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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A-2
--------------------------------------------
AMENDMENT TO APPLICATION OR REPORT
FiledPursuant to Section 12, 15, or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-26508
PURETEC CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 22-3376449
(State of Incorporation) (I.R.S. Employer Identification No.)
65 Railroad Avenue, Ridgefield, New Jersey 07657
(Address of principal executive offices and zip code)
(201) 941-6550
(Registrant's telephone number, including area code)
AMENDMENT NO. 2
TO FORM 10-K
The undersigned registrant hereby amends the following items and
exhibits of its Annual Report on Form 10-K for the Year Ended July 31, 1997, as
set forth in the pages attached hereto.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its
behalf by the undersigned, thereunto duly authorized.
PURETEC CORPORATION
(Registrant)
By /s/ Thomas V. Gilboy
---------------------------------
Thomas V. Gilboy
Chief Financial Officer and Vice President
Date: January 14, 1998
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Item 1. BUSINESS
Introduction
PureTec Corporation ("PureTec" or the "Company") was formed as the
result of a merger (accounted for as a merger), effective as of July 31, 1995,
between the former Pure Tech International, Inc. and the significantly larger
Ozite Corporation ("Ozite"). Subsequently, in August 1995, PureTec acquired a
specialty vinyl resin plant from Occidental Chemical Corporation. The
combination of these three entities constitutes the active business operations
of PureTec Corporation. At the time of the merger, the legal name of the former
Pure Tech International, Inc. was changed to PTI Plastic, Inc. ("PTIP"). For
financial reporting purposes, most of the historical financial information
reported in this Form 10-K regarding the Company for fiscal years prior to 1996
is that of PTIP.
Prior to the merger, PTIP's principal businesses were the recycling of
glass, metals and plastics and the thermoplastic molding of custom parts using
both recycled and virgin materials. PTIP discontinued and sold its glass and
metal recycling and Material Recovery Facility ("MRF") operations during fiscal
1994 and 1995. PureTec discontinued and sold its thermoplastic molding
operations ("Styrex Industries") during fiscal 1997.
Prior to the merger, Ozite's principal businesses were the
manufacturing of hoses, tubing, and vinyl compounds. These operations now
constitute the major portion of PureTec's operations and product lines. The
Company discontinued the manufacturing of Ozite's non-woven textile products and
sold the related assets effective January 31, 1996.
As discussed in Note 18 to the Company's Financial Statements, on
November 11, 1997 the Company entered into a Merger Agreement with Tekni-Plex,
Inc. ("Tekni-Plex"). Subject to the approval of a majority of the shareholders
at a shareholders' meeting that the Company will arrange, the Merger Agreement
contemplates Tekni-Plex (i) purchasing all of the Company's outstanding Common
Stock for cash consideration of $3.50 per share, and (ii) assuming or
refinancing all of the Company's debt. The Merger Agreement and the Acquisition
have been unanimously approved and recommended to shareholders for adoption by
the Company's Board of Directors.
Description of Business
PureTec is a vertically integrated manufacturer of specialty plastic
products. Many of these products are leaders in their niche markets. PureTec is
a leading producer of garden hose, disposable medical tubing, and precision
tubing and gaskets. The Company also produces plastic materials that are used in
various specialized applications. For example, PureTec's Colorite Polymers group
is the worldwide leader in medical-grade vinyl compounds. The Company is also a
leader in plastic recycling, producing high-grade recycled polyethylene
terephthalate ("PET") for packaging and fiber applications.
The Company's operations consist of two manufacturing categories,
"Plastic Products," with approximately 60% of total sales; and "Plastic
Materials," with approximately 40% of total sales. The Company's major product
lines are listed below, with the manufacturing division names in parenthesis:
Plastic Products Plastic Materials
---------------- -----------------
Garden Hose (Colorite Plastics) Medical-grade Vinyl Compounds
(Colorite Polymers)
Medical Tubing (Plastron) Specialty Vinyl Polymers (Colorite
Polymers; Cybertech Polymers)
Specialty Tubing & Gaskets (Action Recycled Plastics (Pure Tech Plastics)
Technology; American Gasket & Rubber)
Each of these product lines has its own unique customer base,
competitive environment, cost and pricing structures, business cycles, and
related business strategies, as described in the following paragraphs.
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Garden Hose
PureTec believes that its Colorite Plastics division is the leading
producer of garden hose in the United States, with more than 40% of the market.
There are two other principal competitors in the United States, and several
smaller companies having substantially smaller market shares. Founded in 1949 in
Garfield, New Jersey, Colorite Plastics now manufactures in six modern
facilities throughout the United States and Canada.
Garden hose products are sold primarily to home centers, hardware
cooperatives, food, automotive, drug and mass merchandising chains and catalog
companies throughout the United States and Canada. Approximately 88% of sales
are to Colorite Plastics' ten largest customers. The remaining sales are divided
among approximately 350 smaller customer accounts. Colorite Plastics' ten
largest customers include some of the fastest growing and most widely respected
retail chains in North America. Colorite Plastics' market strategy is to provide
a complete line of innovative, high-quality products along with superior
customer service. Innovations have included the patented Colorite(R) Evenflow(R)
design and the "drinking water safe" product lines.
Products are sold directly through Colorite Plastics' salespeople and
also through approximately 20 independent representatives. The division sells
both private label and brand-name products to the retail market. Advertising is
limited to trade journals and advertising allowances to retailers.
Colorite Plastics manufactures vinyl garden hose by the plastic
extrusion process. The primary raw materials are vinyl compounds and brass
couplings that are produced by the Company, and nylon reinforcement fiber that
is purchased from suppliers. The Colorite Plastics division typically sets
prices for its garden hose products in advance of each season and, to the extent
that raw material costs increase more than anticipated, the additional costs
cannot be passed on during that season.
The garden hose business is highly seasonal with approximately 75% of
sales occurring in the second half of the Company's fiscal year. As a result of
the need to build up inventories in anticipation of such second-half sales, the
Company's working capital requirements have historically peaked in the second
and third quarters of the Company's fiscal year. In addition, this seasonality
has a significant impact on the Company's net income from quarter to quarter.
Colorite Plastics historically operates the first two quarters of the fiscal
year at a loss.
In addition to its core garden hose business, Colorite Plastics has
launched new products, such as a new line of irrigation products for the
do-it-yourself markets. For example, in recent years the division has introduced
an irrigator "soaker hose," composed of 65% recycled rubber, and the
Auto-Moist(TM) line of drip irrigation and watering products. Colorite Plastics
also manufactures specialty hose products such as air hose. Colorite Plastics,
like other PureTec divisions, is also expanding to international markets. In
1996, it began serving the Canadian market with a new facility in Mississauga,
Ontario.
The garden hose business is included in the plastic products segment of
the Company's operations (See Note 15).
Medical Tubing
The Company's Plastron division has been a leader in disposable medical
tubing for more than 40 years. Plastron's worldwide operation includes
strategically located plants in California, Georgia, and several production
lines at Action Technology Belgium that support sales to the medical industry.
These facilities include "clean room" extrusion operations. Plastron specializes
in high-quality, close tolerance tubing for various surgical procedures and
related medical applications. These applications include intravenous ("IV")
therapy, hemodialysis therapy, cardiovascular procedures such as coronary bypass
surgery, suction and aspiration products, and urinary drainage and catheter
products. Action Technology Belgium had sales from its medical tubing operation
of approximately $2,100,000 and $1,834,000 for fiscal years 1997 and 1996,
respectively.
The Company believes that its Plastron division is a leading producer
of medical tubing, with approximately 25% of the worldwide, non-captive market.
There are four other principal competitors serving the medical tubing market.
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Medical tubing is sold primarily to a small number of manufacturers of
medical devices. Approximately 50% of sales are to Plastron's five largest
customers. Products are sold directly through Plastron's salespeople.
Advertising is limited to trade journals and trade shows.
Plastron manufactures medical tubing by the plastic extrusion process.
The primary raw materials are proprietary vinyl compounds, which are produced by
Plastron, and certain other plastic materials, which are purchased from a select
number of suppliers. Raw material price increases generally can be passed on to
customers after a delay of two or three months, although competitive pressures
sometimes prevent price increases.
Medical tubing is one of the Company's fastest growing product lines.
Continued growth is expected to come from general market expansion and expansion
in international markets, as well as the addition of new customers and new
products. New products include microbore tubing, silicone substitute
formulations, and trilayer tubing substitutes. For example, Plastron has
developed microbore tubing with extremely small internal diameters. This
microbore tubing can be used to regulate the delivery of critical intravenous
fluids without the need for more expensive drip control devices. Medical
professionals can precisely control the drug delivery speed simply by selecting
the proper diameter tube, thereby improving accuracy and reducing cost.
The medical tubing business is included within the plastic products
segment of the Company's operations (See Note 15).
Specialty Tubing & Gaskets
PureTec's specialty tubing and gasket product line consists of (i)
extruded plastic tubing, sold primarily to manufacturers of aerosol valves,
dispenser pumps, and writing instruments; (ii) rubber and thermoplastic gaskets
for the aerosol and dispenser pump markets; and (iii) consumer products, chiefly
consisting of swimming pool and other corrugated hose. These products are
manufactured primarily by the Company's Action Technology ("Action") division,
which includes the American Gasket and Rubber Company ("AGR"), Plastron, and
Action - Europe.
Most of Action's products are manufactured by the plastic extrusion
process and are sold throughout the United States, Europe, and selected
worldwide markets. Action is the largest tubing extruder in North America.
Writing instrument products include pen barrels and ink tubing as well as ink
reservoirs for felt-tip pens. Action's sales to the dispenser industry are
comprised of dip tubes which transmit the contents of a dispenser can to the
nozzle, and plastic and rubber gaskets and seals used in the manufacture of
dispenser valves and pumps. These products are manufactured to very precise
tolerances, according to the specifications developed by Action and its
customers for specific applications. Other OEM (Original Equipment Manufacturer)
sales include corrugated hose to manufacturers of floor care products, and
various types of hoses and tubing for other industrial applications. Action also
manufactures consumer products which are primarily sold to retail merchandisers,
including swimming pool and spa hose.
Action's principal competitive pressure is the possibility of internal
production by its customers. The Company believes Action's products compete
successfully based on product quality, prompt delivery, technical service and
price. Action believes that its ability to produce high volumes of products to
exact specifications has been a key to its success in the marketplace and the
longevity of its customer relationships.
Each Action facility is strategically located to supply multi-national
customers on a timely basis. In the United States, Action maintains plants in
New Jersey and Illinois. AGR's facilities are in Illinois, and Action's Plastron
subsidiary operates in California and Georgia. Action's European plants, in
Belgium and Italy, serve the European, Asian, and African markets with products
similar to those manufactured in the United States. Sales from its plants in
Belgium and Italy were approximately $13,458,000 and $12,450,000 for 1997 and
1996, respectively.
Action's OEM sales are conducted by technically trained full-time
employees who coordinate marketing activities directly with the managers of each
plant. Action also uses independent representatives to sell its pool hose
products. In addition, Action manufactures and markets pool hose nationwide
under a joint agreement with Haviland Consumer Products. This agreement utilizes
the technology and marketing strengths of both companies in their effort to
build a leadership position in the market for pool hose.
The raw materials for all of Action's products (primarily polyethylene
and polypropylene) are purchased from a number of different suppliers. Some PVC
compounds are purchased by Action from other PureTec divisions. The
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Action division has generally been able to pass through increases in raw
material costs to its customers pursuant to multi-year contracts and other
agreements.
Order backlogs at July 31, 1997 and 1996 pertaining to the Company's
Action division were $11,860,000 and $11,202,000, respectively.
The specialty tubing and gaskets business is included within the
plastic products segment of the Company's operations (See Note 15).
Medical-grade Vinyl Compounds
The Company believes that its Colorite Polymers division is the world's
largest producer of high-quality vinyl compounds for use in the medical
industry. Medical-grade compounds are sold primarily under the "Unichem
Products" brand. These compounds are sold to leading manufacturers of medical
devices and equipment. They are also sold to producers of tubing and closures
for the food and beverage industry and used in a variety of food contact
applications.
The market for medical-grade vinyl compounds is highly specialized,
with two significant competitors. For more than 30 years, Colorite Polymers has
been supplying these specialized vinyl compounds for FDA-regulated applications.
The Company believes it competes effectively based on product quality and
performance and prompt delivery, and that price is a secondary consideration for
its customers. Colorite Polymers' chemists work closely with customers to
develop compounds that address their specific requirements. Through this custom
work, the Company has introduced a number of breakthroughs to the medical device
industry by developing formulations with unique physical characteristics. For
example, Colorite Polymers has recently developed a new family of flexible vinyl
compounds designed to replace silicone rubber in a variety of medical and
commercial applications.
Medical-grade compounds are produced in the Company's facilities in
Ridgefield, New Jersey; Sparks, Nevada; and Belfast, Northern Ireland. The
Company sells these compounds in worldwide markets. Approximately 25% of
external sales are to Colorite Polymers' five largest customers. Products are
sold directly through the Company's salespeople. Advertising is limited to trade
journals and trade shows.
Colorite Polymers purchases raw materials for its compounding operation
(vinyl resins, plasticizers and stabilizers) from several sources. The Company
in the past has generally been able to pass on raw materials price increases for
Unichem Products on a relatively timely basis.
The medical-grade vinyl compounds business is included within the
plastic materials segment of the Company's operations (See Note 15).
Specialty Vinyl Polymers
The Company's specialty vinyl polymers business consists of two
divisions of the Colorite Polymers group: Burlington Resins, Inc., doing
business as Colorite Specialty Vinyl Resins ("SVR"); and Cybertech Polymers.
