-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q77NY7u8jz53IWyxTXx8c0mPhV+6kvMnsk+2X4BiJMxNcREvOiDyr8+K77n9jkMx FOpoAuYGD+IYWgfN8xhfig== 0000950123-02-008338.txt : 20020822 0000950123-02-008338.hdr.sgml : 20020822 20020822170652 ACCESSION NUMBER: 0000950123-02-008338 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 24 FILED AS OF DATE: 20020822 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TP ELM ACQUISITION SUBSIDIARY INC CENTRAL INDEX KEY: 0001182092 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-98561-01 FILM NUMBER: 02746077 MAIL ADDRESS: STREET 1: 201 INDUSTRIAL PARKWAY CITY: SOMERVILE STATE: NJ ZIP: 08876 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TPI ACQUISITION SUBSIDIARY INC CENTRAL INDEX KEY: 0001174580 IRS NUMBER: 522340472 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-98561-02 FILM NUMBER: 02746078 BUSINESS ADDRESS: STREET 1: 201 INDUSTRIAL PARKWAY CITY: SOMMERVILLE STATE: NJ ZIP: 08876 BUSINESS PHONE: 9087224800 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRI SEAL HOLDINGS INC CENTRAL INDEX KEY: 0001174579 IRS NUMBER: 522141575 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-98561-03 FILM NUMBER: 02746079 BUSINESS ADDRESS: STREET 1: 201 INDUSTRIAL PARKWAY CITY: SOMMERVILLE STATE: NJ ZIP: 08876 BUSINESS PHONE: 9087224800 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATVAR HOLDINGS INC CENTRAL INDEX KEY: 0001174578 IRS NUMBER: 223703725 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-98561-04 FILM NUMBER: 02746080 BUSINESS ADDRESS: STREET 1: 201 INDUSTRIAL PARKWAY CITY: SOMMERVILLE STATE: NJ ZIP: 08876 BUSINESS PHONE: 9087224800 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALUMET SMELTING CORP CENTRAL INDEX KEY: 0001174577 IRS NUMBER: 222054447 STATE OF INCORPORATION: NJ FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-98561-05 FILM NUMBER: 02746081 BUSINESS ADDRESS: STREET 1: 201 INDUSTRIAL PARKWAY CITY: SOMMERVILLE STATE: NJ ZIP: 08876 BUSINESS PHONE: 9087224800 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PURE TECH RECYCLING OF CALIFORNIA CENTRAL INDEX KEY: 0001174576 IRS NUMBER: 770356589 STATE OF INCORPORATION: CA FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-98561-06 FILM NUMBER: 02746082 BUSINESS ADDRESS: STREET 1: 201 INDUSTRIAL PARKWAY CITY: SOMMERVILLE STATE: NJ ZIP: 08876 BUSINESS PHONE: 9087224800 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REI DISTRIBUTORS INC CENTRAL INDEX KEY: 0001174575 IRS NUMBER: 222418824 STATE OF INCORPORATION: NJ FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-98561-07 FILM NUMBER: 02746083 BUSINESS ADDRESS: STREET 1: 201 INDUSTRIAL PARKWAY CITY: SOMMERVILLE STATE: NJ ZIP: 08876 BUSINESS PHONE: 9087224800 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DISTRIBUTORS RECYCLING INC CENTRAL INDEX KEY: 0001174574 IRS NUMBER: 222466975 STATE OF INCORPORATION: NJ FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-98561-08 FILM NUMBER: 02746084 BUSINESS ADDRESS: STREET 1: 201 INDUSTRIAL PARKWAY CITY: SOMMERVILLE STATE: NJ ZIP: 08876 BUSINESS PHONE: 9087224800 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COAST RECYCLING NORTH INC CENTRAL INDEX KEY: 0001174573 IRS NUMBER: 680200870 STATE OF INCORPORATION: CA FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-98561-09 FILM NUMBER: 02746085 BUSINESS ADDRESS: STREET 1: 201 INDUSTRIAL PARKWAY CITY: SOMMERVILLE STATE: NJ ZIP: 08876 BUSINESS PHONE: 9087224800 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PURE TECH APR INC CENTRAL INDEX KEY: 0001174572 IRS NUMBER: 113065942 STATE OF INCORPORATION: NY FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-98561-10 FILM NUMBER: 02746086 BUSINESS ADDRESS: STREET 1: 201 INDUSTRIAL PARKWAY CITY: SOMMERVILLE STATE: NJ ZIP: 08876 BUSINESS PHONE: 9087224800 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BURLINGTON RESINS INC CENTRAL INDEX KEY: 0001174571 IRS NUMBER: 223334106 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-98561-11 FILM NUMBER: 02746087 BUSINESS ADDRESS: STREET 1: 201 INDUSTRIAL PARKWAY CITY: SOMMERVILLE STATE: NJ ZIP: 08876 BUSINESS PHONE: 9087224800 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLASTIC SPECIALTIES & TECHNOLOGIES INVESTMENTS INC CENTRAL INDEX KEY: 0001174570 IRS NUMBER: 222663552 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-98561-12 FILM NUMBER: 02746088 BUSINESS ADDRESS: STREET 1: 201 INDUSTRIAL PARKWAY CITY: SOMMERVILLE STATE: NJ ZIP: 08876 BUSINESS PHONE: 9087224800 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEKNI PLEX INC CENTRAL INDEX KEY: 0001039542 STANDARD INDUSTRIAL CLASSIFICATION: GASKETS, PACKAGING AND SEALING DEVICES & RUBBER & PLASTIC HOSE [3050] IRS NUMBER: 223286312 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-98561 FILM NUMBER: 02746076 BUSINESS ADDRESS: STREET 1: 201 INDUSTRIAL PKWY CITY: SOMERVILLE STATE: NJ ZIP: 08876 BUSINESS PHONE: 9087224800 MAIL ADDRESS: STREET 1: 201 INDUSTRIAL PKWY CITY: SOMERVILLE STATE: NJ ZIP: 08876 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLASTIC SPECIALTIES & TECHNOLOGIES INC CENTRAL INDEX KEY: 0000810628 STANDARD INDUSTRIAL CLASSIFICATION: TIRES AND INNER TUBES [3011] IRS NUMBER: 222515864 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-98561-13 FILM NUMBER: 02746089 BUSINESS ADDRESS: STREET 1: 65 RAILROAD AVE CITY: RIDGEFIELD STATE: NJ ZIP: 07657 BUSINESS PHONE: 2019412900 MAIL ADDRESS: STREET 1: 65 RAILROAD AVE CITY: RIDGEFIELD STATE: NJ ZIP: 07657 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PURETEC CORP CENTRAL INDEX KEY: 0000928451 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS PLASTIC PRODUCTS [3080] IRS NUMBER: 223376449 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-98561-14 FILM NUMBER: 02746090 BUSINESS ADDRESS: STREET 1: 65 RAILROAD AVE CITY: RIDGFIELD STATE: NJ ZIP: 07657 BUSINESS PHONE: 2019416550 MAIL ADDRESS: STREET 1: 65 RAILROAD AVE CITY: RIDGEFIELD STATE: NJ ZIP: 07657 S-4 1 y61170sv4.txt FORM S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 22, 2002 REGISTRATION NO. 333--- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- TEKNI-PLEX, INC.* (Exact name of Registrant as specified in its charter) DELAWARE 3086, 3052 22-3286312 (State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification No.)
260 NORTH DENTON TAP ROAD COPPELL, TEXAS 75019 TELEPHONE: (972) 304-5077 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) --------------------- DR. F. PATRICK SMITH CHIEF EXECUTIVE OFFICER TEKNI-PLEX, INC. 260 NORTH DENTON TAP ROAD COPPELL, TEXAS 75019 TELEPHONE: (972) 304-5077 FACSIMILE: (972) 304-6297 (Name, address, including zip code, and telephone number, including area code, of agent for service) --------------------- COPIES TO: FRANCIS J. MORISON DAVIS POLK & WARDWELL 450 LEXINGTON AVENUE NEW YORK, NEW YORK 10017 TELEPHONE: (212) 450-4044 FACSIMILE: (212) 450-6892 --------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. --------------------- If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. [ ] CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE - -------------------------------------------------------------------------------------------------------------------------- 12 3/4% Series B Senior Subordinated Notes due 2010............................................. $40,000,000 100% $40,000,000 $3,680 - -------------------------------------------------------------------------------------------------------------------------- Guarantees of 12 3/4% Series B Senior Subordinated Notes due 2010(2)................................ -- -- -- None(3) - -------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the Registration Fee as provided in Rule 457(F). (2) The 12 3/4% Series B Senior Subordinated Notes due 2010 are guaranteed by each of the entities listed in the Table of Additional Registrants. (3) Pursuant to Rule 457(n), no Registration Fee is required with respect to the guarantees of the notes registered hereby. THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- *TABLE OF ADDITIONAL REGISTRANTS
STATE OR OTHER JURISDICTION OF I.R.S. EMPLOYER INCORPORATION OR IDENTIFICATION NAME, ADDRESS AND TELEPHONE NUMBER ORGANIZATION NUMBER - ---------------------------------- ---------------- --------------- PureTec Corporation(1)...................................... Delaware 22-3376449 Plastic Specialties and Technologies, Inc.(1)............... Delaware 22-2743384 Plastic Specialties and Technologies Investments, Inc.(1)... Delaware 22-2663552 Burlington Resins, Inc.(1).................................. Delaware 22-3334106 Pure Tech APR, Inc.(1)...................................... New York 11-3065942 Coast Recycling North, Inc.(1).............................. California 68-0200870 Distributors Recycling, Inc.(1)............................. New Jersey 22-2466975 REI Distributors, Inc.(1)................................... New Jersey 22-2418824 Pure Tech Recycling of California(1)........................ California 77-0356589 Alumet Smelting Corp.(1).................................... New Jersey 22-2054447 Tri-Seal Holdings, Inc(1)................................... Delaware 52-2141575 Natvar Holdings, Inc(1)..................................... Delaware 22-3703725 TPI Acquisition Subsidiary, Inc.(1)......................... Delaware 52-2340472 TP/Elm Acquisition Subsidiary, Inc.(1)...................... Delaware 71-0891561
- --------------- (1) The address of each of these additional registrants is: 201 Industrial Parkway, Somerville, New Jersey 08876. The telephone number of each is (908) 722-4800. THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED AUGUST 22, 2002 PROSPECTUS TEKNI-PLEX, INC. OFFER TO EXCHANGE 12 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2010 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 FOR ANY AND ALL OF OUR OUTSTANDING 12 3/4% SENIOR SUBORDINATED NOTES DUE 2010 --------------------- We are offering to exchange up to $40,000,000 of our 12 3/4% Series B Senior Subordinated Notes due 2010, which will be registered under the Securities Act of 1933, as amended, for up to $40,000,000 of our existing 12 3/4% Senior Subordinated Notes due 2010. We have $275,000,000 principal amount of our existing 12 3/4% Senior Notes due 2010 issued and outstanding that have identical terms to the notes offered by this prospectus. We are offering to issue the new notes to satisfy our obligations contained in the registration rights agreement entered into when the old notes were sold in transactions permitted by Rule 144A and Regulation S under the Securities Act. The terms of the new notes are identical in all material respects to the terms of the old notes, except that the transfer restrictions, registration rights and additional interest provisions relating to the old notes do not apply to the new notes. --------------------- To exchange your old notes for new notes: - You must complete and send the letter of transmittal that accompanies this prospectus to the exchange agent by 5:00 p.m., New York time, on , 2002. - If your old notes are held in book-entry form at The Depository Trust Company, you must instruct DTC, through your signed letter of transmittal, that you wish to exchange your old notes for new notes. When the exchange offer closes, your DTC account will be changed to reflect your exchange of old notes for new notes. - You should read the section called "The Exchange Offer" for additional information on how to exchange your old notes for new notes. SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DESCRIPTION OF RISK FACTORS THAT YOU SHOULD CONSIDER BEFORE TENDERING YOUR OLD NOTES IN THE EXCHANGE OFFER. THIS PROSPECTUS IS ACCOMPANIED BY A COPY OF THE FOLLOWING: OUR ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 29, 2001 AND OUR QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 29, 2002. --------------------- THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------------- YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THOSE DOCUMENTS. --------------------- The date of this prospectus is , 2002. TABLE OF CONTENTS
PAGE ---- Prospectus Summary.......................................... 1 Where You Can Find More Information......................... i The Exchange Offer.......................................... 3 Risk Factors................................................ 8 Use of Proceeds............................................. 14 Capitalization.............................................. 15 The Exchange Offer.......................................... 16 Description of the New Notes................................ 24 Certain United States Federal Income Tax Considerations..... 53 Plan of Distribution........................................ 53 Legal Matters............................................... 54 Experts..................................................... 54
NOTICE TO NEW HAMPSHIRE RESIDENTS NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE UNIFORM SECURITIES ACT WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH. DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS This prospectus includes "forward-looking statements" including, in particular, the statements about our plans, strategies and prospects under the headings "Prospectus Summary," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," and in the Pro Forma Unaudited Condensed Financial Information and the related notes thereto. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we cannot assure you that such plans, intentions or expectations will be achieved. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this prospectus are set forth in this prospectus, including under the headings "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." All forward-looking statements attributable to Tekni-Plex or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements and risk factors contained throughout this prospectus. WHERE YOU CAN FIND MORE INFORMATION We are subject to the informational requirements of the Exchange Act, and we file periodic reports and other information with the SEC. Our obligation to file periodic reports and other information with the SEC will be suspended if the notes are held of record by fewer than 300 holders as of the beginning of any fiscal year of Tekni-Plex. We have also agreed that, whether or not we are required to do so by the rules and regulations of the SEC, for so long as any of the notes remain outstanding, we will furnish to the noteholders i and following the consummation of the exchange offer file with the SEC (unless the SEC will not accept such a filing): - all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if we were required to file such forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by our certified independent accountants and - all reports that would be required to be filed with the SEC on Form 8-K if we were required to file such reports. In addition, for so long as any of the notes remain outstanding, we will make available to any prospective purchaser of the notes or beneficial owner of the notes in connection with any sale thereof the information required by Rule 144(d)(4) under the Securities Act. Under the indenture, we will file with the trustee annual, quarterly and other reports within 15 days after we file such reports with the SEC. Further, to the extent that we furnish annual, quarterly or other financial reports to stockholders generally, we will mail such reports to holders of notes. We will furnish annual and quarterly financial reports to our stockholders and will mail such reports to holders of notes pursuant to the indenture. Annual reports delivered to the trustee and the noteholders will contain financial information that has been examined and reported upon, with an opinion expressed by an independent public or certified public accountant. We will also furnish such other reports as may be required by law. STATEMENTS MADE IN THIS PROSPECTUS OR IN ANY DOCUMENT INCORPORATED BY REFERENCE IN THIS PROSPECTUS AS TO THE CONTENTS OF ANY CONTRACT OR OTHER DOCUMENT REFERRED TO HEREIN OR THEREIN ARE NOT NECESSARILY COMPLETE, AND IN EACH INSTANCE REFERENCE IS MADE TO THE COPY OF THE CONTRACT OR OTHER DOCUMENT FILED AS AN EXHIBIT TO THE DOCUMENTS INCORPORATED BY REFERENCE, EACH STATEMENT BEING QUALIFIED IN ALL MATERIAL RESPECTS BY THAT REFERENCE. WE WILL PROMPTLY PROVIDE WITHOUT CHARGE TO YOU, UPON ORAL OR WRITTEN REQUEST, A COPY OF ANY OR ALL OF THE DOCUMENTS INCORPORATED BY REFERENCE IN THIS PROSPECTUS. TO OBTAIN TIMELY DELIVERY, YOU MUST REQUEST THE INFORMATION NO LATER THAN , 2002, OR FIVE BUSINESS DAYS BEFORE THE EXPIRATION DATE, IF THE EXCHANGE OFFER IS EXTENDED. REQUESTS SHOULD BE DIRECTED TO: TEKNI-PLEX, INC. 260 NORTH DENTON TAP ROAD COPPELL, TEXAS 75019 TELEPHONE: (972) 304-5077 FACSIMILE: (972) 304-6297 Our SEC filings are available over the Internet at the SEC's web site at http://www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facilities: Public Reference Room Office 450 Fifth Street, N.W. Room 1024 Washington, D.C. 20549 You may also obtain copies of the documents at prescribed rates by writing to the Public Reference section of the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Please call 1-800-SEC-0330 for further information on the operations of the public reference facilities. The SEC allows us to "incorporate by reference" into this prospectus the information we file with it, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference or deemed incorporated by reference is considered to be part of this prospectus. Information that we file with the SEC after the date of this prospectus will update and supersede this information. We incorporate by reference the documents listed below and any future filings made with the ii SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until our offering is completed: - Our Annual Report on Form 10-K for the year ended June 29, 2001; and - Our Quarterly Reports on form 10-Q for the quarters ended September 28, 2001, December 28, 2001 and March 29, 2002. Copies of our most recent annual report on Form 10-K and quarterly report on Form 10-Q accompany this prospectus as well as being incorporated into this prospectus by reference. iii PROSPECTUS SUMMARY The following summary contains information about Tekni-Plex and the exchange offer. It does not contain all the information that may be important to you in deciding whether to exchange your old notes. For a more complete understanding of Tekni-Plex and the exchange offer, we urge you to read this entire prospectus carefully, including the "Risk Factors" section and our financial statements and the notes to those statements. Our fiscal year ends on the Friday closest to June 30 of each calendar year. For example, fiscal year 2001 refers to the year ended June 29, 2001. COMPANY OVERVIEW We are a global, diversified manufacturer of packaging, products and materials for the healthcare, food and consumer industries. We have built a leadership position in our core markets and focus on vertically integrated production of highly specialized products. Our operations are aligned under two business groups: Industrial Packaging, Products and Materials and Consumer Packaging and Products. COMPETITIVE STRENGTHS We believe that our competitive strengths include: - Strong customer relationships. We have long-standing relationships with many of our customers. We attribute our long-term customer relationships to our ability consistently to manufacture high quality products and provide a superior level of customer service. We routinely win customer awards for our superior products and customer service and have recently been recognized for supplier excellence by 3M Pharmaceuticals, Pfizer, Eli Lilly, Boston Scientific, Kraft Foods and Purdue Farms, among others. - Strong market positions in core businesses. We have a strong market presence in our product lines. The following table shows what we believe to be our market position in the U.S. in each core product line:
MARKET PRODUCT POSITION - ------- -------- Vinyl medical device materials.............................. 1 Vinyl medical tubing........................................ 1 Laminated, clear, high barrier blister packaging............ 1 Closure liners.............................................. 1 Garden and irrigation hose.................................. 1 Precision tubing and gaskets................................ 1 Egg cartons................................................. 1 Foam processor trays........................................ 2
- Experienced management team. Our management team has been successful in selecting and integrating strategic acquisitions as well as improving underlying business fundamentals. After significantly improving the business of Tekni-Plex following our 1994 acquisition, management successfully integrated both the Flemington and Dolco operations during 1996, the latter being a public company then nearly twice our size. During the same period, the Brooklyn and Flemington operations were also successfully merged. In 1997, we acquired and integrated the PurePlast operations. In 1998, we acquired PureTec, a public company then more than twice our size. In 1999, we acquired and integrated the assets and business of Tn-Seal and Natvar. In 2000, we acquired and integrated all the assets of the Super Plastics division of RCR International, Inc. In 2001, we acquired and integrated the Swan Hose garden hose business of Mark IV Industries, Inc. Management has substantially improved the operating margins of each of these acquisitions. Members of our management team have integrated acquisitions, effected turnarounds, provided strategic direction and leadership, increased sales and 1 market share, improved manufacturing efficiencies and productivity, and developed new technologies to enhance the competitive strengths of the companies they have managed. - Cost efficient producer. We continually focus on improving underlying operations and reducing costs. Since the 1994 acquisition, current management has improved our cost structure from an EBITDA margin of 8.5% with EBITDA of $3.8 million on sales of $44.9 million for the 12 months ended December 31, 1993 to an EBITDA margin of 19.0% with EBITDA of $100.1 million on sales of $525.8 million for the fiscal year ended June 29, 2001. Our acquisitions have provided significant opportunities to realize cost savings and synergies in the combined businesses through the sharing of complementary technologies and manufacturing techniques, as well as economies of scale including the purchase of raw materials. - Producer of high quality, technically sophisticated products. We believe, based upon our knowledge and experience in the industry, that we have a long-standing reputation as a manufacturer of high quality, high performance products, materials and primary packaging material (where the packaging material comes into direct contact with the end product). Our emphasis on quality is evidenced by our product lines which address the more technically sophisticated areas of their respective markets. - Strong equity sponsorship. We have obtained a strong equity commitment from co-investors in conjunction with the recapitalization in June 2000. New investors agreed to contribute $269.6 million in aggregate equity commitments to Tekni-Plex Partners, of which $167.0 million was contributed to consummate the recapitalization in June 2000. Of the remaining $102.6 million, $5.0 million was contributed in conjunction with our acquisition of Super Plastics in October 2000, and $30.0 million was contributed in June 2001 in anticipation of our announced acquisition of Mark IV's Swan Hose division. In October 2001, an additional $50.0 million was contributed to consummate the Swan Hose acquisition and in anticipation of our Elm acquisition. The remaining $17.6 million is available at least through June 2005 to be used for our general corporate purposes, including acquisitions. We believe that these equity commitments will provide us with significant flexibility to take advantage of business opportunities as they arise. In connection with the recapitalization, all members of our current management maintained their entire equity investment, which had an implied aggregate value, as of June 2000, of approximately $96.0 million. BUSINESS STRATEGY We seek to maximize our profitability and growth and take advantage of our competitive strengths by pursuing the following business strategy: - Ongoing cost reduction through technical process improvement. We have an ongoing program to improve manufacturing and other processes in order to drive down costs. Examples of cost improvement programs include: - material and energy conservation through enhanced process controls and advanced product design; - reduction in machine set-up time through the use of proprietary technology; - continual product line rationalization; and - development of backward and forward integration opportunities. - Internal growth through product line extension and improvement. We continually seek to improve and extend our product lines and leverage our existing technological capabilities in order to increase market share in existing markets, effectively penetrate new markets and improve profitability. Our strategy is to emphasize our expertise in providing packaging, products and materials with specific high performance characteristics through the development of various unique proprietary materials and proprietary manufacturing process techniques. - Growth through acquisitions. We will continue to pursue acquisitions selectively when the opportunity arises. Our objective is to pursue acquisitions that provide us with the opportunity to gain 2 economies of scale and reduce costs through, among other things, technology sharing and synergistic cost reduction. - Growth through international expansion. We believe that there is significant opportunity to expand our international sales, which currently represent approximately 11% of our total revenues. At present we have manufacturing or conversion operations with attached sales offices in Argentina, Canada, The United Kingdom, Belgium and Italy. We have a regional sales office in Singapore covering the southeast Asia region, including the People's Republic of China. In addition, we have manufacturing liaisons and strategic supplier agreements in Japan, Germany and Italy and a manufacturing licensee in Japan. We have recently added sales representatives for Jordan, Saudi Arabia and the United Arab Emirates, as well as in the Philippines and India to our existing representatives in Australia/New Zealand, South Africa, Central America, Brazil, Mexico, China (including Hong Kong) and Taiwan. We believe that our growing international presence, which is a combination of our own regional manufacturing and sales forces and independent sales representatives, will continue to generate increases in sales. RECENT DEVELOPMENTS On July 10, 2002, Tekni-Plex acquired Elm Packaging Company for $16.4 million in cash. The acquisition was structured as an acquisition of substantially all of the assets of Elm by a wholly-owned subsidiary of Tekni-Plex. Elm produces polystyrene foam packaging products such as plates, bowls, trays and hinged-lid containers for the food service industry. Elm will become part of Tekni-Plex's Industrial Packaging, Products and Materials business segment. THE EXCHANGE OFFER All capitalized terms used without definition within this section shall have the respective meanings set forth under "Description of the New Notes" below. New Notes..................... $40,000,000 principal amount of 12 3/4% Series B Senior Subordinated Notes due 2010. The terms of the new notes are identical in all material respects to the terms of the old notes, except that the transfer restrictions, registration rights and additional interest provisions relating to the old notes do not apply to the new notes. Old Notes..................... The old notes were sold on May 6, 2002 to Lehman Brothers Inc. (the initial purchaser) pursuant to a Purchase Agreement dated May 1, 2002 between Tekni-Plex and the initial purchaser. The initial purchaser subsequently resold the old notes to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The Exchange Offer............ We are offering to exchange $1,000 principal amount of new notes for each $1,000 principal amount of old notes. As of the date hereof, $40,000,000 aggregate principal amount of old notes are outstanding. We are offering to issue the new notes to satisfy our obligations contained in the registration rights agreement we entered into when we sold the old notes in transactions pursuant to Rule 144A, Rule 501 and Regulation S under the Securities Act. Based on interpretations by the SEC's staff in no-action letters issued to third parties, we believe that new notes issued in exchange for old notes in the exchange offer may be offered for resale, resold or otherwise transferred by you without registering the new notes under the Securities Act or delivering a prospectus, 3 unless you are a broker-dealer receiving notes for your own account, so long as: - you are not one of our "affiliates," which is defined in Rule 405 of the Securities Act; - you acquire the new notes in the ordinary course of your business; - you do not have any arrangement or understanding with any person to participate in the distribution of the new notes; and - you are not engaged in, and do not intend to engage in, a distribution of the new notes. If you are an affiliate of Tekni-Plex, or you are engaged in, intend to engage in or have any arrangement or understanding with respect to, the distribution of new notes acquired in the exchange offer, you (1) should not rely on our interpretations of the position of the SEC's staff and (2) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. If you are a broker-dealer and receive new notes for your own account in the exchange offer: - you must represent that you do not have any arrangement with us or any of our affiliates to distribute the new notes; - you must acknowledge that you will deliver a prospectus in connection with any resale of the new notes you receive from us in the exchange offer. The letter of transmittal states that by so acknowledging and by delivering a prospectus, you will not be deemed to admit that you are an "underwriter" within the meaning of the Securities Act; and - you may use this prospectus, as it may be amended or supplemented from time to time, in connection with the resale of new notes received in exchange for old notes acquired by you as a result of market-making or other trading activities. For a period of 180 days after the expiration of the exchange offer, we will make this prospectus available to any broker-dealer for use in connection with any resale described above. Expiration Date, Tenders, Withdrawal.................... 5:00 p.m., New York City time, on , 2002 unless we choose to extend the exchange offer in our sole discretion, in which case the term "expiration date" means the latest date and time to which we extend the exchange offer. To tender your old notes you must follow the detailed procedures described under the heading "The Exchange Offer -- Procedures for Tendering" including special procedures for certain beneficial owners and broker-dealers. If you decide to exchange your old notes for new notes, you must acknowledge that you do not intend to engage in and have no arrangement with any person to participate in a distribution of the new notes. If you decide to tender your old notes pursuant to the exchange offer, you may withdraw them 4 at any time prior to 5:00 p.m., New York City time, on the expiration date. Maturity Date................. June 15, 2010. Interest...................... Interest on new notes will accrue from the last interest payment date on which interest was paid on the old notes surrendered for them, or, if no interest has been paid on such old notes, from May 6, 2002. We will not pay interest on the old notes accepted for exchange. Interest will be paid on June 15 and December 15 of each year. Denominations and Issuance of New Notes..................... The new notes will be issued only in registered form without coupons, in minimum denominations of $1,000 and multiples of $1,000. Consequences of Failure to Exchange...................... If you fail to exchange your old notes for new notes in the exchange offer, your old notes will continue to be subject to transfer restrictions and you will not have any further rights under the registration rights agreement, including any right to require us to register your old notes or to pay any additional interest. Trading Market................ To the extent that old notes are tendered and accepted in the exchange offer, your ability to sell untendered, and tendered but unaccepted, old notes could be adversely affected. There may be no trading market for the old notes. We cannot assure you that an active public market for the new notes will develop or as to the liquidity of any market that may develop for the new notes, your ability to sell the new notes, or the price at which you would be able to sell the new notes. Shelf Registration Statement..................... If any holder of the old notes (other than any such holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) is not eligible under applicable securities laws to participate in the exchange offer, and such holder has provided information regarding such holder and the distribution of such holder's old notes to us for use therein, we have agreed to register the old notes on a shelf registration statement and to use our best efforts to cause it to be declared effective by the SEC as promptly as reasonably practical on or after the consummation of the exchange offer. We have agreed to maintain the effectiveness of the shelf registration Statement, under certain circumstances, until the date on which the old notes are no longer "restricted securities" (within the meaning of Rule 144 under the Securities Act). Use of Proceeds............... We will not receive any cash proceeds from the issuance of the new notes in the exchange offer. Exchange Agent................ HSBC Bank USA is the exchange agent for the exchange offer. Federal Income Tax Consequences.................. Your exchange of old notes for new notes pursuant to the exchange offer will not result in a gain or loss to you. 5 Ranking....................... The new notes and the guarantees will be unsecured senior subordinated obligations. The new notes will rank: - subordinate in right of payment to all of our and our guarantors' existing and future senior indebtedness (including our and our guarantors' obligations under our senior credit facility); - equal in right of payment to our and our guarantors' existing and future senior subordinated indebtedness (including our existing 12 3/4% Senior Subordinated Notes due 2010); and - senior in right of payment to our and our guarantors' future subordinated indebtedness. Exchange Guarantee............ The new notes will be fully and unconditionally guaranteed on a senior subordinated basis by our domestic subsidiaries. The form and terms of the new guarantees will be substantially identical to the form and terms of the old guarantees. The guarantees will be general unsecured obligations of the guarantors and will rank subordinate in right of payment to all existing and future senior debt of such guarantors, including the guarantors' guarantee of indebtedness under the new credit facility. The guarantees will rank equal in right of payment with any other senior subordinated indebtedness of the guarantors. Our foreign subsidiaries will not be guarantors. Optional Redemption........... We may redeem the new notes in whole or in part, at any time on or after June 15, 2005 at the redemption prices set forth in the "Description of the New Notes" section under the heading "Optional Redemption" (plus accrued and unpaid interest to the redemption date). Prior to June 15, 2003 we may redeem up to 35% of the principal amount of the new notes with the cash proceeds we have received from one or more public offerings of our capital stock (other than disqualified stock) at a redemption price of 112.75 % of the principal amount thereof, plus accrued and unpaid interest to the redemption date; provided, however, that at least 65% of the aggregate principal amount of the old notes originally issued pursuant to the initial private placement (including any new notes exchanged therefor) remains outstanding immediately after any such redemption. Change of Control............. Upon a change of control of Tekni-Plex, you may require us to repurchase your new notes, in whole or in part, at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest to the purchase date. See "Description of New Notes -- Change of Control." Our new credit facility prohibits us from purchasing outstanding new notes prior to repaying borrowings under the new credit facility. We cannot assure you that upon a change of control we will have sufficient funds to repurchase any of the new notes. See "Description of Certain Indebtedness." Certain Covenants............. The indenture governing the new notes contains covenants, which are the same as the covenants applicable to the old notes, that, among other things, limit our and certain of our subsidiaries' ability to: - incur liens upon properties or assets; 6 - incur additional indebtedness; - merge or consolidate with another company; - transfer substantially all of our assets; - enter into transactions with affiliates; - make certain restricted payments or investments; or - permit dividend or other payment restrictions to apply to subsidiaries. For more details, see the section under the heading "Description of the New Notes -- Covenants" in the prospectus. In addition, in certain circumstances, we will be required to offer to purchase new notes at 100% of the principal amount thereof with the net proceeds of certain asset sales. These covenants are subject to a number of significant exceptions and qualifications. For additional information regarding the new notes, see "Description of the New Notes." RISK FACTORS You should carefully consider the specific matters set forth under "Risk Factors" as well as the other information and data included in this prospectus in evaluating the exchange offer and deciding whether to exchange your old notes. RATIO OF EARNINGS TO FIXED CHARGES
YEARS ENDED NINE MONTHS ENDED -------------------------------------------------- --------------------- JUNE 27, JULY 3, JULY 2, JUNE 30, JUNE 29, MARCH 30, MARCH 29, 1997 1998 1999 2000 2001 2001 2002 -------- ------- ------- -------- -------- --------- --------- Ratio of earnings to fixed charges........ 2.6x 1.9x 1.7x 1.8x 0.8x 0.6x 0.9x
For the purposes of the ratio of earnings to fixed charges, (i) earnings are calculated as our earnings before income taxes, extraordinary item and fixed charges and (ii) fixed charges include interest on all indebtedness and amortization of deferred financing costs. For the nine-month periods ended March 30, 2001 and March 29, 2002, fixed charges exceed earnings by $20.4 million and $7.2 million, respectively. 7 RISK FACTORS You should carefully consider the following risk factors as well as the other information and data included in this prospectus before investing in the notes. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business operations. Any of the following risks could materially and adversely affect our business, financial condition or results of operations. In such case, you may lose all or part of your original investment. RISKS RELATING TO OUR DEBT OUR SUBSTANTIAL INDEBTEDNESS COULD PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES AND OTHERWISE RESTRICT OUR ACTIVITIES. We currently have a significant amount of indebtedness. Our total debt and stockholders' equity (deficit) were $672.8 million and $(96.1) million, respectively, as of March 28, 2002. Our substantial debt may have important consequences to you. For example, it could: - make it more difficult for us to satisfy our obligations with respect to these notes; - require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes; - limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; - put us at a competitive disadvantage compared to our competitors that have less debt; - increase our vulnerability to general adverse economic and industry conditions; - increase our vulnerability to interest rate increases to the extent our variable-rate debt is not effectively hedged; and - limit our ability to make investments or take other actions or borrow additional funds. In addition, the indenture relating to the notes and our credit facility contain financial and other restrictive covenants that will limit our ability to engage in activities that may be in our long-term best interests. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in acceleration of all of our debts. DESPITE CURRENT INDEBTEDNESS LEVELS, WE AND OUR SUBSIDIARIES MAY STILL BE ABLE TO INCUR SUBSTANTIALLY MORE DEBT. THIS COULD FURTHER EXACERBATE THE RISKS ASSOCIATED WITH OUR SUBSTANTIAL INDEBTEDNESS. Despite our high leverage, we may be able to incur substantial additional indebtedness in the future. The terms of the indenture do not prohibit us or our subsidiaries from incurring indebtedness, although the indenture does contain limitations on additional indebtedness. If new debt is added to our and our subsidiaries' current debt levels, the related risks that we and they now face could intensify. THE OPERATING AND FINANCIAL RESTRICTIONS IMPOSED BY OUR DEBT AGREEMENTS, INCLUDING OUR CREDIT FACILITY AND THE INDENTURE RELATING TO THE NOTES, COULD NEGATIVELY AFFECT OUR ABILITY TO FINANCE OPERATIONS AND CAPITAL NEEDS OR TO ENGAGE IN OTHER BUSINESS ACTIVITIES. Covenants contained in the indenture and our credit facility limit our operating flexibility with respect to certain business matters. Among other things, these covenants limit our ability and our subsidiaries' ability to: - incur additional indebtedness; - incur liens upon properties or assets; - make acquisitions; 8 - merge or consolidate with third parties; - make investments; - pay dividends and make distributions; - repurchase or redeem capital stock; - dispose of assets; and - engage in certain transactions with subsidiaries and affiliates and otherwise restrict corporate activities. In addition, our credit facility contains financial covenants, including: - a minimum consolidated EBITDA test; - a minimum fixed coverage ratio; and - a maximum leverage ratio. These covenants may adversely affect our ability to finance our future operations or capital needs or to engage in other business activities that may be in our interest. Our ability to meet these covenants and requirements in the future may be affected by events beyond our control, including prevailing economic, financial and industry conditions. Our breach of or failure to comply with any of these covenants could result in a default under our credit facility or the indenture even if we are able to make the required payments thereunder. If we default under our credit facility, our lenders could cease to make further extensions of credit, cause all of our outstanding debt obligations under the new credit facility to become due and payable, require us to apply all of our available cash to repay the indebtedness under our credit facility or prevent us from making debt service payments on any other indebtedness we owe. If a default under the indenture occurs, the holders of the notes could elect to declare the notes due and payable. If the indebtedness under the new credit facility or the notes is accelerated, we may not have sufficient assets to repay amounts due under these existing debt agreements or on other debt securities then outstanding. We may amend the provisions and limitations of the new credit facility from time to time without the consent of the holders of the notes. For a more complete description of the terms of our outstanding debt and the covenants contained in the notes, see "Description of Certain Indebtedness" and "Description of the Notes -- Covenants." WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH TO SERVICE OUR INDEBTEDNESS. OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL. Our ability to repay or refinance our indebtedness will depend on our financial and operating performance. which, in turn, is subject to prevailing economic and competitive conditions and to financial, business and other factors, many of which are beyond our control. These factors could include operating difficulties, increased operating costs or raw material or product prices, the response of competitors, regulatory developments and delays in implementing strategic projects. Our ability to meet our debt service and other obligations may depend in significant part on the extent to which we can successfully implement our business strategy. We may not be able to implement our business strategy or the anticipated results of our strategy may not be realized. As of March 28, 2002, subject to certain restrictions, we could have borrowed up to $23 million of additional senior indebtedness under our revolving credit facility. If the entire $100 million under the revolving credit facility had been outstanding for the nine months ended March 28, 2002, our debt service (all interest) for this period would have increased by approximately $2.4 million based on an average interest rate of 6.1%. We cannot assure you that our business will generate sufficient cash flows from operations or that future borrowings will be available to us under our credit facility in an amount sufficient to enable us to pay our indebtedness, including these notes, or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness, including these notes, on or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness including our credit facility, our existing 12 3/4% Senior Subordinated Notes due 2010 and these notes, on commercially reasonable terms or at all. 9 YOUR RIGHT TO RECEIVE PAYMENTS ON THESE NOTES IS JUNIOR TO OUR SENIOR DEBT AND POSSIBLY ALL OF OUR FUTURE BORROWINGS. THE GUARANTEES WILL BE JUNIOR TO GUARANTOR SENIOR DEBT, AND THESE OBLIGATIONS WILL BE EFFECTIVELY JUNIOR TO THE LIABILITIES OF OUR NONGUARANTOR SUBSIDIARIES AND POSSIBLY TO ALL OF THEIR FUTURE BORROWINGS, WHICH MAY BE SIGNIFICANT. The notes will be unsecured senior subordinated obligations and will be junior to all our existing and future senior indebtedness, including our credit facility. Each of our currently existing domestic subsidiaries will guarantee the notes. These guarantees will be unsecured senior subordinated obligations and will be junior to all existing and future senior debt of the guarantors. The notes will be effectively junior to all existing and future debt and other liabilities of our subsidiaries that are not guarantors, which include our foreign subsidiaries. As of March 28, 2002, we had outstanding $408.0 million of senior debt, the guarantors had no senior debt outstanding (other than their guarantees of our debt) and the nonguarantor subsidiaries had outstanding $11.2 million of total debt to third parties including trade payables. We also may incur significant additional senior indebtedness under the terms of our revolving credit facility. For example, as of March 28, 2002, we had $23 million available under our revolving credit facility which, if borrowed, would be senior indebtedness. If we become bankrupt, liquidate or dissolve, our assets would be available to pay obligations on the notes only after our senior indebtedness has been paid. Similarly, if one of our guarantor subsidiaries becomes bankrupt, liquidates or dissolves, that subsidiary's assets would be available to pay obligations on its guarantee only after payments have been made on its senior indebtedness. If we fail to pay any of our senior indebtedness, we may make payments on the notes only if either we first pay our senior debt or the holders of our senior indebtedness waive the payment default. Moreover, if any non-payment default exists under our senior indebtedness, we may not make any cash payments on the notes for a period of up to 179 days in any 360-day period, unless we cure the non-payment default, the holders of the senior indebtedness waive the default or rescind acceleration of the indebtedness or we repay the indebtedness in full. In the event of a non-payment default we may not have sufficient assets to pay amounts due on the notes. In addition, various events of default under the new credit facility would prohibit us from making any payments on the notes. THE NOTES WILL NOT BE SECURED BY ANY OF OUR ASSETS. HOWEVER, OUR CREDIT FACILITY IS SECURED BY SUBSTANTIALLY ALL OF OUR ASSETS. In addition to being subordinated to all our senior indebtedness, the notes will not be secured by any of our assets. However, our credit facility is secured by substantially all of our assets and the assets of our domestic subsidiaries. Additionally, the terms of the indenture and our credit facility permit us to incur additional secured debt. If we become insolvent or are liquidated, or if payment under any of the instruments governing our secured debt is accelerated, the lenders under these instruments will be entitled to exercise the remedies available to a secured lender under applicable law and pursuant to instruments governing such debt. Accordingly, the lenders will have a prior claim on our assets. In that event, because the notes will not be secured by any of our assets, it is possible that there will be no assets remaining from which claims of the holders of the notes can be satisfied or, if any assets remain, the remaining assets might be insufficient to satisfy those claims in full. WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE INDENTURE. Upon the occurrence of a change of control, you will have the right to require us to purchase all or a portion of your notes. Nevertheless, if a change of control were to occur, we might not have sufficient financial resources, or might not be able to arrange financing, to pay the purchase price for all notes that you tender. In addition, the terms of our credit facility limit our ability to purchase any notes and to identify certain events that would constitute a change of control or an event of default under our credit facility. The terms of our existing notes contain change of control provisions substantially identical in the notes issued pursuant to this offering. Any future credit agreements or other agreements relating to other indebtedness to which we become a party may contain similar restrictions and provisions. In the event a change of control occurs at a 10 time when we are prohibited from purchasing notes, we could seek the consent of our lenders to purchase notes or could attempt to refinance the borrowings that contain such prohibition. If we do not obtain this consent or repay the borrowing, however, we would remain prohibited from purchasing the notes. Our failure to purchase tendered notes would constitute an event of default under the indenture, that would, in turn, constitute a further default under certain of our existing debt agreements and may constitute a default under the terms of other indebtedness that we may enter into from time to time. Further, the provisions of the indenture may not protect you in the event of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction that might adversely affect holders of notes, if the transaction did not result in a change of control. For a more complete description of the change of control provisions contained in the notes, see "Description of the Notes -- Change of Control." FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO LIMIT YOUR RIGHTS AS A NOTEHOLDER OR VOID GUARANTEES AND REQUIRE NOTEHOLDERS TO RETURN PAYMENTS RECEIVED FROM GUARANTORS. Federal and state fraudulent transfer laws permit a court, if it makes certain findings, to: - avoid all or a portion of our obligations to you; - subordinate our obligations to you to our other existing and future indebtedness, entitling other creditors to be paid in full before any payment is made on the notes; and - take other action detrimental to you, including invalidating the notes. In that event, we cannot assure you that you would ever be repaid. Under federal and state fraudulent transfer laws, in order to take any of those actions, a court typically would need to find that, at the time the notes were issued, we: - issued the notes with the intent of hindering, delaying or defrauding current or future creditors; or - received less than fair consideration or reasonably equivalent value for incurring the indebtedness represented by the notes; and (a) were insolvent or were rendered insolvent by reason of the issuance of the notes; (b) were engaged, or about to engage, in a business or transaction for which our assets were unreasonably small; or (c) intended to incur, or believed or should have believed we would incur, debts beyond our ability to pay as such debts mature. Many of the foregoing terms are defined in or interpreted under those fraudulent transfer statutes. We cannot assure you as to what standard a court would apply in order to determine whether we were "insolvent" as of the date the notes were issued, and we cannot assure you that, regardless of the method of valuation, a court would not determine that we were insolvent on that date. Nor can we assure you that a court would not determine, regardless of whether we were insolvent on the date the notes were issued, that the payments constituted fraudulent transfers on another ground. Different jurisdictions define "insolvency" differently. However, we generally would be considered insolvent at the time we incurred the indebtedness constituting the notes if our liabilities exceeded our assets (at a fair valuation) or if the present saleable value of our assets is less than amount required to pay our total existing debts and liabilities (including the probable liability related to contingent liabilities) as they become absolute or matured. Our obligations under the notes are guaranteed on a senior subordinated basis by our restricted domestic subsidiaries, and the guarantees may also be subject to review under various laws for the protection of creditors. It is possible that creditors of the guarantors may challenge the guarantees as a fraudulent transfer or conveyance. The analysis set forth above would generally apply, except that the guarantees could also be subject to the claim that, since the guarantees were incurred for our benefit, and only indirectly for the benefit 11 of the guarantors, the obligations of the guarantors thereunder were incurred for less than reasonably equivalent value or fair consideration. A court could void a guarantor's obligation under its guarantee, subordinate the guarantee to the other indebtedness of a guarantor, direct that holders of the notes return any amounts paid under a guarantee to the relevant guarantor or to a fund for the benefit of its creditors, or take other action detrimental to the holders of the notes. In addition, the liability of each guarantor under the indenture will be limited to the amount that will result in its guarantee not constituting a fraudulent conveyance or improper corporate distribution, and we cannot assure you as to what standard a court would apply in making a determination as to what would be the maximum liability of each guarantor. CONSEQUENCES OF THE EXCHANGE OFFER ON NON-TENDERING HOLDERS OF THE OUTSTANDING NOTES. In the event the exchange offer is completed, we will not be required to register any old notes not tendered and accepted in the exchange offer. In that event, holders of old notes seeking liquidity in their investment would have to rely on exemptions to the registration requirements under the securities laws, including the Securities Act, since the old notes will continue to be subject to restrictions on transfer. Consequently, holders of old notes who do not participate in the exchange offer could experience significant diminution in the value of their old notes, compared to the value of the new notes. Following the exchange offer, none of the new notes will be entitled to the contingent increase in interest rate provided for (in the event of a failure to complete the exchange offer in accordance with the terms of the registration rights agreement) pursuant to the registration rights agreement. RISKS RELATING TO OUR BUSINESS OUR PROFITS MAY BE ADVERSELY AFFECTED BY PRICE VOLATILITY AND AVAILABILITY OF RAW MATERIALS IF WE ARE UNABLE TO PASS PRICE INCREASES ON TO CUSTOMERS OR TO OBTAIN NECESSARY RAW MATERIALS. Our profitability may be adversely affected if raw material prices increase and we are unable to pass these price increases on to our customers, employ successful hedging strategies, enter into supply contracts at favorable prices or buy on the spot market at favorable prices. Our products are manufactured from commodity petrochemicals that are readily available in bulk quantities from numerous large, vertically integrated chemical companies. Except for PCTFE film, a raw material used in manufacturing our clear, laminated blister packaging materials, we currently purchase each principal raw material from several of the top suppliers. Prices for our raw materials have fluctuated in the past and likely will continue to do so in the future. Historically, we have been able to pass on substantially all of the price increases in raw materials to our customers on a timely basis, although in the case of our garden hose products we are usually not able to do so until the following season because prices are set annually. We cannot be sure, however, that we will be able to pass on price increases in the future. WE OPERATE IN DISCRETE MARKET SEGMENTS OF OUR INDUSTRY, SOME OF WHICH ARE HIGHLY COMPETITIVE AND INCLUDE PARTICIPANTS WITH GREATER RESOURCES THAN OURS. We compete with a wide variety of manufacturers because we operate in discrete market segments. Some of our competitors are larger, have greater financial resources and are less leveraged than we are. As a result, these competitors may be better able to withstand a change in market conditions within the industry and throughout the economy as a whole. These competitors may also be able to maintain significantly greater operating and financial flexibility than we can. Additionally, a number of our niche product applications are customized or sold for highly specialized uses. Competitors with greater financial, technological, manufacturing and marketing resources than ours and that do not currently market similar applications for these uses could choose to do so in the future. Increased competition could have a material adverse effect on our business, financial condition or results of operations. 12 THE SUCCESS OF OUR ACQUISITION STRATEGY COULD BE ADVERSELY AFFECTED BY THE UNAVAILABILITY OF SUITABLE ACQUISITION CANDIDATES OR OUR INABILITY TO FINANCE FUTURE ACQUISITIONS OR SUCCESSFULLY INTEGRATE ACQUIRED BUSINESSES. Acquiring suitable businesses is a key component of our business strategy. Nonetheless, we may not identify suitable acquisitions or acquisitions that can be made at an acceptable price. In the event we are able to acquire additional businesses, we may require substantial capital to do so. Although we will be able to borrow under our revolving credit facility under certain circumstances to fund acquisitions, we cannot be sure that such borrowings will be available in sufficient amounts or that other financing will be available in amounts and on terms that we deem acceptable. In addition, growth by acquisition involves risks such as - diversion of our management's attention from ongoing business concerns; - difficulties in integrating the operations and personnel of acquired companies; - difficulty in assessing the value, strengths and weaknesses of acquisition candidates; - failure to discover liabilities of the acquired company for which we will be responsible following the acquisition; - the potential loss of key employees and customers of acquired companies; - diversion of other corporate resources from our existing operations; and - failure to achieve the expected benefits of the acquisition. If the execution of our acquisition strategy is unsuccessful, our ability to compete successfully or repay our indebtedness may be reduced. RISKS RELATING TO FOREIGN INVESTMENT AND OPERATIONS MAY HARM OUR RESULTS. We have operations and other investments in a number of countries outside of the United States. Our foreign operations and investments are subject to the risks normally associated with conducting business in foreign countries, including: - limitations on ownership and on repatriation of earnings; - import and export restrictions and tariffs; - additional expenses relating to the difficulties and costs of staffing and managing international operations; - labor disputes and uncertain political and economic environments, including risks of war and civil disturbances and the impact of foreign business cycles; - change in laws or policies of a foreign country; - delays in obtaining or the inability to obtain necessary governmental permits; - potentially adverse consequences resulting from the applicability of foreign tax laws; - cultural differences; and - increased expenses due to inflation. Our foreign operations and investments may also be adversely affected by laws and policies of the United States and the other countries in which we operate affecting foreign trade, investment and taxation. THE GARDEN AND IRRIGATION HOSE PRODUCTS BUSINESS IS HIGHLY SEASONAL, WHICH RESULTS IN SIGNIFICANT FLUCTUATION OF OUR FINANCIAL RESULTS OVER THE COURSE OF THE FISCAL YEAR. The market for our garden and irrigation hose products is highly seasonal, with approximately 75% of the sales occurring in spring and early summer. As a result of the need to build up inventories in anticipation of 13 such sales, our working capital requirements peak in the spring. In addition, this seasonality has a significant impact on our net income from quarter to quarter. To the extent such sales peak later in any fiscal year compared to other fiscal years, as a result of weather or other factors, cash flows may not be comparable on an interim period basis. WE ARE DEPENDENT ON CERTAIN KEY PERSONNEL AND COULD BE ADVERSELY AFFECTED BY LOSS OF THEIR SERVICES. We are dependent on the management experience and continued services of our executive officers, including Dr. F. Patrick Smith and Mr. Kenneth W.R. Baker. We maintain a key person life insurance policy on Dr. Smith. The loss of the services of these officers could have a material adverse effect on our business. In addition, our continued growth depends on our ability to attract and retain experienced key employees. WE MAY BE ADVERSELY AFFECTED BY ENVIRONMENTAL AND SAFETY LAWS AND REGULATIONS. We could incur significant fines, penalties, capital costs or other liabilities associated with any noncompliance, remediation of contamination or natural resource damage or toxic tort liability at or related to any of our current or former facilities. Changes in laws or the interpretation thereof, the development of new facts or the failure of third parties to perform remediation at current or former facilities could also cause us to incur additional costs. Any of these foregoing fines, penalties, capital costs, liabilities or costs could have a material adverse effect on our businesses, financial condition or results of operations. Our facilities, operations, and properties are subject to foreign, federal, provincial, state and local environmental laws and regulations. As a result, we are involved from time to time in administrative or legal proceedings relating to environmental matters and have in the past and will continue to incur capital costs and other expenditures relating to environmental matters. Current and prior owners and operators of property or businesses may be liable under environmental laws without regard to fault or to knowledge about the condition or action causing the liability. We are currently, and may in the future be, required to incur costs relating to the remediation of property, including property where we dispose of our waste, and environmental conditions could lead to claims for personal injury, property damage or damages to natural resources. We are aware of environmental conditions at certain properties that we now or previously owned or leased that are undergoing remediation by us or by third parties. Although based on current information we have no reason to believe otherwise, these third parties may not complete the required remediation. WE ARE CONTROLLED BY SHAREHOLDERS WHO WILL BE ABLE TO MAKE IMPORTANT DECISIONS ABOUT OUR BUSINESS AND CAPITAL STRUCTURE; THE CONTROLLING SHAREHOLDERS' INTERESTS MAY DIFFER FROM YOUR INTERESTS AS A NOTEHOLDER. Circumstances may occur in which the interests of the controlling shareholders of Tekni-Plex could be in conflict with your interests as a noteholder. The common shareholders may have an interest in pursuing acquisitions, divestitures or other transactions that, in their judgment, could enhance the value of their individual equity investments, even though these transactions might involve risks to the holders of the notes. Tekni-Plex Partners holds approximately 96.3% of our outstanding common stock (approximately 93.6% on a fully diluted basis) and MST/TP Partners holds the remaining common stock. Tekni-Plex Management, as sole managing member of Tekni-Plex Partners and MST/TP Partners, controls both these entities. Tekni-Plex Management is controlled by Dr. Smith, our Chairman of the Board and Chief Executive Officer. USE OF PROCEEDS We will not receive any cash proceeds from the issuance of the new notes. The new notes will be exchanged for old notes as described in this prospectus upon our receipt of old notes. We will cancel all of the old notes surrendered in exchange for the new notes. Our net proceeds from the sale of the old notes were approximately $40.4 million, after deduction of the initial purchasers' discounts and commissions and other expenses of the offering. We used those net proceeds to repay borrowings under our revolving credit facility and for related fees and expenses. 14 CAPITALIZATION The following table sets forth our actual capitalization as of March 29, 2002. You should read this table in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," in our Form l0-Q for the period ended March 29, 2002 as well as the financial statements and the notes to these statements incorporated by reference in this prospectus.
