<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-K
<TABLE>
<C> <S>
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 1-9988
</TABLE>
--------------------------
REXENE CORPORATION
(Exact name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 75-2104131
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5005 LBJ FREEWAY 75244
DALLAS, TEXAS (Zip Code)
(Address of Principal Executive
Offices)
(214) 450-9000
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
- --------------------------------------- --------------------------
Common Stock, $0.01 par value New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes _X_ No ____
The aggregate market value of the 9,320,211 shares of common stock held by
non-affiliates of the registrant was $33,785,765 as of March 14, 1994.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
NUMBER OF SHARES OUTSTANDING
TITLE OF EACH CLASS AT MARCH 14, 1994
- ----------------------------------- -----------------------------------
<S> <C>
Common Stock, $0.01 par value 10,500,867
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference from the registrant's
definitive proxy statement to be filed for its annual meeting of stockholders
scheduled to be held on May 24, 1994.
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<PAGE>
REXENE CORPORATION
1993 ANNUAL REPORT ON FORM 10-K
PART I
ITEM 1. BUSINESS
INTRODUCTION
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.
The Company is the result of a combination of three businesses operated by
predecessor entities. In 1958, a subsidiary of The El Paso Company ("El Paso")
constructed a styrene plant in Odessa, Texas. In 1960, El Paso and a predecessor
of Dart Industries Inc. ("Dart") formed a joint venture to produce ethylene,
propylene, polyethylene and polypropylene in Odessa, Texas. El Paso subsequently
acquired the plastic film business of Dart in 1979 and full ownership of these
businesses by 1983. In 1983 El Paso sold its petrochemical, polyolefin and
plastic film business to a management-led group of investors, who consolidated
the businesses under a Delaware corporation named Rexene Corporation ("Old
Rexene"). In 1988, Old Rexene was sold to an investor group organized by
Gilliam, Joseph & Littlejohn, an investment banking firm.
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 its wholly-owned operating subsidiary, Rexene Products
Company, a Delaware corporation ("Products"), which subsequently changed its
name to Rexene Corporation ("New Rexene"). See "Item 1 -- The Reorganization".
The corporate headquarters of New Rexene, a Delaware corporation, is located
at 5005 LBJ Freeway, Dallas, Texas 75244, and its telephone number is
214-450-9000. Unless otherwise indicated, Old Rexene, Products and New Rexene
and their consolidated direct and indirect subsidiaries are sometimes
collectively or separately referred to as "Rexene" or the "Company".
PRINCIPAL PRODUCTS
The following chart presents the net sales, excluding intercompany sales,
contributed by the Company's five principal products during the periods
indicated:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
YEAR ENDED ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1993 1992(1) 1992(1) 1991
------------ ------------- ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Polyethylene................................ $ 120,060 $ 32,250 $ 90,799 $ 131,044
Polypropylene............................... 64,459 13,213 51,989 73,625
APAO........................................ 15,084 2,649 10,997 13,001
Plastic film................................ 147,468 34,140 104,264 135,923
Styrene..................................... 61,372 13,705 49,392 80,409
<FN>
- ------------------------
(1) Notwithstanding the accounting changes instituted pursuant to the
Company's reorganization under federal bankruptcy laws, the net sales
presented for the three months ended December 31, 1992 and the nine months
ended September 30, 1992 are comparable on an aggregate basis to those
amounts presented for the years ended December 31, 1993 and 1991.
</TABLE>
No customer accounted for more than 10% of the Company's consolidated sales
for the year ended December 31, 1993, the three months ended December 31, 1992,
the nine months ended September 30, 1992 or the year ended December 31, 1991.
1
<PAGE>
POLYETHYLENE
THE PRODUCT. Polyethylene represents by volume the most widely produced
thermoplastic resin in the world. The majority of polyethylene produced is low
density polyethylene resin ("LDPE"). In 1993 U.S. LDPE producers sold 11.4
billion pounds in the domestic market and 1.7 billion pounds in the export
market. The United States industry utilization rate for LDPE capacity in 1993
was approximately 90%. Approximately 59% of LDPE capacity is used to make high
pressure LDPE ("HPLDPE") and the balance to make linear LDPE ("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., bags, grocery sacks, food packaging and pallet stretch wrap, coatings,
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, HPDLPE is easier to extrude and has the advantage of
higher clarity.
The Company produces a variety of grades of HPLDPE, some of which are
combined with other polymers to meet specific customer requirements, such as
circuit board protective films. The Company does not produce LLDPE.
MARKETING. Prime grade products are sold domestically primarily through the
Company's sales staff. Most wide specification products are sold to brokers for
resale. The Company participates in every principal market for HPLDPE, selling
its HPLDPE resins under the REXENE-R- name.
COMPETITION. There are currently eleven domestic producers of LDPE, all of
which produce HPLDPE and six of which produce LLDPE. The largest manufacturer of
LDPE is Quantum Chemical Corp. The other five largest domestic producers of LDPE
include Dow Chemical U.S.A., Union Carbide Corporation, Chevron Chemical
Company, Exxon Chemical Americas and Mobil Chemical Company.
In 1993, Rexene accounted for approximately 3% of the United States capacity
for LDPE and approximately 5% of the United States capacity for HPLDPE.
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. The United States demand for
LDPE grew by approximately 1.2% in 1993 over 1992 and has averaged a 4.3% annual
growth over the last five years.
POLYPROPYLENE
THE PRODUCT. Polypropylene represents another major category of
thermoplastic resin and is surpassed only by polyethylene and polyvinylchloride
in total volume of production. Polypropylene is produced in many grades for
fiber applications, packaging and industrial films, and injection-molded
products, including automobile components, medical disposables, appliance parts,
housewares and other consumer products.
The Company emphasizes the manufacturing of polypropylene resins for
specialized applications such as medical bottles, electrical capacitor film and
radiation resistant medical devices. The Company's line of impact copolymer
polypropylene products is used primarily for automotive components and rigid
packaging. 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. Domestic and Canadian sales of prime grade products are sold
through the Company's sales staff. Most wide-specification products are sold to
brokers for resale. The Company sells its polypropylene products under the
REXENE-R- name.
2
<PAGE>
COMPETITION. In 1993 there were 16 domestic producers of polypropylene. In
1993, the four largest domestic producers of polypropylene were Himont
Incorporated, Amoco Chemicals Corporation, Fina Oil & Chemical Company (a unit
of American Petrofina, Inc.) and Exxon Chemical Americas. 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.
In 1993, Rexene accounted for approximately 2% of the United States capacity
for polypropylene. The Company seeks to compete by focusing on specialty
products responsive to customers' specific requirements. Examples of such
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.
In 1993 the United States production capacity of polypropylene was
approximately 9.8 billion pounds and the United States plants operated at
approximately 88% of capacity. Domestic consumption in 1993 grew by
approximately 9% over 1992 levels. Growth in domestic consumption has averaged
approximately 6.7% per year during the last five years.
APAO
THE PRODUCT. In late 1986, the Company began commercial production of
Rextac-R- amorphous polyalphaolefins ("APAO"). This polymer was developed
principally to replace atactic polypropylene ("APP"), a by-product of
polypropylene manufacturing, with a higher quality polymer. The supply of APP
has been reduced by technological developments primarily in catalyst systems in
recent years. APAO is used primarily in the production of modified bitumen
roofing materials; lamination; wire and cable; and adhesives and sealants,
including hot melt adhesives for non-wovens, packaging, pressure sensitive and
assembly applications.
MARKETING. Prime grade products are sold domestically through the Company's
sales staff. The Company sells its APAO products under the REXTAC-R- name. The
Company supplements its sales of APAO with purchases from Ube Rexene Corporation
("URC"), a joint venture company located in Japan. 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 the only domestic
on-purpose producers of APAO. In addition, many producers of polypropylene also
produce APP, which competes with APAO for some uses.
Based on management estimates, in 1993 Rexene accounted for approximately
30% of the United States capacity for APAO. The Company has a production
capacity of approximately 35 million pounds per year, and is currently expanding
the production capacity to 45 million pounds per year by the end of 1994. The
Company seeks to compete by providing a high level of customer service and
developing products which are responsive to customers' specific requirements.
PLASTIC FILM
THE PRODUCT. The Company, through its Consolidated Thermoplastics division
("CT Film"), is a major participant in the specialty market for high-quality
cast and blown plastic film. Product applications for these films include
disposable diapers, feminine hygiene products, medical products, adult
incontinent products, food packaging, paper packaging, electronic component
packaging, skin packaging, greenhouse film, industrial tapes and other
industrial and consumer packaging 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 high value-added applications.
Examples include a post consumer recycle film containing a minimum of 25%
recycled materials, low gel film developed for photoresist applications,
3
<PAGE>
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.
MARKETING. CT Film ships film nationwide from its plants in Clearfield,
Utah; Harrington, Delaware; Dalton, Georgia and Chippewa Falls, Wisconsin and
maintains customer relationships with a number of Fortune 500 companies. Prime
grade products are sold primarily through the Company's sales staff.
COMPETITION. CT Film's principal competitors include Tredegar Industries,
Exxon Chemical Americas, Clopay Corporation, Blessings Company, Deerfield
Plastics Company, Inc., Pierson Industries Co., 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 late 1993, a United Kingdom subsidiary of the
Company, Rexene Corporation Ltd. ("RCL"), signed a long-term supply agreement
with Kimberly-Clark Ltd. ("KCL") to supply plastic film backsheet to KCL. Film
backsheet is used in the production of disposable diapers and training pants.
RCL is currently constructing a manufacturing facility in Humberside County,
England to supply KCL and other potential customers in Europe. The plant will
have an initial production capacity of 20 million pounds and is expected to be
operational in late 1994.
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, housewares, luggage, appliances
and children's toys; building products such as roof insulation, pipes and
fittings; transportation products ranging from auto and boat trim to tires,
recreational vehicle molding and fan belts; and textile products such as
pigments, binder, paper coating and carpet backing.
MARKETING. The Company sells the vast majority of its styrene directly to
domestic customers, and handles export sales through international trading
companies.
COMPETITION. 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. In
1993, Rexene accounted for approximately 3% of the United States capacity for
styrene. Due to global capacity expansions and weak economic conditions, the
domestic styrene industry operated at an approximately 87% utilization rate in
1993. Competition for sales of styrene is generally based on price. The Company
anticipates that the styrene industry will continue to have overcapacity in
1994.
4
<PAGE>
EXPORT SALES
The following chart summarizes revenues from export sales, and the
percentages of net sales represented by export sales, for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
YEAR ENDED ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1993 1992(1) 1992(1) 1991
------------ ------------- ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Export sales................................ $ 30,495 $ 9,295 $ 33,806 $ 71,570
Percentage of net sales..................... 7.1% 9.4 % 10.7 % 15.9 %
<FN>
- ------------------------
(1) Notwithstanding the accounting changes instituted pursuant to the
Company's reorganization under federal bankruptcy laws, the net sales
presented for the three months ended December 31, 1992 and the nine months
ended September 30, 1992 are comparable on an aggregate basis to those
amounts presented for the years ended December 31, 1993 and 1991.
</TABLE>
The decrease in aggregate export sales for the year ended December 31, 1993,
the three months ended December 31, 1992 and the nine months ended September 30,
1992 as compared to 1991 was due primarily to the Company's decreasing emphasis
on this market because of lower selling prices and overcapacity in international
markets. The majority of the Company's 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.
RAW MATERIALS FOR PRINCIPAL PRODUCTS
Principal raw materials consist of ethane, propane and benzene
("feedstocks") for the polymer and styrene business and polyethylene resins for
the film business. The prices of feedstocks fluctuate widely based on the prices
of natural gas and oil. As a result, the Company's ability to pass on increases
in raw material costs to customers has a significant impact on operating
results.
The Company's plant in Odessa, Texas (the "Odessa Facility") obtains a
combination of pure and mixed streams of natural gas liquids from multiple
natural gas liquid extraction plants located in west Texas and uses such streams
as feedstocks to the Company's olefins plant. The Company's feedstock supplies
are currently adequate for its requirements. The Company has storage capacity
for an approximately ten-day supply of feedstocks.
In 1993 the Company purchased substantially all of its benzene requirements
under contracts from Gulf Coast 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.
Raw materials accounted for approximately 60% of the total cost of sales for
the Company's five principal product groups in 1993. Ethane and propane prices
are established in Mont Belvieu, Texas (Gulf Coast) according to prevailing
market conditions, but the Company is able to purchase ethane and propane in
West Texas at prices discounted from the reported average Mont Belvieu, Texas
prices prevailing from time to time. The discounts represent a significant
portion of the average cost for the producers to transport the ethane and
propane to Mont Belvieu, Texas and to fractionate them into a purity product.
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.
5
<PAGE>
EMPLOYEES
On March 1, 1994, the Company employed approximately 1,300 persons. None of
the Company's employees are unionized, except for approximately 130 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.
PATENTS, TRADE SECRETS AND TRADEMARKS
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. See the Consolidated
Statements of Operations of the Consolidated Financial Statements included in
Item 8. 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 ("Phillips") for
infringement of its crystalline and block copolymer polypropylene patents. See
"Item 3 -- Legal Proceedings" below.
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. Further, groundwater and/or soil
contamination at the Company's Odessa Facility, which is the Company's main
facility, and at other sites 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.
The Company's operational expenditures for environmental remediation and
waste disposal were approximately $6.4 million in 1993 and are expected to be
approximately $6.9 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 $2.9 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 environmental requirements.
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, it will
have adequate resources to conduct its operations in compliance with currently
applicable environmental and health and safety
6
<PAGE>
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. The Company recorded $23.4 million as an estimate at December 31,
1993 of its total potential environmental liability with respect to remediating
site contamination, which it believes is adequate. 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 its Odessa
Facility through injection wells operated under permits from the Texas Natural
Resource Conservation Commission ("TNRCC"). In the process of renewing the
permits on these deep wells, TNRCC has expressed concern over the long-term
viability of the current deep well injection system. TNRCC has granted the
Company a permit to drill and operate a new deeper well. Company consultants
have estimated the cost of installing a new deep well injection system at $5.7
million, but the Company has not begun drilling such a well. The Company, with
neighboring industrial facilities, has begun investigating the possibility of
entering into an agreement with a publicly-owned treatment works to build a
near-by 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.
Failure to develop such a system and denial of the renewal applications could
have a material adverse effect on the Company's financial condition.
SOLID WASTES. The Company's Odessa Facility has interim authorization as a
hazardous waste treatment/storage/disposal facility under the Resource
Conservation and Recovery Act ("RCRA") and has applied for a final permit, which
the Company expects TNRCC to issue later this year. This permit will include 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 hydrocarbons in an intermittently-flowing stream adjacent to the
Odessa Facility. The company is continuing its investigations as to the source
and extent of contaminants in this stream.
Based upon the results of its investigations of onsite contamination, the
Company does not believe that implementation of such 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 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 impact of such legislation on its operations until 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.
ADDITIONAL ENVIRONMENTAL ISSUES. The Federal Comprehensive Environmental
Response Compensation and Liability Act, as amended ("CERCLA"), and similar laws
in many states, impose
7
<PAGE>
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 formerly owned facilities which are or were in
the plastics, petrochemicals or oil refinery businesses. The Company has sent
wastes from its currently-owned and formerly-owned facilities 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 a wastewater treatment plant (the "South
Dixie Plant") owned by the City of Odessa (the "City"). The City is implementing
a plan to expand a second water treatment plant and abandon the South Dixie
Plant. The City has alleged that the Company has contributed to groundwater
contamination at the South Dixie Plant. If the City'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.
THE REORGANIZATION
Pursuant to a First Amended Plan of Reorganization (the "Amended Plan")
under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code")
which was confirmed by the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court") on July 7, 1992 and became effective on
September 18, 1992 (the "Effective Date"), Old Rexene was merged (the "1992
Merger") into its wholly-owned operating subsidiary.
As a result of its reorganization under Chapter 11 of the Bankruptcy Code
(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 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 in New Rexene (the "Common Stock") to the holders of such debt.
On July 7, 1992, the Bankruptcy Court entered an order confirming the
Amended Plan (the "Confirmation Order"). The Confirmation Order required as a
condition to the consummation of the Amended Plan that, among other things, the
Company and the creditors' committee (the "Committee") be satisfied with the
status or any resolution of certain outstanding obligations and of certain
claims. With the agreement of the Company and the Committee and upon the
satisfaction or waiver of all other conditions to the effectiveness of the 1992
Merger and the Amended Plan, the 1992 Merger and the Amended Plan were
consummated on September 11, 1992 and the Effective Date, respectively.
Under the Amended Plan, the holders of outstanding senior notes of Old
Rexene received, as of the Effective Date, 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 "Senior Notes"), (ii) 26% of the
Common Stock 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. 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) of New Rexene at an initial rate of 10% per year (the
"Subordinated Notes", and together with the Senior Notes, the "Notes"), (ii)
66.5% of the Common Stock 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
8
<PAGE>
common stock of Old Rexene became entitled to receive 7.5% in the aggregate of
the Common Stock to be outstanding after giving effect to the Amended Plan. Such
holders received in exchange one share for each 40 shares of common stock of Old
Rexene previously held.