SVR operates a plant in Burlington, New Jersey, with an annual
production capacity of 120 million pounds of vinyl resins. The plant was
purchased from Occidental Chemical Corporation in August 1995. The plant employs
specialized technology to produce dispersion, blending, and copolymer suspension
resins for a variety of industries, including floor covering, automotive
sealants and adhesives, coil coatings, plastisol compounding and PVC packaging.
Management believes that SVR has built a relatively unique position in
the specialty resins market by offering customized products for niche markets
that the larger commodity producers do not serve. SVR's business strategy is
built on individual customer service and the highest standards of quality.
Although SVR's market share in the overall specialty resins market is about 7%,
SVR's share in its target markets exceeds 20%. Approximately 50% of sales are to
the division's 10 largest customers.
SVR is actively developing new products to serve specific customer
applications. The division has also added to its product line by initiating a
technology exchange with Vinnolit Kunstsoff of Ismaning, Germany. The exchange
agreement enhances the Company's breadth of product line by offering specialty
resin formulations not previously available in North America.
SVR purchases raw materials from several large chemical companies. The
division in the past has generally been able to pass on raw materials price
increases for its specialty formulations, but to a lesser extent for its more
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commodity-type products. The division has also experienced competitive pressure
from large chemical companies who offer a greater breadth of products.
The Cybertech Polymers division produces a variety of specialized and
general purpose vinyl compounds. Approximately 70% of Cybertech Polymers'
outside sales are to manufacturers of wire and cable, with the remaining outside
sales going to the footwear, general purpose extrusion and molding markets.
Cybertech Polymers' compounds are sold throughout the United States by an
internal sales force and eight independent representatives. Approximately 50% of
Cybertech Polymers' overall production is used internally by PureTec's Colorite
Plastics division in the manufacture of garden hose.
The markets for Cybertech Polymers' vinyl compounds are highly
fragmented, and neither the Company nor any competitor has a controlling share.
The Company believes it competes effectively based on product quality,
performance and prompt delivery, and price.
Cybertech Polymers purchases raw materials from several sources and
also manufactures them internally. This division also recycles scrap vinyl.
Cybertech Polymers in the past generally has been able to pass on raw materials
price increases to customers on a relatively timely basis.
The specialty vinyl polymers business is included within the plastic
materials segment of the Company's operations (See Note 15).
Recycled Plastics
PureTec believes that its Pure Tech Plastics division is the leading
supplier of high-quality recycled PET for reuse in bottle-grade and sheet
applications. The division has developed proprietary processes for cleaning,
sorting, and recycling post-consumer plastic bottles into clean PET flakes or
pellets. This technology has been optimized to produce extremely high quality
recycled PET, suitable for reuse in new bottles. The technology continues to be
refined by Company engineers, and has been licensed to other companies in a
number of countries, including Taiwan, South Korea, Canada, and Japan.
Raw materials used by the Pure Tech Plastics division consist mostly of
post-consumer soft drink bottles. This raw material is purchased from various
suppliers who obtain bottles in states with "deposit laws," or who conduct
curbside pickup operations. Pure Tech Plastics competes with other recycling
facilities both to obtain materials for recycling and to sell recycled materials
to manufacturers. Competition for supplies of recyclable material is based upon
price and promptness of service in collecting or accepting material. Competition
for sales of recycled material is based on price and consistency of quality.
Prices for recycled PET have been volatile in recent years, causing
wide swings in the division's revenues and earnings. To reduce the impact of
this volatility, the Company has restructured its recycling operations and
linked supply contracts to the market price of recycled PET. This has resulted
in a more consistent spread between the cost of bottles and the price of
recycled PET, providing the Company with an opportunity to increase earnings by
reducing processing costs. This strategy is being followed with the planned
opening of a new state-of-the-art recycling facility in Huntington, West
Virginia in early 1998. The Huntington plant is expected to reduce processing
costs per pound.
This line of business comprises the recycling segment of the Company's
operations (See Note 15).
Company Organization
The Company continues to assess and simplify its organizational
structure. In the current year, this has included the elimination of certain
non-performing entities, reducing the equity in non-core businesses, and
increasing the ownership of Plastic Specialties and Technology, Inc. ("PST"),
the Company's primary operating subsidiary. Although these actions have had a
short-term impact during the 1997 fiscal year, management believes that they
will be accretive to earnings in 1998 and beyond.
As of September 30, 1997, PureTec Corporation owned approximately 96.1%
of the outstanding common stock of PST, and 100% of Burlington Resins, Inc. The
following chart shows PureTec's principal divisions and subsidiaries and their
primary business function:
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-------------------
PureTec Corporation
-------------------
|
-------------------
Ozite Corporation
(inactive)
-------------------
|
---------------------------------------------
| |
- ---------------------------------------- |
Plastic Specialties & Technologies, Inc. |
- ---------------------------------------- |
| |
|--Action Technology (Specialty Tubing) |
| |
| --------------------------------------------------------- |
|---Action Technology Belgium NV (Medical & Specialty Tubing) |
| --------------------------------------------------------- |
| |
| --------------------------------------------------------- |
|---Action Technology Italia SpA (Specialty Tubing & Gaskets) |
| --------------------------------------------------------- |
| |
| -- American Gasket & Rubber (Dispenser Gaskets) |
| |
| -- Plastron (Medical Tubing) |
| |
|-- Colorite Plastics (Home & Garden Products) |
| |
|-- Colorite Polymers (Vinyl Polymers) |
| |
| -- Unichem Products (Medical-grade Compounds) |
| |
| ---------------------------------------------- |
|---Colorite Europe, LTD (Medical-grade Compounds) |
| ---------------------------------------------- |
| |
| -- Cybertech Polymers (Vinyl Compounds) |
| |
| ------------------------------------------ |
| Burlington Resins (Specialty Vinyl Resins)----------------
| ------------------------------------------
|
|--Pure Tech Plastics (Recycled PET)
Patents and Trademarks
The Company seeks to protect its proprietary know-how through the
application of patent and trademark laws. However, in the opinion of management,
none of its patents or trademarks are material to its operations.
Research and Development
The Company employs certain professionals who, along with other
responsibilities, are engaged in research relating to the development of new
products and to the improvement of existing products. The Company works closely
with certain clients to develop and improve certain products and product lines.
Much of this product development is funded by clients and therefore is not
reflected in the Company's financial results. For the years ended July 31, 1997,
1996, and 1995, the Company recorded $654,000, $689,000 and $1,268,000 for
research and development activities.
Employees
As of July 31, 1997, the Company employed approximately 1,900 full-time
employees, of which approximately 1,650 were employed in the United States and
the balance in Europe and Canada. Certain employees at facilities in Ridgefield
and Rockaway, New Jersey are represented by the International Brotherhood of
Teamsters, under contracts that expire August 1, 2000. Certain employees at the
Burlington, New Jersey facility are represented by the Oil
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Chemical & Atomic Workers International Union, AFL-CIO, under contracts that
expire July 1, 2001. Contracts with both of the above unions were successfully
renegotiated in 1997. Certain employees in East Farmingdale, New York are
represented by the Waste Material Sorters, Trimmers & Handlers Union, under a
contract that expires on April 30, 1998. Approximately 45% of all employees are
members of unions including a majority of the European and Canadian employees.
The Company believes that employee relations at all of its manufacturing
facilities are good, and it has not experienced any work stoppage since its
formation.
Environmental Matters
As described in Item 3. Legal Proceedings, the Company is party to
environmental proceedings in the ordinary course of business, none of which
management believes are likely to have a material adverse effect on its
consolidated financial position or results of operations. Additionally, in
management's opinion none of these proceedings nor compliance with Federal,
state and local environmental laws and regulations are believed to require any
material estimated capital expenditures for environmental control facilities in
the foreseeable future.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (Dollars in thousands, except for per share data).
Since the consummation of the transaction between PTI Plastics, Inc.
("PTIP") and Ozite Corporation ("Ozite") in which both became wholly-owned
subsidiaries of PureTec Corporation (the "Company" ), the Company's financial
statements show historical information only for PTIP for periods prior to August
1995. Consequently, references to the Company with respect to such historical
financial information refer solely to PTIP, unless otherwise stated. The
following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and notes thereto.
Results of Operations
Fiscal 1997 Compared to Fiscal 1996
Net sales for the year ended July 31, 1997 ("fiscal 1997") were
$315,334, a decrease of $11,010 or 3.4% compared to the year ended July 31, 1996
("fiscal 1996").
Domestic plastic product sales were $149,083, a decrease of $3,269 or
2.1% compared to 1996. The decrease represents volume shortfalls for garden hose
partially offset by increased volume of gaskets and medical and dip tubing.
Foreign plastic product sales of $35,300 increased $1,142 or 3.3%. The increase
represents volume growth in both medical tubing and rubber and plastic gaskets.
Plastic material products had sales of $154,064, an increase of $11,750 or 8.3%.
This increase represents volume growth in medical-grade compound and specialty
vinyl polymers as well as increased volume used internally by the plastic
products segment. Recycling sales were $18,681 which represents a decrease of
$15,567 or 45%. This decrease is a result of price decreases for recycled PET,
which in recent years has been very volatile.
Gross profit for fiscal 1997 was $66,915, an increase of $1,462
(2.2%) compared to $65,453 for fiscal 1996. Domestic plastic products had gross
profit of $38,061 for fiscal 1997 which is a decrease of $846 or 2.2% compared
to 1996. This decrease is a result of volume shortfall for garden hose partially
offset by increased volume of gaskets and medical and dip tubing. Foreign
plastic products had gross margins of $11,501, an increase of $1,254 or 12.2% as
compared to 1996. This is a result of increased volume and reduced operating
costs. Plastic material products had a gross margin of $16,942 which represents
an increase of $1,168 or 7.4% as compared to 1996. This increase represents
volume growth in medical-grade compounds and specialty vinyl polymers. This was
partially offset by start-up costs associated with Colorite Europe Limited.
Recycling gross margins of $1,528 represents a decrease of $414 or 21% compared
to 1996. This is a direct result of price decreases for recycled PET.
Selling, general and administrative expenses for fiscal 1997 were
$36,091, a $536 (1.5%) increase compared to fiscal 1996. As a percentage of net
sales, these expenses increased to 11.5% in fiscal 1997 from 10.9% in fiscal
1996. This increase is largely due to the start-up of Colorite Europe Limited in
Ireland and an increase in professional fees on a corporate basis which was
partially offset by reduced selling commissions for garden hose.
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Operating income for fiscal 1997 and 1996 was $26,617 (8.4% of net
sales) and $20,868 (6.4% of net sales), respectively, an increase of $5,749 or
28%. Domestic plastic product's operating income of $21,822 for fiscal 1997
represents an increase of $2,456 or 12% compared to 1996. This increase is a
direct result of increased volume of gaskets and medical and dip tubing
partially offset by reduced volume for garden hose. Foreign plastic product's
operating income of $8,276 for fiscal 1997 is an increase of $1,901 or 31% as
compared to fiscal 1996. This increase is a result of improved volume in both
medical tubing and rubber and plastic gaskets. The plastic material products
segment had operating income of $6,533 for fiscal 1997, an increase of $626 or
11% compared to 1996. The increase is a result of volume growth in medical-grade
compounds and specialty vinyl polymers partially offset by start-up costs at
Colorite Europe Limited. Recycling had an operating loss of $197 which
represents an improvement of $255 (after the exclusion of $4,636 write-off of
goodwill and obsolete facilities). The improvement is due to the decrease in
costs and the stability of PET prices during the second half of 1997. An overall
comparison between 1997 and 1996 shows an aggregate write-off of goodwill and
obsolete assets of $4,636 in 1996. The majority of this write-off represents a
reserve for shutdown costs at the Company's Springfield recycling facility.
Interest expense for fiscal 1997 and 1996 was $18,108 and $18,702,
respectively, which represents a $594 (3.2%) decrease. This decrease is
primarily due to the interest related to the settlement of the OxyChem loan, the
payoff of certain Old Recycling loans during the current fiscal year and
improved borrowing rates from our primary lender.
The tax provision for 1997 includes a current foreign tax provision of
$2,804, a current state tax provision of $150 and a deferred foreign tax
provision of $177. The tax provision for fiscal 1996 includes a current foreign
tax provision of $2,269, a current state tax provision of $288 and a deferred
foreign tax provision of $80.
The Company generated net income from continuing operations of $1,345
for fiscal 1997 compared to a loss of $4,407 in fiscal 1996. The increase is
partly attributed to write-offs of obsolete assets related to recycling
operations in 1996 of $4,636 as well as improvements within the plastic products
segment.
During 1997, the Company recognized losses on the discontinuance of its
injection molding operation of $3,476 (which includes a $2,250 loss related to
the disposal of the operation), an additional $672 loss on the disposal of its
Ozite Manufacturing operations, an additional $1,988 loss related to Circuit
Chemistry and a $2,000 gain from the Dalen lawsuit. During 1996, the Company
recorded a loss related to Ozite of $3,220 (which includes a $2,241 loss for
disposal of the operation) as well as a $546 loss from its injection molding
operation. See Note 17 for a further description related to the Company's
discontinued operations.
Fiscal 1996 Compared to Fiscal 1995
For the year end July 31, 1996, the Company recorded net sales of
$326,344 compared to $30,189 for fiscal 1995. The large increase was
attributable to the combination with Ozite and reflects the Company's greatly
expanded scope of operations together with the acquisition of Burlington Resins,
Inc. ("Burlington"). The Company's domestic and foreign plastic products and
plastic materials segments were acquired as part of the aforementioned mergers.