AS OF MARCH 29, 2002 --------------- (DOLLARS IN THOUSANDS) Cash and cash equivalents................................... $ 8,620 ========= Long term debt: Senior credit facility: Revolving credit facility(1)........................... $ 77,000 Term loans............................................. 330,980 12 3/4% senior subordinated notes outstanding(2).......... 271,798 Other..................................................... 4,677 --------- Total debt.................................................. $ 684,549 Stockholders' equity (deficit): Common stock.............................................. $ -- Additional paid in capital................................ 170,176 Foreign currency translation.............................. (11,316) Retained earnings......................................... (34,454) Treasury stock............................................ (220,522) --------- Total stockholders' equity (deficit)........................ $ (96,116) --------- Total capitalization........................................ $ 588,433 =========
- --------------- (1) At March 29, 2002, $23 million was available under our revolving credit facility. (2) On May 6, 2002 we issued an additional $40,000 aggregate principal amount of 12 3/4% senior subordinated notes, represented by the old notes which may be exchanged for the new notes. 15 THE EXCHANGE OFFER PURPOSE OF THE EXCHANGE OFFER The old notes were sold by us to the initial purchaser on May 6, 2002 pursuant to a purchase agreement, dated May 1, 2002, between us and the initial purchaser. The initial purchaser subsequently sold the old notes to "qualified institutional buyers," as defined in Rule 144A under the Securities Act in reliance on Rule 144A, to a limited number of institutional "accredited investors," as defined in Rule 501 under the Securities Act, and outside the United States in accordance with Regulation S under the Securities Act. As a condition to the initial sale of the old notes, we and the initial purchaser entered into the registration rights agreement. Pursuant to the registration rights agreement, we agreed that we would: - use our reasonable best efforts to file with the SEC within 120 days after the closing date, which is the date we delivered the old notes to the initial purchaser, a registration statement under the Securities Act with respect to the new notes; and - cause such registration statement to become effective under the Securities Act within 210 days after the closing date and to remain open for at least 20 business days. We agreed to issue and exchange new notes for all old notes validly tendered and not withdrawn before the expiration of the exchange offer. A copy of the registration rights agreement has been filed as an exhibit to the registration statement of which this prospectus is a part. The registration statement is intended to satisfy certain of our obligations under the registration rights agreement and the purchase agreement. In the event that due to a change in current interpretations by the SEC, we are not permitted to effect such exchange offer, or if for any other reason the exchange offer is not consummated within 250 days after the original issue date of the old notes, or if any holder of the old notes (other than an "affiliate" of Tekni-Plex or the initial purchaser) is not eligible to participate in the exchange offer, or upon the request of the initial purchaser under certain circumstances, it is contemplated that we will instead file a shelf registration statement covering resales by the holders of the old notes and will use our reasonable best efforts to cause such shelf registration statement to become effective and to keep such shelf registration statement effective for a maximum of two years from the closing date. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal, we will accept any and all old notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time on the expiration date. We will issue $1,000 principal amount of new notes in exchange for each respective $1,000 principal amount of outstanding old notes validly tendered and not withdrawn pursuant to the exchange offer. Old notes may be tendered in the principal amount of $1,000 and integral multiples of $1,000 in excess thereof, provided that if fewer than all of the old notes of a holder are tendered for exchange, the untendered principal amount of the holder's remaining old notes must be $100,000 or any integral multiple of $1,000 in excess thereof. The form and terms of the new notes are substantially the same as the form and terms of the old notes except that: - the new notes bear a Series B designation and a different CUSIP number from the old notes; - the exchange will be registered under the Securities Act and, therefore, the new notes will not bear legends restricting the transfer thereof; and - holders of the new notes will not be entitled to any of the registration rights of holders of old notes under the registration rights agreement, which rights will terminate upon the consummation of the exchange offer. The new notes will evidence the same indebtedness as the old notes (which they replace) and will be issued under, and be entitled to the benefits of, the indenture, which also authorized the issuance of the old notes, such that the new notes and the old notes will be treated as a single class of securities under the indenture. The 16 new notes will be fully and unconditionally guaranteed on a senior subordinated basis by the guarantors. The form and terms of the exchange guarantees will be substantially identical to the form and terms of the old guarantees. As of the date of this prospectus, $40,000,000 principal amount of old notes are outstanding, all of which are registered in the name of Cede & Co., as nominee for DTC. Solely for reasons of administration, we have fixed the close of business on , 2002 as the record date for the exchange offer for purposes of determining the persons to whom this prospectus and the letter of transmittal will be mailed initially. There will be no fixed record date for determining holders of the old notes entitled to participate in the exchange offer. Holders of the old notes do not have any appraisal or dissenters' rights under the General Corporation Law of the State of Delaware or the indenture in connection with the exchange offer. We intend to conduct the exchange offer in accordance with the provisions of the registration rights agreement and the applicable requirements of the Securities Act and the rules and regulations of the SEC thereunder. We shall be deemed to have accepted validly tendered old notes when, and if, we have given oral or written notice thereof to HSBC Bank USA, the exchange agent. The exchange agent will act as agent for the tendering holders of old notes for the purpose of receiving the new notes from us. Holders who tender old notes in the exchange offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of old notes pursuant to the exchange offer. We will pay all charges and expenses, other than certain applicable taxes described below, in connection with the exchange offer. See "The Exchange Offer -- Fees and Expenses." EXPIRATION DATE; EXTENSIONS; AMENDMENTS The term "expiration date" shall mean 5:00 p.m., New York City time, on , 2002, unless we, in our sole discretion, extend the exchange offer, in which case the term "expiration date" shall mean the latest date and time to which the exchange offer is extended. If we determine to extend the exchange offer, we will, prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date: - notify the exchange agent of any extension by oral or written notice; and - mail to registered holders an announcement of the extension. We reserve the right, in our sole discretion: - to delay accepting any old notes; - to extend the exchange offer; or - if, in the opinion of our counsel, the consummation of the exchange offer would violate any applicable law, rule or regulation or any applicable interpretation of the staff of the SEC, to terminate or amend the exchange offer by giving oral or written notice of such delay, extension, termination or amendment to the exchange agent. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by a press release or other public announcement thereof. INTEREST ON THE NEW NOTES Interest on new notes will accrue from the last interest payment date on which interest was paid on the old notes surrendered for them, or, if no interest has been paid on such old notes, from May 6, 2002. We will not pay interest on the old notes accepted for exchange. Interest on the new notes will be paid on June 15 and December 15 of each year commencing December 15, 2002. 17 RESALE OF THE NEW NOTES With respect to the new notes, based upon interpretations by the staff of the SEC set forth in certain no-action letters issued to third parties, we believe that a holder who exchanges old notes for new notes in the ordinary course of business, who is not participating, does not intend to participate, and has no arrangement or understanding with any person to participate in a distribution of the new notes, and who is not an "affiliate" of ours within the meaning of Rule 405 of the Securities Act, will be allowed to resell new notes to the public without further registration under the Securities Act and without delivering to the purchasers of the new notes a prospectus that satisfies the requirements of Section 10 of the Securities Act. If any holder is an affiliate of ours or acquires new notes in the exchange offer for the purpose of distributing or participating in the distribution of the new notes, such holder: - cannot rely on the position of the staff of the SEC enumerated in such no-action letters issued to third parties; and - must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, unless an exemption from registration is otherwise available. Each broker-dealer that receives new notes for its own account in exchange for old notes acquired by such broker-dealer as a result of market-making or other trading activities must acknowledge that it will deliver a prospectus in connection with any resale of such new notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of any new notes received in exchange for old notes acquired by such broker-dealer as a result of market-making or other trading activities. We will make this prospectus, as it may be amended or supplemented from time to time, available to any such broker-dealer that requests copies of such prospectus in the letter of transmittal for use in connection with any such resale for a period of up to 180 days after the expiration date. See "Plan of Distribution." PROCEDURES FOR TENDERING To tender in the exchange offer, a holder of old notes must either: - complete, sign and date the letter of transmittal or facsimile thereof, have the signatures thereon guaranteed if required by the letter of transmittal, and mail or otherwise deliver such letter of transmittal or such facsimile to the exchange agent; or - if such old notes are tendered pursuant to the procedures for book-entry transfer set forth below, a holder tendering old notes may transmit an agent's message (as defined below) to the exchange agent in lieu of the letter of transmittal, in either case for receipt on or prior to the expiration date. In addition, either: - certificates for such old notes must be received by the exchange agent along with the letter of transmittal; - a timely confirmation of a book-entry transfer of such old notes into the exchange agent's account at DTC pursuant to the procedure for book-entry transfer described below, along with the letter of transmittal or an agent's message, as the case may be, must be received by the exchange agent prior to the expiration date; or - the holder must comply with the guaranteed delivery procedures described below. The term "agent's message" means a message, transmitted to the exchange agent's account at DTC and received by the exchange agent and forming a part of the book-entry confirmation, which states that such account has received an express acknowledgment from the tendering participant that such participant has 18 received and agrees to be bound by the letter of transmittal and that we may enforce the letter of transmittal against such participant. To be tendered effectively, the letter of transmittal and other required documents, or an agent's message in lieu thereof, must be received by the exchange agent at the address set forth below under "-- Exchange Agent" prior to 5:00 p.m., New York City time, on the expiration date. The tender by a holder that is not withdrawn prior to the expiration date will constitute an agreement between such holder and us in accordance with the terms and subject to the conditions set forth herein and in the letter of transmittal. THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. DO NOT SEND THE LETTER OF TRANSMITTAL OR ANY OLD NOTES TO US. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS. Any beneficial owner(s) of the old notes whose old notes are held through a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such intermediary promptly and instruct such intermediary to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on its own behalf, such owner must, prior to completing and executing the letter of transmittal and delivering such owner's old notes: - make appropriate arrangements to register ownership of the old notes in such owner's name; or - obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. Signatures on a letter of transmittal or a notice of withdrawal described below (see "-- Withdrawal of Tenders"), as the case may be, must be guaranteed by an eligible institution unless the old notes tendered pursuant thereto are tendered: - by a registered holder who has not completed the box titled "Special Delivery Instruction" on the letter of transmittal; or - for the account of an eligible institution. In the event that signatures on a letter of transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be made by an "eligible guarantor institution" (within the meaning of Rule 17Ad-15 under the Exchange Act) which is a member of one of the recognized signature guarantee programs identified in the letter of transmittal. If the letter of transmittal is signed by a person other than the registered holder of any old notes listed therein, such old notes must be endorsed or accompanied by a properly completed bond power, signed by such registered holder exactly as such registered holder's name appears on such old notes with the signature thereon guaranteed by an eligible guarantor institution. In connection with any tender of old notes in definitive certified form, if the letter of transmittal or any old notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by us, evidence satisfactory to us of their authority to so act must be submitted with the letter of transmittal. The exchange agent and DTC have confirmed that any financial institution that is a participant in DTC's system may utilize DTC's Automated Tender Offer Program to tender old notes. Accordingly, DTC participants may electronically transmit their acceptance of the exchange offer by causing DTC to transfer old notes to the exchange agent in accordance with DTC's ATOP procedures for transfer. DTC will then send an agent's message to the exchange agent. 19 All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered old notes will be determined by us in our sole discretion, which determination will be final and binding. We reserve the absolute right: - to reject any and all old notes not properly tendered and any old notes our acceptance of which would, in the opinion of our counsel, be unlawful; and - to waive any defects, irregularities or conditions of tender as to particular old notes. Our interpretation of the terms and conditions of the exchange offer (including the instructions in the letter of transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of old notes must be cured within such time as we shall determine. Although we intend to notify holders of defects or irregularities in connection with tenders of old notes, neither we, the exchange agent nor any other person shall incur any liability for failure to give such notification. Tenders of old notes will not be deemed to have been made until such defects or irregularities have been cured or waived. While we have no present plan to acquire any old notes that are not tendered in the exchange offer or to file a registration statement to permit resales of any old notes that are not tendered pursuant to the exchange offer, we reserve the right in our sole discretion to purchase or make offers for any old notes that remain outstanding subsequent to the expiration date and, to the extent permitted by applicable law, purchase old notes in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers could differ from the terms of the exchange offer. By tendering old notes pursuant to the exchange offer, each holder of old notes will represent to us that, among other things, that: - the new notes to be acquired by such holder of old notes in connection with the exchange offer are being acquired by such holder in the ordinary course of business of such holder; - such holder is not participating, does not intend to participate, and has no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the new notes; - such holder acknowledges and agrees that any person who is participating in the exchange offer for the purpose of distributing the new notes must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale of the new notes acquired by such person and cannot rely on the position of the staff of the SEC set forth in certain no-action letters; - such holder understands that a secondary resale transaction, described above, and any resales of new notes obtained by such holder in exchange for old notes acquired by such holder directly from us should be covered by an effective registration statement containing the selling security holder information required by Item 507 or Item 508, as applicable, of Regulation S-K of the SEC; and - such holder is not an "affiliate", as defined in Rule 405 under the Securities Act, of ours. If the holder is a broker-dealer that will receive new notes for such holder's own account in exchange for old notes that were acquired as a result of market-making activities or other trading activities, such holder will be required to acknowledge in the letter of transmittal that such holder will deliver a prospectus in connection with any resale of such new notes; however, by so acknowledging and by delivering a prospectus, such holder will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. RETURN OF OLD NOTES In all cases, issuance of new notes for old notes that are accepted for exchange pursuant to the exchange offer will be made only after timely receipt by the exchange agent of: - old notes or a timely book-entry confirmation of such old notes into the exchange agent's account at DTC; and 20 - a properly completed and duly executed letter of transmittal and all other required documents, or an agent's message in lieu thereof. If any tendered old notes are not accepted for any reason set forth in the terms and conditions of the exchange offer or if old notes are withdrawn or are submitted for a greater principal amount than the holders desire to exchange, such unaccepted, withdrawn or otherwise non-exchanged old notes will be returned without expense to the tendering holder thereof (or, in the case of old notes tendered by book-entry transfer into the exchange agent's account at DTC pursuant to the book-entry transfer procedures described below, such old notes will be credited to an account maintained with DTC) as promptly as practicable. BOOK-ENTRY TRANSFER The exchange agent will make a request to establish an account with respect to the old securities at DTC for purposes of the exchange offer promptly after the date of this prospectus. Any financial institution that is a participant in DTC's systems may make book-entry delivery of old securities by causing DTC to transfer old securities into the exchange agent's account in accordance with DTC's Automated Tender Offer Program procedures for transfer. However, the exchange for the old securities so tendered will only be made after timely confirmation of book-entry transfer of old securities into the exchange agent's account, and timely receipt by the exchange agent of an agent's message, transmitted by DTC and received by the exchange agent and forming a part of a book-entry confirmation. The agent's message must state that DTC has received an express acknowledgment from the participant tendering old securities that are the subject of that book-entry confirmation that the participant has received and agrees to be bound by the terms of the letter of transmittal, and that we may enforce the agreement against that participant. Although delivery of old securities may be effected through book-entry transfer into the exchange agent's account at DTC, the letter of transmittal, or a facsimile copy, properly completed and duly executed, with any required signature guarantees, must in any case be delivered to and received by the exchange agent at its address listed under "-- Exchange Agent" on or prior to the expiration date. If your old securities are held through DTC, you must complete a form called "instructions to registered holder and/or book-entry participant," which will instruct the DTC participant through whom you hold your securities of your intention to tender your old securities or not tender your old securities. Please note that delivery of documents to DTC in accordance with its procedures does not constitute delivery to the exchange agent and we will not be able to accept your tender of securities until the exchange agent receives a letter of transmittal and a book-entry confirmation from DTC with respect to your securities. A copy of that form is available from the exchange agent. GUARANTEED DELIVERY PROCEDURES If a holder of the old notes desires to tender such old notes and the old notes are not immediately available or the holder cannot deliver its old notes (or complete the procedures for book-entry transfer), the letter of transmittal or any other required documents to the exchange agent prior to the expiration date, a holder may effect a tender if: - the tender is made through an eligible institution; - prior to the expiration date, the exchange agent receives from such eligible institution (by facsimile transmission, mail or hand delivery) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by us setting forth the name and address of the holder, the certificate number(s) of such old notes (if applicable) and the principal amount of old notes tendered, stating that the tender is being made thereby and guaranteeing that, within three New York Stock Exchange trading days after the expiration date: (i) the letter of transmittal (or a facsimile thereof), or an agent's message in lieu thereof, (ii) the certificate(s) representing the old notes in proper form for transfer or a book-entry confirmation, as the case may be, and 21 (iii) any other documents required by the letter of transmittal, will be deposited by the eligible institution with the exchange agent; and - such properly executed letter of transmittal (or facsimile thereof), or an agent's message in lieu thereof, as well as the certificate(s) representing all tendered old notes in proper form for transfer or a book-entry confirmation, as the case may be, and all other documents required by the letter of transmittal, are received by the exchange agent within three New York Stock Exchange trading days after the expiration date. Upon request to the exchange agent, a form of Notice of Guaranteed Delivery will be sent to holders who wish to tender their old notes according to the guaranteed delivery procedures set forth above. WITHDRAWAL OF TENDERS Except as otherwise provided herein, tenders of old notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration date. To withdraw a tender of old notes in the exchange offer, a written or facsimile transmission notice of withdrawal must be received by the exchange agent at its address set forth herein prior to the expiration date. Any such notice of withdrawal must: - specify the name of the person having deposited the old notes to be withdrawn; - identify the old notes to be withdrawn (including the certificate number or numbers, if applicable, and principal amount of such old notes); and - be signed by the holder in the same manner as the original signature on the letter of transmittal by which such old notes were tendered (including any required signature guarantees). If old notes have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn old notes and otherwise comply with the procedures of DTC. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by us, in our sole discretion, which determination shall be final and binding on all parties. Any old notes so withdrawn will be deemed not to have been validly tendered for purposes of the exchange offer, and no new notes will be issued with respect thereto, unless the old notes so withdrawn are validly re-tendered. Properly withdrawn old notes may be re-tendered by following one of the procedures described above under "-- Procedures for Tendering" at any time prior to the expiration date. TERMINATION OF CERTAIN RIGHTS All registration rights under the registration rights agreement accorded to holders of the old notes (and all rights to receive additional interest in the event of a Registration Default as defined therein) will terminate upon consummation of the exchange offer. However, for a period of up to 180 days after the registration statement is declared effective, we will keep the registration statement effective and provide copies of the latest version of the prospectus to any broker-dealer that requests copies of such prospectus in the letter of transmittal for use in connection with any resale by such broker-dealer of new notes received for its own account pursuant to the exchange offer in exchange for old notes acquired for its own account as a result of market-making or other trading activities. 22 EXCHANGE AGENT HSBC Bank USA has been appointed as exchange agent for the exchange offer. Questions and requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal and requests for notice of guaranteed delivery should be directed to the exchange agent addressed as follows:
By Registered or Certified Mail, Overnight Courier or Hand: By Facsimile: HSBC Bank USA HSBC Bank USA One Hanson Place Attention: Paulette Shaw Brooklyn, New York 11243 (718) 488-4488 Attention: Paulette Shaw Tel: (718) 488-4475
Originals of all documents submitted by facsimile should be sent promptly by registered or certified mail, overnight courier or hand. Delivery to an address other than as set forth above will not constitute a valid delivery. HSBC Bank USA also serves as trustee under the indenture. FEES AND EXPENSES We will bear the expenses of soliciting tenders. The principal solicitation is being made by mail; however, additional solicitation may be made by telegraph, facsimile transmission, telephone or in person by our officers and regular employees or those of our affiliates. We have not retained any dealer-manager in connection with the exchange offer and will not make any payments to brokers, dealers or others soliciting acceptances of the exchange offer. We, however, will pay the exchange agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The expenses to be incurred in connection with the exchange offer, including registration fees, fees and expenses of the exchange agent and the trustee, accounting and legal fees, and printing costs, will be paid by us. We will pay all transfer taxes, if any, applicable to the exchange of old notes pursuant to the exchange offer. If, however, a transfer tax is imposed for any reason other than the exchange of the old notes pursuant to the exchange offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. CONSEQUENCE OF FAILURE TO EXCHANGE Participation in the exchange offer is voluntary. Holders of the old notes are urged to consult their financial and tax advisors in making their own decisions on what action to take. Old notes that are not exchanged for the new notes pursuant to the exchange offer will remain "restricted securities" within the meaning of Rule 144(a)(3)(iv) under the Securities Act. Accordingly, such old notes may not be offered, sold, pledged or otherwise transferred except: - to us (upon redemption thereof or otherwise); - to a person whom the seller reasonably believes is a "qualified institutional buyer" within the meaning of Rule 144A purchasing for its own account or for the account of a qualified institutional buyer in a transaction meeting the requirements of Rule 144A; - in an offshore transaction complying with Rule 903 or Rule 904 of Regulation S under the Securities Act; 23 - pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if available); - pursuant to an effective registration statement under the Securities Act; or - pursuant to another available exemption from the registration requirements of the Securities Act, and, in each case, in accordance with all other applicable securities laws. ACCOUNTING TREATMENT For accounting purposes, we will recognize no gain or loss as a result of the exchange offer. The expenses of the exchange offer will be amortized over the term of the new notes. CONDITIONS Notwithstanding any other term of the exchange offer, we shall not be required to accept for exchange, or new notes for, any old notes, and may terminate or amend the exchange offer as provided herein before the acceptance of such old notes, if: (a) any action or proceeding is instituted or threatened in any court or by or before any governmental agency with respect to the exchange offer (or other similar exchange offers) which, in our sole judgment, might materially impair our ability to proceed with the exchange offer or any material adverse development has occurred in any existing action or proceeding with respect to us or any of our subsidiaries; (b) any law, statute, rule, regulation or interpretation by the staff of the SEC is proposed, adopted or enacted, which, in our reasonable judgment, might materially impair our ability to proceed with the exchange offer or materially impair the contemplated benefits of the exchange offer to us; or (c) any governmental approval has not been obtained, which approval we shall, in our reasonable discretion, deem necessary for the consummation of the exchange offer as contemplated hereby. If we determine in our reasonable discretion that any of the conditions is not satisfied, we may (i) refuse to accept any old notes and return all tendered old notes to the tendering holders, (ii) extend the exchange offer and retain all old notes tendered prior to the expiration of the exchange offer, subject, however, to the rights of holders to withdraw such old notes (see "-- Withdrawal of Tenders") or (iii) waive such unsatisfied condition(s) with respect to the exchange offer and accept all properly tendered old notes that have not been withdrawn. DESCRIPTION OF THE NEW NOTES As used below in this "Description of the New Notes" section, the "Company," "we," "us," "our" and "ours" means Tekni-Plex, Inc. but not any of its subsidiaries. We issued the old notes, and the new notes are to be issued under an indenture, dated as of June 21, 2000 and amended as of May 6, 2002, among us, the guarantors and HSBC Bank USA, as trustee. The terms of the notes include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939, as amended. The notes are subject to all such terms, and holders of the notes are referred to the indenture and the Trust Indenture Act for a statement thereof. A copy of the indenture and the registration rights agreement described below will be made available to prospective investors upon request. The statements made under this caption relating to the notes, the indenture and the registration rights agreement are intended to be summaries of all material elements of such documents and, as such, do not purport to be complete and where reference is made to particular provisions of the indenture and registration rights agreement, such provisions, including the definitions of certain terms appearing at the end of this section, are qualified in their entirety by such reference. The terms of the new notes are identical in all material respects to the terms of the old notes, except that the transfer restrictions, registration rights and additional interest provisions relating to the old notes do not 24 apply to the new notes. The old notes and the new notes will be considered collectively to be a single class for all purposes under the indenture, including, without limitation, waivers and amendments. The notes will be our general unsecured obligations. The notes constitute a further issuance of and, following their registration under the Act, will be consolidated and form a single series with our outstanding 12 3/4% Senior Subordinated Notes. The indenture is not limited in amount, and additional amounts may be issued in one or more series from time to time under the indenture subject to the limitations on the incurrence of additional indebtedness set forth under "Covenants -- Limitation on Indebtedness" and restrictions contained in the credit agreement. The notes will be our senior subordinated obligations, subordinated in right of payment to all our senior debt. The notes will be issued only in fully registered form, without coupons, in denominations of $1,000 and any integral multiple thereof. No service charge will be made for any registration of transfer or exchange of notes, but we may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Initially, the trustee will act as paying agent and registrar for the notes. PRINCIPAL, MATURITY AND INTEREST The notes will mature on June 15, 2010 and will bear interest at the rate per annum shown on the cover page hereof, except as noted under "-- Registration Rights," from the Issue Date or from the most recent interest payment date to which interest has been paid or provided for. Interest on the new notes will be payable semiannually on June 15 and December 15 of each year, commencing December 15, 2002, to the person in whose name a note is registered at the close of business on the preceding June 1 or December 1 (each, a "record date"), as the case may be. Interest on the notes will be computed on the basis of a 360-day year of twelve 30-day months. Holders must surrender the notes to the paying agent for the notes to collect principal payments. We will pay principal and interest by check and may mail interest checks to a holder's registered address. OPTIONAL REDEMPTION The notes will be subject to redemption, at our option, in whole or in part, at any time on or after June 15, 2005 and prior to maturity, upon not less than 30 nor more than 60 days' notice mailed to each holder of notes to be redeemed at his address appearing in the register for the notes, in amounts of $1,000 or an integral multiple of $1,000, at the following redemption prices (expressed as percentages of principal amount) plus accrued interest to but excluding the date fixed for redemption (subject to the right of holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the date fixed for redemption), if redeemed during the 12-month period beginning June 15 of the years indicated:
YEAR PERCENTAGE - ---- ---------- 2005........................................................ 106.375% 2006........................................................ 104.250% 2007........................................................ 102.135% 2008 and thereafter......................................... 100.000%
In addition, prior to June 15, 2003, we may redeem up to 35% of the principal amount of the notes with the net cash proceeds received by us from one or more public offerings of our capital stock (other than disqualified stock), at a redemption price (expressed as a percentage of the principal amount) of 112.75% of the principal amount thereof, plus accrued and unpaid interest to the date fixed for redemption; provided however, that at least 65% of the aggregate principal amount of the notes originally issued pursuant to this offering remains outstanding immediately after any such redemption (excluding any notes owned by us or any of our affiliates). Notice of redemption pursuant to this paragraph must be mailed to holders of notes not later than 60 days following the consummation of such public offering. Selection of notes for any partial redemption shall be made by the trustee, in accordance with the rules of any national securities exchange on which the notes may be listed or, if the notes are not so listed, pro rata or by lot or in such other manner as the trustee shall deem appropriate and fair. Notes in denominations larger 25 than $1,000 may be redeemed in part but only in integral multiples of $1,000. Notice of redemption will be mailed before the date fixed for redemption to each holder of notes to be redeemed at his or her registered address. On and after the date fixed for redemption, interest will cease to accrue on notes or portions thereof called for redemption. The notes will not have the benefit of any sinking fund. RANKING The payment of principal, premium, if any, and interest on the notes and any claims arising out of or with respect to the indenture is subordinated and subject in right of payment, to the extent and in the manner provided in the indenture, to the prior payment in full of all our senior debt. Upon any payment or distribution of our assets or securities of any kind or character, whether in cash, property or securities, upon any dissolution or winding up or total or partial liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due or to become due with respect to our senior debt (including any interest accruing on or after, or which would accrue but for, an event of bankruptcy, regardless of whether such interest is an allowed claim enforceable against the debtor under the Bankruptcy Code) shall first be paid in full, or payment provided for, in either case in cash or cash equivalents or otherwise in a form satisfactory to the holders of senior debt, before the holders of the notes or the trustee on behalf of such holders shall be entitled to receive any payment by us of the principal of premium, if any, or interest on the notes, or any payment to acquire any of the notes for cash, property or securities, or any distribution with respect to the notes of any kind or character, whether in cash, property or securities, by set-off or otherwise (all such payments and distributions referred to individually and collectively, as a "securities payment"). Before any payment may be made by us, or on our behalf, of the principal of, premium, if any, or interest on the notes upon any such dissolution or winding up or liquidation or reorganization, any payment or distribution of our assets or securities of any kind or character, whether in cash, property or securities, to which the holders of the notes or the trustee on their behalf would be entitled, but for the subordination provisions of the indenture, shall be made by us or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, directly to the holders of our senior debt (pro rata to such holders on the basis of the respective amounts of senior debt held by such holders) or their representatives or to the trustee or trustees under any indenture pursuant to which any such senior debt may have been issued as their respective interests may appear, to the extent necessary to pay all such senior debt in full in cash or cash equivalents or otherwise in a form satisfactory to the holders of such senior debt after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of such senior debt. No securities payment by us or on our behalf, whether pursuant to the terms of the notes or upon acceleration or otherwise, will be made if, at the time of such payment, there exists a default in the payment of all or any portion of the obligations on any designated senior debt, whether at maturity, on account of mandatory redemption or prepayment, acceleration or otherwise, and such default shall not have been cured or waived or the benefits of this sentence waived by or on behalf of the holders of such designated senior debt. In addition, during the continuance of any non-payment default or non-payment event of default with respect to any designated senior debt pursuant to which the maturity thereof may be accelerated, and upon receipt by the Trustee of notice (a "payment blockage notice") from a holder or holders of such designated senior debt or the trustee or agent acting on behalf of such designated senior debt, then, unless and until such default or event of default has been cured or waived or has ceased to exist or such designated senior debt has been discharged or repaid in full in cash or cash equivalents or otherwise in a form satisfactory to the holders of such designated senior debt, no securities payment will be made by us or on our behalf, except from those funds held in trust for purposes of defeasance for the benefit of the holders of any notes to such holders, during a period (a "payment blockage period") commencing on the date of receipt of such payment blockage notice by the trustee and ending 179 days thereafter. Notwithstanding anything herein to the contrary, (1) in no event will a payment blockage period extend beyond 179 days from the date of the payment blockage notice in respect thereof was given and (2) there must be 180 days in any 365 day period during which no payment blockage period is in effect. Not more than one payment blockage period may be commenced with respect to 26 the notes during any period of 365 consecutive days. No default or event of default that existed or was continuing on the date of commencement of any payment blockage period with respect to the designated senior debt initiating such payment blockage period may be, or be made, the basis for the commencement of any other payment blockage period by the holder or holders of such designated senior debt or the trustee or agent acting on behalf of such designated senior debt, whether or not within a period of 365 consecutive days, unless such default or event of default has been cured or waived for a period of not less than 90 consecutive days (it being acknowledged that any subsequent action or any breach of any financial covenants for a period commencing after the date of commencement of such payment blockage period that, in either case, would give rise to an event of default pursuant to any provision under which an event of default previously existed or was continuing, shall constitute a new event of default for this purpose). The failure to make any payment or distribution for or on account of the notes by reason of the provisions of the indenture described under this section will not be construed as preventing the occurrence of an event of default described in clause (1), (2) or (3) of the first paragraph under "-- Events of Default." By reason of the subordination provisions described above, in the event we become insolvent, funds which would otherwise be payable to holders of the notes will be paid to the holders of our senior debt to the extent necessary to repay such senior debt in full, and we may be unable to fully meet our obligations with respect to the notes. Subject to the restrictions set forth in the indenture, in the future we may incur additional senior debt. At March 28, 2002, there was $408.0 million of senior debt outstanding. However, we could also have borrowed up to an additional $23 million of indebtedness under our revolving credit facility, all of which would have constituted senior debt. THE GUARANTEES The indenture provides that the guarantors will fully and unconditionally guarantee, jointly and severally, on a senior subordinated basis all of our obligations under the indenture, including our obligation to pay principal, premium, if any, and interest with respect to the notes. The obligation of each guarantor is limited to the maximum amount which, after giving effect to all other contingent and fixed liabilities of such guarantor, including, without limitation, such guarantor's guarantee of outstanding obligations under the credit agreement, will result in the obligations of such guarantor under the guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. Except as provided in "-- Covenants" below, we are not restricted from selling or otherwise disposing of a guarantor. The indenture provides that if the notes are defeased in accordance with the terms of the indenture, or if all or substantially all of the assets of a guarantor or all of the capital stock of a guarantor is sold (including by issuance or otherwise) by us or any of our restricted subsidiaries in a transaction constituting an asset disposition, and if (1) the net available proceeds from such asset dispositions are used in accordance with the covenant described under "-- Covenants -- Limitation on Certain Asset Dispositions" or (2) we deliver to the trustee an officers' certificate to the effect that the net available proceeds from such asset disposition shall be used in accordance with the covenant described under "-- Covenants -- Limitation on Certain Asset Dispositions" and within the time limits specified by such covenant, then such guarantor (in the event of a sale or other disposition of all or substantially all of its assets) shall be released and discharged from its guarantee obligations. The obligations of each guarantor under the guarantee are subordinated to the prior payment in full of all senior debt of such guarantor on the same basis as our obligations on the notes are subordinated to our senior debt. The guarantee will be pari passu in right of payment with any other senior subordinated indebtedness of each guarantor and senior to any future subordinated indebtedness of each guarantor. 27 COVENANTS The indenture contains, among others, the following covenants: LIMITATION ON INDEBTEDNESS The indenture provides that we will not, and will not permit any of our restricted subsidiaries to, directly or indirectly, incur any indebtedness (including acquired indebtedness), except: (1) indebtedness of ours or of any of our restricted subsidiaries, if immediately after giving effect to the incurrence of such indebtedness and the receipt and application of the net proceeds thereof, our consolidated cash flow ratio for a year consisting of the four full fiscal quarters for which quarterly or annual financial statements are available next preceding the incurrence of such indebtedness (calculated on a pro forma basis in accordance with Article 11 of Regulation S-X under the Securities Act or any successor provision as if such indebtedness had been incurred on the first day of such year) would be greater than 2.0 to 1.0; (2) indebtedness of ours and of our restricted subsidiaries incurred under the credit agreement in an amount not to exceed $125.0 million in aggregate principal amount at any time outstanding less the amount of any such indebtedness that is permanently repaid or, without duplication, the amount by which commitments thereunder are permanently reduced, in either case, from the proceeds of asset dispositions; (3) indebtedness owed by us to any of our direct or indirect wholly owned subsidiaries or indebtedness owed by any of our direct or indirect restricted subsidiaries to us or any other of our direct or indirect wholly owned subsidiaries; provided, however, upon either (a) the transfer or other disposition by such direct or indirect wholly owned subsidiary of any indebtedness so permitted under this clause (3) to a Person other than us or another of our direct or indirect wholly owned subsidiaries or (b) the issuance (other than directors' qualifying shares), sale, transfer or other disposition of shares of capital stock or other ownership interests (including by consolidation or merger) of such direct or indirect wholly owned subsidiary to a person other than us or another such wholly owned subsidiary, the provisions of this clause (3) shall no longer be applicable to such indebtedness and such indebtedness shall be deemed to have been incurred at the time of any such issuance, sale, transfer or other disposition, as the case may be; (4) indebtedness of ours or of any of our restricted subsidiaries under any interest rate or foreign currency hedge or exchange or other similar agreement to the extent entered into to hedge any other indebtedness permitted under the indenture (including the notes); (5) indebtedness incurred to defer, renew, extend, replace, refinance or refund, whether under any amendment, supplement or otherwise (collectively for purposes of this clause (5) to "refund"), any indebtedness described in clause (8) below, any indebtedness incurred under clause (1) above, the notes issued on June 21, 2000 and the guarantee of the notes; provided, however, that (a) such indebtedness does not exceed the principal amount (or accrued amount, if less) of indebtedness so refunded plus the amount of any premium required to be paid in connection with such refunding pursuant to the terms of the indebtedness refunded or the amount of any premium reasonably determined by the issuer of such indebtedness as necessary to accomplish such refunding by means of a tender offer, exchange offer, or privately negotiated repurchase, plus the expenses of such issuer reasonably incurred in connection therewith, and (b) (i) in the case of any refunding of indebtedness that is pari passu with the notes, such refunding indebtedness is made pari passu with or subordinate in right of payment to the notes, and, in the case of any refunding of indebtedness that is subordinate in right of payment to the notes, such refunding indebtedness is subordinate in right of payment to the notes on terms no less favorable to the holders of the notes than those contained in the indebtedness being refunded, (ii) in either case, the refunding indebtedness by its terms, or by the terms of any agreement or instrument pursuant to which such indebtedness is issued, does not have an average life that is less than the remaining average life of the indebtedness being refunded and does not permit redemption or other retirement 28 (including pursuant to any required offer to purchase to be made by us or any of our restricted subsidiaries) of such indebtedness at the option of the holder thereof prior to the final stated maturity of the indebtedness being refunded, other than a redemption or other retirement at the option of the holder of such indebtedness (including pursuant to a required offer to purchase made by us or any of our restricted subsidiaries) which is conditioned upon a change of control of us pursuant to provisions substantially similar to those contained in the indenture described under "-- Change of Control" below and (iii) any indebtedness incurred to refund any indebtedness is incurred by the obligor on the indebtedness being refunded or by us; provided, further, that clause (b) of the immediately preceding proviso shall not apply to any indebtedness incurred to refinance term loans under the credit agreement outstanding on June 21, 2000 or to subsequent refinancings of any such refinancing indebtedness; (6) commodity agreements of ours or of any of our restricted subsidiaries to the extent entered into to protect us and our restricted subsidiaries from fluctuations in the prices of raw materials used in their businesses; (7) indebtedness of ours under the exchange notes and indebtedness of the guarantors under the guarantees incurred in accordance with the indenture; (8) indebtedness issued or outstanding on June 21, 2000 (including (a) indebtedness under clause (13) below and (b) indebtedness consisting of term loans under the credit agreement outstanding on June 21, 2000 and excluding indebtedness consisting of revolving loans under the credit agreement outstanding on June 21, 2000; (9) guarantees by us or our restricted subsidiaries of indebtedness otherwise permitted to be incurred hereunder; (10) indebtedness the net proceeds of which are applied to defease the notes in their entirety; (11) indebtedness of ours or of any of our subsidiaries that is an endorsement of bank drafts and similar negotiable instruments for collection or deposit in the ordinary course of business; (12) indebtedness incurred by us or by any of our restricted subsidiaries constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including, without limitation, letters of credit in respect of workers' compensation claims or self-insurance, or other indebtedness with respect to reimbursement-type obligations regarding workers' compensation claims or self-insurance and obligations in respect of performance and surety bonds and completion guarantees provided by us or any of our restricted subsidiaries in the ordinary course of business not in excess of $10.0 million at any time outstanding; and (13) indebtedness of ours or of our restricted subsidiaries not otherwise permitted to be incurred pursuant to clauses (1) through (12) above which, together with any other outstanding indebtedness incurred pursuant to this clause (13), has an aggregate principal amount not in excess of $40.0 million at any time outstanding, which indebtedness may be incurred under the credit agreement or otherwise. For purposes of determining compliance with this covenant, in the event than an item of indebtedness meets the criteria of more than one of the categories of indebtedness described in clauses (1) through (14) above, we shall, in our sole discretion, classify such item of indebtedness in any manner that complies with this covenant and such item of indebtedness will be treated as having been incurred pursuant to only one of such clauses. In addition, we may, at any time, change the classification of an item of indebtedness (or any portion thereof) to any other clause; provided that we would be permitted to incur such item of indebtedness (or such portion thereof) pursuant to such other clause at such time of reclassification. Accrual of interest, accretion or amortization of original issue discount will not be deemed to be an incurrence of indebtedness for purposes of this covenant. 29 LIMITATION ON RESTRICTED PAYMENTS The indenture provides that we will not, and will not permit any of our restricted subsidiaries to, directly or indirectly, (1) declare or pay any dividend, or make any distribution of any kind or character (whether in cash, property or securities), on or in respect of any class of our capital stock or that of any of our restricted subsidiaries excluding any (a) dividends or distributions payable solely in shares of our capital stock (other than disqualified stock) or in options, warrants or other rights to acquire our capital stock (other than disqualified stock), or (b) in the case of any of our restricted subsidiaries, dividends or distributions payable to us or to any of our restricted subsidiaries or to the extent payable on a pro rata basis to all holders of capital stock of such restricted subsidiary, (2) purchase, redeem, or otherwise acquire or retire for value shares of our capital stock or that of any of our restricted subsidiaries, any options, warrants or rights to purchase or acquire shares of our capital stock or that of any of our restricted subsidiaries or any securities convertible or exchangeable into shares of our capital stock or that of any of our restricted subsidiaries, excluding any such shares of capital stock, options, warrants, rights or securities which are owned by us or any of our restricted subsidiaries, (3) make any investment in (other than a permitted investment), or make any payment on a guarantee of any obligation of, any person, other than us or any of our direct or indirect wholly owned subsidiaries, or (4) redeem, defease, repurchase, retire or otherwise acquire or retire for value, prior to any scheduled maturity, repayment or sinking fund payment, subordinated indebtedness (each of the transactions described in clauses (1) through (4) (other than any exception to any such clause) being a "restricted payment"), if at the time thereof: (1) a default or an event of default shall have occurred and be continuing, or (2) upon giving effect to such restricted payment, we could not incur at least $1.00 of additional indebtedness pursuant to the terms of the indenture described in clause (1) of "-- Limitation on Indebtedness" above, or (3) upon giving effect to such restricted payment, the aggregate of all restricted payments made on or after the issue date exceeds the sum of: (a) 50% of our cumulative consolidated net income (or, in the case our cumulative consolidated net income shall be negative, less 100% of such deficit) since June 21, 2000, plus (b) 100% of the aggregate net proceeds received after June 21, 2000, including the fair market value of property other than cash (determined in good faith by our board of directors as evidenced by a resolution of such board of directors filed with the trustee) from the issuance of, or equity contribution with respect to, our capital stock (other than disqualified stock) and warrants, rights or options on our capital stock (other than disqualified stock) (other than in respect of any such issuance to any of our restricted subsidiaries) and the principal amount of indebtedness of ours or of any of our restricted subsidiaries that has been converted into or exchanged for our capital stock which indebtedness was incurred after June 21, 2000, plus (c) 100% of the aggregate after-tax net cash proceeds of the sale or other disposition of any investment constituting a restricted payment made after June 21, 2000; provided that any gain on the sale or disposition to the extent included in this clause (c) shall not be included in determining consolidated net income for purposes of clause (a) above; provided, further, that amounts included in this clause (c) shall not exceed the net investment by us in the asset so sold or disposed. 30 The foregoing provision will not be violated by: (1) any dividend on any class of our capital stock or that of any of our restricted subsidiaries paid within 60 days after the declaration thereof if, on the date when the dividend was declared, we or such restricted subsidiary, as the case may be, could have paid such dividend in accordance with the provisions of the indenture; (2) the renewal, extension, refunding or refinancing of any indebtedness otherwise permitted pursuant to the terms of the indenture described in clause (5) of "-- Limitation on Indebtedness" above; (3) the exchange or conversion of any indebtedness of ours or of any of our restricted subsidiaries for or into our capital stock (other than disqualified stock): (4) so long as no default or event of default has occurred and is continuing, any investment made with the proceeds of a substantially concurrent sale (other than in respect of any issuance to any of our restricted subsidiaries) for cash of our capital stock (other than disqualified stock); provided, however, that the proceeds of such sale of capital stock, to the extent used in any such investment, shall not be (and have not been) included in subclause (b) of clause (3) of the preceding paragraph; (5) the redemption, repurchase, retirement or other acquisition of any our capital stock in exchange for or out of the net cash proceeds of a substantially concurrent sale (other than to any of our restricted subsidiaries) of our capital stock (other than disqualified stock); provided, however, that the proceeds of such sale of capital stock, to the extent used for such redemption, repurchase, retirement or other acquisition or retirement, shall not be (and have not been) included in subclause (b) of clause (3) of the preceding paragraph; (6) payments made by us in an aggregate amount not to exceed $237.0 million to acquire shares of our capital stock as part of our 2000 recapitalization; (7) payments made to purchase, redeem or otherwise acquire or retire for value shares of our capital stock or that of any of our restricted subsidiaries at no more than fair market value (determined in good faith by our board of directors as evidenced by a resolution of such board of directors filed with the trustee) from our present and former employees and directors or those of any such restricted subsidiary in an amount not in excess of up to $5.0 million for each fiscal year and $15.0 million in the aggregate, in each case net of the aggregate net cash proceeds received from such persons after June 21, 2000 from the issuance of, or equity contributions with respect to, our capital stock (other than disqualified stock) and warrants, rights or options on our capital stock (other than disqualified stock); (8) so long as no default or event of default has occurred and is continuing, the redemption, repurchase or retirement of our subordinated indebtedness in exchange for, by conversion into, or out of the net proceeds of, a substantially concurrent sale or incurrence of subordinated indebtedness (other than any indebtedness owed to a subsidiary) of ours that is contractually subordinated in right of payment to the notes to at least the same extent, and which has an average life at least as long, in each case, as the subordinated indebtedness being redeemed, repurchased or retired; (9) so long as no default or event of default has occurred and is continuing, investments not otherwise permitted pursuant to this covenant up to $15.0 million in the aggregate; (10) so long as no default or event of default has occurred and is continuing, restricted payments not otherwise permitted pursuant to this covenant up to $10.0 million in the aggregate; (11) any permitted investment; and (12) so long as no default or event of default has occurred and is continuing, investments in any person the primary business of which is located outside the United States and is related, ancillary or complementary to our business or that of our restricted subsidiaries, provided that the aggregate amount of investments pursuant to this clause does not exceed $25.0 million. 