Old Senior
Notes Indenture") $_____ million pursuant to Section 8.01(1)(B)(ii) of the Old
Senior Notes Indenture, (B) the holders of the Old Senior Notes have a perfected
security interest in the funds deposited pursuant to Section 8.01(1)(B)(ii) of
the Old Senior Notes Indenture and (C) the notice of redemption related to the
Old Senior Notes, in the form of Exhibit ___ hereto, and the terms contained
therein, are satisfactory to the trustee under the Old Senior Notes Indenture,
all obligations of the Company under the Old Senior Notes have been discharged,
except for the surviving obligations set forth in Section 8.01 of the Old Senior
Notes Indenture; assuming that (A) the Company has deposited with the trustee
under the indenture governing the Old Subordinated Notes (the "Old Subordinated
Notes Indenture") $_____ million pursuant to Section 8.01(1)(B)(ii) of the Old
Subordinated Notes Indenture, (B) the holders of the Old Subordinated Notes have
a perfected security interest in the funds deposited pursuant to Section
8.01(1)(B)(ii) of the Old Subordinated Notes Indenture and (C) the notice of
redemption related to the Old Subordinated Notes, in the form of Exhibit ___
hereto, and the terms contained therein, are satisfactory to the trustee under
the Old Subordinated Notes Indenture, all obligations of the Company under the
Old Subordinated Notes have been discharged, except for the surviving
obligations set forth in Section 8.01 of the Old Subordinated Notes Indenture;
and
(xiv) Although counsel has not undertaken, except as
otherwise indicated in their opinion, to determine independently, and does not
assume any responsibility for, the accuracy or completeness of the statements in
the Registration Statement, such counsel has participated in the preparation of
the Registration Statement and the Prospectus, including review and discussion
of the contents thereof (including review and discussion of the contents of all
Incorporated Documents), and nothing has come to the attention of such counsel
that has caused them to believe that the Registration Statement (including the
Incorporated Documents) at the time the Registration Statement became effective,
or the Prospectus, as of its date and as of the Closing Date contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or that any amendment
or supplement to the Prospectus, as of its respective date and as of the Closing
Date contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein
- 22 -
<PAGE>
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (it being understood
that such counsel need express no opinion with respect to the financial
statements and the notes thereto and the schedules and other financial and
statistical data included in the Registration Statement or the Prospectus or any
Incorporated Document).
In rendering their opinion as aforesaid, counsel may rely upon (a) an
opinion or opinions, each dated the Closing Date, of other counsel retained by
them or the Company as to laws of any jurisdiction other than the United States
and the States of Texas and Delaware, provided that (1) each such local counsel
is acceptable to the Representatives, (2) such reliance is expressly authorized
by each opinion so relied upon and a copy of each such opinion is delivered to
the Representatives and is, in form and substance satisfactory to them and their
counsel, and (3) counsel shall state in their opinion that they believe that
they and the Underwriters are justified in relying thereon and (b) as to matters
of fact, to the extent they deem proper, on certificates of responsible officers
of the Company or its Subsidiaries and public officials. Reference to the
Prospectus in this paragraph includes any supplements thereto at the Closing
Date.
(d) You shall have received on the Closing Date, an opinion of
Bernard J. McNamee, Esq., corporate counsel for the Company, dated the Closing
Date and addressed to you to the effect that:
(i) Based solely on certificates from and correspondence
with public officials, the Company is qualified to do business and is in good
standing in each jurisdiction or place where the nature of its properties or the
conduct of its business requires such registration or qualification, except
where the failure so to register or qualify does not have, individually or in
the aggregate with other such failures, a Material Adverse Effect;
(ii) The Company has full corporate power and authority, and
all governmental authorizations, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental regulatory officials and
bodies necessary to own its properties and to conduct its businesses as now
being conducted, as described in the Prospectus, except where the failure so to
have any such authorizations, approvals, orders, licenses, certificates,
franchises or permits would not have, individually or in the aggregate, a
Material Adverse Effect;
(iii) After giving effect to the Recapitalization, all shares
of capital stock of the Company will be duly authorized, validly issued and
fully paid and nonassessable and free of any preemptive or similar rights to
subscribe for or purchase any such shares;
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<PAGE>
(iv) Except as disclosed in the Prospectus, the Company owns
of record, directly or indirectly, all the outstanding shares of capital stock
of each of the Subsidiaries free and clear of any lien, adverse claim, security
interest, equity, or other encumbrance;
(iv) Other than as described or contemplated in the
Prospectus (or any supplement thereto), there are no legal or governmental
proceedings pending or, to the best knowledge of such counsel, threatened
against the Company or any of the Subsidiaries, or to which the Company or any
of the Subsidiaries, or any of their property, is subject, which are required to
be described in the Registration Statement or Prospectus (or any amendment or
supplement thereto);
(v) There are no agreements, contracts, indentures, leases
or other instruments, that are required to be described in the Registration
Statement or the Prospectus (or any amendment or supplement thereto) or to be
filed as an exhibit to the Registration Statement or any Incorporated Document
that are not described or filed as required, as the case may be;
(vi) The Company and the Subsidiaries own all patents,
trademarks, trademark registrations, service marks, service mark registrations,
trade names, copyrights, licenses, inventions, trade secrets and rights
described in the Prospectus as being owned by them or any of them or necessary
for the conduct of their respective businesses, except where the failure so to
own or possess will not have, individually or in the aggregate, a Material
Adverse Effect, and such counsel is not aware of any claim to the contrary or
any challenge by any other person to the rights of the Company and the
Subsidiaries with respect to the foregoing, except as otherwise disclosed in the
Prospectus;
(vii) Except as described in the Prospectus, to the best
knowledge of such counsel, neither the Company nor any of the Subsidiaries is in
violation of any law, ordinance, administrative or governmental rule or
regulation applicable to the Company or any of the Subsidiaries or of any decree
of any court or governmental agency or body having jurisdiction over the Company
or any of the Subsidiaries, except for such violations as would not have,
individually or in the aggregate, a Material Adverse Effect;
(viii) To the best knowledge of such counsel, neither the
Company nor any of the Subsidiaries is in default in the performance of any
material obligation, agreement or condition contained in any bond, debenture,
note or other evidence of indebtedness, except as may be disclosed in the
Prospectus and except for such defaults as would not have, individually or in
the aggregate, a Material Adverse Effect;
(ix) Neither the offer, sale or delivery of the Senior
Notes, the execution, delivery or performance of this Agreement, the
consummation of the Recapitalization, nor
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<PAGE>
consummation by the Company of the transactions contemplated hereby and thereby,
conflicts or will conflict with or constitutes or will constitute a breach of,
or a default under, any agreement, indenture, lease or other instrument to which
the Company or any of the Subsidiaries is a party or by which any of them or any
of their respective properties is bound that is an exhibit to the Registration
Statement or to any Incorporated Document, or is known to such counsel after
reasonable inquiry, or will result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any of the
Subsidiaries (other than any lien created pursuant to the Credit Agreement),
except where the conflict, breach, default, creation or imposition of any lien,
charge or encumbrance will not have, individually or in the aggregate, a
Material Adverse Effect;
(x) Except as described in the Prospectus, there is no
holder of any securities of the Company or any other person who has the right,
contractual or otherwise, to cause the Company to sell or otherwise issue to
them, or to permit them to underwrite the sale of, the Senior Notes or the right
to have any securities of the Company included in the Registration Statement or
the right, as a result of the filing of the Registration Statement or
consummation of the transactions contemplated by this Agreement or the
Recapitalization, to require registration under the Act of any securities of the
Company;
(xi) The statements in the Registration Statement and the
Prospectuses under "INVESTMENT CONSIDERATIONS -- Environmental Considerations,"
"-- Legal Matters," "BUSINESS -- Environmental and Related Regulation" and "--
Litigation," insofar as they are descriptions of contracts, agreements or other
legal documents, or refer to statements of law or legal conclusions, are
accurate and present fairly the information required to be shown, to the extent
governed by the federal laws and the laws of jurisdictions on which such counsel
expresses an opinion; and
(xii) Such counsel has discussed the Registration Statement,
the Prospectus and the Incorporated Documents with the officers of the Company
and has participated in the preparation of the Registration Statement and the
Prospectus, including review and discussion of the contents thereof, and based
thereon nothing has come to the attention of such counsel that has caused him to
believe that the Registration Statement at the time the Registration Statement
became effective, or the Prospectus, as of its date and as of the Closing Date,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or that any amendment or supplement to the Prospectus, as of its
respective date, and as of the Closing Date contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (it being understood
that such counsel need express no opinion with respect
- 25 -
<PAGE>
to the financial statements and the notes thereto and the schedules and other
financial and statistical data included in the Registration Statement or the
Prospectus).
(e) You shall have received on the Closing Date, an opinion of
Simpson & Curtis, special counsel for the Company, dated the Closing Date and
addressed to you to the effect that:
(i) RCL is a corporation duly organized and validly
existing in good standing under the laws of the jurisdiction of its
organization, with full corporate power and authority to own, lease, and operate
its properties and to conduct its business as described in the Registration
Statement and the Prospectus (and any amendment or supplement thereto) and is
duly registered and qualified to conduct its business and is in good standing in
each jurisdiction or place where the nature of its properties or the conduct of
its business requires such registration or qualification, except where the
failure so to register or qualify does not have, individually or in the
aggregate with other such failures, a material adverse effect on the condition
(financial or other), business, properties, net worth or results of operations
of RCL; and all the outstanding shares of capital stock of RCL have been duly
authorized and validly issued, are fully paid and nonassessable and free of any
preemptive rights and are owned of record by the Company directly or indirectly,
free and clear of any perfected security interest, or, to the best knowledge of
such counsel, any other security interest, lien, adverse claim, equity or other
encumbrance.
(f) You shall have received on the Closing Date, an opinion of
Patterson Belknap, New York counsel for the Company, dated the Closing Date and
addressed to you to the effect that:
(i) Assuming the Company has the corporate power and
authority to enter into this Agreement and to issue, sell and deliver the Senior
Notes to the Underwriters as provided herein, and this Agreement has been duly
authorized, executed and delivered by the Company, then this Agreement is a
valid, legal and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as enforcement of rights to
indemnity and contribution hereunder may be limited by Federal or state
securities laws or principles of public policy and subject to the qualification
that the enforceability of the Company's obligations hereunder may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and
other laws relating to or affecting creditors' rights generally and by general
equitable principles;
(ii) Assuming the Company has the corporate power and
authority to enter into and perform its obligations under the Indenture and the
Indenture has been duly authorized, executed and delivered by the Company, and
assuming the Indenture has been duly authorized, executed and delivered by the
Trustee, then the Indenture is a valid, legal and binding agreement of the
Company,
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<PAGE>
enforceable against the Company in accordance with its terms, subject to the
qualification that the enforceability of the Company's obligations under the
Indenture may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors'
rights generally and by general equitable principles; and
(iii) Assuming the Company has the corporate power and
authority to enter into and perform its obligations under the Senior Notes and
the Senior Notes have been duly authorized, executed and delivered by the
Company, and assuming the due authentication of the Senior Notes by the Trustee,
then upon delivery to the Underwriters against payment therefor in accordance
with the terms hereof, the Senior Notes will constitute valid, legal and binding
obligations of the Company entitled to the benefits of the Indenture and
enforceable against the Company in accordance with their terms, subject to the
qualification that the enforceability of the Company's obligations under the
Senior Notes may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors'
rights generally and by general equitable principles.
(g) You shall have received on the Closing Date an opinion of Latham
& Watkins, counsel for the Underwriters, dated the Closing Date and addressed to
you with respect to certain of the matters referred to in clauses (i), (iii),
(vi), (x) and (xiv) of the foregoing paragraph (c) and such other related
matters as you may request.
(h) You shall have received letters addressed to you and dated the
date hereof and the Closing Date from Price Waterhouse LLP, independent
certified public accountants, substantially in the forms heretofore approved by
you.
(i) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been taken or, to the knowledge of the Company, shall be
contemplated by the Commission at or prior to the Closing Date; (ii) there shall
not have been any change in the capital stock of the Company nor any material
increase in the short-term or long-term debt of the Company (other than in the
ordinary course of business) from that set forth or contemplated in the
Registration Statement or the Prospectus (or any amendment or supplement
thereto); (iii) there shall not have been, since the respective dates as of
which information is given in the Registration Statement and the Prospectus (or
any amendment or supplement thereto), except as may otherwise be stated in the
Registration Statement and Prospectus (or any amendment or supplement thereto),
any material adverse change in the condition (financial or other), business,
prospects, properties, net worth or results of operations of the Company and the
Subsidiaries taken as a whole; (iv) the Company and the Subsidiaries shall not
have any liabilities or obligations, direct or contingent (whether or not in the
ordinary course of business), that are material to the Company
- 27 -
<PAGE>
and the Subsidiaries, taken as a whole, other than those reflected in the
Registration Statement or the Prospectus (or any amendment or supplement
thereto); and (v) all the representations and warranties of the Company
contained in this Agreement shall be true and correct on and as of the date
hereof and on and as of the Closing Date as if made on and as of the Closing
Date, and you shall have received a certificate, dated the Closing Date and
signed by the chief executive officer and the chief financial officer of the
Company (or such other officers as are acceptable to you), to the effect set
forth in this Section 8(i) and in Section 8(j) hereof.
(j) The Company shall not have failed at or prior to the Closing Date
to have performed or complied with any of its agreements herein contained and
required to be performed or complied with by it hereunder at or prior to the
Closing Date.
(k) The Company shall have entered into the Credit Agreement (the
form and substance of which shall be reasonably acceptable to the Underwriters)
and the Underwriters shall have received counterparts, conformed as executed,
thereof and of all other documents and agreements entered into in connection
therewith.
(l) Each condition to the closing and the initial borrowing
contemplated by the Credit Agreement (other than the issuance and sale of the
Senior Notes pursuant hereto and the closing of the Common Stock Offering) shall
have been satisfied or, with the Underwriters' specific approval, waived. There
shall exist at and as of the Closing Date (after giving effect to the
transactions contemplated by this Agreement and the Recapitalization) no
conditions that would constitute a default (or an event that with notice or the
lapse of time, or both, would constitute a default) under the Credit Agreement.
On the Closing Date, the closing under the Credit Agreement shall have been
consummated on terms that conform in all material respects to the description
thereof in the Registration Statement and Prospectus and the Underwriters shall
have received evidence satisfactory to the Underwriters of the consummation
thereof.
(m) Each condition to the closing of the Common Stock Offering (other
than the issuance and sale of the Senior Notes pursuant hereto and the initial
borrowing under the Credit Agreement) shall have been satisfied or, with the
Underwriters' specific approval, waived. On the Closing Date, the closing of
the Common Stock Offering shall have been consummated on terms that conform in
all material respects to the description thereof in the Registration Statement
and Prospectus and the Underwriters shall have received evidence satisfactory to
the Underwriters of the consummation thereof.
(n) On the Closing Date, (i) the Company shall have called for
redemption and defeased all of the Old Notes, (ii) all liens on the assets of
the Company and the Subsidiaries securing
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<PAGE>
the Company's obligations under the Old Notes shall have been released and (iii)
the Underwriters shall have received evidence satisfactory to the Underwriters
of the consummation of the transactions set forth in clauses (i) and (ii) above.
(o) On the Closing Date, (i) the Company shall have repaid all
amounts owing under the Existing Credit Agreement, (ii) all liens on the assets
of the Company and the Subsidiaries securing the Company's obligations under the
Existing Credit Agreement shall have been released and (iii) the Underwriters
shall have received evidence satisfactory to the Underwriters of the
consummation of the transactions set forth in clauses (i) and (ii).
(p) There shall not have been any announcement by any "nationally
recognized statistical rating organization", as defined for purposes of Rule
436(g) under the Act, that (i) it is downgrading its rating assigned to any debt
securities of the Company, or (ii) it is reviewing its rating assigned to any
debt securities of the Company with a view to possible downgrading, or with
negative implications, or direction not determined.
(q) On the Closing Date, the Company shall have furnished to you a
copy of the report dated October 17, 1994, regarding certain environmental
matters prepared by Pilkco & Associates, Inc., in form satisfactory to you.
(r) The Company shall have furnished or caused to be furnished to you
such further certificates and documents as you shall have reasonably requested.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to you and your counsel.
Any certificate or document signed by any officer of the Company and
delivered to the Underwriters or to counsel for the Underwriters, shall be
deemed a representation and warranty by the Company to each of the Underwriters
as to the statements made therein.
9. EXPENSES. The Company agrees to pay the following costs and expenses
and all other costs and expenses incident to the performance by it of its
obligations hereunder: (i) the preparation, printing or reproduction, and filing
with the Commission of the Registration Statement (including financial
statements and exhibits thereto), each of the Prepricing Prospectus, the
Prospectus and each amendment or supplement to any of them; (ii) the printing
(or reproduction) and delivery (including postage, air freight charges and
charges for counting and packaging) of such copies of the Registration
Statement, the Prepricing Prospectus, the Prospectus, the Incorporated
Documents, and all amendments or supplements to any of them, as may be
reasonably requested for use in connection with the offering and sale of the
Senior Notes; (iii) the preparation, printing,
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<PAGE>
authentication, issuance and delivery of the Senior Notes, including any stamp
taxes in connection with the original issuance and sale of the Senior Notes;
(iv) the printing (or reproduction) and delivery of this Agreement, the
Indenture, the Statement of Eligibility and Qualification of the Trustee, the
preliminary and final Blue Sky Memoranda and all other agreements or documents
printed (or reproduced) and delivered in connection with the offering of the
Senior Notes; (v) the registration or qualification of the Senior Notes for
offer and sale under the securities or Blue Sky laws of the several states as
provided in Section 5(g) hereof (including the reasonable fees, expenses and
disbursements of counsel for the Underwriters relating to the preparation,
printing or reproduction, and delivery of the preliminary and supplemental Blue
Sky Memoranda and such registration and qualification); (vi) the filing fees and
reasonable fees and expenses of counsel for the Underwriters in connection with
any filings required to be made with the National Association of Securities
Dealers, Inc.; (vii) the transportation and other expenses incurred by or on
behalf of Company representatives in connection with presentations to
prospective purchasers of the Senior Notes; (viii) the fees and expenses of the
Company's accountants and the Trustee; (ix) the fees and expenses of counsel
(including local and special counsel) for the Company; and (x) the fees and
expenses associated with obtaining ratings for the Senior Notes from nationally
recognized statistical rating organizations.
10. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective: (i) upon the execution and delivery hereof by the parties hereto; or
(ii) if, at the time this Agreement is executed and delivered, it is necessary
for the Registration Statement or a post-effective amendment thereto to be
declared effective before the offering of the Senior Notes may commence, when
notification of the effectiveness of the Registration Statement or such
post-effective amendment has been released by the Commission. Until such time
as this Agreement shall have become effective, it may be terminated by the
Company, by notifying you, or by you, by notifying the Company.
If one of the Underwriters shall fail or refuse to purchase Senior
Notes which it is obligated to purchase hereunder on the Closing Date, and the
aggregate principal amount of Senior Notes which such defaulting Underwriter is
obligated but fail or refuse to purchase is not more than one-tenth of the
aggregate principal amount of Senior Notes which the Underwriters are obligated
to purchase on the Closing Date, the non-defaulting Underwriter shall be
obligated to purchase the Senior Notes which such defaulting Underwriter is
obligated, but fails or refuses, to purchase. If one of the Underwriters shall
fail or refuse to purchase Senior Notes which it or is obligated to purchase on
the Closing Date and the aggregate principal amount of Senior Notes with respect
to which such default occurs is more than one-tenth of the aggregate principal
amount of Senior Notes which the Underwriters are obligated to purchase on the
Closing Date and arrangements satisfactory to the non-defaulting Underwriter and
the
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<PAGE>
Company for the purchase of such Senior Notes by the non-defaulting Underwriter
or other party or parties approved by the non-defaulting Underwriter and the
Company are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of the non-defaulting Underwriter or the
Company. In any such case which does not result in termination of this
Agreement, either the non-defaulting Underwriter or the Company shall have the
right to postpone the Closing Date, but in no event for longer than seven days,
in order that the required changes, if any, in the Registration Statement and
the Prospectus or any other documents or arrangements may be effected. Any
action taken under this paragraph shall not relieve any defaulting Underwriter
from liability in respect of any such default of any such Underwriter under this
Agreement. The term "Underwriter" as used in this Agreement includes, for all
purposes of this Agreement, any party not listed in Schedule I hereto who, with
the approval of a non-defaulting Underwriter and the approval of the Company,
purchases Senior Notes which a defaulting Underwriter is obligated, but fails or
refuses, to purchase.