For the year ended July 31, 1996, net sales for the domestic and
foreign plastic products segments were $152,352 and $34,158, respectively. Net
sales for the plastic material segment were $142,314 for the year ended July 31,
1996, reflecting the addition of Burlington and the PVC compound operations. The
plastic materials segment provides PVC compound to the domestic plastic products
segment. Transfers are made at raw material cost plus a value added factor for
labor and overhead. For fiscal 1996, the plastic material segment transferred
approximately $32,000.
Net sales for the recycling operation were $34,248 for the year ended
July 31, 1996, an increase of $4,059 as compared to fiscal 1995.
Gross profit for fiscal 1996 was $65,453 as compared to $4,836 for
fiscal 1995. The $60,617 increase was primarily attributable the addition of
Ozite & Burlington.
Selling, general and administrative expenses were $35,555 and $301 for
fiscal 1996 and fiscal 1995, respectively. As a percentage of net sales, these
expenses were 10.9% for fiscal 1996 and 1.0% for fiscal 1995.
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The Company's aggregate write-offs of goodwill and obsolete assets were
$4,636 for fiscal 1996. The majority of the write-off represents a reserve for
shutdown costs at the Company's Springfield recycling facility. For fiscal 1995,
the Company wrote-off approximately $2,803 of goodwill and other intangible
assets and $4,600 of obsolete equipment.
Operating income for fiscal 1996 was $20,868 (6.4% of net sales) as
compared to an operating loss of $6,284 for fiscal 1995.
Interest expense was $18,702 for fiscal 1996, an $18,283 increase as
compared to fiscal 1995. The increase is due to the above-mentioned transaction
which includes PST which has subordinated notes of $125,000 and a $50,000
revolving credit facility, and includes Burlington which has approximately
$11,000 in debt at July 31, 1996.
The Company had recorded a gain of $1,000 during fiscal 1995 to reflect
a gain realized on the sale of an interest in the Company's reverse vending
machine subsidiary. The Company reduced its equity interest in Evolutions, Inc.
during fiscal 1996 from 75% to 42% and recorded a loss from its equity
investments in Evolutions and certain other equity investments.
The tax provision for fiscal 1996 includes a current foreign tax
provision of $2,269, a current state tax provision of $288 and a deferred
foreign tax provision of $80. For fiscal 1995, no tax provision was recorded.
The Company had a net loss from continuing operations of $4,407 for
fiscal 1996 compared to a net loss from continuing operations of $7,519 in
fiscal 1995.
The Company recognized a loss on the sale of its Ozite Manufacturing
operations (non-woven textiles) in fiscal 1996. This loss amounted to $2,241.
Losses generated from these operations amounted to $979 in fiscal 1996. In
addition the Company disposed of its Styrex injection molding operation in
August 1997. Losses generated from this operation were $546 and $4,580 for
fiscal 1996 and 1995, respectively. Furthermore, the Company recorded a loss on
the disposal of its glass operations in fiscal 1995.
Liquidity and Capital Resources
In the past, the Company has expanded its operations through the
expansion of existing activities, acquisitions of new facilities and various
business combinations. Historically, the Company's sources of liquidity and
capital resources have been net cash provided by operations, bank financing,
private placements of the Company's securities and other private and public
financial sources.
While the management of the Company believes that the Company will be
able to operate on a positive cash flow basis with respect to continuing
operations during the fiscal year ending July 31, 1998, the ability of the
Company to continue to expand its operations may require additional funding.
Cash and cash equivalents increased $750 for fiscal year 1997 compared
to a $1,102 decrease for fiscal year ended July 31, 1996. The changes for these
periods were attributable to the factors discussed below.
The Company had working capital of approximately $20,160 at July 31,
1997 compared to working capital of approximately $21,744 at July 31, 1996. The
decrease in working capital is attributable to an increase in short term
borrowings of $18,495 partially offset by increases in inventory ($13,165),
accounts receivable($3,061), and lower accounts payable of $1,223. The inventory
increase is a result of lower garden hose sales primarily due to a late selling
season for garden hose.
Net cash (used in) operating activities was approximately $(5,444) in
fiscal 1997 compared to net cash provided by operating activities of
approximately $28,811 in fiscal 1996. The change was due principally to an
increase in inventory of 15,864, writeoffs of goodwill, other intangible assets,
and obsolete equipment. Net cash used in investing activities was approximately
$11,264 in fiscal 1997 and approximately $31,469 in fiscal 1996. The change was
primarily due to cash paid in the amount of $22,328 for the acquisitions of net
assets in the Burlington Resins transaction in fiscal 1996. Cash flows from
financing activities were approximately $18,823 for fiscal 1997, which included
a $19,964 increase in short term borrowings. For fiscal 1996, net cash provided
from financing activities was approximately $2,221 which included repayments of
short-term borrowings of $10,840 and proceeds from long-term debt of $18,630.
10
<PAGE>
Net cash provided by operating activities was approximately $28,811 in
fiscal 1996 compared to approximately $1,589 in fiscal 1995. The change was due
principally to a reduction in the overall losses incurred by the Company,
write-offs of goodwill, other intangible assets, and obsolete equipment. Net
cash used in investing activities was approximately $31,469 and $14,077,
respectively in fiscal 1996 and 1995. The change was primarily due to cash paid
in the amount of $22,328 for the acquisitions of net assets in the Burlington
Resins transaction. Cash flows from financing activities were approximately
$2,221 for fiscal 1996, which represented a paydown of $7,056 of debt versus new
long term borrowing of $18,027. For fiscal 1995, net cash provided from
financing activities was approximately $18,766, which were provided principally
by the private placement of an aggregate of 3,308,672 shares of common stock
from October 1994 through July 1995 as well as the proceeds from the sale of
convertible debentures in the amount of approximately $8,371.
Borrowings, Debt Offerings and Redemptions
On December 30, 1992, PST entered into a $50,000 Senior Loan Agreement
(the "Agreement") with a commercial lending company ("CLC"). Proceeds were used
to repay the borrowings outstanding under a prior loan and security agreement
with a bank. The Agreement contains covenants, the most restrictive of which are
maintenance of certain financial ratios, prohibition of the occurrence of
additional indebtedness, the payment of dividends, certain related party
transactions and limitations on capital expenditures. Borrowings under the
Agreement are secured by substantially all the domestic current assets of PST.
Additionally, the CLC has a security interest in PST's intangible assets, and
this security interest ranks pari passu with the security interest of the Senior
Secured Notes (see below) in PST's intangible assets. Revolving credit advances
under the Agreement are based on eligible receivables and inventory.
Effective January 31, 1997, PST amended this Agreement with the CLC
("Amended Agreement"), representing the fourth amendment to the Agreement. The
Amended Agreement provides, among other things, for revolving credit advances of
up to $50,000 through July 31, 2000 and letters of credit of up to $1,000. The
Amended Agreement provides for certain pricing performance adjustments based on
defined Performance Ratios. The Company will pay interest at a defined Index
Rate plus the Applicable Revolver Index Margin (ranging from 0.00% to 0.25%) or,
at the election of PST, the LIBOR Rate plus the Applicable LIBOR Margin (ranging
from 2.50% to 3.00%). The Amended Agreement also provides that outstanding
revolving credit advances shall not exceed $20,000 for 30 consecutive days
during the period from July 1 to September 30 for each year. Furthermore, the
Amended Agreement provides that domestic capital expenditures are limited to
$8,500, $9,000 and $9,500 in fiscal years ending 1997, 1998 and 1999 (and each
fiscal year thereafter), respectively. The Company also has the right to cancel
the Agreement on 30 days' written notice and pay the CLC an early termination
fee of $175 if such cancellation occurs prior to January 31, 1998, and $100 if
cancellation occurs on or after January 31, 1998 and prior to September 30,
1998.
At July 31, 1997, the Company was not in compliance with certain of the
covenants of the Amended Agreement, including the requirement to reduce
borrowing to $20 million and the limitation on capital expenditures. The CLC has
provided a waiver of this non-compliance as of July 31, 1997. The waiver is
effective until the end of the Company's fiscal year ending 1998. The lack of
compliance is a one time event, and once it has occurred, and is waived, the
issue does not need to be addressed again until the end of the next fiscal year.
In addition, on January 31, 1997 PST signed a Receivables Agreement
with the CLC that provides PST with the ability to sell a 100% ownership
interest, without recourse, in certain Eligible Receivables generated by PST.
The CLC's commitment to purchase said receivables from PST are restricted to the
period beginning each February 1 and ending on each May 31. The aggregate
invoice face amount of purchased receivables will not exceed $12,000. PST is
obligated to service the Eligible Receivables that it sells to the CLC. The
CLC's commitment to purchase said receivables from PST are restricted to the
period beginning each February 1 and ending on each May 31.
At July 31, 1997 and 1996, short-term borrowings include revolving
credit advances of $36,772 and $14,138, respectively, under the Amended
Agreement and $2,087 of factored receivables. The CLC owes PST $422 related to
such receivables.
On November 8, 1993, PST issued $125,000 principal amount of 11-1/4%
Senior Secured Notes due in 2003. The Senior Secured Notes are senior secured
obligations of PST, ranking pari passu in right of payment with all existing and
future senior indebtedness of PST and senior to all subordinated indebtedness of
PST, if any. The Senior Secured Notes are secured by substantially all real
property, machinery, equipment, general intangibles and other intellectual
11
<PAGE>
property now owned or hereafter acquired by PST and by a pledge of all
outstanding capital stock of Plastic Specialties and Technologies Investments,
Inc., a wholly-owned subsidiary of PST. The indenture for the Senior Secured
Notes contains covenants which restrict, among other matters, the ability of PST
and its subsidiaries to incur additional indebtedness, pay dividends, (except as
defined in the indenture) redeem capital stock, prepay subordinated
indebtedness, create liens, dispose of certain assets, engage in sale and merger
transactions, make contributions, loans or advances and enter into transactions
with affiliates.
On August 16, 1995, in connection with its acquisition of the
Burlington, New Jersey facility, the Company's Burlington Resins, Inc.
subsidiary has entered into a revolving credit facility with a Commercial Bank
for up to $5,500 based on levels of inventory and accounts receivable. Interest
on this facility is the prime rate plus 1.25%. The prime rate as of July 31,
1997 was 8.5%. At July 31, 1997, there was $1,893 outstanding on this loan. The
Company has also received a term loan from the Commercial Bank in the principal
amount of $5,500. This term loan is payable in 28 quarterly installments of
approximately $196 plus interest accrued at the prime rate plus 1.25%. At July
31, 1997 there was $3,341 outstanding on this term loan. The Commercial Bank
agreement contains covenants, the most restrictive of which are the maintenance
of certain financial ratios, prohibition of the incurrence of additional
indebtedness, the payment of dividends, certain related party transactions and
limitations on capital expenditures. The loans are secured by the property,
plant and equipment, accounts receivable and inventory of Burlington Resins,
Inc. As the Company intends to repay the borrowings outstanding under the
Agreement during 1998, the entire amount has been classified in current portion
of long-term debt at July 31, 1997. The Company also has a term loan provided by
Occidental Chemical Corporation. This loan is subordinated to the Commercial
Bank debt. At July 31, 1997 there was $2,524 outstanding on this loan. This loan
was repaid subsequent to July 31, 1997, and as such has been classified as a
current liability.
In February 1996, Styrex and Pure Tech Plastics, Inc. and subsidiaries
("PTP") entered into a Loan and Security Agreement with a bank ("Styrex/PTP
Loan") providing an aggregate revolving credit line of $7,500 and an aggregate
term loan of $5,000. The proceeds of the loan were used to pay off existing
debt. As of July 31, 1996, there was $3,839 outstanding under the revolving
credit line, and $2,692 under the term loan. In September 1996, the Company
repaid the amount outstanding at that time relating to PTP. Styrex subsequently
paid off its loans to the bank on November 11, 1996 when it signed a new Loan
and Security Agreement (the "Styrex Loan Agreement") with a Finance Company for
a period of three years. The Styrex Loan Agreement provides for a term loan and
revolving loans up to a maximum of $6,000 and letters of credit of up to $1,000
and is secured by all of the assets of Styrex. Advances under the agreement bear
interest at the rate of prime plus 1 1/2%. The initial term loan of $1,360 has
scheduled repayments of $23 per month beginning December 1, 1996. As of July 31,
1997 and 1996 the revolving loan and the term loan balances were $1,086 and
$1,156, respectively. The operations of Styrex were sold in August 1997.
Accordingly, these amounts are included in net assets held for sale in the
consolidated balance sheet which is included in other current assets.
Concurrently with execution of the Merger Agreement, Tekni-Plex
purchased a Convertible Note issued by PureTec in the amount of $5 million. The
loan will assist PureTec and PST in meeting expected cash requirements in the
period prior to completion of the Merger. The Convertible Note bears interest at
13% and is convertible at any time following the 60th day after any termination
of the Agreement into a number of shares of Common Stock sufficient to retire
the principal amount of the Note plus accrued interest or in any event at a base
conversion rate of one share of Common Stock per $2.72 of obligations owed under
the Note. The Company is required to file a registration statement with respect
to the Common Stock issuable upon conversion promptly following a termination of
the Merger Agreement. The Convertible Note matures on September 30, 1998. The
Convertible Note is subject to prepayment by the Company in cash at any time,
and contains covenants and events of default customary for a debt instrument of
this type.
Subsequent Events
In August 1997, the operations of Styrex were sold and the operating
results of Styrex for fiscal 1997 were included within discontinued operations
(see Note 18). Accordingly, results for fiscal 1996 and 1995 were also reclassed
to discontinued operations.