31 Each restricted payment described in clauses (1) (to the extent not already taken into account for purposes of computing the aggregate amount of all restricted payments pursuant to clause (3) of the preceding paragraph), (4), (7), (9), (10) and (12) of this paragraph shall be taken into account for purposes of computing the aggregate amount of all restricted payments pursuant to clause (3) of the preceding paragraph. The indenture provides that for purposes of this covenant: (1) an "investment" shall be deemed to have been made at the time any restricted subsidiary is designated as an unrestricted subsidiary in an amount (proportionate to our equity interest in such subsidiary) equal to the net worth of such restricted subsidiary at the time that such restricted subsidiary is designated as an unrestricted subsidiary ("net worth" to be calculated based upon the fair market value of the assets of such subsidiary as of any such date of designation); (2) at any date the aggregate of all restricted payments made as investments since June 21, 2000 shall exclude and be reduced by an amount (proportionate to our equity interest in such subsidiary) equal to the net worth of an unrestricted subsidiary at the time that such unrestricted subsidiary is designated a restricted subsidiary, not to exceed, in the case of any such redesignation of an unrestricted subsidiary as a restricted subsidiary, the amount of investments previously made by us and the restricted subsidiaries in such unrestricted subsidiary ("net worth" to be calculated based upon the fair market value of the assets of such subsidiary as of any such date of designation); and (3) any property transferred to or from an unrestricted subsidiary shall be valued at its fair market value at the time of such transfer. LIMITATIONS CONCERNING DISTRIBUTIONS AND TRANSFERS BY RESTRICTED SUBSIDIARIES The indenture provides that we will not, and will not permit any of our restricted subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist any consensual encumbrance or restriction on the ability of any of our restricted subsidiaries to: (a) pay, directly or indirectly, dividends or make any other distributions in respect of its capital stock or pay any indebtedness or other obligation owed to us or any of our restricted subsidiaries; (b) make loans or advances to us or any of our restricted subsidiaries; or (c) transfer any of its property or assets to us or any of our restricted subsidiaries, except for such encumbrances or restrictions existing under or by reason of: (1) any agreement in effect on June 21, 2000 as any such agreement is in effect on such date; (2) the credit agreement; (3) any agreement relating to any indebtedness incurred by such restricted subsidiary prior to the date on which such restricted subsidiary was acquired by us and outstanding on such date and not incurred in anticipation or contemplation of becoming a restricted subsidiary and provided such encumbrance or restriction shall not apply to any of our assets or assets of our restricted subsidiaries other than such restricted subsidiary; (4) customary provisions contained in an agreement which has been entered into for the sale or disposition of all or substantially all of the capital stock or assets of a restricted subsidiary; provided, however, that such encumbrance or restriction is applicable only to such restricted subsidiary or assets; (5) an agreement effecting a renewal, exchange, refunding, amendment or extension of indebtedness incurred pursuant to an agreement referred to in clause (1) or (3) above; provided, however, that the provisions contained in such renewal, exchange, refunding, amendment or extension agreement relating to such encumbrance or restriction are no more restrictive in any material respect than the provisions contained in the agreement that is the subject thereof in the 32 reasonable judgment of our board of directors as evidenced by a resolution of such board of directors filed with the trustee; (6) the indenture; (7) applicable law; (8) customary provisions restricting subletting or assignment of any lease governing any leasehold interest of any of our restricted subsidiaries; (9) restrictions contained in indebtedness permitted to be incurred subsequent to June 21, 2000 pursuant to the provisions of the covenant described under "-- Limitation on Indebtedness"; provided that any such restrictions are ordinary and customary with respect to the type of indebtedness incurred; (10) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the type referred to in clause (c) of this covenant; or (11) restrictions of the type referred to in clause (c) of this covenant contained in security agreements securing indebtedness of any of our restricted subsidiaries to the extent that such liens were otherwise incurred in accordance with "-- Limitation on Liens" below and restrict the transfer of property subject to such agreements. LIMITATION ON LIENS The indenture provides that we will not, and will not permit any of our restricted subsidiaries to, incur any lien on or with respect to any property or assets of ours or such restricted subsidiary owned on June 21, 2000 or thereafter acquired or on the income or profits thereof to secure indebtedness, without making, or causing any such restricted subsidiary to make, effective provision for securing the notes and all other amounts due under the indenture (and, if we shall so determine, any other indebtedness of ours or such restricted subsidiary, including subordinated indebtedness; provided, however, that liens securing the notes and any indebtedness pari passu with the notes are senior to such liens securing such subordinated indebtedness) equally and ratably with such indebtedness or, in the event such indebtedness is subordinate in right of payment to the notes or the guarantee, prior to such indebtedness, as to such property or assets for so long as such indebtedness shall be so secured. The foregoing restrictions do not apply to: (1) liens existing on June 21, 2000 securing indebtedness existing on June 21, 2000; (2) liens securing senior debt (including liens securing indebtedness outstanding under the credit agreement) and any guarantees thereof or indebtedness under any interest rate hedge or exchange or other similar agreement to the extent entered into to hedge any floating rate indebtedness permitted under the indenture, in each case to the extent that the indebtedness secured thereby is permitted to be incurred under the covenant described under "-- Limitation on Indebtedness" above; provided, however, that indebtedness under the credit agreement shall be deemed not to have been incurred in violation of such provisions for purposes of this clause (2) if the holder(s) of such indebtedness or their agent or representative shall have received a representation from us to the effect that the incurrence of such indebtedness does not violate such provision; (3) liens securing only the notes and the guarantees; (4) liens in favor of us or a guarantor; (5) liens to secure indebtedness incurred for the purpose of financing all or any part of the purchase price or the cost of construction or improvement of the property (or any other capital expenditure financing) subject to such liens; provided, however, that (a) the aggregate principal amount of any indebtedness secured by such a lien does not exceed 100% of such purchase price or cost, (b) such lien does not extend to or cover any other property other than such item of property and any improvements on 33 such item, (c) the indebtedness secured by such lien is incurred by us within 180 days of the acquisition, construction or improvement of such property and (d) the incurrence of such indebtedness is permitted by the provisions of the indenture described under "-- Limitation on Indebtedness" above; (6) liens on property existing immediately prior to the time of acquisition thereof (and not created in anticipation or contemplation of the financing of such acquisition); (7) liens on property of a person existing at the time such person is acquired or merged with or into or consolidated with us or any such restricted subsidiary (and not created in anticipation or contemplation thereof); (8) liens to secure indebtedness incurred to extend, renew, refinance or refund (or successive extensions, renewals, refinancings or refundings), in whole or in part, any indebtedness secured by liens referred to in clauses (1) through (7), (9) through (12) and (14) of this paragraph so long as such liens do not extend to any other property and the principal amount of indebtedness so secured is not increased except for the amount of any premium required to be paid in connection with such renewal, refinancing or refunding pursuant to the terms of the indebtedness renewed, refinanced or refunded or the amount of any premium reasonably determined by us as necessary to accomplish such renewal, refinancing or refunding by means of a tender offer, exchange offer or privately negotiated repurchase, plus the expenses of the issuer of such indebtedness reasonably incurred in connection with such renewal, refinancing or refunding; (9) liens in favor of the trustee as provided for in the indenture on money or property held or collected by the trustee in its capacity as trustee; (10) liens securing a tax, assessment or other governmental charge or levy or the claim of a materialman, mechanic, carrier, warehouseman or landlord for labor, materials, supplies or rentals incurred in the ordinary course or business; (11) liens consisting of a deposit or pledge made in the ordinary course of business in connection with, or to secure payment of, obligations under workers compensation, unemployment insurance or similar legislation; (12) liens arising pursuant to an order of attachment, distraint or similar legal process arising in connection with legal proceedings; and (13) liens incurred in the ordinary course of business securing assets not having a fair market value in excess of $5.0 million. LIMITATION ON CERTAIN ASSET DISPOSITIONS The indenture provides that we will not, and will not permit any of our restricted subsidiaries to, directly or indirectly, make one or more asset dispositions unless: (1) we or such restricted subsidiary, as the case may be, receive consideration for such asset disposition at least equal to the fair market value of the assets sold or disposed of as determined by our board of directors in good faith amid evidenced by a resolution of such board of directors filed with the trustee; (2) not less than 75% of the consideration for the disposition consists of (a) cash or readily marketable securities or the assumption of indebtedness (other than non-recourse indebtedness or any subordinated indebtedness) of ours or such restricted subsidiary or other obligations relating to such assets (and release of us or of such restricted subsidiary from all liability on the indebtedness or other obligations assumed) or (b) assets which constitute or are part of businesses which are related to our business or that of our restricted subsidiaries as of June 21, 2000 or which assets consist of the issued and outstanding capital stock of a person (which becomes a restricted subsidiary as a result of the transaction) the assets of which are principally comprised of such assets; and 34 (3) all net available proceeds, less any amounts invested within 360 days of such asset disposition in assets related to our business or that of our restricted subsidiaries (including in the capital stock of another person (other than any person that is our restricted subsidiary immediately prior to such investment); provided, however, that immediately after giving effect to any such investment in capital stock (and not prior thereto) such person shall be our restricted subsidiary), (a) are applied, on or prior to the 360th day after such asset disposition, unless and to the extent that we shall determine to make an offer to purchase, to the permanent reduction and prepayment of any senior debt of ours or of any of our subsidiaries then outstanding (including a permanent reduction of commitments in respect thereof) or (b) are committed to the repayment, on a date no later than substantially concurrently with the consummation of an offer to purchase, of any indebtedness which is pari passu in right of payment with the notes on a pro rata basis with the notes. Any net available proceeds from any asset disposition which is subject to the preceding paragraph that are not applied or committed as provided in the preceding paragraph shall be used promptly after the expiration of the 360th day after such asset disposition, or promptly after we shall have earlier determined to not apply any net available proceeds therefrom as provided in clause (3) of the preceding paragraph, to make an offer to purchase outstanding notes at a purchase price in cash equal to 100% of their principal amount plus accrued interest to the purchase date. Notwithstanding the foregoing, we may defer making any offer to purchase outstanding notes until there are aggregate unutilized net available proceeds from asset dispositions otherwise subject to the two immediately preceding sentences equal to or in excess of $15.0 million (at which time, the entire unutilized net available proceeds from asset dispositions otherwise subject to the two preceding paragraphs, and not just the amount in excess of $15.0 million, shall be applied as required pursuant to this covenant). Any remaining net available proceeds following the completion of the required offer to purchase (and any concurrent offer to repurchase pari passu indebtedness) may be used by us for any other purpose (subject to the other provisions of the indenture) and the amount of net available proceeds then required to be otherwise applied in accordance with this covenant shall be reset to zero, subject to any subsequent asset disposition. These provisions will not apply to a transaction consummated in compliance with the provisions of the indenture described under "-- Mergers, Consolidations and Certain Sales of Assets" below. In the event that we make an offer to purchase the notes, we shall comply with any applicable securities laws and regulations, including any applicable requirements of Section 14(e) of, and Rule 14e-1 under, the Exchange Act. LIMITATION ON SENIOR SUBORDINATED INDEBTEDNESS The indenture provides that we will not: (1) directly or indirectly incur any indebtedness that by its terms would expressly rank senior in right of payment to the notes and expressly rank subordinate in right of payment to any senior debt and (2) permit a guarantor to, and no guarantor will, directly or indirectly incur any indebtedness that by its terms would expressly rank senior in right of payment to the guarantee of such guarantor and expressly rank subordinate in right of payment to any senior debt of such guarantor. LIMITATION ON ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES The indenture provides that we will not, and will not permit any of our restricted subsidiaries to transfer, convey, sell or otherwise dispose of any shares of capital stock of any of our restricted subsidiaries, except: (1) to us or to a wholly owned subsidiary; (2) issuances of director's qualifying shares or sales to foreign nationals of shares of capital stock of foreign restricted subsidiaries, to the extent required by applicable law; 35 (3) if immediately after giving effect to such issuance or sale, such restricted subsidiary would no longer constitute a restricted subsidiary and any investment in such person remaining after giving effect to such issuance or sale would have been permitted to be made under the "Limitation on Restricted Payments" covenant if made on the date of such issuance or sale; or (4) issuances or sales of common stock of a restricted subsidiary, provided that we apply or such restricted subsidiary applies the net available proceeds, if any, of any such sale in accordance with the provisions of the "Limitation on Certain Asset Dispositions" covenant described above. LIMITATION ON TRANSACTIONS WITH AFFILIATES AND RELATED PERSONS The indenture provides that we will not, and will not permit any of our restricted subsidiaries to, enter into directly or indirectly any transaction with any of our respective affiliates or related persons (other than us or any of our restricted subsidiaries), including, without limitation, the purchase, sale, lease or exchange of property, the rendering of any service, or the making of any guarantee, loan, advance or investment, either directly or indirectly, involving aggregate consideration in excess of $2.0 million unless a majority of the disinterested directors of our board of directors determines, in its good faith judgment evidenced by a resolution of such board of directors filed with the trustee, that the terms of such transaction are at least as favorable as the terms that could be obtained by us or such restricted subsidiary, as the case may be, in a comparable transaction made on an arm's-length basis between unaffiliated parties; provided, however, that if the aggregate consideration is in excess of $20.0 million we shall also obtain, prior to the consummation of the transaction, the favorable opinion as to the fairness of the transaction to us or such restricted subsidiary, from a financial point of view from an independent financial advisor. The provisions of this covenant shall not apply to: (1) transactions permitted by the provisions of the indenture described above under the caption "-- Limitation on Restricted Payments" above; and (2) reasonable fees and compensation paid to, and indemnity provided on behalf of our officers, directors and employees and those of our restricted subsidiaries as determined in good faith by our board of directors or our authorized executive officers, as the case may be. CHANGE OF CONTROL Within 30 days following the date of the consummation of a transaction resulting in a change of control, we will commence an offer to purchase all outstanding notes at a purchase price in cash equal to 101% of their principal amount plus accrued interest to the purchase date. Such offer to purchase will be consummated not earlier than 30 days and not later than 60 days after the commencement thereof. Each holder shall be entitled to tender all or any portion of the notes owned by such holder pursuant to the offer to purchase, subject to the requirement that any portion of a note tendered must bear an integral multiple of $1,000 principal amount. A "change of control" will be deemed to have occurred in the event that (whether or not otherwise permitted by the indenture), after June 21, 2000: (1) any person or any persons acting together that would constitute a group (for purposes of Section 13(d) of the Exchange Act, or any successor provision thereto) (a "group"), together with any affiliates or related persons thereof, other than any such person, persons. affiliates or related person who are permitted holders, shall "beneficially own" (as defined in Rule l3d-3 under the Exchange Act, or any successor provision thereto), directly or indirectly, at least (a) 50% of the voting power of our outstanding voting stock or (b) 40% of the voting power of our outstanding voting stock and in the case of clause (b) the permitted holders own less than such person or group (in doing the "own less than" comparison in this clause (b), the holdings of the permitted holders who are members of the new group shall not be counted in the shares held in the aggregate by permitted holders); provided that in no event shall a "governance change", within the meaning of the amended and restated limited liability company agreement of Tekni-Plex Partners and the limited liability company agreement of MST/TP Partners, in each case as in effect on June 21, 2000, be deemed to be a change of control under the indenture; 36 (2) any sale, lease or other transfer (in one transaction or a series of related transactions) is made by us or any of our restricted subsidiaries of all or substantially all of the consolidated assets of us and our restricted subsidiaries to any person; (3) we consolidate with or merge with or into another person or any person consolidates with, or merges with or into, us, in any such event pursuant to a transaction in which immediately after the consummation thereof persons owning a majority of our voting stock immediately prior to such consummation shall cease to own a majority of our voting stock, or, if we are not the surviving entity, a majority of the voting stock of such surviving entity; (4) continuing directors cease to constitute at least a majority of our board of directors; or (5) our stockholders approve any plan or proposal for our liquidation or dissolution. In no event would the sale of our common stock to an underwriter or a group of underwriters in privity of contract with us (or anybody in privity of contract with such underwriters) be deemed to be a change of control or be deemed the acquisition of more than 40% of the voting power of our outstanding voting stock by a person or any group unless such common stock is not held in an investment account in which case the investment account would be treated without giving effect to the foregoing part of this sentence. The indenture will acknowledge that, prior to the mailing of a notice to each holder regarding the offer to purchase, but in any event within 30 days following the date on which a change of control occurs, we will be obligated under the credit agreement as in effect on June 21, 2000 to: (1) repay in full all indebtedness under the credit agreement (and terminate all such commitments) or offer to repay in full all such indebtedness (and terminate all such commitments) and to repay the indebtedness owed to (and terminate the commitments of) each lender which has accepted such offer; or (2) obtain the requisite consents under the credit agreement to permit the repurchase of the notes as provided below. We will first comply with our obligations described in the preceding sentence before it will be required to offer to repurchase notes pursuant to the provisions described below, provided that nothing in the preceding paragraph or this paragraph shall eliminate our obligation to consummate an offer to purchase the notes within 90 days of the consummation of a transaction resulting in a change of control. In the event that we make an offer to purchase the notes, we shall comply with any applicable securities laws and regulations, including any applicable requirements of Section 14(e) of, and Rule 14e-1 under, the Exchange Act. With respect to the sale of assets referred to in the definition of "change of control," the phrase "all or substantially all" of our assets will likely be interpreted under applicable law and will be dependent upon particular facts and circumstances. As a result, there may be a degree of uncertainty in ascertaining whether a sale or transfer of "all or substantially all" of our assets has occurred. In addition, no assurances can be given that we will be able to acquire notes tendered upon the occurrence of a change of control. Our ability to pay cash to the holders of notes upon a change of control may be limited by its then existing financial resources. The credit agreement will contain certain covenants prohibiting, or requiring waiver or consent of the lenders thereunder prior to, the repurchase of the notes upon a change of control and our future debt agreements may provide the same. If we do not obtain such waiver or consent to repay such indebtedness, we will remain prohibited from repurchasing the notes. In such event, our failure to purchase tendered notes would constitute an event of default under the indenture (without any further grace period) which would in turn constitute a default under the credit agreement and possibly other indebtedness. If such a cross-default leads to an acceleration of the obligations under the credit agreement or any other senior debt, the payment on the notes would be effectively subordinated to any such senior debt. None of the provisions relating to a repurchase upon a change of control are waivable by our board of directors or the trustee. The foregoing provisions will not prevent us from entering into transactions of the types described above with management or their affiliates. In addition, such provisions may not necessarily afford the holders of the 37 notes protection in the event of a highly leveraged transaction, including a reorganization, restructuring, merger or similar transaction involving us that may adversely affect the holders because such transactions may not involve a shift in voting power or beneficial ownership, or even if they do, may not involve a shift of the magnitude required under the definition of change of control to trigger the provisions. Nonetheless, such provisions may have the effect of deterring certain mergers, tender offers, takeover attempts or similar transactions by increasing the cost of such a transaction and may limit our ability to obtain additional equity financing in the future. FUTURE GUARANTORS The indenture provides that we shall not create or acquire, nor permit any of its domestic restricted subsidiaries to create or acquire, any domestic restricted subsidiary after June 21, 2000 unless, at the time such domestic restricted subsidiary has either assets or stockholder's equity in excess of $25,000, such domestic restricted subsidiary: (1) executes and delivers to the trustee a supplemental indenture in form reasonably satisfactory to the trustee pursuant to which such domestic restricted subsidiary shall unconditionally guarantee all of our obligations under the notes and the indenture on the terms set forth in the indenture; and (2) delivers to the trustee an opinion of counsel that such supplemental indenture has been duly authorized, executed and delivered by such domestic restricted subsidiary and constitutes a legal, valid, binding and enforceable obligation of such domestic restricted subsidiary. PROVISION OF FINANCIAL INFORMATION Whether or not we are subject to Section 13(a) or 15(d) of the Exchange Act, or any successor provision thereto, we shall file with the SEC the annual reports, quarterly reports and other documents which we would have been required to file with the SEC pursuant to such Section 13(a) or 15(d) or any successor provision thereto if we were so required, such documents to be filed with the SEC on or prior to the respective dates (the "required filing dates") by which we would have been required so to file such documents if we were so required. We shall also in any event: (1) within 15 days of each required filing date (a) transmit or cause to be transmitted by mail to all holders of notes, as their names and addresses appear in the note register, without cost to such holders, and (b) file with the trustee, copies of the annual reports, quarterly reports and other documents which we are required to file with the SEC pursuant to the preceding sentence; and (2) if, notwithstanding the preceding sentence, filing such documents by us with the SEC is not permitted under the Exchange Act, promptly upon written request supply copies of such documents to any prospective holder of notes. MERGERS, CONSOLIDATIONS AND CERTAIN SALES OF ASSETS We will not consolidate or merge with or into any person, or sell, assign, lease, convey or otherwise dispose of (or cause or permit any of our restricted subsidiaries to consolidate or merge with or into any person or sell, assign, lease, convey or otherwise dispose of) all or substantially all of our assets (determined on a consolidated basis for us and our restricted subsidiaries), whether as an entirety or substantially an entirety in one transaction or a series of related transactions, including by way of liquidation or dissolution, to any person unless, in each such case: (1) the entity formed by or surviving any such consolidation or merger (if other than us or such restricted subsidiary, as the case may be), or to which such sale, assignment, lease, conveyance or other disposition shall have been made (the "surviving entity"), is a corporation organized and existing under the laws of the United States, any state thereof or the District of Columbia; 38 (2) if there is a surviving entity, the surviving entity assumes by supplemental indenture all of our obligations (or in the case a restricted subsidiary is the surviving entity, the obligations of such restricted subsidiary) on the notes and under the indenture; (3) immediately after giving effect to such transaction and the use of any net proceeds therefrom on a pro forma basis, we or the surviving entity, as the case may be: (a) shall have a consolidated net worth equal to or greater than our consolidated net worth immediately prior to such transaction; and (b) could incur at least $1.00 of indebtedness pursuant to clause (1) of the provisions of the indenture described under "-- Limitation on Indebtedness" above. (4) immediately before and after giving effect to such transaction and treating any indebtedness which becomes an obligation of ours or of any of such restricted subsidiaries as a result of such transaction as having been incurred by us or such restricted subsidiary, as the case may be, at the time of the transaction, no default or event of default shall have occurred and be continuing; and (5) if, as a result of any such transaction, our property or assets or those of any of our restricted subsidiaries would become subject to a lien not excepted from the provisions of the indenture described under "-- Limitation on Liens" above, we, such Restricted Subsidiary or the Surviving Entity, as the case may be, shall have secured the notes as required by said covenant. The provisions of the foregoing paragraph shall not apply to any merger of any of our restricted subsidiaries with or into us or any of our wholly owned subsidiaries or any transaction pursuant to which a guarantor, is to be released in accordance with the terms of the guarantee and the indenture in connection with any transaction complying with the provisions of the indenture described under "-- Limitation on Certain Asset Dispositions" above. EVENTS OF DEFAULT The following are events of default under the indenture: (1) failure to pay principal of (or premium, if any, on) any note when due (whether or not prohibited by the provisions of the indenture described under "-- Ranking" above); (2) failure to pay any interest on any note when due, and the default continues for 30 days (whether or not prohibited by the provisions of the indenture described under "-- Ranking" above); (3) default in the payment of principal of and interest on notes required to be purchased pursuant to an offer to purchase as described under "-- Covenants -- Change of Control" and "-- Covenants -- Limitation on Certain Asset Dispositions" above when due and payable (whether or not prohibited by the provisions of the indenture described under "-- Ranking" above); (4) failure to perform or comply with any of the provisions described under "-- Covenants -- Mergers, Consolidations and Certain Sales of Assets" above; (5) failure to perform any other covenant or agreement of ours under the indenture or the notes and the default continues for 60 days after written notice to us by the trustee or holders of at least 25% in aggregate principal amount of outstanding notes; (6) default under the terms of one or more instruments evidencing or securing indebtedness of ours or of any of our restricted subsidiaries having an outstanding principal amount of $20 million or more individually or in the aggregate that has resulted in the acceleration of the payment of such indebtedness or failure to pay principal when due at the stated maturity of any such indebtedness; (7) the rendering of a final judgment or judgments (not subject to appeal) against us or any of our restricted subsidiaries in an amount of $10 million or more which remains undischarged or unstayed for a period of 60 days after the date on which the right to appeal has expired; 39 (8) certain events of bankruptcy, insolvency or reorganization affecting us or any of our material subsidiaries; and (9) any guarantee ceases to be in full force and effect or is declared null and void and unenforceable or is found to be invalid or a guarantor denies its liability under the guarantee (other than by reason of a release of such guarantor from the guarantee in accordance with the terms of the indenture and the guarantee). If an event of default (other than an event of default with respect to us described in clause (8) of the preceding paragraph) shall occur and be continuing, either the trustee or the holders of at least 25% in aggregate principal amount of the outstanding notes may accelerate the maturity of all notes; provided, however, that after such acceleration, but before a judgment or decree based on acceleration, the holders of a majority in aggregate principal amount of outstanding notes may, under certain circumstances, rescind and annul such acceleration if all events of default, other than the non-payment of accelerated principal, have been cured or waived as provided in the indenture; and provided, further, that so long as the credit agreement shall be in full force and effect, if an event of default shall have occurred and be continuing (other than as specified under clause (8) above), the notes shall not become due and payable until the earlier to occur of (x) five business days following delivery of a written notice of such acceleration of the notes to the agent under the credit agreement, if such event of default has not been cured prior to such fifth business day, and (y) the acceleration of any indebtedness under the credit agreement. If an event of default specified in clause (8) of the preceding paragraph with respect to us occurs, the outstanding notes will ipso facto become immediately due and payable without any declaration or other act on the part of the trustee or any holder. For information as to waiver of defaults, see "-- Modification and Waiver." The indenture provides that the trustee shall, within 30 days after the occurrence of any default or event of default with respect to the notes, give the holders thereof notice of all uncured defaults or events of default known to it; provided, however, that, except in the case of an event of default or a default in payment with respect to the notes or a default or event of default in complying with "-- Covenants -- Mergers, Consolidations and Certain Sales of Assets," the trustee shall be protected in withholding such notice if and so long as the board of directors or responsible officers of the trustee in good faith determine that the withholding of such notice is in the interest of the holders of the notes. No holder of any note will have any right to institute any proceeding with respect to the indenture or for any remedy thereunder, unless such holder shall have previously given to the trustee written notice of a continuing event of default and unless the holders of at least 25% in aggregate principal amount of the outstanding notes shall have made written request, and offered reasonable indemnity, to the trustee to institute such proceeding as trustee, and the trustee shall not have received from the holders of a majority in aggregate principal amount of the outstanding notes a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days. However, such limitations do not apply to a suit instituted by a holder of a note for enforcement of payment of the principal of and premium, if any, or interest on such note on or after the respective due dates expressed in such note. We are required to furnish to the trustee annually a statement as to its performance of certain of its obligations under the indenture and as to any default in such performance. SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE We may terminate our substantive obligations and the substantive obligations of the guarantors in respect of the notes and the guarantees by delivering all outstanding notes to the trustee for cancellation and paying all sums payable by us on account of principal of, premium, if any, and interest on all notes or otherwise. In addition to the foregoing, we may, provided that no default or event of default has occurred and is continuing or would arise therefrom (or, with respect to a default or event of default specified in clause (8) of "-- Events of Default" above, any time on or prior to the 91st calendar day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until after such 91st day)) and provided that no default under any senior debt would result therefrom, terminate our substantive obligations and the substantive obligations of the guarantors in respect of the notes and the guarantees (except for our obligation 40 to pay the principal of (and premium, if any, on) and the interest on the notes and such guarantors's guarantee thereof) by: (1) depositing with the trustee, under the terms of an irrevocable trust agreement, money or United States government obligations sufficient (without reinvestment) to pay all remaining indebtedness on the notes; (2) delivering to the trustee either an opinion of counsel or a ruling directed to the trustee from the Internal Revenue Service to the effect that the holders of the notes will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and termination of obligations; (3) delivering to the trustee an opinion of counsel to the effect that our exercise of our option under this paragraph will not result in us, the trustee or the trust created by our deposit of funds pursuant to this provision becoming or being deemed to be an "investment company" under the Investment Company Act of 1940, as amended; and (4) complying with certain other requirements set forth in the indenture. In addition, we may, provided that no default or event of default has occurred, and is continuing or would arise therefrom (or, with respect to a default or event of default specified in clause (8) of "-- Events of Default" above, any time on or prior to the 91st calendar day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until after such 91st day)) and provided that no default under any senior debt would result therefrom, terminate all of our substantive obligations and all of the substantive obligations of the guarantors in respect of the notes and the guarantees (including our obligation to pay the principal of (and premium, if any, on) and interest on the notes and such guarantor's guarantee thereof by: (1) depositing with the trustee, under the terms of an irrevocable trust agreement, money or United States Government obligations sufficient (without reinvestment) to pay all remaining indebtedness on the notes; (2) delivering to the trustee either a ruling directed to the trustee from the Internal Revenue Service to the effect that the holders of the notes will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and termination of obligations or an opinion of counsel based upon such a ruling addressed to the trustee or a change in the applicable federal tax law since the date of the indenture, to such effect; (3) delivering to the trustee an officers' certificate and an opinion of counsel to the effect that our exercise of our option under this paragraph will not result in us, the trustee or the trust created by our deposit of funds pursuant to this provision becoming or being deemed to be an "investment company" under the Investment Company Act of 1940, as amended; and (4) complying with certain other requirements set forth in the indenture. We may make an irrevocable deposit pursuant to this provision only if at such time it is not prohibited from doing so under the subordination provisions of the indenture or certain covenants in the instruments governing senior debt and we have delivered to the trustee and any paying agent an officers's certificate to that effect, GOVERNING LAW The indenture, the notes and the guarantees are governed by the laws of the State of New York without regard to principles of conflicts of laws. 41 MODIFICATION AND WAIVER Modifications and amendments of the indenture may be made by us and the trustee with the consent of the holders of a majority in aggregate principal amount of the outstanding notes; provided, however, that no such modification or amendment may, without the consent of the holder of each note affected thereby: (1) change the stated maturity of the principal of or any installment of interest on any note or alter the optional redemption or repurchase provisions of any note or the indenture in a manner adverse to the holders of the notes; (2) reduce the principal amount of (or the premium) of any note; (3) reduce the rate of or extend the time for payment of interest on any note; (4) change the place or currency of payment of principal of (or premium) or interest on any note; (5) modify any provisions of the indenture relating to the waiver of past defaults (other than to add sections of the indenture subject thereto) or the right of the holders to institute suit for the enforcement of any payment on or with respect to any note or the guarantee, or the modification and amendment of the indenture and the notes (other than to add sections of the indenture or the notes which may not be amended, supplemented or waived without the consent of each holder affected); (6) reduce the percentage of the principal amount of outstanding notes necessary for amendment to or waiver of compliance with any provision of the indenture or the notes or for waiver of any default; (7) waive a default in the payment of principal of, interest on, or redemption payment with respect to, any note (except a rescission of acceleration of the notes by the holders as provided in the indenture and a waiver of the payment default that resulted from such acceleration); (8) modify the ranking or priority of the notes or the guarantee, or modify the definition of senior debt or designated senior debt or amend or modify the subordination provisions of the indenture in any manner adverse to the holders; (9) release the guarantors from any of their respective obligations under the guarantee or the indenture otherwise than in accordance with the indenture; or (10) modify the provisions relating to any offer to purchase required under the covenants described under "-- Covenants -- Limitation on Certain Asset Dispositions" or "-- Covenants -- Change of Control" in a manner materially adverse to the holders of notes with respect to any asset disposition that has been consummated or change of control that has occurred. The holders of a majority in aggregate principal amount of the outstanding notes, on behalf of all holders of notes, may waive compliance by us with certain restrictive provisions of the indenture. Subject to certain rights of the trustee, as provided in the indenture, the holders of a majority in aggregate principal amount of the outstanding notes, on behalf of all holders of notes, may waive any past default under the indenture, except a default in the payment of principal, premium or interest or a default arising from failure to purchase any note tendered pursuant to an offer to purchase, or a default in respect of a provision that under the indenture cannot be modified or amended without the consent of the holder of each outstanding note affected. THE TRUSTEE The indenture provides that, except during the continuance of a default, the trustee will perform only such duties as are specifically set forth in the indenture. During the existence of a default, the trustee will exercise such rights and powers vested in it under the indenture and use the same degree of care and skill in their exercise as a prudent person would exercise under the circumstances in the conduct of such person's own affairs. The indenture and provisions of the Trust Indenture Act incorporated by reference therein contain limitations on the rights of the trustee, should it become our creditor, the guarantors, or any other obligor upon the notes, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claim as security or otherwise. The trustee is permitted to engage in other transactions with us or 42 an affiliate of ours; provided, however, that if it acquires any conflicting interest (as defined in the indenture or in the Trust Indenture Act), it must eliminate such conflict or resign. CERTAIN DEFINITIONS Set forth below is a summary of certain of the defined terms used in the indenture or the registration rights agreement. Reference is made to the indenture or the registration rights agreement for the full definition of all such terms, as well as any other terms used herein for which no definition is provided. "Acquired indebtedness" means, with respect to any person, indebtedness of such person (1) existing at the time such person becomes a restricted subsidiary; (2) assumed in connection with the acquisition of assets from another person; or (3) incurred in connection with, or in contemplation of, such person becoming a restricted subsidiary or such acquisition, as the case may be. "Affiliate" of any specified person means any other person directly or indirectly controlling or controlled by or under direct or indirect common control with any specified person. For purposes of this definition, "control" when used with respect to any person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Asset disposition" means any sale, transfer or other disposition (including, without limitation, by merger, consolidation or sale-and-leaseback transaction) of: (1) shares of capital stock of any of our restricted subsidiaries (other than directors' qualifying shares); or (2) our property or assets or the property or assets of any of our restricted subsidiaries other than in the ordinary course of business; provided, however, that an asset disposition shall not include: (a) any sale, transfer or other disposition of shares of capital stock, property or assets by any of our restricted subsidiaries to us or to any of our wholly owned subsidiaries; (b) any sale, transfer or other disposition of defaulted receivables for collection or any sale, transfer or other disposition of property or assets in the ordinary course of business; (c) any isolated sale, transfer or other disposition that does not involve aggregate consideration in excess of $5 million individually; (d) the grant in the ordinary course of business of any non-exclusive license of patents, trademarks, registrations therefor and other similar intellectual property; (e) any lien (or foreclosure thereon) securing indebtedness to the extent that such lien is granted in compliance with "-- Covenants -- Limitation on Liens" above; (f) any restricted payment permitted by "-- Covenants -- Limitation on Restricted Payments" above; (g) any disposition of assets or property in the ordinary course of business to the extent such property or assets are obsolete, worn-out or no longer useful in our business or that of any of our restricted subsidiaries; (h) the sale, lease, conveyance or disposition or other transfer of all or substantially all of our assets as permitted under "-- Covenants -- Mergers, Consolidations and Certain Sales of Assets" above; provided, that the assets not so sold, leased, conveyed, disposed of or otherwise transferred shall be deemed an asset disposition; or (i) any disposition that constitutes a change of control. 43 "Average life" means, as of the date of determination, with respect to any indebtedness for borrowed money or preferred stock, the quotient obtained by dividing (1) the sum of the products of the number of years from the date of determination to the dates of each successive scheduled principal or liquidation value payments of such indebtedness or preferred stock, respectively, and the amount of such principal or liquidation value payments, by (2) the sum of all such principal or liquidation value payments. "Bankruptcy Code" means Title 11 of United States Code. "Capital lease obligations" of any person means the obligations to pay rent or other amounts under a lease of (or other indebtedness arrangements conveying the right to use) real or personal property of such Person which are required to be classified and accounted for as a capital lease or liability on the face of a balance sheet of such Person in accordance with GAAP. The amount of such obligations shall be the capitalized amount thereof in accordance with GAAP and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Capital stock" of any person means any and all shares, interests, participations or other equivalents (however designated) of corporate stock of such person. "Common stock" of any person means capital stock of such person that does not rank prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such person, to shares of capital stock of any other class of such person. "Consolidated cash flow available for fixed charges" of any person means for any period the consolidated net income of such person for such period increased (to the extent consolidated net income for such period has been reduced thereby) by the sum of (without duplication): (1) consolidated interest expense of such person for such period, plus (2) consolidated income tax expense of such person for such period, plus (3) the consolidated depreciation and amortization expense included in the income statement of such person prepared in accordance with GAAP for such period, plus (4) any other non-cash charges to the extent deducted from or reflected in consolidated net income except for any non-cash charges that represent accruals of, or reserves for, cash disbursements to be made in any future accounting period. "Consolidated cash flow ratio" of any person means for any period the ratio of: (1) consolidated cash flow available for fixed charges of such person for such period, to (2) the sum of: (a) consolidated interest expense of such person for such period, plus (b) the annual interest expense with respect to any indebtedness proposed to be incurred by such person or our restricted subsidiaries, minus (c) consolidated interest expense of such person to the extent included in clause (2)(a) with respect to any indebtedness that will no longer be outstanding as a result of the incurrence of the indebtedness proposed to be incurred, plus (d) the annual interest expense with respect to any other indebtedness incurred by such person or our restricted subsidiaries since the end of such period to the extent not included in clause (2)(a), minus (e) consolidated interest expense of such person to the extent included in clause (2)(a) with respect to any indebtedness that no longer is outstanding as a result of the incurrence of the indebtedness referred to in clause (2)(d). 44 In making such computation, the consolidated interest expense of such person attributable to interest on any indebtedness bearing a floating interest rate shall be computed on a pro forma basis as if the rate in effect on the date of computation (after giving effect to any hedge in respect of such indebtedness that will, by its terms, remain in effect until the earlier of the maturity of such indebtedness or the date one year after the date of such determination) had been the applicable rate for the entire period. In the event such person or any of its restricted subsidiaries has made any asset dispositions or acquisitions of assets not in the ordinary course of business (including acquisitions of other persons by merger, consolidation or purchase of capital stock) during or after such period and on or prior to the date of measurement, such computation shall be made on a pro forma basis as if the asset dispositions or acquisitions had taken place on the first day of such period. Calculations of pro forma amounts in accordance with this definition shall be done in accordance with Article 11 of Regulation S-X under the Securities Act or any successor provision and may include reasonably ascertainable cost savings. "Consolidated income tax expense" of any person means for any period the consolidated provision for income taxes of such person and its restricted subsidiaries for such period calculated on a consolidated basis in accordance with GAAP. "Consolidated interest expense" for any person means for any period, without duplication: (1) the consolidated interest expense included in a consolidated income statement (without deduction of interest or finance charge income) of such person and its restricted subsidiaries for such period calculated on a consolidated basis in accordance with GAAP and (2) dividend requirements of such person and its restricted subsidiaries with respect to disqualified stock and with respect to all other preferred stock of restricted subsidiaries of such person (in each case whether in cash or otherwise (except dividends payable solely in shares of capital stock of such person or such restricted subsidiary)) paid, accrued or accumulated during such period times a fraction the numerator of which is one and the denominator of which is one minus the then effective consolidated federal, state and local tax rate of such person, expressed as a decimal. "Consolidated net income" of any person means for any period the consolidated net income (or loss) of such person and its restricted subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided, however, that there shall be excluded therefrom: (1) the net income (or loss) of any person acquired by such person or a restricted subsidiary of such person in a pooling-of-interests transaction for any period prior to the date of such transaction; (2) the net income (but not net loss) of any restricted subsidiary of such person which is subject to restrictions which prevent or limit the payment of dividends or the making of distributions to such person to the extent of such restrictions (regardless of any waiver thereof); (3) non-cash gains and losses due solely to fluctuations in currency values; (4) the net income of any person that is not a restricted subsidiary of such person, except to the extent of the amount of dividends or other distributions representing such person's proportionate share of such other person's net income for such period actually paid in cash to such person by such other person during such period; (5) gains but not losses on asset dispositions by such person or its restricted subsidiaries; (6) all extraordinary gains and losses determined in accordance with GAAP; and (7) in the case of a successor to the referent person by consolidation or merger or as a transferee of the referent person's assets, any earnings (or losses) of the successor corporation prior to such consolidation, merger or transfer of assets. 45 "Consolidated net worth" of any person means the consolidated stockholders' equity of such person, determined on a consolidated basis in accordance with GAAP, less (without duplication) amounts attributable to disqualified capital stock of such person. "Continuing director" means a director who either was a member of our board of directors on June 21, 2000 or who became one of our directors subsequent to the issue date and whose election, or nomination for election by our stockholders, was duly approved by a majority of the continuing directors then on our board of directors in accordance with the investors' agreement or otherwise, either by a specific vote or by approval of the proxy statement issued by us on behalf of our entire board of directors in which such individual is named as nominee for director. "Credit agreement" means the amended and restated credit agreement, to be dated as of June 21, 2000, among us, as borrower thereunder, and Morgan Guaranty Trust Company of New York, as agent on behalf of itself and the others named therein, and any deferrals, renewals, extensions, replacements, refinancings or refundings thereof, or amendments, modifications or supplements thereto or replacements thereof (including, without limitation, any amendment increasing the amount borrowed thereunder) and any agreement providing therefor whether by or with the same or any other lender, creditors, or group of creditors and including related notes, guarantee agreements, security agreements and other instruments and agreements executed in connection therewith. "Default" means any event that is, or after notice or lapse of time or both would become, an event of default. "Designated senior debt" means (1) so long as the credit agreement is in effect, the senior debt incurred thereunder and (2) thereafter, any other senior debt which has at the time of initial issuance an aggregate outstanding principal amount in excess of $25.0 million which has been so designated as designated senior debt by our board of directors at the time of initial issuance in a resolution delivered to the trustee. "Disqualified stock" of any person means any capital stock of such person which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the final maturity of the notes (other than pursuant to change of control provisions similar to those applicable to the notes, provided that such provisions expressly provide that no payment can be made on such stock until any offer to purchase required pursuant to the provisions described under "-- Change of Control" above shall have been consummated and paid in full). "Domestic restricted subsidiary" means any of our restricted subsidiaries organized and existing under the laws of the United States, any state thereof or the District of Columbia. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the Commission thereunder. "GAAP" means generally accepted accounting principles, consistently applied, as in effect on June 21, 2000 in the United States of America, as set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as is approved by a significant segment of the accounting profession in the United States. "Guarantee" means the guarantee of the senior subordinated notes by each guarantor under the indenture. "Guarantor" means (1) each domestic restricted subsidiary on June 21, 2000 with assets or stockholder's equity in excess of $25,000 and (2) each domestic restricted subsidiary, if any, of ours formed or acquired after the issue date, which pursuant to the terms of the indenture executes a supplement to the indenture as a guarantor. 46 "Incur" means, with respect to any indebtedness or other obligation of any person, to create, issue, incur (including by conversion, exchange or otherwise), assume, guarantee or otherwise become liable in respect of such indebtedness or other obligation or the recording, as required pursuant to GAAP or otherwise, of any such indebtedness or other obligation on the balance sheet of such person (and "incurrence," "incurred" and "incurring" shall have meanings correlative to the foregoing). Indebtedness of any person or any of its restricted subsidiaries existing at the time such person becomes our restricted subsidiary (or is merged into or consolidates with us or any of our restricted subsidiaries), whether or not such indebtedness was incurred in connection with, or in contemplation of, such person becoming our restricted subsidiary (or being merged into or consolidated with us or any of our restricted subsidiaries), shall be deemed incurred at the time any such person becomes our restricted subsidiary or merges into or consolidates with us or any of our restricted subsidiaries. "Indebtedness" means (without duplication), with respect to any person, whether recourse is to all or a portion of the assets of such person and whether or not contingent: (1) every obligation of such person for money borrowed; (2) every obligation of such person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; (3) every reimbursement obligation of such person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such person outstanding for more than 15 days; (4) every obligation of such person issued or assumed as the deferred purchase price of property or services outstanding for more than 15 days (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business which are not overdue or which are being contested in good faith); (5) every capital lease obligation of such person; (6) every net obligation under interest rate swap or similar agreements or foreign currency hedge, exchange or similar agreements of such person; and (7) every obligation of the type referred to in clauses (1) through (6) of another person and all dividends of another person the payment of which, in either case, such person has guaranteed or is responsible or liable for, directly or indirectly, as obligor, guarantor or otherwise. Indebtedness shall include the liquidation preference and any mandatory redemption payment obligations in respect of any of our disqualified stock owned by any person other than us or any of our restricted subsidiaries, and any preferred stock of any of our restricted subsidiaries. Indebtedness shall never be calculated taking into account any cash and cash equivalents held by such person. Indebtedness shall not include obligations arising from agreements of ours or of any of our restricted subsidiaries to provide for indemnification, adjustment of purchase price, earn-out, or other similar obligations, in each case, incurred or assumed in connection with the disposition of any business or assets of any of our restricted subsidiaries. The amount outstanding at any time of any indebtedness issued with original issue discount is the face amount of such indebtedness less the remaining unamortized portion of the original issue discount of such indebtedness at such time as determined in accordance with GAAP. "Investment" by any person means any direct or indirect loan, advance, guarantee or other extension of credit (excluding credit balances in bank accounts or similar accounts with other financial institutions) or capital contribution to (by means of transfers of cash or other property to others or payments for property or services for the account or use of others, or otherwise), or purchase or acquisition of capital stock, bonds, notes, debentures or other securities or evidence of indebtedness issued by any other person. "Investors' agreement" means the investors' agreement be dated as of June 21, 2000 among Tekni-Plex, Tekni-Plex Partners, MST/TP Partners, Dr. Smith, Michael F. Cronin and Tekni-Plex Management as in effect on June 21, 2000. 