Substantially all other creditors with allowed claims were entitled at the
Company's option either to payment in full or to have their legal, equitable
and/or contractual rights survive the bankruptcy unaltered. The Company has made
substantially all of the distributions contemplated by the Amended Plan. Also in
connection with the consummation of the Amended Plan, the Company entered into a
Loan Agreement (the "Loan Agreement") as of the Effective Date with Transamerica
Business Credit Corporation as described below.
The 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"). The Subordinated
Notes are secured by a second lien on the Collateral.
Interest is payable on the Notes semiannually on May 15 and November 15. In
addition, the interest rates on the Senior and Subordinated Notes increase
beginning in 1995 and 1996, respectively. The annual interest rate on the 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
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 Subordinated Notes by
delivering additional Subordinated Notes in lieu of cash ("Pay-in-Kind"), if
certain financial tests are met. With respect to the interest payments on the
Subordinated Notes which have been due since the issuance of the Subordinated
Notes, the Company has issued an aggregate principal amount of $11.0 million in
additional Subordinated Notes. On March 1, 1994, the Board of Directors decided
to exercise the Pay-in-Kind feature for the interest payment due on May 15,
1994, which will result in the issuance of approximately $4.3 million of
additional Subordinated Notes. The Board of Directors will consider the
advisability of exercising such feature for the interest payment on November 15,
1994.
The Senior Notes and, after all Senior Notes are redeemed, the 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 Senior Notes in the open market. In the event the
Company generates "excess cash flow" from operations (as defined in the
indenture governing the Senior Notes) in any fiscal year, the Company is
required to make an offer to purchase Senior Notes at par in an amount equal to
such excess cash flow. However, the cash purchase price of 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 quarters, the
Company is required to make an offer to purchase Senior Notes and thereafter, if
applicable, 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,
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 Loan Agreement, as amended through 1993, provides a credit facility for
general corporate purposes to the Company of up to $35 million, $15 million of
which may be used for financing the operations of RCL. The Loan Agreement
terminates December 31, 1996. The Company pays interest on borrowed funds at
1.5% above the prime rate. In addition, the Company pays monthly facility and
collateral management fees. At December 31, 1993, the Company had outstanding
borrowings under
9
<PAGE>
the Loan Agreement of $2 million plus $2.9 million of standby letters of credit.
Funds advanced under the Loan 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
Loan Agreement also contains certain continuing obligations, such as 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.
ITEM 2. PROPERTIES
The Company manufactures its thermoplastic resins 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.
CT Film has four manufacturing facilities for the production of blown and cast
plastic film. These facilities are located in Chippewa Falls, Wisconsin;
Harrington, Delaware; Clearfield, Utah and Dalton, Georgia.
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 a parcel of land held
for sale in the La Porte and Pasadena industrial districts near Houston, Texas.
The polyethylene plant in Odessa, Texas has been in operation since 1961.
The plant's initial rated capacity has been expanded, primarily through
technological developments and capital improvements, from 120 million pounds per
year to a current rated capacity, depending upon product selection, of 405
million pounds per year. Using six high-pressure tubular reactors and one
autoclave reactor, 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 three separate manufacturing
lines. Line I was built in 1964 with a rated capacity of approximately 28
million pounds per year and has been modified to a rated capacity of
approximately 70 million pounds per year. Line II was constructed in 1967 with
an initial capacity of approximately 15 million pounds of polypropylene per year
but was modified in 1986 to enable the line to produce approximately 35 million
pounds per year of APAO. Line III was built in 1969 and was modified to increase
its rated capacity to a total of approximately 110 million pounds per year in
1988.
The styrene plant in Odessa, Texas was constructed in 1958. Its original
capacity has been expanded to a present rated capacity of approximately 320
million pounds per year. The olefins plant at the Odessa Facility was built in
1961 with a rated capacity of approximately 150 million pounds per year. Through
modernization and expansion, the rated capacity of the olefins plant has been
expanded to approximately 540 million pounds per year of ethylene and 210
million pounds per year of propylene.
CT Film's Chippewa Falls plant began operations in 1948 and contains 20
blown monolayer film lines, three monolayer cast film lines and one coextrusion
cast line. The total annual capacity is rated at 76 million pounds.
The Harrington plant began operations in 1972 and contains seven monolayer
blown film lines including a large Greenhouse film line, two monolayer cast film
lines and three coextrusion cast film lines. The total annual capacity is rated
at 67 million pounds.
The Clearfield plant began operations in 1991 and contains four monolayer
blown film lines, one coextrusion blown film line and two coextrusion cast film
lines. The total annual capacity is rated at 44 million pounds.
10
<PAGE>
The Dalton plant began operations in 1966 and contains five monolayer blown
film lines and six coextrusion blown film lines. In addition there are three
printing presses, five slitter rewinders and six bag machines in the converting
area. The total annual film extrusion capacity is rated at 38 million pounds.
In 1993, CT Film acquired 6.5 acres of land and began construction of a
62,000 square foot film production plant in Humberside County, England. The
plant will include both cast and blown film lines and is anticipated to be in
operation by late 1994.
ITEM 3. LEGAL PROCEEDINGS
BANKRUPTCY. On October 18, 1991, and pursuant to an agreement in principle
detailing the terms for the Company's recapitalization, Old Rexene, Products and
Poly-Pac, Inc., a wholly-owned subsidiary, filed voluntary petitions for
reorganization under Chapter 11 of the Bankruptcy Code in 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 procedural purposes only. On July 7, 1992, the Bankruptcy
Court entered an order confirming the Amended Plan. 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 the Effective Date, respectively. See "Item 1 -- The
Reorganization", "Item 7 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 2 to the Consolidated Financial
Statements included in Item 8. Substantially all distributions contemplated by
the Amended Plan have been made. Certain matters, including the Izzarelli Class
(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 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, 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 Rexene
created a misleading impression of the Company'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 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 Rexene 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 (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 had
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
11
<PAGE>
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 Confirmation Order 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
which are currently pending in the Fifth Circuit Court of Appeals. The Izzarelli
Class 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, which 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 the Izzarelli Litigation 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 in the Izzarelli Litigation, it has otherwise denied
coverage and reserved all rights.
PHILLIPS BLOCK COPOLYMER LITIGATION. In March 1984, 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 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
12
<PAGE>
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 which remain
pending, 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 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 condition.
With respect to certain pending or threatened proceedings involving the
discharge of materials into or protection of the environment, see "Item 1 --
Business -- 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's security holders during
the fourth quarter of 1993.
13
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names, ages and offices of the Company's
executive officers as of March 1, 1994:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------- --- -------------------------------------------------------------
<S> <C> <C>
Arthur L. Goeschel 72 Chairman of the Board
Andrew J. Smith 52 Director, Chief Executive Officer
Lavon N. Anderson 58 Director, President and Chief Operating Officer
Kevin W. McAleer 43 Executive Vice President and Chief Financial Officer
Jack E. Knott 39 Executive Vice President -- Sales and Market Development
James M. Ruberto 47 Executive Vice President and President -- CT Film
Jonathan R. Wheeler 42 Senior Vice President -- Administration
Bernard J. McNamee 58 Vice President, Secretary and General Counsel
Geff Perera 40 Vice President and Controller
</TABLE>
Mr. Goeschel has been Chairman of the Board of Rexene since March 1992. He
also was a director of 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. 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 Rexene 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 the Company from January 1991 to June 1991. Immediately prior
thereto, he had been a director of Rexene since May 1988 and the President and
Chief Executive Officer of Rexene since June 1988. Prior thereto he had held
various positions with Rexene since 1976.
Dr. Anderson has been President and Chief Operating Officer of Rexene 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
Rexene. Prior thereto he had held various engineering, manufacturing and
research and development positions with Rexene since 1972.
Mr. McAleer has been an Executive Vice President and Chief Financial Officer
of Rexene 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 Rexene since March 1992. Prior thereto, Mr. Knott was an Executive Vice
President of 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 Rexene 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 Rexene. From October 1987 through March 1989,
Mr. Ruberto was Vice President -- Strategic Planning of Plicon Corp., a
manufacturer of flexible packaging materials.
14
<PAGE>
Mr. Wheeler has been Senior Vice President -- Administration of Rexene since
December 1990. Prior thereto, Mr. Wheeler had been Vice President -- Human
Resources and Administration of Rexene since September 1988.
Mr. McNamee has been Vice President, Secretary and General Counsel of Rexene
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,
polyolefins and other chemical products.
Mr. Perera has been Vice President of Rexene since January 1991 and
Corporate Controller since February 1989. From October 1988 to February 1989,
Mr. Perera was Director of External Reporting of Rexene.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Prior to the effective date of the Company's Reorganization, the common
stock of Old Rexene was listed on the New York Stock Exchange. On the effective
date, for every 40 shares of common stock of Old Rexene, the holders thereof
became entitled to receive in exchange therefor one share of Common Stock.
The Common Stock began trading on the New York Stock Exchange on a when
issued basis on September 14, 1992 and on a regular way basis on October 8,
1992. The high and low daily closing sales prices of the Common Stock for each
calendar quarter or portion thereof from September 14, 1992 to December 31, 1993
are as follows:
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
1993:
Fourth Quarter........................ 3 3/8 2 1/2
Third Quarter......................... 3 5/8 2 3/4
Second Quarter........................ 4 1/4 3
First Quarter......................... 4 1/8 3
1992:
Fourth Quarter........................ 3 7/8 2 5/8
Third Quarter (from September 14,
1992)................................ 3 1/4 2 1/2
</TABLE>
The high and low daily closing sales prices of the common stock of Old
Rexene for each calendar quarter or portion thereof from January 1, 1992 to
September 11, 1992 are as follows:
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
1992:
Third Quarter (through September 11,
1992)................................ 3/8 7/32
Second Quarter........................ 1 1/4 9/32
First Quarter......................... 1 5/8 7/8
</TABLE>
The Company did not pay dividends on its common stock during the last two
fiscal years. The Loan Agreement prohibits the payment of any dividends with
respect to common stock. Also, the Indentures contain substantial restrictions
on the payment of any such dividends. See "Item 7 -- Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources".
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the Company for
the periods indicated. Information should be read in conjunction with the
Company's Consolidated Financial Statements
15
<PAGE>
and the Notes thereto included on the pages immediately following the Index to
Consolidated Financial Statements appearing on page F-1. See Item 7 --
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Note 3 to the Consolidated Financial Statements for a discussion
about comparability.
<TABLE>
<CAPTION>
POST-EMERGENCE PRE-EMERGENCE
--------------------------- -------------------------------------------------
THREE MONTHS NINE MONTHS
YEAR ENDED ENDED ENDED YEARS ENDED DECEMBER 31,
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, ----------------------------------
1993 1992 1992 1991 1990 1989
------------ ------------- ------------- ------------ --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA: (1)
Net sales.................... $ 429,353 $ 98,854 $ 316,106 $ 449,728 $ 502,186 $ 608,631
Operating income............. 14,504 1,418 9,392 12,028 81,100 99,938
Debt restructuring costs and
reorganization items........ -- -- 38,514 13,596 -- --
Interest expense............. 49,834 12,660 -- 58,374(2) 71,732 61,111
Income (loss) before
extraordinary items......... (25,243) (6,528) (31,476) (42,747) 2,705 10,205
Extraordinary items, net of
income taxes................ -- -- 123,672 -- 17,169 (76,459)
------------ ------------- ------------- ------------ --------- ---------
Net income (loss)............ $ (25,243) $ (6,528) $ 92,196 $ (42,747) $ 19,874 $ (66,254)
------------ ------------- ------------- ------------ --------- ---------
------------ ------------- ------------- ------------ --------- ---------
Loss per share (3)........... $ (2.38) $ (.62 )
------------ -------------
------------ -------------
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------------------------
1993 1992 1991 1990 1989
--------- --------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEETS
DATA: (1)
Current assets............... $ 147,463 $ 140,982 $ 159,548 $ 196,043 $ 291,690
Current liabilities.......... (42,353) (36,158) (49,771) (62,992) (172,637)
Liabilities subject to
compromise.................. -- -- (428,297)(4) -- --
Working capital.............. 105,110 104,824 109,777 133,051 119,053
Total assets................. 430,036 423,591 440,665 461,152 555,679
Long-term debt and other
noncurrent liabilities...... (392,820) (367,337) (57,410) (454,096) (464,418)
Stockholders' equity
(deficit)................... (5,137) 20,106 (94,813) (55,936) (81,376)
<FN>
- ------------------------------
(1) The financial results of a manufacturing facility in Bayport, Texas, which
was sold, are included in the Consolidated Statements of Operations Data
for the years ended December 31, 1990 and 1989. In addition, the assets
and liabilities of this facility are included in the Consolidated Balance
Sheet Data at December 31, 1989.
(2) Interest from October 16, 1991 through December 31, 1991 was calculated
using the terms of 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. If the interest expense from October 16,
1991 to December 31, 1991 had been calculated based on the terms of the
senior and subordinated notes of Old Rexene, the interest expense for the
year ended December 31, 1991 would have aggregated $73.8 million.
(3) Per share data for the pre-emergence periods is not presented because such
information is not comparable to the similar information for the
post-emergence periods.
(4) Represents senior and subordinated notes of Old Rexene and interest
thereon.
</TABLE>
16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of the Company's consolidated results
of operations and financial condition should be read in conjunction with
Selected Financial Data in Item 6 and the Company's Consolidated Financial
Statements and Notes thereto included on the pages immediately following the
Index to Consolidated Financial Statements appearing on page F-1.
RESULTS OF OPERATIONS
In connection with the Reorganization more fully described in Item 1, 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 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's industry historically has been highly cyclical and at times
production capacities have increased more rapidly than demand, thereby causing
lower prices. During fiscal years 1987 and 1988, the industry experienced
increased levels of demand for its products which resulted in near full capacity
utilization rates and higher domestic and export prices. Further, feedstock
prices were also favorable during this period. Since that time, the
polyethylene, polypropylene and styrene industries in general have experienced a
softening of sales prices due to a number of factors. The robust period enjoyed
by the industry in 1987 and 1988 led producers to increase worldwide production
capacity, resulting in excess product supply and industry-wide decreases in
prices during the last four years. Therefore, the Company's operating results
declined significantly between 1989 and 1993.
1993 COMPARED TO 1992 (ON A PRO FORMA BASIS)
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 pro forma adjustments relate primarily to (i) the
recording of interest expense in accordance with the terms of the 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.
17
<PAGE>
Results of operations for the year ended December 31, 1993 and the year
ended December 31, 1992, restated on a pro forma basis for comparative purposes,
are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1993 1992
--------- --------------
(PRO FORMA
AND UNAUDITED)
<S> <C> <C>
Net sales......................................... $ 429,353 $ 414,960
Operating expenses:
Cost of sales................................... 375,609 360,257
Marketing, general and administrative........... 32,641 30,629
Research and development........................ 6,599 6,374
--------- --------------
414,849 397,260
--------- --------------
Operating income.................................. 14,504 17,700
Interest expense:
Cash............................................ (24,446) (24,446)
Non-cash........................................ (25,388) (25,126)
Interest income................................... 1,392 1,377
Other, net........................................ (245) (6,818)
--------- --------------
Loss before income taxes.......................... (34,183) (37,313)
--------- --------------
Income tax benefit................................ 8,940 8,116
--------- --------------
Net loss.......................................... $ (25,243) $ (29,197)
--------- --------------
--------- --------------
</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 principally due to an increase
in sales resulting from purchases of product manufactured by 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.
18
<PAGE>
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 class action
lawsuit discussed in Note 20 to the Consolidated Financial Statements, 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.
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, the Company's
financial condition and results of operations 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 pro
forma results for the three months ended December 31, 1991 and compares the
results for the nine months ended September 30, 1992 to the nine months ended
September 30, 1991. The pro forma information gives effect to the Reorganization
as though it had occurred on September 30, 1991. The pro forma adjustments
relate primarily to (i) the recording of interest expense in accordance with the
terms of the 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.
19
<PAGE>
Results of operations for the three months ended December 31, 1992 and the
three months ended December 31, 1991, restated on a pro forma basis for
comparative purposes, 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>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------- -----------------------
1992 1991 1992 1991
-------- -------------- --------- -----------
(PRO FORMA AND (UNAUDITED)
UNAUDITED)
<S> <C> <C> <C> <C>
Net sales............................... $ 98,854 $ 98,826 $ 316,106 $ 350,902
Operating expenses:
Cost of sales......................... 86,732 87,523 278,081 299,356
Marketing, general and
administrative....................... 9,045 10,132 23,918 32,446
Research and development.............. 1,659 1,709 4,715 4,546
-------- -------------- --------- -----------
97,436 99,364 306,714 336,348
-------- -------------- --------- -----------
Operating income (loss)................. 1,418 (538) 9,392 14,554
Interest expense:
Cash.................................. (6,215) (6,215) -- (52,242)
Non-cash.............................. (6,445) (6,445) -- 2,845
Other, net.............................. 806 (651) 282 4,402
Debt restructuring costs................ -- -- -- (9,786)
Reorganization items.................... -- -- (38,514) --
-------- -------------- --------- -----------
Loss before income taxes and
extraordinary gain..................... (10,436) (13,849) (28,840) (40,227)
-------- -------------- --------- -----------
Income tax (expense) benefit............ 3,908 3,352 (2,636) 8,567
-------- -------------- --------- -----------
Loss before extraordinary gain.......... (6,528) (10,497) (31,476) (31,660)
Extraordinary gain...................... -- -- 123,672 --
-------- -------------- --------- -----------
Net income (loss)....................... $ (6,528) $ (10,497) $ 92,196 $ (31,660)
-------- -------------- --------- -----------
-------- -------------- --------- -----------
</TABLE>
THREE MONTHS ENDED DECEMBER 31, 1992 COMPARED TO THREE MONTHS ENDED
DECEMBER 31, 1991 (ON A PRO FORMA BASIS)
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 HPLDPE 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.