Any notice under this Section 10 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
11. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company by notice to the Company, if prior to the Closing
Date (i) trading in securities generally on the New York Stock Exchange, the
American Stock Exchange or the Nasdaq National Market shall have been suspended
or materially limited, (ii) a general moratorium on commercial banking
activities in New York or Texas shall have been declared by either federal or
state authorities, (iii) any securities of the Company shall have been
downgraded or placed on any "watch list" for possible downgrading by any
nationally recognized statistical rating organization, or (iv) there shall have
occurred any outbreak or escalation of hostilities or other international or
domestic calamity, crisis or change in political, financial or economic
conditions, the effect of which on the financial markets of the United States is
such as to make it, in your judgment, impracticable to commence or continue the
offering of the Senior Notes on the terms set forth on the cover page of the
Prospectus or to enforce contracts for the resale of the Senior Notes by the
Underwriters. Notice of such termination may be given to the Company by
telegram, telecopy or telephone and shall be subsequently confirmed by letter.
12. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set forth
in the last paragraph on the cover page, the stabilization legend on the inside
cover page, and the statements in the first and second paragraphs under the
caption "Underwriting" in any Prepricing Prospectus and in the Prospectus,
constitute the only information furnished by or on behalf of the Underwriters as
such information is referred to in Sections 6(b) and 7 hereof.
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<PAGE>
13. MISCELLANEOUS. Except as otherwise provided in Sections 5, 10 and 11
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company, at the office of the
Company at 5005 LBJ Freeway, Occidental Tower, Suite 500, Dallas, Texas 75244,
Attention: Bernard J. McNamee, Esq.; or (ii) if to you, care of Smith Barney
Inc., 1345 Avenue of the Americas, New York, New York 10105, Attention: Manager,
Investment Banking Division.
This Agreement has been and is made solely for the benefit of the
Underwriters, the Company, its directors and officers, and the other controlling
persons referred to in Section 7 hereof and their respective successors and
assigns, to the extent provided herein, and no other person shall acquire or
have any right under or by virtue of this Agreement. Neither the term
"successor" nor the term "successors and assigns" as used in this Agreement
shall include a purchaser from any Underwriter of any of the Senior Notes in his
status as such purchaser.
14. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
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<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Underwriters.
Very truly yours,
REXENE CORPORATION
By ........................
Andrew J. Smith
Chief Executive Officer
Confirmed as of the date first
above mentioned.
SMITH BARNEY INC.
By ..........................
Managing Director
WERTHEIM SCHRODER & CO. INCORPORATED
By ..........................
Managing Director
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<PAGE>
SCHEDULE I
REXENE CORPORATION
Principal Amount
Underwriter of Senior Notes
----------- ----------------
Smith Barney Inc. . . . . . . . . . . . . . . . . . . .
Wertheim Schroder
& Co. Incorporated . . . . . . . . . . . . . . . . . . .
TOTAL . . . . . . . $175,000,000
-------------
-------------
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<PAGE>
L&W DRAFT NOVEMBER 3, 1994
REXENE CORPORATION
$175,000,000
__% Senior Notes due 2004
--------------------------------
INDENTURE
Dated as of __________, 1994
--------------------------------
[BANK ONE]
--------------------------------
Trustee
<PAGE>
CROSS-REFERENCE TABLE*
TRUST INDENTURE ACT SECTION INDENTURE SECTION
310(a)(1)............................................. 7.10
(a)(2)............................................. 7.10
(a)(3)............................................. N.A.
(a)(4)............................................. N.A.
(a)(5)............................................. 7.10
(b)................................................ 3.09;7.08;7.10
(c)................................................ N.A.
311(a)................................................ 7.11
(b) ............................................... 7.11
(c) ............................................... N.A.
312(a)................................................ 2.05
(b)................................................ 10.03
(c)................................................ 10.03
313(a)................................................ 7.06
(b)(1)............................................. N.A.
(b)(2)............................................. 7.06
(c)................................................ 7.06;10.02
(d)................................................ 7.06
314(a)................................................ 4.03;4.04;10.02
(b)................................................ N.A.
(c)(1)............................................. 10.04
(c)(2)............................................. 10.04
(c)(3)............................................. N.A.
(d)................................................
10.02;10.03;10.04;10.05
(e)................................................ 10.05
(f)................................................ N.A.
315(a)................................................ 7.01(2)
(b)................................................ 7.05;10.02
(c)................................................ 7.01(1)
(d)................................................ 7.01(3)
(e) ............................................... 6.11
316(a)(last sentence)................................. 2.09
(a)(1)(A).......................................... 6.05
(a)(1)(B).......................................... 6.04
(a)(2)............................................. N.A.
(b)................................................ 6.07
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317(a)(1)............................................. 6.08
(a)(2)............................................. 6.09
(b)................................................ 2.04
318(a)................................................ N.A.
(b)................................................ N.A.
(c)................................................ 10.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions............................................ 1
Section 1.02. Other Definitions...................................... 16
Section 1.03. Incorporation by Reference of Trust Indenture Act...... 16
Section 1.04. Rules of Construction.................................. 17
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating........................................ 17
Section 2.02. Execution and Authentication........................... 18
Section 2.03. Registrar and Paying Agent............................. 18
Section 2.04. Paying Agent to Hold Money in Trust.................... 19
Section 2.05. Noteholder Lists....................................... 19
Section 2.06. Transfer and Exchange.................................. 19
Section 2.07. Replacement Notes...................................... 20
Section 2.08. Outstanding Notes...................................... 20
Section 2.09. Treasury Notes......................................... 21
Section 2.10. Temporary Notes........................................ 21
Section 2.11. Cancellation........................................... 21
Section 2.12. Defaulted Interest..................................... 21
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee..................................... 22
Section 3.02. Selection of Notes to Be Redeemed...................... 22
Section 3.03. Notice of Redemption................................... 23
Section 3.04. Effect of Notice of Redemption......................... 23
Section 3.05. Deposit of Redemption Price............................ 23
Section 3.06. Notes Redeemed in Part................................. 24
Section 3.07. Optional Redemption.................................... 24
Section 3.08. Mandatory Redemption................................... 25
Section 3.09. Asset Sale Offers...................................... 25
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes....................................... 27
Section 4.02. Maintenance of Office or Agency........................ 27
Section 4.03. SEC Reports............................................ 28
Section 4.04. Compliance Certificate................................. 28
Section 4.05. Taxes.................................................. 29
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Section 4.06. Stay, Extension and Usury Laws......................... 29
Section 4.07. Limitation on Restricted Payments...................... 29
Section 4.08. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries......... 32
Section 4.09. Limitation on Additional Indebtedness.................. 32
Section 4.10. Sale of Assets......................................... 34
Section 4.11. Limitation on Transactions With Affiliates............. 35
Section 4.12. Limitation on Liens.................................... 36
Section 4.13. Corporate Existence.................................... 36
Section 4.14. Change of Control...................................... 36
Section 4.15. Limitation on Issuances and Sales of Capital
Stock of Wholly Owned Restricted Subsidiaries.......... 37
Section 4.16. Subsidiary Guarantees.................................. 37
Section 4.17. Limitation on Applicability of Covenants............... 38
ARTICLE 5
SUCCESSORS
Section 5.01. Limitations on Merger, Consolidation or Sale of
Substantially All Assets............................... 38
Section 5.02. Successor Corporation Substituted...................... 39
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default...................................... 39
Section 6.02. Acceleration........................................... 40
Section 6.03. Other Remedies......................................... 41
Section 6.04. Waiver of Past Defaults................................ 41
Section 6.05. Control by Majority.................................... 42
Section 6.06. Limitation on Suits.................................... 42
Section 6.07. Rights of Holders to Receive Payment................... 42
Section 6.08. Collection Suit by Trustee............................. 42
Section 6.09. Trustee May File Proofs of Claim....................... 43
Section 6.10. Priorities............................................. 43
Section 6.11. Undertaking for Costs.................................. 44
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee...................................... 44
Section 7.02. Rights of Trustee...................................... 45
Section 7.03. Individual Rights of Trustee........................... 46
Section 7.04. Trustee's Disclaimer................................... 46
Section 7.05. Notice of Defaults..................................... 46
Section 7.06. Reports by Trustee to Holders.......................... 46
Section 7.07. Compensation and Indemnity............................. 47
Section 7.08. Replacement of Trustee................................. 47
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Section 7.09. Successor Trustee by Merger, etc....................... 48
Section 7.10. Eligibility; Disqualification.......................... 48
Section 7.11. Preferential Collection of Claims Against the Company.. 49
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance ............................................ 49
Section 8.02. Legal Defeasance and Discharge......................... 49
Section 8.03. Covenant Defeasance.................................... 50
Section 8.04. Conditions to Legal or Covenant Defeasance............. 50
Section 8.05. Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions.................. 52
Section 8.06. Repayment to the Company............................... 52
Section 8.07. Reinstatement.......................................... 52
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders............................. 53
Section 9.02. With Consent of Holders................................ 53
Section 9.03. Compliance with Trust Indenture Act.................... 55
Section 9.04. Revocation and Effect of Consents...................... 55
Section 9.05. Notation on or Exchange of Notes....................... 55
Section 9.06. Trustee to Sign Amendments, etc........................ 55
ARTICLE 10
MISCELLANEOUS
Section 10.01. Trust Indenture Act Controls......................... 56
Section 10.02. Notices.............................................. 56
Section 10.03. Communication by Holders with Other Holders.......... 57
Section 10.04. Certificate and Opinion as to Conditions
Precedent............................................ 57
Section 10.05. Statements Required in Certificate or
Opinion.............................................. 57
Section 10.06. Rules by Trustee and Agents.......................... 58
Section 10.07. Legal Holidays....................................... 58
Section 10.08. No Recourse Against Others........................... 58
Section 10.09. Duplicate Originals.................................. 58
Section 10.10. Governing Law........................................ 58
Section 10.11. No Adverse Interpretation of Other
Agreements........................................... 58
Section 10.12. Successors........................................... 59
Section 10.13. Severability......................................... 59
Section 10.14. Counterpart Originals................................ 59
Section 10.15. Table of Contents, Headings, etc..................... 59
SIGNATURES........................................................... 60
iii
<PAGE>
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions............................................ 1
Section 1.02. Other Definitions...................................... 16
Section 1.03. Incorporation by Reference of Trust Indenture Act...... 16
Section 1.04. Rules of Construction.................................. 17
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating........................................ 17
Section 2.02. Execution and Authentication........................... 18
Section 2.03. Registrar and Paying Agent............................. 18
Section 2.04. Paying Agent to Hold Money in Trust.................... 19
Section 2.05. Noteholder Lists....................................... 19
Section 2.06. Transfer and Exchange.................................. 19
Section 2.07. Replacement Notes...................................... 20
Section 2.08. Outstanding Notes...................................... 20
Section 2.09. Treasury Notes......................................... 21
Section 2.10. Temporary Notes........................................ 21
Section 2.11. Cancellation........................................... 21
Section 2.12. Defaulted Interest..................................... 21
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee..................................... 22
Section 3.02. Selection of Notes to Be Redeemed...................... 22
Section 3.03. Notice of Redemption................................... 23
Section 3.04. Effect of Notice of Redemption......................... 23
Section 3.05. Deposit of Redemption Price............................ 23
Section 3.06. Notes Redeemed in Part................................. 24
Section 3.07. Optional Redemption.................................... 24
Section 3.08. Mandatory Redemption................................... 25
Section 3.09. Asset Sale Offers...................................... 25
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes....................................... 27
Section 4.02. Maintenance of Office or Agency........................ 27
Section 4.03. SEC Reports............................................ 28
Section 4.04. Compliance Certificate................................. 28
Section 4.05. Taxes.................................................. 29
Section 4.06. Stay, Extension and Usury Laws......................... 29
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Section 4.07. Limitation on Restricted Payments...................... 29
Section 4.08. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries......... 32
Section 4.09. Limitation on Additional Indebtedness.................. 32
Section 4.10. Sale of Assets......................................... 34
Section 4.11. Limitation on Transactions With Affiliates............. 35
Section 4.12. Limitation on Liens.................................... 36
Section 4.13. Corporate Existence.................................... 36
Section 4.14. Change of Control...................................... 36
Section 4.15. Limitation on Issuances and Sales of Capital
Stock of Wholly Owned Restricted Subsidiaries.......... 37
Section 4.16. Subsidiary Guarantees.................................. 37
Section 4.17. Limitation on Applicability of Covenants............... 38
ARTICLE 5
SUCCESSORS
Section 5.01. Limitations on Merger, Consolidation or Sale of
Substantially All Assets............................... 38
Section 5.02. Successor Corporation Substituted...................... 39
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default...................................... 39
Section 6.02. Acceleration........................................... 40
Section 6.03. Other Remedies......................................... 41
Section 6.04. Waiver of Past Defaults................................ 41
Section 6.05. Control by Majority.................................... 42
Section 6.06. Limitation on Suits.................................... 42
Section 6.07. Rights of Holders to Receive Payment................... 42
Section 6.08. Collection Suit by Trustee............................. 42
Section 6.09. Trustee May File Proofs of Claim....................... 43
Section 6.10. Priorities............................................. 43
Section 6.11. Undertaking for Costs.................................. 44
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee...................................... 44
Section 7.02. Rights of Trustee...................................... 45
Section 7.03. Individual Rights of Trustee........................... 46
Section 7.04. Trustee's Disclaimer................................... 46
Section 7.05. Notice of Defaults..................................... 46
Section 7.06. Reports by Trustee to Holders.......................... 46
Section 7.07. Compensation and Indemnity............................. 47
Section 7.08. Replacement of Trustee................................. 47
Section 7.09. Successor Trustee by Merger, etc....................... 48
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Section 7.10. Eligibility; Disqualification.......................... 48
Section 7.11. Preferential Collection of Claims Against the Company.. 49
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance 49
Section 8.02. Legal Defeasance and Discharge......................... 49
Section 8.03. Covenant Defeasance.................................... 50
Section 8.04. Conditions to Legal or Covenant Defeasance............. 50
Section 8.05. Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions.................. 52
Section 8.06. Repayment to the Company............................... 52
Section 8.07. Reinstatement.......................................... 52
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders............................. 53
Section 9.02. With Consent of Holders................................ 53
Section 9.03. Compliance with Trust Indenture Act.................... 55
Section 9.04. Revocation and Effect of Consents...................... 55
Section 9.05. Notation on or Exchange of Notes....................... 55
Section 9.06. Trustee to Sign Amendments, etc........................ 55
ARTICLE 10
MISCELLANEOUS
Section 10.01. Trust Indenture Act Controls.......................... 56
Section 10.02. Notices............................................... 56
Section 10.03. Communication by Holders with Other Holders........... 57
Section 10.04. Certificate and Opinion as to Conditions
Precedent............................................. 57
Section 10.05. Statements Required in Certificate or
Opinion............................................... 57
Section 10.06. Rules by Trustee and Agents........................... 58
Section 10.07. Legal Holidays........................................ 58
Section 10.08. No Recourse Against Others............................ 58
Section 10.09. Duplicate Originals................................... 58
Section 10.10. Governing Law......................................... 58
Section 10.11. No Adverse Interpretation of Other
Agreements............................................ 58
Section 10.12. Successors............................................ 59
Section 10.13. Severability.......................................... 59
Section 10.14. Counterpart Originals................................. 59
Section 10.15. Table of Contents, Headings, etc...................... 59
SIGNATURES........................................................... 60
vi
<PAGE>
INDENTURE dated as of ____________, 1994 between Rexene Corporation,
a Delaware corporation (the "Company"), and [Bank One, a national banking
association duly organized and existing under the laws of the United States of
America,] as trustee ("Trustee").
The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the __% Senior
Notes due 2004 of the Company (the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01.DEFINITIONS.
"ACQUIRED DEBT" means, with respect to the Company or any
Restricted Subsidiary of the Company, (i) Indebtedness of any other Person
existing at the time such other Person is merged with or into the Company or any
such Restricted Subsidiary or became a Restricted Subsidiary of the Company,
including, without limitation, Indebtedness incurred by such other Person in
connection with, or in contemplation of, such other Person merging with or into
or becoming a Restricted Subsidiary of the Company, and (ii) Indebtedness
secured by a Lien encumbering any asset acquired by such other Person prior to
the date on which the Company or any Restricted Subsidiary acquires such Person.
"ACQUISITION DEBT" means (i) Indebtedness incurred substantially
simultaneously with, and for the purpose of financing all or any part of the
purchase price or cost of, any acquisition of a Permitted Business, which
acquisition is permitted pursuant to Section 4.07 hereof and (ii) Acquired Debt
of the Person which is acquired.
"AFFILIATE" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
PROVIDED that beneficial ownership of 10% or more of the voting securities of
a Person shall be deemed to be control; and PROVIDED FURTHER, that no employee
or group of employees of the Company (other than executive officers and
directors) shall by reason of their employment be deemed to be an Affiliate.
"AGENT" means any Registrar, Paying Agent or co-registrar.
"APAO" means amorphous polyalphaolefins.
<PAGE>
"APAO JOINT VENTURE" means a joint venture between the Company and
any other Person, other than URC, providing for the manufacture and sale of APAO
outside of the United States and Canada in geographic regions in which URC does
not do business.
"APAO VENTURE INVESTMENT" means each of the following Investments
by the Company and its Restricted Subsidiaries in the APAO Joint Venture: (i)
Investments of cash in an aggregate amount outstanding at any time (measured by
their fair market value as of the date made) not in excess of the aggregate cash
received after the date of this Indenture by the Company and its Restricted
Subsidiaries from the APAO Joint Venture as fees for the licensing to the APAO
Joint Venture of any intellectual property rights or other proprietary
technology relating to the manufacture of APAO and (ii) the Guarantee by the
Company and any Subsidiary Guarantor of Indebtedness of the APAO Joint Venture
in a principal amount not exceeding $15 million less all Investments made by the
Company and the Subsidiary Guarantors to satisfy their obligations under any
such Guarantee.
"ASSET SALE" means (i) the sale, lease, transfer or conveyance of
any assets of the Company or any Restricted Subsidiary (including, without
limitation, by way of a sale and leaseback, but specifically excluding a sale
and leaseback of an asset occurring within 150 days after the completion of
construction or acquisition of such asset) other than in the ordinary course of
business (PROVIDED that the sale, lease, transfer or conveyance of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole will be governed by the provisions of Sections 4.14 and/or 5.01
of this Indenture and not by the provisions of Section 4.10 of this Indenture),
(ii) the issuance by any Restricted Subsidiary of the Company of Equity
Interests of any of the Company's Restricted Subsidiaries to any Person other
than the Company or a Restricted Subsidiary, and (iii) the sale by the Company
or its Restricted Subsidiaries of Equity Interests of any Restricted Subsidiary
of the Company, in each case (a) whether in a single transaction or a series of
related transactions and (b) that have a fair market value, as determined by the
Board of Directors of the Company, in excess of $1 million. Notwithstanding the
foregoing: (i) a transfer of assets by the Company to a Restricted Subsidiary
or by a Restricted Subsidiary to the Company or to another Restricted
Subsidiary, (ii) a transfer of up to 375 acres of undeveloped land located in
Bayport, Texas, and owned by the Company on the date of this Indenture, (iii) a
disposition of any machinery, equipment, furniture, apparatus, tools,
implements, materials, supplies or other similar property which have become
worn out or obsolete, (iv) a Restricted Payment that is permitted by the
provisions of Section 4.07 of this Indenture or (v) a sale, transfer or
conveyance of any intellectual property rights of the Company (other than those
used in the C T Film Division) to manufacture a product in any country in which
neither the Company nor any Restricted Subsidiary is manufacturing the same
product at the time of such sale, transfer or conveyance will not be deemed to
be an Asset Sale. In no event shall any sale, lease, transfer or conveyance of
(i) all or substantially all of the capital stock or assets of any of the
styrene, polymer or film businesses of the Company or (ii) all or substantially
all of the capital stock or assets of any Restricted Subsidiary or group of
Restricted Subsidiaries that singly or together would constitute a Significant
Subsidiary or (iii) assets which account for (A) at least 10% of the
consolidated assets of the Company and its Restricted Subsidiaries as of the end
of the most recently ended fiscal quarter of the Company or (B) at least 10% of
the Consolidated Cash Flow of the Company for the four full fiscal
2
<PAGE>
quarters immediately preceding such sale, lease or conveyance be deemed to be
made in the ordinary course of business.