47 "Issue date" means the original issue date of the notes offered by this offering memorandum. "Lien" means, with respect to any property or assets, any mortgage or deed of trust, pledge, hypothecation, assignment, security interest, lien, charge, easement (other than any easement not materially impairing usefulness or marketability), encumbrance, preference, priority or other security agreement with respect to such property or assets (including, without limitation, any conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing). "Material subsidiary" means, at any date of determination, any subsidiary that, together with its subsidiaries, (1) for our most recent fiscal year accounted for more than 5% of our consolidated revenues or (2) as of the end of such fiscal year, was the owner of more than 5% of our consolidated assets, all as set forth on our most recently available consolidated financial statements for such fiscal year prepared in conformity with GAAP. "Moody's" means Moody's Investors Service, Inc. or any successor to its debt rating business. "Net available proceeds" from any asset disposition by any person means cash or readily marketable securities received (including by way of sale or discounting of a note, installment receivable or other receivable, but excluding any other consideration received in the form of assumption by the acquiror of indebtedness or other obligations relating to such properties or assets or received in any other non-cash form) therefrom by such person, including any cash received by way of deferred payment or upon the monetization or other disposition of any non-cash consideration (including notes or other securities) received in connection with such asset disposition, net of: (1) all legal, title and recording tax expenses, commissions and other fees and expenses incurred and all federal, state, foreign and local taxes required to be accrued as a liability as a consequence of such asset disposition; (2) all payments made by such person or its restricted subsidiaries on any indebtedness which is secured by such assets in accordance with the terms of any lien upon or with respect to such assets or which must by the terms of such lien, or in order to obtain a necessary consent to such asset disposition or by applicable law, be repaid out of the proceeds from such asset disposition; (3) all payments made with respect to liabilities associated with the assets which are the subject of the asset disposition, including, without limitation, trade payables and other accrued liabilities; (4) appropriate amounts to be provided by such person or any restricted subsidiary thereof, as the case may be, as a reserve in accordance with GAAP against any liabilities associated with such assets and retained by such person or any restricted subsidiary thereof, as the case may be, after such asset disposition, including, without limitation, liabilities under any indemnification obligations and severance and other employee termination costs associated with such asset disposition, until such time as such amounts are no longer reserved or such reserve is no longer necessary (at which time any remaining amounts will become net available proceeds to be allocated in accordance with the provisions of clause (3) of the covenant of the indenture described under "-- Covenants -- Limitation on Certain Asset Dispositions"); and (5) all distributions and other payments made to minority interest holders in restricted subsidiaries of such person or joint ventures as a result of such asset disposition. "Net investment" means the excess of: (1) the aggregate amount of all Investments in unrestricted subsidiaries or joint ventures made by us or any restricted subsidiary on or after June 21, 2000 (in the case of an investment made other than in cash, the amount shall be the fair market value of such investment as determined in good faith by our board of directors or such restricted subsidiary); over (2) the aggregate amount returned in cash on or with respect to such investments whether through interest payments, principal payments, dividends or other distributions or payments; 48 provided, however, that such payments or distributions shall not be (and have not been) included in subclause (b) of clause (3) of the first paragraph described under "-- Covenants Limitation on Restricted Payments", provided, further that with respect to all Investments made in any unrestricted subsidiary or joint venture the amounts referred to in clause (2) above with respect to such investments shall not exceed the aggregate amount of all such investments made in such unrestricted subsidiary or joint venture. "Offer to purchase" means a written offer (the "offer") sent by us by first class mail, postage prepaid, to each holder at his address appearing in the register for the notes on the date of the offer offering to purchase up to the principal amount of notes specified in such offer at the purchase price specified in such offer (as determined pursuant to the indenture). Unless otherwise required by applicable law, the offer shall specify an expiration date (the "expiration date") of the offer to purchase which shall be not less than 30 days nor more than 60 days after the date of such offer and a settlement date (the "purchase date") for purchase of notes within five business days after the expiration date. We shall notify the trustee at least 15 business days (or such shorter period as is acceptable to the trustee) prior to the mailing of the offer of our obligation to make an offer to purchase, and the offer shall be mailed by us or, at our request, by the trustee in the name and at our expense. The offer shall contain all the information required by applicable law to be included therein. The offer shall contain all instructions and materials necessary to enable such holders to tender notes pursuant to the offer to purchase. The offer shall also state: (1) the section of the indenture pursuant to which the offer to purchase is being made; (2) the expiration date and the purchase date; (3) the aggregate principal amount of the outstanding notes offered to be purchased by us pursuant to the offer to purchase (including, if less than 100%, the manner by which such amount has been determined pursuant to the section of the indenture requiring the offer to purchase) (the "purchase amount"); (4) the purchase price to be paid by us for each $1,000 aggregate principal amount of notes accepted for payment (as specified pursuant to the indenture) (the "purchase price"); (5) that the holder may tender all or any portion of the notes registered in the name of such holder and that any portion of a note tendered must be tendered in an integral multiple of $1,000 principal amount; (6) the place or places where notes are to be surrendered for tender pursuant to the offer to purchase; (7) that interest on any note not tendered or tendered but not purchased by us pursuant to the offer to purchase will continue to accrue; (8) that on the purchase date the purchase price will become due and payable upon each note being accepted for payment pursuant to the offer to purchase and that interest thereon shall cease to accrue on and after the purchase date; (9) that each holder electing to tender all or any portion of a note pursuant to the offer to purchase will be required to surrender such note at the place or places specified in the offer prior to the close of business on the expiration date (such note being, if we or the trustee so require, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to us and the trustee duly executed by, the holder thereof or his attorney duly authorized in writing); (10) that holders will be entitled to withdraw all or any portion of notes tendered if we (or our paying agent) receive, not later than the close of business on the fifth business day next preceding the expiration date, a telegram, telex, facsimile transmission or letter setting forth the name of the holder, the principal amount of the note the holder tendered, the certificate number of the note the holder tendered and a statement that such holder is withdrawing all or a portion of his tender; 49 (11) that (a) if notes in an aggregate principal amount less than or equal to the purchase amount are duly tendered and not withdrawn pursuant to the offer to purchase, we shall purchase all such notes and (b) if notes in an aggregate principal amount in excess of the purchase amount are tendered and not withdrawn pursuant to the offer to purchase, we shall purchase notes having an aggregate principal amount equal to the purchase amount on a pro rata basis (with such adjustments as may be deemed appropriate so that only notes in denominations of $1,000 or integral multiples thereof shall be purchased); and (12) that in the case of any holder whose note is purchased only in part, we shall execute and the trustee shall authenticate and deliver to the holder of such note without service charge, a new note or notes, of any authorized denomination as requested by such holder, in an aggregate principal amount equal to and in exchange for the unpurchased portion of the note so tendered. An offer to purchase shall be governed by and effected in accordance with the provisions above pertaining to any offer. "Permitted holder" means: (1) Dr. F. Patrick Smith, Kenneth W.R. Baker and (a) entities controlled by such persons, (b) trusts for the benefit of such individual persons or the spouses, issue. parents or other relatives of such individual persons and (c) in the event of the death of any such individual person, heirs or testamentary legatees of such Person; and (2) Tekni-Plex Partners and entities controlled by such person. For purposes of this definition, "control," as used with respect to any person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities or by contract or otherwise. "Permitted investments" means: (1) investments in marketable, direct obligations issued or guaranteed by the United States of America, or any governmental entity or agency or political subdivision thereof (provided that the full faith and credit of the United States of America is pledged in support thereof), maturing within one year of the date of purchase; (2) investments in commercial paper issued by corporations or financial institutions maturing within 180 days from the date of the original issue thereof, and rated "P-1" or better by Moody's or "A-1" or better by S&P or an equivalent rating or better by any other nationally recognized securities rating agency; (3) investments in certificates of deposit issued or acceptances accepted by or guaranteed by any bank or trust company organized under the laws of the United States of America, any state thereof, the District of Columbia, Canada or any province thereof, in each case having a combined capital, surplus and undivided profits totaling more than $500,000,000, maturing within one year of the date of purchase; (4) investments representing capital stock or obligations issued or otherwise transferred to us or any of our restricted subsidiaries in the course of the good faith settlement of claims against any other Person or by reason of a composition or readjustment of debt or a reorganization of any of our debtors or those of any of our restricted subsidiaries; (5) deposits, including interest-bearing deposits, maintained in the ordinary course of business in banks; (6) any investment in any person; provided, however, that (a) after giving effect to any such investment such person shall become our restricted subsidiary or (b) such person is merged with or into, or substantially all of such person's assets are transferred to, us or any of our restricted subsidiaries; 50 (7) receivables and prepaid expenses, in each ease arising in the ordinary course of business; provided, however, that such receivables and prepaid expenses would be recorded as assets of such person in accordance with GAAP; (8) endorsements for collection or deposit in the ordinary course of business by such person of bank drafts and similar negotiable instruments of such other Person received as payment for ordinary course of business trade receivables; (9) any interest swap or hedging obligation with an unaffiliated person otherwise permitted by the indenture; (10) investments received as consideration for an asset disposition in compliance with the provisions of the indenture described under "-- Covenants -- Limitation on Certain Asset Dispositions" above; (11) investments in restricted subsidiaries or by virtue of which a person becomes a restricted subsidiary (including under circumstances in which equity interests in a restricted subsidiary are acquired from third parties subsequent to such person becoming a restricted subsidiary pursuant to the terms of any merger or acquisition or similar agreement in existence at the time such person became a restricted subsidiary); and (12) loans and advances to our employees or those of any of our restricted subsidiaries in the ordinary course of business. "Person" means any individual, corporation, limited or general partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Preferred stock", as applied to the capital stock of any person, means capital stock of such person of any class or classes (however designated) that ranks prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such person, to shares of capital stock of any other class of such person. "Purchase date" has the meaning set forth in the definition of "offer to purchase" above. "Recapitalization" means the transactions contemplated to occur prior to, on and immediately after June 21, 2000 by the recapitalization agreement dated as of April 12, 2000 among us, Tekni-Plex Partners LLC, MST/TP Partners, L.P. and the other parties thereto (including the exhibits thereto). "Related person" of any person means any other person directly or indirectly owning (1) 5% or more of the outstanding common stock of such person (or, in the case of a person that is not a corporation, 5% or more of the equity interest in such person) or (2) 5% or more of the combined voting power of the Voting Stock of such person. "Restricted subsidiary" means any of our subsidiaries other than an unrestricted subsidiary. "S&P" means Standard & Poor's Ratings Group or any successor to its debt rating business. "Senior debt" means, with respect to any person at any date: (1) in the case of us or a guarantor, all indebtedness and other obligations under the credit agreement, including, without limitation, principal, premium, if any, and interest on such indebtedness and all other amounts due on or in connection with such indebtedness including all charges, fees and expenses; (2) all other indebtedness of such person for money borrowed, including principal, premium, if any, and interest on such indebtedness, unless the instrument under which such indebtedness for money borrowed is created, incurred, assumed or guaranteed expressly provides that such indebtedness for money borrowed is not senior or superior in right of payment to the notes, and all renewals, extensions, modifications, amendments, refinancing or replacements thereof and all other indebtedness of such 51 person of the types referred to in clauses (3), (4) (not including obligations issued or assumed as the deferred purchase price of services) and (6) of the definition of indebtedness; and (3) all interest on any indebtedness referred to in clauses (1) and (2) accruing during, or which would accrue but for, the pendency of any bankruptcy or insolvency proceeding, whether or not allowed thereunder. Notwithstanding the foregoing, senior debt shall not include: (1) indebtedness which is pursuant to its terms or any agreement relating thereto or by operation of law subordinated or junior in right of payment or otherwise to any other indebtedness of such person; provided, however, that no indebtedness shall be deemed to be subordinate or junior in right of payment or otherwise to any other indebtedness of a person solely by reason of such other indebtedness being secured and such indebtedness not being secured; (2) the notes; (3) any indebtedness of such person to any of its subsidiaries; (4) indebtedness incurred in violation of the provisions of the indenture described under "-- Covenants -- Limitation on Indebtedness"; provided, however, that indebtedness under the credit agreement shall be deemed not to have been incurred in violation of such provisions for purposes of this clause (4) if the holder(s) of such indebtedness or their agent or representative shall have received a representation from us to the effect that the incurrence of such indebtedness does not violate such provision; and (5) any indebtedness which, when incurred and without respect to any election under Section 1111(b) of the Bankruptcy Code, is without recourse to us. "Subordinated indebtedness" means any indebtedness (whether outstanding on the date hereof or hereafter incurred) which is by its terms expressly subordinate or junior in right of payment to the notes. "Subsidiary" of any person means: (1) a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by such person or by one or more other subsidiaries of such person or by such person and one or more other subsidiaries thereof; or (2) any other person (other than a corporation) in which such person, or one or more other subsidiaries of such person or such person and one or more other subsidiaries thereof, directly or indirectly, have at least a majority ownership and voting power relating to the policies, management and affairs thereof. "Unrestricted subsidiary" means: (1) any subsidiary of ours formed or acquired after June 21, 2000 that at the time of determination is designated an unrestricted subsidiary by the board of directors in the manner provided below; and (2) any subsidiary of an unrestricted subsidiary. Any such designation by the board of directors will be evidenced to the trustee by promptly filing with the trustee a copy of the board resolution giving effect to such designation and an officers' certificate certifying that such designation complied with the foregoing provisions. Our board of directors may not designate any subsidiary of ours to be an unrestricted subsidiary if, after such designation: (1) we or any other restricted subsidiary (a) provides credit support for, or a guarantee of, any indebtedness of such subsidiary (including any undertaking, agreement or instrument evidencing such indebtedness) or (b) is directly or indirectly liable for any indebtedness of such subsidiary; (2) a default with respect to any indebtedness of such subsidiary (including any right which the holders thereof may have to take enforcement action against such subsidiary) would permit (upon notice, 52 lapse of time or both) any holder of any other indebtedness of ours or of any restricted subsidiary to declare a default on such other indebtedness or cause the payment thereof to be accelerated or payable prior to its final scheduled maturity; or (3) such subsidiary owns any capital stock of, or owns or holds any lien on any property of, any restricted subsidiary which is not a subsidiary of the subsidiary to be so designated. "Voting stock" of any person means the capital stock of such person which ordinarily has voting power for the election of directors (or persons performing similar functions) of such person, whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The exchange of old notes for new notes pursuant to the exchange offer will not result in any United States federal income tax consequences to holders. When a holder exchanges an old note for an exchange note pursuant to the exchange offer, the holder will have the same adjusted basis and holding period in the exchange note as in the old note immediately before the exchange. NOTEHOLDERS CONSIDERING THIS EXCHANGE OFFER ARE URGED TO CONSULT THEIR TAX ADVISORS WITH REGARD TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION. PLAN OF DISTRIBUTION Prior to the exchange offer, there has been no market for any of the new notes. The old notes are eligible for trading in the Private Offerings, Resales and Trading through Automatic Linkages ("PORTAL") market. There can be no assurance that an active trading market will develop for, or as to the liquidity of, any of the old notes or the new notes. Each participating broker-dealer that receives new notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such new notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a participating broker-dealer in connection with resales of new notes received in exchange for old notes where such old notes were acquired as a result of market-making activities or other trading activities. We have agreed that for a period of 180 days after the expiration date, we will make this prospectus, as amended or supplemented, available to any participating broker-dealer for use in connection with any such resale. We will not receive any proceeds from any sales of the new notes by participating broker-dealers. New notes received by participating broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the new notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchaser or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such participating broker-dealer and/or the purchasers of any such new notes. Any participating broker-dealer that resells the new notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such new notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of new notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a participating broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. 53 LEGAL MATTERS The validity of the notes offered hereby will be passed upon for Tekni-Plex by Davis Polk & Wardwell, New York, New York. EXPERTS The consolidated financial statements of Tekni-Plex included in this prospectus have been audited by BDO Seidman, LLP, independent certified public accountants, to the extent and for the periods set forth in their report appearing elsewhere herein. 54 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- $40,000,000 TEKNI-PLEX, INC. OFFER TO EXCHANGE ALL OUTSTANDING 12 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2010 FOR 12 3/4% SENIOR SUBORDINATED NOTES DUE 2010 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 ------------------------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the General Corporation Law of the State of Delaware authorizes a court to award or a corporation's board of directors to grant indemnification to directors and officers in terms that are sufficiently broad to permit indemnification under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act of 1933. Tekni-Plex's certificate of incorporation contains a provision eliminating the personal liability of its directors to the company or its shareowners for breach of fiduciary duty as a director to the fullest extent permitted by applicable law. Tekni-Plex's bylaws provide for the mandatory indemnification of our directors and officers to the maximum extent permitted by Delaware law. Tekni-Plex's bylaws also provide (i) that we may expand the scope of the indemnification by individual contracts with our directors and officers, and (ii) that we shall not be required by law, if the proceeding in which indemnification is sought was brought by a director or officer, it was authorized in advance by our board of directors, the indemnification is provided by us, in our sole discretion pursuant to powers vested in us under the Delaware law, or the indemnification is required by individual contract. In addition, our bylaws give us the power to indemnify our employees and agents to the maximum extent permitted by Delaware law. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits
3.1 Restated Certificate of Incorporation of Tekni-Plex, Inc.* 3.2 Amended and Restated By-laws of Tekni-Plex, Inc.* 3.3 Certificate of Incorporation of PureTec Corporation.* 3.4 By-laws of PureTec Corporation* 3.5 Certificate of Incorporation of Tri-Seal Holdings, Inc.* 3.6 By-laws of Tri-Seal Holding, Inc.* 3.7 Certificate of Incorporation of Natvar Holdings, Inc.* 3.8 By-laws of Natvar Holdings.* 3.9 Certificate of Incorporation of Plastic Specialities and Technologies, Inc.* 3.10 By-laws of Plastic Specialities and Technologies, Inc.* 3.11 Certificate of Incorporation of Plastic Specialities and Technologies Investments, Inc.* 3.12 By-laws of Plastic Specialities and Technologies Investments, Inc.* 3.13 Certificate of Incorporation of Burlington Resins, Inc.* 3.14 By-laws of Burlington Resins, Inc.* 3.15 Certificate of Incorporation of Pure Tech APR, Inc.* 3.16 By-laws of Pure Tech APR, Inc.* 3.17 Certificate of Incorporation of TPI Acquisition Subsidiary, Inc.** 3.18 By-laws of TPI Acquisition Subsidiary, Inc.** 3.19 Certificate of Incorporation of Coast Recycling North, Inc.* 3.20 By-laws of Coast Recycling North, Inc.* 3.21 Certificate of Incorporation of Distributors Recycling, Inc.* 3.22 By-laws of Distributors Recycling, Inc.* 3.23 Certificate of Incorporation of REI Distributors, Inc.* 3.24 By-laws of REI Distributors, Inc.* 3.25 Certificate of Incorporation of Pure Tech Recycling of California.* 3.26 By-laws of Pure Tech Recycling of California.*
II-1
3.27 Certificate of Incorporation of Alumet Smelting Corp.* 3.28 By-laws of Alumet Smelting Corp.* 3.29 Certificate of Incorporation of TP/Elm Acquisition Subsidiary, Inc.** 3.30 By-laws of TP/Elm Acquisition Subsidiary, Inc.** 4.1 Indenture, dated as of June 21, 2000 among Tekni-Plex, Inc., the Guarantors listed therein and HSBC Bank USA, as Trustee.* 4.2 First Supplemental Indenture, dated as of May 6, 2002 among Tekni-Plex, Inc., TPI Acquisition Subsidiary, Inc. and HSBC Bank USA, as Trustee** 4.3 Second Supplemental Indenture, dated as of August 22, 2002 among Tekni-Plex, Inc., TP/Elm Acquisition Subsidiary, Inc. and HSBC Bank USA, as Trustee** 4.4 Senior Subordinated Note and Guarantee (original not included; form of Note and Guarantee included in Exhibit 4.1). 4.5 Purchase Agreement, dated as of May 1, 2002 among Tekni-Plex, Inc., the Guarantors listed therein, and Lehman Brothers Inc.** 4.6 Registration Right Agreement, dated as of May 6, 2002 among Tekni-Plex, Inc., the Guarantors listed therein and Lehman Brothers Inc.** 5.1 Opinion of Davis Polk & Wardwell.** 12.1 Statement regarding Computation of Ratios.** 13.1 Annual Report on Form 10-K for the year ended June 29, 2001** 13.2 Quarterly Report on Form 10-Q for the quarter ended September 28, 2001** 13.3 Quarterly Report on Form 10-Q for the quarter ended December 28, 2001** 13.4 Quarterly Report on Form 10-Q for the quarter ended March 28, 2002** 23.1 Consent of BDO Seidman LLP.** 23.2 Consent of Davis Polk & Wardwell (included in Exhibit 5.1). 25.1 Statement of Eligibility of Trustee, HSBC Bank USA, on Form T-1.** 99.1 Form of Letter of Transmittal.** 99.2 Form of Notice of Guaranteed Delivery.** 99.3 Form of Tender Instructions.** 99.4 Form of Exchange Agent Agreement.** 99.5 Instruction to Registered Holders and/or Book-Entry Transfer Facility Participants.** 99.6 Broker's Letter to Clients.** 99.7 Exchange Offer Cover Letter.**
- --------------- * Filed previously as an Exhibit to our Registration Statement on Form S-4 (File No. 333-43800) filed on August 15, 2000. ** Filed herewith. ITEM 22. UNDERTAKINGS (a) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act or 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-2 (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (c) The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (d) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not subject of and included in the registration statement when it became effective. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, Tekni-Plex, Inc., a Delaware corporation, has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in Coppell, Texas on August 22, 2002. TEKNI-PLEX, INC. By: /s/ F. PATRICK SMITH ------------------------------------ Name: F. Patrick Smith Title: Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below on the 22nd day of August 2002 by the following persons in the capacities indicated.
SIGNATURE TITLE --------- ----- /s/ F. PATRICK SMITH Chairman of the Board and Chief Executive Officer ------------------------------------------------ F. Patrick Smith /s/ KENNETH W.R. BAKER Director, President and Chief Operating Officer ------------------------------------------------ (principal financial and accounting officer) Kenneth W.R. Baker /s/ ARTHUR P. WITT Director and Corporate Secretary ------------------------------------------------ Arthur P. Witt /s/ J. ANDREW MCWETHY Director ------------------------------------------------ J. Andrew McWethy /s/ MICHAEL F. CRONIN Director ------------------------------------------------ Michael F. Cronin /s/ JOHN S. GEER Director ------------------------------------------------ John S. Geer
II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, PureTec Corporation, a Delaware corporation, has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in Coppell, Texas on August 22, 2002. PURETEC CORPORATION By: /s/ F. PATRICK SMITH ------------------------------------ Name: F. Patrick Smith Title: Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below on the 22nd day of August, 2002 by the following persons in the capacities indicated.
SIGNATURE TITLE --------- ----- /s/ F. PATRICK SMITH Chairman of the Board and Chief Executive Officer ------------------------------------------------ F. Patrick Smith /s/ KENNETH W.R. BAKER Director, President and Chief Operating Officer ------------------------------------------------ (principal financial and accounting officer) Kenneth W.R. Baker
II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, Tri-Seal Holdings, Inc., a Delaware corporation, has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in Coppell, Texas on August 22, 2002. TRI-SEAL HOLDINGS, INC. By: /s/ F. PATRICK SMITH ------------------------------------ Name: F. Patrick Smith Title: Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below on the 22nd day of August, 2002 by the following persons in the capacities indicated.
SIGNATURE TITLE --------- ----- /s/ F. PATRICK SMITH Chairman of the Board and Chief Executive Officer ------------------------------------------------ F. Patrick Smith /s/ KENNETH W.R. BAKER Director, President and Chief Operating Officer ------------------------------------------------ (principal financial and accounting officer) Kenneth W.R. Baker
II-6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, Natvar Holdings, Inc., a Delaware corporation, has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in Coppell, Texas on August 22, 2002. NATVAR HOLDINGS, INC. By: /s/ F. PATRICK SMITH ------------------------------------ Name: F. Patrick Smith Title: Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below on the 22nd day of August, 2002 by the following persons in the capacities indicated.
SIGNATURE TITLE --------- ----- /s/ F. PATRICK SMITH Chairman of the Board and Chief Executive - --------------------------------------------- Officer F. Patrick Smith /s/ KENNETH W.R. BAKER Director, President and Chief Operating - --------------------------------------------- Officer (principal financial and accounting Kenneth W.R. Baker officer)
II-7 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, Plastics Specialties and Technologies, Inc., a Delaware corporation, has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in Coppell, Texas on August 22, 2002. PLASTICS SPECIALTIES AND TECHNOLOGIES, INC. By: /s/ F. PATRICK SMITH ------------------------------------ Name: F. Patrick Smith Title: Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below on the 22nd day of August, 2002 by the following persons in the capacities indicated.
SIGNATURE TITLE --------- ----- /s/ F. PATRICK SMITH Chairman of the Board and Chief Executive - --------------------------------------------- Officer F. Patrick Smith /s/ KENNETH W.R. BAKER Director, President and Chief Operating - --------------------------------------------- Officer (principal financial and accounting Kenneth W.R. Baker officer)
II-8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, Plastics Specialties and Technologies Investments, Inc., a Delaware corporation, has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in Coppell, Texas on August 22, 2002. PLASTICS SPECIALTIES AND TECHNOLOGIES INVESTMENTS, INC. By: /s/ F. PATRICK SMITH ------------------------------------ Name: F. Patrick Smith Title: Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below on the 22nd day of August, 2002 by the following persons in the capacities indicated.
SIGNATURE TITLE --------- ----- /s/ F. PATRICK SMITH Chairman of the Board and Chief Executive - --------------------------------------------- Officer F. Patrick Smith /s/ KENNETH W.R. BAKER Director, President and Chief Operating - --------------------------------------------- Officer (principal financial and accounting Kenneth W.R. Baker officer)
II-9 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, Burlington Resins, Inc., a Delaware corporation, has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in Coppell, Texas on August 22, 2002. BURLINGTON RESINS, INC. By: /s/ F. PATRICK SMITH ------------------------------------ Name: F. Patrick Smith Title: Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below on the 22nd day of August, 2002 by the following persons in the capacities indicated.
SIGNATURE TITLE --------- ----- /s/ F. PATRICK SMITH Chairman of the Board and Chief Executive - --------------------------------------------- Officer F. Patrick Smith /s/ KENNETH W.R. BAKER Director, President and Chief Operating - --------------------------------------------- Officer (principal financial and accounting Kenneth W.R. Baker officer)
II-10 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, Pure Tech APR, Inc., a New York corporation, has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in Coppell, Texas on August 22, 2002. PURE TECH APR, INC. By: /s/ F. PATRICK SMITH ------------------------------------ Name: F. Patrick Smith Title: Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below on the 22nd day of August 2002 by the following persons in the capacities indicated.
SIGNATURE TITLE --------- ----- /s/ F. PATRICK SMITH Chairman of the Board and Chief Executive - --------------------------------------------- Officer F. Patrick Smith /s/ KENNETH W.R. BAKER Director, President and Chief Operating - --------------------------------------------- Officer (principal financial and accounting Kenneth W.R. Baker officer)
II-11 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, TPI Acquisition Subsidiary, Inc., a Delaware corporation, has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in Coppell, Texas on August 22, 2002. TPI ACQUISITION SUBSIDIARY, INC. By: /s/ F. PATRICK SMITH ------------------------------------ Name: F. Patrick Smith Title: Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below on the 22nd day of August 2002 by the following persons in the capacities indicated.
SIGNATURE TITLE --------- ----- /s/ F. PATRICK SMITH Chairman of the Board and Chief Executive - --------------------------------------------- Officer F. Patrick Smith /s/ KENNETH W.R. BAKER Director, President and Chief Operating - --------------------------------------------- Officer (principal financial and accounting Kenneth W.R. Baker officer)
II-12 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, Coast Recycling North, Inc., a California corporation, has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in Coppell, Texas on August 22, 2002. COAST RECYCLING NORTH, INC. By: /s/ F. PATRICK SMITH ------------------------------------ Name: F. Patrick Smith Title: Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below on the 22nd day of August 2002 by the following persons in the capacities indicated.
SIGNATURE TITLE --------- ----- /s/ F. PATRICK SMITH Chairman of the Board and Chief Executive - --------------------------------------------- Officer F. Patrick Smith /s/ KENNETH W.R. BAKER Director, President and Chief Operating - --------------------------------------------- Officer (principal financial and accounting Kenneth W.R. Baker officer)
II-13 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, Distributors Recycling, Inc., a New Jersey corporation, has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in Coppell, Texas on August 22, 2002. DISTRIBUTORS RECYCLING, INC. By: /s/ F. PATRICK SMITH ------------------------------------ Name: F. Patrick Smith Title: Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below on the 22nd day of August 2002 by the following persons in the capacities indicated.
SIGNATURE TITLE --------- ----- /s/ F. PATRICK SMITH Chairman of the Board and Chief Executive - --------------------------------------------- Officer F. Patrick Smith /s/ KENNETH W.R. BAKER Director, President and Chief Operating - --------------------------------------------- Officer (principal financial and accounting Kenneth W.R. Baker officer)
II-14 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, REI Distributors, Inc., a New Jersey corporation, has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in Coppell, Texas on August 22, 2002. REI DISTRIBUTORS, INC. By: /s/ F. PATRICK SMITH ------------------------------------ Name: F. Patrick Smith Title: Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below on the 22nd day of August, 2002 by the following persons in the capacities indicated.
SIGNATURE TITLE --------- ----- /s/ F. PATRICK SMITH Chairman of the Board and Chief Executive - ----------------------------------------------------- Officer F. Patrick Smith /s/ KENNETH W.R. BAKER Director, President and Chief Operating - ----------------------------------------------------- Officer (principal financial and accounting Kenneth W.R. Baker officer)
II-15 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, PureTech Recycling of California, a California corporation, has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in Coppell, Texas on August 22, 2002. PURE TECH RECYCLING OF CALIFORNIA By: /s/ F. PATRICK SMITH ------------------------------------ Name: F. Patrick Smith Title: Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below on the 22nd day of August, 2002 by the following persons in the capacities indicated.
SIGNATURE TITLE --------- ----- /s/ F. PATRICK SMITH Chairman of the Board and Chief Executive - ----------------------------------------------------- Officer F. Patrick Smith /s/ KENNETH W.R. BAKER Director, President and Chief Operating - ----------------------------------------------------- Officer (principal financial and accounting Kenneth W.R. Baker officer)
II-16 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, Alumet Smelting Corp., a New Jersey corporation, has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in Coppell, Texas on August 22, 2002. ALUMET SMELTING CORP. By: /s/ F. PATRICK SMITH ------------------------------------ Name: F. Patrick Smith Title: Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below on the 22nd day of August, 2002 by the following persons in the capacities indicated.
SIGNATURE TITLE --------- ----- /s/ F. PATRICK SMITH Chairman of the Board and Chief Executive - ----------------------------------------------------- Officer F. Patrick Smith /s/ KENNETH W.R. BAKER Director, President and Chief Operating - ----------------------------------------------------- Officer (principal financial and accounting Kenneth W.R. Baker officer)
II-17 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, TP/Elm Acquisition Subsidiary, Inc., a Delaware corporation, has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in Coppell, Texas on August 22, 2002. TP/ELM ACQUISITION SUBSIDIARY, INC. By: /s/ F. PATRICK SMITH ------------------------------------ Name: F. Patrick Smith Title: Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below on the 22nd day of August, 2002 by the following persons in the capacities indicated.
SIGNATURE TITLE --------- ----- /s/ F. PATRICK SMITH Chairman of the Board and Chief Executive - ----------------------------------------------------- Officer F. Patrick Smith /s/ KENNETH W. R. BAKER Director, President and Chief Operating - ----------------------------------------------------- Officer (principal financial and accounting Kenneth W. R. Baker officer)
II-18 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE - ------- ----------- ---- 3.1 Restated Certificate of Incorporation of Tekni-Plex, Inc.* 3.2 Amended and Restated By-laws of Tekni-Plex, Inc.* 3.3 Certificate of Incorporation of PureTec Corporation.* 3.4 By-laws of PureTec Corporation.* 3.5 Certificate of Incorporation of Tri-Seal Holdings, Inc.* 3.6 By-laws of Tri Seal Holdings, Inc.* 3.7 Certificate of Incorporation of Natvar Holdings, Inc.* 3.8 By-laws of Natvar Holdings.* 3.9 Certificate of Incorporation of Plastic Specialities and Technologies, Inc.* 3.10 By-laws of Plastic Specialities and Technologies, Inc.* 3.11 Certificate of Incorporation of Plastic Specialities and Technologies Investments, Inc.* 3.12 By-laws of Plastic Specialities and Technologies Investments, Inc.* 3.13 Certificate of Incorporation of Burlington Resins, Inc.* 3.14 By-laws of Burlington Resins, Inc.* 3.15 Certificate of Incorporation of Pure Tech APR, Inc.* 3.16 By-laws of Pure Tech APR, Inc.* 3.17 Certificate of Incorporation of TPI Acquisition Subsidiary, Inc.** 3.18 By-laws of TPI Acquisition Subsidiary, Inc.** 3.19 Certificate of Incorporation of Coast Recycling North, Inc.* 3.20 By-laws of Coast Recycling North, Inc.* 3.21 Certificate of Incorporation of Distributors Recycling, Inc.* 3.22 By-laws of Distributors Recycling, Inc.* 3.23 Certificate of Incorporation of REI Distributors, Inc.* 3.24 By-laws of REI Distributors, Inc.* 3.25 Certificate of Incorporation of Pure Tech Recycling of California.* 3.26 By-laws of Pure Tech Recycling of California.* 3.27 Certificate of Incorporation of Alumet Smelting Corp.* 3.28 By-laws of Alumet Smelting Corp.* 3.29 Certificate of Incorporation of TP/Elm Acquisition Subsidiary, Inc.** 3.30 By-laws of TP/Elm Acquisition Subsidiary, Inc.** 4.1 Indenture, dated as of June 21, 2000 among Tekni-Plex, Inc., the Guarantors listed therein and HSBC Bank USA, as Trustee.* 4.2 First Supplemental Indenture, dated as of May 6, 2002 among Tekni-Plex, Inc., TPI Acquisition Subsidiary, Inc. and HSBC Bank USA, as Trustee** 4.3 Second Supplemental Indenture, dated as of August 22, 2002 among Tekni-Plex, Inc., TP/Elm Acquisition Subsidiary, Inc. and HSBC Bank USA, as Trustee** 4.4 Senior Subordinated Note and Guarantee (original not included; form of Note and Guarantee included in Exhibit 4.1). 4.5 Purchase Agreement, dated as of May 1, 2002 among Tekni-Plex, Inc., the Guarantors listed therein, and Lehman Brothers Inc.** 4.6 Registration Right Agreement, dated as of May 6, 2002 among Tekni-Plex, Inc., the Guarantors listed therein and Lehman Brothers Inc.** 5.1 Opinion of Davis Polk & Wardwell.** 12.1 Statement regarding Computation of Ratios.** 13.1 Annual Report on Form 10-K for the year ended June 29, 2001**
EXHIBIT NO. DESCRIPTION PAGE - ------- ----------- ---- 13.2 Quarterly Report on Form 10-Q for the quarter ended September 28, 2001** 13.3 Quarterly Report on Form 10-Q for the quarter ended December 28, 2001** 13.4 Quarterly Report on Form 10-Q for the quarter ended March 28, 2002** 23.1 Consent of BDO Seidman LLP.** 23.2 Consent of Davis Polk & Wardwell (included in Exhibit 5.1). 25.1 Statement of Eligibility of Trustee, HSBC Bank USA, on Form T-1.** 99.1 Form of Letter of Transmittal.** 99.2 Form of Notice of Guaranteed Delivery.** 99.3 Form of Tender Instructions.** 99.4 Form of Exchange Agent Agreement.** 99.5 Instruction to Registered Holders and/or Book-Entry Transfer Facility Participants.** 99.6 Broker's Letter to Clients.** 99.7 Exchange Offer Cover Letter.**
- --------------- * Filed previously as an Exhibit to the Form S-4 (File No. 333-43800) filed on August 15, 2000. ** Filed herewith. EX-3.17 3 y61170exv3w17.txt CERTIFICATE OF INCORPORATION EXHIBIT 3.17 CERTIFICATE OF INCORPORATION OF TPI ACQUISITION SUBSIDIARY, INC. The undersigned, for the purposes of forming a corporation under the laws of the State of Delaware, do make, file and record this Certificate, and do certify that: FIRST: The name of this corporation is: TPI ACQUISITION SUBSIDIARY, INC. SECOND: The address of the corporation's registered office in the State of Delaware is 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808. The name of the registered agent at such address is Corporation Services Company. THIRD: The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation law of the State of Delaware as the same currently exists or may hereafter be amended. FOURTH: The total number of shares of stock which the corporation shall have the authority to issue is 1,000 shares, no par value, and shall be classified as Common Stock. FIFTH: The business and affairs of the corporation shall be managed by or under the direction of the Board of Directors. SIXTH: The Board of Directors shall have the power to adopt, amend or repeal the bylaws of the corporation. SEVENTH: The name and mailing address of the Incorporator are as follows:
NAME MAILING ADDRESS Michael W. Zelenty c/o Pitney, Hardin, Kipp & Szuch LLP 200 Campus Drive Florham Park, New Jersey 07962
1 EIGHTH: (1) To the full extent from time to time permitted by Delaware law, no director of the corporation shall be personally liable to the corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director except for liabilities arising from any breach of duty based upon an act or omission (a) in breach of duty of loyalty to the corporation, (b) not in good faith or involving intentional misconduct or a knowing violation of law, or (c) under Section 174 of the General Corporation Law of the State of Delaware, or (d) in which an improper personal benefit was derived. (2) (a) Each person (and the heirs, executors or administrators of such person) who was or is a party or is threatened to be made a party to, or is involved in any threatened, pending or completed action, suit or proceeding, whether civil criminal, administrative or investigative, by reason of the fact that such person is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless by the corporation to the fullest extent permitted by Delaware law. The right to indemnification conferred in this ARTICLE EIGHTH shall also include the right to be paid by the corporation the expenses incurred in connection with any such proceeding in advance of its final disposition to the fullest extent authorized by Delaware law. The right to indemnification conferred in this ARTICLE EIGHTH shall be a contract right. (b) The corporation may, by action of its Board of Directors, provide indemnification to such of the employees and agents of the corporation to such extent and to such effect as the Board of Directors shall determine to be appropriate and authorized by Delaware law. (3) The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was servicing at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss incurred by such person in any such capacity or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under Delaware law. (4) The rights and authority conferred in this ARTICLE EIGHTH shall not be exclusive of any other right which any person may otherwise have or hereafter acquire. (5) Neither the amendment nor repeal of this ARTICLE EIGHTH, nor the adoption of any provision of this certificate of incorporation or the bylaws of the corporation, nor, to the fullest extent permitted by law, any modification of Delaware law, shall eliminate or reduce the effect of this ARTICLE EIGHTH in 2 respect of any acts or omissions occurring prior to such amendment, repeal, adoption or modification. IN WITNESS WHEREOF, the undersigned, being the Incorporator herein before named, has executed, signed and acknowledged this certificate of incorporation as of the 15th day of June, 2001. /s/ Michael W. Zelenty ------------------------------------ Michael W. Zelenty, Incorporator 3 EX-3.18 4 y61170exv3w18.txt BY-LAWS OF TPI ACQUISITION SUBSIDIARY, INC. EXHIBIT 3.18 BYLAWS OF TPI ACQUISITION SUBSIDIARY, INC. (A Delaware corporation) TABLE OF CONTENTS
Page ---- ARTICLE I CORPORATE OFFICES ........................................................ 1 1.1 REGISTERED OFFICE ................................................... 1 1.2 OTHER OFFICES ....................................................... 1 ARTICLE II MEETINGS OF STOCKHOLDERS ................................................. 1 2.1 PLACE OF MEETINGS ................................................... 1 2.2 ANNUAL MEETING ...................................................... 1 2.3 SPECIAL MEETING ..................................................... 2 2.4 NOTICE OF STOCKHOLDERS' MEETINGS .................................... 2 2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE ........................ 2 2.6 QUORUM .............................................................. 3 2.7 ADJOURNED MEETING; NOTICE ........................................... 3 2.8 CONDUCT OF BUSINESS ................................................. 3 2.9 VOTING .............................................................. 3 2.10 WAIVER OF NOTICE .................................................... 4 2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING ............. 4 2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS ......... 4 2.13 PROXIES ............................................................. 5 ARTICLE III DIRECTORS ................................................................ 6 3.1 POWERS .............................................................. 6 3.2 NUMBER OF DIRECTORS ................................................. 6 3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS ............. 6 3.4 RESIGNATION AND VACANCIES ........................................... 6 3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE ............................ 7 3.6 REGULAR MEETINGS .................................................... 7 3.7 SPECIAL MEETINGS; NOTICE ............................................ 8 3.8 QUORUM .............................................................. 8 3.9 WAIVER OF NOTICE .................................................... 8 3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING ................... 9 3.11 FEES AND COMPENSATION OF DIRECTORS .................................. 9 3.12 APPROVAL OF LOANS TO OFFICERS ....................................... 9 3.13 REMOVAL OF DIRECTORS ................................................ 9 3.14 CHAIRMAN OF THE BOARD OF DIRECTORS .................................. 10
i ARTICLE IV COMMITTEES ................................................................ 10 4.1 COMMITTEES OF DIRECTORS ............................................. 10 4.2 COMMITTEE MINUTES ................................................... 11 4.3 MEETINGS AND ACTION OF COMMITTEES ................................... 11 ARTICLE V OFFICERS .................................................................. 11 5.1 OFFICERS ............................................................ 11 5.2 APPOINTMENT OF OFFICERS ............................................. 11 5.3 OTHER OFFICERS ...................................................... 12 5.4 REMOVAL AND RESIGNATION OF OFFICERS ................................. 12 5.5 VACANCIES IN OFFICES ................................................ 12 5.6 CHIEF EXECUTIVE OFFICER ............................................. 12 5.7 PRESIDENT ........................................................... 12 5.8 VICE PRESIDENTS ..................................................... 13 5.9 SECRETARY ........................................................... 13 5.10 REPRESENTATION OF SHARES OF OTHER CORPORATIONS ...................... 13 5.11 AUTHORITY AND DUTIES OF OFFICERS .................................... 14 ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS ....... 14 6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS ........................... 14 6.2 INDEMNIFICATION OF OTHERS ........................................... 14 6.3 INSURANCE ........................................................... 15 ARTICLE VII RECORDS AND REPORTS ...................................................... 15 7.1 MAINTENANCE AND INSPECTION OF RECORDS ............................... 15 7.2 INSPECTION BY DIRECTORS ............................................. 15 7.3 ANNUAL STATEMENT TO STOCKHOLDERS .................................... 16 ARTICLE VIII GENERAL MATTERS ......................................................... 16 8.1 CHECKS .............................................................. 16 8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS .................... 16 8.3 STOCK CERTIFICATES; PARTLY PAID SHARES .............................. 16 8.4 SPECIAL DESIGNATION ON CERTIFICATES ................................. 17 8.5 LOST CERTIFICATES ................................................... 17 8.6 CONSTRUCTION; DEFINITIONS ........................................... 18 8.7 DIVIDENDS ........................................................... 18 8.8 FISCAL YEAR ......................................................... 18 8.9 SEAL................................................................. 18 8.10 TRANSFER OF STOCK ................................................... 18 8.11 STOCK TRANSFER AGREEMENTS ........................................... 19 8.12 REGISTERED STOCKHOLDERS ............................................. 19
ii ARTICLE IX AMENDMENTS................................................................. 19 ARTICLE X DISSOLUTION................................................................ 19 ARTICLE XI CUSTODIAN.................................................................. 20 11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES................................ 20 11.2 DUTIES OF CUSTODIAN........................................................ 21
iii BYLAWS OF TPI ACQUISITION SUBSIDIARY, INC. ARTICLE I CORPORATE OFFICES 1.1 REGISTERED OFFICE The registered office of the corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. The name of the registered agent of the corporation at such location is Corporation Services Company. 1.2 OTHER OFFICES The board of directors may at any time establish other offices at any place or places where the corporation is qualified to do business. ARTICLE II MEETINGS OF STOCKHOLDERS 2.1 PLACE OF MEETINGS Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the person or persons calling the meetings. In the absence of any such designation, stockholders' meetings shall be held at the registered office of the corporation. 2.2 ANNUAL MEETING The annual meeting of stockholders shall be held each year at such date, time and place, either within or without the State of Delaware, as may be designated by resolution of the board of directors from time to time. At the meeting, directors shall be elected and any other proper business may be transacted. 1 2.3 SPECIAL MEETING A special meeting of the stockholders may be called at any time by the board of directors, the chairman of the board, the president or one or more stockholders holding shares in the aggregate entitled to cast not less than twenty percent of the votes at the meeting. If a special meeting is called by any person or persons other than the board of directors, the president or the chairman of the board, the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the chairman of the board, the president, any vice president, or the secretary of the corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The officer receiving the request shall cause notice to be promptly given to the stockholders entitled to vote, in accordance with the provisions of Sections 2.4 and 2.5 of this Article II, that a meeting will be held at the time requested by the person or persons calling the meeting, not less than ten (10) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after the receipt of the request, the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the board of directors may be held. 2.4 NOTICE OF STOCKHOLDERS' MEETINGS All notices of meetings with stockholders shall be in writing and shall be sent or otherwise given in accordance with Section 2.5 of these bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, date, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. 2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE Written notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the corporation. An affidavit of the secretary or an assistant secretary or of the transfer agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. 2 2.6 QUORUM The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the Chairman of the meeting or (ii) the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed. 2.7 ADJOURNED MEETING; NOTICE When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 2.8 CONDUCT OF BUSINESS The Chairman of any meeting of stockholders shall determine the order of business at the procedure at the meeting, including such regulation of the manner of voting and the conduct of business. 2.9 VOTING The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.13 of these bylaws, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners of stock and to voting trusts and other voting agreements). Except as may be otherwise provided in the certificate of incorporation, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder. 3 2.10 WAIVER OF NOTICE Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation of these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws. 2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING Unless otherwise provided in the certificate of incorporation, any action required by this chapter to be taken at any annual or special meeting of stockholders of the corporation, or any action that may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice, and without a vote if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. If the action which is consented to is such as would have required the filing of a certificate under any section of the General Corporation Law of Delaware if such action had been voted on by stockholders at a meeting thereof, then the certificate filed under section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written notice and written consent have been given as provided in Section 228 of the General Corporation Law of Delaware. 2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion 4 or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. If the board of directors does not so fix a record date: (i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (ii) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the board of directors is necessary, shall be the day on which the first written consent is expressed. (iii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. 2.13 PROXIES Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by a written proxy, signed by the stockholder and filed with the secretary of the corporation, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if the stockholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the stockholder or the stockholder's attorney-in-fact. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(c) of the General Corporation Law of Delaware. 5 ARTICLE III DIRECTORS 3.1 POWERS Subject to the provisions of the General Corporation Law of Delaware and any limitations in the certificate of incorporation or these bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors. 3.2 NUMBER OF DIRECTORS The board of directors shall consist of at least one (1) person and no more than ten (10) persons until changed by a proper amendment of this Section 3.2. No reduction of the authorized number of directors shall have the effect of removing any director before that director's term of office expires. 3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS Except as provided in Section 3.4 of these bylaws, directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws, wherein other qualifications for directors may be prescribed. Each director, including a director elected to fill a vacancy, shall hold office until his successor is elected and qualified or until his earlier resignation or removal. Elections of directors need not be by written ballot. 3.4 RESIGNATION AND VACANCIES Any director may resign at any time upon written notice to the attention of the Secretary of the corporation. When one or more directors so resigns and the resignation is effective at a future date, such vacancy, or any vacancy occurring as a result of a newly created directorship shall be filled in the following manner, unless otherwise provided in the certificate of incorporation or these bylaws: (i) Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote may be filled by a majority of the directors then in office elected by all of the stockholders having a right to vote, although 6 less than a quorum, or by a sole remaining director, provided, however, that in the event there remain no directors elected by all of the stockholders having the right to vote, the holders of the stock of the corporation shall elect a director or directors to fill such vacancy or newly created directorship in accordance with the provisions of Article II of these bylaws and the certificate of incorporation. (ii) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected, provided, however, that in the event there remain no directors elected by any such class or classes or series, the holders of such class or classes or series shall elect a director or directors to fill such vacancy or newly created directorship in accordance with the provisions of Article II of these bylaws and the certificate of incorporation. If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of Article II of these bylaws and the certificate of incorporation, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the General Corporation Law of Delaware. 3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE The board of directors of the corporation may hold meetings, both regular and special, either within or outside the State of Delaware. Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. 3.6 REGULAR MEETINGS Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board. 7 3.7 SPECIAL MEETINGS; NOTICE Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board, the president, any vice president, the secretary or any director. Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at that director's address as it is shown on the records of the corporation. If the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. If the notice is delivered personally or by telephone or by telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. 3.8 QUORUM At all meetings of the board of directors, a majority of the authorized number of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum is not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting. 3.9 WAIVER OF NOTICE Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice, Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, 8 or members of a committee of directors, need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws. 3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the board or committee. 3.11 FEES AND COMPENSATION OF DIRECTORS Unless otherwise restricted by the certificate of incorporation or these bylaws, the board of directors shall have the authority to fix the compensation of directors. No such compensation shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. 3.12 APPROVAL OF LOANS TO OFFICERS Subject to the unanimous approval of the directors, the corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. 3.13 REMOVAL OF DIRECTORS Unless otherwise restricted by statute, by the certificate of incorporation or by these bylaws, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote with respect to the election of such director or directors, as provided in the certificate of incorporation. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director's term of office. 9 3.14 CHAIRMAN OF THE BOARD OF DIRECTORS The corporation may also have, at the discretion of the board of directors, a chairman of the board of directors who shall not be considered an officer of the corporation. ARTICLE IV COMMITTEES 4.1 COMMITTEES OF DIRECTORS The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, with each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the board of directors or in the bylaws of the corporation, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) amend the certificate of incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the board of directors as provided in Section 151(a) of the General Corporation Law of Delaware, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), (ii) adopt an agreement of merger or consolidation under Sections 251 or 252 of the General Corporation Law of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, (iv) recommend to the stockholders a dissolution of the corporation or a revocation of a dissolution, or (v) amend the bylaws of the corporation; and, unless the board resolution establishing the committee, the bylaws or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law of Delaware. 10 4.2 COMMITTEE MINUTES Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. 4.3 MEETINGS AND ACTION OF COMMITTEES Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, Section 3.5 (place of meetings and meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and Section 3. 10 (action without a meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members; provided, however, that the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee, that special meetings of committees may also be called by resolution of the board of directors and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws. ARTICLE V OFFICERS 5.1 OFFICERS The officers of the corporation shall be a chief executive officer, a president, and a secretary. The corporation may also have, at the discretion of the board of directors, one or more vice presidents, one or more assistant secretaries, and any such other officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws. Any number of offices may be held by the same person. 5.2 APPOINTMENT OF OFFICERS The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall be appointed by the board of directors, subject to the rights, if any, of an officer under any contract of employment. 11 5.3 OTHER OFFICERS The board of directors may appoint, or empower the chief executive officer to appoint, such other officers and agents as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine. 5.4 REMOVAL AND RESIGNATION OF OFFICERS Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the board of directors at any regular or special meeting of the board or, except in the case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors. Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party. 5.5 VACANCIES IN OFFICES Any vacancy occurring in any office of the corporation shall be filled by the board of directors. 5.6 CHIEF EXECUTIVE OFFICER Subject to these By-laws and the direction of the Board of Directors, the Chief Executive Officer, with the President, shall have the responsibility for management and direction of the Corporation and all such powers that are commonly incident to the office of chief executive. He shall have the authority to execute all contracts and instruments, as well as stock certificates in the name of the Corporation. The Chief Executive Officer shall preside at all meetings of the Board of Directors or the shareholders, unless the Board otherwise provides. 5.7 PRESIDENT The President shall be the chief operating officer of the corporation. Subject to these Bylaws and the direction of the Board of Directors, he or she shall have the responsibility for the general management and control of the business and affairs of the Corporation and shall perform all duties and have all powers which are commonly incident to the office of president or which are 12 delegated to him or her by the Board of Directors. He or she shall have the power to sign all stock certificates, contracts and other instruments of the Corporation which are authorized and shall have general supervision and direction of all of the other officers, employees, and agents of the Corporation. 5.8 VICE PRESIDENTS In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, these bylaws, the president or the chairman of the board. 5.9 SECRETARY The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and stockholders. The minutes shall show the time and place of each meeting, the names of those present at directors' meetings or committee meetings, the number of shares present or represented at stockholders' meetings, and the proceedings thereof. The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation's transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names offal stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation. The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the board of directors required to be given by law or by these bylaws. He shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these bylaws. 5.10 REPRESENTATION OF SHARES OF OTHER CORPORATIONS The chairman of the board, the chief executive officer, the president, any vice president, the secretary or assistant secretary of this corporation, or any other 13 person authorized by the board of directors or the chief executive officer, president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority. 5.11 AUTHORITY AND DUTIES OF OFFICERS In addition to the foregoing authority and duties, all officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the board of directors or the stockholders. ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS 6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS The corporation shall, to the maximum extent and in the manner permitted by the General Corporation Law of Delaware, indemnify each of its directors and officers against expenses (including attorneys' fees), judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 6. 1, a "director" or "officer" of the corporation includes any person (i) who is or was a director or officer of the corporation, (ii) who is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was a director or officer of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation. 6.2 INDEMNIFICATION OF OTHERS The corporation shall have the power, to the maximum extent and in the manner permitted by the General Corporation Law of Delaware, to indemnify each of its employees and agents (other than directors and officers) against expenses (including attorneys' fees), judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 6.2, an "employee" or "agent" of the corporation (other than a director or officer) includes any person (i) who is or was an 14 employee or agent of the corporation, (ii) who is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was an employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation. 6.3 INSURANCE The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the provisions of the General Corporation Law of Delaware. ARTICLE VII RECORDS AND REPORTS 7.1 MAINTENANCE AND INSPECTION OF RECORDS The corporation shall, either at its principal executive offices or at such place or places as designated by the board of directors, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these bylaws as amended to date, accounting books, and other records. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business. 7.2 INSPECTION BY DIRECTORS Any director shall have the right to examine the corporation's stock ledger, a list of its stockholders, and its other books and records for a purpose 15 reasonably related to his position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper. 7.3 ANNUAL STATEMENT TO STOCKHOLDERS The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation. ARTICLE VIII GENERAL MATTERS 8.1 CHECKS From time to time, the board of directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments. 8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS The board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount. 8.3 STOCK CERTIFICATES; PARTLY PAID SHARES The shares oaf corporation shall be represented by certificates, provided that the board of directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. 16 Notwithstanding the adoption of such a resolution by the board of directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation by the chairman or vice-chairman of the board of directors, or the chief executive officer, or the president or vice-president, or the secretary or an assistant secretary of such corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon. 8.4 SPECIAL DESIGNATION ON CERTIFICATES If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. 8.5 LOST CERTIFICATES Except as provided in this Section 8.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and canceled at the same time. The corporation may issue a 17 new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares. 8.6 CONSTRUCTION; DEFINITIONS Unless the context requires otherwise, the general provisions, rules or construction, and definitions in the Delaware General Corporation Law shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term "person" includes both a corporation and a natural person. 8.7 DIVIDENDS The directors of the corporation, subject to any restrictions contained in (i) the General Corporation Law of Delaware or (ii) the certificate of incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property, or in shares of the corporation's capital stock. The directors of the corporation may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the corporation, and meeting contingencies. 8.8 FISCAL YEAR The fiscal year of the corporation shall be fixed by resolution of the board of directors and may be changed by the board of directors. 8.9 SEAL The corporation may adopt a corporate seal, which may be altered at pleasure, and may use the same by causing it or a facsimile thereof, to be impressed or affixed or in any other manner reproduced. 8.10 TRANSFER OF STOCK Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the 18 corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction in its books. 8.11 STOCK TRANSFER AGREEMENTS The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the General Corporation Law of Delaware. 8.12 REGISTERED STOCKHOLDERS The corporation shall be entitled to recognize the exclusive right oaf person registered on its books as the owner of shares to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments the person registered on its books as the Owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE IX AMENDMENTS The bylaws of the corporation may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws. ARTICLE X DISSOLUTION If it should be deemed advisable in the judgment of the board of directors of the corporation that the corporation should be dissolved, the board, after the adoption of a resolution to that effect by a majority of the whole board at any meeting called for that purpose, shall cause notice to be mailed to each stockholder entitled to vote thereon of the adoption of the resolution and of a meeting of stockholders to take action upon the resolution. At the meeting a vote shall be taken for and against the proposed dissolution. If a majority of the outstanding stock of the corporation entitled to 19 vote thereon votes for the proposed dissolution, then a certificate stating that the dissolution has been authorized in accordance with the provisions of Section 275 of the General Corporation Law of Delaware and setting forth the names and residences of the directors and officers shall be executed, acknowledged, and filed and shall become effective in accordance with Section 103 of the General Corporation Law of Delaware. Upon such certificate's becoming effective in accordance with Section 103 of the General Corporation Law of Delaware, the corporation shall be dissolved. Whenever all the stockholders entitled to vote on a dissolution consent in writing, either in person or by duly authorized attorney, to a dissolution, no meeting of directors or stockholders shall be necessary. The consent shall be filed and shall become effective in accordance with Section 103 of the General Corporation Law of Delaware. Upon such consent's becoming effective in accordance with Section 103 of the General Corporation Law of Delaware, the corporation shall be dissolved. If the consent is signed by an attorney, then the original power of attorney or a photocopy thereof shall be attached to and filed with the consent. The consent filed with the Secretary of State shall have attached to it the affidavit of the secretary or some other officer of the corporation stating that the consent has been signed by or on behalf of all the stockholders entitled to vote on a dissolution; in addition, there shall be attached to the consent a certification by the secretary or some other officer of the corporation setting forth the names and residences of the directors and officers of the corporation. ARTICLE XI CUSTODIAN 11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES The Court of Chancery, upon application of any stockholder, may appoint one or more persons to be custodians and, if the corporation is insolvent, to be receivers, of and for the corporation when: (i) at any meeting held for the election of directors the stockholders are so divided that they have failed to elect successors to directors whose terms have expired or would have expired upon qualification of their successors; or (ii) the business of the corporation is suffering or is threatened with irreparable injury because the directors are so divided respecting the management of the affairs of the corporation that the required vote for action by the board of directors cannot be obtained and the stockholders are unable to terminate this division; or 20 (iii) the corporation has abandoned its business and has failed within a reasonable time to take steps to dissolve, liquidate or distribute its assets. 11.2 DUTIES OF CUSTODIAN The custodian shall have all the powers and title of a receiver appointed under Section 291 of the General Corporation Law of Delaware, but the authority of the custodian shall be to continue the business of the corporation and not to liquidate its affairs and distribute its assets, except when the Court of Chancery otherwise orders and except in cases arising under Sections 226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware. 21 EX-3.29 5 y61170exv3w29.txt CERTIFICATE OF INCORPORATION EXHIBIT 3.29 CERTIFICATE OF INCORPORATION OF TP/ELM ACQUISITION SUBSIDIARY, INC. The undersigned, for the purposes of forming a corporation under the laws of the State of Delaware, do make, file and record this Certificate, and do certify that: FIRST: The name of this corporation is: TP/ELM ACQUISITION SUBSIDIARY, INC. SECOND: The address of the corporation's registered office in the State of Delaware is 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808. The name of the registered agent at such address is Corporation Services Company. THIRD: The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware as the same currently exists or may hereafter be amended. FOURTH: The total number of shares of stock which the corporation shall have the authority to issue is 1,000 shares, no par value, and shall be classified as Common Stock. FIFTH: The business and affairs of the corporation shall be managed by or under the direction of the Board of Directors. SIXTH: The Board of Directors shall have the power to adopt, amend or repeal the bylaws of the corporation. SEVENTH: The name and mailing address of the Incorporator are as follows: NAME MAILING ADDRESS ---- --------------- Michael W. Zelenty c/o Pitney, Hardin, Kipp & Szuch LLP P.O. Box 1945 Morristown, New Jersey 07902-1945 EIGHTH: (1) To the full extent from time to time permitted by Delaware law, no director of the corporation shall be personally liable to the corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director except for liabilities arising from any breach of duty based upon an act or omission (a) in breach of duty of loyalty to the corporation, (b) not in good faith or involving intentional misconduct or a knowing violation of law, or (c) under Section 174 of the General Corporation Law of the State of Delaware, or (d) in which an improper personal benefit was derived. (2) (a) Each person (and the heirs, executors or administrators of such person) who was or is a party or is threatened to be made a party to, or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless by the corporation to the fullest extent permitted by Delaware law. The right to indemnification conferred in this ARTICLE EIGHTH shall also include the right to be paid by the corporation the expenses incurred in connection with any such proceeding in advance of its final disposition to the fullest extent authorized by Delaware law. The right to indemnification conferred in this ARTICLE EIGHTH shall be a contract right. (b) The corporation may, by action of its Board of Directors, provide indemnification to such of the employees and agents of the corporation to such extent and to such effect as the Board of Directors shall determine to be appropriate and authorized by Delaware law. (3) The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was servicing at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss incurred by such person in any such capacity or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under Delaware law. (4) The rights and authority conferred in this ARTICLE EIGHTH shall not be exclusive of any other right which any person may otherwise have or hereafter acquire. (5) Neither the amendment nor repeal of this ARTICLE EIGHTH, nor the adoption of any provision of this certificate of incorporation or the bylaws of the corporation, nor, to the fullest extent permitted by law, any modification of Delaware law, shall eliminate or reduce the effect of this ARTICLE EIGHTH in respect of any acts or omissions occurring prior to such amendment, repeal, adoption or modification. IN WITNESS WHEREOF, the undersigned, being the Incorporator herein before named, has executed, signed and acknowledged this certificate of incorporation as of the 11th day of June, 2002. /s/ Michael W. Zelenty ___________________________________ Michael W. Zelenty, Incorporator 2 EX-3.30 6 y61170exv3w30.txt BY-LAWS EXHIBIT 3.30 BYLAWS OF TP/ELM ACQUISITION SUBSIDIARY, INC. (A Delaware corporation) TABLE OF CONTENTS