20
<PAGE>
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.
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 primarily 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 Bankruptcy Code. (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. (See Note 3 to the Consolidated
Financial Statements).
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 class action lawsuit discussed in Note 20 to the Consolidated
Financial Statements, 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.
21
<PAGE>
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 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 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 year ended December 31, 1993, $11.3 million of cash was generated
from operations. During 1992, $2.8 million was generated from operations before
reorganization items for the three months ended December 31, 1992 and $10.9
million for the nine months ended September 30, 1992. The operating cash flows
for 1992 were unfavorably affected by the payout of $15.8 million for
prepetition liabilities and favorably affected by an income tax refund of $17.2
million received from the Internal Revenue Service.
Management believes that the unrestricted cash balance of $28.3 million on
December 31, 1993, together with cash flow generated from operations and the
availability of financing provided by the Loan Agreement, will be sufficient to
meet the Company's liquidity needs during 1994. During 1993, the Company
borrowed $2.0 million under the Loan Agreement for financing construction of the
United Kingdom manufacturing facility. The restricted cash at December 31, 1993
of $2.2 million consists of amounts held in a reserve account under the Amended
Plan for payment of disputed claims and administrative expenses.
For each interest period relating to the Subordinated Notes ending on or
prior to November 15, 1994, the Company may exercise the Pay-in-Kind feature.
See "Item 1 -- The Reorganization". In 1993 and 1992, the Board of Directors
exercised the Pay-in-Kind feature and issued $8.1 million and $2.9 million of
Subordinated Notes. On March 1, 1994, the Board of Directors decided to exercise
the Pay-in-Kind feature for the interest payment due on May 15, 1994, which will
result in the issuance of approximately $4.3 million of additional Subordinated
Notes. The Board of Directors will consider the advisability of exercising such
feature for the interest payments on November 15, 1994.
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.
In addition, the interest rates on the Senior and Subordinated Notes
increase beginning in 1995 and 1996, respectively. The annual interest rate on
the Senior Notes is 9% through November 14, 1995. Thereafter, the annual
interest rate increases to 12% from November 15, 1995 through November 14, 1996
and 14% thereafter. The annual interest rate on the Subordinated Notes is 10%
through November 14, 1996. Thereafter, the annual interest rate increases to 12%
from November 15, 1996 through November 14, 1997 and 14% thereafter.
22
<PAGE>
The Company's projected cash flow generated from operations and the
availability of financing provided by the Loan Agreement are anticipated to be
sufficient to meet its operating and debt service requirements for the next few
years. Because of recent favorable trends in the economy and financing market,
the Company is exploring a restructuring of its current long-term debt to reduce
future cash interest costs.
A number of potential environmental liabilities exist which relate to
contaminated property. See "Item 1 -- Business-Environmental and Related
Regulation". 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; however, the Company recorded $23.4
million as an estimate at December 31, 1993 of its total potential environmental
liability with respect to remediation of contaminated sites which management
believes, on the basis of its reasonable investigation and analysis, is
adequate. 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 liabilities would not have a
material adverse effect on the financial condition of the Company. In addition,
because government and environmental groups have become increasingly concerned
in recent years about environmental issues, 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 $10.5 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 December 31, 1993 balance sheet. This amount
deposited in trust does not cover the costs of addressing existing contamination
at the Odessa Facility. The Company does not believe that in the near future it
will be able to satisfy any of the alternative financial assurance methods under
RCRA which would allow funds to be released from the trust. To the extent any
funds are released, they would be considered for the purpose of determining the
mandatory redemption requirements for Senior Notes which may arise due to excess
cash flow.
The Company's operational expenditures for environmental remediation and
waste disposal were approximately $6.4 million in 1993 and are expected to be
approximately $6.9 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 $2.9 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 environmental requirements.
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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's Consolidated Financial Statements and supplementary data
required by this item are included on the pages immediately following the Index
to Consolidated Financial Statements and Financial Statement Schedules appearing
on page F-1 and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
23
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item will be contained in the definitive
proxy statement (the "Proxy Statement") of the Company to be filed in connection
with its forthcoming annual meeting of stockholders scheduled for May 24, 1994,
except for the information regarding executive officers of the Company contained
in Part I of this Annual Report on Form 10-K. The information required by this
item to be contained in the Proxy Statement is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be contained in the Proxy
Statement. Such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item will be contained in the Proxy
Statement. Such information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item will be contained in the Proxy
Statement. Such information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Consolidated Financial Statements:
See Index to Consolidated Financial Statements on page F-1.
2. Financial Statement Schedules:
See Index to Consolidated Financial Statements on page F-1.
3. Exhibits:
<TABLE>
<S> <C> <C>
2.1 -- First Amended Plan of Reorganization of Rexene Products Company, et al.,
dated April 29, 1992 (filed as Exhibit 2.1 to Rexene Corporation'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 Rexene Corporation'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 Rexene Corporation and Rexene Products
Company dated as of September 11, 1992 (filed as Exhibit 2.3 to Rexene
Corporation'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 Rexene
Corporation's Form 10-K for the fiscal year ended December 31, 1992 and
incorporated herein by reference.)
3.1.2 -- Rexene Corporation Amendment to Certificate of Incorporation dated June 9,
1993.
3.2.1 -- Rexene Corporation Amended and Restated By-Laws dated September 18, 1992
(filed as Exhibit 3.2.1 to Rexene Corporation's Form 10-K for the fiscal year
ended December 31, 1992 and incorporated herein by reference).
3.2.2 -- Rexene Corporation Amendments to By-Laws adopted January 26, 1993 (filed as
Exhibit 3.2.2 to Rexene Corporation's Form 10-K for the fiscal year ended
December 31, 1992 and incorporated herein by reference).
</TABLE>
24
<PAGE>
<TABLE>
<S> <C> <C>
4.1 -- Indenture dated as of September 18, 1992 between Rexene Corporation, as
Issuer, and Chemical Bank, as Trustee, for Increasing Rate First Priority
Notes Due 1999 (filed as Exhibit 4.1 to Rexene Corporation's Form 10-Q
Quarterly Report for the three months ended September 30, 1992 and
incorporated herein by reference).
4.2 -- Indenture dated as of September 18, 1992 between Rexene Corporation, 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
Rexene Corporation's Form 10-Q Quarterly Report for the three months ended
September 30, 1992 and incorporated herein by reference).
4.3 -- Intercreditor and Collateral Trust Agreement dated as of September 18, 1992
by and among Rexene Corporation 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 Rexene Corporation's Form 10-Q
Quarterly Report for the three months ended September 30, 1992 and
incorporated herein by reference).
4.4 -- Company First Priority Security and Pledge Agreement dated as of September
18, 1992 made by Rexene Corporation, as Grantor, in favor of Chemical Bank,
as Collateral Agent (filed as Exhibit 4.4 to Rexene Corporation's Form 10-Q
Quarterly Report for the three months ended September 30, 1992 and
incorporated herein by reference).
4.5 -- Company Second Priority Security and Pledge Agreement dated as of September
18, 1992 made by Rexene Corporation, as Grantor, in favor of Chemical Bank,
as Collateral Agent (filed as Exhibit 4.5 to Rexene Corporation's Form 10-Q
Quarterly Report for the three months ended September 30, 1992 and
incorporated herein by reference).
4.6 -- 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 Rexene Corporation's Form 10-Q
Quarterly Report for the three months ended September 30, 1992 and
incorporated herein by reference).
4.7 -- 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 Rexene Corporation's Form
10-Q Quarterly Report for the three months ended September 30, 1992 and
incorporated herein by reference).
4.8 -- First Priority Deed of Trust and Security Agreement dated as of September 18,
1992 from Rexene Corporation, 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 Rexene Corporation's Form
10-Q Quarterly Report for the three months ended September 30, 1992 and
incorporated herein by reference).
4.9 -- Second Priority Deed of Trust and Security Agreement dated as of September
18, 1992 from Rexene Corporation, 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 Rexene
Corporation's Form 10-Q Quarterly Report for the three months ended September
30, 1992 and incorporated herein by reference).
4.10 -- First Priority Deed of Trust and Security Agreement dated as of September 18,
1992 from Rexene Corporation, 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 Rexene Corporation's
Form 10-Q Quarterly Report for the three months ended September 30, 1992 and
incorporated herein by reference).
</TABLE>
25
<PAGE>
<TABLE>
<S> <C> <C>
4.11 -- Second Priority Deed of Trust and Security Agreement dated as of September
18, 1992 from Rexene Corporation, 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 Rexene
Corporation's Form 10-Q Quarterly Report for the three months ended September
30, 1992 and incorporated herein by reference).
4.12 -- First Priority Mortgage, Fixture Filing and Security Agreement dated as of
September 18, 1992 from Rexene Corporation, as Mortgagor, to Chemical Bank,
as Collateral Agent, Mortgagee, for certain property located in Chippewa
Falls, Wisconsin (filed as Exhibit 4.12 to Rexene Corporation's Form 10-Q
Quarterly Report for the three months ended September 30, 1992 and
incorporated herein by reference).
4.13 -- Second Priority Mortgage, Fixture Filing and Security Agreement dated as of
September 18, 1992 from Rexene Corporation, as Mortgagor, to Chemical Bank,
as Collateral Agent, Mortgagee, for certain property located in Chippewa
Falls, Wisconsin (filed as Exhibit 4.13 to Rexene Corporation's Form 10-Q
Quarterly Report for the three months ended September 30, 1992 and
incorporated herein by reference).
4.14 -- First Priority Mortgage and Security Agreement dated as of September 18, 1992
from Rexene Corporation, as Mortgagor, to Chemical Bank, as Collateral Agent,
Mortgagee, for certain property located in Harrington, Delaware (filed as
Exhibit 4.14 to Rexene Corporation's Form 10-Q Quarterly Report for the three
months ended September 30, 1992 and incorporated herein by reference).
4.15 -- Second Priority Mortgage and Security Agreement dated as of September 18,
1992 from Rexene Corporation, as Mortgagor, to Chemical Bank, as Collateral
Agent, Mortgagee, for certain property located in Harrington, Delaware (filed
as Exhibit 4.15 to Rexene Corporation's Form 10-Q Quarterly Report for the
three months ended September 30, 1992 and incorporated herein by reference).
4.16 -- First Priority Leasehold Deed of Trust, Fixture Filing and Security Agreement
dated as of September 18, 1992 from Rexene Corporation, 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 Rexene Corporation's Form 10-Q Quarterly
Report for the three months ended September 30, 1992 and incorporated herein
by reference).
4.17 -- Second Priority Leasehold Deed of Trust, Fixture Filing and Security
Agreement dated as of September 18, 1992 from Rexene Corporation, 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 Rexene Corporation's Form 10-Q Quarterly
Report for the three months ended September 30, 1992 and incorporated herein
by reference).
4.18 -- 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 Rexene Corporation's Form 10-Q Quarterly Report for
the three months ended September 30, 1992 and incorporated herein by
reference).
4.19 -- 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 Rexene Corporation's Form 10-Q Quarterly Report for
the three months ended September 30, 1992 and incorporated herein by
reference).
</TABLE>
26
<PAGE>
<TABLE>
<S> <C> <C>
4.20 -- Stockholder Rights Agreement between Rexene Corporation and American Stock
Transfer & Trust Company, as Rights Agent, dated as of January 26, 1993
(filed as Exhibit 4.20 to Rexene Corporation's Form 10-K for the fiscal year
ended December 31, 1992 and incorporated herein by reference).
10.1.1 -- Rexene Corporation 1988 Stock Incentive Plan (filed as Exhibit 10.5 to Rexene
Corporation's Form S-1 Registration Statement No. 33-22723 and incorporated
herein by reference).
10.1.2 -- Amendment to Rexene Corporation 1988 Stock Incentive Plan (filed as Exhibit
10.2.1 to Rexene Corporation's Annual Report on Form 10-K for the year ended
December 31, 1991 and incorporated herein by reference).
10.2.1 -- Rexene Corporation 1993 Non-Qualified Stock Option Plan (filed as Exhibit
10.2 to Rexene Corporation's Form 10-K for the fiscal year ended December 31,
1992 and incorporated herein by reference).
10.2.2 -- Form of Non-Qualified Stock Option Agreement dated as of May 27, 1993 between
Rexene Corporation and each executive officer.
10.2.3 -- Form of Non-Qualified Stock Option Agreement dated as of March 1, 1994
between Rexene Corporation and each executive officer.
10.3.1 -- Non-Qualified Stock Option Plan for Outside Directors of Rexene Corporation
(filed as Exhibit 10.3 to Rexene Corporation's Form 10-K for the fiscal year
ended December 31, 1992 and incorporated herein by reference).
10.3.2 -- Form of Non-Qualified Stock Option Agreement effective as of January 1, 1993
between Rexene Corporation and each director who is not an employee of the
Company.
10.3.3 -- Form of Non-Qualified Stock Option Agreement effective as of January 1, 1994
between Rexene Corporation and each director who is not an employee of the
Company.
10.4.1 -- Rexene Corporation 1993 Annual Incentive Bonus Plan (filed as Exhibit 10.4 to
Rexene Corporation's Form 10-K for the fiscal year ended December 31, 1992
and incorporated herein by reference).
10.4.2 -- Rexene Corporation 1994 Annual Incentive Bonus Plan.
10.5 -- Rexene Corporation Executive Management Committee Severance Policy (filed as
Exhibit 10.5 to Rexene Corporation's Form 10-K for the fiscal year ended
December 31, 1992 and incorporated herein by reference).
10.6 -- Executive Security Plan of Rexene Products Company (filed as Exhibit 10.8 to
Rexene Corporation's Form S-1 Registration Statement No. 33-22723 and
incorporated herein by reference).
10.7 -- Letter Agreement, dated as of March 16, 1992, between Rexene Corporation and
Arthur L. Goeschel (filed as Exhibit 10.13 to Rexene Corporation's Form 10-K
Annual Report for the year ended December 31, 1991 and incorporated herein by
reference).
10.8.1 -- Letter Agreement dated January 7, 1993 between Rexene Corporation and Andrew
J. Smith (filed as Exhibit 10.8.1 to Rexene Corporation's Form 10-K for the
fiscal year ended December 31, 1992 and incorporated herein by reference).
10.8.2 -- Indemnity Agreement dated as of May 25, 1990 by and among Rexene Corporation,
Rexene Products Company and Andrew J. Smith (filed as Exhibit 10.8.2 to
Rexene Corporation's Form 10-K for the fiscal year ended December 31, 1992
and incorporated herein by reference).
</TABLE>
27
<PAGE>
<TABLE>
<S> <C> <C>
10.9.1 -- Non-Qualified Stock Option Agreement dated as of July 6, 1989 between Rexene
Corporation and Lavon N. Anderson (filed as Exhibit 10.12.2 to Rexene
Corporation's Form 10-K Annual Report for the year ended December 31, 1990,
and incorporated herein by reference).
10.9.2 -- Non-Qualified Stock Option Agreement, dated as of June 15, 1988 between
Rexene Corporation and Lavon N. Anderson (filed as Exhibit 10.29.2 to Rexene
Corporation's Form S-1 Registration Statement No. 33-22723 and incorporated
herein by reference).
10.9.3 -- Indemnity Agreement dated as of May 25, 1990 by and among Rexene Corporation,
Rexene Products Company and Lavon N. Anderson (filed as Exhibit 10.9.3 to
Rexene Corporation's Form 10-K for the fiscal year ended December 31, 1992
and incorporated herein by reference).
10.9.4 -- Letter Agreement dated January 7, 1993 between Rexene Corporation and Lavon
N. Anderson (filed as Exhibit 10.9.4 to Rexene Corporation's Form 10-K for
the fiscal year ended December 31, 1992 and incorporated herein by
reference).
10.10.1 -- Employment Agreement dated as of July 23, 1990 between Rexene Products
Company and Kevin W. McAleer (filed as Exhibit 10.13 to Rexene Corporation's
Form 10-K Annual Report for the year ended December 31, 1990, and
incorporated herein by reference).
10.10.2 -- Non-Qualified Stock Option Agreement dated as of July 23, 1990 between Rexene
Corporation and Kevin W. McAleer (filed as Exhibit 10.13.1 to Rexene
Corporation's Form 10-K Annual Report for the year ended December 31, 1990,
and incorporated herein by reference).
10.10.3 -- Letter Agreement dated July 23, 1993 between Rexene Corporation and Kevin W.
McAleer (filed as Exhibit 10.10.4 to Rexene Corporation's Form 10-Q Quarterly
Report for the three months ended June 30, 1993 and incorporated herein by
reference).
10.11.1 -- Employment Agreement, dated as of May 29, 1990 between Rexene Products
Company and Jack E. Knott (filed as Exhibit 10.15 to Rexene Corporation's
Form 10-K Annual Report for the year ended December 31, 1990, and
incorporated herein by reference).