In September 1997, Burlington Resins, Inc. settled a lawsuit it had
filed against OxyChem. The result of this settlement was to reduce goodwill at
Burlington by $1,476. (See Note 1).
12
<PAGE>
In October 1997, PST settled a lawsuit pertaining to Circuit Chemistry,
and Ozite settled the Dalen litigation. The impact of both settlements was
accounted for as discontinued operations (see Note 20(b) and Note 18).
On November 11, 1997, the Company announced that it had signed an
Agreement and Plan of Merger ("Agreement") with Tekni-Plex, Inc., ("Tekni-Plex")
a privately -owned company, pursuant to which the Company would, through a
merger ("Merger") become a wholly-owned subsidiary of Tekni-Plex. The Agreement
provides that the owner of each share of common stock of the Company would
receive $3.50 in cash for that share in the Merger. The Agreement and the Merger
will be submitted to the shareholders of the Company for approval at the
Company's annual shareholders' meeting expected to be held in January 1998. The
Agreement and the Merger have been unanimously approved, and recommended to
shareholders for adoption by the Company's Board of Directors. Officers and
directors of the Company owning approximately 10% of the outstanding common
stock of the Company have agreed to vote their shares in favor of the Merger.
The Agreement contains a number of conditions which must be satisfied
in order for the Merger to occur, including the successful completion of a
consent solicitation and tender offer for PST"s 11.25% Senior Secured Notes due
2003, the receipt of all necessary governmental and regulatory approvals, and
the absence of any changes occurring prior to the closing date which would have
a material adverse significance with respect to the value of the Company and its
subsidiaries, taken as a whole.
The Agreement also requires that the outstanding minority common
shareholders' interest in PST be eliminated, either through purchase or a
short-form merger procedure under Delaware law, not later than immediately prior
to completion of the Merger, at a price of $7.00 per share of PST common stock.
The Merger is further subject to the receipt by Tekni-Plex of
sufficient financing to pay for the Company shares, purchase the PST Notes
tendered in the tender offer, and fund all other cash requirements of the
Merger. TekniPlex has received commitments from Morgan Guaranty Trust Company of
New York to provide senior bank financing and subordinated bridge loans in an
aggregate amount which the parties believe will be sufficient to complete the
Merger, subject to a number of conditions.
The Agreement is terminable by Tekni-Plex , the Company, or either of
them under certain circumstances. In the event the Agreement is terminated
because the Company's Board of Directors withdraws or materially modifies its
approval or recommendation of the Merger or the Agreement or another person,
entity or group acquires beneficial ownership of 50% or more of the outstanding
shares of the Company's Common Stock, the Company is obligated to pay a fee of
$10 million to Tekni-Plex and to reimburse Tekni-Plex for up to $5 million of
its expenses in connection with the Agreement and related transactions. The
Company expects the Merger to be completed in February 1998, but cannot assure
that all of the conditions to the Merger will be satisfied.
In connection with the Company's acceptance of the Tekni-Plex Offer,
Tekni-Plex has also agreed to lend to PureTec Corporation $5,000, as discussed
above.
Future Capital Expenditure and Commitments
The Company's businesses are relatively mature and as a result do not
require significant ongoing additions to plant and equipment, except for the
expansion discussed below. The Company generally finances its ongoing capital
expenditure requirements from its cash flow provided from operations and
borrowings under its Revolving Credit Facility.
Construction has been completed on a new plant in Northern Ireland for
the Company's Unichem division. For purposes of this new business venture, a new
subsidiary has been formed, Colorite Europe Limited (a United Kingdom company).
The total capital costs for the Company in connection with this new Unichem
plant were approximately $6,000. The Company has received commitments for
certain grants, subsidies and other inducements from government authorities in
Northern Ireland. The Company has financed a large part of its capital costs of
this new plant by using cash reserves (and possibly some additional borrowing
from a commercial bank) at Action Belgium N.V.
The Company is in the process of constructing a state-of-the-art
recycling facility in Huntington, West Virginia. The facility is expected to
open early in calendar 1998. The Company will invest approximately $8 million in
the
13
<PAGE>
facility, which will recycle PET containers, such as soft drink bottles and food
packaging. Management is still evaluating various financing alternatives for
this new facility.
In October 1997, the Company settled a lawsuit pertaining to Circuit
Chemistry, a discontinued operation. Total settlement payments were $1,725 as of
October 31, 1997. Additionally, in October 1997, in accordance with the Dalen
litigation settlement, Ozite Corp. made two (2) payments of $500 each (see Note
20(b)). These payments were made out of the Company's current working capital.
Management believes that it has a number of alternatives available to finance
the final settlement payment of $2,250 related to Dalen by January 31, 1998.
Inflation
Generally, the Company's operations have benefited from relatively
stable or declining prices for raw materials. During 1997, the Company has
benefited domestically from declining raw material costs. Foreign operations saw
raw material costs continued to rise until they stabilized during the second
quarter. Raw material costs have generally stabilized at this time In the event
significant inflationary trends were to resume, management believes that the
Company will generally be able to offset the effects thereof through continuing
improvements in operating efficiencies and increasing prices, to the extent
permitted by competitive factors. However, there can be no assurance that all
such cost increases can be passed through to customers.
Year 2000 Issues
The Company has developed action plans for addressing "Year 2000"
issues in the computer systems of the majority of its operating divisions. At
this point in time, the review of computer systems at all operating divisions is
not complete. Management does not believe that the year 2000 exposure is a
material item, particularly considering that most of the application programs
used by the Company do not perform a substantial amount of "date sensitive"
functions. Nonetheless, some minor costs will be incurred to remedy these
weaknesses in these computer systems. Computer systems at some smaller divisions
may be replaced completely. The one major system that has been evaluated will
require some adjustments, and the costs to make these adjustments will be in the
range of $100,000 - $200,000. An evaluation of all the alternatives available to
the Company has not yet been completed.
14
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names, ages and positions of the current directors and
executive officers of PureTec.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Fred W. Broling 62 Chairman of the Board and Chief Executive Officer
David C. Katz 57 President, Chief Operating Officer and Director
Murray Fox 74 Vice President and Director
Leo Gans 71 Vice President and Director
Robert Guyett 60 Director
Werner Haase 59 Director
Edward P. Hamway 49 Director
Peter R. Harvey 62 Director
John J. Harvey 66 Director
Joseph T. Bruno 62 Vice President
Thomas V. Gilboy 43 Vice President, Treasurer and Chief Financial Officer
Paul Litwinczuk 44 Secretary
Gerard R. Giordano 47 Asst. Secretary and Vice President
</TABLE>
Mr. Broling has served as the Chairman and Chief Executive Officer of
the Company since July 26, 1995. Prior to that, Mr. Broling was a Vice President
of PTIP. Mr. Broling has served as Chairman and President of PST since 1984 and
as Chairman and Chief Executive Officer of Ozite since 1990. Prior to 1984, Mr.
Broling served as President of the plastic specialty sector of Dart & Kraft.
Mr. Katz has served as President of the Company since its inception and
as President of PTIP since August 1988 and as a Director since September 1991.
He was appointed Chief Operating Officer in February 1994. From 1987 until
August 1988 he was an independent consultant to contract and food and beverage
packers. From 1982 until 1987, he was Vice President and operations director for
Taylor Wine Company, and was responsible for operation, distribution, purchasing
and maintenance of the plant owned by Taylor Wine Company in Hammondsport, New
York. From 1977 until 1982, he was U.S. manager of packaging for the Coca-Cola
Company in Atlanta, Georgia and in 1978 and 1979 he coordinated the introduction
of PET bottles to U.S. bottlers.
Mr. Fox has been a Director of PTIP since September 1991 and of the
Company since July 26, 1995. Mr. Fox also served as Secretary/Treasurer of PTIP
from September 1991 until July 1995. Mr. Fox was also Secretary/Treasurer of REI
Distributors, Inc. from 1981 until July 1995 and was a co-founder of that
company. Mr. Fox is also President of Recycling Enterprises, Inc., a company
engaged in glass recycling and fabrication of reprocessing equipment.
Mr. Gans has been a Vice President and director of the Company since
July 1995. Mr. Gans has served as Vice President since 1984 and was a director
of PST from 1989 to June 1993. He has also served as President of PST's Action
Technology Division since 1983.
Mr. Guyett has been a director of the Company since 1996. Mr. Guyett
serves as President, Chief Executive Officer of Crescent Management Enterprises,
LLC.
Mr. Haase has been a director of the Company since July 1995. Mr. Haase
has been the Chief Executive Officer of Journeycraft, Inc., a privately held New
York corporation involved in travel and sales promotion, since 1986. Mr. Haase
served as a Director of PTIP from 1987 to 1991. Mr. Haase is also a director of
Water-Jel Technologies, Inc., a publicly held company which develops, produces
and markets products which provide emergency first aid on burns, and shields
against heat and fires, and Multi-Media Tutorial Services, Inc., a publicly held
company which develops and markets personal educational materials on videotape
and CD-ROM formats.
Mr. Hamway has served as a director of the Company since November 1995.
He has been Chairman of Round Hill Group, Ltd., a financial consulting firm,
since March 1995. Prior to that he held various executive positions with IBJ
Schroeder Bank & Trust Company.
15
<PAGE>
Mr. John Harvey has served as Director of the Company since July 1995.
Mr. Harvey has served as a Director of Ozite since August 1990 and as a Director
of PST since October 1993. He has also served as the Chairman of the Board and
Chief Executive Officer of ARTRA Group Incorporated, a publicly held company
which manufactures and markets fashion jewelry, flexible packaging and
investments and as a director of The Lori Corporation (fashion jewelry) since
1985. Peter R. Harvey and John J. Harvey are brothers.
Mr. Peter Harvey has served as Director of the Company since July 1995.
Mr. Harvey has served as a Director since 1993. He has been a director of Ozite
since 1984. He also has served as President, Chief Operating Officer and a
director of ARTRA Group Incorporated since 1986, a director of The Lori
Corporation since 1984, and a director of SoftNet Systems, Inc. since 1988. He
was also Chief Executive Officer and Chairman of SoftNet from 1985 to 1993.
Mr. Bruno has served as Vice President - Human Resources of the Company
since April 1996 and has held the same position with PST since 1986. Prior
thereto, from 1979 to 1985, he served as a Director and Vice President of
Personnel for Wilson Fiberfil International, a division of Dart & Kraft.
Mr. Gilboy has served as Vice President, Treasurer and Chief Financial
Officer of the Company since May 1996. Previously (from 1991 to 1996) Mr. Gilboy
had been Vice President and Chief Financial Officer of Troy Corporation, a
specialty chemical company.
Mr. Litwinczuk has served as Secretary of the Company since its
inception. Mr. Litwinczuk has served as the Secretary of Ozite and PST since
April 1996. He also served as Assistant Secretary of PTIP from September 1991 to
July 1995. Prior to 1991, Mr. Litwinczuk was Administrative Manager with REI
Distributors, Inc.
Mr. Giordano has served as Vice President of Corporate Finance since
February 1997 and was Vice president of Colorite since 1989. Previously (from
1983 - 1989) Mr. Giordano had been Vice President of Finance and Administration
for Ingredient Technology, a division of Crompton & Knowles Corporation.
PST is a subsidiary of Ozite, which is a wholly owned subsidiary of
PureTec.
Compensation Committee Interlocks and Insider Participation; Additional
Information
Compensation of executive officers is determined by the Company's Board
of Directors. Messrs. Fred Broling and Peter R. Harvey currently serve on PST's
Board of Directors and have served as directors and officers of PST and continue
to serve Ozite in such capacities. Mr. Broling is currently employed as an
officer of PST. See "Item 13. Certain Relationships and Related Transactions."
Mr. Broling and Mr. Peter R. Harvey recommend to the Board of Directors
compensation payable to executive officers of the Company. Mr. Broling's
compensation is based on the actual performance of the Company compared to the
operating plan. The compensation of Mr. Gans is determined in accordance with
the performance of his operating division based on such plan. Messrs. Broling
and Harvey consider the performance of the Company, among other factors, in
determining the compensation of other executive officers; however, neither they
nor the Board of Directors have adopted compensation policies applicable to such
other executive officers.
Compliance With Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership. Officers, directors and greater than 10% stockholders are required to
furnish the Company with copies of all Section 16(a) forms they file. The
Company believes that its officers, directors, and greater than 10% beneficial
owners complied with all applicable filing requirements.
Item 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Name and Fiscal Stock All Other
Principal Position Year Salary Bonus Options Compensation (1)
<S> <C> <C> <C> <C> <C>
Fred W. Broling 1997 $250,000 $250,000 100,000 $ 5,192
Chairman and Chief 1996 259,216 125,000 100,000 5,010
Executive Officer 1995 263,446 250,000 --- 11,232
David C. Katz 1997 165,000 165,000 100,000 4,362
President, Chief Operating 1996 152,385 75,000 --- 4,854
Officer, Director 1995 130,000 150,000 50,000 ---
Leo Gans 1997 186,000 249,240 50,000 5,192
Vice President, Director, 1996 187,042 166,500 100,000 5,132
President of Action 1995 186,582 236,000 --- 9,987
Technologies
Thomas V. Gilboy 1997 176,000 176,000 100,000 5,192
Vice President, Treasurer & 1996 31,067 40,000 100,000 --
Chief Financial Officer 1995 -- -- -- --
Robert E. Brookman, Ph.D. 1997 197,000 73,100 50,000 5,192
President - Colorite 1996 191,582 49,454 50,000 4,992
Polymers Division 1995 190,703 99,000 --- 4,992
</TABLE>
(1) The amounts in this column are contributions made by the Company to one
of the Savings Plan for Employees of PureTec or its affiliates and the
amount of premiums paid by the Company for life insurance policies for
the benefit of the named executive officers.