PAGE ARTICLE I - CORPORATE OFFICES............................................. 1 1.1 REGISTERED OFFICE........................................... 1 1.2 OTHER OFFICES............................................... 1 ARTICLE II - MEETINGS OF STOCKHOLDERS..................................... 1 2.1 PLACE OF MEETINGS........................................... 1 2.2 ANNUAL MEETING.............................................. 1 2.3 SPECIAL MEETING............................................. 1 2.4 NOTICE OF STOCKHOLDERS' MEETINGS............................ 2 2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE................ 2 2.6 QUORUM...................................................... 2 2.7 ADJOURNED MEETING; NOTICE................................... 3 2.8 CONDUCT OF BUSINESS......................................... 3 2.9 VOTING...................................................... 3 2.10 WAIVER OF NOTICE............................................ 3 2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING....................................... 3 2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS................................. 4 2.13 PROXIES..................................................... 5 ARTICLE III - DIRECTORS................................................... 5 3.1 POWERS...................................................... 5 3.2 NUMBER OF DIRECTORS......................................... 5 3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS..................................... 5 3.4 RESIGNATION AND VACANCIES................................... 5 3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.................... 6 3.6 REGULAR MEETINGS............................................ 6 3.7 SPECIAL MEETINGS; NOTICE.................................... 6 3.8 QUORUM...................................................... 7 3.9 WAIVER OF NOTICE............................................ 7 3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING....................................... 7 3.11 FEES AND COMPENSATION OF DIRECTORS.......................... 7 3.12 APPROVAL OF LOANS TO OFFICERS............................... 8 3.13 REMOVAL OF DIRECTORS........................................ 8 3.14 CHAIRMAN OF THE BOARD OF DIRECTORS.......................... 8
-i- ARTICLE IV - COMMITTEES................................................... 8 4.1 COMMITTEES OF DIRECTORS..................................... 8 4.2 COMMITTEE MINUTES........................................... 9 4.3 MEETINGS AND ACTION OF COMMITTEES........................... 9 ARTICLE V - OFFICERS 9 5.1 OFFICERS.................................................... 9 5.2 APPOINTMENT OF OFFICERS..................................... 9 5.3 SUBORDINATE OFFICERS........................................ 10 5.4 REMOVAL AND RESIGNATION OF OFFICERS......................... 10 5.5 VACANCIES IN OFFICES........................................ 10 5.6 CHIEF EXECUTIVE OFFICER..................................... 10 5.7 PRESIDENT................................................... 10 5.8 VICE PRESIDENTS............................................. 11 5.9 SECRETARY................................................... 11 5.1O REPRESENTATION OF SHARES OF OTHER CORPORATIONS.............. 11 5.11 AUTHORITY AND DUTIES OF OFFICERS............................ 11 ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS...................................... 12 6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS................... 12 6.2 INDEMNIFICATION OF OTHERS................................... 12 6.3 INSURANCE................................................... 12 ARTICLE VII - RECORDS AND REPORTS......................................... 13 7.1 MAINTENANCE AND INSPECTION OF RECORDS....................... 13 7.2 INSPECTION BY DIRECTORS..................................... 13 7.3 ANNUAL STATEMENT TO STOCKHOLDERS............................ 13 ARTICLE VIII - GENERAL MATTERS............................................ 13 8.1 CHECKS...................................................... 13 8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS......................................... 14 8.3 STOCK CERTIFICATES; PARTLY PAID SHARES...................... 14 8.4 SPECIAL DESIGNATION ON CERTIFICATES......................... 14 8.5 LOST CERTIFICATES........................................... 15 8.6 CONSTRUCTION; DEFINITIONS................................... 15 8.7 DIVIDENDS................................................... 15 8.8 FISCAL YEAR................................................. 15 8.9 SEAL........................................................ 15 8.10 TRANSFER OF STOCK........................................... 16
-ii- 8.11 STOCK TRANSFER AGREEMENTS................................... 16 8.12 REGISTERED STOCKHOLDERS..................................... 16 ARTICLE IX - AMENDMENTS................................................... 16 ARTICLE X - DISSOLUTION................................................... 16 ARTICLE XI - CUSTODIAN.................................................... 17 11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES................. 17 11.2 DUTIES OF CUSTODIAN......................................... 17
-iii- BYLAWS OF TP/ELM ACQUISITION SUBSIDIARY, INC. ARTICLE I CORPORATE OFFICES 1.1 REGISTERED OFFICE The registered office of the corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. The name of the registered agent of the corporation at such location is Corporation Services Company. 1.2 OTHER OFFICES The board of directors may at any time establish other offices at any place or places where the corporation is qualified to do business. ARTICLE II MEETINGS OF STOCKHOLDERS 2.1 PLACE OF MEETINGS Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the person or persons calling the meetings. In the absence of any such designation, stockholders' meetings shall be held at the registered office of the corporation. 2.2 ANNUAL MEETING The annual meeting of stockholders shall be held each year at such date, time and place, either within or without the State of Delaware, as may be designated by resolution of the board of directors from time to time. At the meeting, directors shall be elected and any other proper business may be transacted. 2.3 SPECIAL MEETING A special meeting of the stockholders may be called at any time by the board of directors, the chairman of the board, the president or one or more stockholders holding shares in the aggregate entitled to cast not less than twenty percent of the votes at the meeting. -1- If a special meeting is called by any person or persons other than the board of directors, the president or the chairman of the board, the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the chairman of the board, the president, any vice president, or the secretary of the corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The officer receiving the request shall cause notice to be promptly given to the stockholders entitled to vote, in accordance with the provisions of Sections 2.4 and 2.5 of this Article II, that a meeting will be held at the time requested by the person or persons calling the meeting, not less than ten (10) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after the receipt of the request, the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the board of directors may be held. 2.4 NOTICE OF STOCKHOLDERS' MEETINGS All notices of meetings with stockholders shall be in writing and shall be sent or otherwise given in accordance with Section 2.5 of these bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, date, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. 2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE Written notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the corporation. An affidavit of the secretary or an assistant secretary or of the transfer agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. 2.6 QUORUM The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the Chairman of the meeting or (ii) the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed. 2.7 ADJOURNED MEETING; NOTICE When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place thereof are -2- announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 2.8 CONDUCT OF BUSINESS The Chairman of any meeting of stockholders shall determine the order of business at the procedure at the meeting, including such regulation of the manner of voting and the conduct of business. 2.9 VOTING The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.13 of these bylaws, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners of stock and to voting trusts and other voting agreements). Except as may be otherwise provided in the certificate of incorporation, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder. 2.10 WAIVER OF NOTICE Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation of these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws. 2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING Unless otherwise provided in the certificate of incorporation, any action required by this chapter to be taken at any annual or special meeting of stockholders of the corporation, or any action that may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice, and without a vote if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. If the action which is consented to is such as would have required the filing of a -3- certificate under any section of the General Corporation Law of Delaware if such action had been voted on by stockholders at a meeting thereof, then the certificate filed under section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written notice and written consent have been given as provided in Section 228 of the General Corporation Law of Delaware. 2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. If the board of directors does not so fix a record date: (i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (ii) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the board of directors is necessary, shall be the day on which the first written consent is expressed. (iii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. 2.13 PROXIES Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by a written proxy, signed by the stockholder and filed with the secretary of the corporation, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if the stockholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the stockholder or the stockholder's attorney-in-fact. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(c) of the General Corporation Law of Delaware. -4- ARTICLE III DIRECTORS 3.1 POWERS Subject to the provisions of the General Corporation Law of Delaware and any limitations in the certificate of incorporation or these bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors. 3.2 NUMBER OF DIRECTORS The board of directors shall consist of at least one (1) person and no more than ten (10) persons until changed by a proper amendment of this Section 3.2. No reduction of the authorized number of directors shall have the effect of removing any director before that director's term of office expires. 3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS Except as provided in Section 3.4 of these bylaws, directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws, wherein other qualifications for directors may be prescribed. Each director, including a director elected to fill a vacancy, shall hold office until his successor is elected and qualified or until his earlier resignation or removal. Elections of directors need not be by written ballot. 3.4 RESIGNATION AND VACANCIES Any director may resign at any time upon written notice to the attention of the Secretary of the corporation. When one or more directors so resigns and the resignation is effective at a future date, such vacancy, or any vacancy occurring as a result of a newly created directorship shall be filled in the following manner, unless otherwise provided in the certificate of incorporation or these bylaws: (i) Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote may be filled by a majority of the directors then in office elected by all of the stockholders having a right to vote, although less than a quorum, or by a sole remaining director, provided, however, that in the event there remain no directors elected by all of the stockholders having the right to vote, the holders of the stock of the corporation shall elect a director or directors to fill such vacancy or newly created directorship in accordance with the provisions of Article II of these bylaws and the certificate of incorporation. -5- (ii) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected, provided, however, that in the event there remain no directors elected by any such class or classes or series, the holders of such class or classes or series shall elect a director or directors to fill such vacancy or newly created directorship in accordance with the provisions of Article II of these bylaws and the certificate of incorporation. If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of Article II of these bylaws and the certificate of incorporation, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the General Corporation Law of Delaware. 3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE The board of directors of the corporation may hold meetings, both regular and special, either within or outside the State of Delaware. Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. 3.6 REGULAR MEETINGS Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board. 3.7 SPECIAL MEETINGS; NOTICE Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board, the president, any vice president, the secretary or any director. Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at that director's address as it is shown on the records of the corporation. If the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. If the notice is delivered personally or by telephone or by telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of -6- the director who the person giving the notice has reason to believe will promptly communicate it to the director. 3.8 QUORUM At all meetings of the board of directors, a majority of the authorized number of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum is not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting. 3.9 WAIVER OF NOTICE Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice, Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws. 3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the board or committee. 3.11 FEES AND COMPENSATION OF DIRECTORS Unless otherwise restricted by the certificate of incorporation or these bylaws, the board of directors shall have the authority to fix the compensation of directors. No such compensation shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. -7- 3.12 APPROVAL OF LOANS TO OFFICERS Subject to the unanimous approval of the directors, the corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. 3.13 REMOVAL OF DIRECTORS Unless otherwise restricted by statute, by the certificate of incorporation or by these bylaws, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote with respect to the election of such director or directors, as provided in the certificate of incorporation. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director's term of office. 3.14 CHAIRMAN OF THE BOARD OF DIRECTORS The corporation may also have, at the discretion of the board of directors, a chairman of the board of directors who shall not be considered an officer of the corporation. ARTICLE IV COMMITTEES 4.1 COMMITTEES OF DIRECTORS The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, with each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the board of directors or in the bylaws of the corporation, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) amend the certificate of incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the board of directors as provided in Section 151 (a) of the General Corporation Law of Delaware, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class -8- or classes of stock of the corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), (ii) adopt an agreement of merger or consolidation under Sections 251 or 252 of the General Corporation Law of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, (iv) recommend to the stockholders a dissolution of the corporation or a revocation of a dissolution, or (v) amend the bylaws of the corporation; and, unless the board resolution establishing the committee, the bylaws or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law of Delaware. 4.2 COMMITTEE MINUTES Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. 4.3 MEETINGS AND ACTION OF COMMITTEES Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, Section 3.5 (place of meetings and meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and Section 3. 10 (action without a meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members; provided, however, that the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee, that special meetings of committees may also be called by resolution of the board of directors and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws. ARTICLE V OFFICERS 5.1 OFFICERS The officers of the corporation shall be a chief executive officer, a president, and a secretary. The corporation may also have, at the discretion of the board of directors, one or more vice presidents, one or more assistant secretaries, and any such other officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws. Any number of offices may be held by the same person. 5.2 APPOINTMENT OF OFFICERS The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall be appointed by the board of directors, subject to the rights, if any, of an officer under any contract of employment. -9- 5.3 OTHER OFFICERS The board of directors may appoint, or empower the chief executive officer to appoint, such other officers and agents as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine. 5.4 REMOVAL AND RESIGNATION OF OFFICERS Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the board of directors at any regular or special meeting of the board or, except in the case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors. Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party. 5.5 VACANCIES IN OFFICES Any vacancy occurring in any office of the corporation shall be filled by the board of directors. 5.6 CHIEF EXECUTIVE OFFICER Subject to these By-laws and the direction of the Board of Directors, the Chief Executive Officer, with the President, shall have the responsibility for management and direction of the Corporation and all such powers that are commonly incident to the office of chief executive. He shall have the authority to execute all contracts and instruments, as well as stock certificates in the name of the Corporation. The Chief Executive Officer shall preside at all meetings of the Board of Directors or the shareholders, unless the Board otherwise provides. 5.7 PRESIDENT The President shall be the chief operating officer of the corporation. Subject to these By-laws and the direction of the Board of Directors, he or she shall have the responsibility for the general management and control of the business and affairs of the Corporation and shall perform all duties and have all powers which are commonly incident to the office of president or which are delegated to him or her by the Board of Directors. He or she shall have the power to sign all stock certificates, contracts and other instruments of the Corporation which are authorized and shall have general supervision and direction of all of the other officers, employees, and agents of the Corporation. -10- 5.8 VICE PRESIDENTS In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, these bylaws, the president or the chairman of the board. 5.9 SECRETARY The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and stockholders. The minutes shall show the time and place of each meeting, the names of those present at directors' meetings or committee meetings, the number of shares present or represented at stockholders' meetings, and the proceedings thereof. The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation's transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation. The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the board of directors required to be given by law or by these bylaws. He shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these bylaws. 5.10 REPRESENTATION OF SHARES OF OTHER CORPORATIONS The chairman of the board, the chief executive officer, the president, any vice president, the secretary or assistant secretary of this corporation, or any other person authorized by the board of directors or the chief executive officer, president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority. 5.11 AUTHORITY AND DUTIES OF OFFICERS In addition to the foregoing authority and duties, all officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the board of directors or the stockholders. -11- ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS 6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS The corporation shall, to the maximum extent and in the manner permitted by the General Corporation Law of Delaware, indemnify each of its directors and officers against expenses (including attorneys' fees), judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 6. 1, a "director" or "officer" of the corporation includes any person (i) who is or was a director or officer of the corporation, (ii) who is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was a director or officer of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation. 6.2 INDEMNIFICATION OF OTHERS The corporation shall have the power, to the maximum extent and in the manner permitted by the General Corporation Law of Delaware, to indemnify each of its employees and agents (other than directors and officers) against expenses (including attorneys' fees), judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 6.2, an "employee" or "agent" of the corporation (other than a director or officer) includes any person (i) who is or was an employee or agent of the corporation, (ii) who is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was an employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation. 6.3 INSURANCE The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the provisions of the General Corporation Law of Delaware. -12- ARTICLE VII RECORDS AND REPORTS 7.1 MAINTENANCE AND INSPECTION OF RECORDS The corporation shall, either at its principal executive offices or at such place or places as designated by the board of directors, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these bylaws as amended to date, accounting books, and other records. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business. 7.2 INSPECTION BY DIRECTORS Any director shall have the right to examine the corporation's stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper. 7.3 ANNUAL STATEMENT TO STOCKHOLDERS The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation. ARTICLE VIII GENERAL MATTERS 8.1 CHECKS From time to time, the board of directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments. -13- 8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS The board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount. 8.3 STOCK CERTIFICATES; PARTLY PAID SHARES The shares of a corporation shall be represented by certificates, provided that the board of directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption of such a resolution by the board of directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation by the chairman or vice-chairman of the board of directors, or the chief executive officer, or the president or vice-president, or the secretary or an assistant secretary of such corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon. 8.4 SPECIAL DESIGNATION ON CERTIFICATES If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock a statement that the corporation will furnish without charge to each -14- stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. 8.5 LOST CERTIFICATES Except as provided in this Section 8.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and canceled at the same time. The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares. 8.6 CONSTRUCTION; DEFINITIONS Unless the context requires otherwise, the general provisions, rules or construction, and definitions in the Delaware General Corporation Law shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term "person" includes both a corporation and a natural person. 8.7 DIVIDENDS The directors of the corporation, subject to any restrictions contained in (i) the General Corporation Law of Delaware or (ii) the certificate of incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property, or in shares of the corporation's capital stock. The directors of the corporation may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the corporation, and meeting contingencies. 8.8 FISCAL YEAR The fiscal year of the corporation shall be fixed by resolution of the board of directors and may be changed by the board of directors. 8.9 SEAL The corporation may adopt a corporate seal, which may be altered at pleasure, and may use the same by causing it or a facsimile thereof, to be impressed or affixed or in any other manner reproduced. -15- 8.10 TRANSFER OF STOCK Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction in its books. 8.11 STOCK TRANSFER AGREEMENTS The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the General Corporation Law of Delaware. 8.12 REGISTERED STOCKHOLDERS The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments the person registered on its books as the Owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE IX AMENDMENTS The bylaws of the corporation may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws. ARTICLE X DISSOLUTION If it should be deemed advisable in the judgment of the board of directors of the corporation that the corporation should be dissolved, the board, after the adoption of a resolution to that effect by a majority of the whole board at any meeting called for that purpose, shall cause notice to be mailed to each stockholder entitled to vote thereon of the adoption of the resolution and of a meeting of stockholders to take action upon the resolution. At the meeting a vote shall be taken for and against the proposed dissolution. If a majority of the outstanding stock of the corporation entitled to vote thereon votes for the pro- posed dissolution, then a certificate stating that the dissolution has been authorized in accordance with the provisions of Section 275 of the General Corporation Law of Delaware and setting forth the names and residences of the directors and officers shall be executed, acknowledged, and filed -16- and shall become effective in accordance with Section 103 of the General Corporation Law of Delaware. Upon such certificate's becoming effective in accordance with Section 103 of the General Corporation Law of Delaware, the corporation shall be dissolved. Whenever all the stockholders entitled to vote on a dissolution consent in writing, either in person or by duly authorized attorney, to a dissolution, no meeting of directors or stockholders shall be necessary. The consent shall be filed and shall become effective in accordance with Section 103 of the General Corporation Law of Delaware. Upon such consent's becoming effective in accordance with Section 103 of the General Corporation Law of Delaware, the corporation shall be dissolved. If the consent is signed by an attorney, then the original power of attorney or a photocopy thereof shall be attached to and filed with the consent. The consent filed with the Secretary of State shall have attached to it the affidavit of the secretary or some other officer of the corporation stating that the consent has been signed by or on behalf of all the stockholders entitled to vote on a dissolution; in addition, there shall be attached to the consent a certification by the secretary or some other officer of the corporation setting forth the names and residences of the directors and officers of the corporation. ARTICLE XI CUSTODIAN 11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES The Court of Chancery, upon application of any stockholder, may appoint one or more persons to be custodians and, if the corporation is insolvent, to be receivers, of and for the corporation when: (i) at any meeting held for the election of directors the stockholders are so divided that they have failed to elect successors to directors whose terms have expired or would have expired upon qualification of their successors; or (ii) the business of the corporation is suffering or is threatened with irreparable injury because the directors are so divided respecting the management of the affairs of the corporation that the required vote for action by the board of directors cannot be obtained and the stockholders are unable to terminate this division; or (iii) the corporation has abandoned its business and has failed within a reasonable time to take steps to dissolve, liquidate or distribute its assets. 11.2 DUTIES OF CUSTODIAN The custodian shall have all the powers and title of a receiver appointed under Section 291 of the General Corporation Law of Delaware, but the authority of the custodian shall be to continue the business of the corporation and not to liquidate its affairs and distribute its assets, except when the Court of Chancery otherwise orders and except in cases arising under Sections 226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware. -17- EX-4.2 7 y61170exv4w2.txt FIRST SUPPLEMENTAL INDENTURE EXHIBIT 4.2 SUPPLEMENTAL INDENTURE dated as of May 6, 2002 among Tekni-Plex, Inc. TPI Acquisition Subsidiary, Inc. and HSBC Bank USA as Trustee 12 3/4% Senior Subordinated Notes due June 15, 2010 THIS SUPPLEMENTAL INDENTURE (this "SUPPLEMENTAL INDENTURE"), entered into as of May 6, 2002, among Tekni-Plex, Inc., a Delaware corporation (the "COMPANY"), TPI Acquisition Subsidiary, Inc. ("TPI"), and HSBC Bank USA, as trustee (the "TRUSTEE"). RECITALS WHEREAS, the Company, the Guarantors party thereto and the Trustee entered into the Indenture, dated as of June 21, 2000 (the "INDENTURE"), relating to the Company's 12 3/4% Senior Subordinated Notes due June 15, 2010 (the "NOTES"); WHEREAS, as a condition to the Trustee entering into the Indenture and the purchase of the Notes by the Holders, the Company agreed pursuant to the Indenture to cause any newly acquired or created Domestic Restricted Subsidiaries to provide Guaranties. AGREEMENT NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and intending to be legally bound, the parties to this Supplemental Indenture hereby agree as follows: SECTION 1. Capitalized terms used herein and not otherwise defined herein are used as defined in the Indenture. SECTION 2. TPI, by its execution of this Supplemental Indenture, agrees to be a Guarantor under the Indenture and to be bound by the terms of the Indenture applicable to Guarantors, including, but not limited to, Article 11 and Article 12 thereof. SECTION 3. This Supplemental Indenture shall be governed by and construed in accordance with the laws of the State of New York. SECTION 4. This Supplemental Indenture may be signed in various counterparts which together will constitute one and the same instrument. SECTION 5. This Supplemental Indenture is an amendment supplemental to the Indenture and the Indenture and this Supplemental Indenture will henceforth be read together. 2 SECTION 6. The Trustee makes no representation and shall have no responsibility as to the validity of this Supplemental Indenture or the proper authorization or the due execution hereof by the Company or TPI. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written. 3 TEKNI-PLEX, INC., as Issuer By: /s/ JAMES E. CONDON --------------------------------- Name: James E. Condon Title: Chief Financial Officer TPI ACQUISITION SUBSIDIARY, INC. By: /s/ F. PATRICK SMITH --------------------------------- Name: F. Patrick Smith Title: Chief Executive Officer HSBC BANK USA, as Trustee By: /s/ FRANK J. GODINO --------------------------------- Name: Frank J. Godino Title: Vice President 4 EX-4.3 8 y61170exv4w3.txt SECOND SUPPLEMENTAL INDENTURE Exhibit 4.3 SECOND SUPPLEMENTAL INDENTURE dated as of August 22, 2002 among Tekni-Plex, Inc. TP/Elm Acquisition Subsidiary, Inc. and HSBC Bank USA as Trustee ___________________________ 12 3/4% Senior Subordinated Notes due June 15, 2010 THIS SUPPLEMENTAL INDENTURE (this "SUPPLEMENTAL INDENTURE"), entered into as of August 22, 2002, among Tekni-Plex, Inc., a Delaware corporation (the "COMPANY"), TP/Elm Acquisition Subsidiary, Inc. ("TP/ELM"), and HSBC Bank USA, as trustee (the "TRUSTEE"). RECITALS WHEREAS, the Company, the Guarantors party thereto and the Trustee entered into the Indenture, dated as of June 21, 2000 (the "INDENTURE"), relating to the Company's 12 3/4% Senior Subordinated Notes due June 15, 2010 (the "NOTES"); WHEREAS, as a condition to the Trustee entering into the Indenture and the purchase of the Notes by the Holders, the Company agreed pursuant to the Indenture to cause any newly acquired or created Domestic Restricted Subsidiaries to provide Guaranties. AGREEMENT NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and intending to be legally bound, the parties to this Supplemental Indenture hereby agree as follows: SECTION 1. Capitalized terms used herein and not otherwise defined herein are used as defined in the Indenture. SECTION 2. TP/Elm, by its execution of this Supplemental Indenture, agrees to be a Guarantor under the Indenture and to be bound by the terms of the Indenture applicable to Guarantors, including, but not limited to, Article 11 and Article 12 thereof. SECTION 3. This Supplemental Indenture shall be governed by and construed in accordance with the laws of the State of New York. SECTION 4. This Supplemental Indenture may be signed in various counterparts which together will constitute one and the same instrument. SECTION 5. This Supplemental Indenture is an amendment supplemental to the Indenture and the Indenture and this Supplemental Indenture will henceforth be read together. 2 SECTION 6. The Trustee makes no representation and shall have no responsibility as to the validity of this Supplemental Indenture or the proper authorization or the due execution hereof by the Company or TP/Elm. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written. 3 TEKNI-PLEX, INC., as Issuer By: /s/ F. Patrick Smith ________________________________ Name: F. Patrick Smith Title: Chief Executive Officer TP/ELM ACQUISITION SUBSIDIARY, INC. By: /s/ F. Patrick Smith _________________________________ Name: F. Patrick Smith Title: Chief Executive Officer HSBC BANK USA, as Trustee By: /s/ Frank J. Godino _________________________________ Name: Frank J. Godino Title: Vice President 4 EX-4.5 9 y61170exv4w5.txt PURCHASE AGREEMENT EXHIBIT 4.5 TEKNI-PLEX, INC. $40,000,000 12 3/4% Senior Subordinated Notes due 2010 Purchase Agreement May 1, 2002 LEHMAN BROTHERS INC. 745 Seventh Avenue New York, New York 10019 Ladies and Gentlemen: Tekni-Plex, Inc., a corporation formed under the laws of Delaware (the "Company"), proposes to issue and sell (the "Offering") to Lehman Brothers Inc. (the "Initial Purchaser") $40,000,000 principal amount of its 12 3/4% Senior Subordinated Notes due 2010 (the "Notes"). The Notes will be issued pursuant to the provisions of an Indenture dated as of June 21, 2000 (the "Indenture") among the Company, the Guarantors (as defined) and HSBC Bank USA, as trustee (the "Trustee"). The Notes will be guaranteed (the "Guarantee" and, collectively with the Notes, the "Securities") on a senior subordinated basis by each of the domestic subsidiaries of the Company listed on Schedule A attached hereto (the "Guarantors"). The sale of the Securities to the Initial Purchaser will be made without registration of the Securities under the Securities Act of 1933, as amended (the "Act" or the "Securities Act"), in reliance upon the exemption therefrom provided by Section 4(2) of the Act. Holders of the Securities will have the benefits of a Registration Rights Agreement to be dated as of May 6, 2002 among the Company, the Guarantors and the Initial Purchaser, substantially in the form attached hereto as Exhibit A (the "Registration Rights Agreement") pursuant to which the Issuers will agree to file with the Securities and Exchange Commission (the "Commission") (i) a registration statement under the Securities Act (the "Exchange Registration Statement") registering an issue of senior subordinated notes of the Company which are identical in all material respects to the Securities (except that the Exchange Notes will not contain terms with respect to transfer restrictions or liquidated damages) (such notes, together with any Private Exchange Securities (as defined in the Registration Rights Agreement), are referred to herein as the "Exchange Notes") and (ii) under certain limited circumstances, a shelf registration statement with respect to the resale of the Securities pursuant to Rule 415 under the Securities Act (the "Shelf Registration Statement"). This Agreement, the Indenture, the Notes, the Exchange Notes and the Registration Rights Agreement and the Guarantees are collectively referred to herein as the "Offering Agreements." The Company and the Guarantors hereby agree, jointly and severally, with the Initial Purchaser as follows: 1. The Company agrees to issue and sell the Notes and the Guarantors agree to issue the Guarantees to the Initial Purchaser as hereinafter provided, and the Initial Purchaser, upon the basis of the representations and warranties herein contained, but subject to the conditions hereinafter stated, agrees to purchase from the Company all of the Securities at a price (the "Purchase Price") equal to 101.5% of their principal amount. No additional consideration shall be paid by the Initial Purchaser for the Guarantee. 2. The Company and the Guarantors understand that the Initial Purchaser intends (x) to offer privately the Securities as soon after this Agreement has become effective as in the judgment of the Initial Purchaser is advisable and (y) initially to offer the Securities upon the terms set forth in the Offering Memorandum (as defined below): The Company and the Guarantors confirm that they have authorized the Initial Purchaser, subject to the restrictions set forth below, to distribute copies of the Offering Memorandum in connection with the offering of the Securities. The Initial Purchaser hereby makes to the Company and the Guarantors the following representations and agreements (i) it is a qualified institutional buyer within the meaning of Rule 144A under the Act; and (ii) (A) it will not solicit offers for, or offer to sell, the Securities by any form of general solicitation or general advertising (as those terms are used in Regulation D under the Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Act, (B) it will solicit offers for the Securities only from, and will offer, sell or deliver the Securities only to, (1) persons whom it reasonably believes to be "qualified institutional buyers" within the meaning of Rule 144A under the Act to whom notice has been given that such offer, sale or delivery is being made in reliance on Rule 144A in transactions under Rule 144A or (2) upon the terms and conditions set forth in Annex I to this Agreement, and (C) it is not purchasing with a view to or for offer or sale in connection with any distribution that would be in violation of federal or state law. 3. Payment for the Securities shall be made by wire transfer in immediately available funds, to the account specified by the Company to the Initial Purchaser no later than noon on the Business Day (as defined below) prior to the Closing Date (as defined below), on May 6, 2002, or at such other time on the same or such other date, not later than the fifth Business Day thereafter, as the Initial Purchaser and the Company may agree upon in writing. The time and date of such payment are referred to herein as the "Closing Date". As used herein, the term "Business Day" means any day other than a day on which banks are permitted or required to be closed in New York City. Payment for the Securities shall be made against delivery to the nominee of The Depository Trust Company for the account of the Initial Purchaser of one or more global notes representing the Securities (collectively, the "Global Notes"), with any transfer taxes payable in 2 connection with the transfer to the Initial Purchaser of the Securities duly paid by the Company. The Global Notes will be made available for inspection by the Initial Purchaser at the office of Lehman Brothers Inc. at the address set forth above, or at such other location as the Company and the Initial Purchaser agree, not later than 1:00 P.M., New York City time, on the Business Day prior to the Closing Date. 4. Each of the Company and each Guarantor represents and warrants to the Initial Purchaser that: (a) an offering memorandum, dated May 1, 2002 (the "Offering Memorandum") has been prepared in connection with the offering of the Securities. Any reference to the Offering Memorandum shall be deemed to refer to and include (i) any Rule 144A(d)(4) Information (as defined in Section 5(m)) furnished by the Company prior to the completion of the distribution of the Securities and (ii) the Company's most recent Annual Report on Form 10-K and all subsequent documents filed with the Commission pursuant to Section 13(a), 13(c) or 15(d) of the United States Securities Exchange Act of 1934, as amended (the "Exchange Act") on or prior to the date of the Offering Memorandum. Any reference to the Offering Memorandum, as amended or supplemented, as of any specified date, shall be deemed to refer to and include (i) any documents filed with the Commission pursuant to the Exchange Act after the date of the Offering Memorandum and prior to such specified date. All documents filed under the Exchange Act and so deemed to be included in the Offering Memorandum or any amendment or supplement thereto are hereinafter referred to as the "Incorporated Documents." The Offering Memorandum and any amendments or supplements thereto did not and will not, as of their respective dates, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that this -------- representation and warranty does not apply to statements or omissions made in reliance upon and in conformity with information furnished in writing by the Initial Purchaser relating to the Initial Purchaser to the Company expressly for use in the Offering Memorandum or any amendment or supplement thereto; (b) the financial statements, and the related notes thereto, included in the Offering Memorandum present fairly the consolidated financial position of each of the Company and its consolidated subsidiaries and of PureTec Corporation and its consolidated subsidiaries, as of the dates indicated and the results of their operations and the changes in their consolidated cash flows for the periods specified; said financial statements have been prepared in conformity with generally accepted accounting principles and practices applied on a consistent basis; and the pro forma financial information, and the related notes thereto, included in the Offering Memorandum are based upon good faith estimates and assumptions believed by the Company to be reasonable; (c) since the respective dates as of which information is given in the Offering Memorandum, except as otherwise stated therein, there has not been any material change in the capital stock or long-term debt of the Company or the Subsidiaries (as defined below), or any material adverse change, or any development involving a prospective 3 material adverse change, in or affecting the business, condition (financial or other), results of operations or prospects of the Company and the Subsidiaries, taken as a whole (a "Material Adverse Change" or "Prospective Material Adverse Change", respectively), otherwise than as set forth or contemplated in the Offering Memorandum; and except as set forth or contemplated in the Offering Memorandum, neither the Company, nor any of the Subsidiaries, has entered into any transaction or agreement (whether or not in the ordinary course of business) material to the Company and the Subsidiaries, taken as a whole; (d) the Company has been duly incorporated and is validly existing as a corporation under the laws of its jurisdiction of incorporation, with power and authority (corporate and other) to own its properties and conduct its business as described in the Offering Memorandum, and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties, or conducts any business, so as to require such qualification, other than where the failure to be so qualified or in good standing would not have a material adverse effect on the business, condition (financial or other), results of operations or prospects of the Company and the Subsidiaries, taken as a whole (a "Material Adverse Effect"); the authorized, issued and outstanding capital stock of the Company, as set forth in the Offering Memorandum, is owned by the persons and in the amounts as set forth therein; the shares of issued and outstanding capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable; none of the outstanding shares of capital stock of the Company was issued in violation of any preemptive or other similar rights; (e) the Company has no subsidiaries other than those set forth on Schedule A attached hereto (each a "Subsidiary" and together, the "Subsidiaries"); each of the Subsidiaries has been duly incorporated and, unless otherwise indicated on Schedule A, is validly existing as a corporation under the laws of its jurisdiction of incorporation, with power and authority (corporate and other) to own its properties and conduct its business as described in the Offering Memorandum, and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each jurisdiction in which its owns or leases properties or conducts any business, so as to require such qualification, other than where the failure to be so qualified or in good standing would not have a Material Adverse Effect; and all the outstanding shares of capital stock of the Subsidiaries has been duly authorized and validly issued, are fully-paid and non-assessable under the corporate laws of the jurisdiction of incorporation, and (except as described in the Offering Memorandum) owned by the Company free and clear of all liens, encumbrances, security interests and claims; (f) this Agreement has been duly authorized, executed and delivered by the Company and the Guarantors and (assuming the due authorization, execution and delivery by the Initial Purchaser) will constitute a valid agreement of the Company and the Guarantors and, subject to (i) the effect of applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other laws affecting creditors' rights generally, (ii) general principles of equity and (iii) principles of public policy limiting the rights to enforce indemnification provisions (clauses (i), (ii) and (ii) being 4 referred to herein as the "Creditors' Rights Limitations"), will be binding and will be enforceable in accordance with its terms; and will conform, in all material respects, to the description thereof in the Offering Memorandum; (g) the Registration Rights Agreement has been duly authorized by each of the Company and the Guarantors, and when executed and delivered by them and (assuming the due authorization, execution and delivery by the Initial Purchaser) will constitute a valid agreement of the Company and the Guarantors and, subject to the Creditors' Rights Limitations, will be binding and will be enforceable in accordance with its terms; and will conform, in all material respects, to the description thereof in the Offering Memorandum; (h) the Notes and the Exchange Notes have been duly authorized by the Company, and when issued and delivered pursuant to this Agreement (and the Registration Rights Agreement in the case of the Exchange Notes), will have been duly executed, issued and delivered and, when the Notes and the Exchange Notes are authenticated by the Trustee in accordance with the terms of the Indenture (assuming the due authorization, execution and delivery by the Trustee) and are delivered to and paid for by the Initial Purchaser in accordance with the terms of this Agreement (and the Registration Rights Agreement in the case of the Exchange Notes), will constitute valid obligations of the Company entitled to the benefits provided by the Indenture and, subject to the Creditors' Rights Limitations, will be binding and will be enforceable in accordance with their terms; and the Securities will conform, in all material respects, to the descriptions thereof in the Offering Memorandum; (i) the Guarantees have been duly authorized by the Guarantors, and when the Notes or Exchange Notes, as the case may be, are issued and delivered pursuant to this Agreement (and the Registration Rights Agreement in the case of the Exchange Notes), will have been duly executed and delivered and, when the Notes or Exchange Notes, as the case may be, are authenticated by the Trustee in accordance with the terms of the Indenture (assuming the due authorization, execution and delivery by the Trustee) and are delivered to and paid for by the Initial Purchaser in accordance with the terms of this Agreement (and the Registration Rights Agreement in the case of the Exchange Notes), will constitute a valid obligation of the Guarantors and, subject to the Creditors' Rights Limitations, will be binding and will be enforceable in accordance with its terms; (j) the Indenture has been duly authorized by the Company and the Guarantors and, when executed and delivered by each of the Company and the Guarantors (assuming the due authorization, execution and delivery by the Trustee), the Indenture will constitute a valid instrument of the Company and each such Guarantor and, subject to the Creditors' Rights Limitations, will be binding and will be enforceable in accordance with its terms; and the Indenture will conform, in all material respects, to the descriptions thereof in the Offering Memorandum; (k) none of the transactions contemplated by this Agreement (including, without limitation, the use of the proceeds from the sale of the Securities) will violate or result in a violation of Section 7 of the Exchange Act, or any regulation promulgated 5 thereunder, including, without limitation, Regulations T, U, and X of the Board of Governors of the Federal Reserve System; (l) neither the Company nor any Subsidiary is, or with the giving of notice or lapse of time or both would be, in violation of or in default under its Certificate of Incorporation or By-Laws (or similar organizational documents) or any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it or any of its properties is bound, except for violations and defaults which individually and in the aggregate would not have a Material Adverse Effect or are not material to the holders of the Securities as such; the issue and sale of the Securities and the performance by each of the Company and the Guarantors of all of the provisions of their obligations under the Offering Agreements and the consummation of the transactions herein and therein contemplated will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any Guarantor is a party or by which the Company or any Guarantor is bound or to which any of the property or assets of the Company or any Guarantor is subject, except such as would not have a Material Adverse Effect, nor will any such action result in any violation of the provisions of the Certificate of Incorporation or By-Laws of the Company or any Guarantor or (assuming the accuracy of the representations by, and compliance with the agreements of, the Initial Purchaser set forth in paragraph 2 of this Agreement) any applicable law or statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company, any Guarantor or any of their respective properties; and no consent, approval, authorization, order, license, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Securities or the consummation by the Company or any Guarantor of the transactions contemplated by the Offering Agreements, except such consents, approvals, authorizations, registrations or qualifications as may be required under any state securities or Blue Sky Laws in connection with the purchase and distribution of the Securities by the Initial Purchaser and except as such as would not have a Material Adverse Effect; (m) other than as set forth or contemplated in the Offering Memorandum, there are no legal or governmental investigations, actions, suits or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or any of their respective properties or to which the Company or any Subsidiary is or may be a party or to which any property of the Company or any Subsidiary is or may be the subject which could individually or in the aggregate have, or reasonably be expected to have, a Material Adverse Effect and, to the best of the Company's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others; (n) neither the Company nor any affiliate (as defined in Rule 501(b) of Regulation D under the Act ("Regulation D")) of the Company has directly, or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as defined in the Act) which is or will be integrated with the sale of the 6 Securities in a manner that would require the registration under the Act of the offering contemplated by the Offering Memorandum; (o) neither the Company, the Guarantors nor any person (other than the Initial Purchaser, as to which the Company makes no representation) acting on their behalf has offered or sold the Securities by means of any general solicitation or general advertising within the meaning of Rule 502(c) under the Act or, with respect to Securities sold outside the United States to non-U.S. persons (as defined in Rule 902 under the Act), by means of any directed selling efforts within the meaning of Rule 902 under the Act and the Company, the Guarantors and any of their affiliates and any person (other than the Initial Purchaser) acting on their behalf has complied with and will implement the "offering restriction" within the meaning of such Rule 902; (p) neither the Company nor any of the Guarantors is, or will be after giving effect to the offering and sale of the Securities to be sold and the application of the proceeds from such sale (as described in the Offering Memorandum under the caption "Use of Proceeds"), an "investment company" as such term is defined in the Investment Company Act of 1940, as amended; (q) assuming that the representations of the Initial Purchaser set forth in paragraph 2 of this Agreement are true, correct and complete and assuming compliance by the Initial Purchaser with its agreements in paragraph 2 of this Agreement, it is not necessary in connection with the offer, sale and delivery of the Securities in the manner contemplated by this Agreement to register the Securities under the Act or to qualify an indenture under the Trust Indenture Act of 1939, as amended (the "TIA"); (r) the Securities satisfy the requirements set forth in Rule 144A(d)(3) under the Act; (s) BDO Seidman, LLP, who have certified certain financial statements of the Company and its subsidiaries, are independent public accountants as required by the Act; (t) the Company and the Subsidiaries have good and marketable title in fee simple to all material items of real property and good and marketable title to all material personal property owned by them, in each case free and clear of all liens, encumbrances and defects except such as are otherwise described or referred to in the Offering Memorandum or such as do not interfere with the use made or proposed to be made of such property by the Company and the Subsidiaries; and any real property and buildings held under lease by the Company or the Subsidiaries are held by them under valid, existing and enforceable leases (subject to the Creditors' Rights Limitations) with such exceptions as are not material and do not interfere with the use made or proposed to be made of such property and buildings by the Company or the Subsidiaries. The Company and the Subsidiaries own or possess, or have no reason to believe they cannot acquire on reasonable terms, adequate licenses or other rights to use all patents, trademarks, service marks, trade names, copyrights and know-how necessary to conduct the businesses now or proposed to be operated by them as described in the Offering Memorandum, except where the failure to own, possess or have the ability to acquire any such licenses or other 7 rights could not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect, and neither the Company nor any Subsidiary has received any written or, to the best knowledge of the Company, oral notice of infringement of or conflict with asserted rights of others with respect to any patents, trademarks, service marks, trade names, copyrights or know-how which, if such assertion of infringement or conflict were sustained, would have a Material Adverse Effect; (u) the Company and the Subsidiaries have filed all federal, state, local and foreign tax returns which have been required to be filed and have paid all taxes shown thereon and all assessments received by them or any of them to the extent that such taxes have become due and are not being contested in good faith except in any case where the failure to file or pay would not individually or in the aggregate have a Material Adverse Effect, and, except as disclosed in the Offering Memorandum, the Company has no knowledge of any material tax deficiency which has been or might reasonably be expected to be asserted or threatened against the Company; (v) each of the Company and each Subsidiary owns, possesses or has obtained all material licenses, permits, certificates, consents, orders, approvals and other authorizations from, and has made all declarations and filings with, all federal, state, local and other governmental authorities (including foreign regulatory agencies), all self-regulatory organizations and all courts and other tribunals, domestic or foreign, necessary to own or lease, as the case may be, and to operate its properties and to carry on its business as conducted as of the date hereof, except to the extent that the failure to so obtain or file, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, and neither the Company nor any Subsidiary has received any actual notice, or is not aware, of any proceeding relating to revocation or modification of any such license, permit, certificate, consent, order, approval or other authorization, except as described in the Offering Memorandum; and each of the Company and each Subsidiary is in compliance with all laws and regulations relating to the conduct of its business as of the date hereof; (w) there are no existing or, to the best knowledge of the Company, threatened labor disputes with the employees of the Company and the Subsidiaries which are likely to have a Material Adverse Effect; (x) each of the Company and each Subsidiary (i) is in compliance with any and all applicable federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii) has received all permits, licenses or other approvals required of it under applicable Environmental Laws to conduct its business and (iii) is in compliance or is in the process of complying with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with 8 Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties) would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; (y) each employee benefit plan, within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), that is maintained, administered or contributed to by the Company or any affiliates of the Company for employees or former employees of the Company and its affiliates has been maintained, in all material respects, in compliance with its terms and the requirements of any applicable statutes, orders, rules and regulations, including but not limited to ERISA and the Internal Revenue Code of 1986, as amended (the "Code"); no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code has occurred with respect to any such plan excluding transactions effected pursuant to a statutory or administrative exemption and excluding transactions which would not have a Material Adverse Effect; and for each such plan which is subject to the funding rules of Section 412 of the Code or Section 302 of ERISA no "accumulated funding deficiency" as defined in Section 412 of the Code has been incurred, whether or not waived, and the fair market value of the assets of each such plan which is subject to Title IV of ERISA (excluding for these purposes accrued but unpaid contributions) exceeded the present value of all benefits accrued under such plan as determined using reasonable actuarial assumptions; and (z) The Incorporated Documents, when they were or are filed with the Commission, conformed or will conform in all material respects to the applicable requirements of the Exchange Act and the applicable rules and regulations of the Commission thereunder. 