10.11.2 -- Non-Qualified Stock Option Agreement dated as of July 6, 1989 between Rexene
Corporation and Jack E. Knott (filed as Exhibit 10.15.1 to Rexene
Corporation's Form 10-K Annual Report for the year ended December 31, 1990,
and incorporated herein by reference).
10.11.3 -- Letter Agreement dated June 11, 1993 between Rexene Corporation and Jack E.
Knott (filed as Exhibit 10.11.4 to Rexene Corporation's Form 10-Q Quarterly
Report for the three months ended June 30, 1993 and incorporated herein by
reference).
10.12.1 -- Non-Qualified Stock Option Agreement dated as of July 6, 1989 between Rexene
Products Company and James M. Ruberto (filed as Exhibit 10.14.1 to Rexene
Corporation's Form 10-K Annual Report for the year ended December 31, 1990,
and incorporated herein by reference).
10.12.2 -- Letter Agreement dated January 7, 1993 between Rexene Corporation and James
M. Ruberto (filed as Exhibit 10.12.2 to Rexene Corporation's Form 10-K for
the fiscal year ended December 31, 1992 and incorporated herein by
reference).
10.13.1 -- Non-Qualified Stock Option Agreement dated as of July 6, 1989 between Rexene
Corporation and Jonathan R. Wheeler (filed as Exhibit 10.16.2 to Rexene
Corporation's Form 10-K Annual Report for the year ended December 31, 1990,
and incorporated herein by reference).
</TABLE>
28
<PAGE>
<TABLE>
<S> <C> <C>
10.13.2 -- Letter Agreement dated January 7, 1993 between Rexene Corporation and
Jonathan R. Wheeler (filed as Exhibit 10.13.2 to Rexene Corporation's Form
10-K for the fiscal year ended December 31, 1992 and incorporated herein by
reference).
10.14 -- Agreement dated as of June 10, 1992 by and among Rexene Corporation, Rexene
Products Company, Gilliam & Company, Inc. and William J. Gilliam (filed as
Exhibit 10.14 to Rexene Corporation's Form 10-K for the fiscal year ended
December 31, 1992 and incorporated herein by reference).
10.15 -- Indemnity Agreement dated as of May 25, 1990 by and among Rexene Corporation,
Rexene Products Company and William B. Hewitt (filed as Exhibit 10.22 to
Rexene Corporation's Form 10-K Annual Report for the year ended December 31,
1992, and incorporated herein by reference).
10.16 -- Letter Agreement dated June 11, 1993 between Rexene Corporation and Bernard
J. McNamee (filed as Exhibit 10.23.2 to Rexene Corporation's Form 10-Q
Quarterly Report for the three months ended June 30, 1993 and incorporated
herein by reference).
10.17.1 -- Loan Agreement dated as of September 18, 1992 between Rexene Corporation and
Transamerica Business Credit Corporation (filed as Exhibit 28 to Rexene
Corporation's Form 10-Q Quarterly Report for the quarter ended September 30,
1992 and incorporated herein by reference).
10.17.2 -- First Amendment to Loan Agreement dated as of February 10, 1993 between
Rexene Corporation and Transamerica Business Credit Corporation. (filed as
Exhibit 28.2 to Rexene Corporation's Form 10-K for the fiscal year ended
December 31, 1992 and incorporated herein by reference).
10.17.3 -- Fourth Amendment to Loan Agreement dated as of December 22, 1993 between
Rexene Corporation and Transamerica Business Credit Corporation.
21.1 -- Rexene Corporation Limited, organized October 1, 1993, under the laws of
England.
24 -- Consent of Price Waterhouse.
</TABLE>
(b) Reports on Form 8-K:
None
29
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, as of March 17, 1994.
REXENE CORPORATION
Registrant
By: /s/ ANDREW J. SMITH
--------------------------------------
Andrew J. Smith
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below as of March 17, 1994 by the following persons on
behalf of the registrant and in the capacities indicated.
<TABLE>
<S> <C>
/s/ ARTHUR L. GOESCHEL /s/ ANDREW J. SMITH
- ------------------------------------------- -------------------------------------------
Arthur L. Goeschel Andrew J. Smith
CHAIRMAN OF THE BOARD CHIEF EXECUTIVE OFFICER
AND DIRECTOR
/s/ LAVON N. ANDERSON /s/ KEVIN CLOWE
- ------------------------------------------- -------------------------------------------
Lavon N. Anderson Kevin Clowe
PRESIDENT, CHIEF OPERATING DIRECTOR
OFFICER AND DIRECTOR
/s/ D. GEORGE HARRIS /s/ WILLIAM B. HEWITT
- ------------------------------------------- -------------------------------------------
D. George Harris William B. Hewitt
DIRECTOR DIRECTOR
/s/ ILAN KAUFTHAL /s/ HEINN TOMFOHRDE
- ------------------------------------------- -------------------------------------------
Ilan Kaufthal Heinn Tomfohrde
DIRECTOR DIRECTOR
/s/ FRED RULLO /s/ PHILLIP SIEGEL
- ------------------------------------------- -------------------------------------------
Fred Rullo Phillip Siegel
DIRECTOR DIRECTOR
/s/ KEVIN W. McALEER /s/ GEFF PERERA
- ------------------------------------------- -------------------------------------------
Kevin W. McAleer Geff Perera
EXECUTIVE VICE PRESIDENT VICE PRESIDENT AND CONTROLLER
AND CHIEF FINANCIAL OFFICER
</TABLE>
30
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
ITEMS 8 AND 14(A)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Accountants:
Post-emergence Consolidated Financial Statements...................................................... F-2
Pre-emergence Consolidated Financial Statements....................................................... F-3
Consolidated Financial Statements:
Consolidated Statements of Operations for the year ended December 31, 1993, the three months ended
December 31, 1992, the nine months ended September 30, 1992 and the year ended December 31, 1991..... F-4
Consolidated Balance Sheets as of December 31, 1993 and 1992.......................................... F-5
Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the year ended December 31,
1993, the three months ended December 31, 1992, the nine months ended September 30, 1992 and the year
ended December 31, 1991.............................................................................. F-6
Consolidated Statements of Cash Flows for the year ended December 31, 1993, the three months ended
December 31, 1992, the nine months ended September 30, 1992 and the year ended December 31, 1991..... F-7-8
Notes to Consolidated Financial Statements............................................................ F-9-27
Financial Statement Schedules:
Consolidated Schedules for the year ended December 31, 1993, the three months ended December 31, 1992,
the nine months ended September 30, 1992 and the year ended December 31, 1991:
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>
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.
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 and
financial statement schedules 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, 1993 and 1992, and the
results of their operations and their cash flows for the year ended December 31,
1993 and the three months ended December 31, 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
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
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 and
financial statement schedules 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 nine months
ended September 30, 1992 and the year ended December 31, 1991, 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
Dallas, Texas
April 12, 1993
F-3
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
POST-EMERGENCE PRE-EMERGENCE
-------------------------- ---------------------------
THREE MONTHS NINE MONTHS
YEAR ENDED ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1993 1992 1992 1991
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net sales.............................................. $ 429,353 $ 98,854 $ 316,106 $ 449,728
------------ ------------ ------------- ------------
Operating expenses:
Cost of sales........................................ 375,609 86,732 278,081 388,057
Marketing, general and administrative................ 32,641 9,045 23,918 43,388
Research and development............................. 6,599 1,659 4,715 6,255
------------ ------------ ------------- ------------
414,849 97,436 306,714 437,700
------------ ------------ ------------- ------------
Operating income....................................... 14,504 1,418 9,392 12,028
Interest expense:
Cash................................................. (24,446) (6,215) -- (55,029)
Non-cash............................................. (25,388) (6,445) -- (3,345)
Interest income........................................ 1,392 637 740 2,750
Debt restructuring costs............................... -- -- -- (7,866)
Other, net............................................. (245) 169 (458) 1,001
------------ ------------ ------------- ------------
Income (loss) before reorganization items, income taxes
and extraordinary gain................................ (34,183) (10,436) 9,674 (50,461)
Reorganization items................................... -- -- (38,514) (5,730)
------------ ------------ ------------- ------------
Loss before income taxes and extraordinary gain........ (34,183) (10,436) (28,840) (56,191)
Income tax (expense) benefit........................... 8,940 3,908 (2,636) 13,444
------------ ------------ ------------- ------------
Loss before extraordinary gain......................... (25,243) (6,528) (31,476) (42,747)
Extraordinary gain, net of income taxes................ -- -- 123,672 --
------------ ------------ ------------- ------------
Net income (loss)...................................... $ (25,243) $ (6,528) $ 92,196 $ (42,747)
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
Weighted average shares outstanding.................... 10,585 10,508
------------ ------------
------------ ------------
Net loss per share..................................... $ (2.38) $ (.62 )
------------ ------------
------------ ------------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1993 1992
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Unrestricted.......................................................................... $ 28,288 $ 30,444
Restricted............................................................................ 2,247 3,758
Accounts receivable, net................................................................ 57,820 51,771
Inventories............................................................................. 52,621 53,692
Income taxes receivable................................................................. 4,965 71
Prepaid expenses and other.............................................................. 1,522 1,246
----------- -----------
Total current assets................................................................ 147,463 140,982
----------- -----------
Property, plant and equipment, net...................................................... 244,346 243,621
Reorganization value in excess of amounts allocable to identifiable assets, net......... 3,660 3,928
Intangible assets, net.................................................................. 4,198 5,317
Other noncurrent assets................................................................. 30,369 29,743
----------- -----------
$ 430,036 $ 423,591
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable........................................................................ $ 27,386 $ 20,387
Accrued liabilities..................................................................... 8,116 9,719
Accrued interest........................................................................ 3,097 3,145
Employee benefits payable............................................................... 3,754 2,907
----------- -----------
Total current liabilities........................................................... 42,353 36,158
----------- -----------
Long-term debt.......................................................................... 279,764 261,726
Deferred income taxes................................................................... 45,216 49,376
Bank borrowings......................................................................... 2,000 --
Other noncurrent liabilities............................................................ 65,840 56,225
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................................................................... (31,771) (6,528)
----------- -----------
Total stockholders' equity (deficit)................................................ (5,137) 20,106
----------- -----------
$ 430,036 $ 423,591
----------- -----------
----------- -----------
</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>
POST-EMERGENCE PRE-EMERGENCE
-------------------------- ---------------------------
THREE NINE
MONTHS MONTHS
YEAR ENDED ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1993 1992 1992 1991
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................... $ (25,243) $ (6,528) $ 92,196 $ (42,747)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization.................... 17,446 4,315 20,062 23,852
Reorganization items............................. -- -- 38,514 5,730
Reversal of accrued interest..................... -- -- (6,831) --
Debt restructuring costs......................... -- -- -- 7,866
Extraordinary gain............................... -- -- (123,672) --
Non-cash interest expense........................ 25,388 6,445 -- --
Deferred income taxes............................ (4,160) (3,690) 525 2,262
Change in:
Accounts receivable............................ (6,049) 5,756 (9,343) 11,080
Inventories.................................... 1,071 (3,030) 182 20,983
Prepaid expenses and other..................... (276) (940) 727 (446)
Income taxes................................... (4,894) (408) 17,441 (12,856)
Accounts payable............................... 6,999 2,517 1,139 5,549
Accrued interest............................... (48) (2,914) -- 11,312
Employee benefits payable and accrued
liabilities................................... (756) 612 (1,552) --
Prepetition liabilities paid:
Accounts payable............................... -- (1,093) (15,834) --
Accrued interest............................... -- -- (14,737) --
Increase in other noncurrent liabilities......... 1,006 985 12,518 2,259
Other............................................ 857 782 (456) 844
------------ ------------ ------------- ------------
Total adjustments.............................. 36,584 9,337 (81,317) 78,435
------------ ------------ ------------- ------------
Net cash provided by operating activities before
reorganization items paid........................... 11,341 2,809 10,879 35,688
Reorganization items paid........................ -- (2,053) (10,180) (3,396)
------------ ------------ ------------- ------------
Net cash provided by operating activities.............. 11,341 756 699 32,292
------------ ------------ ------------- ------------
(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>
POST-EMERGENCE PRE-EMERGENCE
-------------------------- ---------------------------
THREE NINE
MONTHS MONTHS
YEAR ENDED ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1993 1992 1992 1991
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Cash flows from investing activities:
Capital expenditures................................. (17,008) (3,961) (11,136) (33,464)
Investment in joint venture.......................... -- (325) -- (733)
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................. (17,008) (4,286) (11,136) (41,961)
------------ ------------ ------------- ------------
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... 2,000 -- -- (6,456)
------------ ------------ ------------- ------------
Net decrease in cash and cash equivalents.............. (3,667) (3,530) (10,437) (16,125)
Cash and cash equivalents at beginning of period..... 34,202 37,732 48,169 64,294
------------ ------------ ------------- ------------
Cash and cash equivalents at end of period........... $ 30,535 $ 34,202 $ 37,732 $ 48,169
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
Supplemental cash flow information:
Cash paid for interest............................... $ 24,039 $ 9,002 $ 14,737 $ 50,745
Cash paid for income taxes........................... $ 114 $ -- $ 1,703 $ --
</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 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 PREOPERATING 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 preoperating 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
and common stock equivalents 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 "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 "Subordinated Notes", and together with the Senior Notes, the "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 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,
--------------------
1993 1992
------- -------
<S> <C> <C>
Trade............................................. $57,697 $52,137
Other............................................. 3,930 4,143
------- -------
61,627 56,280
Less allowances................................... (3,807) (4,509)
------- -------
$57,820 $51,771
------- -------
------- -------
</TABLE>
Bad debt expense for the year ended December 31, 1993, the three months
ended December 31, 1992, the nine months ended September 30, 1992 and the year
ended December 31, 1991 is $223,000, $300,000, $327,000 and $1,175,000,
respectively.
5. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1993 1992
------- -------
<S> <C> <C>
Raw materials..................................... $11,313 $14,971
Work in progress.................................. 6,694 7,481
Finished goods.................................... 34,614 31,240
------- -------
$52,621 $53,692
------- -------
------- -------
</TABLE>
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1993 1992
-------- --------
<S> <C> <C>
Land.............................................. $ 5,738 $ 5,276
Buildings......................................... 17,758 13,841
Plant and equipment............................... 230,026 216,440
Construction in progress.......................... 10,530 11,728
-------- --------
264,052 247,285
Less accumulated depreciation..................... (19,706) (3,664)
-------- --------
$244,346 $243,621
-------- --------
-------- --------
</TABLE>
Depreciation expense for the year ended December 31, 1993, the three months
ended December 31, 1992, the nine months ended September 30, 1992 and the year
ended December 31, 1991 is $16,059,000, $3,664,000, $17,689,000 and $20,656,000,
respectively. During the year ended December 31, 1993, the three months ended
December 31, 1992 and the year ended December 31, 1991, $1,259,000, $312,000 and
$4,685,000, 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,
------------------
1993 1992
------ ------
<S> <C> <C>
Reorganization value in excess of amounts
allocable to identifiable assets................. $4,298 $4,298
Less accumulated amortization..................... (638) (370)
------ ------
$3,660 $3,928
------ ------
------ ------
Intangible assets................................. $5,598 $5,598
Less accumulated amortization..................... (1,400) (281)
------ ------
$4,198 $5,317
------ ------
------ ------
</TABLE>
8. OTHER NONCURRENT ASSETS
Other noncurrent assets consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1993 1992
------- -------
<S> <C> <C>
Spare parts inventories........................... $16,654 $18,107
Deposits held in trusts........................... 10,523 10,428
Deferred preoperating costs....................... 1,322 --
Other............................................. 1,870 1,208
------- -------
$30,369 $29,743
------- -------
------- -------
</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,
----------------
1993 1992
------ ------
<S> <C> <C>
Accrued taxes, other than income.................. $2,555 $3,122
Accrued reorganization costs and disputed
claims........................................... 435 2,422
Other accrued expenses............................ 5,126 4,175
------ ------
$8,116 $9,719
------ ------
------ ------
</TABLE>
10. BANK BORROWINGS
The Company entered into a loan agreement dated September 18, 1992 (the
"Loan 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 Loan Agreement includes a sub-facility
of $15 million for stand-by letters of credit. The Loan 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 Loan Agreement at an annual interest rate of 7%. There were no borrowings
under the Loan Agreement in 1992. At December 31, 1993 and 1992
F-13
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. BANK BORROWINGS (CONTINUED)
approximately $2.9 million and $1.1 million, respectively, of stand-by letters
of credit were outstanding under the Loan Agreement. Funds advanced under the
Loan 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 Loan 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. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1992
-------- --------
<S> <C> <C>
Senior Notes due November 15, 1999................ $253,000 $253,000
Subordinated Notes due November 15, 2002 (subject
to certain sinking fund payments
in 2001)......................................... 95,342 87,249
Less: unamortized discount........................ (68,578) (78,523)
-------- --------
$279,764 $261,726
-------- --------
-------- --------
</TABLE>
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 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 Notes semiannually on May 15 and November 15. In
addition, the interest rates on the Senior and Subordinated Notes increase
beginning in 1995 and 1996, respectively. The annual interest rate on the Senior
Notes is 9% through November 14, 1995, 12% from November 15, 1995 through
November 14, 1996 and 14% thereafter. The Subordinated Notes are secured by a
second lien on the Collateral. The annual interest rate on the 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 Subordinated Notes by
delivering additional 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 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 Senior Notes, and after all Senior Notes are redeemed, the 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
F-14
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. LONG-TERM DEBT (CONTINUED)
the Company may at any time purchase Senior Notes in the open market. In the
event the Company generates "excess cash flow" from operations (as defined in
the indenture governing the Senior Notes) in any fiscal year, the Company is
required to make an offer to purchase Senior Notes at par in an amount equal to
such excess cash flow. However, the cash purchase price of 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 Senior Notes and
thereafter, if applicable, 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.