"BANK CREDIT AGREEMENTS" means one or more credit agreements
between the Company and lenders thereunder providing for term borrowings and/or
revolving borrowings, including all related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, in each
case as amended, modified, renewed, refunded, replaced or refinanced, in whole
or in part, from time to time (and regardless of the number of lenders
thereunder and whether Indebtedness thereunder would constitute Permitted
Refinancing Debt) and including, but not limited to, the New Credit Agreement.
"BOARD OF DIRECTORS" means the Board of Directors of the Company
or any authorized committee of the Board of Directors.
"BORROWING BASE" means the greater of (i) $80 million and (ii) the
sum of (A) 80% of the net book value of all accounts receivable of the Company
that are not more than 60 days past due and (B) 60% of the net book value of all
inventory of the Company.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITAL LEASE" means, at the time any determination thereof is to
be made, any lease of property, real or personal, in respect of which the
present value of the minimum rental commitment would be capitalized on a balance
sheet of the lessee in accordance with GAAP.
"CAPITAL LEASE OBLIGATION" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a Capital Lease
that would at such time be so required to be capitalized on the balance sheet in
accordance with GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participation, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"CASH EQUIVALENTS" means (i) United States dollars, pounds
sterling and any other freely convertible currency, (ii) securities issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality thereof, having maturities of not more than six months
from the date of acquisition, (iii) certificates of deposit and eurodollar time
deposits, with maturities of six months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500 million and a Keefe Bank Watch Rating of "B" or
better, (iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above and (v) commercial paper having the highest rating
obtainable from Moody's Investors Service, Inc.
3
<PAGE>
or Standard & Poor's Corporation and in each case maturing within six months
after the date of acquisition.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, (42 U.S.C. Section 9607(1)).
"CHANGE OF CONTROL" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition in one or a
series of related transactions, by merger or consolidation or otherwise, of all
or substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole to any Person or Group (as such term is used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act), (ii) the adoption of a plan
relating to the liquidation or dissolution of the Company unless such plan is
abandoned within 30 days after the date of adoption of such plan, (iii) the
acquisition by any Person or Group (as defined above) of a direct or indirect
interest in more than 50% of the voting power of the voting stock of the
Company, by way of merger or consolidation or otherwise, or (iv) the first day
on which a majority of the members of the Board of Directors of the Company are
not Continuing Directors. For purposes of this definition, any transfer of an
Equity Interest of an entity that was formed for the purpose of acquiring voting
stock of the Company will be deemed to be a transfer of such portion of such
voting stock as corresponds to the portion of the equity of such entity that has
been so transferred, and the acquisition of voting power of the voting stock of
the Company by any Subsidiary of the Company shall be disregarded.
"COGEN ASSETS" means (i) feasibility studies and other similar
developmental items related to one or more joint ventures to produce steam and
power for the Odessa Facility; PROVIDED, HOWEVER, that the aggregate cost
thereof does not exceed $3.0 million and (ii) up to ten acres of unused land at
the Odessa Facility which is owned by the Company as of the date of this
Indenture.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period PLUS (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), PLUS (ii) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such Consolidated
Net Income PLUS (iii) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations), to the extent that any
such expense was deducted in computing such Consolidated Net Income, PLUS (iv)
depreciation and amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) of such Person and its Restricted Subsidiaries for such
period to the extent that such depreciation and amortization were deducted in
computing such Consolidated Net Income PLUS (v) any other non-cash charges
that were deducted in computing such Consolidated Net Income
4
<PAGE>
LESS all non-cash income that was included in computing such Consolidated Net
Income. Notwithstanding the foregoing, the provision for taxes on the income or
profits of, and the depreciation and amortization of, a Subsidiary of the
referent person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent (and in same proportion) that the Net
Income of such Subsidiary was included in calculating the Consolidated Net
Income of such Person and only if a corresponding amount would be permitted at
the date of determination to be dividended to the Company by such Subsidiary
without prior approval, pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; PROVIDED that (i) the Net Income of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (which
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of
any date, the sum of (i) the consolidated equity of the common stockholders of
such Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, LESS (x) all write-ups (other
than write-ups resulting from foreign currency translations and write-ups of
tangible assets of a going concern business made within 12 months after the
acquisition of such business) subsequent to the date of this Indenture in the
book value of any asset owned by such Person or a consolidated Subsidiary of
such Person, (y) all investments as of such date in unconsolidated Subsidiaries
and in Persons that are not Subsidiaries (except, in each case, Permitted
Investments), and (z) all unamortized debt discount and expense and unamortized
deferred charges as of such date, all of the foregoing determined in accordance
with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination,
any member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of this Indenture or (ii) was nominated for
election or elected to such Board of Directors
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with the affirmative vote of a majority of the Continuing Directors who were
members of such Board at the time of such nomination or election.
"CONTRACT OBLIGATIONS" means contractual obligations of the
Company and any Subsidiary Guarantor to repay or credit to a third party amounts
advanced by such third party (or its Affiliates) to the Company or any
Subsidiary Guarantor, which obligations to repay or credit are secured by a Lien
on the assets of the Company and/or any Subsidiary Guarantor. The amount of
Contract Obligations outstanding as of any date shall be equal to the aggregate
amount of remaining payments required to be made by, and credits required to be
given by, the Company and/or the Subsidiary Guarantors under the agreements
related to such Contractual Obligations at such time.
"CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of
the Trustee specified in Section 10.02 or such other address as the Trustee may
give notice to the Company.
"C T FILM DIVISION" means the Company's Consolidated
Thermoplastics division, which produces specialty grades of polyethylene films.
"CURRENCY AGREEMENT" means the obligation of any Person pursuant
to any foreign exchange contract, currency swap agreement or other similar
agreement or arrangement designed to protect such Person against fluctuations in
currency values.
"DEFAULT" means any event that is or with the passage of time or
the giving of notice or both would be an Event of Default.
"DESIGNATED UNRESTRICTED SUBSIDIARY" means, as of any date, any
Unrestricted Subsidiary of the Company from which the Company and its Wholly
Owned Restricted Subsidiaries have received, as of the date of determination,
cash distributions in an amount less than the Investments made by the Company
and its Restricted Subsidiaries in such Unrestricted Subsidiary.
"DISQUALIFIED STOCK" means any Capital Stock that, 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
date that is 91 days after the date on which the Notes mature.
"DOLLARS" and "$" means lawful money of the United States of
America.
"EQUITY INTERESTS" means Capital Stock and all warrants, options
or other rights to acquire Capital Stock (but excluding any debt security which
is convertible into, or exchangeable for, Capital Stock).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXISTING DEBT" means all Indebtedness outstanding on the date of
this Indenture.
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"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for
any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the Company or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues
preferred stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee or redemption
of Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. For purposes of making the computation referred to above, (i)
acquisitions that have been made by the Company or any of its Restricted
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period, and (ii) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, and (iii) the
Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
"FIXED CHARGES" means, with respect to any Person for any period,
the sum of (i) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued, to the extent
that such expense was deducted in computing Consolidated Net Income (excluding
all non-cash amortization of financing fees incurred in connection with the
Recapitalization and including, without limitation, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations) and (ii)
the consolidated interest expense of such Person and its Restricted Subsidiaries
that was capitalized during such period, and (iii) any interest expense on
Indebtedness of another Person that is Guaranteed by such Person or any of its
Restricted Subsidiaries or secured by a Lien on assets of such Person or any of
its Restricted Subsidiaries (whether or not such Guarantee or Lien is called
upon) and (iv) the product of (a) all cash dividend payments (and non-cash
dividend payments in the case of a Person that is a Restricted Subsidiary) on
any series of preferred stock of such Person, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis and in accordance
with GAAP.
"FOREIGN SUBSIDIARY" means any Subsidiary of the Company organized
under the laws of a jurisdiction outside of the United States.
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"FOREIGN SUBSIDIARY BORROWING BASE" means, with respect to any
Foreign Subsidiary that is a Restricted Subsidiary and not a Subsidiary
Guarantor, the sum of (A) 80% of the net book value of all accounts receivable
of such Foreign Subsidiary that are not more than 60 days past due and (B) 60%
of the net book value of all inventory of such Foreign Subsidiary.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect on the date of this Indenture;
PROVIDED, HOWEVER, that for purposes of all information and other reports
required to be delivered pursuant to the provisions of Section 4.03 of this
Indenture, GAAP shall mean such generally accepted accounting principles as are
in effect from time to time.
"GOVERNMENT SECURITIES" means direct obligations of the United
States of America, or any agency or instrumentality thereof for the payment of
which the full faith and credit of the United States of America is pledged.
"GUARANTEE" means, with respect to any Person, a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner (including, without
limitation, letters of credit and reimbursement agreements in respect thereof),
of all or any part of any Indebtedness that is owned by any other Person.
"HEDGING OBLIGATIONS" means, with respect to any Person, the
obligations of such Person under (i) Currency Agreements, (ii) Interest Rate
Agreements and (iii) agreements to protect against fluctuations in the price of
feedstocks.
"HOLDER" means a Person in whose name a Note is registered.
"INDEBTEDNESS," means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof) or indebtedness
representing Hedging Obligations, Capital Lease Obligations or the balance of
the deferred and unpaid portion of the purchase price of any property, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all Indebtedness of others
secured by a Lien on any asset of such Person (whether or not such Indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any indebtedness of any other Person other than a
Restricted Subsidiary of such Person.
"INDENTURE" means this Indenture as amended or supplemented from
time to time.
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"INTEREST RATE AGREEMENT" means the obligations of any person
pursuant to any interest rate swap agreement, interest rate collar agreement or
other similar agreement or arrangement designed to protect such Person against
fluctuations in interest rates.
"INVESTMENTS" means, with respect to the Company and its
Restricted Subsidiaries, any investment by the Company or any of its Restricted
Subsidiaries in other Persons (including Affiliates) in the form of loans
(including Guarantees of Indebtedness), advances (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), capital contributions, purchases or other acquisitions from such
other Persons for consideration of Indebtedness, Equity Interests, cash or other
property, and all other items that are or would be classified as investments on
a balance sheet prepared in accordance with GAAP; PROVIDED, HOWEVER, that
Investments shall not include purchases and sales of goods and services in the
ordinary course of business on an arms' length basis, except that purchases and
sales of goods between the Company or any Restricted Subsidiary on the one hand
and any Unrestricted Subsidiary which is a Foreign Sales Corporation (within the
meaning of 26 U.S.C. Sections 921-927 or any successor to such sections) on
hand need not be on arms' length terms.
"LIEN" means, with respect to any asset owned by the Company or
its Restricted Subsidiaries, any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind in respect of such asset, whether or not
filed, recorded or otherwise perfected under applicable law (including any
conditional sale or other title retention agreement, any option or other
agreement to sell or give a security interest in and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"MAKE-WHOLE PREMIUM" means, as of any date of determination, the
greater of (a) 1.0% of the then outstanding principal amount of the Notes or (b)
the excess of (A) the present value of all required interest and principal
payments due on such Notes from and after such date to the first date that the
Notes may be redeemed at the option of the Company assuming all such Notes so
redeemed and computed using a discount rate equal to the Treasury Rate on such
date plus 100 basis points compounded semi-annually over (B) the then
outstanding principal amount of the Notes.
"NET INCOME" means with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP, and before any
reduction in respect of preferred stock dividends, excluding, however, (i) any
gain (but not loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback transactions) or
(b) the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary gain (but not loss),
together with any related provision for taxes on such extraordinary gain (but
not loss).
"NET PROCEEDS" means the aggregate proceeds of cash and Cash
Equivalents received by the Company or any of its Restricted Subsidiaries in
respect of any Asset Sale (including, without limitation, any cash received upon
the sale or other disposition of any non-
9
<PAGE>
cash consideration received in any Asset Sale), net of the direct costs relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements) and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"NEW CREDIT AGREEMENT" means the Credit Agreement, dated as of
__________________, between the Company, the Bank of Nova Scotia and the lenders
party thereto.
"NOTEHOLDER" means a Holder of one or more Notes.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OBSOLETE PLANTS" means plant and equipment, together with land on
which such plant and equipment is situated, at the Odessa Facility that, as of
the date of this Indenture, has been shut down (other than plant or equipment
that has been temporarily shut down for repairs or maintenance); PROVIDED,
HOWEVER, that the aggregate net book value of all such Obsolete Plants on the
date of this Indenture shall not exceed $2.0 million.
"ODESSA FACILITY" means the Company's integrated production
facility in Odessa, Texas.
"OFFICERS" means the Chief Executive Officer, the President, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, Controller,
Secretary or any Vice-President of the Company.
"OFFICERS' CERTIFICATE" means a certificate signed by two
Officers, one of whom must be the principal executive officer, principal
financial officer or principal accounting officer of the Company.
"OPINION OF COUNSEL" means an opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or
the Trustee.
"PERMITTED BUSINESS" means any business that is not unrelated to
the businesses in which the Company is engaged on the date of this Indenture.
"PERMITTED INVESTMENTS" means (a) Investments in the Company or in
a Wholly Owned Restricted Subsidiary of the Company; (b) Investments in Cash
Equivalents; (c) Investments by the Company or any Restricted Subsidiary of the
Company in a Person, if as a result of such Investment (i) such Person becomes a
Wholly Owned Restricted Subsidiary of the Company or (ii) such Person is merged,
consolidated or amalgamated with or into, or
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<PAGE>
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or a Wholly Owned Restricted Subsidiary of the Company; (d) the APAO
Venture Investments and the URC Venture Investments; (e) Investments received as
consideration for Asset Sales permitted under this Indenture; (f) Investments by
the Company and its Restricted Subsidiaries in RCL not exceeding the amount of
such Investment on the date of this Indenture, calculated as of the date of each
such Investment, (g) the transfer by the Company of the Cogen Assets to one or
more joint ventures; and (h) other Investments in joint ventures or Unrestricted
Subsidiaries of the Company that are engaged in a Permitted Business in an
aggregate amount outstanding at any time (measured by their fair market value as
of the date made) not exceeding $15 million.
"PERMITTED LIENS" means:
(i) Liens on assets of the Company and the Subsidiary Guarantors
securing Indebtedness permitted to be incurred pursuant to clauses (i) and (ii)
of the second paragraph of Section 4.09 of this Indenture;
(ii) Liens in favor of the Company or any Subsidiary Guarantor;
(iii) first priority Liens (other than Liens permitted pursuant to
any other clause of this definition) securing Indebtedness of the Company and
any Subsidiary Guarantor that is not subordinated to any other Indebtedness of
the Company or such Subsidiary Guarantor and/or Contract Obligations of the
Company or such Subsidiary Guarantor, PROVIDED that the sum of the aggregate
principal amount of such Indebtedness and the total amount of such Contract
Obligations outstanding from time to time does not exceed $100 million LESS
the principal amount of Senior Term Debt (and Permitted Refinancing Debt with
respect thereto) outstanding as of such time;
(iv) Liens existing on the property of any Person at the time such
Person becomes a Restricted Subsidiary of the Company (excluding Liens which
were incurred in connection with, or in contemplation of, such Person becoming a
Restricted Subsidiary of the Company) that do not extend to any other property
of the Company or its Restricted Subsidiaries;
(v) Liens on the shares of URC stock now owned or hereafter
acquired by the Company and on patents of the Company licensed to URC, in each
case, to the extent required pursuant to the agreements governing the URC
Venture Investment, as amended from time to time;
(vi) Liens on (x) the Company's Equity Interest in the APAO Joint
Venture and (y) intellectual property rights permitted by this Indenture to be
licensed and licensed to the APAO Joint Venture required pursuant to the
agreements governing the APAO Investments;
(vii) Liens to secure Acquisition Debt permitted to be incurred
pursuant to Section 4.09 of this Indenture; PROVIDED, HOWEVER, that (a) such
Liens shall either (1) extend only to the assets acquired with the proceeds of
such Acquisition Debt or (2) otherwise be permitted by clause (iv) or (xvii) of
this definition, (b) the Acquisition Debt secured thereby shall not
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<PAGE>
exceed the fair market value of the assets acquired with the proceeds of such
Acquisition Debt and (c) except with respect to Acquired Debt, such Lien shall
be created simultaneously with the incurrence of such Acquisition Debt;
(viii) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, provided
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor;
(ix) landlords', carriers', vendors', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising by operating of law in
the ordinary course of business;
(x) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(xi) deposits to secure the performance of bids, trade contracts,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of like nature incurred in the ordinary course of business;
(xii) easements, rights of way, restrictions, licenses,
consignments and other similar encumbrances on any property of the Company or of
any Restricted Subsidiary, including Liens constituting leases or subleases to
third parties granted by the Company or any Restricted Subsidiary, in each case
to the extent incurred in the ordinary course of business;
(xiii) judgment Liens that do not constitute a Default;
(xiv) Liens on unearned premiums of insurance policies that secure
the financing of such premiums for such policies;
(xv) Liens arising pursuant to authority granted under CERCLA, RCRA
or analogous state statutes, PROVIDED that the aggregate of all obligations in
respect of which the Company is required to record a reserve in accordance with
GAAP that are secured by such Liens shall not exceed $40 million at any time;
(xvi) Liens existing on the date of this Indenture;
(xvii) Liens on property existing at the time of acquisition
thereof by the Company or any Restricted Subsidiary of the Company; PROVIDED
that such Liens were in existence prior to contemplation of such acquisition;
(xviii) Liens on assets of any Person which is not a Restricted
Subsidiary;
(xix) Liens incurred to secure (a) Purchase Money Financings or (b)
Capital Lease Obligations but only, in the case of (a) and (b), if such Liens do
not extend to any assets other than the assets purchased with the proceeds of
the corresponding Purchase Money Financing or which are the subject of such
Capital Lease Obligation, and in each case to the
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<PAGE>
extent the Indebtedness secured thereby is permitted to be incurred pursuant to
Section 4.09 of this Indenture;
(xx) Liens on accounts receivable and inventory of Foreign
Subsidiaries that are Restricted Subsidiaries and not Subsidiary Guarantors to
secure Indebtedness permitted to be incurred pursuant to clause (x) of second
paragraph of Section 4.09 of this Indenture; and
(xxi) Liens securing any extension, renewal or refunding of any
obligations secured by the foregoing Liens that do not increase the obligations
secured thereby and do not extend such Lien to any assets other than those
previously securing such obligations.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness issued
in exchange for, or the net proceeds of which are used to extend, refinance,
renew, replace, defease or refund Indebtedness (other than the Notes);
PROVIDED that: (i) the principal amount of such Permitted Refinancing
Indebtedness does not exceed the principal amount of the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus the amount
of reasonable expenses incurred in connection therewith), (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated in right of payment to the Notes or any Subsidiary Guarantee,
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes
and the Subsidiary Guarantee on terms at least as favorable to the Holders of
Notes as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"PERSON" means any individual, corporation, limited liability
company, partnership, association, joint stock company, trust or trustee
thereof, estate or executor thereof, unincorporated organization or joint
venture.
"PURCHASE MONEY FINANCING" means, with respect to any Person,
Indebtedness incurred to finance the purchase of any assets of such Person
(within 90 days of such purchase) to the extent (i) the amount of Indebtedness
thereunder shall not exceed 95% of the purchase cost of such assets, (ii) the
purchase cost for such assets is or should be included in "additions to property
plant and equipment" in accordance with GAAP and (iii) the purchase of such
assets is not part of an acquisition of any Person.
"RCL" means Rexene Corporation Limited, an English company.
"RCRA" means the Resource Conservation and Recovery Act
(42 U.S.C. Section 6901 et. seq.).
"RECAPITALIZATION" shall have the meaning ascribed to such term in
the Registration Statement on Form S-3 relating to the Notes as declared
effective by the SEC on _______, 1994.
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"RESPONSIBLE OFFICER" when used with respect to the Trustee, means
any officer within the Corporate Trust Office (or any successor group of the
Trustee) assigned by the Trustee to administer its corporate trust matters.
"RESTRICTED INVESTMENT" means any Investment other than a
Permitted Investment.