Director's Compensation
Directors who are officers of the Company receive no compensation for
serving as directors. Independent directors who serve on the compensation
committee participate in the 1995 Disinterested Director Stock Option Plan and
are paid a $10,000 annual fee.
<PAGE>
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Potential
Realizable Realizable
Value at Value at
Assumed Assumed
Percent of Annual Annual
Total Rates of Rates of
Number of Options/ Stock Stock
Securities SARs Price Price
Under- Granted Apprecia- Apprecia-
lying to Exer- tion for tion for
Options/ Employees cise or Expi- Option Option
SARs in Fiscal Base ration Term Term
Name Granted Year Price Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Fred W. Broling 100,000 13.9% $2.25 8/01/2005 $97,153 $234,841
David C. Katz 100,000 13.9% $2.25 8/01/2005 97,153 234,841
Leo Gans 50,000 6.9% $2.25 8/01/2005 48,577 117,420
Thomas V. Gilboy 100,000 13.9% $2.25 8/01/2005 97,153 234,841
Robert E. Brookman 50,000 6.9% $2.25 8/01/2005 48,577 117,420
</TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End FY-end
Shares Acquired Exercisable/ Exercisable/
Name on Exercise Value Realized Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Fred W. Broling --- --- 33,333/166,667 ---/---
David C. Katz --- --- 108,300/100,000 ---/---
Leo Gans --- --- 33,333/116,667 ---/---
Thomas V. Gilboy --- --- 33,333/166,667 ---/---
Robert E. Brookman --- --- 16,667/83,333 ---/---
</TABLE>
<PAGE>
Compensation Pursuant to PST Pension Plan
Pensions for salaried personnel of the Company are provided through the
Plastic Specialties and Technologies, Inc. And Affiliates Pension Plan,
effective as of May 10, 1984 and amended January 1, 1988 (the "PST Pension
Plan"). The following table illustrates the amount of the annual pension benefit
payable under the PST Pension Plan to a person in the specified average salary
and year-of-service classifications:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of service
-----------------------------------------------------------------------------
Remuneration 15 20 25 30 35
- ------------ ---------- --------- ---------- ---------- ------
<C> <C> <C> <C> <C> <C>
$100,000 $15,000 $20,000 $25,000 $30,000 $35,000
125,000 18,740 25,000 31,250 37,500 43,750
150,000 or more 22,500 30,000 37,500 45,000 52,500
</TABLE>
For purposes of the PST Pension Plan, compensation is defined as the
total wages, salaries, commissions, bonuses, overtime and special awards paid
during the year. All cash compensation reported in the Summary Compensation
Table under the columns "Salary" and "Bonus" is included in compensation under
the Pension Plan (subject to the dollar limitation shown in the Pension Plan
Table), for each officer listed.
The estimated number of credited years of service of each of the
executive officers listed in the Summary Compensation Table is as follows: Fred
W. Broling, 21 years; Thomas V Gilboy, 1 year; Leo Gans, 15 years; Joseph T.
Bruno; 18 years and Robert Brookman, 8 years. Mr. Katz is not presently covered
by the PST Pension Plan.
The PST Pension Plan provides a monthly benefit payable for life,
beginning at age 65, equal to one-twelfth of one percent of the total
compensation received during the period the employee participated in the PST
Pension Plan. None of the PST Pension benefits are subject to any deduction for
Social Security or other offset amounts.
<PAGE>
Severance Arrangements
The Company adopted, subject to negotiation of final documentation with
Tekni-Plex concerning such arrangements, a severance payment plan (the
"Severance Plan") that will become effective at the effective time of the Merger
(the "Effective Time") pursuant to which domestic salaried employees of the
Company and its subsidiaries, including the executive officers of the Company,
may receive separation benefits.
16
<PAGE>
Under the Severance Plan, any domestic salaried employee (including an executive
officer) whose employment is terminated as a result of restructuring changes
within one year from the Effective Time (unless the employee is a party at that
time to a separate agreement with the Company that provides for the payment of
a greater amount) is eligible to receive a severance payment. In order to
receive a severance payment, the employee must continue his or her employment
through a separation date to be determined by the Company, and sign a release
of any claim that he or she may have against the Company or Tekni-Plex or both.
The amount of the payment will be based upon the employee's length of service,
position responsibility and current base salary, and will be calculated at one
week of pay per year of service, but shall not be less than a prescribed number
of weeks depending on position title (that is, 52 weeks for the Chief Executive
Officer of the Company (the "CEO"), 26 weeks for the Chief Operating Officer,
the Chief Financial Officer, The Corporate Secretary, the President and any
Vice President of the Company, 20 weeks for any director or general manager of
the Company and between 4 and 16 weeks for other domestic salaried employees
of the Company).
Thomas V. Gilboy, the Chief Financial Officer of the Company has a
separate severance agreement with the Company that provides for severance
payments in a greater amount than is provided for by the the Severance Plan.
Mr. Gilboy's agreement with the Company, which expires in May 1998, provides
that he shall receive 52 weeks of severance pay, based on current salary plus
a bonus, if he is terminated for any reason other than cause.
Stay Bonus and Consulting Arrangements
To provide for a successful transition of the Company's ownership,
the Company intends to adopt, prior to the Effective Time, a stay bonus program
covering up to 10 officers and employees of the Company and its subsidiaries
(the "Participating Employees") exclusive of the Chief Executive Officer of the
Company (the "CEO"). If adopted, the stay bonus program shall be adopted
pursuant to documentation satisfactory to each of Tekni-Plex and the Company and
shall provide for (i) the payment of up to $800,000 in the aggregate in a lump
sum to Participating Employees who remain employed by the Company and its
subsidiaries through the 45th day following the Merger (unless earlier
terminated by Tekni-Plex not for cause) and (ii) the payment of up to $400,000
to the CEO if such CEO remains employed by the Company until the Merger. In
addition, the CEO shall be entitled to $150,000 per annum pursuant to and in
accordance with a consulting agreement between the CEO and the Company. It shall
be a condition of each Participating Employee's right to receive a stay bonus
pursuant to the program that such employee not be terminated for cause, that
such employee shall discharge his assigned duties, that such employee shall at
all times promote the interests of the Company and the harmonious transition of
ownership thereof, and that such employee sign a general release of all claims,
as of such date, against the Company and its subsidiaries.
17
<PAGE>
Index To Exhibits
Number Exhibit
2.1 Agreement and Plan of Merger dated as of November 11, 1997 among
PureTec Corporation, Plastic Specialties & Technologies, Inc.,
Tekni-Plex, Inc. And P.T. Holding, Inc.
3.1 Certificate of Incorporation (incorporated by reference from Exhibit
3(a) of the Company's registration statement on Form S-4, file no. 33 -
82768).
3.2 By-laws (incorporated by reference from Exhibit 3(b) of the Company's
registration statement on Form S-4, file no. 33 - 82768).
3.3 Certificate of Amendment of Certificate of Incorporation dated July 26,
1995
3.4 Certificate of Amendment of Certificate of Incorporation dated May 1,
1996
4.1 Form of Indenture between Plastic Specialties and Technologies, Inc.
and First Fidelity Bank, NA Pennsylvania, as Trustee, relating to the
Senior Secured Notes of Plastic Specialties and Technologies, Inc. due
2003 (incorporated by reference to Exhibit 4.1 to Amendment No. 2 to
Registration Statement of Plastic Specialties and Technologies, Inc. on
Form S-1 (No. 33-66338) filed November 8, 1993).
4.2 Form of Specimen Senior Secured Note (incorporated by reference from
Exhibit 4.10 of Amendment No. 2 to PST's registration statement on Form
S-1, file no. 34-11686).
4.3 Form of 13% Convertible Senior Note among PureTec Corporation and
Tekni-Plex, Inc. dated November 11, 1997.
10.1 Agreement and Plan of Merger, dated July 6, 1994 by and among PTI, the
Company, Pure Tech Newco (PTI), Inc., Pure Tech Newco (Ozite), Inc.,
and Ozite (incorporated by reference from PTI's report on Form 8-K,
filed with the Commission on July 13, 1994) and Amendments Nos. 1 to 4
thereto (incorporated by reference from Exhibit 2(a) of the Company's
registration statement on Form S-4, file no. 33 - 82768).
10.2 Form of Amended and Restated Senior Loan Agreement dated as of November
8, 1993 between PST and General Electric Capital Corporation, as agent
and lender (incorporated by reference from Exhibit 10.3 of Ozite's
Annual Report on Form 10-K for the fiscal year ended July 31, 1993).
10.3 Plastic Specialties and Technologies, Inc. and Affiliates Pension Plan,
Amended and Restated Effective as of January 1, 1985 (incorporated by
reference from Exhibit 10.18 of PST's registration statement on Form
S-1, no. 34-11686).
10.4 1995 Stock Option Plan (incorporated by reference from Exhibit 10(s) of
the Company's registration statement on Form S-4, file no. 33 - 82768).
10.5 1995 Disinterested Directors' Stock Option Plan (incorporated by
reference from Exhibit 10(u) of the Company's registration statement on
Form S-4, file no. 33 - 82768).
10.6 Asset Transfer Agreement dated September 29, 1994 by and between
Occidental Chemical Corporation, as amended October 5, 1994, October
14, 1994, May 24, 1995, and August 18, 1995 (incorporated by reference
from Exhibit 2 of the Company's current report on Form 8-K filed
September 1, 1995).
10.7 Demand Note dated May 20, 1988 between Peter R. Harvey and Plastic
Specialties and Technologies, Inc.
10.8 Lease, dated June 1989, between Richard C. Lauer and Roy I. Anderson,
as lessor, and PST, as lessee, re: 19555 East Arenth Avenue, Industry
California (incorporated by reference from Exhibit 28.1 of PST's
quarterly report on Form 10-Q for the fiscal quarter ended October 31,
1992).
10.9 Lease, dated September 23, 1991, between E.T. Herman and Jane D. Herman
1978 Living Trust, as lessor, and the Colorite Plastics Division of
PST, as lessee, re: 909 East Glendale Avenue, Sparks, Nevada
(incorporated by reference from Exhibit 28.1 of PST's quarterly report
on Form 10-Q for the fiscal quarter ended October 31, 1992).
10.10 Lease, dated January 1, 1993, between OHR Realty Corporation, as
lessor, and PST, as lessee, re: Piscataway, New Jersey (incorporated by
reference from Exhibit 28.1 of PST's quarterly report on Form 10-Q for
the fiscal quarter ended October 1992).
10.11 Lease, dated April 24, 1972, between Pacific Western Warehouse, Inc.
and Dark Industries, Inc. (assigned by Dart Industries, Inc. to PST)
(incorporated by reference from Exhibit 10.8 to PST's registration
statement on Form S-1, file no. 33-11686).
10.12 Credit Agreement among Burlington Resins, Inc. And Texas Commerce Bank
National Association dated August 18, 1995.
10.13 Receivable Purchase Program Agreement between General Electric Capital
Corporation and Plastic Specialties and Technologies, Inc. dated
January 31, 1997 (incorporated by reference from Exhibit 10.12 to
Annual Report of PST (No. 34-11686) on Form 10-K/A for fiscal year
ended July 31, 1997).
18
<PAGE>
10.14 Senior Loan Agreement dated as of December 30, 1992 between PST, as
borrower, General Electric Capital Corporation, as agent and lender,
and certain participating lenders (the "GECC Senior Loan Agreement");
incorporated by reference from Exhibit 10.24 to Annual Report on Form
10-K of PST for the fiscal year ended July 31, 1992.
10.15 Amendment No. 2 dated July 7, 1993 to the GECC Senior Loan Agreement
(incorporated by reference from Exhibit 10.9 to Registration Statement
of PST on Form S-1 (No. 33-66338)).
10.16 Amendment No. 3 dated October 8, 1993 to the GECC Senior Loan Agreement
(incorporated by reference from Exhibit 10.10 to Amendment No. 1 to
Registration Statement of PST on Form S-1 (No. 33-66338)).
10.17 Amendment No. 4 dated January 31, 1997 to the GECC Senior Loan
Agreement (incorporated by reference from Exhibit 10.11 to Annual
Report on Form 10-K/A of PST for year ended July 31, 1997 (No. 34 -
11686)).
10.18 Employment contract dated April 23, 1996 between PureTech
International, Inc. and Thomas V. Gilboy
10.19 Summary Plan Description: Severance pay plan for domestic, salaried,
non-corporate office employees terminated as a result of restructuring
21 List of subsidiaries
23.1 Consent of Deloitte & Touche LLP with respect to Registration Statment
No. 33-98266 on Form S-8 and Registration Statement No. 33-98190 on
Form S-3.
23.2 Consent of Holtz Rubenstein & Co., LLP with respect to Registration
Statement No. 33-98190 on Form S-3.
27 Financial Data Schedule
99 Form 8-K, dated June 30, 1997.
19
<PAGE>
April 23, 1996
Mr. Thomas V. Gilboy
44 Benjamin Street
Old Greenwich, CT 06870
Dear Tom:
Congratulations on your decision to join Pure Tech International, Inc. as its
Vice President and Chief Financial Officer effective on or about May 15, 1996.
Please consider this correspondence as our letter of intent regarding your
employment with us.
Functions and Responsibilities
Per the attached.