12. OTHER NONCURRENT LIABILITIES
Other noncurrent liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1993 1992
------- -------
<S> <C> <C>
Accrued environmental remediation costs........... $23,357 $24,298
Accumulated postretirement benefit obligation
(note 17)........................................ 14,729 13,152
Noncurrent interest payable....................... 11,630 3,021
Lawsuit accrual (note 20)......................... 7,400 7,400
Other............................................. 8,724 8,354
------- -------
$65,840 $56,225
------- -------
------- -------
</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 Notes (see note 15).
13. 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>
F-15
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. COMMITMENTS (CONTINUED)
Rental expense under operating leases for the year ended December 31, 1993,
the three months ended December 31, 1992, the nine months ended September 30,
1992 and the year ended December 31, 1991, approximated $7,630,000, $2,024,000,
$6,451,000 and $7,810,000, respectively.
14. 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 year ended December 31, 1993 and the three months ended December 31, 1992 is
not comparable with the income tax expense (benefit) for the nine months ended
September 30, 1992 and the year ended December 31, 1991.
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>
THREE MONTHS NINE MONTHS
YEAR ENDED ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1993 1992 1992 1991
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Current:
State....................... $ (610) $ 177 $ 683 $ 220
Federal..................... 5,390 41 (2,794) 16,399
Deferred income taxes......... 4,160 3,690 (525) (2,262)
Charge equivalent to federal
income taxes................. -- -- -- (913)
------------ ------------ ------------- ------------
$ 8,940 $ 3,908 $ (2,636) $ 13,444
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
</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,
F-16
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. INCOME TAXES (CONTINUED)
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>
THREE MONTHS NINE MONTHS
YEAR ENDED ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1993 1992 1992 1991
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Depreciation and amortization........... $ (5,119) $ 1,571 $ (3,010) $ (2,708)
Non-cash interest....................... 10,700 2,096 -- --
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.............................. (88) 23 (19) 1,104
------------ ------------ ------------- ------------
$ 4,160 $ 3,690 $ (525) $ (2,262)
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
</TABLE>
Deferred income taxes consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1993 1992
---------- ----------
<S> <C> <C>
Excess financial over tax basis of property, plant and equipment..... $ 69,533 $ 63,962
Excess tax over financial basis of the Notes......................... 9,168 16,396
---------- ----------
Gross deferred tax liabilities..................................... 78,701 80,358
Accounts receivable.................................................. (1,639) (2,188)
Inventories.......................................................... (666) (2,485)
Intangible assets.................................................... (1,140) (2,780)
Other noncurrent assets.............................................. (4,474) (3,180)
Other noncurrent liabilities......................................... (23,600) (19,982)
Other................................................................ (1,966) (367)
---------- ----------
$ 45,216 $ 49,376
---------- ----------
---------- ----------
</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 35% for the year ended
F-17
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. INCOME TAXES (CONTINUED)
December 31, 1993 and 34% for the three months ended December 31, 1992, the nine
months ended September 30, 1992 and the year ended December 31, 1991. The
reasons for these differences are as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
YEAR ENDED ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1993 1992 1992 1991
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Tax computed at federal statutory tax
rate................................... $ 11,964 $ 3,549 $ 9,806 $ 19,104
State income taxes...................... (397) 116 461 168
Differences in financial and tax bases
of assets and liabilities.............. -- -- (3,893) (4,496)
Non-deductible amortization............. (493) -- -- --
Non-cash interest....................... (728) -- -- --
Effect of change in federal statutory
income tax rate........................ (1,333) -- -- --
Reorganization items.................... -- 325 (8,133) --
Non-qualified executive stock option
plan................................... -- -- -- (1,180)
Other, net.............................. (73) (82) (877) (152)
------------ ------------ ------------- ------------
Income tax (expense) benefit............ $ 8,940 $ 3,908 $ (2,636) $ 13,444
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
</TABLE>
15. INTEREST EXPENSE
Cash interest for the year ended December 31, 1993 and the three months
ended December 31, 1992 consists of interest on the Senior Notes and 10% of the
interest on the Subordinated Notes. The remaining 90% of the interest on the
Subordinated Notes is included as non-cash interest in accordance with the
Pay-in-Kind feature (see note 11). In addition, non-cash interest includes (i)
accretion on the Notes (see note 11), (ii) an adjustment for EITF Issue No.
86-15 (see note 12), and (iii) an adjustment for interest capitalized in
connection with construction projects (see note 6).
16. OTHER STATEMENT OF OPERATIONS INFORMATION
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 20 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.
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.
Export sales of the Company were $30,495,000, $9,295,000, $33,806,000 and
$71,570,000 for the year ended December 31, 1993, the three months ended
December 31, 1992, the nine months ended September 30, 1992 and the year ended
December 31, 1991, 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 $27,017,000, $6,221,000, $18,244,000
and $26,665,000 for the year ended December 31, 1993, the three months ended
December 31, 1992, the nine months ended September 30, 1992 and the year ended
December 31, 1991, respectively.
F-18
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. 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 1993, 1992 and 1991, the Company matched 25% of the employee contributions
up to the 6% limit. The Company contributed approximately $351,000, $96,000,
$275,000 and $351,000 to the Savings Plan during the year ended December 31,
1993, the three months ended December 31, 1992, the nine months ended September
30, 1992 and the year ended December 31, 1991, 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>
THREE MONTHS NINE MONTHS
YEAR ENDED ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1993 1992 1992 1991
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Service cost............................ $ 1,279 $ 369 $ 1,108 $ 1,601
Interest accrued on pension
obligations............................ 976 239 717 1,064
Actual cash return on plan assets....... (1,278) (137) (446) (1,565)
Net amortization and deferral........... 162 -- (540) 726
------------ ------ ------------- ------------
Net pension expense..................... $ 1,139 $ 471 $ 839 $ 1,826
------------ ------ ------------- ------------
------------ ------ ------------- ------------
</TABLE>
The following table sets forth the funded status of the Pension Plan (in
thousands):
<TABLE>
<CAPTION>
1993 1992
---------- ----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits.................................................................... $ 11,924 $ 9,476
---------- ----------
---------- ----------
Accumulated benefit obligation..................................................... $ 13,822 $ 10,820
---------- ----------
---------- ----------
Projected benefit obligation......................................................... $ 16,518 $ 13,161
Plan assets at fair value............................................................ (14,238) (12,109)
---------- ----------
Excess of projected benefit obligations over plan assets............................. 2,280 1,052
Unrecognized net loss................................................................ (1,392) --
Prior service cost................................................................... 125 --
Other................................................................................ 100 --
---------- ----------
Pension liability included in other noncurrent liabilities........................... $ 1,113 $ 1,052
---------- ----------
---------- ----------
</TABLE>
At December 31, 1993 and 1992, in determining the present value of benefit
obligations, a discount rate of 7.0% and 7.5% was used, respectively. The
assumption for the increase in future compensation levels was 4.5% at December
31, 1993 and 1992. At December 31, 1993 and 1992, the expected long-term rate of
return on assets used in determining future service costs was 9.0%.
F-19
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. EMPLOYEE BENEFITS (CONTINUED)
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, 1993 and 1992 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
YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31,
1993 1992
------------ ------------
<S> <C> <C>
Service cost.................. $ 760 $ 175
Interest cost................. 1,070 234
------------ -----
$ 1,830 $ 409
------------ -----
------------ -----
</TABLE>
The actuarial value of postretirement benefit obligations consists of (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1992
--------- ---------
<S> <C> <C>
Active participants eligible for retirement........................ $ 3,016 $ 3,025
Active participants not yet eligible for retirement................ 3,736 5,655
Retired participants............................................... 3,154 4,472
Prior service cost................................................. 914 --
Net unrecognized gain.............................................. 3,909 --
--------- ---------
Accumulated postretirement benefit obligation...................... $ 14,729 $ 13,152
--------- ---------
--------- ---------
</TABLE>
In 1993 and 1992, in determining the value of postretirement benefit
obligations, a discount rate of 7.0% and 8.25%, 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.
F-20
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. EMPLOYEE BENEFITS (CONTINUED)
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, 1993, the three
months ended December 31, 1992, the nine months ended September 30, 1992 and the
year ended December 31, 1991, 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.
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, 1994 and 1993 was $0.43 and $0.63 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
F-21
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. EMPLOYEE BENEFITS (CONTINUED)
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 20).
18. 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.
19. 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 $107,250,
$60,500 and $137,500 in additional fees for the year ended December 31, 1993,
the three months ended December 31, 1992 and the nine months ended September 30,
1992, respectively. Mr. Goeschel is also a director of Calgon Carbon Corporation
("Calgon"). During the year ended December 31, 1993, the three months ended
December 31, 1992, the nine months ended September 30, 1992, and the year ended
December 31, 1991, the Company purchased approximately $44,000, $36,000, $54,000
and $126,000, 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 amorphous polyalphaolefins
("APAO") manufactured by the Company at its plant in Odessa, Texas. During the
year ended December 31, 1993, the three months ended December 31, 1992, the nine
months ended September 30, 1992, and the year ended December 31, 1991, the
Company sold approximately $283,000, $241,000, $671,000 and $1,005,000,
respectively, of such by-product and scrap products to Orion in the ordinary
course of business. For the same periods, the
F-22
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. RELATED PARTY TRANSACTIONS (CONTINUED)
Company purchased approximately $1,551,000, $302,000, $1,033,000 and $1,087,000,
respectively, of APAO processing and packaging services and miscellaneous
materials from Orion. At December 31, 1993, the net payable to Orion was
approximately $55,000 and at December 31, 1992, the net receivable from Orion
was approximately $332,000. 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
$860,000 and $1,075,000 for the nine months ended September 30, 1992 and the
year ended December 31, 1991, 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 18) 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 17), 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 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
F-23
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. RELATED PARTY TRANSACTIONS (CONTINUED)
settlement in the Izzarelli litigation (as hereafter described in note 20) 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.
20. 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. The Company recorded $23.4 million
as an estimate at December 31, 1993 of its total potential environmental
liability with respect to remediating site contamination, which it believes is
adequate. 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 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.
F-24
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. CONTINGENCIES (CONTINUED)
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, 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
F-25
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. CONTINGENCIES (CONTINUED)
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 condition.
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.
F-26
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
21. 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>
POST-EMERGENCE PRE-EMERGENCE
------------------------------------------------------------------- -------------------------
FOR THE QUARTERS ENDED
-----------------------------------------------------------------------------------------------
DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30,
1993 1993 1993 1993 1992 1992 1992
------------ ------------- --------- --------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales................ $ 102,893 $ 111,188 $ 105,998 $109,274 $ 98,854 $ 109,640 $ 102,763
Gross profit............. 12,184 14,537 13,613 13,410 12,122 12,386 16,288
Loss before extra-
ordinary gain........... (5,608) (7,826) (3,656) (8,153) (6,528) (27,981) (3,258)
Extraordinary gain....... -- -- -- -- -- 123,672 --
Net income (loss)........ (5,608) (7,826) (3,656) (8,153) (6,528) 95,691 (3,258)
Loss per share........... (.53) (.74) (.35) (.77) (.62)
Market prices:
High................... 3 3/8 3 5/8 4 1/4 4 1/2 3 1/8
Low.................... 2 1/2 2 3/4 3 3 2 5/8
<CAPTION>
MARCH 31,
1992
---------
<S> <C>
Net sales................ $103,703
Gross profit............. 9,351
Loss before extra-
ordinary gain........... (237)
Extraordinary gain....... --
Net income (loss)........ (237)
Loss per share...........
Market prices:
High...................
Low....................
</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-27
<PAGE>
SCHEDULE V
REXENE CORPORATION AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE
BEGINNING ADDITIONS RETIREMENTS OTHER AT END
DESCRIPTION OF PERIOD AT COST OR SALES CHARGES OF PERIOD
- ---------------------------------------- ---------- --------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
POST-EMERGENCE
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
---------- --------- ----------- ------------ ---------
---------- --------- ----------- ------------ ---------
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
---------- --------- ----------- ------------ ---------
---------- --------- ----------- ------------ ---------
PRE-EMERGENCE
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
---------- --------- ----------- ------------ ---------
---------- --------- ----------- ------------ ---------
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
---------- --------- ----------- ------------ ---------
---------- --------- ----------- ------------ ---------
<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 OTHER AT END OF
DESCRIPTION OF PERIOD EXPENSES RETIREMENTS CHARGES PERIOD
- ---------------------------------------- ---------- ---------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
POST-EMERGENCE
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
---------- ---------- ----------- ------------ ---------
---------- ---------- ----------- ------------ ---------
Three months ended December 31, 1992:
Buildings........................... $ -- $ 216 $ -- $ -- $ 216
Plant and equipment................. -- 3,448 -- -- 3,448
---------- ---------- ----------- ------------ ---------
$ -- $ 3,664 $ -- $ -- $ 3,664
---------- ---------- ----------- ------------ ---------
---------- ---------- ----------- ------------ ---------
PRE-EMERGENCE
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) $ --
---------- ---------- ----------- ------------ ---------
---------- ---------- ----------- ------------ ---------
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
---------- ---------- ----------- ------------ ---------
---------- ---------- ----------- ------------ ---------
<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 AT
BEGINNING COSTS AND ACCOUNTS END OF
OF PERIOD EXPENSES WRITTEN OFF PERIOD
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
POST-EMERGENCE
Year ended December 31, 1993:
Allowance for doubtful accounts............................. $ 4,509 $ 223 $ (925) $ 3,807
Three months ended December 31, 1992:
Allowance for doubtful accounts............................. $ 4,427 $ 300 $ (218) $ 4,509
PRE-EMERGENCE
Nine months ended September 30, 1992:
Allowance for doubtful accounts............................. $ 4,100 $ 327 $ -- $ 4,427
Year ended December 31, 1991:
Allowance for doubtful accounts............................. $ 4,703 $ 1,175 $ (1,778) $ 4,100
</TABLE>
S-3
<PAGE>
EXHIBIT 3.1.2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
* * * * * *
REXENE CORPORATION, a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of REXENE CORPORATION
resolutions were duly adopted setting forth a proposed amendment to the
Certificate of Incorporation of said corporation, declaring said amendment to be
advisable and calling a meeting of the stockholders of said corporation for
consideration thereof. The resolution setting forth the proposed amendment is as
follows:
RESOLVED, that this board of directors declares it advisable to
and does hereby propose and approve an amendment to the
Corporation's Certificate of Incorporation to remove the
restrictions against the Corporation issuing any class of
nonvoting equity securities by striking out Part (c) of Article IV
of the Certificate of Incorporation of the Corporation in its
entirety and inserting in lieu thereof a new Part (c) of Article
IV as set forth below:
(c) Any series of Preferred Stock designated pursuant to
Part (b) of this Article IV shall contain adequate
provisions for the election of directors representing such
class in the event of default in the payment of dividends.
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
the annual meeting of the stockholders of said corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said REXENE CORPORATION has caused this certificate to
be signed by Lavon N. Anderson, its President and attested by Bernard J.
McNamee, its Secretary, this 9th day of June, 1993.
<TABLE>
<S> <C>
By:
--------------------------------------------
Lavon N. Anderson
PRESIDENT
ATTEST:
By:
----------------------------------------
Bernard J. McNamee
SECRETARY
</TABLE>
<PAGE>
EXHIBIT 10.2.2
REXENE CORPORATION
KEY EMPLOYEE
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT is entered into effective as of May 27, 1993, by and between
REXENE CORPORATION, a Delaware corporation (the "Company"), and
("Optionee"),
W I T N E S S E T H :
A. The Company has adopted the 1993 Non-Qualified Stock Option Plan for key
employees (the "Plan") providing for the grant of options to purchase shares of
the common stock of the Company ("Common Stock").
B. The Management Development and Compensation Committee of the Board of
Directors of the Company ("the "Committee") administering the Plan has granted
to the Optionee on May 27, 1993 an option to purchase shares of the Common Stock
on the terms and conditions set forth in this Agreement.
Accordingly, with the intent to be bound by this Agreement, the Company and
Optionee agree to the following terms and conditions:
1. GRANT OF OPTION
The Company hereby grants to Optionee effective as of May 27, 1993 the
option to purchase shares of Common Stock at the price of $3.43 per
share (the "Option"). The Option may be exercised only at the times and in
accordance with the terms set out in the other sections of this Agreement. The
Optionee accepts the Company's grant of the Option and agrees to the other terms
set out in this Agreement.