"RESTRICTED SUBSIDIARY" of the Company means any Subsidiary of the
Company that is designated as a Restricted Subsidiary by the Board of Directors
or otherwise fails to meet the requirement set forth in the definition of
Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR REVOLVING DEBT" means revolving credit borrowings under
the Bank Credit Agreements.
"SENIOR TERM DEBT" means term borrowings under the Bank Credit
Agreements.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act.
"SUBSIDIARY" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or one or more Subsidiaries
of such Person (or any combination thereof).
"SUBSIDIARY GUARANTEE" means (i) the full and unconditional
guarantee by a Restricted Subsidiary (other than a Foreign Subsidiary) of all of
the Company's obligations under this Indenture and the Notes delivered pursuant
to Section 4.16 of this Indenture and (ii) the full and unconditional guarantee
of all of the Company's obligations under this Indenture and the Notes by any
Foreign Subsidiary that is a Restricted Subsidiary that elects to so guarantee
such obligations, in each case, in the form of Exhibit B hereto.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"TRUSTEE" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
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"UNRESTRICTED SUBSIDIARY" means (i) each of the Subsidiaries of
the Company in existence on the date of this Indenture, (ii) any Subsidiary of
the Company designated as an Unrestricted Subsidiary pursuant to the provisions
of Section 4.07 of this Indenture and (iii) any Subsidiary formed or acquired by
the Company after the date of this Indenture, but only to the extent that such
Subsidiary: (a) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Restricted Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates of the
Company; (b) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation to maintain or
preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; (c) has not guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of the
Company or any of its Restricted Subsidiaries; and (d) has at least one director
on its board of directors that is not a director or executive officer of the
Company or any of its Restricted Subsidiaries and has at least one executive
officer that is not a director or executive officer of the Company or any of its
Restricted Subsidiaries. Any designation of a Subsidiary as an Unrestricted
Subsidiary pursuant to the provisions of Section 4.07 of this Indenture by the
Board of Directors shall be evidenced to the Trustee by filing with the Trustee
a certified copy of the Board Resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by the provisions of Section 4.07 of this
Indenture. If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under the provisions of Section 4.09 of
this Indenture, the Company shall be in default of such covenant unless such
default shall have been cured within a period of 30 days thereafter). The Board
of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; PROVIDED that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted under
the provisions of Section 4.09 of this Indenture, (ii) no Default or Event of
Default would be in existence following such designation and (iii) unless such
Subsidiary is a Foreign Subsidiary, such Subsidiary executes a Subsidiary
Guarantee.
"URC VENTURE INVESTMENT" means (i) all Investments by the Company
in URC outstanding as of the date of this Indenture PLUS (ii) all Investments
made by the Company and its Restricted Subsidiaries in URC after the date of
this Indenture; PROVIDED, HOWEVER, that the aggregate amount of all such
Investment made after the date of this Indenture (measured by their fair market
value as of the date made) shall not exceed the aggregate amount of the cash
received after the date of this Indenture by the Company and its Restricted
Subsidiaries as fees for the licensing of any intellectual property rights or
other proprietary technology to URC PLUS (iii) the Guaranty (as defined in the
Joint Venture Modification Agreement dated as of (and as in effect on) February
25, 1992 between the Company and UBE Industries Inc.); PROVIDED that at no
time shall the Guaranty made by the Company and its Restricted Subsidiaries (a)
be with
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recourse to the Company or any of its Subsidiaries or (b) be secured by any
Liens on the property of the Company or any of its Subsidiaries (other than
Liens permitted pursuant to clause (v) of the definition of Permitted Liens);
and PROVIDED FURTHER that the amount of the obligations guaranteed pursuant to
such Guaranty shall be reduced by the amount of all Investments made to satisfy
the Company's obligations under such Guaranty.
"URC" means Ube Rexene Corporation, a Japanese corporation.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (b) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED 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
Restricted Subsidiaries of such Person or a combination thereof.
SECTION 1.02.OTHER DEFINITIONS.
Defined in
Term Section
---- -----------
"Affiliate Transaction"............................... 4.11(a)
"Asset Sale".......................................... 4.10(a)
"Asset Sale Offer".................................... 4.10
"Bankruptcy Law"...................................... 6.01
"Change of Control Offer"............................. 4.14
"Change of Control Payment"........................... 4.14
"Change of Control Payment Date"...................... 4.14
"Commencement Date"................................... 3.09
"Custodian"........................................... 6.01
"Event of Default".................................... 6.01
"Legal Holiday"....................................... 11.07
"Offer Amount"........................................ 3.09
"Offer Period"........................................ 3.09
"Paying Agent"........................................ 2.03
"Purchase Date"....................................... 3.09
"Registrar"........................................... 2.03
"Restricted Payments"................................. 4.07
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
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Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"INDENTURE SECURITIES" means the Notes;
"INDENTURE SECURITY HOLDER" means a Noteholder;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee;
"OBLIGOR" on the Notes means the Company or any successor obligor
upon the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
(5) provisions apply to successive events and transactions.
ARTICLE 2
THE NOTES
SECTION 2.01. FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A, which is part of this Indenture. The
Notes may have notations, legends or endorsements required by law, stock
exchange rule or usage. Each Note shall be dated the date of its
authentication. The Notes shall be issued initially in denominations of $1,000
and integral multiples thereof.
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The terms and provisions contained in the Notes shall constitute,
and are hereby expressly made, a part of this Indenture, and the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
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SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Notes and
may be in facsimile form.
If an Officer whose signature is on a Note no longer holds that
office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature of the Trustee shall be conclusive
evidence that the Note has been authenticated under this Indenture. The form of
Trustee's certificate of authentication to be borne by the Notes shall be
substantially as set forth in Exhibit A hereto.
The Trustee shall, upon a written order of the Company signed by two
Officers, authenticate Notes for original issue up to an aggregate principal
amount stated in paragraph 4 of the Notes. The aggregate principal amount of
Notes outstanding at any time may not exceed the amount set forth herein except
as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain in the Borough of Manhattan, City of New
York, State of New York, and in such other locations as it shall determine, (i)
an office or agency where Notes may be presented for registration of transfer or
for exchange ("REGISTRAR") and (ii) an office or agency where Notes may be
presented for payment ("PAYING AGENT"). The Registrar shall keep a register
of the Notes and of their transfer and exchange. The Company may appoint one or
more co-registrars and one or more additional paying agents. The term
"Registrar" includes any co-registrar and the term "Paying Agent" includes any
additional paying agent. The Company may change any Paying Agent or Registrar
without notice to any Noteholder. The Company shall notify the Trustee in
writing of the name and address of any Agent not a party to this Indenture. If
the Company fails to appoint or maintain another entity as Registrar or Paying
Agent or fails to give the foregoing notice, the Trustee shall act as such. The
Company or any of its Subsidiaries may act as Paying Agent or Registrar.
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which shall incorporate the provisions
of the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent.
The Company initially appoints the Trustee to act as the Registrar
and Paying Agent.
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SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee
to agree in writing that the Paying Agent will hold in trust for the benefit of
Noteholders or the Trustee all money held by the Paying Agent for the payment of
principal, premium, if any, or interest on the Notes, and will notify the
Trustee of any default by the Company in making any such payment. While any
such default continues, the Trustee may require a Paying Agent to pay all money
held by it to the Trustee. The Company at any time may require a Paying Agent
to pay all money held by it to the Trustee. Upon payment over to the Trustee,
the Paying Agent (if other than the Company or a Subsidiary) shall have no
further liability for the money delivered to the Trustee. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Noteholders all money held by it as Paying Agent.
Upon any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05. NOTEHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
(42 U.S.C. Section Noteholders and shall otherwise comply with TIA Section
the Registrar, the Company shall furnish to the Trustee at least seven Business
Days before each interest payment date and at such other times as the Trustee
may request in writing a list in such form and as of such date as the Trustee
may reasonably require of the names and addresses of Noteholders, including the
aggregate principal amount thereof, and the Company shall otherwise comply with
TIA Section 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
When Notes are presented by a Holder to the Registrar with a request
to register, transfer or exchange them for an equal principal amount of Notes of
other authorized denominations, the Registrar shall register the transfer or
make the exchange as requested if its requirements for such transactions are
met; PROVIDED, HOWEVER, any Note presented or surrendered for registration of
transfer or exchange shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar and the Trustee
duly executed by the Holder thereof or by his attorney duly authorized in
writing. To permit registrations of transfer and exchanges, the Company shall
issue and the Trustee shall authenticate Notes at the Registrar's request,
subject to such rules as the Trustee may reasonably require.
Neither the Company nor the Registrar shall be required (i) to
issue, register the transfer of or exchange Notes during a period beginning at
the opening of business on a Business Day 15 days before the day of any
selection of Notes for redemption under Section 3.02 and ending at the close of
business on the day of selection, or (ii) to register the transfer or exchange
of any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
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No service charge shall be made to any Noteholder for any
registration of transfer or exchange (except as otherwise expressly permitted
herein), but the Company may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection therewith
(other than such transfer tax or similar governmental charge payable upon
exchanges pursuant to Sections 2.10, 3.06 or 9.05 hereof, which shall be paid by
the Company).
Prior to due presentment for registration of transfer of any Note,
the Trustee, any Agent and the Company may deem and treat the Person in whose
name any Note is registered as the absolute owner of such Note for the purpose
of receiving payment of principal of and interest on such Note and for all other
purposes whatsoever, whether or not such Note is overdue, and neither the
Trustee, any Agent nor the Company shall be affected by notice to the contrary.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or the Company
and the Trustee receives evidence to their satisfaction of the destruction, loss
or theft of any Note, the Company shall issue and the Trustee, upon the written
order of the Company signed by two Officers of the Company, shall authenticate a
replacement Note if the Trustee's requirements are met. If required by the
Trustee or the Company, an indemnity bond must be supplied by the Holder that is
sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Note is replaced. The Company may charge for its
expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company
and shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation and those described in this Section as not outstanding.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on
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that date, then on and after that date such Notes shall be deemed to be no
longer outstanding and shall cease to accrue interest.
Subject to Section 2.09 hereof, a Note does not cease to be
outstanding because the Company or an Affiliate of the Company holds the Note.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount
of Notes have concurred in any direction, waiver or consent, Notes owned by the
Company or an Affiliate of the Company shall be considered as though they are
not outstanding, except that for purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes which a Responsible Officer knows to be so owned shall be so considered.
SECTION 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes. Temporary Notes
shall be substantially in the form of definitive Notes but may have variations
that the Company and the Trustee consider appropriate for temporary Notes.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Notes in exchange for temporary Notes. Until such
exchange, temporary Notes shall be entitled to the same rights, benefits and
privileges as definitive Notes.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee and no one else shall cancel all Notes surrendered for registration
of transfer, exchange, payment, replacement or cancellation. The Company may
not issue new Notes to replace Notes that it has redeemed or paid or that have
been delivered to the Trustee for cancellation. All cancelled Notes held by the
Trustee shall be destroyed (subject to the record retention requirement of the
Exchange Act) and certification of their destruction delivered to the Company
unless by a written order, signed by an Officer of the Company, the Company
shall direct that cancelled Notes be returned to it.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest (i) if payment is made during
the period of five Business Days following the date on which such interest was
due, to the Persons who were to receive payment on the date such interest was
due or (ii) if payment is made after such period, to the Persons who are
Noteholders on a subsequent special record date, which date shall be at the
earliest practicable date but in all events at least five Business Days prior to
the payment date, in each case at the
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rate provided in the Notes and in Section 4.01 hereof. The Company shall, with
the consent of the Trustee, fix or cause to be fixed each such special record
date and payment date. At least 15 days before the special record date, the
Company (or the Trustee, in the name of and at the expense of the Company) shall
mail to Noteholders a notice that states the special record date, the related
payment date and the amount of such interest to be paid.
ARTICLE 3
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 45 days but not more than 60 days before a redemption date (unless a
shorter notice shall be satisfactory to the Trustee), an Officers' Certificate
setting forth the Section of this Indenture pursuant to which the redemption
shall occur, the redemption date, the principal amount of Notes to be redeemed
and the redemption price.
If the Company is required to make an offer to repurchase Notes
pursuant to the mandatory repurchase provisions of Section 3.09 hereof, it shall
notify the Trustee in writing of the Section of this Indenture pursuant to which
the repurchase shall occur, the repurchase date, the principal amount of Notes
to be repurchased and the repurchase price and shall furnish to the Trustee an
Officers' Certificate to the effect that (a) the Company has effected an Asset
Sale and (b) the conditions set forth in Section 4.10 have been satisfied.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed, the Trustee shall
select the Notes to be redeemed among the Holders of the Notes in compliance
with the requirements of the principal national securities exchange, if any, on
which the Notes are listed or, if the Notes are not so listed, on a PRO RATA
basis, by lot or by such other method as the Trustee shall deem fair and
appropriate. In the event of partial redemption by lot, the Trustee shall make
the selection not less than 30 nor more than 60 days prior to the redemption
date from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the
Notes selected for redemption and, in the case of any Note selected for partial
redemption, the portion of the principal amount thereof to be redeemed. Notes
and portions of them selected to be redeemed shall be in principal amounts of
$1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder
are to be redeemed, the entire outstanding amount of Notes held by such Holder,
even if not a multiple of $1,000, shall be redeemed. Except as provided in the
preceding sentence, provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes called for redemption.
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SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail, by first class mail, a notice of redemption to each
Holder whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
redemption date, upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(6) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the redemption date;
(7) the paragraph of the Notes pursuant to which the Notes called
for redemption are being redeemed; and
(8) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on
the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, Notes called for redemption
become irrevocably due and payable on the redemption date at the price set forth
in the Note.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
On or before the redemption date, the Company shall deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption price of
and accrued interest on all Notes to be redeemed on that date. The Trustee or
the Paying Agent shall return to the Company any money deposited with the
Trustee or the Paying Agent by the Company in excess
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of the amounts necessary to pay the redemption price of, and accrued interest
on, all Notes to be redeemed.
Interest on the Notes to be redeemed will cease to accrue on the
applicable redemption date, whether or not such Notes are presented for payment,
if the Company makes the redemption payment. If any Note called for redemption
shall not be so paid upon surrender for redemption because of the failure of the
Company to comply with the preceding paragraph, interest will be paid on the
unpaid principal, from the redemption date until such principal is paid, and to
the extent lawful on any interest not paid on such unpaid principal, in each
case at the rate provided in the Notes and in Section 4.01 hereof. Section 8.06
shall apply to any Notes not redeemed within 2 years from the redemption date.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and the Trustee shall authenticate for the Holder at the expense of the
Company a new Note equal in principal amount to the unredeemed portion of the
Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
The Notes are not redeemable at the Company's option prior to
_________, ____. Thereafter, the Notes will be subject to redemption at the
option of the Company, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below, plus accrued and unpaid interest thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on _______, of the years indicated below:
YEAR PERCENTAGE
Notwithstanding the foregoing, on or before ___________, 1997, the
Company may, from time to time, redeem up to $___ million in aggregate principal
amount of Notes, upon not less than 30 nor more than 60 days' notice, at a
redemption price of ______% of the principal amount thereof plus accrued and
unpaid interest thereon to the redemption date, with the net proceeds of an
offering or offerings of common stock of the Company; PROVIDED that at least
$100 million in aggregate principal amount of Notes remains outstanding
immediately after the occurrence of each such redemption; and PROVIDED,
FURTHER, that each such redemption shall occur within 60 days of the date of
the closing of the related offering of common stock of the Company.
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Any redemption pursuant to this Section 3.07 shall be made pursuant
to the provisions of Sections 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
Subject to the Company's obligation to make an offer to repurchase
Notes under certain circumstances pursuant to Sections 4.10 and 4.14 hereof, the
Company shall have no mandatory redemption or sinking fund obligations with
respect to the Notes.
SECTION 3.09. ASSET SALE OFFERS
In the event that the Company shall commence an Asset Sale Offer
pursuant to Section 4.10 hereof, it shall follow the procedures specified below:
The Asset Sale Offer shall remain open for 20 Business Days after
the commencement (the "Commencement Date") of such Asset Sale Offer, except to
the extent required to be extended by applicable law (as so extended, the "Offer
Period"). No later than three Business Days after the termination of the Offer
Period (the "Purchase Date"), the Company shall purchase the principal amount
(the "Offer Amount") of Notes required to be purchased in such Asset Sale Offer
pursuant to Section 4.10 hereof or, if less than the Offer Amount has been
tendered, all Notes tendered in response to the Asset Sale Offer.
If the Purchase Date is on or after an interest payment record date
and on or before the related interest payment date, any interest accrued to such
Purchase Date shall be paid to the Person in whose name a Note is registered at
the close of business on such record date, and no additional interest shall be
payable to Holders who tender Notes pursuant to the Asset Sale Offer.
On the Commencement Date of any Asset Sale Offer, the Company shall
send or cause to be sent, by first class mail, a notice to each of the Holders,
with a copy to the Trustee. Such notice, which shall govern the terms of the
Asset Sale Offer, shall contain all instructions and materials necessary to
enable the Holders to tender Notes pursuant to the Asset Sale Offer and shall
state:
(1) that the Asset Sale Offer is being made pursuant to this
Section 3.09 and Section 4.10 hereof and the length of time
the Asset Sale Offer shall remain open;
(2) the Offer Amount, the purchase price and the Purchase Date;
(3) that any Note not tendered or accepted for payment shall
continue to accrue interest;
(4) that, unless the Company defaults in the payment of the
purchase price, any Note accepted for payment pursuant to the
Asset Sale Offer shall cease to accrue interest after the
Purchase Date;
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(5) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with
the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Note completed, to the Company, a depositary,
if appointed by the Company, or a Paying Agent at the address
specified in the notice prior to the close of business at
least three Business Days preceding the Purchase Date;
(6) that Holders shall be entitled to withdraw their election if
the Company, the depositary or Paying Agent, as the case may
be, receives, not later than the close of business on the
second Business Day preceding the termination of the Offer
Period, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of
the Note the Holder delivered for purchase and a statement
that such Holder is withdrawing his election to have the Note
purchased;
(7) that, if the aggregate principal amount of Notes surrendered
by Holders exceeds the Offer Amount, the Trustee shall select
the Notes to be purchased on a PRO RATA basis (with such
adjustments as may be deemed appropriate by the Company so
that only Notes in denominations of $1,000, or integral
multiples thereof, shall be purchased); and
(8) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered.
On or before each Purchase Date, the Company shall irrevocably
deposit with the Trustee or Paying Agent, in immediately available funds, the
aggregate purchase price with respect to a principal amount of Notes equal to
the Offer Amount, together with accrued interest thereon, if any, to be held for
payment in accordance with the terms of this Section. On the Purchase Date, the
Company shall, to the extent lawful, (i) accept for payment, on a PRO RATA
basis to the extent necessary, an aggregate principal amount equal to the Offer
Amount of Notes tendered pursuant to the Asset Sale Offer, or if less than the
Offer Amount has been tendered, all Notes or portions thereof tendered, (ii)
deliver or cause the Paying Agent or depositary, as the case may be, to deliver
to the Trustee Notes so accepted and (iii) deliver to the Trustee an Officers'
Certificate stating that such Notes or portions thereof were accepted for
payment by the Company in accordance with the terms of this Section 3.09. The
Company, the depositary or Paying Agent, as the case may be, shall promptly (but
in any case not later than three Business Days after the Purchase Date) mail or
deliver to each tendering Holder an amount equal to the purchase price with
respect to the Notes tendered by such Holder and accepted by the Company for
purchase, and the Company shall promptly issue a new Note, and the Trustee shall
authenticate and mail or deliver such new Note, to such Holder, equal in
principal amount to any unpurchased portion of such Holder's Notes surrendered.
Any Note not accepted in the Asset Sale Offer shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company shall publicly
announce in a newspaper of national circulation or in a press release provided
to a nationally recognized financial wire service the results of the Asset Sale
Offer on or as soon as practicable after the Purchase Date.
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Other than as specifically provided in this Section 3.09, any
redemption pursuant to this Section 3.09 shall be made pursuant to the
provisions of Sections 3.01 through 3.06 hereof.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent (other than the Company or a Subsidiary), holds at
least one Business Day before that date money deposited by the Company in
immediately available funds and designated for and sufficient to pay all
principal, premium, if any, and interest then due. Such Paying Agent shall
return to the Company, no later than five days following the date of payment,
any money (including accrued interest) that exceeds such amount of principal,
premium, if any, and interest paid on the Notes.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Notes to
the extent lawful; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace period) at the same rate to the extent
lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or
Registrar) where Notes may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The Company will give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations;
PROVIDED, HOWEVER, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
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The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03.