Salary and Incentive Compensation
1. Base salary of $13,333.34 per month effective on or about May 15, 1996.
2. Effective August 1, 1996, participation in an incentive program that
provides a maximum compensation of 50% of base pay for fiscal year
ending 7/31/97 based on accomplishment of predetermined goals and
objectives.
3. Payment of a guaranteed bonus of $40,000 for fiscal year ending 7/31/96
payable in October 1996.
4. Availability to receive stock options equal to 100,000 shares at $3.00
exercise price upon approval of Board of Directors.
Benefits
1. Participation in the Company sponsored health insurance program with
present employee contribution rate schedule.
2. Life Insurance at two times annual salary plus one time annual salary
for accidental death presently fully sponsored by the Company.
3. Participation in our long-term disability program with present employee
contribution rate schedule.
<PAGE>
Mr. Thomas Gilboy
April 23, 1996
Page 2 of 3
4. Participation in the voluntary accident insurance program with present
employee contribution rate schedule.
5. Participation after one full year of service in the Company sponsored
401k savings plan. Company fully matches first 2% of employee
contributions.
6. Participation, after one year of service, in the Company sponsored and
fully supported employee pension plan.
7. Present vacation policy permits two weeks after one full year of
service and three weeks after six full years of service.
Auto
1. The Company will provide an auto for business and personal use, per
corporate policy.
2. The Company will provide a cellular phone with the above auto.
Continued Employment
1. If Pure Tech International, (the Company), is sold and/or restructured
which results in your termination, at anytime during the first two
years of your employment, you will receive one (1) year's salary and
applicable bonus upon termination.
Pre Employment Medical Examination
1. Employment is conditional upon satisfactory completion of a
pre-employment medical examination that includes drug screening for use
of illegal drugs.
Restrictive Covenants - Conflicts of Interest
1. Acceptance of the Plastic Specialties & Technologies, Inc. Restrictive
Covenants Agreement and Conflicts with Interests Policy (enclosed) by
signing same and returning them in the self stamped, self addressed
return envelope.
Sexual Harassment - Americans With Disabilities Act
1. Acceptance of the Plastic Specialties & Technologies, Inc. Sexual
Harassment and Americans With Disabilities Act (enclosed) by signing
same and returning them in the self stamped, self addressed return
envelope.
<PAGE>
Mr. Thomas Gilboy
April 23, 1996
Page 3 of 3
The above referred policies (Restrictive Covenants - Conflicts of Interest,
Sexual Harassment Americans With Disabilities Act) apply to Pure Tech
International, Inc. employees also.
Please acknowledge your acceptance of our intent by signing as indicated below.
Return the signed letter in the enclosed stamped, self addressed envelope.
- ------------------------------------ ------------------------------
Signature Date
Please feel free to call me at 201-941-6550 if you have any questions.
Sincerely,
Joseph T. Bruno
JTB/sb
enclosures
<PAGE>
April 26, 1996
Thomas V. Gilboy
44 Benjamin Street
Old Greenwich, CT 06870
Dear Tom:
Below are responses to questions you raised regarding our 4/23/96 letter of
intent. Please sign both the original of 4/23/96 and this letter of 4/26/96.
1. Health insurance coverages start on date of hire except for pre
existing conditions, if any, which are not covered for six months.
2. PPO directory is enclosed per your zip code area (Old Greenwich, CT).
3. Employee contribution for health and dental coverage is $45.00 per
month. LTD cost is 36(cent) per thousand to maximum of $75.00 per
month.
4. Bonus is included as compensation for life insurance purposes.
5. Company matches first 2% of your contributions up front and you vest
accordingly: yr 1 through 4 yrs at ten percent per yr., at yr 5 besting
jumps to 60%, 80% at yr 6 and 100% at yr 7.
6. Rollovers are permitted into our 401k plan anytime after your hire
date.
7. Loans are permitted per safe harbor regulations only.
8. Auto use is unlimited and includes gasoline and maintenance.
9. Litigation issues will be part of your responsibility.
10. Corporate communication will be part of any ongoing team effort of
corporate management to those affected.
11. Per your discussion with Fred, your bonus is targeted at 50% of base
salary assuming 100% of the corporate operating plan is achieved. If
plan is exceeded, your bonus increases incrementally to a maximum of
100% of base salary.
<PAGE>
Mr. Thomas V.Gilboy
April 26, 1996
Page 2 of 2
12. Your stock option vests over three years and your option to exercise is
approximately 9 1/2 yrs.
13. You will be permitted to take eight vacation days in 1996 and be
eligible for three weeks of vacation beginning January 1, 1997.
14. Termination
If for any reason other than cause your employment terminates within
the first two years of employment you will receive one year of salary
and bonus as severance pay.
15. We understand you are negotiating with your present employer to retain
$40,000 of your non-vested profit sharing account. If your negotiations
are unsuccessful, PureTec will place $40,000 in an escrow account for
you which you will vest 25% over the first four years of employment.
- ----------------------------- ---------------------------
Signature Date
Tom, please call me at home on Sunday evening to discuss 908-889-1262.
Sincerely,
Joseph T. Bruno
JTB/sb
encl.
<PAGE>
PURETEC CORPORATION
SUMMARY PLAN DESCRIPTION
SEVERANCE PAY PLAN FOR DOMESTIC, SALARIED,
NON-CORPORATE OFFICE EMPLOYEES TERMINATED
AS A RESULT OF RESTRUCTURING
PURPOSE OF PLAN: In view of the possible restructuring of PureTec
Corporation, and its subsidiary, affiliated and
related entities (collectively "PureTec"),
following the purchase of PureTec shares by
TekniPlex, Inc. ("Tekni-Plex"), which may result
in the permanent termination of certain domestic,
salaried, non-corporate office employees, PureTec
has adopted this Severance Pay Plan ("Plan") to
provide for a severance payment to PureTec
salaried, non-corporate office employees whose
employment is terminated in connection with the
restructuring.
TERMINATION OF PRIOR This Plan terminates, supercedes and replaces any
SEVERANCE PAY PLANS: and all prior severance pay plans, practices,
programs and policies applicable to the employees
eligible for this Plan.
EFFECTIVE DATE: The effective date of this Plan is the date that
Tekni-Plex gains control of PureTec.
1
<PAGE>
ELIGIBILITY FOR SEVERANCE Any domestic, salaried, non-corporate office
PAYMENT employee who: (a) is continuously on PureTec=s
active payroll on the date that their termination
is announced and remain so through his or her
Separation Date ("eligibility period"); (b) is
terminated by PureTec or Tekni-Plex, or
voluntarily resigns following a significant
reduction in the employee's base salary or the
relocation of the employee's office to a location
more than seventy-five miles from the location of
his or her office immediately prior to the
Effective Date of this Plan within twelve (12)
months following the Effective Date of this Plan,
in connection with restructuring changes; (c) sign
an Agreement for Separation of Employment and
General Release; (d) deliver to PureTec an
executed Certificate of Non-Revocation of
Agreement for Separation of Employment and General
Release, if the employee is age 40 or above; (e)
complete an Illness/Injury Report; and (f)
otherwise remain qualified and are not
disqualified under any of the terms and conditions
set forth in this Summary Plan Description, are
eligible for a severance payment in accordance
with this Plan. An employee of PureTec will not be
eligible for a severance payment under this Plan,
if the employee: (a) is not a domestic, salaried,
non-corporate office employee as of the Effective
Date of this Plan; (b) is a party to an agreement
with PureTec, which provides for the employee to
receive a payment upon termination of employment
that is greater than the severance payment
provided under this Plan; (c) is terminated in
connection with the restructuring at PureTec and
then is
2
<PAGE>
employed by TekniPlex, Inc., or one of
PureTec's or TekniPlex's subsidiaries, affiliates
or otherwise related entities; or (d) is
terminated more than one (1) year after the
Effective Date of this plan. This Plan does not
apply to PureTec employees who are employed at the
PureTec corporate office located at 65 Railroad
Avenue, Ridgefield, NJ 07657.
SEPARATION DATE: The date that PureTec designates as the employee's
last date of employment.
AGREEMENT FOR SEPARATION OF An agreement in the form of Exhibit 1 attached
EMPLOYMENT AND GENERAL hereto, for employees age 40 and above. An
RELEASE: agreement in the form of Exhibit 2 attached
hereto, for employees under the age of 40.
ILLNESS/INJURY REPORT: A report in the form of Exhibit 3 attached hereto.
CERTIFICATE OF A certificate in the form of Exhibit 4 attached
NONREVOCATION OF AGREEMENT hereto.
FOR SEPARATION OF
EMPLOYMENT AND GENERAL
RELEASE:
3
<PAGE>
ACTIVE PAYROLL REQUIREMENT: For purposes of eligibility under this Plan, an
employee will be considered to be on active payroll
if the employee regularly performs work for
PureTec, to PureTec's satisfaction, through and
including the eligibility period, or is off work
during the eligibility period on an approved
vacation, approved leave of absence or a paid
holiday. The employee will not be considered on the
active payroll for purposes of this Plan if the
employee: (a) does not regularly report for work
during the eligibility period (except as otherwise
authorized under this paragraph); (b) is not
working because of a disciplinary suspension during
any part of the eligibility period; or (c) is
determined by PureTec to have voluntarily resigned
for reasons other than following a significant
reduction in the employee's base salary or the
relocation of the employee's office to a location
more than seventy-five miles from the location of
his or her office immediately prior to the
Effective Date of this Plan, or terminated for any
reason other than the elimination of the employee's
position due to the restructuring of PureTec after
the Effective Date of this Plan.
4
<PAGE>
SEVERANCE PAYMENT: Each eligible employee will receive a severance
payment in the form of a single payment. The
severance payment will be based on the employee's
length of service at PureTec on the Separation
Date, and will be equivalent to one (1) week per
year of service at the employee's weekly base
salary on the Separation Date, less applicable
deductions and any amount owed to PureTec by the
employee, but in no case less than the number of
weeks defined in the Position Responsibility Table,
Exhibit 5, attached hereto for the employee's
position or job title as in effect immediately
prior to the Effective Date. The employee's years
of service shall mean the number of whole calendar
years during which the employee was employed with
PureTec, plus a pro rata portion of any partial
years determined by dividing the number of whole
months during which the employee was employed with
PureTec in the partial year by 12. If an employee
is otherwise eligible, the severance payment will
be paid even if the employee commences other
employment with an employer other than PureTec or
Tekni-Plex after the employee's Separation Date;
the employee shall not be required to take any
actions to mitigate the severance payment.
EMPLOYEE BENEFITS: Separated employees will be eligible to
continue their participation in group insurance
coverage, to the same extent and at the same cost
that they participated in group insurance coverage
immediately prior to their separation, for the
remainder of the calendar month in which the
Separation Date occurs plus one additional calendar
month.
5
<PAGE>
WARN CREDIT: All amounts paid to or on behalf of any employee by
PureTec pursuant to this Plan shall be deemed to be
amounts paid in satisfaction of PureTec's
obligation, if any, under the Worker Adjustment and
Retraining Act, 29 U.S.C. Section 2012, et seq.
("WARN").
TERMINATION An employee, who is separated for cause,
FOR CAUSE OR FOR voluntarily resigns for reasons other than
ANY REASON OTHER following a significant reduction in the
THAN THE ELIMINATION employee's base salary or the relocation of the
OF THE EMPLOYEE'S employee's office to a location more than
POSITION DUE TO seventy-five miles from the location of his or her
RESTRUCTURING: office immediately prior to the Effective Date of
this Plan, or is terminated for any reason other
than the elimination of the employee's position due
to a restructuring following the Effective Date of
this Plan as determined by PureTec, on or before
the employee's Separation Date, will not be
eligible under this Plan to receive a severance
payment. For purposes of this Plan, "cause" shall
include, but not be limited to: (a) a failure of
an employee to perform his or her duties to
PureTec; (b) commission of a felony; or (c) any
event of moral misconduct.
DETRIMENTAL CONDUCT: If PureTec reasonably determines, in its sole
discretion, that an employee who is eligible to
receive a severance payment under this Plan engages
in conduct which is detrimental to the interests of
PureTec or Tekni-Plex, such employee will
immediately cease to be eligible for a severance
payment.
6
<PAGE>
Severance pay is conditioned upon the employee
refraining from attempting to or engaging in any
disruption of, or giving support to anyone who
disrupts, any PureTec or Tekni-Plex operation or
the performance of any PureTec or Tekni-Plex
employee, either directly or indirectly. Any
employee engaging in such activity will immediately
cease to be eligible for a severance payment.
ADMINISTRATION: All questions, disputes and claims regarding this
Plan ("Claims"), including, but not limited to,
Claims concerning interpretation, administration,
benefit amounts, eligibility, and definitions, will
be decided and approved by the Plan Administrator,
who is PureTec's Chief Executive Officer as
appointed after the Effective Date of this Plan, or
his/her designee. The decision of the Plan
Administrator will be final and binding on all
employees and dependents. The Plan Administrator
may be contacted at: 201 Industrial Parkway,
Somerville, NJ 08876, telephone number
908-722-4800.
EMPLOYEE'S MAILING ADDRESS: The employee eligible to receive a severance
payment is responsible for notifying PureTec of any
change of the employee's mailing address from the
address on file with PureTec's personnel office on
or before the date of the employee's separation.
The Plan shall satisfy its obligations to make
payment to or otherwise contact the employee by
using regular U.S. mail addressed to the employee
at the last address on file.
7
<PAGE>
AMENDMENT AND TERMINATION: The Plan has been duly adopted by PureTec, and
PureTec hereby reserves the right to amend or
modify the Plan, in whole or in part, at any time;
provided, however, that no such amendment or
modification shall alter the eligibility for
severance payment or severance payment provisions
(and related definition provisions) as they exist
as of the Effective Date. This Plan may not be
terminated prior to the end of the twelve-month
period immediately following the Effective Date.