2. OPTION PERIOD
2.1 The Option shall become exercisable in installments as follows:
a. shares of Common Stock may be purchased in whole at any time
or in part from time to time on or after May 27, 1994;
b. additional shares of Common Stock may be purchased in whole
at any time or in part from time to time on or after May 27, 1995; and
c. additional shares of Common Stock may be purchased in whole
at any time or in part from time to time on or after May 27, 1996.
2.2 No Option may be exercised in whole or in part and no shares may be
purchased pursuant to any attempted exercise of any Option under this Agreement
after May 26, 2003, at which time all Options which shall not have been
exercised by such date shall lapse and terminate without the necessity of any
further notice or action by the Company or Optionee.
3. EXERCISE OF OPTION
3.1 This Option may be exercised by written notice signed by the Optionee
and delivered to the Secretary of the Company or sent by United States
registered or certified mail, postage prepaid, addressed to the Company (to the
attention of its Secretary) at its principal corporate office. Such notice shall
state the number of whole shares of Common Stock as to which the Option is
exercised and shall be accompanied by the full amount of the purchase price of
such shares, by check or in cash. Any such notice shall be deemed given on the
date on which the notice and payment shall have been actually received at the
Secretary's office. In the event of the Optionee's death, the executor or
administrator of the Optionee's estate (or anyone who shall have acquired this
Option by will or pursuant to the laws of descent and distribution) may exercise
this Option in accordance with the provisions of this Agreement.
3.2 No fractional shares will be issued pursuant to the exercise of any
part of the Option nor will any cash payment be made in lieu of fractional
shares with respect to such exercise.
<PAGE>
3.3 If the Company or its counsel determine that it is required to withhold
an amount of federal, state or local income or employment taxes as a result of
the exercise of any Option, the Company may require the Optionee to pay the
amount of such withholding tax to the Company by check or in cash. The payment
of such withholding tax shall be due upon exercise of the Option and must be
made prior to the delivery of the certificate or certificates representing the
purchased shares as described below.
4. DELIVERY OF CERTIFICATES UPON EXERCISE OF OPTION
Delivery of a certificate or certificates representing the purchased shares
of Common Stock shall be made promptly after receipt of notice of exercise and
payment of the purchase price and the amount of any withholding taxes to the
Company, if required, provided that the Company shall have such time as it
reasonably deems desirable or necessary to qualify or register such shares under
any law or governmental rule or regulation.
5. EARLIER TERMINATION OF OPTION UPON OCCURRENCE OF CERTAIN EVENTS
Notwithstanding the provisions set out in Section 2 above, the Options
granted under this Agreement shall earlier terminate in the manner and under the
conditions set out in this Section 5.
5.1 If the Optionee ceases to be employed by the Company or any subsidiary
thereof for any reason other than those reasons set forth in Sections 5.2 and
5.3 below, then the Optionee's Option, subject to earlier termination due to
normal expiration of the option term, shall expire three months thereafter, and
during such three-month period after the Optionee ceases to be an employee, the
Optionee's Option shall be exercisable only as to those shares, if any, with
respect to which the Optionee could have exercised the Option as of the date of
such cessation of employment. Notwithstanding the foregoing, if the Optionee's
employment is terminated for cause as defined below, his or her Option shall
terminate upon the Optionee's termination of employment. For the purposes
hereof, cause shall mean any of the following:
(i) conduct involving moral turpitude or fraud, regardless of the
context, which conduct shall be conclusively presumed if the Optionee is
convicted of or enters a plea of NOLO CONTENDERE or similar plea as to a
crime involving moral turpitude or fraud,
(ii) repeated intoxication by alcohol or drugs during the performance of
the Optionee's duties,
(iii) malfeasance in the conduct of the Optionee's duties, including
misuse or diversion of the Company's funds, embezzlement or willful and
material misrepresentations or concealments on any reports submitted to the
Company,
(iv) repeated material failure by the Optionee to perform his or her
duties as an employee, or
(v) material failure to follow or comply with the reasonable and lawful
directives of the Board of the written policies of the Company.
5.2 If the Optionee becomes permanently and totally disabled (as defined by
Section 22(e)(3) of the Internal Revenue Code) or dies while in the employment
of the Company or any subsidiary thereof, the Optionee's Option shall become
fully exercisable and the Optionee or, in the case of death, the person or
persons to whom rights under the Option shall have passed by will or the
applicable laws of descent and distribution, shall have the right to exercise
the Option during the twelve months following the date of disability or death,
subject to earlier termination due to normal expiration of the option term.
5.3 If the Optionee's employment with the Company or any subsidiary thereof
is terminated without cause after a change of control in the Company, or if the
Optionee voluntarily resigns his or her employment with the Company or any
subsidiary thereof after such a change in control because as a condition to
continued employment with the Company or such subsidiary, the Optionee is
required to (x) relocate outside the continental United States, (y) relocate
within the continental United States without relocation assistance under the
Company relocation policy then in effect, or (z) accept a
2
<PAGE>
reduction in the Optionee's base salary, then the Optionee's Option shall become
fully exercisable, and, subject to earlier termination due to normal expiration
of the option term, shall expire three months after such termination or
resignation of employment. For the purposes hereof, a change of control in the
Company shall mean the occurrence of any of the following:
(i) Continuing Directors no longer constitute at least two-thirds of the
Directors constituting the Board (the terms "Continuing Directors" and
"Directors" being used as defined below);
(ii) any person or group of persons (as defined in Rule 13d-5 under the
Securities Exchange Act of 1934, as amended from time to time [the "Exchange
Act"]), together with its affiliates, becomes the beneficial owner, directly
or indirectly, of 20% or more of the Company's then outstanding common stock
or 20% or more of the voting power of the Company's then outstanding
securities entitled generally to vote for the election of Directors;
(iii) the occurrence of or the approval by the Company's stockholders of
the merger or consolidation of the Company with any other corporation, the
sale of any substantial portion of the assets of the Company or the
liquidation or dissolution of the Company unless, in the case of a merger or
consolidation, the Continuing Directors in office immediately prior to such
merger or consolidation will constitute at least two-thirds of the directors
constituting the board of directors of the surviving corporation of such
merger or consolidation and any parent (as such term is defined in Rule
12b-2 under the Exchange Act) of such corporation; or
(iv) at least a majority of the Continuing Directors in office
immediately prior to any other action taken or proposed to be taken by the
Company's stockholders or by the Board determines that such action
constitutes, or that such proposed action, if taken, would constitute, a
Change of Control of the Company and such action is taken.
For the purposes of this Section 5.3, "Director" means a member of the Board,
and "Continuing Director" means any person who is either (i) a Director on the
date hereof, or (ii) was designated as a Continuing Director by a majority of
the Continuing Directors.
5.4 The Option may be canceled at any time with the consent of the Optionee
and a new option may be granted to the Optionee in lieu thereof.
6. ADJUSTMENTS UPON CHANGE IN COMMON STOCK
In the event that before delivery by the Company of all the shares in
respect of which this Option is granted, the Company shall have effected a
Common Stock split or dividend payable in Common Stock, or the outstanding
Common Stock shall have been combined into a smaller number of shares, the
shares still subject to the Option shall be increased or decreased to reflect
proportionately the increase or decrease in the number of shares outstanding,
and the purchase price per share shall be decreased or increased proportionately
so that the aggregate purchase price for all the then optioned shares shall
remain the same as immediately prior to such split, dividend or combination. In
the event of a reclassification of Common Stock not covered by the foregoing, or
in the event of a liquidation or reorganization, including a merger,
consolidation or sale of assets, the Committee may make such adjustments, if
any, as it may deem appropriate in the number, purchase price and kind of shares
still subject to this Option.
7. TRANSFERABILITY
The Option evidenced hereby is not transferable otherwise than by will or by
the laws of descent and distribution and, during the lifetime of Optionee, is
exercisable only by Optionee.
8. CANCELLATION OF CERTAIN EARLIER OPTIONS
The grant of the Option to Optionee is conditional upon the Optionee
releasing the Company from his or her rights to any stock option authorized by
the Committee at its meeting on May 14, 1991 under the Company's 1988 Stock
Incentive Plan. Accordingly, the Optionee hereby agrees to the cancellation as
of the date of this Agreement of all stock options granted to him or her by the
Committee at its meeting on May 14, 1991 and releases the Company from all
further obligations to
3
<PAGE>
issue any shares of Common Stock pursuant to any attempt to exercise any part of
such stock option, and from all claims, liabilities, losses or damages
(including attorney's fees) which may be made in respect thereto.
9. NOTICES
Any notice to be given to the Company shall be personally delivered to or
addressed to the Secretary of the Company, at its principal office, and any
notice to be given to the Optionee shall be addressed to him at the address
given beneath his signature hereto, or at such other address as the Optionee may
hereafter designate in writing to the Company. Any notice to the Company is
deemed given when received at the office of the Secretary of the Company. Any
notice to the Optionee is deemed given when enclosed in a properly sealed
envelope addressed as aforesaid, registered or certified, and deposited, postage
and registration or certification fee prepaid, in a post office or branch post
office regularly maintained by the United States.
10. TAX STATUS OF OPTION
This Option is a nonqualified stock option, and is not intended to qualify
as an "incentive stock option" within the meaning of Section 422(b) of the
Internal Revenue Code of 1986, as amended.
11. CONSTRUCTION
This Agreement shall be governed by, subject to and construed in accordance
with all the provisions of the Plan, as it shall be amended from time to time in
accordance with the terms thereof, but no such amendment shall adversely affect
the Optionee's rights under this Option.
12. EMPLOYMENT
Nothing in the Plan or in this Agreement shall confer upon the Optionee any
right to continue in the employment of the Company or a parent or subsidiary
thereof.
13. DEFINED TERMS
Unless the context clearly indicates otherwise, the words and phrases used
in this Agreement shall have the meanings assigned to them under the provisions
of the Plan.
14. APPLICABLE LAW
All questions arising with respect to the provisions of this Agreement shall
be determined by application of the laws of the State of Texas except to the
extent preempted by Federal Law.
15. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof, and it supersedes any prior or
contemporaneous discussions, negotiations, writings or other agreements between
the parties with respect to the subject matter of this Agreement. Except as
otherwise provided in Section 10 hereof, this Agreement may be amended only
pursuant to a written instrument duly signed by both parties.
<TABLE>
<S> <C>
REXENE CORPORATION OPTIONEE
By: ----------------------------------------
-------------------------------------------
Employee Name
-------------------------------------------
-------------------------------------------
Address
-------------------------------------------
Social Security Number
</TABLE>
4
<PAGE>
EXHIBIT 10.2.3
REXENE CORPORATION
KEY EMPLOYEE
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT is entered into effective as of March 1, 1994, by and between
REXENE CORPORATION, a Delaware corporation (the "Company"), and
("Optionee"),
W I T N E S S E T H:
A. The Company has adopted the 1993 Non-Qualified Stock Option Plan for key
employees (the "Plan") providing for the grant of options to purchase shares of
the common stock of the Company ("Common Stock").
B. The Management Development and Compensation Committee of the Board of
Directors of the Company ("the "Committee") administering the Plan has granted
to the Optionee on March 1, 1994 an option to purchase shares of the Common
Stock on the terms and conditions set forth in this Agreement.
Accordingly, with the intent to be bound by this Agreement, the Company and
Optionee agree to the following terms and conditions:
1. GRANT OF OPTION
The Company hereby grants to Optionee effective as of March 1, 1994 the
option to purchase shares of Common Stock at the price of $3.71 per
share (the "Option"). The Option may be exercised only at the times and in
accordance with the terms set out in the other sections of this Agreement. The
Optionee accepts the Company's grant of the Option and agrees to the other terms
set out in this Agreement.
2. OPTION PERIOD
2.1 The Option shall become exercisable in installments as follows:
a. shares of Common Stock may be purchased in whole at any time
or in part from time to time on or after March 1, 1995;
b. additional shares of Common Stock may be purchased in whole
at any time or in part from time to time on or after March 1, 1996; and
c. additional shares of Common Stock may be purchased in whole
at any time or in part from time to time on or after March 1, 1997.
2.2 No Option may be exercised in whole or in part and no shares may be
purchased pursuant to any attempted exercise of any Option under this Agreement
after February 29, 2004, at which time all Options which shall not have been
exercised by such date shall lapse and terminate without the necessity of any
further notice or action by the Company or Optionee.
3. EXERCISE OF OPTION
3.1 This Option may be exercised by written notice signed by the Optionee
and delivered to the Secretary of the Company or sent by United States
registered or certified mail, postage prepaid, addressed to the Company (to the
attention of its Secretary) at its principal corporate office. Such notice shall
state the number of whole shares of Common Stock as to which the Option is
exercised and shall be accompanied by the full amount of the purchase price of
such shares, by check or in cash. Any such notice shall be deemed given on the
date on which the notice and payment shall have been actually received at the
Secretary's office. In the event of the Optionee's death, the executor or
administrator of the Optionee's estate (or anyone who shall have acquired this
Option by will or pursuant to the laws of descent and distribution) may exercise
this Option in accordance with the provisions of this Agreement.
<PAGE>
3.2 No fractional shares will be issued pursuant to the exercise of any part
of the Option nor will any cash payment be made in lieu of fractional shares
with respect to such exercise.
3.3 If the Company or its counsel determine that it is required to withhold
an amount of federal, state or local income or employment taxes as a result of
the exercise of any Option, the Company may require the Optionee to pay the
amount of such withholding tax to the Company by check or in cash. The payment
of such withholding tax shall be due upon exercise of the Option and must be
made prior to the delivery of the certificate or certificates representing the
purchased shares as described below.
4. DELIVERY OF CERTIFICATES UPON EXERCISE OF OPTION
Delivery of a certificate or certificates representing the purchased shares
of Common Stock shall be made promptly after receipt of notice of exercise and
payment of the purchase price and the amount of any withholding taxes to the
Company, if required, provided that the Company shall have such time as it
reasonably deems desirable or necessary to qualify or register such shares under
any law or governmental rule or regulation.
5. EARLIER TERMINATION OF OPTION UPON OCCURRENCE OF CERTAIN EVENTS
Notwithstanding the provisions set out in Section 2 above, the Options
granted under this Agreement shall earlier terminate in the manner and under the
conditions set out in this Section 5.
5.1 If the Optionee ceases to be employed by the Company or any subsidiary
thereof for any reason other than those reasons set forth in Sections 5.2 and
5.3 below, then the Optionee's Option, subject to earlier termination due to
normal expiration of the option term, shall expire three months thereafter, and
during such three-month period after the Optionee ceases to be an employee, the
Optionee's Option shall be exercisable only as to those shares, if any, with
respect to which the Optionee could have exercised the Option as of the date of
such cessation of employment. Notwithstanding the foregoing, if the Optionee's
employment is terminated for cause as defined below, his or her Option shall
terminate upon the Optionee's termination of employment. For the purposes
hereof, cause shall mean any of the following:
(i) conduct involving moral turpitude or fraud, regardless of the
context, which conduct shall be conclusively presumed if the Optionee is
convicted of or enters a plea of NOLO CONTENDERE or similar plea as to a
crime involving moral turpitude or fraud,
(ii) repeated intoxication by alcohol or drugs during the performance of
the Optionee's duties,
(iii) malfeasance in the conduct of the Optionee's duties, including
misuse or diversion of the Company's funds, embezzlement or willful and
material misrepresentations or concealments on any reports submitted to the
Company,
(iv) repeated material failure by the Optionee to perform his or her
duties as an employee, or
(v) material failure to follow or comply with the reasonable and lawful
directives of the Board of the written policies of the Company.
5.2 If the Optionee becomes permanently and totally disabled (as defined by
Section 22(e)(3) of the Internal Revenue Code) or dies while in the employment
of the Company or any subsidiary thereof, the Optionee's Option shall become
fully exercisable and the Optionee or, in the case of death, the person or
persons to whom rights under the Option shall have passed by will or the
applicable laws of descent and distribution, shall have the right to exercise
the Option during the twelve months following the date of disability or death,
subject to earlier termination due to normal expiration of the option term.
5.3 If the Optionee's employment with the Company or any subsidiary thereof
is terminated without cause after a change of control in the Company, or if the
Optionee voluntarily resigns his or her employment with the Company or any
subsidiary thereof after such a change in control because as a condition to
continued employment with the Company or such subsidiary, the Optionee is
required
2
<PAGE>
to (x) relocate outside the continental United States, (y) relocate within the
continental United States without relocation assistance under the Company
relocation policy then in effect, or (z) accept a reduction in the Optionee's
base salary, then the Optionee's Option shall become fully exercisable, and,
subject to earlier termination due to normal expiration of the option term,
shall expire three months after such termination or resignation of employment.
For the purposes hereof, a change of control in the Company shall mean the
occurrence of any of the following:
(i) Continuing Directors no longer constitute at least two-thirds of the
Directors constituting the Board (the terms "Continuing Directors" and
"Directors" being used as defined below);
(ii) any person or group of persons (as defined in Rule 13d-5 under the
Securities Exchange Act of 1934, as amended from time to time [the "Exchange
Act"]), together with its affiliates, becomes the beneficial owner, directly
or indirectly, of 20% or more of the Company's then outstanding common stock
or 20% or more of the voting power of the Company's then outstanding
securities entitled generally to vote for the election of Directors;
(iii) the occurrence of or the approval by the Company's stockholders of
the merger or consolidation of the Company with any other corporation, the
sale of any substantial portion of the assets of the Company or the
liquidation or dissolution of the Company unless, in the case of a merger or
consolidation, the Continuing Directors in office immediately prior to such
merger or consolidation will constitute at least two-thirds of the directors
constituting the board of directors of the surviving corporation of such
merger or consolidation and any parent (as such term is defined in Rule
12b-2 under the Exchange Act) of such corporation; or
(iv) at least a majority of the Continuing Directors in office
immediately prior to any other action taken or proposed to be taken by the
Company's stockholders or by the Board determines that such action
constitutes, or that such proposed action, if taken, would constitute, a
Change of Control of the Company and such action is taken.