SECTION 4.03. SEC REPORTS.
Whether or not required by the federal securities laws or the rules and
regulations of the SEC, so long as any Notes are outstanding, the Company shall
furnish to the Holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the SEC on
Forms 10-Q and 10-K if the Company were required to file such Forms including,
in addition to the "Management's Discussion and Analysis of Financial Condition
and Results of Operations" with respect to the Company and its Subsidiaries
required pursuant to such Forms, and with respect to the annual information
only, a report thereon by the Company's certified independent accountants and
(ii) all current reports that would be required to be filed with the SEC on Form
8-K if the Company were required to file such reports. Such information and
reports shall be mailed to the Holders of Notes at their addresses appearing in
the register of Notes maintained by the Registrar, (i) in the case of such
information and reports that are required to be filed with the SEC, within 15
days after such filing with the SEC and (ii) in the case of information and
reports that are not required to be so filed, within the same time periods as
would have applied if such information and reports had been required to be so
filed. If at any time during the period presented in such quarterly or annual
financial information, the Company has one or more Unrestricted Subsidiaries
that singly or together would constitute a Significant Subsidiary, all such
quarterly and annual financial information shall also include a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" with
respect to the Company and its Restricted Subsidiaries (if any) for such period.
In addition, whether or not required by the federal securities laws or the rules
and regulations of the SEC, the Company shall file a copy of all such
information and reports with the SEC for public availability (unless the SEC
will not accept such a filing) and make such information available to securities
analysts and prospective investors upon request.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) the Company shall deliver to the Trustee, within 120 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether each has kept, observed, performed and fulfilled in all
material respects its obligations under this Indenture and further stating, as
to each such Officer signing such certificate, that to the best of his knowledge
each has kept, observed, performed and fulfilled each and every covenant
contained in this Indenture and is not in any material respect in default in the
performance or observance of any of the terms, provisions and conditions hereof
or thereof (or, if such Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he may have knowledge
and what action each is taking or proposes to take with respect thereto).
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03 above shall be accompanied by a
written statement of the Company's
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independent public accountants (who shall be a firm of established national
reputation reasonably satisfactory to the Trustee) that in making the
examination necessary for certification of such financial statements nothing has
come to their attention which would lead them to believe that either the Company
or any of its Subsidiaries has violated any provisions of Sections 4.01, 4.05,
4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16 or 4.17 hereof or of
Article 5 of this Indenture or, if any such violation has occurred, specifying
the nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any person for any
failure to obtain knowledge of any such violation.
(c) The Company will, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon becoming aware of (i) any Default or
Event of Default or (ii) any event of default under any other mortgage,
indenture or instrument as that term is used in Section 6.01(v) which permits an
acceleration that could become an Event of Default, an Officers' Certificate
specifying such Default, Event of Default or event of default and what action
the Company is taking or proposes to take with respect thereto.
SECTION 4.05. TAXES.
The Company shall, and shall cause each of its Subsidiaries to, pay
prior to delinquency all material taxes, assessments, and governmental levies
except as contested in good faith and by appropriate proceedings.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or usury law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefit or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
has been enacted.
SECTION 4.07. LIMITATION ON RESTRICTED PAYMENTS.
Subject to the other provisions of Section 4.07, the Company shall
not and shall not permit any of its Restricted Subsidiaries to, directly or
indirectly: (i) declare or pay any dividend or make any distribution on account
of the Company's Equity Interests (other than dividends or distributions payable
to any Wholly Owned Restricted Subsidiary of the Company); (ii) purchase, redeem
or otherwise acquire or retire for value any Equity Interests of the Company;
(iii) purchase, redeem or otherwise acquire or retire for value any Indebtedness
that is subordinated to the Notes, except at final maturity thereof as set forth
in the original documentation governing such Indebtedness; or (iv) make any
Restricted Investment (all such
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payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"), unless, at the time of such
Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have
been permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in the first paragraph
of Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of this Indenture (including Restricted
Payments permitted by clauses (v), (w) and (y) of the next succeeding
paragraph), is less than the sum of (w) 50% of the Consolidated Net Income
of the Company (excluding the amount of all cash payments received by the
Company and its Wholly Owned Restricted Subsidiaries from URC or the APAO
Joint Venture after the date of this Indenture as fees for licensing of
intellectual property rights or other proprietary technology that are
applied to an Investment in either such joint venture pursuant to clause
(d) of the definition of "Permitted Investments") for the period (taken as
one accounting period) from the beginning of the first month commencing
after the date of this Indenture to the end of the Company's most recently
ended fiscal quarter for which internal financial statements are available
at the time of such Restricted Payment (or, if such Consolidated Net
Income for such period is a deficit, less 100% of such deficit), PLUS
(x) 100% of the aggregate net cash proceeds received by the Company from
the issue or sale since the date of this Indenture of Equity Interests of
the Company or of debt securities of the Company that have been converted
into such Equity Interests (other than Equity Interests (or convertible
debt securities) sold to a Subsidiary of the Company and other than
Disqualified Stock or debt securities that have been converted into
Disqualified Stock), PLUS (y) to the extent that any Restricted
Investment that was made after the date of this Indenture is sold for cash
or otherwise liquidated or repaid for cash, the lesser of (A) the cash
return of capital with respect to such Restricted Investment (less the
cost of disposition if any) and (B) the initial amount of such Restricted
Investment.
Notwithstanding anything to the contrary contained herein, the
provisions of this Section 4.07 shall not prohibit (v) the payment of any
dividend within 60 days after the date of declaration thereof if, at said date
of declaration, such payment would have complied with the provisions of this
Indenture; (w) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company in exchange for, or out of the proceeds of,
the substantially concurrent sale (other than to a Restricted Subsidiary of the
Company or a Designated Unrestricted Subsidiary) of other Equity Interests of
the Company (other than any Disqualified Stock); (x) the defeasance, redemption
or repurchase of subordinated Indebtedness with the net proceeds from an
incurrence of Permitted Refinancing Indebtedness; (y) the repurchase, redemption
or other acquisitions or retirement for value of any Equity Interests of the
Company
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or any Restricted Subsidiary of the Company held by any member of the Company's
(or any of its Restricted Subsidiaries') management pursuant to any management
equity subscription agreement or stock option agreement; PROVIDED that (1) the
aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $1.0 million in any twelve-month period plus
the aggregate cash proceeds received by the Company during such twelve-month
period from any reissuance of Equity Interests by the Company to members of
management of the Company and its Restricted Subsidiaries and (2) no Default or
Event of Default shall have occurred and be continuing immediately after such
transaction; or (z) Restricted Payments to the extent made with Equity Interests
(other than Disqualified Stock) of the Company.
In no event will the Company or any Restricted Subsidiary of the
Company make an Investment after the date of this Indenture in any Person in
which it has an Equity Interest on the date of this Indenture but which is not a
Subsidiary of the Company on the date of this Indenture, including any Guarantee
of Indebtedness of such Person, in excess of the aggregate cash received from
such Person after the date of this Indenture by the Company and its Wholly Owned
Restricted Subsidiaries as fees for the licensing of any intellectual property
rights or other proprietary technology.
Not later than the thirtieth day after the end of each calendar
quarter in which any Restricted Payment is made, the Company shall deliver to
the Trustee an Officers' Certificate stating that such Restricted Payment was
permitted and setting forth the basis upon which the calculations required by
this Section 4.07 were computed, which calculations may be based upon the
Company's latest available financial statements at the time such Officers'
Certificate is delivered.
The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if (x) the Company would, at the time of such
designation and after giving pro forma effect thereto as if such designation had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of Section
4.09 of this Indenture and (y) such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries in the Subsidiary so designated will be
deemed to be Restricted Payments at the time of such designation and will reduce
the amount available for Restricted Payments under the first paragraph of this
Section 4.07. All such outstanding Investments will be deemed to constitute
Investments in an amount equal to the greater of (y) the net book value of such
Investments at the time of such designation or (z) the fair market value of such
Investments at the time of such designation. Such designation will only be
permitted if such Restricted Payment would be permitted at such time and if such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
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SECTION 4.08. LIMITATION ON DIVIDEND AND OTHER PAYMENT
RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any contractual encumbrance or other restriction on
the ability of any Restricted Subsidiary to (i) (a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits or (b) pay any Indebtedness owed to the Company or
any of its Restricted Subsidiaries (ii) make loans or advances to the Company or
any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, in each case,
except for such encumbrances or restrictions existing under or by reason of (a)
applicable law, (b) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such Indebtedness
was incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, provided that the Consolidated Cash Flow of such Person is
not taken into account in determining whether such acquisition was permitted by
the terms of this Indenture, (c) any Bank Credit Agreement, PROVIDED that such
encumbrances and restrictions are no more restrictive than such encumbrances and
restrictions under the New Credit Agreement as in effect on the date of this
Indenture, (d) by reason of customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices or (e) purchase money obligations and Capital Lease Obligations for
property acquired in the ordinary course of business that impose restrictions of
the nature described in clause (iii) above on the property so acquired.
SECTION 4.09. LIMITATION ON ADDITIONAL INDEBTEDNESS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to create, incur, issue, assume, guarantee or otherwise become
liable with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock and
will not permit any of its Restricted Subsidiaries to issue any shares of
preferred stock; PROVIDED, HOWEVER, that the Company and any Subsidiary
Guarantor may incur Indebtedness (including Acquired Debt) or the Company may
issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued would
have been at least 2.0 to 1, with respect to any such Indebtedness incurred, or
Disqualified Stock issued, on or prior to ___________, 1997, and at least 2.25
to 1, with respect to any such Indebtedness incurred, or Disqualified Stock
issued, after ____________, determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued, as
the case may be, at the beginning of such four-quarter period.
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Notwithstanding the foregoing, the limitations of this Section 4.09
shall not apply to:
(i) the incurrence by the Company and any Subsidiary Guarantor of
Senior Term Debt in an aggregate principal amount outstanding at any time
not to exceed $100 million LESS the aggregate amount of all repayments
after the date of this Indenture, optional or mandatory, of the principal
of such Indebtedness, including, without limitation, pursuant to the
provisions of Section 4.10 of this Indenture;
(ii) the incurrence by the Company and any Subsidiary Guarantor of
Senior Revolving Debt and letters of credit (and any Guarantees thereof by
the Company and any Subsidiary Guarantor) in an aggregate principal amount
at any time outstanding (with letters of credit and Guarantees being
deemed to have a principal amount equal to the maximum potential liability
of the Company and its Restricted Subsidiaries thereunder) not to exceed
the Borrowing Base, LESS the aggregate amount of all permanent
repayments of Senior Revolving Debt made pursuant to clause (ii) of the
first sentence of Section 4.10(b) of this Indenture;
(iii) the incurrence by the Company and any Subsidiary Guarantor of
Acquisition Debt, if the Fixed Charge Coverage Ratio for the Company's
most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such
Acquisition Debt is incurred, determined on a pro forma basis as if the
Acquisition Debt had been incurred and the related acquisition had been
consummated at the beginning of such four-quarter period, would be greater
than the actual Fixed Charge Coverage Ratio of the Company for such
four-quarter period;
(iv) the incurrence by the Company and any Subsidiary Guarantor of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, decrease or refund
Indebtedness that was permitted by this Indenture to be incurred;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Restricted Subsidiaries;
(vi) the incurrence in the ordinary course of business by the
Company and any Subsidiary Guarantor of Hedging Obligations;
(vii) the incurrence by the Company and any Subsidiary Guarantor of
Indebtedness pursuant to letters of credit issued in the ordinary course
of business to support payment by the Company and such Subsidiary
Guarantors of insurance premiums;
(viii) the incurrence by the Company of Existing Debt;
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(ix) the incurrence of Indebtedness which also constitutes
Investments, to the extent permitted by the provisions of Section 4.07 of
this Indenture;
(x) the incurrence of Indebtedness for general corporate purposes
by any Foreign Subsidiary that is a Restricted Subsidiary and not a
Subsidiary Guarantor in an aggregate principal amount outstanding at any
time not exceeding such Foreign Subsidiary's Foreign Subsidiary Borrowing
Base; and
(xi) the incurrence by the Company and any Subsidiary Guarantor of
additional Indebtedness in an aggregate principal amount outstanding at
any one time not exceeding $35 million.
SECTION 4.10. SALE OF ASSETS.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, engage in an Asset Sale unless (i) the Company (or
the Restricted Subsidiary, at the case may be) receives consideration at the
time of such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued, sold or
otherwise disposed of in such Asset Sale less the amount of liabilities (as
shown on the Company's or such Restricted Subsidiary's most recent balance sheet
or in the notes thereto) and obligations assumed in connection with such Asset
Sale by the transferee of any such assets or on behalf of such transferee by a
third party and (ii) except with respect to Asset Sales involving Obsolete
Plants, at least 80% of the consideration therefor received by the Company or
such Restricted Subsidiary (after deducting expenses associated with such Asset
Sale) is in the form of cash or Cash Equivalents; PROVIDED that the amount
of (x) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet or in the notes thereto) of the Company
or such Restricted Subsidiary that are assumed in connection with such Asset
Sale by the transferee of any such assets or on behalf of such transferee by a
third party and (y) any notes or other obligations received by the Company or
any such Restricted Subsidiary from such transferee that are immediately
converted by the Company or such Restricted Subsidiary into cash or Cash
Equivalents and (z) with respect to any Asset Sale for consideration not
exceeding $10.0 million, up to $10 million principal amount of notes or other
obligations received by the Company or such Restricted Subsidiary from such
transferee that are repaid in cash or Cash Equivalents to the Company or such
Restricted Subsidiary within 360 days after consummation of such Asset Sale (to
the extent of the cash or Cash Equivalents received), shall be deemed to be cash
for purposes of this provision.
(b) Within 360 days after the consummation of any Asset Sale, the
Company may apply the Net Proceeds from such Asset Sale, at its option, (i) to
reduce Senior Term Debt, (ii) to repay Senior Revolving Debt or (iii) to an
acquisition of a Permitted Business, the making of capital expenditures or the
acquisition of other fixed assets, in each case, engaged or used in a Permitted
Business. At any time on or prior to 360 days following consummation of any
Asset Sale, the Company may designate all or any portion of the Net Proceeds
from such Asset Sale as "Excess Proceeds." Pending the final application of any
such Net Proceeds in accordance with the first sentence of this paragraph or to
an Asset Sale Offer, the Company may invest such
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Net Proceeds in any manner that is not prohibited by this Indenture and may
temporarily repay Senior Revolving Debt. Any Net Proceeds from Asset Sales that
are not applied or invested as provided in the first sentence of this paragraph
or which are designated "Excess Proceeds" as provided above in this paragraph
will constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $25.0 million, the Company will be required to make an offer to all
Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes that may be purchased out of the Excess Proceeds, at an offer
price in cash equal to 100% of the principal amount thereof plus accrued and
unpaid interest thereon to the date of purchase. To the extent that the
aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than
the Excess Proceeds, the Company may use any remaining Excess Proceeds for
general corporate purposes. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
(c) An Asset Sale Offer shall be made pursuant to the provisions
of Section 3.09 hereof. Simultaneously with the notification of such offer of
redemption to the Trustee as required by Sections 3.01, 3.03 and 3.09 hereof,
the Company shall provide the Trustee with an Officers' Certificate setting
forth the information required to be included therein by Section 3.01 hereof
and, in addition, setting forth the calculations used in determining the amount
of Net Proceeds to be applied to the redemption of Notes. If the aggregate
principal amount of Notes tendered pursuant to an Asset Sale Offer exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on
a pro rata basis.
SECTION 4.11. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make any contract, agreement, understanding, loan, advance or guarantee with,
or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to
the Trustee (a) with respect to any Affiliate Transaction involving aggregate
consideration in excess of $1.0 million, a resolution of the Board of Directors
set forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (i) above and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board of Directors
and (b) with respect to any Affiliate Transaction involving aggregate
consideration in excess of $10.0 million, an opinion as to the fairness to the
Company or such Restricted Subsidiary of such Affiliate Transaction from a
financial point of view issued by an investment banking firm of national
standing; PROVIDED, HOWEVER, that (x) any contract, agreement, understanding,
payment, loan, advance or guarantee (each a "Compensation Benefit") with, for
the benefit of, or to an executive officer of the Company as compensation for
employment by the Company, whether pursuant to an employment agreement, an
employee benefit plan or other compensation arrangement if either (1) such
Compensation Benefit is less than $1 million or (2) is approved by the
Compensation Committee or the Board of Directors of the Company, (y)
transactions between or among the
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Company and/or its Restricted Subsidiaries and (z) Restricted Payments permitted
by Section 4.07 of this Indenture, in each case, shall not be deemed Affiliate
Transactions.
SECTION 4.12. LIMITATION ON LIENS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired, or any income or
profits therefrom, or assign or convey any right to receive any income or
profits therefrom, except Permitted Liens.
SECTION 4.13. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company will do or cause to be done
all things necessary to preserve and keep in full force and effect (a) its
corporate existence, and the corporate, partnership or other existence of each
Subsidiary, in accordance with the respective organizational documents (as the
same may be amended from time to time) of each Subsidiary and (b) its (and its
Subsidiaries') rights (charter and statutory), licenses and franchises;
PROVIDED, HOWEVER, that the Company shall not be required to preserve any such
right, license or franchise, or the corporate, partnership or other existence
of any Subsidiary, if the Board of Directors of the Company shall determine that
the preservation thereof is no longer desirable in the conduct of the business
of the Company and its Subsidiaries taken as a whole and that the loss thereof
is not adverse in any material respect to the Holders.
SECTION 4.14. CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of
Notes will have the right to require the Company to purchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described below (the "Change of Control Offer) at an offer
price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest thereon to the date of purchase (the "Change of
Control Payment"). Within ten days following any Change of Control, the Company
will mail a notice to each Holder stating: (1) that the Change of Control Offer
is being made pursuant to the provisions of this Section 4.14 and that all Notes
properly tendered will be accepted for payment; (2) the purchase price and the
purchase date, which will be no earlier than 30 days nor later than 40 days from
the date such notice is mailed (the "Change of Control Payment Date"); (3) that
any Note not properly tendered will continue to accrue interest; (4) that,
unless the Company defaults in the payment of the Change of Control Payment, all
Notes accepted for payment pursuant to the Change of Control Offer will cease to
accrue interest after the Change of Control Payment Date; (5) that Holders
electing to have any Notes purchased pursuant to a Change of Control Offer will
be required to surrender the Notes, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Notes completed, or transfer by
book-entry, to the Payment Agent at the address specified in the notice prior to
the close of business on the third Business Day preceding the Change of Control
Payment Date; (6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the second
Business Day preceding the Change of Control Payment Date, a
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telegram, telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of Notes delivered for purchase, and a statement
that such Holder is withdrawing his election to have such Notes purchased; and
(7) that Holders whose Notes are being purchased only in part will be issued new
Notes equal in principal amount to the unpurchased portion of the Notes
surrendered (or transferred by book-entry), which unpurchased portion must be
equal to $1,000 in principal amount or an integral multiple thereof. The
Company will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of the Notes in
connection with a Change of Control.
(b) On the Change of Control Payment Date, the Company will, to
the extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes so tendered and the Change of Control
Payment for such Notes, and the Trustee will promptly authenticate and mail (or
cause to be transferred by book entry) to each Holder a new Note equal in
principal amount to any unpurchased portion of the Notes surrendered, if any;
PROVIDED that each such new Note will be in a principal amount of $1,000 or an
integral multiple thereof. The Company shall publicly announce in a newspaper
of national circulation or in a press release provided to a nationally
recognized financial wire service the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment Date.
SECTION 4.15. LIMITATION ON ISSUANCES AND SALES OF CAPITAL
STOCK OF WHOLLY OWNED RESTRICTED SUBSIDIARIES.