5. Each of the Company and each Guarantor covenants and agrees with the Initial Purchaser as follows: (a) before distributing any amendment or supplement to the Offering Memorandum, to furnish to the Initial Purchaser a copy of the proposed amendment or supplement for review and not to distribute any such proposed amendment or supplement to which the Initial Purchaser reasonably objects; (b) if, at any time prior to the completion of the initial placement of the Securities, any event shall occur as a result of which it is necessary to amend or supplement the Offering Memorandum in order that the Offering Memorandum does not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances when the Offering Memorandum is delivered to a purchaser, not misleading, or if it is necessary to amend or supplement the Offering Memorandum to comply with law, forthwith to prepare and furnish, at the expense of the Company, to the Initial Purchaser and to the dealers (whose names and addresses the Initial Purchaser will furnish to the Company) to which Securities may have been sold by the Initial Purchaser on behalf of the Initial Purchaser and to any other dealers upon request, such amendments or supplements to the Offering Memorandum as may be necessary so that the Offering Memorandum as so amended or 9 supplemented will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances when the Offering Memorandum is delivered to a purchaser, not misleading or so that the Offering Memorandum will comply with law; (c) to cooperate with you and your counsel in connection with the registration or qualification of the Securities for offering and sale by the Initial Purchaser and by dealers under the securities or Blue Sky laws of such jurisdictions as you may designate and will file such consents to service of process or other documents necessary or appropriate in order to effect such registration or qualification; provided that in no event shall the Company or the Guarantors be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action that would subject it to taxation or service of process in suits, other than those arising out of the Offering or sale of the Securities, in any jurisdiction where it is not now so subject; (d) so long as the Securities are outstanding, to furnish to the Initial Purchaser copies of all reports or other communications (financial or other) furnished to holders of Securities, and copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange; (e) during the period beginning on the date hereof and continuing to and including the Business Day following the Closing Date, not to offer, sell, contract to sell, or otherwise dispose of any debt securities of or guaranteed by the Company or the Guarantors which are substantially similar to the Securities; (f) to use the net proceeds received by the Company from the sale of the Securities pursuant to this Agreement in the manner specified in the Offering Memorandum under the caption "Use of Proceeds" ; (g) if requested by you, to use its best efforts to cause such Securities to be eligible for the PORTAL trading system of the National Association of Securities Dealer, Inc.; (h) to furnish to the holders of the Securities as soon as practicable after the end of each fiscal year an annual report (including a balance sheet and statements of income, stockholders' equity and cash flows of the Company and the Subsidiaries certified by independent public accountants) and, as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the date of the Offering Memorandum), consolidated summary financial information of the Company and the Subsidiaries of such quarter in reasonable detail; (i) during the period of two years after the Closing Date, not to, and to use its best efforts not to permit any of its "affiliates" (as defined in Rule 144 under the Act) to, resell any of the Securities which constitute "restricted securities" under Rule 144 that have been reacquired by any of them; (j) whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated and in addition to any obligations they 10 may have under any other agreements with you and/or your affiliates, to pay or cause to be paid all costs and expenses incident to the performance of their obligations hereunder, including without limiting the generality of the foregoing, all costs and expenses (i) incident to the preparation, issuance, execution, authentication and delivery of the Securities, including any expenses of the Trustee, (ii) incident to the preparation, printing and distribution of the Offering Memorandum and any preliminary offering memorandum (including in each case all exhibits, amendments and supplements thereto), (iii) incurred in connection with the registration or qualification and determination of eligibility for investment of the Securities under the laws of such jurisdictions as the Initial Purchaser may designate (including fees of counsel for the Initial Purchaser and their disbursements), (iv) in connection with the application for eligibility for trading of the Securities in the PORTAL trading system, (v) in connection with the printing (including word processing and duplication costs) and delivery of this Agreement, the Indenture, the Registration Rights Agreement, the Blue Sky Memoranda and any Legal Investment Survey and the furnishing to the Initial Purchaser and dealers of copies of the Offering Memorandum, including mailing and shipping, as herein provided, (vi) payable to rating agencies in connection with the rating of the Securities, and (vii) incurred by the Company in connection with a "road show" presentation to potential investors; (k) to take all reasonable action that is appropriate or necessary to assure that its offerings of other securities will not be integrated for purposes of the Act with the offerings contemplated hereby; (l) not to solicit any offer to buy or offer to sell Securities by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D under the Act; (m) while the Securities remain outstanding and are "restricted securities" within the meaning of Rule 144(a)(3) under the Act, during any period in which it is not subject to Section 13 or 15(d) under the Exchange Act, to make available to the Initial Purchaser and any holder of Securities in connection with any sale thereof and any prospective purchaser of Securities, in each case upon request, the information specified in, and meeting the requirements of, Rule 144A(d)(4) ("Rule 144A(d)(4) Information") under the Act (or any successor thereto); and (n) not to take any action prohibited by Regulation M under the Exchange Act (or any successor provision), in connection with the distribution of the Securities contemplated hereby. 6. The obligations of the Initial Purchaser hereunder to purchase the Securities on the Closing Date are subject to the performance, in all material respects, by each of the Company and the Guarantors of their obligations hereunder and to the following additional conditions: (a) the representations and warranties of each of the Company and the Guarantors contained herein are true and correct on and as of the Closing Date as if made on and as of the Closing Date and each of the Company and the Guarantors shall have 11 complied, in all material respects, with all agreements and all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date; (b) subsequent to the execution and delivery of this Agreement and prior to the Closing Date, there shall not have occurred any downgrading, nor shall any notice have been given of (i) any downgrading, (ii) any intended or potential downgrading or (iii) any review or possible change that does not indicate an improvement, in the rating accorded any securities of or guaranteed by the Company by any "nationally recognized statistical rating organization", as such term is defined for purposes of Rule 436(g)(2) under the Act; (c) since the respective dates as of which information is given in the Offering Memorandum, except as otherwise stated therein, there shall not have been any material change in the capital stock or long-term debt of any of the Company or the Guarantors or any Material Adverse Change, or any development involving a Prospective Material Adverse Change, otherwise than as set forth or contemplated in the Offering Memorandum, the effect of which in the judgment of the Initial Purchaser makes it impracticable or inadvisable to proceed with the offering or the delivery of the Securities on the Closing Date on the terms and in the manner contemplated in the Offering Memorandum; and neither the Company nor the Subsidiaries has sustained since the date of the latest audited financial statements included in the Offering Memorandum any loss or interference with its respective business from fire, flood, hurricane, accident or other calamity, whether or not covered by insurance, or from any labor dispute or legal or governmental proceeding, which loss or interference, in the judgment of the Initial Purchaser, has had or has a Material Adverse Effect, otherwise than as set forth or contemplated in the Offering Memorandum; (d) the Initial Purchaser shall have received on and as of the Closing Date a certificate of the Company signed for the Company by an executive officer of the Company with specific knowledge about the Company's and Guarantors' financial matters, satisfactory to the Initial Purchaser to the effect set forth in subsections (a) and (b) of this Section and to the further effect that there has not occurred any Material Adverse Change, or any development involving a Prospective Material Adverse Change, from those set forth or contemplated in the Offering Memorandum; (e) Davis Polk & Wardwell, Counsel for the Company, shall have furnished to the Initial Purchaser their written opinion, dated the Closing Date in form and substance satisfactory to the Initial Purchaser, to the effect that: (i) the Company has been duly organized and is validly existing as a corporation in good standing under the laws of Delaware with the corporate power and authority to own its properties and conduct its business as described in the Offering Memorandum; (ii) each Guarantor organized under the laws of the State of Delaware or New York is a corporation validly existing under the laws of its jurisdiction of incorporation with power and authority to enter into the Offering Agreements; 12 (iii) to such counsel's knowledge, other than as set forth or contemplated in the Offering Memorandum, there are no legal or governmental investigations, actions, suits or proceedings (i) pending or threatened against or affecting the Company or the Subsidiaries or any of their respective properties or to which the Company or any Subsidiary is or may be a party or to which any property of the Company or any Subsidiary is or may be the subject which, if determined adversely to the Company or such Subsidiary, could individually or in the aggregate have, or reasonably be expected to have, a Material Adverse Effect or (ii) which seek to restrain, enjoin, prevent the consummation of or otherwise challenge the issuance or sale of the Securities in the manner contemplated by the Offering Memorandum or the consummation of the Offering or the Transactions; to such counsel's knowledge, no such proceedings are threatened by governmental authorities or by others; (iv) this Agreement has been duly authorized, executed and delivered by each of the Company and each Guarantor organized under the laws of the State of Delaware or New York; (v) the Registration Rights Agreement has been duly authorized, executed and delivered by each of the Company and each Guarantor organized under the laws of the State of Delaware or New York and is a valid agreement of each of the Company and each such Guarantor and, subject to the Creditors' Rights Limitations, is binding and is enforceable in accordance with its terms; (vi) the Guarantee has been duly authorized, executed and delivered by each Guarantor organized under the laws of the State of Delaware or New York and, and upon delivery to and payment for the Notes by the Initial Purchaser in accordance with the terms of this Agreement, will constitute a valid obligation of each such Guarantor and, subject to the Creditors' Rights Limitations, is binding and is enforceable against each such Guarantor in accordance with its terms; (vii) the Notes have been duly authorized, executed and delivered by the Company and, when duly authenticated in accordance with the terms of the Indenture and delivered to and paid for by the Initial Purchaser in accordance with the terms of this Agreement, will constitute valid obligations of the Company entitled to the benefits provided by the Indenture and, subject to the Creditors' Rights Limitations, are binding and are enforceable against the Company in accordance with their terms; (viii) the Indenture has been duly authorized, executed and delivered by the Company and each Guarantor organized under the laws of the State of Delaware or New York and (assuming the due authorization, execution and delivery by the Trustee) constitutes a valid agreement of the Company and each such Guarantor and, subject to the Creditors' Rights Limitations, is binding and is enforceable against the Company and each such Guarantor, respectively, in accordance with its terms; 13 (ix) other than the subject matter of subparagraphs (xi) and (xv), the issue and sale of the Securities and the performance by the Company and the Guarantors of their obligations under the Securities, the execution and delivery of the Offering Agreements and the consummation by the Company and the Guarantors of the transactions contemplated hereby and thereby will not conflict with or constitute or result in a breach or a default under or violation of any of (i) the terms or provisions of any indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument known to such counsel to which the Company or such Guarantor is a party or by which they or any of their properties is known by such counsel to be bound except as such as would not have a Material Adverse Effect, (ii) the Certificate of Incorporation or By-Laws of the Company or such Guarantor, or (iii) any applicable federal or New York statute or, to the best of such counsel's knowledge, any federal or New York order, rule or regulation of any federal or New York governmental agency or body having jurisdiction over the Company, the Guarantors or any of their respective properties or any judgment, decree or order of any court to which the Company or such Guarantor is a named party; (x) other than the subject matter of paragraph (xi), to their knowledge, no consent, approval, authorization, order, license, registration or qualification of or with any court or governmental agency or body is required for the issue and sale of the Securities or the consummation of the other transactions contemplated by this Agreement or the Indenture, except as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Securities or the Exchange Notes or the federal securities laws with respect to the Exchange Notes; (xi) no registration under the Act of the Securities is required in connection with the sale of the Securities to the Initial Purchaser as contemplated by this Agreement and the Offering Memorandum or in connection with the initial resale of the Securities by the Initial Purchaser in accordance with Section 2 (including Annex I) of this Agreement, and prior to the commencement of the Exchange Offer or the effectiveness of the Shelf Registration Statement, the Indenture is not required to be qualified under the TIA, in each case assuming (i) that the purchasers who buy the Securities in the initial resales are qualified institutional buyers (as defined in Rule 144A under the Act) or non-U.S. Persons (as defined in Rule 902 under the Act) and (ii) the accuracy of the Initial Purchaser's representations and those of the Company and the Guarantors contained in this Agreement regarding the absence of a general solicitation in connection with the sale of the Securities to the Initial Purchaser and the initial resales thereof (it being understood that such counsel need express no opinion as to any subsequent resale of any Notes); (xii) the Securities satisfy the requirements set forth in Rule 144A(d)(3) under the Act; 14 (xiii) the statements in the Offering Memorandum under "Description of Notes," insofar as such statements constitute a description of the legal matters, documents or proceedings referred to therein, fairly present the information called for with respect to such legal matters, documents or proceedings; (xiv) on the basis stated below, no facts have come to the attention of such counsel that lead such counsel to believe, except for the financial statements, related financial statement schedules, and other financial information contained in the Offering Memorandum as to which such counsel expresses no belief, that the Offering Memorandum, as of its date of issuance and, as amended or supplemented, if applicable, as of the Closing Date, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (xv) the Company is not and, after giving effect to the offering and sale of the Securities to be sold and the application of the proceeds from such sale (as described in the Offering Memorandum under the caption "Use of Proceeds") will not be, an "investment company" as defined in the Investment Company Act of 1940, as amended. In rendering such opinions, such counsel may rely (A) as to matters involving the application of laws other than the federal laws of the United States, the corporate law of the State of Delaware and the laws of the State of New York, to the extent such counsel deems proper and to the extent specified in such opinion, if at all, upon an opinion or opinions (reasonably satisfactory to the Initial Purchaser's counsel) of other counsel, reasonably acceptable to the Initial Purchaser's counsel, familiar with the applicable laws; and (B) as to matters of fact, to the extent such counsel deems proper, on the representations and warranties made by the Company and the Guarantors herein, and certificates and statements of public officials and officers and other representatives of the Company and the Guarantors (and such counsel has not independently verified or investigated, nor does such counsel assume any responsibility for, the factual accuracy or completeness of such representations and warranties or certificates or of such factual statements). The opinion of such counsel for the Company shall state that the opinion of any such other counsel upon which they relied is in form satisfactory to such counsel and, in such counsel's opinion, the Initial Purchaser and they are justified in relying thereon. With respect to the matters to be covered in subparagraph (xiv) above counsel may state that their opinion and belief is based upon their participation in the preparation of the Offering Memorandum and any amendment or supplement thereto, and that since such counsel has not conducted any independent investigation with regard to the information set forth in the Offering Memorandum and any amendment or supplement thereto, such counsel is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained therein except with respect to the opinions set forth in subparagraph (xiii) above. The opinion of Davis Polk & Wardwell described above shall be rendered to the Initial Purchaser at the request of the Company and shall so state therein. 15 (f) the Company shall have furnished to the Initial Purchaser a solvency certificate dated the Closing Date in form and substance satisfactory to the Initial Purchaser; (g) on the date of the issuance of the Offering Memorandum and also on the Closing Date, BDO Seidman, LLP shall have furnished to the Initial Purchaser letters, dated the respective dates of delivery thereof, in form and substance satisfactory to you, containing statements and information of the type customarily included in accountants "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in the Offering Memorandum; (h) the Offering Agreements shall have been executed and delivered by the Company and the Guarantors to the extent that each is a party thereto, the Registration Rights Agreement being substantially in the form attached hereto as Annex II; (i) the Initial Purchaser shall have received on and as of the Closing Date an opinion of Latham & Watkins, counsel to the Initial Purchaser, with respect to the validity of the Indenture and the Securities, and such other related matters as the Initial Purchaser may reasonably request, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters; and (j) on or prior to the Closing Date, the Company shall have furnished to the Initial Purchaser such further certificates and documents as the Initial Purchaser shall reasonably request. 7. Indemnification and Contribution (a) Each of the Company and each Guarantor, jointly and severally, shall indemnify and hold harmless the Initial Purchaser, its directors, officers and employees and each person, if any, who controls the Initial Purchaser within the meaning of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating to purchases and sales of Securities), to which the Initial Purchaser, director, officer, employee or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained (A) in the Offering Memorandum or in any amendment or supplement thereto or (B) in any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the offering of the Securities, including any roadshow or investor presentations made to investors by the Company (whether in person or electronically) (the "Marketing Materials") or (ii) the omission or alleged omission to state in the Offering Memorandum, or in any amendment or supplement thereto, or in any Marketing Materials, any material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company and the Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, 16 any untrue statement or alleged untrue statement or omission or alleged omission made in the Offering Memorandum, or in any such amendment or supplement, in reliance upon and in conformity with written information concerning the Initial Purchaser furnished to the Company by the Initial Purchaser specifically for inclusion therein which information consists solely of the information specified in Section 7(e). The foregoing indemnity agreement is in addition to any liability which the Company and the Guarantors may otherwise have to the Initial Purchaser or to any director, officer, employee or controlling person of the Initial Purchaser. (b) The Initial Purchaser shall indemnify and hold harmless each of the Company, the Guarantors, their respective officers and employees and directors, and each person, if any, who controls the Company within the meaning of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company or any such director, officer or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Offering Memorandum or in any amendment or supplement thereto, or (ii) the omission or alleged omission to state in the Offering Memorandum, or in any amendment or supplement thereto, any material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning the Initial Purchaser furnished to the Company by the Initial Purchaser specifically for inclusion therein, which information is limited to the information set forth in Section 7(e), and shall reimburse the Company and any such director, officer or controlling person for any legal or other expenses reasonably incurred by the Company or any such director, officer or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred. The foregoing indemnity agreement is in addition to any liability which the Initial Purchaser may otherwise have to the Company or any such director, officer, employee or controlling person. (c) Promptly after receipt by an indemnified party under this Section 7 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 7, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 7 except to the extent it has been materially prejudiced by such failure and, provided further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 7. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the 17 indemnified party under this Section 7 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that the Initial Purchaser shall have the right to employ counsel to represent jointly the Initial Purchaser and its respective officers, employees and controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Initial Purchaser against the Company under this Section 7 if, in the reasonable judgment of the Initial Purchaser, it is advisable for the Initial Purchaser, its directors, officers, employees and controlling persons to be jointly represented by separate counsel, and in that event the fees and expenses of such separate counsel shall be paid by the Company. No indemnifying party shall (i) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding, or (ii) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with the consent of the indemnifying party or if there be a final judgment of the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. (d) If the indemnification provided for in this Section 7 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 7(a) or 7(b) in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company and the Guarantors on the one hand and the Initial Purchaser on the other from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Guarantors on the one hand and the Initial Purchaser on the other with respect to the statements or omissions which resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantors on the one hand and the Initial Purchaser on the other with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Securities purchased under this Agreement (before deducting expenses) received by the Company and the Guarantors, on the one hand, and the total underwriting discounts and commissions received by the Initial Purchaser with respect to the Securities purchased under this Agreement, on the other hand, bear to the total gross proceeds from the offering of the Securities under this Agreement. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company and the 18 Guarantors or the Initial Purchaser, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, each of the Guarantors and the Initial Purchaser agree that it would not be just and equitable if contributions pursuant to this Section were to be determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section shall be deemed to include, for purposes of this Section 7(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (e) The Initial Purchaser confirms and the Company and each of the Guarantors, acknowledges that the stabilization legend on page iii and the information set forth in the 1st through the 7th and the 10th paragraphs under the caption "Plan of Distribution" in the Offering Memorandum constitute the only information concerning the Initial Purchaser furnished in writing to the Company by or on behalf of the Initial Purchaser specifically for inclusion in the Offering Memorandum. 8. Notwithstanding anything herein contained, this Agreement may be terminated in the absolute discretion of the Initial Purchaser, by notice given to the Company, if after the execution and delivery of this Agreement (i) trading in securities generally on the New York Stock Exchange, the American Stock Exchange, the Chicago Board Options Exchange, the Chicago Mercantile Exchange or in the over-the-counter market, or trading of any securities of or guaranteed by the Company on any exchange or in the over-the-counter market, shall have been suspended or the settlement of such trading generally shall have been materially disrupted or minimum prices shall have been established on any such exchange or such market by the Commission, by such exchange or by any other regulatory body or governmental authority having jurisdiction, (ii) a banking moratorium shall have been declared by either Federal or state authorities or (iii) there shall have occurred (A) such a material adverse change in general economic, political or financial conditions (or the effect of international conditions on the financial markets in the United States shall be such), including, without limitation, as a result of terrorist activities, (B) an engagement of the United States in hostilities, (C) an escalation in hostilities involving the United States, (D) a declaration of a national emergency or war by the United States or (E) any calamity or crisis, after the date hereof, as to make it, in the judgment of the Initial Purchaser, impracticable or inadvisable to market the Securities on the terms and in the manner contemplated in the Offering Memorandum. 9. This Agreement shall become effective upon the execution and delivery hereof by the parties hereto. 10. If this Agreement shall be terminated by the Initial Purchaser, because of any failure or refusal on the part of any of the Issuers to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason any of the Issuers shall be unable to perform its obligations under this Agreement or any condition of the Initial Purchaser's obligations 19 cannot be fulfilled other than solely by reason of a default by the Initial Purchaser in payment for the Securities on the Closing Date, the Company agrees to reimburse the Initial Purchaser for all out-of-pocket expenses (including the fees and expenses of its counsel) reasonably incurred by the Initial Purchaser in connection with this Agreement or the offering contemplated hereunder. 11. This Agreement shall inure to the benefit of and be binding upon the Company, the Initial Purchaser, any controlling persons referred to herein and their respective successors and assigns. Nothing in this Agreement is intended or shall be construed to give any other person, firm or corporation any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. No purchaser of Securities from the Initial Purchaser shall be deemed to be a successor by reason merely of such purchase. 12. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Initial Purchaser shall be given to them at the following address: Lehman Brothers Inc., 101 Hudson Street, Jersey City, New Jersey 07302; Attention: Syndicate Department, (Fax: (201) 524-5980). Notices to the Company shall be given to them at the following address: Tekni-Plex, Inc., 201 Industrial Parkway, Somerville, New Jersey 08876; Attention: Dr. F. Patrick Smith; with a copy to Davis Polk & Wardwell, 450 Lexington Avenue, New York, NY 10017; Attention: Winthrop Conrad, Esq. 13. This Agreement may be signed in counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument. 14. Pursuant to Section 5-1401 of the General Obligations Laws of the State of New York, this Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to any other conflicts of laws provisions. 20 If the foregoing is in accordance with your understanding, please sign and return four counterparts hereof. Very truly yours, TEKNI-PLEX, INC. By: /s/ JAMES E. CONDON ----------------------------------- Name: James E. Condon Title: Chief Financial Officer Accepted: May 1, 2002 LEHMAN BROTHERS INC. By: /s/ MICHAEL KONIGSBERG ----------------------------------- Name: Michael Konigsberg Title: Managing Director Each of the undersigned by its execution hereof agrees to become a party to this Agreement as a Guarantor as of the date set forth above: PURETEC CORPORATION PLASTIC SPECIALTIES AND TECHNOLOGIES, INC. PLASTIC SPECIALTIES AND TECHNOLOGIES INVESTMENTS, INC. BURLINGTON RESINS, INC. DISTRIBUTORS RECYCLING, INC. REI DISTRIBUTORS, INC. ALUMET SMELTING CORP NATVAR HOLDINGS, INC TRI-SEAL HOLDINGS, INC PURE TECH RECYCLING OF CALIFORNIA COAST RECYCLING NORTH, INC. PURE TECH APR, INC. TPI ACQUISITION SUBSIDIARY, INC. collectively, the Guarantors By: /s/ F. PATRICK SMITH ------------------------------------ Name: F. Patrick Smith Title: Chief Executive Officer ANNEX I (A) In addition to offers pursuant to clause (B)(1) of paragraph 2(ii) of the Agreement, the Initial Purchaser intends to offer and sell the Securities in accordance with Regulation S under the Act. Accordingly, the Initial Purchaser agrees that neither it, its affiliates nor any persons acting on its or their behalf has engaged or will engage in any directed selling efforts within the meaning of Rule 902 under the Act with respect to the Securities and it and they have complied and will comply with the offering restrictions requirement of Regulation S. The Initial Purchaser agrees that, at or prior to confirmation of sale of Securities (other than a sale pursuant to and in accordance with paragraph 2(ii) of the Agreement to purchasers described in clause (B)(1) thereof), it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Securities from it during the restricted period a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the United States Securities Act of 1933, as amended (the "Act"), and may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the closing date, except in either case in accordance with Regulation S (or Rule 144A if available) under the Act. Terms used above have the meaning given to them by Regulation S." Terms used in this paragraph have the meanings given to them by Regulation S. The Initial Purchaser agrees that it has not entered and will not enter into any contractual arrangement with respect to the distribution or delivery of the Securities in accordance with this paragraph (A), except with its affiliates or with the prior written consent of the Company. (B) The Initial Purchaser represents and agrees that (i) it has not offered or sold, and prior to the date six months after the Closing Date will not offer or sell any Securities to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995, (ii) it has complied, and will comply, with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Securities in, from or otherwise involving the United Kingdom, and (iii) it has only issued or passed on, and will only issue or pass on, in the United Kingdom, any document received by it in connection with the issuance of the Securities to a person who -is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom such document may otherwise lawfully be issued or passed on. A-I-1 (C) The Initial Purchaser agrees that it will not directly or indirectly offer, sell or deliver any of the Securities or distribute any offering memorandum, prospectus or other document or information in any jurisdiction outside the United States except under circumstances that will result in compliance with the applicable laws thereof, and that it will take at its own expense whatever action is required to permit its purchase and resale of the Securities in such jurisdictions. The Initial Purchaser understands that no action has been taken by the Company to permit a public offering in any jurisdiction outside the United States where action would be required for such purposes. The Initial Purchaser agrees not to cause any advertisement of the Securities to be published in any newspaper or periodical or posted in any public place and not to issue any circular relating to the Securities in any jurisdiction outside of the United States. Without prejudice to the generality of the foregoing, the Initial Purchaser is not authorized to give any information or to make any representation in connection with the offering or sale of the Securities other than those contained in the Offering Memorandum. A-I-2 ANNEX II [Form of Registration Rights Agreement] A-II-1 SCHEDULE A DOMESTIC SUBSIDIARIES PureTec Corporation (Delaware) Plastic Specialties and Technologies. Inc. (Delaware) Plastic Specialties and Technologies Investments, Inc. (Delaware) Burlington Resins, Inc. (Delaware) Distributors Recycling, Inc. (New Jersey) REI Distributors Inc. (New Jersey)* Alumet Smelting Corporation (New Jersey) Natvar Holdings, Inc. (Delaware) Tri-Seal Holdings, Inc. (Delaware) Pure Tech Recycling of California (California)* Coast Recycling North, Inc. (California)* Pure Tech APR, Inc. (New York) TPI Acquisition Subsidiary, Inc. (Delaware) FOREIGN SUBSIDIARIES PurePlast Acquisition Limited (Nova Scotia) PurePlast Inc. (Ontario) Tekni-Plex Europe, N.V. (Belgium) Action Technology Italia S.p.A (Italy) Colorite Europe, Ltd. (Northern Ireland) Colorite Plastics Canada Ltd. (Ontario) Tekni-Plex Holdings (Canada) Ltd. (Nova Scotia) Tekni-Plex Argentina, S.A. (Argentina) Tekni-Plex, Inc. (Singapore) - ------------------------------ * Not currently in good standing. S-A-1 EX-4.6 10 y61170exv4w6.txt REGISTRATION RIGHT AGREEMENT Exhibit 4.6 REGISTRATION RIGHTS AGREEMENT Dated as of May 6, 2002 among TEKNI-PLEX, INC., THE GUARANTORS NAMED HEREIN and LEHMAN BROTHERS INC. REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "Agreement") is dated as of May 6, 2002, by and among TEKNI-PLEX, INC., a corporation formed under the laws of the State of Delaware (the "Company"), each of the Subsidiaries of the Company listed on the signature pages hereto as a Guarantor (collectively, the "Guarantors" and together with the Company, the "Issuers"), and LEHMAN BROTHERS INC. (the "Initial Purchaser"). This Agreement is entered into in connection with the Purchase Agreement, dated as of May 1, 2002, among the Company, certain subsidiaries of the Company, the Guarantors and the Initial Purchaser (the "Purchase Agreement") relating to the sale by the Company to the Initial Purchaser of $40,000,000 aggregate principal amount of its 12 3/4% Senior Subordinated Notes due 2010 (the "Notes") and the issuance by the Guarantors to the Initial Purchaser of guarantees (the "Guarantees" and together with the Notes, the "Securities"). In order to induce the Initial Purchaser to enter into the Purchase Agreement, the Issuers have agreed to provide the registration rights set forth in this Agreement for the benefit of the Initial Purchaser and its direct and indirect transferees. The execution and delivery of this Agreement is a condition to the Initial Purchaser's obligation to purchase the Securities under the Purchase Agreement. The parties hereby agree as follows: 1. Definitions As used in this Agreement, the following terms shall have the following meanings: "Additional Interest": See Section 4. "Advice": See Section 5. "Applicable Period": See Section 2(b). "Closing Date": The Closing Date as defined in the Purchase Agreement. "Company": See the introductory paragraph to this Agreement. "Consummation Date": The 250th day after the Closing. "DTC": See Section 5(a). "Effectiveness Date": The 180th day after the Closing Date. "Effectiveness Period": See Section 3(a). "Event Date": See Section 4(b). "Exchange Act": The Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. "Exchange Offer": See Section 2(a). "Exchange Registration Statement": See Section 2(a). "Exchange Securities": See Section 2(a). "Filing Date": The 120th day after the Closing Date. "Guarantors": See the introductory paragraph to this Agreement. "Holder": Any record holder of Registrable Securities. "Indemnified Person": See Section 7. "Indemnifying Person": See Section 7. "Indenture": The Indenture, dated as of June 21, 2000, among the Company, the Guarantors and HSBC Bank USA, as trustee, pursuant to which the Notes are being issued, as amended or supplemented from time to time in accordance with the terms thereof. "Initial Purchaser": See the introductory paragraph to this Agreement. "Initial Shelf Registration": See Section 3(a). "Inspectors": See Section 5(p). "Issue Date": The original issue date of the Notes. "Issuers": See the introductory paragraph to this Agreement. "NASD": See Section 5(t). "Notes": See the preamble to this Agreement. "Participant": See Section 7. "Participating Broker-Dealer": See Section 2(b). "Person": An individual, corporation, limited or general partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Private Exchange": See Section 2(b). "Private Exchange Securities": See Section 2(b). "Prospectus": The prospectus included in any Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A 2 promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. "Records": See Section 5(p). "Registrable Securities": The Securities, upon original issuance thereof and at all times subsequent thereto, each Exchange Security as to which Section 2(c)(1)(i) hereof is applicable upon original issuance and at all times subsequent thereto and, if issued, the Private Exchange Securities, until, in the case of any such Securities, Exchange Securities or Private Exchange Securities, as the case may be, (i) a Registration Statement (other than, with respect to any Exchange Security as to which Section 2(c)(1)(i) hereof is applicable, the Exchange Registration Statement) covering such Securities, Exchange Securities or Private Exchange Securities has been declared effective by the SEC and such Securities, Exchange Securities or Private Exchange Securities, as the case may be, have been disposed of in accordance with such effective Registration Statement, (ii) such Securities, Exchange Securities or Private Exchange Securities, as the case may be, are sold in compliance with Rule 144, or (iii) such Securities, Exchange Securities or Private Exchange Securities, as the case may be, cease to be outstanding. "Registration Statement": Any registration statement of the Company and the Guarantors, including, but not limited to, the Exchange Registration Statement, that covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. "Rule 144": Rule 144 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the SEC providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of an issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act. "Rule 144A": Rule 144A promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the SEC. "Rule 415": Rule 415 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. "SEC": The Securities and Exchange Commission. "Securities Act": The Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. "Shelf Notice": See Section 2(c). 3 "Shelf Registration": See Section 3(b). "Subsequent Shelf Registration": See Section 3(b). "TIA": The Trust Indenture Act of 1939, as amended. "Trustee": The trustee as defined in the Indenture and, if existent, the trustee under any indenture governing the Exchange Securities and Private Exchange Securities (if any). "Underwritten registration or underwritten offering": A registration in connection with which securities are sold to an underwriter for reoffering to the public pursuant to an effective Registration Statement. 2. Exchange Offer (a) The Issuers agree to file with the SEC as soon as practicable after the Closing Date, but in no event later than the Filing Date, an offer to exchange (the "Exchange Offer") any and all of the Registrable Securities for a like aggregate principal amount of debt securities of the Company which are identical in all material respects to the Notes and guaranteed by the Guarantors with terms identical in all material respects to the Guarantees (the "Exchange Securities") (and which are entitled to the benefits of a trust indenture which is identical in all material respects to the Indenture (other than such changes as are necessary to comply with any requirements of the SEC to effect or maintain the qualification of such trust indenture under the TIA) and which has been qualified under the TIA), except that the Exchange Securities shall have been registered pursuant to an effective Registration Statement under the Securities Act and shall contain no restrictive legend thereon. The Issuers agree to use their reasonable best efforts to keep the Exchange Offer open for at least 20 business days (or longer if required by applicable law) after the date notice of the Exchange offer is mailed to Holders and to consummate the Exchange Offer on or prior to the Consummation Date. The Exchange Offer will be registered under the Securities Act on the appropriate form (the "Exchange Registration Statement") and will comply with all applicable tender offer rules and regulations under the Exchange Act. If after such Exchange Registration Statement is initially declared effective by the SEC, the Exchange Offer or the issuance of the Exchange Securities thereunder is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court such Exchange Registration Statement shall be deemed not to have become effective for purposes of this Agreement. Each Holder who participates in the Exchange Offer will be deemed to represent that any Exchange Securities received by it will be acquired in the ordinary course of its business, that at the time of the consummation of the Exchange Offer such Holder will have no arrangement with any person to participate in the distribution of the Exchange Securities in violation of the provisions of the Securities Act, and that such Holder is not an affiliate of the Company within the meaning of Rule 501(b) of Regulation D under the Securities Act and such Holder has full power and authority to exchange the Registrable Securities in exchange for the Exchange Securities. Upon consummation of the Exchange Offer in accordance with this Section 2, the provisions of this Agreement shall continue to apply, mutatis, mutandis, solely with 4 respect to Registrable Securities that are Private Exchange Securities and Exchange Securities held by Participating Broker-Dealers, and the Issuers shall have no further obligation to register Registrable Securities (other than Private Exchange Securities and other than Exchange Securities as to which clause (c)(1)(i) hereof applies) pursuant to Section 3 of this Agreement. No securities other than the Exchange Securities shall be included in the Exchange Registration Statement. (b) The Issuers shall include within the Prospectus contained in the Exchange Registration Statement one or more section(s) reasonably acceptable to the Initial Purchaser, which shall contain a summary statement of the positions taken or policies made by the Staff of the SEC (which are available to the Issuers) with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Securities received by such broker-dealer in the Exchange Offer (a "Participating Broker-Dealer"), whether such positions or policies have been publicly disseminated by the Staff of the SEC or such positions or policies, in the reasonable judgment of the Initial Purchaser, represent the prevailing views of the Staff of the SEC. Such section(s) shall also allow the use of the prospectus by all persons subject to the prospectus delivery requirements of the Securities Act, including all Participating Broker-Dealers, and include a statement describing the means by which Participating Broker-Dealers may resell the Exchange Securities. The Issuers shall use their reasonable best efforts to keep the Exchange Registration Statement effective and to amend and supplement the Prospectus contained therein in order to permit such Prospectus to be lawfully delivered by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Securities, provided that such period shall not exceed 180 days (or such longer period if extended pursuant to the last paragraph of Section 5) (the "Applicable Period"). If, prior to consummation of the Exchange Offer, the Initial Purchaser holds any Notes acquired by it and having the status of an unsold allotment in the initial distribution, the Company upon the request of the Initial Purchaser shall, simultaneously with the delivery of the Exchange Securities in the Exchange Offer, issue and deliver to the Initial Purchaser, in exchange (the "Private Exchange") for the Securities held by the Initial Purchaser, a like principal amount of debt securities of the Company that are identical in all material respects to the Exchange Securities (the "Private Exchange Securities") (and which are issued pursuant to the same indenture as the Exchange Securities) except for the placement of a restrictive legend on such Private Exchange Securities. If possible, the Private Exchange Securities shall bear the same CUSIP number as the Exchange Securities. Interest on the Exchange Securities and Private Exchange Securities will accrue from the last interest payment date on which interest was paid on the Notes surrendered in exchange therefor or, if no interest has been paid on the Notes, from the Issue Date. Any indenture under which the Exchange Securities or the Private Exchange Securities will be issued shall provide that the holders of any of the Exchange Securities and the Private Exchange Securities will vote and consent together on all matters (to 5 which such holders are entitled to vote or consent) as one class and that none of the holders of the Exchange Securities and the Private Exchange Securities will have the right to vote or consent as a separate class on any matter (to which such holders are entitled to vote or consent). (c) If (1) prior to the consummation of the Exchange Offer, the Company reasonably determines in good faith or Holders of at least a majority in aggregate principal amount of the Registrable Securities notify the Company that they have reasonably determined in good faith that (i) in the opinion of counsel, the Exchange Securities would not, upon receipt, be tradable by such Holders who are not affiliates of the Company without restriction under the Securities Act and without restrictions under applicable blue sky or state securities laws or (ii) in the opinion of counsel, the SEC is unlikely to permit the consummation of the Exchange Offer and/or (2) subsequent to the consummation of the Private Exchange, holders of at least a majority in aggregate principal amount of the Private Exchange Securities so request with respect to the Private Exchange Securities and/or (3) the Exchange Offer is commenced and not consummated prior to the 40th day following the Consummation Date for any reason, then the Company shall promptly deliver to the Holders and the Trustee notice thereof (the "Shelf Notice") and shall thereafter file an Initial Shelf Registration as set forth in Section 3 (which only in the circumstances contemplated by clause (2) of this sentence will relate solely to the Private Exchange Securities). The parties hereto agree that, following the delivery of a Shelf Notice to the Holders of Registrable Securities (only in the circumstances contemplated by clauses (1) and/or (3) of the preceding sentence), the Issuers shall not have any further obligation to conduct the Exchange Offer or the Private Exchange under this Section 2. 3. Shelf Registration If a Shelf Notice is delivered as contemplated by Section 2(c), then: (a) Initial Shelf Registration. The Issuers shall as promptly as reasonably practicable prepare and file with the SEC a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Registrable Securities (the "Initial Shelf Registration"). If the Issuers shall have not yet filed an Exchange Offer, the Issuers shall use their reasonable best efforts to file with the SEC the Initial Shelf Registration on or prior to the Filing Date. Otherwise, the Issuers shall use their reasonable best efforts to file with the SEC the Initial Shelf Registration within 45 days of the delivery of the Shelf Notice. The Initial Shelf Registration shall be on Form S-1 or another appropriate form permitting registration of such Registrable Securities for resale by such holders in the manner or manners designated by them (including, without limitation, one or more underwritten offerings). The Issuers shall not permit any securities other than the Registrable Securities to be included in the Initial Shelf Registration or any Subsequent Shelf Registration. The Issuers shall use their reasonable best efforts to cause the Initial Shelf Registration to be declared effective under the Securities Act on or prior to the 90th day after the filing thereof with the Commission and to keep the Initial Shelf Registration continuously effective under the Securities Act until the date on which the Securities are no longer "restricted securities" 6 (within the meaning of Rule 144 under the Act) (subject to extension pursuant to the last paragraph of Section 5 hereof) (the "Effectiveness Period"), or such shorter period ending when (i) all Registrable Securities covered by the Initial Shelf Registration have been sold in the manner set forth and as contemplated in the Initial Shelf Registration, (ii) the second anniversary of the Closing Date occurs or (iii) a Subsequent Shelf Registration covering all of the Registrable Securities has been declared effective under the Securities Act. (b) Subsequent Shelf Registrations. If the Initial Shelf Registration or any Subsequent Shelf Registration ceases to be effective for any reason at any time during the Effectiveness Period (other than because of the sale of all of the securities registered thereunder), the Issuers shall use their reasonable best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within 45 days of such cessation of effectiveness amend the Shelf Registration in a manner reasonably expected to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional "shelf" Registration Statement pursuant to Rule 415 covering all of the Registrable Securities (a "Subsequent Shelf Registration"). If a Subsequent Shelf Registration is filed, the Issuers shall use their reasonable best efforts to cause the Subsequent Shelf Registration to be declared effective as soon as practicable after such filing and to keep such Registration Statement continuously effective for a period equal to the number of days in the Effectiveness Period less the aggregate number of days during which the Initial Shelf Registration or any Subsequent Shelf Registration was previously continuously effective. As used herein the term "Shelf Registration" means the Initial Shelf Registration and any Subsequent Shelf Registration. (c) Supplements and Amendments. The Issuers shall promptly supplement and amend the Shelf Registration if required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration, if required by the Securities Act, or if reasonably requested by the Holders of a majority in aggregate principal amount of the Registrable Securities covered by such Registration Statement or by any underwriter of such Registrable Securities. 4. Additional Interest (a) The Issuers and the Initial Purchasers agree that the Holders of Registrable Securities will suffer damages if the Issuers fail to fulfill their obligations under Section 2 or Section 3 hereof and that it would not be feasible to ascertain the extent of such damages with precision. Accordingly, the Issuers, jointly and severally, agree to pay, as liquidated damages, additional interest on the Registrable Securities ("Additional Interest") under the circumstances and to the extent set forth below (each of which shall be given independent effect and shall not be duplicative except as otherwise provided below): (i) if neither the Exchange Registration Statement nor the Initial Shelf Registration has been filed on or prior to the Filing Date, Additional Interest shall accrue on the Registrable Securities over and above the stated interest at a rate of .25% per annum for the first 90 days immediately following the Filing Date, such 7 Additional Interest rate increasing by an additional .25% per annum at the beginning of each subsequent 90-day period; (ii) if neither the Exchange Registration Statement nor the Initial Shelf Registration is declared effective by the SEC on or prior to the Effectiveness Date, Additional Interest shall be accrued on the Registrable Securities included or which should have been included in such Registration Statement over and above the stated interest at a rate of .25% per annum for the first 90 days immediately following the day after the Effectiveness Date, such Additional Interest rate increasing by an additional .25% per annum at the beginning of each subsequent 90-day period; and (iii) if (A) the company has not exchanged Exchange Securities for all Securities validly tendered in accordance with the terms of the Exchange Offer on or prior to the Consummation Date or (B) the Exchange Registration Statement ceases to be effective at any time prior to the time that the Exchange Offer is consummated or (C) if applicable, the Shelf Registration has been declared effective and such Shelf Registration ceases to be effective at any time during the Effectiveness Period, then Additional Interest shall be accrued on the Registrable Securities (over and above any interest otherwise payable on the Registrable Securities) at a rate of .25% per annum for the first 90 days commencing on the (x) 251st day after the Issue Date, in the case of (A) above, or (y) the day the Exchange Registration Statement ceases to be effective in the case of (B) above, or (z) the day such Shelf Registration ceases to be effective in the case of (C) above, such Additional Interest rate increasing by an additional .25% per annum at the beginning of each such subsequent 90-day period; provided, however, that the Additional Interest rate on the Registrable Securities may not exceed at any one time in the aggregate 1.0% per annum; and provided, further, that (1) upon the filing of the Exchange Registration Statement or a Shelf Registration as required hereunder (in the case of clause (i) of this Section 4(a)), (2) upon the effectiveness of the Exchange Registration Statement or the Shelf Registration as required hereunder (in the case of clause (ii) of this Section 4(a)), or (3) upon the exchange of Exchange Securities for all Notes tendered (in the case of clause (iii)(A) of this Section 4(a)), or upon the effectiveness of the Exchange Registration Statement which had ceased to remain effective (in the case of (iii)(B) of this Section 4(a)), or upon the effectiveness of the Shelf Registration which had ceased to remain effective (in the case of (iii)(C) of this Section 4(a)), Additional Interest on the Registrable Securities as a result of such clause (or the relevant subclause thereof), as the case may be, shall cease to accrue. It is understood and agreed that, notwithstanding any provision to the contrary, so long as any Registrable Security is then covered by an effective Shelf Registration Statement, no Additional Interest shall accrue on such Registrable Security. (b) The Company shall notify the Trustee within one business day after each and every date on which an event occurs in respect of which Additional Interest is required to be paid (an "Event Date"). The Issuers shall pay the Additional Interest due on the Registrable Securities by depositing with the Trustee, in trust, for the benefit of the 8 Holders thereof, on or before the applicable semi-annual interest payment date, immediately available funds in sums sufficient to pay the Additional Interest then due to Holders of Registrable Securities. The Additional Interest amount due shall be payable on each interest payment date to the record Holder of Registrable Securities entitled to receive the interest payment to be made on such date as set forth in the Indenture. The amount of Additional Interest will be determined by multiplying the applicable Additional Interest rate by the principal amount of the affected Registrable Securities of such Holders, multiplied by a fraction, the numerator of which is the number of days such Additional Interest rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months and, in the case of a partial month, the actual number of days elapsed including the first day but excluding the last day of such period), and, the denominator of which is 360. Each obligation to pay Additional Interest shall be deemed to accrue immediately following the occurrence of the applicable Event Date. The parties hereto agree that the Additional Interest provided for in this Section 4 constitutes a reasonable estimate of the damages that may be incurred by Holders of Registrable Securities by reason of the failure of a Shelf Registration or Exchange Offer to be filed or declared effective, or a Shelf Registration to remain effective, as the case may be, in accordance with this Section 4. 