For the purposes of this Section 5.3, "Director" means a member of the Board,
and "Continuing Director" means any person who is either (i) a Director on the
date hereof, or (ii) was designated as a Continuing Director by a majority of
the Continuing Directors.
5.4 The Option may be canceled at any time with the consent of the Optionee
and a new option may be granted to the Optionee in lieu thereof.
6. ADJUSTMENTS UPON CHANGE IN COMMON STOCK
In the event that before delivery by the Company of all the shares in
respect of which this Option is granted, the Company shall have effected a
Common Stock split or dividend payable in Common Stock, or the outstanding
Common Stock shall have been combined into a smaller number of shares, the
shares still subject to the Option shall be increased or decreased to reflect
proportionately the increase or decrease in the number of shares outstanding,
and the purchase price per share shall be decreased or increased proportionately
so that the aggregate purchase price for all the then optioned shares shall
remain the same as immediately prior to such split, dividend or combination. In
the event of a reclassification of Common Stock not covered by the foregoing, or
in the event of a liquidation or reorganization, including a merger,
consolidation or sale of assets, the Committee may make such adjustments, if
any, as it may deem appropriate in the number, purchase price and kind of shares
still subject to this Option.
7. TRANSFERABILITY
The Option evidenced hereby is not transferable otherwise than by will or by
the laws of descent and distribution and, during the lifetime of Optionee, is
exercisable only by Optionee.
8. NOTICES
Any notice to be given to the Company shall be personally delivered to or
addressed to the Secretary of the Company, at its principal office, and any
notice to be given to the Optionee shall be addressed to him at the address
given beneath his signature hereto, or at such other address as the
3
<PAGE>
Optionee may hereafter designate in writing to the Company. Any notice to the
Company is deemed given when received at the office of the Secretary of the
Company. Any notice to the Optionee is deemed given when enclosed in a properly
sealed envelope addressed as aforesaid, registered or certified, and deposited,
postage and registration or certification fee prepaid, in a post office or
branch post office regularly maintained by the United States.
9. TAX STATUS OF OPTION
This Option is a nonqualified stock option, and is not intended to qualify
as an "incentive stock option" within the meaning of Section 422(b) of the
Internal Revenue Code of 1986, as amended.
10. CONSTRUCTION
This Agreement shall be governed by, subject to and construed in accordance
with all the provisions of the Plan, as it shall be amended from time to time in
accordance with the terms thereof, but no such amendment shall adversely affect
the Optionee's rights under this Option.
11. EMPLOYMENT
Nothing in the Plan or in this Agreement shall confer upon the Optionee any
right to continue in the employment of the Company or a parent or subsidiary
thereof.
12. DEFINED TERMS
Unless the context clearly indicates otherwise, the words and phrases used
in this Agreement shall have the meanings assigned to them under the provisions
of the Plan.
13. APPLICABLE LAW
All questions arising with respect to the provisions of this Agreement shall
be determined by application of the laws of the State of Texas except to the
extent preempted by Federal Law.
14. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof, and it supersedes any prior or
contemporaneous discussions, negotiations, writings or other agreements between
the parties with respect to the subject matter of this Agreement. Except as
otherwise provided in Section 10 hereof, this Agreement may be amended only
pursuant to a written instrument duly signed by both parties.
<TABLE>
<S> <C>
REXENE CORPORATION OPTIONEE
By: ----------------------------------------
-------------------------------------------
Employee Name
-------------------------------------------
-------------------------------------------
Address
-------------------------------------------
Social Security Number
</TABLE>
4
<PAGE>
EXHIBIT 10.3.2
REXENE CORPORATION
OUTSIDE DIRECTOR
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made and executed this day of , 1993, by and
between REXENE CORPORATION, a Delaware corporation (the "Company"), and
, ("Director"),
W I T N E S S E T H:
WHEREAS, the Company has adopted the Nonqualified Stock Option Plan for
Outside Directors of Rexene Corporation (the "Plan") providing for the grant of
nonqualified options to each of the Outside Directors of the Company; and
WHEREAS, subject to and upon the terms and conditions of this Agreement, the
Plan provides that an option is to be granted under the Plan to Director, who
currently serves as an Outside Director of the Company;
NOW, THEREFORE, it is agreed as follows:
1. GRANT OF OPTION AND OPTION PERIOD. The Company hereby grants to
Director as of the effective date of this Agreement as indicated on the last
page hereof (the "Grant Date"), subject to the provisions of Sections 2 and 3
hereof and as hereinafter set forth, an option (the "Option") to purchase
shares of Common Stock of the Company at the price of $0.63 per share,
at any time or (with respect to partial exercises) from time to time during a
period commencing on the first anniversary of the Grant Date and terminating on
the date immediately preceding the tenth anniversary of the Grant Date (the
"Option Period"). This Option is a nonqualified stock option, and is not
intended to qualify as an "incentive stock option" within the meaning of Section
422(b) of the Internal Revenue Code of 1986, as amended (the "Code").
2. EXERCISABILITY. Any provision of Section 1 hereof to the contrary
notwithstanding and subject to the provisions of Section 3 hereof, this Option
may be exercised only in accordance with the following:
(a) shares may be purchased in whole at any time or in part from
time to time, on or after the first anniversary of the Grant Date; and
(b) the remaining shares may be purchased in whole at any time or
in part from time to time, on or after the second anniversary of the Grant
Date.
3. TERMINATION OF SERVICE, DEATH, ETC. Any provision of Sections 1 and 2
hereof to the contrary notwithstanding:
(a) If Director is removed from the Board for Cause or resigns from the
Board upon request of the remaining Board members within the Option Period
due to Cause, the unexercised portion of this Option, whether or not then
exercisable, shall automatically terminate as of the effective date of such
removal or resignation;
(b) If Director resigns from the Board for reasons other than (i) Cause,
(ii) a Change of Control, or (iii) Disability prior to the date all shares
subject to this Option have become exercisable in accordance with Section 2
hereof, the unexercisable portion of this Option shall be forfeited upon the
effective date of such resignation;
(c) If Director is removed from the Board on account of or following a
Change of Control, or resigns from the Board upon request of the remaining
Board members within the Option Period on account of or following a Change
of Control, the unexercisable portion of this Option shall become
immediately exercisable upon the effective date of such removal or
resignation;
(d) If, within the Option Period, Director (i) is not reelected to the
Board, is removed from the Board on account of or following a Change of
Control, or resigns from the Board upon request
<PAGE>
of the remaining Board members on account of or following a Change of
Control, or for any reason other than Cause, (ii) resigns from the Board due
to Disability or (iii) dies while a Board member, the person entitled to
exercise the Option may elect within the 20-day period immediately following
the effective date of the removal, resignation, termination as a member of
the Board or date of death, either to (A) retain this Option and exercise
same in accordance with its terms within the remaining Option Period or (B)
surrender this Option to the Company in exchange for a lump sum payment in
cash equal to the product of $ multiplied by X/12 multiplied by
Y/ , where "X" equals the number of months Director served on the Board
during the fiscal year of the Company for which this Option was granted and
"Y" equals the number of shares of Common Stock allocable to the unexercised
portion of this Option as of the date of the election.
4. EXERCISE OF OPTION. This Option may be exercised by written notice
signed by Director and delivered to the Secretary of the Company or sent by
United States registered or certified mail, postage prepaid, addressed to the
Company (to the attention of its Secretary) at its corporate office in Dallas,
Texas. Such notice shall state the number of shares as to which the Option is
exercised and shall be accompanied by the full amount of the purchase price of
such shares, in cash. Any such notice shall be deemed given on the date on which
the same was deposited in a regularly maintained receptacle for the deposit of
United States mail, addressed and sent as above-stated. Promptly after demand by
the Company, Director shall pay to the Company an amount equal to applicable
withholding taxes, if any, due in connection with the exercise of this Option.
In the event of Director's death, the executor or administrator of Director's
estate (or anyone who shall have acquired this Option by will or pursuant to the
laws of descent and distribution) may exercise this Option in accordance with
the provisions of this Agreement.
5. DELIVERY OF CERTIFICATES UPON EXERCISE OF OPTION. Delivery of a
certificate or certificates representing the purchased shares of common stock of
the Company shall be made promptly after receipt of notice of exercise and
payment of the purchase price and the amount of any withholding taxes to the
Company, if required, provided that the Company shall have such time as it
reasonably deems necessary to qualify or register such shares under any law or
governmental rule or regulation that it deems desirable or necessary.
6. ADJUSTMENTS UPON CHANGE IN COMMON STOCK. In the event that before
delivery by the Company of all the shares in respect of which this Option is
granted, the Company shall have effected a common stock split or dividend
payable in common stock, or the outstanding common stock of the Company shall
have been combined into a smaller number of shares, the shares still subject to
the Option shall be increased or decreased to reflect proportionately the
increase or decrease in the number of shares outstanding, and the purchase price
per share and the surrender payment per share provided under Section 2(d) shall
be decreased or increased proportionately so that the aggregate purchase price
and the aggregate surrender payment for all the then optioned shares shall
remain the same as immediately prior to such split, dividend or combination. In
the event of a reclassification of common stock not covered by the foregoing, or
in the event of a liquidation or reorganization, including a merger,
consolidation or sale of assets, it is agreed that the Committee shall make such
adjustments, if any, as it may deem appropriate in the number, purchase price
and kind of shares still subject to this Option.
7. TRANSFERABILITY. The Option evidenced hereby is not transferable
otherwise than by will or by the laws of descent and distribution and, during
the lifetime of Director, is exercisable only by Director.
8. INVESTMENT PURPOSE. The Director represents that any shares purchased
by him pursuant to this Option will be acquired for his own account for
investment and not with a view to, or for offer or sale in connection with, the
distribution of such shares; provided, however, that such representation need
not be given if (i) the shares subject to this Option have been registered under
the Securities Act of 1933 ("Securities Act") and registered or qualified, as
the case may be, under applicable state securities laws or (ii) counsel to the
Company determines that such registration is not necessary for
2
<PAGE>
purposes of compliance with applicable federal and state securities laws. Prior
to the purchase of shares of Common Stock on exercise of this Option, or any
part hereof, the Director shall give such further representations of an
investment or other nature as may be reasonably required by the Company in order
to comply with applicable federal and state securities laws. Furthermore,
nothing herein shall require the Company to issue any shares upon exercise of
this Option if such issuance would, in the opinion of counsel for the Company,
constitute a violation of the Securities Act, the Exchange Act or any other
applicable statute or regulation then in effect. Nothing herein shall prohibit
the Director from using any shares of Common Stock acquired hereunder as
collateral or security for any debt, loan or other obligation.
9. OPTION CONDITIONAL ON APPROVAL OF PLAN. Anything herein to the contrary
notwithstanding, this Option is conditional and shall be of no force and effect
and may not be exercised unless and until (i) Article IV(c) of the Company's
Restated Certificate of Incorporation has been amended to eliminate the
prohibition against the issuance by the Company of nonvoting equity securities,
and (ii) the Plan has been approved by the affirmative vote of the holders of a
majority of the shares of Common Stock present, or represented, and entitled to
vote at a meeting of stockholders of the Company duly held not later than the
date of the next annual meeting of stockholders. In the event the Plan is not
approved at the next annual meeting of stockholders of the Company, then the
Company shall pay Director, in addition to any meeting attendance cash
compensation, a cash retainer in the amount of $20,000 per year, payable in
equal monthly installments at the time of each regular meeting of the Board.
10. CONSTRUCTION. This Agreement shall be governed by, subject to and
construed in accordance with all the provisions of the Plan.
11. DEFINED TERMS. Unless the context clearly indicates otherwise, the
words and phrases used in this Agreement shall have the meanings assigned to
them under the provisions of the Plan.
12. APPLICABLE LAWS. All questions arising with respect to the provisions
of this Agreement shall be determined by application of the laws of the State of
Texas except to the extent preempted by Federal law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written, to be effective as of January 1, 1993.
REXENE CORPORATION
By
--------------------------------------
Title:
--------------------------------------
Director
3
<PAGE>
EXHIBIT 10.3.3
REXENE CORPORATION
OUTSIDE DIRECTOR
NON-QUALIFIED STOCK OPTION AGREEMENT
This Outside Director Non-Qualified Stock Option Agreement is made and
entered into effective as of the 1st day of January, 1994 (the "Grant Date"), by
and between Rexene Corporation, a Delaware corporation (the "Company"), and
("Director").
W I T N E S S E T H:
WHEREAS, the Company has adopted the Non-Qualified Stock Option Plan for
Outside Directors of Rexene Corporation (the "Plan") providing for the grant of
non-qualified options to each of the Outside Directors of the Company; and
WHEREAS, subject to and upon the terms and conditions of this Agreement, the
Plan provides that an option is to be granted under the Plan to Director, who
currently serves as an Outside Director of the Company.
NOW, THEREFORE, it is agreed as follows:
1. GRANT OF OPTION AND OPTION PERIOD. The Company hereby grants to
Director, subject to the provisions of Sections 2 and 3 hereof and as
hereinafter set forth, an option (the "Option") to purchase shares of
Common Stock of the Company at the price of $0.43 per share, at any time or
(with respect to partial exercises) from time to time during a period commencing
on the first anniversary of the Grant Date and terminating on the date
immediately preceding the tenth anniversary of the Grant Date (the "Option
Period"). This Option is a non-qualified stock option, and is not intended to
qualify as an "incentive stock option" within the meaning of Section 422(b) of
the Internal Revenue Code of 1986, as amended (the "Code").
2. EXERCISABILITY. Any provision of Section 1 hereof to the contrary
notwithstanding and subject to the provisions of Section 3 hereof, this Option
may be exercised only in accordance with the following:
(a) shares may be purchased in whole at any time or in part from
time to time, on or after the first anniversary of the Grant Date; and
(b) the remaining shares may be purchased in whole at any time or
in part from time to time, on or after the second anniversary of the Grant
Date.
3. TERMINATION OF SERVICE, DEATH, ETC. Any provision of Sections 1 and 2
hereof to the contrary notwithstanding:
(a) If Director is removed from the Board for Cause or resigns from the
Board upon request of the remaining Board members within the Option Period
due to Cause, the unexercised portion of this Option, whether or not then
exercisable, shall automatically terminate as of the effective date of such
removal or resignation;
(b) If Director resigns from the Board for reasons other than (i) Cause,
(ii) a Change of Control or (iii) Disability prior to the date all shares
subject to this Option have become exercisable in accordance with Section 2
hereof, the unexercisable portion of this Option shall be forfeited upon the
effective date of such resignation;
(c) If Director is removed from the Board on account of or following a
Change of Control, or resigns from the Board upon request of the remaining
Board members within the Option Period on account of or following a Change
of Control, the unexercisable portion of this Option shall become
immediately exercisable upon the effective date of such removal;
(d) If, within the Option Period, Director (i) is not re-elected to the
Board, is removed from the Board on account of or following a Change of
Control, or resigns from the Board upon request of the remaining Board
members on account of or following a Change of Control or for any reason
<PAGE>
other than Cause, (ii) resigns from the Board due to Disability or (iii)
dies while a Board member, the person entitled to exercise the Option may
elect within the 20-day period immediately following the effective date of
the removal, resignation, termination as a member of the Board or date of
death, either to (A) retain this Option and exercise same in accordance with
its terms within the remaining Option Period or (B) surrender this Option to
the Company in exchange for a lump sum payment in cash equal to the product
of $ multiplied by X/12 multiplied by Y/ , where "X" equals the
number of months Director served on the Board during the fiscal year of the
Company for which this Option was granted and "Y" equals the number of
shares of Common Stock allocable to the unexercised portion of this Option
as of the date of the election.
4. EXERCISE OF OPTION. This Option may be exercised by written notice
signed by Director and delivered to the Secretary of the Company or sent by
United States registered or certified mail, postage prepaid, addressed to the
Company (to the attention of its Secretary) at its corporate offices in Dallas,
Texas. Such notice shall state the number of shares as to which the Option is
exercised and shall be accompanied by the full amount of the purchase price of
such shares, in cash. Any such notice shall be deemed given on the date on which
the same was deposited in a regularly maintained receptacle for the deposit of
United States mail, addressed and sent as above-stated. Promptly after demand by
the Company, Director shall pay to the Company an amount equal to applicable
withholding taxes, if any, due in connection with the exercise of this Option.
In the event of Director's death, the executor or administrator of Director's
estate (or anyone who shall have acquired this Option by will or pursuant to the
laws of descent and distribution) may exercise this Option in accordance with
the provisions of this Agreement.
5. DELIVERY OF CERTIFICATES UPON EXERCISE OF OPTION. Delivery of a
certificate or certificates representing the purchased shares of Common Stock of
the Company shall be made promptly after receipt of notice of exercise and
payment of the purchase price and the amount of any withholding taxes to the
Company, if required, provided that the Company shall have such time as it
reasonably deems necessary to qualify or register such shares under any law or
governmental rule or regulation that it deems desirable or necessary.