The Company (i) shall not, and shall not permit any Wholly Owned
Restricted Subsidiary of the Company to, transfer, convey or sell any Capital
Stock of any Wholly Owned Restricted Subsidiary of the Company to any Person
(other than to the Company or a Wholly Owned Restricted Subsidiary of the
Company), unless (a) such transfer, conveyance or sale is of all the Capital
Stock of such Wholly Owned Restricted Subsidiary and (b) the cash Net Proceeds
from such transfer, conveyance or sale are applied in accordance with the
provisions of Section 4.10 of this Indenture and (ii) shall not permit any
Wholly Owned Restricted Subsidiary of the Company to issue any of its Equity
Interests (other than, if necessary, shares of its Capital Stock constituting
directors' qualifying shares) to any Person other than to the Company or a
Wholly Owned Restricted Subsidiary of the Company.
SECTION 4.16. SUBSIDIARY GUARANTEES.
The Company shall cause all Subsidiaries of the Company that are
designated or are otherwise deemed to be Restricted Subsidiaries after the date
of this Indenture (other than Foreign Subsidiaries) to execute Subsidiary
Guarantees. The Company may, at its option, cause any Restricted Subsidiary
that is a Foreign Subsidiary to execute a Subsidiary Guarantee.
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SECTION 4.17. LIMITATION ON APPLICABILITY OF COVENANTS.
During any period that (i) the ratings assigned to the Notes by each
of Standard & Poor's Rating Group and Moody's Investors Services (collectively,
the "Ratings Agencies") are higher than BBB- or Baa3, respectively (the
"Investment Grade Ratings") and (ii) no Default or Event of Default has occurred
and is continuing, the Company and its Restricted Securities will not be subject
to Sections 4.07, 4.09 and 4.10 (collectively "Suspended Covenants"). If one or
both Rating Agencies withdraws its rating or downgrades its Investment Grade
Rating, then thereafter the Company and its Restricted Subsidiaries will be
subject to the Suspended Covenants (until the Rating Agencies have again
assigned Investment Grade Ratings to the Senior Notes) and compliance with the
Suspended Covenants with respect to Restricted Payments made after the time of
such withdrawal or downgrade will be calculated in accordance with Section 4.07
as if such covenant had been in effect at all times after the date of this
Indenture.
ARTICLE 5
SUCCESSORS
SECTION 5.01. LIMITATIONS ON MERGER, CONSOLIDATION OR SALE OF SUBSTANTIALLY
ALL ASSETS.
The Company shall not consolidate or merge with or into (whether or
not the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another Person unless: (i) the
Company is the surviving corporation or the entity or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia, (ii) the
entity or Person formed by or surviving any such consolidation or merger (if
other than the Company) or the entity or Person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made assumes
all the obligations of the Company under the Notes and this Indenture pursuant
to a supplemental Indenture in a form reasonably satisfactory to the Trustee;
(iii) immediately after such transaction no Default or Event of Default exists;
and (iv) the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) will have Consolidated Net Worth (immediately after the transaction but
prior to any purchase accounting adjustments resulting from the transaction)
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of Section 4.09 of this Indenture.
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The Company shall deliver to the Trustee prior to the consummation
of the proposed transaction an Officers' Certificate to the foregoing effect and
an Opinion of Counsel stating that the proposed transaction and such
supplemental indenture if applicable comply with this Indenture. The Trustee
shall be entitled to conclusively rely upon such Officers' Certificate and
Opinion of Counsel.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company in
accordance with Section 5.01, the successor corporation formed by such
consolidation or into or with which the Company is merged or to which such sale,
lease, conveyance or other disposition is made shall succeed to, and be
substituted for (so that from and after the date of such consolidation, merger,
sale, lease, conveyance or other disposition, the provisions of this Indenture
referring to the "Company" shall refer instead to the successor corporation and
not to the Company), and may exercise every right and power of the Company under
this Indenture with the same effect as if such successor Person had been named
as the Company herein; PROVIDED, HOWEVER, that the Company shall not be
released or discharged from the obligation to pay the principal of or interest
on the Notes.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if: (i) default for 30 days in the
payment when due of interest on any Note; (ii) default in payment when due of
the principal of or premium, if any, on any Note; (iii) failure by the Company
for 30 days to comply with any of the provisions described under Sections 4.07,
4.09, 4.10 or 4.14 of this Indenture; (iv) failure by the Company for 60 days
after notice to comply with any of its other agreements in this Indenture or the
Notes; (v) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries) whether such Indebtedness or guarantee now exists, or is created
after the date of this Indenture, which default (a) is caused by a failure to
pay principal of or premium, if any, or interest on such Indebtedness prior to
the expiration of a period of 10 days after expiration of any grace period
provided in such Indebtedness (as amended from time to time) (a "Payment
Default") or (b) results in the acceleration of such Indebtedness prior to its
express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $10.0 million or more (excluding the principal amount
of the Notes); (vi) failure by the Company or any of its Restricted Subsidiaries
to pay final judgments aggregating in excess of $5.0 million, which judgments
are not paid, discharged or stayed for a period of 60 days; (vii) except as
permitted by this Indenture or if, at the time thereof, the obligor under such
Subsidiary Guarantee is and is permitted to be designated as an Unrestricted
Subsidiary without causing a
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Default, any Subsidiary Guarantee of a Significant Subsidiary shall be held in
any judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Subsidiary Guarantor that is a
Significant Subsidiary, or any Person acting on behalf of any such Subsidiary
Guarantor, shall deny or disaffirm, in writing, its obligation under its
Subsidiary Guarantee; (viii) the Company or any of its Restricted Subsidiaries
that are Significant Subsidiaries pursuant to or within the meaning of any
Bankruptcy Law (a) commences a voluntary case, (b) consents to the entry of an
order for relief against it in an involuntary case, (c) consents to the
appointment of a Custodian of it or for all or substantially all of its
property, (d) makes a general assignment for the benefit of its creditors, (e)
generally is unable to pay its debts as the same become due; or (ix) a court of
competent jurisdiction enters an order or decree under any Bankruptcy Law that
(a) is for relief against the Company or any of its Restricted Subsidiaries that
are Significant Subsidiaries in an involuntary case, (b) appoints a Custodian of
the Company or any of its Restricted Subsidiaries that are Restricted
Subsidiaries or for all or substantially all of their property, (c) orders the
liquidation of the Company or any of its Restricted Subsidiaries that are
Significant Subsidiaries, and the order or decree remains unstayed and in effect
for 60 days.
The term "Bankruptcy Law" means title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
SECTION 6.02. ACCELERATION.
If an Event of Default (other than an Event of Default specified in
clauses (viii) and (ix) of Section 6.01, with respect to the Company or any
Restricted Subsidiary that is a Significant Subsidiary) occurs and is
continuing, the Trustee by notice to the Company, or the Holders of at least 25%
in principal amount of the then outstanding Notes by written notice to the
Company and the Trustee may declare the unpaid principal of and any accrued
interest on all the Notes to be due and payable immediately. Upon such
declaration the principal and interest shall be due and payable immediately. If
an Event of Default specified in clause (viii) or (ix) of Section 6.01 occurs
with respect to the Company or any Restricted Subsidiary that is a Significant
Subsidiary, such an amount shall IPSO FACTO become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Holder. In the event of a declaration of acceleration of the Notes because
an Event of Default in Section 6.01(v) hereof has occurred and is continuing,
such declaration of acceleration shall be automatically annulled if the holders
of the Indebtedness described in Section 6.01(v) hereof have rescinded the
declaration of acceleration in respect of such Indebtedness within 15 Business
Days thereof and if (i) the annulment of such acceleration would not conflict
with any judgment or decree of a court of competent jurisdiction, (ii) all
existing Events of Default, except non-payment of principal or interest which
shall have become due solely because of the acceleration, have been cured or
waived and (iii) the Company has delivered an Officers' Certificate to the
Trustee to the effect of clauses (i) and (ii) above. In accordance with the
provisions of Section 6.04, the Holders of a majority in principal amount of the
then outstanding Notes by written notice to the Trustee may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpay-
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ment of principal or interest that has become due solely because of the
acceleration) have been cured or waived.
In the case of any Event of Default occurring by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the Company
with the intention of avoiding payment of the premium that the Company would
have had to pay if the Company then had elected to redeem the Notes pursuant to
the optional redemption provisions of Section 3.07 of this Indenture, an
equivalent premium shall also become and be immediately due and payable to the
extent permitted by law upon the acceleration of the Notes. If an Event of
Default occurs prior to _________, ____ by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company with the intention
of avoiding the prohibition on redemption of the Notes prior to such date, then
the Make-whole Premium shall also become immediately due and payable to the
extent permitted by law upon the acceleration of the Notes.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal or interest on
the Notes or to enforce the performance of any provision of the Notes or this
Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
(1) Holders of a majority in aggregate principal amount of the
Notes then outstanding by notice to the Trustee may on behalf of the Holders of
all of the Notes waive any existing Default or Event of Default and its
consequences under this Indenture (except a continuing Default or Event of
Default in the payment of interest or premium on, or the principal of, any Note
held by a non-consenting Holder). Upon any such waiver, such Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon.
(2) The Trustee may, without the consent of any Holders of the
Notes, waive any Event of Default that relates to untimely or incomplete reports
or information if the legal rights of the Holders would not be materially
adversely affected thereby and may waive any other defaults the effect of which
would not materially adversely affect the rights of the Holders under this
Indenture.
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SECTION 6.05. CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it. However, the Trustee may refuse to follow any direction
that conflicts with law or this Indenture, that the Trustee determines may be
unduly prejudicial to the rights of other Noteholders, or that may involve the
Trustee in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Noteholder may pursue a remedy with respect to this Indenture or
the Notes only if:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(5) during such 60-day period the Holders of a majority in
aggregate principal amount of the then outstanding Notes do not give the
Trustee a direction inconsistent with the request.
A Noteholder may not use this Indenture to prejudice the rights of another
Noteholder or to obtain a preference or priority over another Noteholder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium, if any, and
interest on the Note, on or after the respective due dates expressed in the
Note, or to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or adversely affected without the
consent of the Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(i) or (ii) occurs
and is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against the Company for the whole amount of
principal and interest remaining unpaid on the
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Notes and interest on overdue principal and, to the extent lawful, interest and
such further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Noteholders allowed in any judicial proceedings relative to the Company (or any
other obligor upon the Notes), its creditors or its property and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Noteholder to make such
payments to the Trustee, and in the event that the Trustee shall consent to the
making of such payments directly to the Noteholders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 hereof. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof out
of the estate in any such proceeding, shall be denied for any reason, payment of
the same shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties which the
Holders of the Notes may be entitled to receive in such proceeding whether in
liquidation or under any plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Noteholder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Noteholder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 7.07, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Noteholders for amounts due and unpaid on the Notes for
principal, premium, if any, and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Notes for
principal, premium and interest, respectively;
Third: without duplication, to Holders of Notes for any other
Obligations owing to the Holders of Notes under the Notes or this Indenture; and
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Fourth: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment
to Noteholders.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by Holders of more than 10% in principal
amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(1) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(2) Except during the continuance of an Event of Default:
(a) The duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee.
(b) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(3) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(a) This paragraph does not limit the effect of paragraph (2) of
this Section.
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(b) The Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(c) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(4) Whether or not therein expressly so provided, every provision
of this Indenture that in any way relates to the Trustee is subject to
paragraphs (1), (2) and (3) of this Section.
(5) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee may refuse to
perform any duty or exercise any right or power unless it receives indemnity
satisfactory to it against any loss, liability or expense.
(6) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(1) The Trustee may conclusively rely upon any document believed
by it to be genuine and to have been signed or presented by the proper Person.
The Trustee need not investigate any fact or matter stated in the document.
(2) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel and the written advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(3) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(4) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers conferred upon it by this Indenture.
(5) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
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SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or an
Affiliate with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. However, the Trustee is subject to Sections
7.10 and 7.11. Subject to the provisions of Section 310(b) of the TIA, the
Trustee shall be permitted to engage in transactions with the Company and its
Subsidiaries other than those contemplated by this Indenture.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company or upon the Company's direction under
any provision hereof, it shall not be responsible for the use or application of
any money received by any Paying Agent other than the Trustee and it shall not
be responsible for any statement or recital herein or any statement in the Notes
or any other document in connection with the sale of the Notes or pursuant to
this Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
Subject to Section 6.04(2), if a Default or Event of Default occurs
and is continuing and if it is known to the Trustee, the Trustee shall mail to
Noteholders a notice of the Default or Event of Default within 90 days after it
obtains knowledge of the existence of such Event of Default. Except in the case
of a Default or Event of Default in payment of principal, premium or interest on
any Note, the Trustee may withhold the notice if and so long as a committee of
its Responsible Officers in good faith determines that withholding the notice is
in the interests of Noteholders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each October 15 beginning with the October 15
following the date of this Indenture, the Trustee shall mail to Noteholders a
312(a). If the Trustee is not brief report dated as of such reporting date that
complies with TIA Section 313(a) (but if no event described in TIA Section
preceding the reporting date, no report need be transmitted). The Trustee also
313(a) has occurred within the twelve months shall comply with TIA Section
reports as required by TIA Section 313(c).
Commencing at the time this Indenture is qualified under the TIA, a
copy of each report at the time of its mailing to Noteholders shall be filed
with the SEC and each stock exchange on which the Notes are listed. The Company
shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
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SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee and its agents, employees,
officers and directors against any and all losses, liabilities or expenses
incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, except as set forth in the
next paragraph. The Trustee shall notify the Company promptly of any claim for
which it may seek indemnity. Failure by the Trustee to so notify the Company
shall not relieve the Company of its obligations hereunder. The Company shall
defend the claim and the Trustee shall cooperate in the defense. The Trustee
may have separate counsel and the Company shall pay the reasonable fees and
expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through its own negligence or bad
faith.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(viii) or (ix) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign at any time and be discharged from the trust
hereby created by so notifying the Company. The Holders of a majority in
principal amount of the then
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outstanding Notes may remove the Trustee by so notifying the Trustee and the
Company. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(3) a Custodian or public officer takes charge of the Trustee or
its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the then outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee after written request by any Noteholder who has been
a Noteholder for at least six months fails to comply with Section 7.10, such
Noteholder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Noteholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, provided all sums owing
to the Trustee hereunder have been paid and subject to the Lien provided for in
Section 7.07. Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 hereof shall continue
for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any state
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thereof authorized under such laws to exercise corporate trustee power, shall be
subject to supervision or examination by Federal or state authority and shall
have a combined capital and surplus of at least $100,000,000 as set forth in its
most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1) and 310(a)(5). The Trustee is subject to
TIA Section 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced
by a resolution set forth in an Officers' Certificate, at any time, with respect
to the Notes, elect to have either Section 8.02 or 8.03 be applied to all
outstanding Notes upon compliance with the conditions set forth below in this
Article Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 of the option
applicable to this Section 8.02, the Company shall be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "LEGAL
DEFEASANCE"). For this purpose, such Legal Defeasance means that the Company
shall be deemed to have paid and discharged the entire Indebtedness represented
by the outstanding Notes, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.05 and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive solely from the trust fund described in Section
8.04, and as more fully set forth in such Section, payments in respect of the
principal of, premium, if any, and interest on such Notes when such payments are
due, (b) the Company's obligations with respect to such Notes under Sections
2.03, 2.05, 2.06, 2.07, 2.10 and 4.02, (c) the rights, powers, trusts, duties
and immunities of the Trustee hereunder and the Company's obligations in
connection therewith and (e) this Article Eight. Subject to compliance with
this Article Eight, the Company may exercise its option under this Section 8.02
notwithstanding the prior exercise of its option under Section 8.03 with respect
to the Notes.
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SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 of the option
applicable to this Section 8.03, the Company shall be released from its
obligations under the covenants contained in Sections 4.03, 4.04, 4.07, 4.08,
4.09, 4.10, 4.11, 4.12, 4.14, 4.15, 4.16 and 4.17 and Article Five with respect
to the outstanding Notes on and after the date the conditions set forth below
are satisfied (hereinafter, "COVENANT DEFEASANCE"), and the Notes shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, such Covenant Defeasance means that, with respect to the outstanding
Notes, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default under Section 6.01(iii) or
(iv), but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby. In addition, upon the Company's exercise
under Section 8.01 of the option applicable to this Section 8.03, Sections
6.01(iii) through 6.01(v) shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02 or Section 8.03 to the outstanding Notes:
(1) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 7.10 who shall agree to comply with the provisions of this
Article Eight applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Notes, (a) cash in
U.S. Dollars in an amount, or (b) non-callable Government Securities which
through the scheduled payment of principal and interest in respect thereof
in accordance with their terms will provide, not later than one day before
the due date of any payment, cash in U.S. Dollars in an amount, or (c) a
combination thereof, in such amounts, as will be sufficient, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to
pay and discharge and which shall be applied by the Trustee (or other
qualifying trustee) to pay and discharge the principal of, premium, if
any, and interest on the outstanding Notes on the stated maturity or on
the applicable redemption date, as the case may be, and the Company must
specify whether the Notes are being defeased to maturity or to a
particular redemption date of such principal or installment of principal,
premium, if any, or interest; PROVIDED that the Trustee shall have been
irrevocably instructed to apply such money or the proceeds of such
non-callable Government Securities to said payments with respect to the
Notes;
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(2) In the case of an election under Section 8.02, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably satisfactory to the Trustee confirming that (i) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (ii) since the date hereof, there has been a
change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion shall confirm that, the
Holders of the outstanding Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Legal Defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance has not occurred;
(3) In the case of an election under Section 8.03, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably satisfactory to the Trustee to the effect that the
Holders of the outstanding Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Covenant Defeasance
and will be subject to Federal income tax in the same amount, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
(4) No Default or Event of Default with respect to the Notes shall
have occurred and be continuing on the date of such deposit or, in so
far as Section 6.01(viii) or (ix) is concerned, at any time in the period
ending on the 91st day after the date of such deposit (it being understood
that this condition shall not be deemed satisfied until the expiration of
such period);
(5) Such Legal Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute a default under, this Indenture
or any other material agreement or instrument to which the Company is a
party or by which the Company is bound;
(6) In the case of an election under either Section 8.02 or 8.03,
the Company shall have delivered to the Trustee an Officers' Certificate
stating that the deposit made by the Company pursuant to its election
under Section 8.02 or 8.03 was not made by the Company with the intent of
preferring the Holders over other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding creditors of the
Company or others; and
(7) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States, each stating
that all conditions precedent provided for relating to either the Legal
Defeasance under Section 8.02 or the Covenant Defeasance under Section
8.03 (as the case may be) have been complied with as contemplated by this
Section 8.04.
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SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06, all money and Government Securities
(including the proceeds thereof) deposited with the Trustee (or other qualifying
trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant
to Section 8.04 in respect of the outstanding Notes shall be held in trust and
applied by the Trustee, in accordance with the provisions of such Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as Paying Agent) as the Trustee may determine, to
the Holders of such Notes of all sums due and to become due thereon in respect
of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or Government Securities
deposited pursuant to Section 8.04 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or Government Securities held by it as provided in
Section 8.04 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(1)), are in excess of the amount thereof which would then be required to be
deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO THE COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium, if
any, or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
creditor, look only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, shall thereupon cease; PROVIDED, HOWEVER,
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in the
New York Times and The Wall Street Journal (national edition), notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
Dollars or Government Securities in accordance with Section 8.02 or 8.03, as the
case may be, by reason
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of any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, then the Company's
obligations under this Indenture and the Notes shall be revived and reinstated
as though no deposit had occurred pursuant to Section 8.02 or 8.03 until such
time as the Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 8.02 or 8.03, as the case may be; PROVIDED, HOWEVER,
that, if the Company makes any payment of principal of, premium, if any, or
interest on any Note following the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Notes to receive such
payment from the money held by the Trustee or Paying Agent and PROVIDED
FURTHER that if such order or judgment is issued in connection with the
insolvency, receivership or other similar occurrence with respect to the
Trustee, upon the reinstatement of such obligations the Company shall be
released from its obligations under Sections 4.03, 4.04, 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.14, 4.15, 4.16, and 4.17.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS.
The Company and the Trustee may amend or supplement this Indenture
or the Notes without the consent of any Noteholder to cure any ambiguity, defect
or inconsistency, to provide for uncertificated Notes in addition to or in place
of certificated Notes, to provide for the assumption of the Company's
obligations to Holders of Notes in the case of a merger or consolidation, to
make any change that would provide any additional rights or benefits to the
Holders of Notes or that does not materially adversely affect the legal rights
under this Indenture of any such Holder, or to comply with requirements of the
SEC in order to effect or maintain the qualification of this Indenture under the
TIA.