8
<PAGE>
CLAIMS PROCEDURE: An employee shall have no obligation to apply for a
severance payment under the Plan, but an employee
who believes that he or she has not received a
severance payment to which the employee believes
the employee is entitled, may submit a written
Claim for such payment to the Plan Administrator. A
Claim must be presented to the Plan Administrator
within 90 days after the employee knew or should
have known of the facts that gave rise to the
Claim. Failure to present a Claim in a timely
manner shall be a waiver of the Claim.
The Plan Administrator will respond in writing to a
Claim for benefits under the Plan within 90 days of
receipt of the Claim, unless the Plan Administrator
needs additional information, or special
circumstances require an extension of time for
processing the claim, in which case the 90-day
period may be extended to a period of up to 180
calendar days from the receipt of the Claim. The
Plan Administrator will notify the employee with a
written explanation of the denial which shall state
(i) the specific reason or reasons that the Claim
was denied; (ii) the exact references to the Plan
provisions that dealt with the Claim; (iii) an
explanation as to why such material or information
is necessary; and (iv) an explanation of the Plan
procedure to have the Claim reviewed. If no
response is given by the Plan Administrator within
the applicable time period, it will be deemed a
denial of the Claim.
Within 60 calendar days after an employee receives
a denial of the Claim, the employee may appeal the
Claim
9
<PAGE>
denial to the Plan Administrator. The employee or
the employee's authorized representative may make a
written request for a review of the denial and to
review applicable documents, and must submit
comments and issues in writing. The Plan
Administrator will decide an appeal within 60
calendar days after receiving the request for
review, unless special circumstances require an
extension of time for processing, in which case the
60-day period may be extended to a period of up to
120 calendar days from the receipt of the request
for review.
The Plan Administrator will notify the employee in
writing of any such extension. The Plan
Administrator's decision on the review will be in
writing, and shall include specific reasons for the
decision and references to the Plan provision upon
which it was based.
10
<PAGE>
STATEMENT OF ERISA RIGHTS: As a participant in this Plan, the Employee
Retirement Income Security Act of 1974, as amended
("ERISA"), gives employees certain rights and
protection and imposes certain duties on the
persons who administer the Plan, as discussed
below. ERISA provides that all Plan participants
shall be entitled to:
(1) Examine, without charge, during normal business
hours at the Plan Administrator's office, all Plan
documents and copies of all documents filed by the
Plan with the U.S. Department of Labor, if any.
(2) Obtain copies of all the Plan documents and
other Plan information upon written request to the
Plan Administrator. The Administrator may make a
reasonable charge for copies; therefore, employees
should inquire what the charge will be before
requesting specific copies.
In addition to creating rights for Plan
participants, ERISA imposes duties upon the people
who are responsible for the operation of the Plan.
Those persons, called "fiduciaries" of the Plan,
have a duty to operate the employee benefit plan
prudently and in the interest of Plan participants
and beneficiaries. No one, including PureTec's
officers or directors may fire an employee or
otherwise discriminate against an employee in any
way to prevent an employee from obtaining a welfare
benefit under the Plan or from exercising an
employee's rights under ERISA, if any.
If an employee has a Claim for a Plan benefit which
is denied in whole or in
11
<PAGE>
part, the employee will be given a written
explanation of the reason for the denial. The
employee will have a right to have the Claim
reviewed and reconsidered. The employee may submit
a written request for reconsideration of the Claim
to the Plan Administrator.
Under ERISA, there are steps the employee can take
to enforce the above rights. For instance, if the
employee requests materials from the Plan and does
not receive them within thirty (30) days, the
employee may file suit in a federal court. In such
a case, the court may require the Plan
Administrator to provide the materials and pay the
employee up to $100 a day until the employee
receives the materials, unless the materials were
not sent because of reasons beyond the control of
the Administrator. If the employee has a claim for
benefits which is denied or ignored, in whole or in
part, the employee may file suit in a state or
federal court. If it should happen that Plan
fiduciaries misuse the Plan's money, or if the
employee is discriminated against for asserting
rights under ERISA, the employee may seek
assistance from the U.S. Department of Labor or the
employee may file suit in a federal court. The
court will decide who should pay court costs and
legal fees. If the employee is successful, the
court may order the person sued by the employee to
pay those costs and fees. If the employee loses,
the court may order the employee to pay those costs
and fees, for example, if it finds the employee's
claim is frivolous.
12
<PAGE>
If an employee has any questions about the Plan,
the employee should contact the
Plan Administrator. If the employee has any
questions about this statement or about the
employee's rights under ERISA, the employee should
contact the nearest area office of the U.S. Labor-
Management Services Administration, Department of
Labor.
PLAN'S END OF FISCAL YEAR: June 28, 1998. This is the date of the end of the
year for purposes of maintaining the Plan's fiscal
records.
EMPLOYER ID NUMBER: ___*__*___. This is PureTec's identification number
assigned by the Internal Revenue Service.
AGENT FOR LEGAL PROCESS: Service of legal process may be made upon the Plan
Administrator.
(Intentionally Left Blank)
13
<PAGE>
[age 40 and above]
AGREEMENT FOR SEPARATION OF EMPLOYMENT AND GENERAL RELEASE
In consideration for the eligibility of
____________________________ ("Employee") for a Severance payment, pursuant to
the PureTec Severance Pay Plan for Domestic, Salaried, Non-Corporate Office
Employees Terminated as a Result of Restructuring (the "Plan"), effective on the
date that Tekni-Plex, Inc. ("Tekni-Plex") gained control of PureTec Corporation
("PureTec"), Employee and PureTec execute this Agreement for Separation of
Employment ("Agreement") and agree as follows:
1. Employee's employment at PureTec, or its subsidiary or
affiliated companies, or any related entity (collectively "Employer") was
terminated as part of restructuring after Tekni-Plex gained control of PureTec.
2. Upon Employee's termination, Employer paid to Employee all
final wages, which are vested and accrued, reduced by applicable payroll
deductions. Employee agrees that except for a severance payment under the Plan,
Employee has been fully paid for any and all: (a) business expenses incurred on
behalf of Employer; and (b) accrued and vested wages, bonuses and benefits,
including, but not limited to, vacation, if any.
3. Upon termination of Employee's employment with Employer,
Employee will comply with the following:
A. Employee will immediately return all Employer
files, records, documents, plans, drawings, specifications, equipment, pictures,
videotapes, programs or any property or other items concerning Employer,
including, but not limited to, its and their employees, operations, business,
and customers, whether prepared by Employee or otherwise coming into Employee's
possession or control.
B. Employee has had access to and has become
acquainted with various trade secrets, including, but not limited to, the
identities and requirements of Employer's customers, all of which are owned by
Employer. Employee will never
EXHIBIT 1
<PAGE>
disclose any of the trade secrets, directly or indirectly, and will never use
them in any way, unless given permission in writing by Employer's Chief
Executive Officer.
C. Employee will not be required to perform any
further services for Employer, except: (a) as is necessary to cooperate with and
assist Employer, and its officers and employees in the transition of business
and management; and (b) to assist and cooperate (including, but not limited to,
testifying or providing information to Employer) in the investigation and
handling of any actual or threatened court action, arbitration or administrative
proceeding involving any matter that arose during the period of Employee's
employment. Such assistance and cooperation will be rendered at times and places
convenient to the parties.
4. Employee, for Employee and for Employee's heirs, executors,
administrators, successors, and assigns, does hereby fully and forever release
and discharge Tekni-Plex and PureTec, and their parent, affiliated and
subsidiary corporations and related entities, including its, and their
shareholders, employees and former employees, agents, directors, officers,
attorneys, predecessors, successors, assigns, heirs, executors, administrators,
and all other persons, firms, corporations, associations, partnerships, or
entities having any legal relationship to any of them, of and from any and all
claims, demands, causes of action, charges and grievances, of whatever kind or
nature, whether known or unknown, suspected or unsuspected, which Employee now
owns or holds or has at any time before this date owned or held against any of
them, including, but not limited to, any and all claims, demands, causes of
action, charges, and grievances: (1) which are alleged about, set forth in,
arise out of, or are in any way connected with any transactions, occurrences,
acts or omissions concerning any loss, damage or injury whatsoever resulting
from any act committed or omission made prior to the effective date of this
Agreement; (2) which are alleged about, set forth in, arise out of, or are in
any way connected with Employee's employment with Employer, or the termination
of Employee's employment with Employer; or (3) which are related to or concern
(i) violation of local, state or federal law, including but not limited to the
federal
2
<PAGE>
Age Discrimination in Employment Act and Worker Adjustment and Retraining
Notification Act ("WARN"); and (ii) wrongful termination, breach of the covenant
of good faith and fair dealing, intentional or negligent infliction of emotional
distress, defamation, invasion of privacy, breach of employment contract, fraud
or negligent misrepresentation, or any other tort cause of action. Any and all
benefits and amounts paid to or on behalf of Employee shall apply toward any
obligation of Employer under WARN, if any. Nothing contained herein shall be
construed so as to apply to or in any way limit the indemnification rights which
Employee may have pursuant to Section 6.03 of the Agreement and Plan of Merger,
dated November 11, 1997, among PureTec Corporation, Plastic Specialties &
Technologies, Inc., Tekni-Plex, Inc. and P.T. Holding, Inc.
5. Employer has advised Employee to consult with independent
legal counsel prior to executing this Agreement.
6. Employee has forty-five (45) days after receipt of this
Agreement within which to consider the Agreement and seven (7) days following
Employee's execution of the Agreement to revoke the Agreement. This Agreement
was received by Employee on . Attached to this Agreement as Exhibit
A is a Notice Regarding The Scope of Employer's Severance Pay Plan for Salaried,
Non-Corporate Office Employees Terminated as a Result of Restructuring.
7. If any term or provision of this Agreement is held to be
invalid or unenforceable, the remaining portions of this Agreement will continue
to be valid and will be performed, construed and enforced to the fullest extent
permitted by law, and the invalid or unenforceable term will be deemed amended
and limited in accordance with the intent of the parties, as determined from the
face of the Agreement, to the extent necessary to permit the maximum
enforceability or validation of the term or provision.
8. This Agreement constitutes and contains the entire
agreement and understanding between the parties and supersedes and replaces all
prior negotiations
3
<PAGE>
and agreements proposed or otherwise, whether written or oral, concerning the
subject matter of this Agreement. This is an integrated document.
9. This Agreement is effective and enforceable on the eighth
(8th) day following the date of execution of this Agreement by Employee, if it
is also executed by
Employer, and if Employee returns to Employer an executed Certificate of
NonRevocation of Separation Agreement and General Release no earlier than on the
eighth (8th) day following the date of execution of this Agreement. The
severance payment provided under the Plan will be made to Employee on the next
regular pay date, but no less than five (5) days, following the effective date
of this Agreement as provided in this paragraph, and pursuant to the terms and
conditions of the Plan.
10. The provisions of this Agreement shall continue to be
fully effective and enforceable even if an event occurs after the effective date
of the Agreement that causes Employee to cease being eligible for benefits under
the Plan.
11. Any claim, dispute or disagreement between Employee,
Employer or Tekni-Plex, whether or not arising out of the terms of this
Agreement, Employee's employment, termination of employment, or otherwise, that
the Employer or Tekni-Plex, or both, may have against Employee, or that Employee
may have against the Employer or against Tekni-Plex, the shareholders, officers,
directors, employees, agents or any other representatives of any of the
foregoing (a "Claim"), shall be resolved in accordance with the procedure set
forth below.
12. THE SOLE AND EXCLUSIVE METHOD TO RESOLVE ANY CLAIM IS
MEDIATION AND/OR ARBITRATION AS PROVIDED IN THIS AGREEMENT. EACH PARTY WAIVES
THE RIGHT TO A JURY TRIAL OR COURT TRIAL. Neither party shall initiate or
prosecute any lawsuit in any way related to any Claim covered by this Agreement.
13. A Claim may be submitted first to mediation, which shall
be non-binding and conducted in accordance with the mediation dispute resolution
procedures of the American Arbitration Association ("AAA"). If the mediation
does not result in
4
<PAGE>
settlement of the Claim, the aggrieved party may proceed to arbitration. The
mediation or arbitration, or both, will occur in the county where employee
works. The arbitration shall be conducted in accordance with the
then-current National Rules for the Resolution of Employment Disputes of the AAA
before a single arbitrator. The determination of the arbitrator shall be
conclusive and binding on the parties, and judgment may be entered on the
arbitrator's award in any court of competent jurisdiction.
14. The prevailing party shall be entitled to reasonable
attorneys' fees, in addition to all costs and necessary disbursements.
15. The date indicated below and Employee's signature below
acknowledge Employee's review, understanding and full, knowing and voluntary
acceptance of the terms and conditions set forth in this Agreement.
NOTICE: BY SIGNING THIS AGREEMENT, YOU ARE
AGREEING THAT ALL DISPUTES WILL BE DECIDED BY
NEUTRAL ARBITRATION, AND YOU ARE GIVING UP YOUR
RIGHT TO A JURY TRIAL OR COURT TRIAL
(SEE PARAGRAPH 12).