6. ADJUSTMENTS UPON CHANGE IN COMMON STOCK. In the event that before
delivery by the Company of all the shares in respect of which this Option is
granted, the Company shall have effected a Common Stock split or dividend
payable in Common Stock, or the outstanding Common Stock of the Company shall
have been combined into a smaller number of shares, the shares still subject to
the Option shall be increased or decreased to reflect proportionately the
increase or decrease in the number of shares outstanding, and the purchase price
per share and the surrender payment per share provided under Section 3(d) shall
be decreased or increased proportionately so that the aggregate purchase price
and the aggregate surrender payment for all the then-optioned shares shall
remain the same as immediately prior to such split, dividend or combination. In
the event of a reclassification of Common Stock not covered by the foregoing, or
in the event of a liquidation or reorganization, including a merger,
consolidation or sale of assets, it is agreed that the Committee shall make such
adjustments, if any, as it may deem appropriate in the number, purchase price
and kind of shares still subject to this Option.
7. TRANSFERABILITY. The Option evidenced hereby is not transferable
otherwise than by will or by the laws of descent and distribution and, during
the lifetime of Director, is exercisable only by Director.
8. INVESTMENT PURPOSE. The Director represents that any shares purchased
by him pursuant to this Option will be acquired for his own account for
investment and not with a view to, or for offer or sale in connection with, the
distribution of such shares; provided, however, that such representation need
not be given if (i) the shares subject to this Option have been registered under
the Securities Act of 1933 ("Securities Act") and registered or qualified, as
the case may be, under applicable state securities laws or (ii) counsel to the
Company determines that such registration is not necessary for purposes of
compliance with applicable federal and state securities laws. Prior to the
purchase of
2
<PAGE>
shares of Common Stock on exercise of this Option, or any part hereof, the
Director shall give such further representations of an investment or other
nature as may be reasonably required by the Company in order to comply with
applicable federal and state securities laws. Furthermore, nothing herein shall
require the Company to issue any shares upon exercise of this Option if such
issuance would, in the opinion of counsel for the Company, constitute a
violation of the Securities Act, the Exchange Act or any other applicable
statute or regulation then in effect. Nothing herein shall prohibit the Director
from using any shares of Common Stock acquired hereunder as collateral or
security for any debt, loan or other obligation.
9. CONSTRUCTION. This Agreement shall be governed by, subject to and
construed in accordance with all the provisions of the Plan.
10. DEFINED TERMS. Unless the context clearly indicates otherwise, the
words and phrases used in this Agreement shall have the meanings assigned to
them under the provisions of the Plan.
11. APPLICABLE LAW. All questions arising with respect to the provisions
of this Agreement shall be determined by application of the laws of the State of
Texas except to the extent preempted by Federal Law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first above written.
REXENE CORPORATION
By:
--------------------------------------
B. J. McNamee
VICE PRESIDENT, SECRETARY &
GENERAL COUNSEL
-----------------------------------
Director
3
<PAGE>
EXHIBIT 10.4.2
REXENE CORPORATION
1994 ANNUAL INCENTIVE BONUS PLAN
I. PURPOSE
The Rexene Annual Incentive Bonus Plan (AIB) is designed to reward key
employees for their contribution to the achievement of Corporate and individual
performance objectives.
II. DEFINITIONS
TARGETED OPERATING CASH FLOW -- operating income adjusted for non-cash items
such as depreciation and amortization, allowance for bad debts, adjustments to
environmental reserves, etc. This target will be established by the Board of
Directors in conjunction with the approval of the annual forecast.
GUIDELINE FORMULA BONUS -- expressed as a percent of base salary the amount
of formula bonus award that, when combined with base salary, yields a total cash
compensation package that is competitive.
MAXIMUM BONUS -- expressed as a percent of base salary, the maximum total
bonus award that can be earned.
III. ANNUAL INCENTIVE PLAN THRESHOLD -- In order to trigger eligibility for any
formula bonus payments to be made under this plan, the Company must attain at
least ninety percent (90%) of Targeted Operating Cash Flow.
IV. SCHEDULE OF POTENTIAL BONUS PAYOUT PERCENTAGES (INTERPOLATIONS IF
NECESSARY)
<TABLE>
<CAPTION>
% ATTAINMENT OF TARGETED
OPERATING CASH FLOW % FORMULA PAYOUT
- --------------------------- ---------------------
<S> <C>
90 75
100 100
120 150
150 200
</TABLE>
V. BONUS AWARD STRUCTURE
The guideline and maximum bonus award levels, expressed as a percent of an
individual participant's base salary, are as follows:
<TABLE>
<CAPTION>
GUIDELINE BONUS MAXIMUM BONUS
------------------- -------------------
<S> <C> <C>
CEO & COO....................................................... 50% 100%
Executive Management Committee.................................. 40 80
Officers........................................................ 30 60
Directors....................................................... 20 40
</TABLE>
VI. EXAMPLES OF FORMULA CALCULATIONS:
ASSUMPTION: Officer SALARY: $100,000
The Company attains 90% of the targeted cash flow. The officer's bonus
payout will be:
<TABLE>
<CAPTION>
(SECTION (SECTION
IV) FORMULA V) FORMULA
PAYOUT ELIGIBILITY SALARY BONUS
- ----------- ---------- ----------- ---------
<C> <C> <C> <C> <S> <C> <C>
.75 X .30 X $100,000 = $22,500
</TABLE>
<PAGE>
VII. GENERAL PROVISIONS
ELIGIBILITY
- Participants are eligible for pro rata bonus consideration
under this plan if they have completed at least six (6) months
of service in one or more designated eligible positions, and do
not participate in any other incentive program.
- Participants who are terminated during the fiscal year for any
reason, except cause, shall be eligible to receive a pro rata
bonus based on year-end financial results. Participants who
voluntarily resign their employment prior to the end of the
fiscal year shall not be entitled to a pro rata bonus.
- Payment of bonuses will occur as soon as practicable after the
end of the fiscal year and completion of the year-end audit.
VIII. DISCRETIONARY BONUS POOL
The Company shall establish a bonus pool of $250,000 to fund discretionary
bonus payments to eligible employees if no bonuses are paid to said employees
under Section IV above.
IX. ADMINISTRATION
The Senior Vice President of Human Resources and Administration shall be
responsible for the administration of this program. The Board of Directors is
the sole interpreter and arbitrator of the general and specific provisions of
this plan and has the sole authority to approve awards recommended by the Chief
Executive Officer within the parameters of this plan or to amend or modify them,
if necessary, to provide equitable bonus opportunity for participants.
2
<PAGE>
EXHIBIT 10.17.3
FOURTH AMENDMENT TO LOAN AGREEMENT
THIS FOURTH AMENDMENT ("Amendment"), made and entered into as of the 22nd
day of December, 1993 by and between REXENE CORPORATION, a Delaware corporation
("Borrower"), and TRANSAMERICA BUSINESS CREDIT CORPORATION, a Delaware
corporation ("Lender");
W I T N E S S E T H:
WHEREAS, Borrower and Lender are parties to a certain Loan Agreement, dated
as of September 17, 1992 (as the same has been previously amended, the "Loan
Agreement"), pursuant to which Lender has made and continues to make certain
financial accommodations to Borrower; and
WHEREAS, Borrower and Lender have agreed to amend the Loan Agreement in
certain respects as hereinafter set forth; and
WHEREAS, Borrower and Lender wish to enter into this Amendment in order to
memorialize their mutual understanding regarding such amendments;
NOW, THEREFORE, in consideration of the premises, the terms and conditions
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. DEFINED TERMS. Capitalized terms used hereinbelow, but not expressly
defined hereinbelow, shall have the meanings given to such terms in the Loan
Agreement.
2. MODIFICATIONS TO DEFINED TERMS. The following defined terms, as used in
the Loan Agreement, shall be re-defined, in whole or in part, as follows:
(a) BORROWING BASE. There shall be added to the definition of
"Borrowing Base" set forth in Section 1(a) of the Loan Agreement, the
following, at the end thereof:
LESS (d) the sum of Seven Million Dollars ($7,000,000).
and the term "five (5) Business Days in such definition shall be amended to
read "sixty (60) days."
(b) SIGNIFICANT SUBSIDIARY. There shall be added to the definition of
"Significant Subsidiary" in Section 1(a) of the Loan Agreement, the
following, after the word "means" in the first line thereof:
(c) TERMINATION DATE. The definition of "Termination Date" in Section
1(a) shall be re-defined in its entirety to read as follows:
"Termination Date" shall mean December 31, 1996.
3. ADDITIONAL DEFINED TERMS. There shall be added to Section 1(a) of the
Agreement the following defined terms:
"SUBSIDIARY GUARANTEES" means the guarantees of Borrower described
in Section 9(a)(x).
"UK SUBSIDIARY" means Rexene Corporation Limited, an English
Corporation, one hundred percent of the capital stock of which is
owned by Borrower.
4. DIRECT LOANS TO UK SUBSIDIARY. There shall be added to Section 2(a)(i)
of the Agreement, at the end thereof, the following:
Lender hereby agrees that, at Borrower's request, it will make
such Advances directly to the UK Subsidiary in an amount up to
Five Million Dollars ($5,000,000) at any time outstanding upon
compliance with the procedures set forth herein with respect to
Advances by Borrower, provided that the UK Subsidiary shall have
executed and delivered to Lender a supplement to this Agreement,
in form and substance acceptable to Lender, making it a party
hereto for such purpose; and,
<PAGE>
provided further, in any event, that any Advances so made by
Lender to the UK Subsidiary shall be fully and unconditionally
guaranteed by Borrower, constitute its joint and several liability
to Lender and be part of the Obligations secured by the
Collateral.
5. REQUESTS FOR ADVANCES. The term "three (3) Business Days" in Section
2(b)(i) of the Agreement shall be amended to read "one (1) Business Day".
6. USE OF PROCEEDS. The first sentence of Section 2(h) of the Agreement
which reads:
"The proceeds of any Advance shall be used solely for Borrower's
general working capital purposes."
shall be deleted and replaced by the following sentence:
"The proceeds of any Advance shall be used solely for general
corporate purposes of Borrower and its Subsidiaries; provided,
however, that not more than Fifteen Million Dollars ($15,000,000)
of proceeds of Advances outstanding at any one time shall be used
for general corporate purposes of the UK Subsidiary."
7. INTEREST. Section 3(a) of the Agreement shall be amended by deleting in
its entirety the proviso set forth in clause (i) thereof concerning an increase
in interest rate.
8. COLLATERAL REPORTS. The term "ten (10) days" in Section 7(c) of the
Agreement shall be amended to read "ten (10) Business Days." Also, inventory and
accounts of the UK Subsidiary shall not be required to be included in the
reports on Collateral set forth in said Section 7(c).
9. OTHER FINANCIAL DATA. The terms "ten (10) days" and "thirty (30) days"
appearing in Section 7(e) of the Agreement are amended to read, respectively,
"ten (10) Business Days" and "fifteen (15) days".
10. NOTICE OF DEFAULT. The words "or could reasonably be expected to have"
in the third and fourth lines of Section 7(f) of the Agreement are deleted.
11. LANDLORD'S WAIVERS. Section 8(h) of the Agreement is amended by adding
thereto, before the words "but, provided, however", these words:
and that Borrower shall not be required to obtain any such waivers
from purchasers of Borrower's Inventory with respect to Inventory
contained in railcars temporarily located on the premises of such
purchasers
12. UK SUBSIDIARY. There shall be added to Section 8 a new subsection (i),
to read as follows:
UK SUBSIDIARY. Upon the occurrence and during the continuance of
an Event of Default, upon written request by Lender, Borrower
shall cause the UK Subsidiary to execute and deliver to Lender a
security agreement in substantially the form of the Security
Agreement covering accounts and inventory of the UK Subsidiary, to
the extent it is permitted to do so under the First Priority Note
Indenture and the Second Priority Note Indenture, and to reimburse
Borrower for payments made under the UK Subsidiary Guarantees.
13. INDEBTEDNESS. Section 9(a) shall be amended:
(i) by adding the words "(calculated without duplication)" after
the words "except the following" in the introductory sentence
thereof.
(ii) by adding thereto a new clause (x) at the end thereof, to
read as follows:
(x) Borrower may guarantee obligations of its
Consolidated Subsidiaries in an aggregate amount not to
exceed the U.S. dollar equivalent of Nine Million Pounds
Sterling.
2
<PAGE>
14. SUBSIDIARIES. Section 9(b) of the Agreement is amended by adding
thereto after the words "or create any Subsidiaries" the words "(other than the
UK Subsidiary)".
15. INVESTMENTS. Section 9(d) is amended by deleting, in clause (ii)
thereof the words "in an aggregate amount not to exceed Five Million Dollars
($5,000,000)" and substituting therefor the words:
; provided that the aggregate Investments in the UK Subsidiary,
excluding Investments made with proceeds of Advances and
Indebtedness under Subsidiary Guarantees will not exceed Eight
Million Five Hundred Thousand Dollars ($8,500,000) in the
aggregate.
and by deleting clause (vii) thereof, in its entirety.
16. CONTRAVENING AMENDMENTS. Lender acknowledges and agrees that Borrower
may refinance its Indebtedness under the First Priority Notes and Second
Priority Notes without the necessity of Lender's prior written consent, so long
as: (i) the terms of such refinancing are no less favorable to Borrower than
those of the refinanced Indebtedness; and (ii) the terms of such refinancing do
not, in any event, contravene any terms of Section 9(k) of the Agreement.
17. ORDINARY COURSE OF BUSINESS. Section 9(l) of the Agreement is amended
by deleting existing clause (i) thereof in its entirety and replacing it with
this revised clause (i):
(i) make any sales, transfers or other dispositions of Inventory
to any Subsidiary except in the Ordinary Course of Business, and
on terms otherwise in conformity with Section 9(i) hereof;
18. FINANCIAL COVENANTS. Section 10 is amended by deleting existing
subsections (a), (c) and (d) thereof in their entirety and revising the first
part of subsection (b) thereof, through the words "provided, however," to read
as follows:
(b) FIXED CHARGE COVERAGE RATIO. Borrower will have at the end
of each fiscal quarter of each Fiscal Year, determined on a
rolling four (4) quarters' basis, a Fixed Charge Coverage Ratio of
not less than .7:1; "provided, however"
19. NOTICE OF NON-PERFORMANCE. Section 12(b) of the Agreement is amended
by deleting the term "ten (10) days" therein and substituting therefor the term
"thirty (30) days".
20. NOTICE OF LEVIES AND JUDGMENTS. The words "thirty (30) days" in
Sections 12(l) and 12(m) of the Agreement shall be deleted and the words "sixty
(60) days" shall be substituted therefor.
21. MISCELLANEOUS.
(a) EFFECT OF AMENDMENT. Except as set forth expressly herein, all terms
of the Loan Agreement and the other Loan Documents, as amended hereby, shall
be and remain in full force and effect and shall constitute the legal,
valid, binding and enforceable obligations of Borrower to Lender. To the
extent any terms and conditions in any of the Loan Documents shall
contradict or be in conflict with any terms or conditions of the Loan
Agreement, after giving effect to this Amendment, such terms and conditions
are hereby deemed modified and amended accordingly to reflect the terms and
conditions of the Loan Agreement as modified and amended hereby. This
Amendment supersedes in its entirety the terms of that certain Consent,
dated September 30, 1993, executed by Lender and Borrower, concerning the UK
Subsidiary.
(b) RATIFICATION. Borrower hereby restates, ratifies and reaffirms each
and every term and condition set forth in the Loan Agreement, as amended
hereby, and the Loan Documents effective as of the date hereof.
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(c) ESTOPPEL. To induce Lender to enter into this Amendment and to
continue to make Advances to Borrower under the Loan Agreement, Borrower
hereby acknowledges and agrees that, as of the date hereof, there exists no
Event of Default and no right of offset, defense, counterclaim or objection
in favor of Borrower as against Lender with respect to the Obligations.
(d) GOVERNING LAW. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York and all applicable
federal laws of the United States of America.
(e) COSTS AND EXPENSES. Borrower agrees to pay on demand all costs and
expenses of Lender in connection with the preparation, execution, delivery
and enforcement of this Amendment and all other Loan Documents executed in
connection herewith, the closing hereof, and any other transactions
contemplated hereby, including the fees and out-of-pocket expenses of
Lender's counsel. In the event of Borrower's failure to pay such fees (or
the fee described in Section 4 above) on demand, such fees may be charged as
Advances against Borrower's Loan Account established pursuant to Section
2(f) of the Loan Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
REXENE CORPORATION
By:
--------------------------------------
Name: Kevin W. McAleer
Title: Executive Vice President
Attest:
--------------------------------------
Name: Bernard J. McNamee
Title: Secretary
[CORPORATE SEAL]
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By:
--------------------------------------
Name: Michael F. Johnson
Title: Senior Account Executive
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EXHIBIT 24
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-33584) of Rexene Corporation of our reports dated
February 10, 1994 appearing on pages F-2 and F-3 of this Form 10-K.
PRICE WATERHOUSE
Dallas, Texas
February 10, 1994