Upon the request of the Company, accompanied by a resolution of its
Board of Directors authorizing the execution of any such supplemental indenture,
and upon receipt by the Trustee of the documents described in Section 9.06
hereof, the Trustee shall join with the Company in the execution of any
supplemental indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations which may be
therein contained, but the Trustee shall not be obligated to enter into such
supplemental indenture which affects its own rights, duties or immunities under
this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS.
The Company and the Trustee may amend or supplement this Indenture
or the Notes with the written consent of the Holders of at least a majority in
principal amount of the then outstanding Notes (including consents obtained in
connection with a tender offer or exchange offer for the Notes) and any existing
Default (including, without limitation, an acceleration of the Notes) or
compliance with any provision of this Indenture or the Notes may be waived with
the written consent of the Holders of at least a majority in principal amount of
the then outstanding Notes (including consents obtained in connection with a
tender offer or exchange offer for the Notes).
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Upon the request of the Company, accompanied by a resolution of its
Board of Directors authorizing the execution of any such supplemental indenture,
and upon the filing with the Trustee of evidence satisfactory to the Trustee of
the consent of the Noteholders as aforesaid, and upon receipt by the Trustee of
the documents described in Section 9.06 hereof, the Trustee shall join with the
Company in the execution of such supplemental indenture unless such supplemental
indenture affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or waiver, but
it shall be sufficient if such consent approves the substance thereof.
After a supplement, amendment or waiver under this Section becomes
effective, the Company shall mail to the Holders of each Note affected thereby a
notice briefly describing the supplement, amendment or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture,
amendment or waiver. Subject to Sections 6.04(1) and 6.07 hereof, the Holders
of a majority in principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Notes. However, without the consent of each Noteholder
affected, a supplement, amendment or waiver under this Section may not (with
respect to any Notes held by a non-consenting Noteholder):
(1) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any
Note or alter the provisions with respect to redemption of the Notes
other than pursuant to Sections 3.09, 4.10 and 4.14 hereof;
(3) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(4) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on any Note (except a recision of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment
default that resulted from such acceleration);
(5) make any Note payable in money other than that stated in the
Note;
(6) make any change in Section 6.04(1) or 6.07 hereof or in this
sentence of this Section 9.02 or the rights of Holders of Notes to
receive payments of principal of or premium, if any, or interest on
the Notes;
(7) waive a redemption payment with respect to any Note (other than
a payment required by the provisions of Sections 4.10 or 4.14
hereof); or
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(8) make any change in the foregoing amendment and waiver
provisions.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to this Indenture or the Notes shall be set forth in
a supplemental indenture that complies with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until a supplement, amendment or waiver becomes effective, a consent
to it by a Noteholder is a continuing consent by the Noteholder and every
subsequent Noteholder or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Noteholder or subsequent Noteholder may revoke the
consent as to its Note if the Trustee receives written notice of revocation
before the date the waiver or amendment becomes effective. An amendment or
waiver becomes effective in accordance with its terms and thereafter binds every
Noteholder.
The Company may fix a record date for determining which Holders must
consent to such amendment or waiver. If the Company fixes a record date, the
record date shall be fixed at (i) the later of 30 days prior to the first
solicitation of such consent or the date of the most recent list of Holders
furnished to the Trustee prior to such solicitation pursuant to Section 2.05, or
(ii) such other date as the Company shall designate.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about a supplement,
amendment or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the supplement, amendment or waiver.
Failure to make the appropriate notation or issue a new Note shall
not affect the validity and effect of such supplement, amendment or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article 9 if the amendment does not adversely affect
the rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing or refusing to sign such
amendment or supplemental indenture, the Trustee shall be entitled to receive,
if requested, an indemnity reasonably satisfactory to it and to receive and,
subject to Section 7.01, shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel as conclusive evidence that such amendment
or supplemental indenture is authorized or permitted by this Indenture, that it
is not inconsistent herewith, and that it will be valid and binding upon the
Company in accordance with its terms. The Company may not sign an amendment or
supplemental indenture until the Board of Directors approves it.
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ARTICLE 10
MISCELLANEOUS
SECTION 10.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA Section 318(c), the imposed duties shall control.
SECTION 10.02. NOTICES.
Any notice or communication by the Company or the Trustee to the
other is duly given if in writing and delivered in Person or mailed by
first-class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
other's address:
If to the Company:
Rexene Corporation
5005 LBJ Freeway
Occidental Tower, Suite 500
Dallas, Texas 75244
Attention: General Counsel
Telecopier No.: (214) 450-9017
If to the Trustee:
______________
______________
______________
Attention: _____________________
Telecopier No.:
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to
Noteholders) shall be deemed to have been duly given: at the time delivered by
hand, if personally delivered; five days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Noteholder shall be mailed by
first-class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on the
register kept by the Registrar. Any notice or communication shall also be so
mailed to any Person described in TIA Section 313(c), to the extent
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required by the TIA. Failure to mail a notice or communication to a Noteholder
or any defect in it shall not affect its sufficiency with respect to other
Noteholders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Noteholders, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 10.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Noteholders may communicate pursuant to TIA Section 312(b) with
other Noteholders with respect to their rights under this Indenture or the
Notes. The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
SECTION 10.04. CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 10.05 hereof) stating that, in the opinion of the
signers, all conditions precedent and covenants, if any, provided
for in this Indenture relating to the proposed action have been
complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 10.05 hereof) stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been
complied with.
SECTION 10.05. STATEMENTS REQUIRED IN CERTIFICATE OR
OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
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(3) a statement that, in the opinion of such Person, he has made
such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with.
SECTION 10.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting
of Noteholders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 10.07. LEGAL HOLIDAYS.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in The City of New York or at a place of payment are authorized or
obligated by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
SECTION 10.08. NO RECOURSE AGAINST OTHERS.
No director, officer, employee, incorporator or stockholder of the
Company or any Subsidiary Guarantor, as such, shall have any liability for any
Obligations of the Company or any Subsidiary Guarantor under the Notes, this
Indenture or any Subsidiary Guarantee or for any claim based on, in respect of
or by reason of such obligations or their creation. Each Noteholder by
accepting a Note waives and releases all such liability. This waiver and
release are part of the consideration for issuance of the Notes.
SECTION 10.09. DUPLICATE ORIGINALS.
The parties may sign any number of copies of this Indenture. One
signed copy is enough to prove this Indenture.
SECTION 10.10. GOVERNING LAW.
The internal law of the State of New York shall govern and be used
to construe this Indenture and the Notes.
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SECTION 10.11. NO ADVERSE INTERPRETATION OF OTHER
AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or its Subsidiaries. Any such indenture, loan
or debt agreement may not be used to interpret this Indenture.
SECTION 10.12. SUCCESSORS.
All agreements of the Company in this Indenture, and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successor.
SECTION 10.13. SEVERABILITY.
In case any provision in this Indenture or the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 10.14. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 10.15. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
[Signature Page Follows]
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SIGNATURES
Dated as of _______, 1994
REXENE CORPORATION
By:________________
Name:
Title:
Attest:______________
(SEAL)
Dated as of ________, 1994
[TRUSTEE]
By:________________
Name:
Title:
Attest:______________
(SEAL)
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Exhibit A
(Face of Security)
__% Senior Notes due 2004
No. $__________
REXENE CORPORATION
promises to pay to
or registered assigns,
the principal sum of
Dollars on _______, 2004.
Interest Payment Dates: _______, and _______, commencing _______, 1995
Record Dates: _______, and _______ (whether or not a Business Day)
Dated: _______, 1994
REXENE CORPORATION
By:
-------------------------------
Name:
Title:
This is one of the By:
Notes referred to in the -------------------------------
within-mentioned Indenture: Name:
Title:
_______________________, (SEAL)
as Trustee
By:
--------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
(Back of Security)
__% Senior Notes due 2004
Capitalized terms used herein shall have the meanings assigned to them in the
Indenture referred to below unless otherwise indicated.
1. INTEREST. Rexene Corporation, a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Note at the rate and in
the manner specified below.
Interest on the Notes will accrue at the rate of _____% per annum and will be
payable semi-annually in arrears on _____________ and _______________,
commencing on _____________, 1995, or if any such day is not a Business Day, on
the next succeeding Business Day (each an "Interest Payment Date"), to Holders
of record on the immediately preceding __________ and _______________.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. Interest on the Notes will accrue from the most recent date to which
interest has been paid or duly provided for or, if no interest has been paid or
duly provided for, from the date of original issuance of the Notes. To the
extent, lawful, the Company shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue principal at the rate of
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; it shall pay interest on overdue installments of interest
(without regard to applicable grace periods) at the same rate to the extent
lawful.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except
defaulted interest) to the Persons who are registered Holders of Notes at the
close of business on the record date next preceding the Interest Payment Date,
even if such Notes are cancelled after such record date and on or before such
Interest Payment Date. Principal, premiums, if any, and interest on the Notes
will be payable at the office or agency of the Company maintained for such
purpose within the City and State of New York, or at the option of the Company,
payment of interest may be made by check mailed to the Holders of the Notes at
their respective addresses set forth in the register of Holders of Notes;
PROVIDED that all payments with respect to Notes the Holders of which have
given wire transfer instructions to the Company will be required to be made by
wire transfer of immediately available funds to the accounts specified by the
Holders thereof. The Company will pay principal, premiums, if any, and interest
in money of the United States that at the time of payment is legal tender for
payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially the Trustee under the Indenture
will act as Paying Agent and Registrar. The Company may change any Paying
Agent, Registrar or co-registrar without notice to any Noteholder. The Company
or any of its Subsidiaries may act in any such capacity.
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4. INDENTURE. The Company issued the Notes under an Indenture dated as of
_______, 1994 ("Indenture") between the Company and the Trustee. The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of the Indenture. The Notes are subject
to all such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. The terms of the Indenture shall govern any
inconsistencies between the Indenture and the Notes. Terms not otherwise
defined herein shall have the meanings assigned in the Indenture. The Notes are
general unsecured obligations of the Company limited to $175,000,000 in
aggregate principal amount.
5. OPTIONAL REDEMPTION.
The Notes are not redeemable at the Company's option prior to
_________________, ____. Thereafter, the Notes will be redeemable, at the
option of the Company, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below, plus accrued and unpaid interest thereon to the
redemption date, if redeemed during the twelve-month period beginning __________
of the years indicated below:
YEAR PERCENTAGE
Notwithstanding the foregoing, on or before _____, 1997, the Company may, from
time to time, redeem up to $___ million in aggregate principal amount of Notes,
upon not less than 30 nor more than 60 days' notice, at a redemption price of
______% of the principal amount thereof plus accrued and unpaid interest thereon
to the redemption date, with the net proceeds of an offering or offerings of
common stock of the Company; PROVIDED that at least $100 million in aggregate
principal amount of Notes remains outstanding immediately after the occurrence
of such redemption; and PROVIDED, FURTHER, that each such redemption shall
occur within 60 days of the date of the closing of the related offering of
common stock of the Company.
6. MANDATORY REDEMPTION.
Subject to the Company's obligation to make an offer to repurchase Notes under
certain circumstances pursuant to Sections 4.10 and 4.14 of the Indenture (as
described in paragraph 7 below), the Company is not required to make mandatory
redemption or sinking fund payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to offer
to purchase all or any part (equal to $1,000 or an integral multiple thereof) of
each Holder's Notes at a purchase price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase. Holders of Notes that are subject to an offer to purchase will
receive an offer to purchase from the Company prior to any related
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<PAGE>
purchase date, and may elect to have such Notes purchased by completing the form
entitled "Option of Holder to Elect Purchase" appearing below.
(b) If the Company consummates any Asset Sale, the Company will be required,
under certain circumstances, to apply the Excess Proceeds thereof to an offer to
all Holders of Notes to purchase the maximum principal amount of Notes that may
be purchased out of the Excess Proceeds at an offer price in cash equal to 100%
of the principal amount of the Notes plus accrued interest, in accordance with
the procedures set forth in the Indenture. Holders of Notes that are subject to
an offer to purchase will receive an offer to purchase from the Company prior to
any related purchase date, and may elect to have such Notes purchased by
completing the form entitled "Option of Holder to Elect Purchase" appearing
below.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in face denominations
of $1,000 and integral multiples of $1,000. The Notes may be transferred and
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption. Also, it need not exchange or register the transfer of any Notes
for a period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
9. PERSONS DEEMED OWNERS. Prior to due presentment to the Trustee for
registration of the transfer of this Note, the Trustee, any Agent and the
Company may deem and treat the Person in whose name this Note is registered as
its absolute owner for the purpose of receiving payment of principal of and
interest on this Note and for all other purposes whatsoever, whether or not this
Note is overdue, and neither the Trustee, any Agent nor the Company shall be
affected by notice to the contrary. The registered holder of a Note shall be
treated as its owner for all purposes.
10. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture and the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the then outstanding
Notes, and any existing default (except a payment default) may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes. Without the consent of any Noteholder, the Indenture or the
Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of the Company's obligations
to Holders of the Notes in case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights of any such Holder under the
Indenture, or to comply with the requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act.
11. DEFAULTS AND REMEDIES. Events of Default include in summary form: (i)
default for 30 days in the payment when due of interest on the Notes; (ii)
default in payment when due of the principal of or premium, if any, on the
Notes; (iii) failure by the Company for 30 days to comply with any of the
provisions described under Sections 4.07, 4.09, 4.10 or 4.14
A-4
<PAGE>
of the Indenture; (iv) failure by the Company for 60 days after notice to comply
with any of its other agreements in the Indenture or the Notes; (v) default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Indebtedness for money borrowed
by the Company or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Restricted Subsidiaries), whether such
Indebtedness or guarantee now exists or is created after the date of the
Indenture, which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness prior to the expiration of a
period of 10 days after expiration of any grace period provided in such
Indebtedness (as amended from time to time) (a "Payment Default") or (b) results
in the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount which has been so accelerated, aggregates $10 million or more
(excluding the principal amount of the Notes); (vi) failure by the Company or
any of its Restricted Subsidiaries to pay final judgments aggregating in excess
of $5 million, which judgments are not paid, discharged or stayed for a period
of 60 days; (vii) except as permitted by the Indenture or if, at the time
thereof, the obligor under such Subsidiary Guarantee is and is permitted to be
designated as an Unrestricted Subsidiary without causing a Default, any
Subsidiary Guarantee of a Significant Subsidiary shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be in
full force and effect or any Subsidiary Guarantor that is a Significant
Subsidiary, or any Person acting on behalf of any such Subsidiary Guarantor,
shall deny or disaffirm, in writing, its obligation under its Subsidiary
Guarantee; or (viii) certain events of bankruptcy or insolvency with respect to
the Company or any Restricted Subsidiary that is a Significant Subsidiary. If
any Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the then outstanding Notes may declare all the
Notes to be due and payable immediately. Notwithstanding the foregoing, in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company or any Restricted Subsidiary that is a
Significant Subsidiary, all outstanding Notes will become due and payable
without further action or notice. Holders may not enforce the Indenture or the
Notes except as provided in the Indenture. The Trustee may require indemnity
satisfactory to it before it enforces the Indenture the Notes. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal, premium or interest) if it determines that withholding
notice is in their interest. The Company is required to deliver to the Trustee
annually a statement regarding compliance with the Indenture, and the Company is
required upon becoming aware of any Default or Event of Default, to deliver to
the Trustee a statement specifying such Default or Event of Default.
12. TRUSTEE DEALINGS WITH THE COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
13. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder of the Company or any Subsidiary Guarantor, as such,
shall have any liability
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<PAGE>
for any obligations of the Company or any Subsidiary Guarantor under the Notes,
the Indenture or any Subsidiary Guarantor or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of Notes,
by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Notes.
14. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
15. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Noteholder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
16. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Noteholders. No representation is
made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Noteholder upon written request and without
charge a copy of the Indenture. Requests may be made to:
Rexene Corporation
5005 LBJ Freeway
Occidental Tower, Suite 500
Dallas, Texas 75244
Attention: General Counsel
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<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint---------------------------------------------------------
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
- --------------------------------------------------------------------------------
Date:
-------------------------
Your Signature:
-------------------------
(Sign exactly as your name appears on
the face of this Note)
Signature Guarantee.*
- --------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-7
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note purchased by
the Company pursuant to Section 4.10 or 4.14 of the Indenture, check the box
below:
/ / Section 4.10 / / Section 4.14
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.14 of the Indenture, state the amount you elect to
have purchased (if all, write "ALL"): $___________
Date: _____________________ Your Signature: _______________
(Sign exactly as your name appears
on the face of this Note)
Tax Identification No.:__________________
Signature Guarantee.*
- -------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-8
<PAGE>
EXHIBIT B
FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSIDIARY GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
________________, between __________________ (the "Subsidiary Guarantor"), a
subsidiary of Rexene Corporation (or its successor), a Delaware corporation (the
"Company"), and [Bank One, a national banking association,] as trustee under the
indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the Trustee
an indenture (the "Indenture"), dated as of _______, 1994, providing for the
issuance of an aggregate principal amount of $175,000,000 of ___% Senior Notes
due 2004 (the "NOTES");
WHEREAS, Section 4.16 of the Indenture provides that under certain
circumstances the Company is required to cause the Subsidiary Guarantor to
execute and deliver to the Trustee a supplemental indenture pursuant to which
the Subsidiary Guarantor shall unconditionally guarantee all of the Company's
Obligations under the Notes pursuant to a Subsidiary Guarantee on the terms and
conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Subsidiary Guarantor and the Trustee mutually covenant and agree for the equal
and ratable benefit of the holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
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<PAGE>
2. AGREEMENT TO GUARANTEE. The Subsidiary Guarantor hereby agrees as
follows:
(a) The Subsidiary Guarantor, jointly and severally with all other
Subsidiary Guarantors, if any, unconditionally guarantees to each Holder of
a Note authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, regardless of the validity and enforceability of the
Indenture, the Notes and the Obligations of the Company under the Indenture
and the Notes, that:
(i) the principal of, premium and interest on the Notes will be promptly
paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue principal of,
premium and Liquidated Damages, if any, and interest on the Notes, to
the extent lawful, and all other Obligations of the Company to the
Holders or the Trustee thereunder will be promptly paid in full, all
in accordance with the terms thereof; and
(ii)in case of any extension of time for payment or renewal of any Notes
or any of such other obligations, that the same will be promptly paid
in full when due in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise.
Notwithstanding the foregoing, in the event that this Subsidiary Guarantee
would constitute or result in a violation of any applicable fraudulent
conveyance or similar law of any relevant jurisdiction, the liability of the
Subsidiary Guarantor under this Supplemental Indenture and its Subsidiary
Guarantee shall be reduced to the maximum amount permissible under such
fraudulent conveyance or similar law.
3. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES.
(a) To evidence its Subsidiary Guarantee set forth in this Supplemental
Indenture, the Subsidiary Guarantor hereby agrees that a notation of such
Subsidiary Guarantee substantially in the form of EXHIBIT C to the
Indenture shall be endorsed by an officer of such Subsidiary Guarantor on
each Note authenticated and delivered by the Trustee after the date hereof.
(b) Notwithstanding the foregoing, the Subsidiary Guarantor hereby agrees
that its Subsidiary Guarantee set forth herein shall remain in full force
and effect notwithstanding any failure to endorse on each Note a notation of
such Subsidiary Guarantee.
(c) If an officer whose signature is on this Supplemental Indenture or on
the Subsidiary Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.
(d) The delivery of any Note by the Trustee, after the authentication
thereof under the Indenture, shall constitute due delivery of the Subsidiary
Guarantee set forth in this Supplemental Indenture on behalf of the
Subsidiary Guarantor.
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<PAGE>
(e) The Subsidiary Guarantor hereby agrees that its obligations hereunder
shall be unconditional, regardless of the validity, regularity or
enforceability of the Notes or the Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with
respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable discharge
or defense of a guarantor.
(f) The Subsidiary Guarantor hereby waives diligence, presentment, demand
of payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against
the Company, protest, notice and all demands whatsoever and covenants that
its Subsidiary Guarantee made pursuant to this Supplemental Indenture will
not be discharged except by complete performance of the obligations
contained in the Notes and the Indenture.