5. Registration Procedures In connection with the registration of any Registrable Securities pursuant to Sections 2 or 3 hereof, the Issuers shall effect such registrations to permit the sale of such Registrable Securities in accordance with the intended method or methods of disposition thereof, and pursuant thereto the Issuers shall: (a) Use their reasonable best efforts to prepare and file with the SEC, as soon as practicable after the date hereof but in any event prior to the Filing Date in the case of the Exchange Registration Statement and the 45th day following the Consummation Date in the case of the Shelf Registration Statement, a Registration Statement or Registration Statements as prescribed by Section 2 or 3, and to use their reasonable best efforts to cause each such Registration Statement to become effective and remain effective as provided herein, provided that, if (1) such filing is pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Issuers shall upon written request furnish to and afford the Holders of the Registrable Securities (which in the case of Registrable Securities in the form of global certificates shall be The Depository Trust Company ("DTC")) and each such Participating Broker-Dealer, as the case may be, covered by such Registration Statement, their counsel and the managing underwriters, if any, a reasonable opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed. (b) Prepare and file with the SEC such amendments and post-effective amendments to each Shelf Registration or Exchange Registration Statement, as the case 9 may be, as may be necessary to keep such Registration Statement continuously effective for the Effectiveness Period or the Applicable Period, as the case may be; cause the related Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act; and comply with the provisions of the Securities Act, the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to it with respect to the disposition of all securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented and with respect to the subsequent resale of any securities being sold by a Participating Broker-Dealer covered by any such Prospectus; the Issuers shall not be deemed to have used their reasonable best efforts to keep a Registration Statement effective during the Applicable Period if either of them voluntarily takes any action that would result in selling Holders of the Registrable Securities covered thereby or Participating Broker-Dealers seeking to sell Exchange Securities not being able to sell such Registrable Securities or such Exchange Securities during that period unless such action is required by applicable law or unless the Issuers comply with this Agreement, including without limitation, the provisions of paragraph 5(k) hereof and the last paragraph of this Section 5. (c) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, notify the selling Holders of Registrable Securities, or each such Participating Broker-Dealer, as the case may be, their counsel and the managing underwriters, if any, who have provided the Issuers with their names and addresses promptly (but in any event within two business days), and confirm such notice in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective under the Securities Act (including in such notice a written statement that any Holder may, upon request, obtain, without charge, one conformed copy of such Registration Statement or post-effective amendment including financial statements and schedules, documents incorporated or deemed to be incorporated by reference and exhibits), (ii) of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or the initiation of any proceedings for that purpose, (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Registrable Securities or the Exchange Securities to be sold by any Participating Broker-Dealer for offer or sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, (iv) of the happening of any event or any information becoming known that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the 10 Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (v) of the Company's reasonable determination that a post-effective amendment to a Registration Statement would be appropriate. (d) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, use their reasonable best efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Securities or the Exchange Securities to be sold by any Participating Broker-Dealer, for sale in any jurisdiction, and, if any such order is issued, to use their reasonable best efforts to obtain the withdrawal of any such order at the earliest possible moment. (e) If a Shelf Registration is filed pursuant to Section 3 and if requested by the managing underwriters, if any, or the Holders of a majority in aggregate principal amount of the Registrable Securities being sold in connection with an underwritten offering, (i) promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriters, if any, or such Holders or counsel reasonably request to be included therein, or (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment provided that the Company shall not be required to take any action pursuant to this Section 5(e) that would, in the opinion of counsel for the Company, violate applicable law. (f) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, furnish to each selling Holder of Registrable Securities and to each such Participating Broker-Dealer who so requests and to counsel and each managing underwriter, if any, without charge, one conformed copy of the Registration Statement or Statements and each post-effective amendment thereto, including financial statements and schedules, and if requested, all documents incorporated or deemed to be incorporated therein by reference and all exhibits. (g) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, deliver to each selling Holder of Registrable Securities, or each such Participating Broker-Dealer, as the case may be, their counsel, and the underwriters, if any, without charge, as many copies of the Prospectus or Prospectuses (including each form of preliminary prospectus) and each 11 amendment or supplement thereto and any documents incorporated by reference therein as such Persons may reasonably request; and, subject to the last paragraph of this Section 5, the Issuers hereby consent to the use of such Prospectus and each amendment or supplement thereto by each of the selling holders of Registrable Securities or each such Participating Broker-Dealer, as the case may be, and the underwriters or agents, if any, and dealers (if any), in connection with the offering and sale of the Registrable Securities covered by or the sale by Participating Broker-Dealers of the Exchange Securities pursuant to such Prospectus and any amendment or supplement thereto. (h) Prior to any public offering of Registrable Securities or any delivery of a Prospectus contained in the Exchange Registration Statement by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, to use their reasonable best efforts to register or qualify, and to cooperate with the selling Holders of Registrable Securities or each such Participating Broker-Dealer, as the case may be, the underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any selling Holder, Participating Broker-Dealer, or the managing underwriters reasonably request in writing, provided that where Exchange Securities held by Participating Broker-Dealers or Registrable Securities are offered other than through an underwritten offering, the Issuers agree, if requested, to cause their counsel to perform Blue Sky investigations and file registrations and qualifications required to be filed pursuant to this Section 5(h); keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and do any and all other reasonable acts or things necessary or advisable to enable the disposition in such jurisdictions of the Exchange Securities held by Participating Broker-Dealers or the Registrable Securities covered by the applicable Registration Statement, provided that neither of the Issuers shall be required to (A) qualify generally to do business in any jurisdiction where it is not then so qualified, (B) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or (C) subject itself to taxation in excess of a nominal dollar amount in any such jurisdiction. (i) If a Shelf Registration is filed pursuant to Section 3, reasonably cooperate with the selling Holders of Registrable Securities and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with DTC; and enable such Registrable Securities to be registered in such names as the managing underwriter or underwriters, if any, or Holders may request at least two business days prior to any sale of Registrable Securities. (j) Use their reasonable best efforts to cause the Registrable Securities covered by the Registration Statement to be registered with or approved by such other United States governmental agencies or authorities of the United States as may be necessary to enable the seller or sellers thereof or the underwriters, if any, to consummate the disposition of such Registrable Securities, except as may be required solely as a consequence of the nature of such selling Holder's business, in which case the Issuers 12 will cooperate in all reasonable respects with the filing of such Registration Statement and the granting of such approvals. (k) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, upon the occurrence of any event contemplated by paragraph 5(c)(iv) or 5(c)(v) above, as promptly as practicable prepare and (subject to Section 5(a) above) file with the SEC, solely at the expense of the Issuers, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder or to the purchasers of the Exchange Securities to whom such Prospectus will be delivered by a Participating Broker-Dealer, any such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (l) Use their reasonable best efforts to cause the Registrable Securities covered by a Registration Statement or the Exchange Securities, as the case may be, to be rated, or, if previously rated, updated, with the appropriate rating agencies, if so requested by the Holders of a majority in aggregate principal amount of Registrable Securities covered by such Registration Statement or the Exchange Securities, as the case may be, or the managing underwriters, if any. (m) Prior to the effective date of the first Registration Statement relating to the Registrable Securities, (i) provide the Trustee with printed certificates for the Registrable Securities in a form eligible for deposit with DTC and (ii) provide a CUSIP number for the Registrable Securities. (n) Use their best efforts to cause all Registrable Securities covered by such Registration Statement or the Exchange Securities, as the case may be, to be (i) listed on each securities exchange, if any, on which similar securities issued by the Company are then listed, or (ii) authorized to be quoted on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or the National Market System of NASDAQ if similar securities of the Company are so authorized. (o) In connection with an underwritten offering of Registrable Securities pursuant to a Shelf Registration, enter into an underwriting agreement as is customary in underwritten offerings and take all such other actions as are reasonably requested by the managing underwriters in order to expedite or facilitate the registration or the disposition of such Registrable Securities, and in such connection, (i) make such representations and warranties to the underwriters, with respect to the business of the Company and its subsidiaries, if any, and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in underwritten offerings, and confirm the 13 same if and when reasonably requested; (ii) obtain an opinion of counsel to the Issuers and updates thereof in form and substance reasonably satisfactory to the managing underwriters (if any), addressed to the underwriters covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by underwriters; (iii) obtain "cold comfort" letters and updates thereof in form and substance reasonably satisfactory to the managing underwriters from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings and such other matters as may be reasonably requested by underwriters; and (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable than those set forth in Section 7 hereof (or such other provisions and procedures acceptable to Holders of a majority in aggregate principal amount of Registrable Securities covered by such Registration Statement and the managing underwriters or agents) with respect to all parties to be indemnified pursuant to said Section provided that, the Company shall not be required to enter into any underwritten offering more than once with respect to all Registrable Securities and provided further that the Company may delay entering into an underwritten offering until the consummation of any underwritten offering the Company shall have undertaken. (p) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, make available for inspection by any selling Holder of such Registrable Securities being sold, or each such Participating Broker-Dealer, as the case may be, any underwriter participating in any such disposition of Registrable Securities, if any, and any attorney, accountant or other agent retained by any such selling holder or each such Participating Broker-Dealer, as the case may be, or underwriter (collectively, the "Inspectors"), at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, if any (collectively, the "Records"), as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Company and its subsidiaries, if any to supply all information in each case reasonably requested by any such Inspector in connection with such Registration Statement; provided that such Inspectors shall first agree in writing with the Company that any information reasonably designated by the Company in good faith in writing as confidential at the time of delivery of such information shall be kept confidential by such Inspector (and such Inspector shall enter into reasonable confidentiality agreements, and observe other customary confidentiality procedures, as the Company may reasonably request), except to the extent that (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such Registration Statement, (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction or (iii) the information in such Records has been made generally available to 14 the public. Each selling Holder of such Registrable Securities and each such Participating Broker-Dealer will be required to agree that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Company unless and until such is made generally available to the public. Each selling Holder of such Registrable Securities and each such Participating Broker-Dealer will be required to further agree that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company at its expense to undertake appropriate action to prevent disclosure of the Records deemed confidential. (q) Provide an indenture trustee for the Registrable Securities or the Exchange Securities, as the case may be, and cause the Indenture or the trust indenture provided for in Section 2(a), as the case may be, to be qualified under the TIA not later than the effective date of the Exchange offer or the first Registration Statement relating to the Registrable Securities; and in connection therewith, cooperate with the trustee under any such indenture and the holders of the Registrable Securities, to effect such changes to such indenture as may be required for such indenture to be so qualified in accordance with the terms of the TIA; and execute, and use their reasonable best efforts to cause such trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable such indenture to be so qualified in a timely manner. (r) Comply in all material respects with all applicable rules and regulations of the SEC and make generally available to their security holders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 90 days after the end of any 12-month period (i) commencing at the end of any fiscal quarter in which Registrable Securities are sold to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company after the effective date of a Shelf Registration Statement, which statements shall cover said 12-month periods. (s) If an Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Registrable Securities by Holders to the Company (or to such other Person as directed by the Company) in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be, the Company shall mark, or caused to be marked, on such Registrable Securities that such Registrable Securities are being cancelled in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be; in no event shall such Registrable Securities be marked as paid or otherwise satisfied. (t) Reasonably cooperate with each seller of Registrable Securities covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (the "NASD"). 15 (u) Use their reasonable best efforts to take all other steps necessary to effect the registration of the Registrable Securities covered by a Registration Statement contemplated hereby. (v) Upon consummation of an Exchange Offer or a Private Exchange, obtain an opinion of counsel to the Company and the Guarantors, in a form customary for underwritten offerings of debt securities similar to the Notes, addressed to the Trustee solely for the benefit of the Trustee, and not for the benefit of Holders of Registrable Securities participating in the Exchange Offer or the Private Exchange, as the case may be, and which includes an opinion that (i) each of the Company and the Guarantors has duly authorized, executed and delivered the Exchange Securities and Private Exchange Securities and the related indenture and (ii) each of the Exchange Securities or the Private Exchange Securities, as the case may be, and related indenture constitute a legal, valid and binding obligation of each of the Company and the Guarantors, enforceable against each of the Company and the Guarantors in accordance with its respective terms (with customary exceptions). The Issuers may require each seller of Registrable Securities or Participating Broker-Dealer as to which any registration is being effected to furnish to the Issuers such in formation regarding such seller or Participating Broker-Dealer and the distribution of such Registrable Securities or Exchange Securities to be sold by such Participating Broker-Dealer, as the case may be, as the Issuers may, from time to time, reasonably request. The Issuers may exclude from such registration the Registrable Securities of any seller or Participating Broker-Dealer who unreasonably fails to furnish such information within a reasonable time after receiving such request. Each seller as to which any Shelf Registration is being effected is deemed to agree to furnish promptly to the Issuers all information required to be disclosed in order to make the information previously furnished to the Issuers by such seller not materially misleading. Each Holder of Registrable Securities and each Participating Broker-Dealer agrees by acquisition of such Registrable Securities or Exchange Securities to be sold by such Participating Broker-Dealer, as the case may be, that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 5(c)(ii), 5(c)(iii), 5(c)(iv), or 5(c)(v), such Holder will forthwith discontinue disposition of such Registrable Securities covered by such Registration Statement or Prospectus or Exchange Securities to be sold by such Participating Broker-Dealer, as the case may be, until such holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 5(k), or until it is advised in writing (the "Advice") by the Company that the use of the applicable Prospectus may be resumed, and has received copies of any amendments or supplements thereto. In the event the Company shall give any such notice, each of the Effectiveness Period and the Applicable Period shall be extended by the number of days during such periods from and including the date of the giving of such notice to and including the date when each seller of Registrable Securities covered by such Registration Statement or Exchange Securities to be sold by such Participating Broker-Dealer, as the case may be, shall have received (x) the copies of the supplemented or amended Prospectus contemplated by Section 5(k) or (y) the Advice. 16 6. Registration Expenses (a) All fees and expenses incident to the performance of or compliance with this Agreement by the Issuers shall be borne by the Issuers, jointly and severally, whether or not the Exchange offer or a Shelf Registration is filed or becomes effective, including, without limitation, (i) all registration and filing fees (including, without limitation, (A) fees with respect to filings required to be made with the NASD in connection with an underwritten offering and (B) fees and expenses of compliance with state securities or Blue Sky laws (including, without limitation, reasonable fees and disbursements of counsel in connection with Blue Sky qualifications of the Registrable Securities or Exchange Securities and determination of the eligibility of the Registrable Securities or Exchange Securities for investment under the laws of such jurisdictions in the United States (x) where the holders of Registrable Securities are located, in the case of the Exchange Securities, or (y) as provided in Section 5(h), in the case of Registrable Securities or Exchange Securities to be sold by a Participating Broker-Dealer during the Applicable Period)), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities or Exchange Securities in a form eligible for deposit with DTC and of printing prospectuses if the printing of prospectuses is requested by the managing underwriters, if any, or, in respect of Registrable Securities or Exchange Securities to be sold by any Participating Broker-Dealer during the Applicable Period, by the Holders of a majority in aggregate principal amount of the Registrable Securities included in any Registration Statement or of such Exchange Securities, as the case may be), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Issuers and fees and disbursements of special counsel for the sellers of Registrable Securities (subject to the provisions of Section 6(b)), (v) fees and disbursements of all independent certified public accountants referred to in Section 5(o)(iii) (including, without limitation, the expenses of any special audit and "cold comfort" letters required by or incident to such performance), (vi) rating agency fees, (vii) Securities Act liability insurance, if the Issuers desire such insurance, (viii) fees and expenses of all other Persons retained by either of the Issuers, (ix) internal expenses of the Issuers (including, without limitation, all salaries and expenses of officers and employees of the Issuers performing legal or accounting duties), (x) the expense of any annual audit, (xi) the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange, if applicable, (xii) the expenses relating to printing, word processing and distributing all Registration Statements, underwriting agreements, securities sales agreements, indentures and any other documents necessary in order to comply with this Agreement, and (xiii) fees and expenses of the Trustee (including reasonable fees and expenses of counsel to the Trustee). (b) In connection with any Shelf Registration hereunder, the Issuers shall reimburse the Holders of the Registrable Securities being registered in such registration for the fees and disbursements of not more than one counsel (in addition to appropriate local counsel) chosen by the Holders of a majority in aggregate principal amount of the Registrable Securities to be included in such Registration Statement. Such Holders shall be responsible for any and all other out-of-pocket expenses of the Holders of Registrable Securities incurred in connection with the registration of the Registrable Securities. 17 7. Indemnification The Issuers agree, jointly and severally, to indemnify and hold harmless each Holder of Registrable Securities and each Participating Broker-Dealer selling Exchange Securities during the Applicable Period, the officers and directors of each such person, and each person, if any, who controls any such person within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act (each, a "Participant"), from and against any and all losses, claims, damages and liabilities (including, without limitation, the reasonable legal fees and other expenses actually incurred in connection with any suit, action or proceeding or any claim asserted) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) or Prospectus (as amended or supplemented if the Issuers shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages or liabilities are caused by any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to any Participant furnished to the Company in writing by such Participant expressly for use therein; provided that the foregoing indemnity with respect to any preliminary prospectus shall not inure to the benefit of any Participant (or to the benefit of any person controlling such Participant) from whom the person asserting any such losses, claims, damages or liabilities purchased Registrable Securities or Exchange Securities if such untrue statement or omission or alleged untrue statement or omission made in such preliminary prospectus is eliminated or remedied in the related Prospectus (as amended or supplemented if the Issuers shall have furnished any amendments or supplements thereto) and a copy of the related Prospectus (as so amended or supplemented) shall not have been furnished to such person at or prior to the sale of such Registrable Securities or Exchange Securities, as the case may be, to such person. Each Participant will be required to agree, severally and not jointly, to indemnify and hold harmless the Issuers, their directors, their officers and each person who controls the Issuers within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Issuers to each Participant, but only with reference to information relating to such Participant furnished to the Company in writing by such Participant expressly for use in any Registration Statement or Prospectus, any amendment or supplement thereto, or any preliminary prospectus. The liability of any Participant under this paragraph shall in no event exceed the proceeds received by such Participant from sales of Registrable Securities giving rise to such obligations. If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any person in respect of which indemnity may be sought pursuant to either of the two preceding paragraphs, such person (the "Indemnified Person") shall promptly notify the person against whom such indemnity may be sought (the "Indemnifying Person") in writing, and the Indemnifying Person, upon request of the Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others the Indemnifying Person may designate in such proceeding and shall pay the reasonable fees and expenses actually incurred by such counsel related to such proceeding, provided that the failure to so notify the Indemnifying Person shall 18 not relieve it of any obligation or liability which it may have hereunder or otherwise (unless and only to the extent that such failure directly results in the loss or compromise of any material rights or defenses). In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed in writing to the contrary, (ii) the Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Person or (iii) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the Indemnifying Person shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reimbursed as they are incurred. Any such separate firm for the Participants and such control persons of Participants shall be designated in writing by Participants who sold a majority in interest of Registrable Securities sold by all such Participants and any such separate firm for the Issuers, their directors, their officers and such control persons of the Issuers shall be designated in writing by the Company. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final non-appealable judgment for the plaintiff, the Indemnifying Person agrees to indemnify any Indemnified Person from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Person shall have requested in writing the chief legal officer or, if no chief legal officer exists, to the chief executive officer of an Indemnifying Person to reimburse the Indemnified Person for reasonable fees and expenses actually incurred by counsel as contemplated by the third sentence of this paragraph, the Indemnifying Person agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 60 days after receipt by such Indemnifying Person of the aforesaid request and (ii) a second such written request shall have been sent to and received by the chief legal officer or, if no chief legal officer exists, by the chief executive officer of the Indemnifying Person at least 30 days after the first such request but at least 15 days prior to the date of such settlement, and (iii) with respect to such request, such Indemnifying Person shall not have reimbursed the Indemnified Person for all reasonable fees and expenses of such counsel in accordance with such request prior to the date of such settlement; provided, however, that the Indemnifying Person shall not be liable for any settlement effected without its consent pursuant to this sentence if the Indemnifying Party is contesting, in good faith, the request for reimbursement. No Indemnifying Person shall, without the prior written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Person, unless such settlement includes an unconditional release of such Indemnified Person from all liability on claims that are the subject matter of such proceeding. If the Indemnification provided for in the first and second paragraphs of this Section 7 is unavailable to an Indemnified Person in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities in such 19 proportion as is appropriate to reflect the relative fault of the Issuers on the one hand and the Participants on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Issuers on the one hand and the Participants on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuers or by the Participants and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties shall agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Participants were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any reasonable legal or other expenses actually incurred by such Indemnified Person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, in no event shall a Participant be required to contribute any amount in excess of the amount by which proceeds received by such Participant from sales of Registrable Securities exceeds the amount of any damages that such Participant has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The indemnity and contribution agreements contained in this Section 7 will be in addition to any liability which the Indemnifying Persons may otherwise have to the Indemnified Persons referred to above. 8. Rule 144 and Rule 144A Each of the Issuers shall use their reasonable best efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder in a timely manner and, if at any time the Issuers are not required to file such reports, they shall, upon the request of any Holder of Registrable Securities, make publicly available other information so long as necessary to permit sales pursuant to Rule 144 and Rule 144A under the Securities Act. The Issuers shall use their reasonable best efforts to take such further action as any Holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 and Rule 144A under the Securities Act, as such Rules may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to require the Issuers to register any of their securities pursuant to the Exchange Act. 20 9. Underwritten Registrations If any of the Registrable Securities covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Holders of a majority in aggregate principal amount of such Registrable Securities included in such offering and reasonably acceptable to the Company. No Holder of Registrable Securities may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. 10. Miscellaneous (a) Remedies. In the event of a breach by the Issuers of any of their obligations under this Agreement, each Holder of Registrable Securities, in addition to being entitled to exercise all rights provided herein, in the Indenture or, in the case of the Initial Purchasers, in the Purchase Agreement or granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Issuers agree that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by them of any of the provisions of this Agreement and hereby further agree that, in the event of any action for specific performance in respect of such breach, they shall waive the defense that a remedy at law would be adequate. (b) No Inconsistent Agreements. The Issuers have not, as of the date hereof, entered and shall not, after the date of this Agreement, enter into any agreement with respect to any of their securities that is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. The Issuers have not entered and will not enter into any agreement with respect to any of their securities which will grant to any Person piggy-back rights with respect to a Registration Statement. (c) Adjustments Affecting Registrable Securities. The Issuers shall not, directly or indirectly, take any action with respect to the Registrable Securities as a class that would adversely affect the ability of the Holders of Registrable Securities to include such Registrable Securities in a registration undertaken pursuant to this Agreement. (d) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of Holders of at least a majority of the then outstanding aggregate principal amount of Registrable Securities. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Securities whose 21 securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders of Registrable Securities may be given by Holders of at least a majority in aggregate principal amount of the Registrable Securities being sold by such Holders pursuant to such Registration Statement, provided that the provisions of this sentence may not be amended, modified or supplemented except in accordance with the provisions of the immediately preceding sentence. (e) Notices. All notices and other communications (including without limitation any notices or other communications to the Trustee) provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, next-day air courier or telecopy: (i) if to a Holder of Registrable Securities, at the most current address given by the Trustee to the Company; and (ii) if to the Issuers, at Tekni-Plex, Inc., 201 Industrial Parkway, Somerville, New Jersey 08876, Attention: Dr. F. Patrick Smith; with a copy to Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017, Attention: Winthrop Conrad, Esq.. All such notices and communications shall be deemed to have been duly given when: delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; one business day after being timely delivered to a next-day air courier; and when receipt is acknowledged by the addressee, if telecopied. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the trustee under the Indenture at the address specified in such Indenture. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Registrable Securities; provided, that, with respect to the indemnity and contribution agreements in Section 7, each Holder of Registrable Securities subsequent to the Initial Purchaser shall be bound by the terms thereof if such Holder elects to include Registrable Securities in a Shelf Registration; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign holds Registrable Securities. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 22 (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. (j) Severabilitv. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or un enforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (k) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement, and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. (l) Securities Held by the Company or Its Affiliates. Whenever the consent or approval of holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or its affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (m) Subsidiary Guarantor a Party. Immediately upon the designation of any subsidiary of the Company as a Guarantor (as defined in the Indenture), the Company shall cause such Guarantor to guarantee the obligations of the Company hereunder (including, without limitation, the obligation to pay Additional Interest, if any, pursuant to the terms of Section 4 hereof), by executing and delivering to the Initial Purchaser an appropriate amendment to this Agreement. 23 IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above. TEKNI-PLEX, INC. By: /s/ JAMES E. CONDON ------------------------- Name: James E. Condon Title: Chief Financial Officer PURETEC CORPORATION PLASTIC SPECIALTIES AND TECHNOLOGIES, INC. PLASTIC SPECIALTIES AND TECHNOLOGIES INVESTMENTS, INC. BURLINGTON RESINS, INC. DISTRIBUTORS RECYCLING INC. REI DISTRIBUTORS, INC. ALUMET SMELTING CORP. NATVAR HOLDINGS, INC. TRI-SEAL HOLDINGS, INC. PURE TECH RECYCLING OF CALIFORNIA COAST RECYCLING NORTH, INC. PURE TECH APR, INC. TPI Acquisition Subsidiary, Inc. collectively, the Guarantors By: /s/ KENNETH BAKER -------------------------------------------- Name: Kenneth Baker Title: President LEHMAN BROTHERS INC. By: /s/ MICHAEL KONIGSBERG -------------------------------------------- Name: Michael Konigsberg Title: Managing Director EX-5.1 11 y61170exv5w1.txt OPINION OF DAVIS POLK & WARDWELL EXHIBIT 5.1 212-450-4000 August 22, 2002 Tekni-Plex, Inc. 260 Denton Tap Road Coppell, TX 75019 Ladies and Gentlemen: We have acted as special counsel to Tekni-Plex, Inc., a Delaware corporation (the "Company"), in connection with the Company's offer (the "Exchange Offer") to exchange its 12.75% Series B Senior Subordinated Notes Due 2010 (the "New Securities") for any and all of its outstanding 12.75% Senior Subordinated Notes Due 2010 (the "Old Securities"). We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments as we have deemed necessary or advisable for the purpose of rendering this opinion. Upon the basis of the foregoing, we are of the opinion that the New Securities, when duly executed, authenticated and delivered in exchange for the Old Securities in accordance with the terms of the Indenture and the Exchange Offer, will be valid and binding obligations of the Company enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and general principles of equity. We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York, the federal laws of the United States of America and the General Corporation Law of the State of Delaware. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement relating to the Exchange Offer. We also consent to the reference to us under the caption "Legal Matters" in the Prospectus contained in such Registration Statement. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by or furnished to any other person without our prior written consent except that HSBC Bank USA, as Exchange Agent for the Exchange Offer, may rely upon this opinion as if it were addressed directly to it. Very truly yours, /s/ DAVIS POLK & WARDWELL 2 EX-12.1 12 y61170exv12w1.txt STATEMENT RE: COMPUTATION OF RATIOS Exhibit 12.1 Tekni-Plex, Inc. and Subsidiary Computation of Ratios Ratio of Earnings to Fixed Charges
For the Nine For the Years Ended Months Ended ------------------------------------------------------- ------------ June 27, July 3, July 2, June 30, June 29, March 30, March 29, 1997 1998 1999 2000 2001 2001 2002 ---- ---- ---- ---- ---- ---- ---- Net income (loss) ...................... $(12,238) $ 8,669 $ 14,997 $(20,968) $(18,994) $(19,348) $ (7,081) Income tax provision (benefit) ......... 4,675 9,112 14,150 14,436 (7,069) (15,345) (3,820) Interest ............................... 8,268 20,182 40,769 38,447 76,569 57,686 53,389 Unrealized loss on derivative contracts -- -- -- -- 13,891 14,293 3,675 Extraordinary item ..................... 20,666 -- -- 35,374 -- Earnings before fixed charges .......... 21,371 37,963 69,916 67,289 64,397 37,286 46,163 Fixed charges .......................... 8,268 20,182 40,769 38,447 76,569 57,686 53,389 Ratio of earnings to fixed charges ..... 2.6 1.9 1.7 1.8 0.8 0.6 0.9
EX-13.1 13 y61170exv13w1.txt ANNUAL REPORT ON FORM 10-K - JUNE 29, 2001 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A (Mark One) [X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended June 29, 2001 [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _____ to _____ Commission File Number 333-28157 Tekni-Plex, Inc. (Exact name of registrant as specified in its charter) Delaware 22-3286312 (State of Incorporation) (I.R.S. Employer Identification No.)
260 North Denton Tap Road, Coppell, Texas 75019 (Address of principal executive offices and zip code) (972) 304-5077 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the registrant's classes of stock as of the latest practicable date. None Documents Incorporated by Reference: See Index to Exhibits. 1 Item 1. BUSINESS INTRODUCTION We were founded as a Delaware corporation in 1967 to acquire the General Felt Products division of Standard Packaging Corporation. At that time, we were located in Brooklyn, NY, where we produced laminated closure (cap) liners primarily for the pharmaceutical and food industries. Over the years, we have built a reputation for solving difficult packaging problems and providing customers with high quality, advanced packaging materials. In 1970, we built an additional manufacturing facility in Somerville, New Jersey, diversifying into the business of producing polystyrene foam trays for the poultry processing industry. In March 1994, Tekni-Plex was acquired by Dr. F. Patrick Smith and other investors. Dr. Smith was elected Chief Executive Officer. In April 1994, Mr. Kenneth W.R. Baker was appointed Chief Operating Officer. At that time, the principal product lines consisted of clear, high-barrier laminations for pharmaceutical blister packaging (which we refer to as clear blister packaging); closure liners, primarily for pharmaceutical end-uses; and foam processor trays primarily for the poultry industry. In December 1995, Tekni-Plex acquired the Flemington, NJ, plant and business of Hargro Flexible Packaging Corporation. The Flemington plant utilizes lamination and coating technology to produce packaging materials primarily for pharmaceutical products such as transdermal patches, sutures, iodine and alcohol swabs, aspirin and other physician samples. We relocated the Brooklyn equipment and business into the Flemington facility during 1996. The synergistic result of having complementary technologies in one location created a combined operation with considerably higher efficiencies and lower costs than the sum of the stand-alone operations. In February 1996, we expanded our food packaging business by completing our acquisition of Dolco Packaging Corp., a publicly-traded $81 million foam products company that was nearly twice the size of Tekni-Plex. Dolco had been in the business of producing foam packaging products since the 1960s and had attained the leading share of foam egg carton sales in the United States. The Dolco acquisition also solidified our position as a leading supplier of foam processor trays. In August 1997, Dolco, which had been a wholly owned subsidiary of Tekni-Plex, was merged into Tekni-Plex. In July 1997, we acquired the business and operating facility of PurePlast Inc. of Cambridge, Ontario, Canada. PurePlast produced calendered polyvinyl chloride (vinyl) sheet primarily for food and electronics packaging applications. Following the acquisition, we developed proprietary formulations of vinyl sheet for vertical integration into our clear blister packaging business and for sale directly to our global pharmaceutical customers. In March 1998, Tekni-Plex acquired PureTec Corporation, a publicly-traded company with annual sales of $315 million. PureTec is a leading manufacturer of plastic packaging, products, and materials primarily for the healthcare and consumer markets. PureTec enjoys leading market positions in its core products, including garden and irrigation hose, precision tubing and gaskets primarily for the packaging industry, vinyl medical tubing, and vinyl compounds for the production of medical devices. PureTec is a wholly-owned subsidiary of Tekni-Plex. In January 1999, we acquired substantially all the assets of Tri-Seal International, Inc., a leader in sophisticated extruded and co-extruded capliners and seals. The Tri-Seal operations have been integrated with our closure liner business. In April 1999, we acquired substantially all the assets of Natvar, a producer of disposable medical tubing. As with Tri-Seal, the Natvar acquisition was intended to strengthen our existing core business and expand product offerings. The Natvar operation has been integrated into our medical tubing business. In June 2000, we completed a recapitalization of Tekni-Plex. As part of the recapitalization, existing investors other than management sold most of their interests, and a group of new investors contributed an aggregate of $167 million in new equity and agreed to contribute up to $103 million in additional equity over the next five years. All members of management maintained 100% of their interests in the Company. Also, Tekni-Plex entered into a new credit agreement, issued $275 million in new senior subordinated notes, and repaid the debt that existed prior to the recapitalization. 2 In October 2000, we acquired substantially all the assets of the Super Plastics division of RCR International Inc. Super Plastics is primarily a manufacturer of garden hose and has a manufacturing facility in Mississauga, Ontario Canada. The Super Plastics operations have been integrated with our garden hose business. DESCRIPTION OF BUSINESS We are a global, diversified manufacturer of packaging, products, and materials for the healthcare, consumer, and food packaging industries. We have built a leadership position in our core markets, and focus on vertically integrated production of highly specialized products. Our operations are aligned under four primary business groups: Healthcare Packaging, Products, and Materials; Consumer Packaging and Products; Food Packaging; and Specialty Resins and Compounds. Our end market and product line diversity has the effect of reducing overall risk related to any single product or customer. Representative product lines in each group are listed below:
HEALTHCARE PACKAGING, PRODUCTS, CONSUMER PACKAGING AND FOOD PACKAGING SPECIALTY RESINS AND AND MATERIALS PRODUCTS COMPOUNDS - ------------------------------ ---------------------- -------------- -------------------- Pharmaceutical packaging Precision tubing and Foamed egg cartons Specialty PVC resins gaskets Medical tubing Garden and irrigation Poultry and meat Recycled PET resins hose products processor trays Medical device materials Pool hose products Agricultural foam General purpose PVC packaging compounds Foamed Consumer Plates
COMPETITIVE STRENGTHS We believe that our competitive strengths include: - Strong customer relationships. We have long-standing relationships with many of our customers. We estimate the average tenure among our largest customers at more than 17 years. We attribute our long-term customer relationships to our ability to consistently manufacture high quality products and provide a superior level of customer service. We routinely win customer awards for our superior products and customer service and have recently been recognized for supplier excellence by 3M Pharmaceuticals, Pfizer, Eli Lilly, Boston Scientific, Kraft Foods and Perdue Farms, among others. - Strong market positions in core businesses. We have a strong market presence in our product lines. The following table shows what we believe to be our market position in the U.S. in each core product line: PRODUCT MARKET POSITION Medical device materials...................................... 1 Vinyl medical tubing.......................................... 1 Clear, high barrier blister packaging......................... 1 Closure liners................................................ 1 Garden and irrigation hose.................................... 1 Precision tubing and gaskets.................................. 1 Egg cartons................................................... 1 Foam processor trays.......................................... 2
- Experienced management team. Our management team has been successful in selecting and integrating strategic acquisitions as well as improving underlying business fundamentals. After 3 significantly improving the business of Tekni-Plex following our 1994 acquisition, management successfully integrated both the Flemington and Dolco operations during 1996, the latter being a public company then nearly twice our size. During the same period, the Brooklyn and Flemington operations were also successfully merged. In 1997, we acquired and integrated the PurePlast operations. In 1998, we acquired PureTec, a public company then more than twice our size. In 1999, we acquired and integrated the assets and business of Tri-Seal and Natvar. Management has substantially improved the operating margins of each of these acquisitions. Members of our management team have integrated acquisitions, effected turnarounds, provided strategic direction and leadership, increased sales and market share, improved manufacturing efficiencies and productivity, and developed new technologies to enhance the competitive strengths of the companies they have managed. - Cost efficient producer. We continually focus on improving underlying operations and reducing costs. Since the 1994 acquisition, current management has improved our cost structure from an EBITDA margin of 8.5% with EBITDA of $3.8 million on sales of $44.9 million for the 12 months ended December 31, 1993 to an EBITDA margin of 19.0% with EBITDA of $100.0 million on sales of $525.8 million for the trailing 12 months ended June 29, 2001. Our seven add-on acquisitions since 1995 have provided significant opportunities to realize cost savings and synergies in the combined businesses through the sharing of complementary technologies and manufacturing techniques, as well as economics of scale including the purchase of raw materials. - Producer of high quality, technically sophisticated products. We believe, based upon our knowledge and experience in the industry, that we have a long-standing reputation as a manufacturer of high quality, high performance products, materials and primary packaging (where the packaging material comes into direct contact with the end product). Our emphasis on quality is evidenced by our product lines which address the more technically sophisticated areas of their respective markets. - Strong equity sponsorship. We have obtained a strong equity commitment from co-investors in conjunction with the recapitalization. New investors agreed to contribute $269.6 million in the aggregate to Tekni-Plex Partners, of which $167.0 million was contributed to consummate the recapitalization in June 2000. An additional $5.0 million was contributed in conjunction with our acquisition of Super Plastics in October 2000, and $30.0 million was contributed in June 2001 in anticipation of our announced acquisition of Mark IV's Swan Division. The remainder ($67.6 million) is available for at least five years from the recapitalization to be used for our general corporate purposes, including acquisitions. We believe that these equity commitments will provide us with significant flexibility to take advantage of business opportunities as they arise. In connection with the recapitalization, all members of our current management maintained their entire equity investment, which had an implied aggregate value of approximately $96.0 million. BUSINESS STRATEGY We seek to maximize our profitability and growth and take advantage of our competitive strengths by pursuing the following business strategy: - Ongoing cost reduction through technical process improvement. We have an ongoing program to improve manufacturing and other processes in order to drive down costs. Examples of cost improvement programs include: - material and energy conservation through enhanced process controls and advanced product design. - reduction in machine set-up time through the use of proprietary technology. - continual product line rationalization; and 4 - development of backward and forward integration opportunities. - Internal growth through product line extension and improvement. We continually seek to improve and extend our product lines and leverage our existing technological capabilities in order to increase market share in existing markets, effectively penetrate new markets and improve profitability. Our strategy is to emphasize our expertise in providing packaging, products and materials with specific high performance characteristics through the development of various unique proprietary materials and proprietary manufacturing process techniques. - Growth through international expansion. We believe that there is significant opportunity to expand our international sales, which currently represent approximately 15% of our total revenues. At present, we have manufacturing operations in Canada, the United Kingdom, Belgium and Italy. We have recently added regional sales offices in Belgium, Germany, Argentina and Singapore to our existing offices in Canada, Italy and the United Kingdom. We have also recently entered into manufacturing liaisons in Italy, Japan, Argentina and Germany which supplement our existing liaisons in Switzerland and the Phillipines. In addition, we have recently added sales representatives in Peru and throughout Central America to our existing representatives in Australia, China (including Hong Kong), Italy, Malaysia, Thailand, Taiwan, South Africa, Argentina, Chile, Brazil and Mexico. We also have a licensee in Japan. We believe that our growing international presence will generate an increase in our sales. - Growth through acquisitions. We will continue to pursue acquisitions selectively when the opportunity arises. Our objective is to pursue acquisitions that provide us with the opportunity to gain economies of scale and reduce costs through, among other things, technology sharing and synergistic cost reduction. HEALTHCARE PACKAGING, PRODUCTS, AND MATERIALS The Healthcare Packaging, Products and Materials segment of our business had revenues of $148.4 million (28.2% total revenues) for the 12 months ended June 29, 2001. Pharmaceutical Packaging Our pharmaceutical packaging product line includes flexible, semi-rigid, and rigid packaging films, coated films, co-extrusions, and laminations. We believe that we are a market leader for clear, high-barrier laminations for pharmaceutical blister packaging. These packaging materials are used for fast-acting pharmaceuticals that are generally highly reactive to moisture. Transparent, high-barrier blister packaging is primarily used to protect drugs from moisture vapor infiltration or desiccation. Blister packaging is the preferred packaging form when dispenser handling can affect shelf life or drug efficacy, or when unit dose packaging is needed. Unit dose packaging is being used to improve patient compliance with regard to dosage regimen, and has been identified as the packaging form of choice in addressing child safety aspects of drug packaging. The advantages of transparent blisters, as opposed to opaque foil-based materials manufactured by various competitors, include the ability to visually inspect the contents of the blister and to present the product with maximum confidence. We believe the flexible and semi-rigid packaging segment of the pharmaceutical packaging industry is growing at a faster rate than the non-plastics segments because of the generally lower package cost and broader range of functional characteristics of plastic packaging. As a result, the technologies used to manufacture plastic packaging materials continue to develop at a faster pace than those used in the more mature paper, glass, and metal products. Our high-barrier, blister packaging is sold to major pharmaceutical companies (or their designated contract packagers). We market our full pharmaceutical product line directly on a worldwide basis, and have assembled a global network of sales and marketing personnel on six continents. 5 In the clear blister packaging market, we have two principal competitors worldwide with resources equal to or greater than ours. However, we believe that neither of these competitors has the breadth of product offering to match ours, and that this differentiation is significant as viewed by the pharmaceutical industry. Also, the high manufacturing and audit compliance standards imposed by the pharmaceutical companies on their suppliers provide a significant barrier to the entry of new competitors. Entry barriers also arise due to the lengthy and stringent approval process required by pharmaceutical companies. Since approval requires that the drug be tested while packaged in the same packaging materials intended for commercial use, changing materials after approval risks renewed scrutiny by the FDA. The packaging materials for pharmaceutical applications also require special documentation of material sources and uses within the manufacturing process as well as heightened quality assurance measures. Closure Liners Tekni-Plex is also the leading producer of sophisticated extruded, co-extruded and laminated cap-liners and seals, known as closure liners, for glass and plastic bottles. Closure liners perfect the seal between a container and its closure, for example, between a bottle and its cap. The liner material has become an integral part of the container/closure package. Without the gasketing effect of the liner, most container/closure packages would not be secure enough to protect the contents from contamination or loss of product efficacy. We sell these products through our direct sales force primarily to packagers of pharmaceutical, healthcare and food products. We have two principal competitors in North America but also compete with several smaller companies having substantially smaller market shares. However, as a result of the Tri-Seal acquisition, we believe that we offer the widest range of liner materials in the industry. We remain competitive by focusing on product quality and performance and prompt delivery. Medical Tubing We are the leading non-captive supplier of vinyl medical tubing in North America and Europe. We specialize in high-quality, close tolerance tubing for various surgical procedures and related medical applications. These applications include intravenous ("IV") therapy, hemodialysis therapy, cardio-vascular procedures such as coronary bypass surgery, suction and aspiration products, and urinary drainage and catheter products. New medical tubing products we have developed include microbore tubing and silicone substitute formulations. 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 (color-coded) diameter tube, thereby improving accuracy and reducing cost. More importantly, as home healthcare trends continue, the use of microbore tubing will help eliminate critical dosage errors on the part of the non-professional caregiver or the patient. Medical tubing is sold primarily to manufacturers of medical devices that are packaged specifically for such procedures and applications. These products are sold through direct salespeople. We remain competitive by focusing on product quality and performance and prompt delivery. We manufacture medical tubing using proprietary plastic extrusion processes. The primary raw materials are proprietary compounds, which we produce. As a result of the Natvar acquisition, we believe that we are the largest third-party supplier of disposable medical tubing in North America. Medical Device Materials We believe that we are the leading non-captive producer of high quality vinyl compounds for use in the medical industry. Our chemists work closely with customers to develop compounds that address their specific requirements. Through this custom work, we have introduced a number of breakthroughs to the medical device industry by developing formulations with unique physical characteristics. For example, we recently developed a new family of flexible vinyl compounds designed to replace silicone rubber in a variety of medical tubing and commercial applications. 6 These medical-grade materials are sold to leading manufacturers of medical devices and equipment. They are also sold to producers of tubing and, to some extent, to producers of closures for the food and beverage industry. We sell these compounds in worldwide markets directly through our salespeople. The market for medical-grade vinyl compounds is highly specialized, and we have two smaller, but significant competitors. For more than 30 years, we have been supplying these specialized vinyl compounds for FDA-regulated applications. We believe that we compete effectively based on product quality, performance and prompt delivery. CONSUMER PACKAGING AND PRODUCTS The Consumer Packaging and Products segment of our business had revenues of $202.0 million (38.4% of total revenues) for the 12 months ended June 29, 2001. Precision Tubing and Gaskets The precision tubing products are manufactured at extremely high speeds while holding to precise tolerances. The process enhancements that allow simultaneous high speed and precision are proprietary to us. The precision gasket products, which we have manufactured for over fifty years, are produced using proprietary formulations. These formulations are designed to provide consistent functional performance throughout the entire shelf life of the product by incorporating chemical resistance characteristics appropriate to the fluid being packaged. For example, we have developed unique formulations that virtually eliminate contamination of the products packaged in spray dispensers. This has greatly expanded the use of these dispensers for personal hygiene products, foods, and fragrances. The Company has also developed proprietary methods for achieving extremely accurate thickness control, superior surface finish, and the elimination of internal imperfections prevalent in other processing methods. Our precision tubing and gaskets product line is sold primarily to manufacturers of aerosol valves, dispenser pumps, and writing instruments. Sales to the aerosol valve and dispenser pump industries consist primarily of dip tubes, which transmit the contents of a dispenser can to the nozzle, and specialized molded or punched rubber-based valve gaskets that serve to control the release of the product from the container. Writing instrument products include pen barrels and ink tubing as well as ink reservoirs for felt-tip pens. These products are sold throughout the United States and Europe, as well as selected worldwide markets. Sales are made through our direct sales force. We believe that it is the leading precision tubing extruder in North America and is the leading supplier of aerosol valve and dispenser pump gaskets worldwide. We are the single-source supplier to much of the industry. The principal competitive pressure in this product line is the possibility of customers switching to internal production, or vertical integration. To counteract this possibility, the Company focuses on product quality, cost reduction, prompt delivery, technical service and innovation. Garden and Irrigation Hose Products We believe that we are the leading producer of garden hose in the United States. We have produced garden hose products for fifty years, and produce its primary components internally, including proprietary material formulations and brass couplings. Innovations have included the patented Colorite(R) Evenflow(R) design and ultra high quality product lines that utilize medical-grade plastics. We also manufacture specialty hose products such as air hose and irrigator "soaker hose". We sell these products primarily through our direct salespeople and also through independent representatives. Both private label and brand-name products are sold to the retail market, primarily to home centers, hardware cooperatives, food, automotive, drug and mass merchandising chains and catalog companies throughout the United States and Canada. Our customers include some of the fastest growing and the most widely respected retail chains in North America. Our market strategy is to provide a complete line of innovative, high-quality products along with superior customer service. 7 The garden hose business is highly seasonal with approximately 75% of sales occurring in the spring and early summer months. This seasonality tends to have an impact on the Company's financial results from quarter to quarter FOOD PACKAGING The Food Packaging segment of our business had revenues of $124.5 million (23.7% of total revenues) for the 12 months ended June 29, 2001. The Food Packaging group produces primarily thermoformed foam polystyrene packaging products such as egg cartons and processor trays for the poultry and meat industries. We believe that we are the leading manufacturer of egg cartons in the United States. We are also a leading supplier of processor trays to the poultry industry. Thermoformed foam polystyrene packaging has been the material of choice for food packaging cartons and trays for many years. In terms of economic and functional characteristics, foamed polystyrene products offer a combination of high strength, minimum material content and superior moisture barrier performance. Foamed polystyrene products also offer greater dimensional consistency that enhances the high speed mechanical feeding of cartons and trays into automated package filling operations. We sell these products through our direct sales force. Within the polystyrene foam processor tray market, we compete principally with two large competitors, both of which have significantly greater financial resources than ours and who, together, control the largest share of this market. In the egg packaging market, our primary competitor manufactures pulp-based egg cartons. We believe, that we compete effectively based on product quality and performance and prompt delivery. Our customer base includes most of the domestic egg packagers (including those owned by egg retailers) and many prominent poultry processors. SPECIALTY RESINS AND COMPOUNDS The Specialty Resins and Compounds segment of our business had revenues of $50.9 million (9.7% of total revenues) for the 12 months ended June 29, 2001. Specialty Vinyl Resins Tekni-Plex manufactures specialty vinyl resins, with an annual production capacity of 100 million pounds. We employ specialized technology to produce dispersion, blending, and copolymer suspension resins for use by suppliers to a variety of industries, including floor covering, automotive sealants and adhesives, coil coatings, plastisol compounding and vinyl packaging. We sell these products through our direct sales force as well as through independent sales representatives. We compete with a number of large chemical companies offering greater breadth of products. However, we believe that we are building a relatively unique position in the specialty resins market by offering customized products for niche markets that the larger producers do not serve. We provide individual customer service and the highest standards of quality. 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 8 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 and processes. The Company works closely with certain clients to develop and improve certain products and product lines. Much of this product development is either funded by clients or its cost is absorbed in the Company's manufacturing cost of sales, and therefore is not reflected as research and development expense. SALES, MARKETING AND CUSTOMERS Excluding customer service representatives, as of June 29, 2001, we had a total of 49 direct sales and marketing personnel covering both our domestic and international businesses. There were also commissioned independent sales representatives (not direct employees of Tekni-Plex) providing additional coverage. We estimate the average tenure among our ten largest customers at more than 17 years. Overall customer concentration is low with no customer accounting for more than 10% of total sales and the top ten customers generating less than 32% of sales for the 12 months ended June 29, 2001. MANUFACTURING As of June 29, 2001 we had strategically located manufacturing facilities throughout North America and Europe, totaling over 3,000,000 square feet of floor space. We utilize many proprietary material formulations throughout our operations. These formulations provide superior processing and end-product performance characteristics, giving us a competitive edge across many of our businesses. Typically, these proprietary material formulations are protected by trade secret, as opposed to patents which, we believe would be a less effective approach to maintaining our competitive edge. We utilize many proprietary, highly efficient manufacturing processes, developed by our own engineering staffs throughout our operations. These processes allow us to make products with superior dimensional tolerances at higher speeds with lower waste factors than our competitors. Our various business units routinely share technological information regarding process and material formulation improvements, and actively seek new synergistic applications for newly developed technologies throughout our company. RAW MATERIALS We purchase raw materials from several sources that differ for each product line. We use commodity petrochemicals, primarily polyvinyl chloride, polystyrene, vinyl chloride monomer, polypropylene and polyethylene. All of these materials are widely available from numerous sources and we currently purchase them from multiple suppliers. This diversity of raw material suppliers, as well as the availability of alternative suppliers, has the effect of reducing our overall risk related to any one supplier. In the past we have generally been able to pass on raw materials cost increases to customers on a relatively timely basis. The exception has been garden hose products, the prices for which are typically set annually in advance of each season. To the extent that raw material costs increase more than anticipated, these additional costs generally cannot be passed on during that season. Conversely, we benefit from any decrease in raw material costs after garden hose prices have been set for the upcoming selling season. INTELLECTUAL PROPERTY We primarily rely on confidentiality agreements contained in our employment applications and the restriction of access to our plants and confidential information to safeguard our proprietary technology. Although we also file and register patents and trademarks, we do not believe that any of our patents or trademarks is material to our operations. 9 EMPLOYEES As of June 29, 2001, the Company employed approximately 3,000 full-time employees. Approximately 28% of all employees are represented by various collective bargaining agreements that expire between June 2003 and June 2004. Item 2. FACILITIES The Company believes that its facilities are suitable and have sufficient productive capacity for its current and foreseeable operational and administrative needs. Set forth below is a list and brief description of all of the Company's offices and facilities, all of which are owned unless otherwise indicated.