DATE:
-------------- ----------------------------------
(Employee Signature)
DATE: PureTec Corporation
--------------
By:
-----------------------------
5
<PAGE>
NOTICE REGARDING THE SCOPE OF PURETEC'S SEVERANCE PAY PLAN
FOR DOMESTIC, SALARIED, NON-CORPORATE OFFICE EMPLOYEES
TERMINATED AS A RESULT OF RESTRUCTURING
Pursuant to the Older Workers Benefit Protection Act of 1990,
we are providing you with the following information in connection with PureTec
Corporation's ("Employer's") Severance Pay Plan for Domestic, Salaried,
Non-Corporate Office Employees Terminated as a Result of Restructuring,
effective on the date that Tekni-Plex gains control of PureTec ("Plan" or
"Program").
1. The following class, unit or group of individuals is
covered by the Program: With certain exceptions, all salaried, non-corporate
employees of PureTec, its subsidiary, affiliated and related entities, who are
terminated as a result of restructuring, within one (1) year after the purchase
of PureTec shares by Tekni-Plex.
2. Appendix A is a list reflecting the job titles and ages of
all individuals who are eligible for this Program.
3. There are no individuals in the same job classification or
organizational unit as those individuals specified in paragraph 2 above who are
terminated as a result of the restructuring, and who are not eligible for the
Program.
4. The following reflects any eligibility factors for this
Program: domestic, salaried, non-corporate office employees who are terminated
as a result of the restructuring following the purchase of Employer's shares by
Tekni-Plex, who meet the eligibility requirements of the Plan and are not
otherwise disqualified for benefits under the terms of the Plan.
EXHIBIT A
<PAGE>
5. The following reflects any time limits applicable to this
Program: Only those domestic, salaried, non-corporate office employees who are
continuously on Employer's active payroll through their Separation Date, as
defined by the Plan, will be eligible under this Program, provided their
employment is terminated with one (1) year following the purchase of PureTec
shares by Tekni-Plex. When more than one (1) employee will be terminated, any
employee who is over the age of forty (40) will be given forty-five (45) days
after receipt of an Agreement For Separation Of Employment And General Release
("Agreement") within which to consider and execute the Agreement, and seven (7)
days following execution of the Agreement to revoke the Agreement. When only one
(1) employee, who is over the age of forty (40), is to be terminated, the
employee will be given twenty-one (21) days after receipt of an Agreement For
Separation Of Employment And General Release ("Agreement") within which to
consider and execute the Agreement, and seven (7) days following execution of
the Agreement to revoke the Agreement. Only those terminated and eligible
employees who have executed the Agreement and other related documents, as
required under the Plan, and, for those employees over forty (40), who have not
revoked the execution, will be eligible for a severance payment under the
Program.
<PAGE>
APPENDIX A
Job Title Age
THE INFORMATION WILL BE GATHERED AFTER TEKNI-
PLEX GAINS CONTROL OF PURETEC
<PAGE>
[age under 40]
AGREEMENT FOR SEPARATION OF EMPLOYMENT AND GENERAL RELEASE
In consideration for the eligibility of
____________________________ ("Employee") for a Severance payment, pursuant to
the PureTec Severance Pay Plan for Domestic, Salaried, Non-Corporate Office
Employees Terminated as a Result of Restructuring (the "Plan"), effective on the
date that Tekni-Plex, Inc. ("Tekni-Plex") gained control of PureTec Corporation
("PureTec"), Employee and PureTec execute this Agreement for Separation of
Employment ("Agreement") and agree as follows:
1. Employee's employment at PureTec, or its subsidiary or
affiliated companies, or any related entity (collectively "Employer") was
terminated as part of restructuring after the purchase of PureTec shares by
Tekni-Plex, Inc. ("Tekni-Plex").
2. Upon Employee's termination, Employer paid to Employee all
final wages, which are vested and accrued, reduced by applicable payroll
deductions. Employee agrees that except for a severance payment under the Plan,
Employee has been fully paid for any and all: (a) business expenses incurred on
behalf of Employer; and (b) accrued and vested wages, bonuses and benefits,
including, but not limited to, vacation, if any.
3. Upon termination of Employee's employment with Employer,
Employee will comply with the following:
A. Employee will immediately return all Employer
files, records, documents, plans, drawings, specifications, equipment, pictures,
videotapes, programs or any property or other items concerning Employer,
including, but not limited to, its and their employees, operations, business,
and customers, whether prepared by Employee or otherwise coming into Employee's
possession or control.
B. Employee has had access to and has and become
acquainted with various trade secrets, including, but not limited to, the
identities and requirements of
EXHIBIT 2
<PAGE>
Employer's customers, all of which are owned by Employer. Employee will never
disclose any of the trade secrets, directly or indirectly, and will never use
them in any way, unless given permission in writing by Employer's Chief
Executive Officer.
C. Employee will not be required to perform any
further services for Employer, except: (a) as is necessary to cooperate with and
assist Employer, and its officers and employees in the transition of business
and management; and (b) to assist and cooperate (including, but not limited to,
testifying or providing information to Employer) in the investigation and
handling of any actual or threatened court action, arbitration or administrative
proceeding involving any matter that arose during the period of Employee's
employment. Such assistance and cooperation will be rendered at times and places
convenient to the parties.
4. Employee, for Employee and for Employee's heirs,
executors, administrators, successors, and assigns, does hereby fully and
forever release and discharge Tekni-Plex and PureTec, and their parent,
affiliated and subsidiary corporations and related entities, including its, and
their shareholders, employees and former employees, agents, directors, officers,
attorneys, predecessors, successors, assigns, heirs, executors, administrators,
and all other persons, firms, corporations, associations, partnerships, or
entities having any legal relationship to any of them, of and from any and all
claims, demands, causes of action, charges and grievances, of whatever kind or
nature, whether known or unknown, suspected or unsuspected, which Employee now
owns or holds or has at any time before this date owned or held against any of
them, including, but not limited to, any and all claims, demands, causes of
action, charges, and grievances: (1) which are alleged about, set forth in,
arise out of, or are in any way connected with any transactions, occurrences,
acts or omissions concerning any loss, damage or injury whatsoever resulting
from any act committed or omission made prior to the effective date of this
Agreement; (2) which are alleged about, set forth in, arise out of, or are in
any way connected with Employee's employment with Employer, or the termination
of Employee's employment with Employer; or (3) which are related to or
2
<PAGE>
concern (i) violation of local, state or federal law, including but not limited
to the Worker Adjustment and Retraining Notification Act ("WARN"); and (ii)
wrongful termination, breach of the covenant of good faith and fair dealing,
intentional or negligent infliction of emotional distress, defamation, invasion
of privacy, breach of employment contract, fraud or negligent misrepresentation,
or any other tort cause of action. Any and all benefits and amounts paid to or
on behalf of Employee shall apply toward any obligation of Employer under WARN,
if any. Nothing contained herein shall be construed so as to apply to or in any
way limit the indemnification rights which Employee may have pursuant to Section
6.03 of the Agreement and Plan of Merger, dated November 11, 1997, among PureTec
Corporation, Plastic Specialties & Technologies, Inc., Tekni-Plex, Inc. and P.T.
Holding, Inc.
5. If any term or provision of this Agreement is held to be
invalid or unenforceable, the remaining portions of this Agreement will continue
to be valid and will be performed, construed and enforced to the fullest extent
permitted by law, and the invalid or unenforceable term will be deemed amended
and limited in accordance with the intent of the parties, as determined from the
face of the Agreement, to the extent necessary to permit the maximum
enforceability or validation of the term or provision.
6. This Agreement constitutes and contains the entire
agreement and understanding between the parties and supersedes and replaces all
prior negotiations and agreements proposed or otherwise, whether written or
oral, concerning the subject matter of this Agreement. This is an integrated
document.
7. The provisions of this Agreement shall continue to be fully
effective and enforceable even if an event occurs after the effective date of
the Agreement that causes Employee to cease being eligible for benefits under
the Plan.
8. Any claim, dispute or disagreement between Employee,
Employer or Tekni-Plex, whether or not arising out of the terms of this
Agreement, Employee's employment, termination of employment, or otherwise, that
the Employer or Tekni-Plex, or both, may have against Employee, or that Employee
may have against the Employer or
3
<PAGE>
against Tekni-Plex, the shareholders, officers, directors, employees, agents or
any other representatives of any of the foregoing (a "Claim"), shall be resolved
in accordance with the procedure set forth below.
9. THE SOLE AND EXCLUSIVE METHOD TO RESOLVE ANY CLAIM IS
MEDIATION AND/OR ARBITRATION AS PROVIDED IN THIS AGREEMENT. EACH PARTY WAIVES
THE RIGHT TO A JURY TRIAL OR COURT TRIAL. Neither party shall initiate or
prosecute any lawsuit in any way related to any Claim covered by this Agreement.
10. A Claim may be submitted first to mediation, which shall
be non-binding and conducted in accordance with the mediation dispute resolution
procedures of the American Arbitration Association ("AAA"). If the mediation
does not result in settlement of the Claim, the aggrieved party may proceed to
arbitration.The mediation or arbitration, or both, will occur in the county
where employee works. The arbitration shall be conducted in accordance with the
then-current National Rules for the Resolution of Employment Disputes of the AAA
before a single arbitrator. The determination of the arbitrator shall be
conclusive and binding on the parties, and judgment may be entered on the
arbitrator's award in any court of competent jurisdiction.
11. The prevailing party shall be entitled to reasonable
attorneys' fees, in addition to all costs and necessary disbursements.
12. The date indicated below and Employee's signature below
acknowledge Employee's review, understanding and full, knowing and voluntary
acceptance of the terms and conditions set forth in this Agreement.
INTENTIONALLY LEFT BLANK
4
<PAGE>
NOTICE: BY SIGNING THIS AGREEMENT, YOU ARE
AGREEING THAT ALL DISPUTES WILL BE DECIDED BY
NEUTRAL ARBITRATION, AND YOU ARE GIVING UP YOUR
RIGHT TO A JURY TRIAL OR COURT TRIAL
(SEE PARAGRAPH 9).
DATE:
---------------- --------------------------
(Employee Signature)
DATE:
---------------- PureTec Corporation
By:
-----------------------
5
<PAGE>
ILLNESS/INJURY REPORT
NEW JERSEY LAW REQUIRES THAT YOU REPORT ALL ILLNESSES OR INJURIES TO PURETEC
CORPORATION, IMMEDIATELY. THEREFORE, IF YOU HAD A WORK-RELATED ILLNESS/INJURY
THAT YOU NEGLECTED TO REPORT, PLEASE DO SO NOW SO THAT WE CAN COMPLY WITH NEW
JERSEY LAW.
PLEASE NOTE THAT ANY MEDICAL TREATMENT YOU RECEIVE PRIOR TO NOTIFYING PURETEC
WILL NOT BE PAID FOR BY THE INSURANCE COMPANY AND YOU WILL BE RESPONSIBLE FOR
THE BILLS.
____ Yes, I have an illness/injury to report.
____ No, I do not have an industrial illness/injury to
report. Furthermore, I hereby state that: (a) I am
presently not ill, injured, or in need of treatment
due to an occupational illness/injury and certify
that I have reported all work-related illnesses and
injuries to the employee; (b) I have not received or
sought medical treatment regarding any workrelated
activity with PureTec; and (c) I am not ill or
injured, and am not in need of treatment.
Employee's signature:
-----------------------------
-----------------------------
(Print/Type Name)
Date:
-----------------------------
Witness:
-----------------------------
PLEASE NOTE: NEW JERSEY LAW MAKES IT A FELONY TO FILE OR TO HELP
SOMEONE ELSE FILE A FRAUDULENT WORKERS' COMPENSATION CLAIM.
IT IS OUR POLICY TO PROSECUTE ALL SUCH CLAIMS TO THE FULLEST
EXTENT OF THE LAW.
EXHIBIT 3
<PAGE>
CERTIFICATE OF NON-REVOCATION
OF AGREEMENT FOR SEPARATION OF EMPLOYMENT
AND GENERAL RELEASE
I hereby certify and represent that seven (7) calendar days
have passed since I signed the Agreement For Separation Of Employment And
General Release ("Agreement") dated , and that I have NOT exercised
my right to revoke my participation in the Agreement pursuant to the Older
Workers Benefit Protection Act of 1990. I understand that PureTec Corporation,
in providing me with the benefits due to me under the Agreement, is relying on
this Certificate, and that I can no longer revoke the Agreement.
-------------------------
(Employee's Signature)
-------------------------
(Print/Type Name)
Dated:
------------------
IMPORTANT:
This Certificate should be signed, dated and returned no
earlier than on the eighth (8th) calendar day after the
employee signs the Agreement.
EXHIBIT 4
<PAGE>
Position Responsibility Table
For Non-Corporate Office Employees
Position Title(1) Minimum Weeks
Chief Operating Officer 26
Chief Financial Officer 26
Corporate Secretary 26
President 26
PureTec Corporation Vice President 26
All Other Vice Presidents 20
Director 20
General Manager 20
Plant Manager 16
Manager 16
Supervisor 12
Engineer 12
All Other 4
(1)Position held immediately prior to the Effective Date as
defined in Plan.
EXHIBIT 5
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-98266 of PureTec Corporation on Form S-8and Registration Statement No.
33-98190 on Form S-3 of our report dated November 13, 1997, appearing in this
Amendment No. 2 to the Annual Report on Form 10-K of PureTec Corporation for the
year ended July 31, 1997.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
January 13, 1998
20
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
PureTec Corporation on Form S-3 of our report dated September 12, 1995,
appearing in this Amendment No. 2 to the Annual Report on Form 10-K of PureTec
Corporation for the year ended July 31, 1997 and to the reference to us under
the heading "Experts" in the Prospectus, which is part of this Registration
Statement.
/s/ Holtz Rubenstein & Co., LLP
Melville, New York
January 14, 1998