(g) If any Holder or the Trustee is required by any court or otherwise to
return to the Company or the Subsidiary Guarantors, or any Custodian,
Trustee, liquidator or other similar official acting in relation to either
the Company or the Subsidiary Guarantors, any amount paid by either to the
Trustee or such Holder, the Subsidiary Guarantee made pursuant to this
Supplemental Indenture, to the extent theretofore discharged, shall be
reinstated in full force and effect.
(h) The Subsidiary Guarantor agrees that it shall not be entitled to any
right of subrogation in relation to the Holders in respect of any
Obligations guaranteed hereby until payment in full of all Obligations
guaranteed hereby. The Subsidiary Guarantor further agrees that, as between
the Subsidiary Guarantors, on the one hand, and the Holders and the Trustee,
on the other hand:
(i) the maturity of the Obligations guaranteed hereby may be accelerated
as provided in Article 6 of the Indenture for the purposes of the
Subsidiary Guarantee made pursuant to this Supplemental Indenture,
notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the Obligations guaranteed hereby;
and
(ii)in the event of any declaration of acceleration of such Obligations
as provided in Article 6, such Obligations (whether or not due and
payable) shall forthwith become due and payable by the Subsidiary
Guarantor for the purpose of the Subsidiary Guarantee made pursuant
to this Supplemental Indenture.
(i) The Subsidiary Guarantor shall have the right to seek contribution
from any other non-paying Subsidiary Guarantor so long as the exercise of
such right does not impair the rights of the Holders under the Subsidiary
Guarantee made pursuant to this Supplemental Indenture.
A-11
<PAGE>
4. SUBSIDIARY GUARANTOR MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
(a) Except as set forth in Articles 4 and 5 of the Indenture, nothing
contained in the Indenture, this Supplemental Indenture or in the Notes
shall prevent any consolidation or merger of the Subsidiary Guarantor with
or into the Company or any other Subsidiary Guarantor or shall prevent any
transfer, sale or conveyance of the property of the Subsidiary Guarantor as
an entirety or substantially as an entirety, to the Company or any other
Subsidiary Guarantor.
(b) Except as set forth in Article 4 of the Indenture, nothing contained
in the Indenture, this Supplemental Indenture or in the Notes shall prevent
any consolidation or merger of the Subsidiary Guarantor with or into a
corporation or corporations other than the Company or any other Subsidiary
Guarantor (in each case, whether or not affiliated with the Subsidiary
Guarantor), or successive consolidations or mergers in which a Subsidiary
Guarantor or its successor or successors shall be a party or parties, or
shall prevent any sale or conveyance of the property of a Subsidiary
Guarantor as an entirety or substantially as an entirety, to a corporation
other than the Company or any other Subsidiary Guarantor (in each case,
whether or not affiliated with the Subsidiary Guarantor) authorized to
acquire and operate the same; PROVIDED, HOWEVER, that the Subsidiary
Guarantor hereby covenants and agrees that, upon any such consolidation,
merger, sale or conveyance, the due and punctual performance and observance
of all of the covenants and conditions of the Indenture and this
Supplemental Indenture to be performed by such Subsidiary Guarantor, shall
be expressly assumed (in the event that the Subsidiary Guarantor is not the
surviving corporation in the merger), by supplemental indenture satisfactory
in form to the Trustee, executed and delivered to the Trustee, by the
corporation formed by such consolidation, or into which the Subsidiary
Guarantor shall have been merged, or by the corporation which shall have
acquired such property.
(c) In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor corporation, by supplemental indenture,
executed and delivered to the Trustee and satisfactory in form to the
Trustee, of the Subsidiary Guarantee made pursuant to this Supplemental
Indenture and the due and punctual performance of all of the covenants and
conditions of the Indenture and this Supplemental Indenture to be performed
by the Subsidiary Guarantor, such successor corporation shall succeed to and
be substituted for the Subsidiary Guarantor with the same effect as if it
had been named herein as the Subsidiary Guarantor. Such successor
corporation thereupon may cause to be signed any or all of the Subsidiary
Guarantees to be endorsed upon the Notes issuable under the Indenture which
theretofore shall not have been signed by the Company and delivered to the
Trustee. All the Subsidiary Guarantees so issued shall in all respects have
the same legal rank and benefit under the Indenture and this Supplemental
Indenture as the Subsidiary Guarantees theretofore and thereafter issued in
accordance with the terms of the Indenture and this Supplemental Indenture
as though all of such Subsidiary Guarantees had been issued at the date of
the execution hereof.
A-12
<PAGE>
5. RELEASES FOLLOWING SALE OF ASSETS. Concurrently with any sale of
assets (including, if applicable, all of the Capital Stock of the Subsidiary
Guarantor), all Liens in favor of the Trustee in the assets sold thereby shall
be released; PROVIDED that in the event of an Asset Sale, the Net Proceeds
from such sale or other disposition are treated in accordance with the
provisions of Section 4.10 of the Indenture. If the assets sold in such sale or
other disposition include all or substantially all of the assets of the
Subsidiary Guarantor or all of the Capital Stock of the Subsidiary Guarantor,
then the Subsidiary Guarantor (in the event of a sale or other disposition of
all of the Capital Stock of such Subsidiary Guarantor) or the corporation
acquiring the property (in the event of a sale or other disposition of all or
substantially all of the assets of such Subsidiary Guarantor) shall be released
from and relieved of its obligations under this Supplemental Indenture and its
Subsidiary Guarantee made pursuant hereto or Section 4 of this Supplemental
Indenture, as the case may be; PROVIDED that in the event of an Asset Sale,
the Net Proceeds from such sale or other disposition are treated in accordance
with the provisions of Section 4.10 of the Indenture. Upon delivery by the
Company to the Trustee of an Officers' Certificate to the effect that such sale
or other disposition was made by the Company in accordance with the provisions
of the Indenture and this Supplemental Indenture, including without limitation,
Section 4.10 of the Indenture, the Trustee shall execute any documents
reasonably required in order to evidence the release of the Subsidiary Guarantor
from its obligations under this Supplemental Indenture and its Subsidiary
Guarantee made pursuant hereto. If the Subsidiary Guarantor is not released
from its Obligations under its Subsidiary Guarantee, it shall remain liable for
the full amount of principal of, premium, if any, and interest on the Notes and
for the other Obligations of such Subsidiary Guarantor under the Indenture as
provided in this Supplemental Indenture.
6. NEW YORK LAW TO GOVERN. The internal law of the State of New York shall
govern and be used to construe this Supplemental Indenture.
7. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
8. EFFECT OF HEADINGS. The Section headings herein are for convenience only
and shall not affect the construction hereof.
A-13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: ____________ ___, ____ [Subsidiary Guarantor]
By: ___________________________
Name:
Title:
Dated: ____________ ___, ____ [BANK ONE],
as Trustee
By: ___________________________
Name:
Title:
A-14
<PAGE>
EXHIBIT C
FORM OF NOTATION ON SENIOR NOTE RELATING TO SUBSIDIARY GUARANTEE
Each Subsidiary Guarantor (as defined in the Indenture (the "Indenture")
referred to in the Note upon which this notation is endorsed), (i) has jointly
and severally unconditionally guaranteed (a) the due and punctual payment of the
principal of, premium with respect to, and interest on the Notes, whether at
maturity or an interest payment date, by acceleration, call for redemption or
otherwise, (b) the due and punctual payment of interest on the overdue principal
and premium of and interest on the Notes, and (c) in case of any extension of
time of payment or renewal of any Notes or any of such other obligations, the
same will be promptly paid in full when due in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise
and (ii) has agreed to pay any and all costs and expenses (including reasonable
attorneys' fees) incurred by the Trustee or any holder in enforcing any rights
under this Subsidiary Guarantee.
Notwithstanding the foregoing, in the event that the Subsidiary Guarantee
of any Subsidiary Guarantor would constitute or result in a violation of any
applicable fraudulent conveyance or similar law of any relevant jurisdiction,
the liability of such Subsidiary Guarantor under its Subsidiary Guarantee shall
be reduced to the maximum amount permissible under such fraudulent conveyance or
similar law.
No director, officer, employee, agent, manager, stockholder or other
Affiliate (other than the other Subsidiary Guarantors) of the Subsidiary
Guarantors, as such, shall have any liability for any obligations of the
Subsidiary Guarantors under the Indenture, any supplemental indenture delivered
pursuant to Section 4.16 of the Indenture by such Subsidiary Guarantors or the
Subsidiary Guarantees, or for any claim based on, in respect of or by reason of
such obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability.
This Subsidiary Guarantee shall be binding upon the Subsidiary Guarantors
and their successors and assigns and shall inure to the benefit of the
successors and assigns of the Trustee and the Holders and, in the event of any
transfer or assignment of rights by any Holder or the Trustee, the rights and
privileges herein conferred upon that party shall automatically extend to and be
vested in such transferee or assignee, all subject to the terms and conditions
hereof.
E-1
<PAGE>
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Note upon which this
Subsidiary Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized officers.
[Subsidiary Guarantor]
By: ___________________________
Name:
Title:
E-2
<PAGE>
November 8, 1994
Rexene Corporation
5005 LBJ Freeway
Occidental Tower, Suite 500
Dallas, Texas 75244
Dear Sirs:
We have acted as counsel for Rexene Corporation, a Delaware corporation
(the "Company"), in connection with the preparation of the Company's
Registration Statement on Form S-3 (No. 33-55609), as amended (the
"Registration Statement"), filed with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the proposed offering by the Company of $175
million aggregate principal amount of the Company's Senior Notes (as defined
in the prospectus forming a part of the Registration Statement). The Senior
Notes are proposed to be sold by the Company to Smith Barney Inc. and Wertheim
Schroder & Co. Incorporated (the "Underwriters") pursuant to and subject to
the terms and conditions of an Underwriting Agreement among the Company and
the Underwriters (the "Underwriting Agreement"), the form of which is filed
as Exhibit 1.1 to the Registration Statement.
In connection with the foregoing, we have examined the originals or
copies, certified or otherwise authenticated to our satisfaction, of the
Registration Statement, the form of the Underwriting Agreement, the form of
Indenture included as Exhibit 4.1 to the Registration Statement and pursuant
to which the Senior Notes will be issued (the "Indenture"), and such corporate
records of the Company, certificates of public officials and of officers of
the Company, and other agreements, instruments and documents as we have deemed
necessary to require as a basis for the opinions hereinafter expressed. Where
facts material to the opinions hereinafter expressed were not independently
established by us, we have relied upon the statements of officers of the
Company, where we deemed such reliance appropriate under the circumstances.
Based upon the foregoing and in reliance thereon, and subject to the
assumptions and qualifications hereinafter specified, it is our opinion that:
1. The Company has been duly incorporated and is validly existing and in
good standing under the laws of the State of Delaware.
<PAGE>
Rexene Corporation
November 8, 1993
Page 2
2. The Senior Notes to be sold by the Company pursuant to the
Underwriting Agreement have been duly authorized for issuance by the Company,
and, upon the effectiveness of the Registration Statement under the Securities
Act, the due execution and delivery of the Indenture and the Underwriting
Agreement by the respective parties thereto in substantially the forms filed as
exhibits to the Registration Statement, the issuance, execution and
authentication of the Senior Notes in accordance with the provisions of the
Indenture, and the delivery to and payment for the Senior Notes by the
Underwriters in accordance with the Underwriting Agreement, and subject to any
applicable state securities or Blue Sky laws, will be valid and binding
obligations of the Company and will be entitled to the benefits of the
Indenture.
3. The Indenture has been duly authorized by the Company and, when
qualified under the Trust Indenture Act of 1939, as amended, and executed and
delivered by the Company will be the valid and binding agreement of the
Company.
The opinions expressed above are limited by and subject to the following
qualifications:
(a) We are members of the Bar of the State of Texas only and do not
purport to be experts on the laws of any state or jurisdiction other than the
State of Texas and the United States. Insofar as the opinions expressed herein
relate to matters governed by Delaware law, we have relied solely upon a
reading of the applicable statutes and the corporate records of the Company and
certificates of public officials and of officers of the Company referenced
above with respect to the opinions given herein. Insofar as the opinions
expressed herein relate to matters governed by New York law, we have assumed,
without knowing and without making any investigtion to determine, that such
laws are the same as the laws of the State of Texas.
(b) In rendering the opinions expressed herein, we have assumed that no
action heretofore taken by the Board of Directors of the Company in connection
with the matters described or referred to herein will be modified, rescinded or
withdrawn after the date hereof. We have also assumed the due execution and
delivery of the Underwriting Agreement by the respective parties thereto in
substantially the form filed as an exhibit to the Registration Statement.
(c) The opinions expressed in Paragraphs 2 and 3 above are subject to the
qualification that the validity and binding effect of the Senior Notes and the
Indenture may be limited or affected by (i) bankruptcy, insolvency,
reorganization, fraudulent transfer or creditor's rights generally and (ii)
general principles of equity, regardless of whether applied in a proceeding in
equity or at law.
<PAGE>
Rexene Corporation
November 8, 1993
Page 3
(d) We note that the rate of interest payable on the Senior Notes has not
yet been determined. In rendering the opinions expressed herein, we have
assumed that such interest rate will not exceed the maximum rate of interest
permitted by applicable law, which, under the laws of the State of Texas, is
currently 18% per annum.
We hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement and to the reference to us under the
caption "Legal Matters" in the prospectus forming a part of the Registration
Statement. In giving this consent, we do not thereby admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act or the rules or regulations of the Commission thereunder.
Respectfully submitted,
THOMPSON & KNIGHT,
A Professional Corporation
By:____________________________
Peter A. Lodwick, Attorney
PAL/cna
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-----------------------
Check if application to determine eligibility of a trustee pursuant to Section
305(b)(2) _____
-----------------------
BANK ONE, TEXAS, NA
(Exact name of trustee as specified in its charter)
NOT APPLICABLE 75-2270994
(Jurisdiction of incorporation or organization (I.R.S. employer
if not a U.S. national bank) identification no.)
1717 MAIN, 7TH FLOOR, DALLAS, TEXAS 75201
(Address of principal executive offices)
JEFF SALAVARRIA, ASSISTANT VICE PRESIDENT
BANK ONE, TEXAS, NA
8111 PRESTON ROAD, SECOND FLOOR, DALLAS, TEXAS 75225
(214) 360-3977
(Name, address and telephone number of agent for service)
REXENE CORPORATION
(Exact name of obligor as specified in its charter)
DELAWARE 75-2104131
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
5005 LBJ FREEWAY
OCCIDENTAL TOWER, SUITE 500
DALLAS, TEXAS 75244
(Address, including zip code, of principal executive offices)
___% SENIOR NOTES DUE 2004
(Title of indenture securities)
- -------------------------------------------------------------------------------
<PAGE>
1. GENERAL INFORMATION.
Furnish the following information as to the trustee;
(a) Name and address of each examining or supervising authority to which
it is subject.
Name Address
---- -------
Comptroller of the Currency Washington, D.C.
Federal Reserve Bank Dallas, Texas
Federal Deposit Insurance Corporation Washington, D.C.
National Bank Examiners Dallas, Texas
(b) Whether it is authorized to exercise corporate trust powers.
Bank One, Texas, N.A., is authorized to exercise corporate trust
powers.
2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3,4,5,6,7,8,9,10,11,12,13,14, AND 15.
Rexene Corporation is not in default under any of its outstanding
securities under which the applicant is Trustee. Accordingly, responses to
Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15 of Form T-1 are not
required under General Instruction B.
16. LIST OF EXHIBITS.
*1. A copy of the articles of association of the trustee as now in effect.
*2. A copy of the certificate of authority of the trustee to commence
business, if not contained in the articles of association.
*3. A copy of the authorization of the trustee to exercise corporate trust
powers, if such authorization is not contained in the documents
specified in paragraph (1) or (2) above.
*4. A copy of the existing bylaws of the trustee, or instruments
corresponding thereto.
5. Not applicable.
6. The consents of United States institutional trustees required by
Section 321(b) of the Act.
2
<PAGE>
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
8. Not applicable.
9. Not applicable.
- -------------------------
*Included in the Statement of Eligibility under the Trust Indenture Act of
1939 on Form T-1 of Bank One, Texas, NA, filed as part of the Registration
Statement (Registration No. 33-40838) on Form S-1 of Dr Pepper Company and Dr.
Pepper/Seven-Up Companies, Inc.
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, BANK ONE, TEXAS, NA, a national banking association organized under the
laws of the United States of America, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
hereunto duly authorized, all in the City of Dallas, and State of Texas, on the
20th day of October, 1994.
BANK ONE, TEXAS, NA
By:
-------------------------------
Jeff Salavarria
Assistant Vice President
3
<PAGE>
NOTES
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base answer to Item 2, the answer to said Item
is based upon incomplete information. Said Item may, however, be considered
correct unless amended by an amendment to this Form T-1.
4
<PAGE>
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED BY
SECTION 321(B) OF THE ACT
October 20, 1994
Bank One, Texas, NA, as a condition to qualification under the Trust
Indenture Act of 1939, consents that reports of examination by federal, state,
territorial, or district authorities may be furnished by said authorities to the
Securities and Exchange Commission of the United States upon request of said
Commission for said reports as provided in Section 321 of said Trust Indenture
Act of 1939.
BANK ONE, TEXAS, NA
By:
-------------------------------
Jeff Salavarria
Assistant Vice President
5
<PAGE>
EXHIBIT 7
A copy of the latest report of condition of the trustee published pursuant
to law or the requirements of its supervising or examining authority.
REPORT OF CONDITION
CONSOLIDATING DOMESTIC AND FOREIGN SUBSIDIARIES OF THE
BANK ONE TEXAS N.A.
OF DALLAS IN THE STATE OF TEXAS, AT THE CLOSE OF BUSINESS ON JUNE 30, 1994,
PUBLISHED IN RESPONSE TO CALL MADE BY COMPTROLLER OF THE CURRENCY,
UNDER TITLE 12, UNITED STATES CODE,
SECTION 161.
CHARTER NUMBER 21969 COMPTROLLER OF THE CURRENCY SOUTHWESTERN DISTRICT
STATEMENT OF RESOURCES AND LIABILITIES
ASSETS
<TABLE>
<CAPTION>
THOUSANDS OF DOLLARS
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,278,648
Interest-bearing balances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83,083
Securities:
Held-to-maturity securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,937,484
Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,789,912
Federal funds sold and securities purchased under agreements to resell in domestic
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs:
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 693,996
Securities purchased under agreements to resell. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Loans and Lease financing receivables:
Loans and leases, net of unearned income . . . . . . . . . 10,244,918
LESS: Allowance for loan and lease losses. . . . . . . . . 107,408
Loans and leases, net of unearned income, allowances, and reserve. . . . . . . . . . . . . . . . . . . . . . .10,137,510
Premises and fixed assets (including capitalized leases) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,519
Other real estate owned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,765
Customers' liability to this bank on acceptances outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,689
Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32,794
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353,124
Total assets . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . .18,505,524
LIABILITIES
Deposits:
In domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14,157,033
Noninterest-bearing. . . . . . . . . . . . . . . . . . . . 3,792,868
Interest-bearing . . . . . . . . . . . . . . . . . . . . . 10,364,165
In foreign offices, Edge and Agreement subsidiaries and IBFs . . . . . . . . . . . . . . . . . . . . . . . . . . . 326,568
Interest-bearing . . . . . . . . . . . . . . . . . . . . . 326,568
Federal funds purchased and securities sold under agreements to repurchase in domestic
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs:
Federal funds purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344,308
Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 930,184
Trading liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 815
Other borrowed money:
With original maturity of one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,033,625
With original maturity of more than one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49,996
Mortgage indebtedness and obligations under capitalized leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291
Bank's liability on acceptances executed and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,689
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213,785
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17,066,294
EQUITY CAPITAL
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224,000
Surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 779,778
Undivided profits and capital reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477,019
Net unrealized holding gains (losses) on available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . .41,567
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,439,230
Total liabilities, limited-life preferred stock, and equity capital. . . . . . . . . . . . . . . . . . . . . . .18,505,524
</TABLE>
6
<PAGE>
I, Bobby Doxey, Chief Financial Officer of the above-named bank do hereby
declare that this Report of Condition is true and correct to the best of my
knowledge and belief,
BOBBY DOXEY
We, the undersigned directors, attest to the correctness of this statement
of resources and liabilities. We declare that it has been examined by us, and
to the best of our knowledge and belief has been prepared in conformance with
the instructions and is true and correct.
HARVEY MITCHELL
RONALD STEINHART
VERNELL STURNS
Directors
7