APPROXIMATE LOCATION FUNCTION SQUARE FEET - -------- -------- ----------- Somerville, New Jersey Food Packaging and Healthcare packaging 172,000 Auburn, Maine (5) Specialty resins 24,000 Belfast, Northern Ireland Healthcare materials 55,000 Blauvelt, New York (8) Healthcare packaging 56,400 Burlington, New Jersey Specialty resins 107,000 Cambridge, Ontario Healthcare packaging 25,000 City of Industry, Healthcare products 110,000 California (5) Clayton, North Carolina Healthcare products 76,000 Clinton, Illinois Consumer packaging 62,500 Coppell, Texas (7) Executive Offices 3,125 Dallas, Texas (1) Food packaging 139,000 Dalton, Georgia Healthcare products 40,000 Decatur, Indiana Food packaging 187,000 Decatur, Indiana (1) Warehouse 3,750 East Farmingdale, New York (2) Specialty resins 50,000 Erembodegem Consumer packaging and 99,100 (Aalst), Belgium healthcare products Flemington, New Jersey Healthcare packaging 145,000 Lawrenceville, Georgia Food packaging 150,000 Lawrenceville, Georgia (1) Warehouse 31,700 Livonia, Michigan (4) Specialty resins 60,000 McKenzie, Tennessee Consumer products 20,000
10 Milan (Gaggiano), Italy (7) Consumer packaging 14,900 Milan (Gaggiano), Italy Consumer packaging 25,800 Milan (Rosate), Italy (3) Consumer packaging 24,000 Mississauga, Ontario (6) Consumer products 100,000 Mississauga, Ontario (5) Consumer Products 126,650 Piscataway, New Jersey (3) Compounds 150,000 Ridgefield, New Jersey Consumer products and 328,000 healthcare materials Ridgefield, New Jersey (3) Warehouse 70,000 Rockaway, New Jersey Consumer packaging 98,600 Schaumburg, Illinois (9) Consumer packaging 58,000 Schiller Park, Illinois Consumer packaging 20,000 Sparks, Nevada (3) Consumer products and 248,000 healthcare materials Tonawanda, New York (2) Consumer products 32,000 Waco, Texas Consumer products 104,600 Wenatchee, Washington Food packaging 97,000 Wenatchee, Washington (4) Warehouse 26,200
(Years relate to calendar years) (1) Leased on a month-to-month basis. (2) Lease expires in 2001. (3) Lease expires in 2002. (4) Lease expires in 2003. (5) Lease expires in 2004. (6) Lease expires in 2005. (7) Lease expires in 2006 (8) Lease expires in 2008. (9) Lease expires in 2019. ITEM 3. LEGAL PROCEEDINGS AND ENVIRONMENTAL MATTERS We are regularly involved in legal proceedings arising in the ordinary course of business, none of which are currently expected to have a material adverse effect on our businesses, financial condition or results of operation. Like similar companies, our facilities, operations and properties are subject to foreign, federal, state, provincial and local laws and regulations relating to, among other things, emissions to air, discharges to water, the generation, handling, storage, transportation and disposal of hazardous and nonhazardous materials and wastes and 11 the health and safety of employees. We maintain a primary commitment to employee health and safety, and environmental responsibility. Our intention and policy are to be at all times a responsible corporate citizen. Our management includes a Director of Environmental Affairs who is responsible for compliance with all foreign, federal, state and local laws and regulations relating to the environment, and health and safety. This director performs internal auditing procedures and provides direction to all local facility managers in the compliance areas. The Director of Environmental Affairs and our President direct outside environmental counsel and outside environmental consulting firms to ensure that regulations are properly interpreted and reporting requirements are met. We are also subject to environmental laws requiring the investigation and cleanup of environmental contamination. Currently, we are remediating contamination resulting from past industrial activity at three of our New Jersey facilities which we acquired from PureTec in 1998. This remediation is being conducted pursuant to the requirements of New Jersey's Industrial Site Recovery Act which were triggered by the 1998 PureTec transaction. We believe that any costs ultimately borne by us in connection with this remediation would not be material. Although we believe that, based on historical experience, the costs of achieving and maintaining compliance with environmental laws and regulations are unlikely to have a material adverse effect on our business, financial condition or results of operations, it is possible that we could incur significant fines, penalties, capital costs or other liabilities associated with any confirmed noncompliance or remediation of contamination or natural resource damage liability at or related to any of our current or former facilities, the precise nature of which we cannot now predict. Furthermore, we cannot assure you that future environmental laws or regulations will not require substantial expenditures by us or significant modifications of our operations. 12 PART II Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS Not Applicable. Item 6. SELECTED FINANCIAL DATA (Dollars in thousands) The following table sets forth selected historical consolidated financial information of the Company, and has been derived from and should be read in conjunction with the Company's audited consolidated financial statements, including the notes thereto, which appear elsewhere herein.
YEARS ENDED ----------- JUNE 27, JULY 3, JULY 2, JUNE 30, JUNE 29, 1997 1998 1999 2000 2001 --------- --------- --------- --------- --------- INCOME STATEMENT DATA: Net sales $ 148,501 $ 316,332 $ 507,314 $ 524,817 $ 525,837 Cost of goods sold 110,772 239,234 376,370 394,480 399,836 Gross profit 37,729 77,098 130,944 130,337 126,001 Selling, general and administrative expenses 15,886 39,220 62,534 58,343 60,999 Income from operations 21,843 37,878 68,410 71,994 65,002 Interest expense, net 8,094 19,682 38,977 38,447 76,569 Unrealized loss on derivative contracts -- -- -- -- (13,891) Other expense 646 415 286 4,705 605 Pre-tax income (loss) before extraordinary item 13,103 17,781 29,147 28,842 (26,063) Income tax provision (benefit) 4,675 9,112 14,150 14,436 (7,069) Income before extraordinary item 8,428 8,669 14,997 14,406 (18,994) Extraordinary item (loss)(b) (20,666) -- -- (35,374) -- Net income (loss) $ (12,238) $ 8,669 $ 14,997 $ (20,968) $ (18,994) BALANCE SHEET DATA (at period end): Working capital $ 25,950 $ 84,897 $ 101,445 $ 145,879 $ 199,129 Total Assets 129,029 539,279 559,436 574,789 621,494 Total debt (including current portion) 75,000 401,905 416,394 651,593 678,150 Stockholders' equity (deficit) 30,397 38,673 52,297 (149,150) (134,697) OTHER FINANCIAL DATA: EBITDA(a) $ 30,223 $ 54,479 $ 101,681 $ 100,527 $ 100,064 EBITDA margin(a) 20.4% 17.2% 20.0% 19.2% 19.0% Depreciation and amortization $ 9,551 $ 17,249 $ 35,343 $ 34,748 $ 37,670 Capital expenditures 3,934 7,283 12,950 16,258 17,116 Cash flows: From operations 19,537 29,009 38,794 9,485 (3,266) From investing (6,273) (310,672) (58,089) (16,905) (26,777) From financing (3,217) 299,926 12,057 (1,687) 62,180
(a) EBITDA is defined as earnings before interest, unrealized loss on derivative contracts, income taxes, depreciation and amortization. EBITDA is presented because it is a widely accepted financial indicator of the Company's ability to incur and service debt. However, EBITDA should not be considered in isolation as a substitute for net income or cash flow data prepared in accordance with generally accepted accounting principles or as a measure of a company's profitability or liquidity. In addition, this measure of EBITDA may not be comparable to similar measures reported by other companies. EBITDA margin is calculated as the ratio of EBITDA to net sales for the period. (b) Net loss for the year ended June 27, 1997 includes an extraordinary loss is comprised of (i) a prepayment penalty of $1.2 million and the write-off of deferred financing costs and debt discount of $3.4 million, net of the combined tax benefit of $1.8 million, and (ii) a loss of $17.8 million on the repurchase of redeemable warrants. 13 (c) Net loss for the year ended June 30, 2000 includes an extraordinary loss of approximately $35,374. The extraordinary loss is comprised of prepayment penalties and other interest costs of $39,303, the write - off of deferred financing costs of $16,696 and other fees of $1,325, net of a tax benefit of $21,950. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS You should read the following discussion and analysis in conjunction with the "Selected Historical Financial Information" and the Financial Statements included elsewhere in this Annual Report. The table below sets forth, for the periods indicated, selected operating data as a percentage of net sales. SELECTED FINANCIAL INFORMATION (PERCENTAGE OF NET SALES)
YEAR ENDED JULY 2, 1999 JUNE 30, 2000 JUNE 29, 2001 ------------ ------------- ------------- Net sales .................................. 100.0% 100.0% 100.0% Cost of sales .............................. 74.2 75.2 76.0 Gross profit ............................... 25.8 24.8 24.0 Selling, general and administrative expenses 12.3 11.1 11.6 Income from operations ..................... 13.5 13.7 12.4 Interest expense ........................... 7.7 7.3 14.6 Provision (Benefit) for income taxes ....... 2.8 2.8 (1.3) Income (loss) before extraordinary item .... 3.0 2.7 (5.0) Extraordinary item (loss) .................. -- (6.7) -- Net income (loss) .......................... 3.0 (4.0) (3.6) Depreciation and amortization .............. 7.0 6.6 7.2 EBITDA ..................................... 20.0 19.2 19.0
EBITDA is defined as earnings before interest, unrealized loss on derivative contracts, income taxes, depreciation and amortization. EBITDA is presented because it is a widely accepted financial indicator of a company's ability to incur and service debt. However, EBITDA should not be considered in isolation as a substitute for net income or cash flow data prepared in accordance with generally accepted accounting principles or as a measure of our profitability or liquidity. In addition, this measure of EBITDA may not be comparable to similar measures reported by other companies. EBITDA margin is calculated as the ratio of EBITDA to net sales for the period. YEAR ENDED JUNE 29, 2001 COMPARED TO YEAR ENDED JUNE 30 2000 Net Sales, increased to $525.8 million for the year ended June 29, 2001 from $524.8 million for the year ended June 30, 2000, representing an increase of $1.0 million or 0.2%. Sales increases in our Food and Consumer businesses were generally offset by weaker sales in our Healthcare and Specialty Resins businesses. Healthcare sales were down because of generally soft economic conditions and inventory de-stocking by some of our customers. Sales of our Specialty Resins segment were down as we continue to reposition this business in both markets and products. Cost of Goods Sold, increased to $399.8 million for the year ended June 29, 2001 from $394.5 million for the year ended June 30, 2000. Expressed as a percentage of Net Sales, Cost of Goods Sold increased to 76.0% for the year ended June 29, 2001 compared to 75.2% for the year ended June 30, 2000. The increase in Cost of Goods Sold as a 14 percentage of Net Sales was due primarily to raw material costs, which rose rapidly in the early part of the year before trending down over the remainder of the year. Gross Profit, as a result, fell to $126.0 million for the year ended June 29, 2001 from $130.3 million for the year ended June 30, 2000. The ratio of Gross Profit to Net Sales decreased to 24.0% for the year ended June 29, 2001 from 24.8% for the year ended June 30, 2000. Selling, General and Administrative Expenses, increased to $61.0 million for the year ended June 29, 2001 from $58.3 million for the year ended June 30, 2000, an increase of $2.7 million or 4.6%. This increase reflects general cost of living increases for our salaried personal as well as the Selling, General and Administrative expenses associated with our Super Plastics acquisition. The resultant ratio to Net Sales increased to 11.6% for the year ended June 29, 2001 from 11.1% for the year ended June 30, 2000. Operating Profit, as a result of the above, decreased to $65.0 million or 12.4% for the year ended June 29, 2001 from $72.0 million or 13.7% for the year ended June 30, 2000. Other Expenses, decreased to $0.6 million for the year ended June 29, 2001 from $4.7 million for the year ended June 29, 2000 primarily due to non-recurring expenses associated with the recapitalization. The year ended June 30, 2000 included approximately $4.0 million of non-recurring expenses associated with the recapitalization. Interest Expense, increased to $76.6 million for the fiscal year ending June 29, 2001 from $38.4 million for the fiscal year ending June 30, 2000 primarily due to increased debt associated with the recapitalization. The Company has also incurred an unrealized loss of $13.9 million from derivative contracts for the year ended June 29, 2001. The Company had no similar gains or losses for the year ended June 30, 2000. The ratio of the provision (benefit) for income taxes to income (loss) before income taxes was 27.1% for the year ended June 29, 2001 compared to 50.1% for the year ending June 30, 2000. The decrease in the effective rate for the year ended June 29, 2001 is due to non-deductible goodwill and other permanent differences in foreign subsidiaries. Net Income (loss), as a result, was a loss of ($19) million or (3.6%) of net sales for the fiscal year ending June 29, 2001 compared to a loss of ($21.0) million or (4.0%) of net sales after an extraordinary charge of ($35.4) million for the year ending June 30, 2000. Depreciation and Amortization Expense, increased to 37.7 million or 7.2% of net sales for the fiscal year ending June 29, 2001 from $34.7 million or 6.6% of net sales for the fiscal year ending June 30, 2000 due to increased depreciation and amortization expense primarily associated with our Super Plastics acquisition. EBITDA, decreased slightly to $100.1 million or 19.0% for the year ended June 29, 2001 from $100.5 million or 19.2% for the fiscal year ending June 30, 2000 for the same reasons discussed above. YEAR ENDED JUNE 30, 2000 COMPARED TO YEAR ENDED JULY 2, 1999 Net Sales, increased to $524.8 million for the year ended June 30, 2000 from $507.3 million for the year ended July 2, 1999, representing an increase of $17.5 million or 3.5%. The increased sales occurred primarily in the Company's Food Packaging business segment and in the European operations, which are accounted for in the Consumer Packaging and Products business segment. These increases were partially offset by decreases in the compounding business units within the Healthcare Packaging, Products and Materials business segment and in the Specialty Resins and Compounding business segment. Compounding sales in the Healthcare Packaging, Products and Materials segment are down because of scattered customer resistance to rapidly rising resin cost increases throughout the year and to the completion of the Company's program over the last several years to eliminate low profit sales. Sales were down in the Specialty Resins and Compounding business segment because the Burlington business segment was completely repositioned in both markets and products. In addition, sales growth was delayed in several business units that were merged and repositioned to emphasize national sales and marketing strategies rather than regional ones in the Healthcare Packaging, Products and Materials segment. Thus, the level of growth for the year ended June 30, 1999 may not be indicative of future operations. Cost of Goods Sold, increased to $394.5 million for the year ended June 30, 2000 from $376.4 million for the year ended July 2, 1999. Expressed as a percentage of net sales, cost of goods sold increased to 75.2% for the year ended June 30, 2000 from 74.2% for the year ended July 2, 1999. The increase in cost of goods sold as a 15 percentage of net sales was due primarily to resin costs, which rose rapidly throughout the year ended June 30, 2000. Several of the Company's business units were unable to pass on all resin cost increases fully and quickly. Of these, the Garden Hose business unit in the Consumer Packaging and Products business segment suffered the most because it could not pass on any of the resin cost increases due to the industry practice of fixing prices with customers in the summer of each year for a full model year. Gross Profit, as a result, stayed virtually the same in the fiscal year ended June 30, 2000 at $130.3 million versus $130.9 million in the fiscal year ended July 2, 1999. The ratio of gross profit to net sales decreased from 25.8% in fiscal year ended July 2, 1999 to 24.8% for the fiscal year ended June 30, 2000. Selling, General and Administrative Expenses, decreased to $58.3 million in the fiscal year ended June 30, 2000 from $62.5 million in the fiscal year July 2, 1999. The resultant ratios to net sales decreased from 12.3% to 11.1% respectively. Primary reasons for the reduction were a decrease in incentive compensation expenses and completion of the Company programs to integrate the acquisitions made in the fiscal year ended July 2, 1999 into Tekni-Plex's culture and operations. Operating Profit, as a result of the above, increased to $72.0 million or 13.7% of sales in fiscal year ended June 30, 2000 from $68.4 million or 13.5% for the fiscal year ended July 2, 1999. Other Expenses, in the fiscal year ended June 30, 2000 included non-recurring expenses of about $4.0 million incurred as a result of the Company's recapitalization program completed near the end of June, 2000. Interest Expense, was $38.4 million for the fiscal year ended June 30, 2000. This was virtually unchanged from the fiscal year ended July 2, 1999 when interest expense was $39.0 million as average monthly usage and the interest rate remained about the same in both years. Interest expense as a ratio to net sales declined in the fiscal year ended June 30, 2000 to 7.3% from 7.7% in the fiscal year ended July 2, 1999. The large increase in total debt at the end of the year ended June 30, 2000 from the debt at the end of July 2, 1999, as shown on the Company's Consolidated Balance Sheet, was incurred in late June of 2000 as a result of the Company's recapitalization thereby having little or no impact on interest expense for the year ending June 30, 2000. Extraordinary Expense Net of Income Tax, of $35.4 million in the fiscal year ended June 30, 2000 represented the costs of calling in the old debt to be replaced by new debt in the Company's recapitalization program. Provision for Income Taxes increased to $14.4 million in the fiscal year ended June 30, 2000, from $14.2 million in the fiscal year ended July 2, 1999. The ratio of the provision for income taxes to net sales remained constant at 2.8%. The Company's effective tax was 50.1% for the fiscal year ended June 30, 2000 compared with 48.5% for the fiscal year ended July 2, 1999. The difference between the two years was primarily a function of tax carryover credits in the fiscal year ending July 2, 1999, and a greater contribution to pretax income by the Company's European operations in the fiscal year ending June 30, 2000 than in the fiscal year ending July 2, 1999. Net Income, for the fiscal year ending June 30, 2000 showed a loss of ($20.9) million or (4.0%) of net sales due to the non-recurring costs of the recapitalization program totaling about $39.1 million. The Company showed a profit in the fiscal year ending July 2, 1999 of $15.0 million or 3.0% of net sales. Depreciation and Amortization decreased to $34.7 million for the year ended June 30, 2000 from $35.3 million for the year ended July 2, 1999. Expressed as a percentage of net sales, depreciation and amortization decreased to 6.6% for the year ended June 30, 2000 from 7.0% for the same period in 1999. EBITDA decreased to $100.5 million or 19.2% of net sales for the year ended June 30, 2000, from $101.7 million or 20.0% of net sales for the same period in 1999 for the same reasons discussed above. LIQUIDITY AND CAPITAL RESOURCES For the year ended June 29, 2001, net cash used by operating activities was ($3.3) million compared to $9.5 million of cash provided by operating activities for the same period in the prior year for an increased usage of $12.8 16 million. The increase was due to higher inventories and receivables in our Consumer Segment to accommodate a shift in the buying patterns of this segment's largest customer and a reduction in accrued expenses and liabilities. Various year-over-year changes in operating assets, accrued expenses, and liabilities are generally due to offsetting timing differences. Working capital at June 29, 2001 was $199.1 million compared to $145.9 million at June 30, 2000. The increase was primarily to increased borrowings of $35 million and the capital contribution of $30 million which were invested in increased inventory. The inventory increase resulted from a shift in the buying pattern of our Consumer Segment's largest customer. Approximately 75% of the annual sales in garden hose, which is the largest business unit in that segment, normally occur in the spring and early summer months. As of June 29, 2001, we had an outstanding balance of $65.0 million under the $100.0 million revolving credit line of the existing credit facility. This was an increase of $35.0 million from the outstanding balance as of June 30, 2000 and was due primarily to normal seasonal requirements of our Consumer Packaging and Products business segment. In addition, as of June 29, 2001 we had $44.6 million of cash compared to $12.5 million of cash as of June 30, 2000. The $32.1 million increase in cash was largely due to new capital contributions. As of June 29, 2001, there was $35.0 million undrawn and available under the new revolving credit facility to fund ongoing general corporate and working capital requirements. In addition, as part of the recapitalization, our new equity investors agreed to contribute to Tekni-Plex Partners $269.6 million in the aggregate, of which $167.0 million has been contributed and used to purchase interests of certain previous Tekni-Plex investors and an additional $35.0 million was used to finance acquisitions, including the announced acquisition of Swan Hose. Tekni-Plex Management, the managing member of Tekni-Plex Partners, may for at least five years from the recapitalization call upon the remainder of the commitment, $67.6 million, for our future use for general corporate purposes, including acquisitions. Apart from acquisitions, our principal uses of cash will be debt service, capital expenditures and working capital requirements. Our capital expenditures for the year ended June 29, 2001 and June 30, 2000 were $17.1 million and $16.3 million, respectively. We expect that annual capital expenditures will increase somewhat from historical levels during the next few years as we make improvements in the recently acquired operations. Management believes that cash generated from operations plus funds from the new credit facility will be sufficient to meet our expected debt service requirements, planned capital expenditures and operating needs. However, we cannot assure you that sufficient funds will be available from operations or borrowings under the new credit facility to meet our anticipated cash needs. To the extent we pursue future acquisitions, we may be required to obtain additional financing. We cannot assure you that you will be able to obtain such financing in amounts and on terms acceptable to us. The terms of the notes and the new credit facility each include various covenants that limit our ability to incur additional debt. NEW ACCOUNTING PRONOUNCEMENTS Effective July 1, 2000, Tekni-Plex adopted Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended and interpreted. FAS 133 requires that all derivative instruments, such as interest rate swaps, be recognized in the financial statements and measured at their fair market value. Changes in the fair market value of derivative instruments are recognized each period in current operations or stockholders equity (as a component of accumulated other comprehensive loss), depending on whether a derivative instrument qualifies as a hedge transaction. In the normal course of business, Tekni-Plex is exposed to changes in interest rates. The objective in managing its exposure to interest rates is to decrease the volatility that changes in interest rates might have on operations and cash flows. To achieve this objective, Tekni-Plex uses interest rate swaps and caps to hedge a portion of total long-term debt that is subject to variable interest rates. These derivative contracts are considered to be a hedge against changes in the amount of future cash flows associated with the interest payments on variable-rate debt obligations however, they do not qualify for hedge accounting under FASB 133. Accordingly, the interest rate swaps are reflected at fair value in the Consolidated Balance Sheet and the related gains or losses on these contracts are recorded as an unrealized loss from derivative instruments in the Consolidated Statements of Operations. Currently these are the only derivative instruments held by Tekni-Plex as of June 29, 2001. The fair value of derivative contracts are determined based on quoted market values obtained from a third party. At July 1, 2000, there was no cumulative effect adjustment required to reflect the accounting change. As of July 1, 2000, Tekni-Plex had interest rate swap contracts to pay variable rates of interest based on a basket of LIBOR Benchmarks and receive variable rates of interest based on 3 month dollar LIBOR on an aggregate of $344 million amount of indebtedness with maturity dates ranging from June 2006 through June 2008. In conjunction with these swap contracts, Tekni-Plex also purchased an interest rate cap. The aggregate fair market value of these interest rate swaps contracts was $(13,891) on June 29, 2001 and is included in other liabilities on the Consolidated Balance Sheet. For the year ended June 29, 2001, Tekni-Plex incurred realized losses of $1,806, which have been reflected in interest expense. In June 2001, the Financial Accounting Standards Board finalized FASB Statements No. 141, Business Combinations (SFAS 141), and No. 142, Goodwill and Other Intangible Assets (SFAS 142). SFAS 141 requires the use of the purchase method of accounting and prohibits the use of the pooling-of-interests method of accounting for business combinations initiated after June 30, 2001. SFAS 141 also requires that the Company recognize acquired intangible assets apart from goodwill if the acquired intangible assets meet certain criteria. SFAS 141 applies to all business combinations initiated after June 30, 2001 and for purchase business combinations completed on or after July 1, 2001. It also requires, upon adoption of SFAS 142, that the Company reclassify the carrying amounts of intangible assets and goodwill based on the criteria in SFAS 141. SFAS 142 requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually. In addition, SFAS 142 requires that the Company identify reporting units for the purposes of assessing potential future impairments of goodwill, reassess the useful lives of other existing recognized intangible assets, and cease amortization of intangible assets with an indefinite useful life. An intangible asset with an indefinite useful life should be tested for impairment in accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in fiscal years beginning after December 15, 2001 to all goodwill and other intangible assets recognized at that date, regardless of when those assets were initially recognized. SFAS 142 requires the Company to complete a transitional goodwill impairment test six months from the date of adoption. The Company is also required to reassess the useful lives of other intangible assets within the first interim quarter after adoption of SFAS 142. The Company's previous business combinations were accounted for using the purchase method. As of June 29, 2001, the net carrying amount of goodwill is $179,100 and other intangible assets is $516. Amortization expense during the period ended June 29, 2001 was $15,400. Currently, the Company is assessing but has not yet determined how the adoption of SFAS 141 and SFAS 142 will impact its financial position and results of operations. INFLATION During the first half of fiscal year 2001, we contended with rising raw material prices. We believe we have generally been able to offset the effects thereof through continuing improvements in operating efficiencies and by increasing prices to our customers to the extent permitted by competitive factors. However, we cannot assure you that such cost increases can be passed through to our customers in the future or that the effects can be offset by further improvements in operating efficiencies. 17 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The market risk inherent in the Company's financial instruments and positions represents the potential loss arising from adverse changes in interest rates. At June 29, 2001 and June 30, 2000 the principal amount of the Company's aggregate outstanding variable rate indebtedness was $401,560 and $374,000 respectively. A hypothetical 1% adverse change in interest rates would have had an annualized unfavorable impact of approximately $4,000 and $3,700, respectively, on the Company's earnings and cash flows based upon these year-end debt levels. To ameliorate these risks, in June 2000, the Company entered into interest rate Swap and Cap Agreements with a notional amount of $344,000. The specific terms of the Swap and Cap Agreements are more fully discussed above in Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations. Item 8. FINANCIAL STATEMENTS The financial statements commence on Page F-1. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None 18 PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Our current directors and executive officers are listed below. Each director is elected at the annual meeting of the stockholders of Tekni-Plex to serve a one year term until the next annual meeting or until a successor is elected and qualified, or until his earlier resignation. Each executive officer holds his office until a successor is chosen and qualified or until his earlier resignation or removal. Pursuant to our by-laws, we indemnify our officers and directors to the fullest extent permitted by the General Corporation Law of the State of Delaware and our certificate of incorporation. The board of directors is composed of six directors. A nominating committee composed of Dr. Smith and Mr. Cronin designated two directors, Dr. Smith designated three members of management as directors (Dr. Smith, Mr. Baker and Mr. Witt and the last director was designated by Mr. Cronin). Directors may only be removed for cause or at the request of the person entitled to designate that director.
NAME AGE POSITION - ---- --- -------- Dr. F. Patrick Smith 53 Chairman of the Board and Chief Executive Officer Kenneth W.R. Baker 57 President, Chief Operating Officer and Director Arthur P. Witt 71 Corporate Secretary and Director John S. Geer 55 Director J. Andrew McWethy 60 Director Michael F. Cronin 47 Director
Dr. F. Patrick Smith has been Chairman of the Board and Chief Executive Officer of Tekni-Plex since March 1994. He received his doctorate degree in chemical engineering from Texas A&M University in 1975. He served as Senior Chemical Engineer to Texas Eastman Company, a wholly owned chemical and plastics subsidiary of Eastman Kodak, where he developed new grades of polyolefin resins and hot melt and pressure sensitive adhesives. In 1979, he became Technical Manager of the Petrochemicals and Plastics Division of Cities Service Company, and a Member of the Business Steering Committee of that division. From 1982 to 1984, Dr. Smith was Vice President of R&D and Marketing for Guardian Packaging Corporation, a diversified flexible packaging company. Thereafter, he joined Lily-Tulip, Inc. and managed their research and marketing functions before becoming Senior Vice President of Manufacturing and Technology. Following the acquisition of Lily-Tulip by Fort Howard Corporation in 1986, he became the Corporate Vice President of Fort Howard, responsible for the manufacturing and technical functions of the combined Sweetheart Products and Lily-Tulip operations. From 1987 to 1990, Dr. Smith was Chairman and Chief Executive Officer of WFP Corporation. Since 1990, Dr. Smith has been a principal of Brazos Financial Group, a business consulting firm. Kenneth W.R. Baker has served as Tekni-Plex Chief Operating Officer since April 1994 and as President since July 1995. Mr. Baker served in various management roles including systems development, finance, industrial engineering, research and development, and manufacturing operations at Owens-Illinois, Inc. and Lily-Tulip, Inc. from 1965 to 1985. From 1986 to 1987, he served as Vice President, Operations at Fort Howard Cup Corporation. In 1987, Mr. Baker joined WFP Corporation, Inc. as Senior Vice President, Operations and eventually became the company's President and CEO before leaving the company in 1992. Thereafter, Mr. Baker became Vice President, Research and Development at the Molded Products Division of Carlisle Plastics, Inc. until joining Tekni-Plex in 1994. Arthur P. Witt has been a director of Tekni-Plex since March 1994 and was appointed Secretary in January 1997. Since July 1989, he has been president of PAJ Investments which is involved in financial consulting and property management. Over the same period, Mr. Witt also served as a temporary chief financial officer for WFP Corporation and Flexible Technology. Prior to 1989, Mr. Witt served in a number of senior management positions for companies such as Lily-Tulip, Inc., BMC Industries and Fort Howard Paper Co. John S. Geer has served as a director of Tekni-Plex since June 2000. He is a partner of Mellon Ventures, Inc., having joined Mellon in 1997. Previously, Mr. Geer was senior vice president of Security Pacific Capital Corp. He has served on 20 boards of directors of emerging growth and middle market companies. Andrew McWethy has served as a director of Tekni-Plex since March 1994. He co-founded and managed MST Partners L.P., a private equity investment fund, from 1989 to 2000. In 2000, Mr. McWethy co-founded Eastport Operating Partners, L.P., a private equity investment fund that he continues to manage. Prior to 1989, Mr. McWethy was employed by Irving Trust Company for 12 years. 19 Michael F. Cronin has served as a director of Tekni-Plex since March 1994. He has invested in emerging growth companies and various industrial and service businesses since 1978. Since June 1991, Mr. Cronin has been a general partner of Weston Presidio Capital. COMPENSATION OF DIRECTORS Tekni-Plex reimburses directors for any reasonable out-of-pocket expenses incurred by them in connection with services provided in such capacity. In addition, each director is paid an annual fee of $50,000. COMPENSATION OF EXECUTIVE OFFICERS The following table sets forth the remuneration paid by Tekni-Plex to the Chief Executive Officer and the next most highly compensated executive officer of Tekni-Plex whose salary and bonus exceeded $100,000 for the years indicated in connection with his position with Tekni-Plex: SUMMARY COMPENSATION TABLE
FISCAL STOCK OTHER ANNUAL NAME & PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(A) - ------------------------- ---- ------ ----- ------- --------------- Dr. F. Patrick Smith, 2001 $5,000,000 $ -- -- $16,000 Chief Executive Officer 2000 1,200,000 4,622,100 -- 16,000 1999 1,200,000 8,981,000 -- 42,000 Mr. Kenneth W.R. Baker, 2001 $2,500,000 $ -- -- $ 9,000 President and Chief Operating 2000 600,000 2,311,050 -- 9,000 Officer 1999 600,000 4,490,000 -- 9,000
(a) Includes amounts reimbursed during the fiscal year for payment of taxes, auto expense, membership fees, etc. In connection with the recapitalization, the employment agreements of Dr. Smith and Mr. Baker were amended and restated as described below. OPTION/SAR GRANTS IN LAST FISCAL YEAR
PERCENT OF POTENTIAL POTENTIAL TOTAL REALIZABLE REALIZABLE VALUE NUMBER OF OPTIONS/ VALUE AT AT ASSUMED SECURITIES SARS GRANTED EXERCISE ASSUMED ANNUAL ANNUAL RATES OF UNDER-LYING TO EMPLOYEES OR BASE RATES OF STOCK STOCK PRICE OPTIONS/ IN FISCAL PRICE PRICE APPRECIATION FOR SARS GRANTED YEAR PER EXPIRATION APPRECIATION OPTION TERM 10% SHARE DATE FOR OPTION TERM ($000) NAME ($000) 5% ($000) Dr. F. Patrick Smith -- --% -- -- -- -- Kenneth W.R. Baker -- --% -- -- -- --
20 AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE ($000) OF UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY OPTIONS/SARS AT OPTIONS/SARS AT FY-END FY-END SHARES ACQUIRED ON EXERCISABLE/ EXERCISABLE/ NAME EXERCISE VALUE REALIZED UNEXERCISABLE UNEXERCISABLE Dr. F. Patrick Smith -- -- -- -- / -- Kenneth W.R. Baker -- -- -- -- / --
EMPLOYMENT AGREEMENTS As part of the recapitalization, Dr. Smith and Mr. Baker entered into amended and restated employment agreements that currently expire July 2, 2004 and contain renewal provisions. Each employment agreement provides that the executive may be terminated by us for cause or upon death or disability of the executive. Each of Dr. Smith and Mr. Baker is entitled to severance benefits if he is terminated due to death or disability. The employment agreements also contain certain non-compete provisions. The annual salaries of Dr. Smith and Mr. Baker are $5 million and $2.5 million, respectively, and each of these salaries will be increased by 10% annually. Neither Dr. Smith's nor Mr. Baker's amended and restated employment agreement provides for any mandatory bonus compensation. No other provisions of Dr. Smith's and Mr. Baker's employment agreements changed materially. REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION The board of directors maintains a three-member compensation committee comprised of Dr. Smith, Mr. Witt and Mr. Cronin. The compensation committee's duties include the annual review and approval of the compensation for each of our Chief Executive Officer and President, as well as the administration of our stock incentive plan. No member of the compensation committee is allowed to vote on issues pertaining to that member's compensation (including option grants). The board may also delegate additional duties to the compensation committee in the future. Compensation levels and bonus awards for all other employees are controlled by Dr. Smith and Mr. Baker. COMPENSATION COMMITTEE The board of directors maintains a three-member compensation committee comprised of Dr. Smith, Mr. Witt and Mr. Cronin. The compensation committee's duties include the annual review and approval of the compensation for each of our Chief Executive Officer and President, as well as the administration of our stock incentive plan. No member of the compensation committee is allowed to vote on issues pertaining to that member's compensation (including option grants). The board may also delegate additional duties to the compensation committee in the future. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Mr. Witt, who is also the corporate Secretary of Tekni-Plex, serves as a member of the compensation committee of Tekni-Plex's board of directors. In addition, as Chief Executive Officer of Tekni-Plex, Dr. Smith participated in deliberations concerning the compensation of the Chief Operating Officer of Tekni-Plex (but not the compensation for himself or Mr. Witt). 21 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Tekni-Plex Partners LLC holds approximately 95.6% (approximately 93.0% on a fully diluted basis) and MST/TP Partners LLC holds approximately 4.4% (approximately 4.2% on a fully diluted basis) of Tekni-Plex's outstanding common stock. Tekni-Plex Management LLC, controlled by Dr. Smith, is the sole managing member of both Tekni-Plex Partners LLC and MST/TP Partners LLC. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS CONSULTING ARRANGEMENTS We have an arrangement with Arthur P. Witt, one of our directors and our corporate secretary, under which Mr. Witt provides us with customary management consulting services. Mr. Witt's compensation for consulting services rendered on our behalf was approximately $50,400 and $66,500 for fiscal years 2001 and 2000, respectively. Our policy is not to enter into any significant transaction with one of our affiliates unless a majority of the disinterested directors of the board of directors determines that the terms of the transaction are at least as favorable as those we could obtain in a comparable transaction made on an arm's-length basis with unaffiliated parties. This determination is made in the board's sole discretion. PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a)(1) Financial Statements and Schedules The financial statements listed in the Index to Financial Statements under Part II, Item 8 and the financial statement schedules listed under Exhibit 27 are filed as part of this annual report. (a)(2) Financial Statement Schedule - Schedule II - Valuation and Qualifying Accounts (a)(3) Exhibits The exhibits listed on the Index to Exhibits following the Signature Page herein are filed as part of this annual report or by incorporation by reference from the documents there listed. (b) Reports on Form 8-K None 22 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TEKNI-PLEX, INC. By: /S/ F. PATRICK SMITH F. Patrick Smith Chairman of the Board and Chief Executive Officer Dated: October 4, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of Registrant and in the capacities indicated, on October 1, 2001.
SIGNATURE TITLE --------- ----- /s/ F. PATRICK SMITH Chairman of the Board and Chief Executive F. Patrick Smith Officer /s/ KENNETH W.R. BAKER President and Chief Operating Officer and Director Kenneth W.R. Baker /s/ ARTHUR P. WITT Corporate Secretary and Director Arthur P. Witt /s/ JOHN S. GEER Director John S. Geer /s/ J. ANDREW MCWETHY Director J. Andrew McWethy /s/ MICHAEL F. CRONIN Director Michael F. Cronin
TEKNI-PLEX, INC. CONTENTS ================================================================================ INDEPENDENT AUDITORS' REPORT F-2 CONSOLIDATED FINANCIAL STATEMENTS: Balance sheets F-3 Statements of operations F-4 Statements of comprehensive income (loss) F-5 Statements of stockholders' equity (deficit) F-6 Statements of cash flows F-7 Notes to financial statements F-8 - F-42 INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTAL SCHEDULE F-43 SUPPLEMENTAL SCHEDULE: Valuation and qualifying accounts and reserves F-44
F-1 INDEPENDENT AUDITORS' REPORT The Board of Directors Tekni-Plex, Inc. Somerville, New Jersey We have audited the accompanying consolidated balance sheets of Tekni-Plex, Inc. and its wholly owned subsidiaries (the "Company") as of June 29, 2001 and June 30, 2000, and the related consolidated statements of operations, comprehensive income (loss), stockholders' equity (deficit) and cash flows for each of the three years in the period ended June 29, 2001. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Tekni-Plex, Inc. and its wholly owned subsidiaries as of June 29, 2001 and June 30, 2000, and the results of their operations and their cash flows for each of the three years in the period ended June 29, 2001, in conformity with accounting principles generally accepted in the United States of America. BDO Seidman, LLP Woodbridge, New Jersey September 20, 2001, except for Note 6 for which the date is October 4, 2001 F-2 TEKNI-PLEX, INC. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) ================================================================================
JUNE 29, 2001 June 30, 2000 - --------------------------------------------------------------------------------------------- ASSETS CURRENT: Cash $ 44,645 $ 12,525 Accounts receivable, net of an allowance of $1,500 and $1,642 for possible losses 105,316 96,039 Inventories (Note 4) 106,258 91,233 Deferred income taxes (Note 7) 5,153 4,997 Refundable income taxes -- 14,883 Prepaid expenses and other current assets 5,595 2,171 - --------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 266,967 221,848 PROPERTY, PLANT AND EQUIPMENT, NET (NOTE 5) 137,008 135,926 INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION OF $62,271 AND $45,480 179,616 190,492 DEFERRED FINANCING COSTS, NET OF ACCUMULATED AMORTIZATION OF $2,549 AND $0 16,607 18,897 DEFERRED INCOME TAXES (NOTE 7) 19,010 5,398 OTHER ASSETS 2,286 2,228 - --------------------------------------------------------------------------------------------- $ 621,494 $ 574,789 ============================================================================================= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Current portion of long term debt (Note 6) $ 8,072 $ 8,401 Accounts payable trade 34,076 30,026 Accrued payroll and benefits 5,222 11,662 Accrued interest 1,673 2,359 Accrued liabilities - other 15,446 23,521 Income taxes payable 3,349 -- - --------------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 67,838 75,969 LONG-TERM DEBT (NOTE 6) 670,078 643,192 OTHER LIABILITIES 18,275 4,778 - --------------------------------------------------------------------------------------------- TOTAL LIABILITIES 756,191 723,939 - --------------------------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES (NOTES 7, 8, 9 AND 11) STOCKHOLDERS' EQUITY (DEFICIT): Common stock, $.01 par value, authorized 20,000 shares, issued 848 at June 29, 2001 and June 30, 2000 -- -- Additional paid-in capital 120,176 84,176 Accumulated other comprehensive loss (7,039) (4,486) Accumulated deficit (27,372) (8,378) Less: Treasury stock at cost, 432 shares (Note 2) (220,462) (220,462) - --------------------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (134,697) (149,150) - --------------------------------------------------------------------------------------------- $ 621,494 $ 574,789 =============================================================================================
See accompanying notes to consolidated financial statements. F-3 TEKNI-PLEX, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS) ================================================================================
Years ended JUNE 29, 2001 June 30, 2000 July 2, 1999 - ------------------------------------------------------------------------------------------ NET SALES $ 525,837 $ 524,817 $507,314 COST OF SALES 399,836 394,480 376,370 - ------------------------------------------------------------------------------------------ GROSS PROFIT 126,001 130,337 130,944 OPERATING EXPENSES: Selling, general and administrative 60,999 58,343 62,534 - ------------------------------------------------------------------------------------------ INCOME FROM OPERATIONS 65,002 71,994 68,410 OTHER EXPENSES: Interest, net 76,569 38,447 38,977 Unrealized loss on derivative contracts (Note 1) 13,891 -- -- Other (Note 9) 605 4,705 286 - ------------------------------------------------------------------------------------------ INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES AND EXTRAORDINARY ITEM (26,063) 28,842 29,147 PROVISION (BENEFIT) FOR INCOME TAXES (NOTE 7): Current 4,098 12,333 7,004 Deferred (11,167) 2,103 7,146 - ------------------------------------------------------------------------------------------ INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (18,994) 14,406 14,997 EXTRAORDINARY ITEM, NET OF INCOME TAXES (NOTE 2) -- (35,374) -- - ------------------------------------------------------------------------------------------ NET INCOME (LOSS) $ (18,994) $ (20,968) $ 14,997 ==========================================================================================
See accompanying notes to consolidated financial statements. F-4 TEKNI-PLEX, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (DOLLARS IN THOUSANDS) ================================================================================
Years ended JUNE 29, 2001 June 30, 2000 July 2, 1999 - ---------------------------------------------------------------------------------- NET INCOME (LOSS) $(18,994) $(20,968) $ 14,997 OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES: Foreign currency translation (2,553) (3,118) (1,373) - ---------------------------------------------------------------------------------- COMPREHENSIVE INCOME (LOSS) $(21,547) $(24,086) $ 13,624 ==================================================================================
See accompanying notes to consolidated financial statements. F-5 TEKNI-PLEX, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (DOLLARS IN THOUSANDS) ================================================================================
Accumulated Additional Other Common Paid-In Comprehensive Accumulated Treasury stock Capital Loss deficit Stock TOTAL - -------------------------------------------------------------------------------------------------------------- BALANCE, JULY 3, 1998 $ -- $ 41,075 $ 5 $ (2,407) $ -- $ 38,673 Foreign currency translation -- -- (1,373) -- -- (1,373) Net income -- -- -- 14,997 -- 14,997 - -------------------------------------------------------------------------------------------------------------- BALANCE, JULY 2, 1999 -- 41,075 (1,368) 12,590 -- 52,297 Foreign currency translation -- -- (3,118) -- -- (3,118) Net loss -- -- -- (20,968) -- (20,968) Purchase of treasury stock -- -- -- -- (220,462) (220,462) Capital contribution -- 43,101 -- -- -- 43,101 - -------------------------------------------------------------------------------------------------------------- BALANCE, JUNE 30, 2000 -- 84,176 (4,486) (8,378) (220,462) (149,150) Foreign currency translation -- -- (2,553) -- -- (2,553) Net loss -- -- -- (18,994) -- (18,994) Capital contributions -- 36,000 -- -- -- 36,000 - -------------------------------------------------------------------------------------------------------------- BALANCE, JUNE 29, 2001 $ -- $120,176 $(7,039) $(27,372) $(220,462) $(134,697) ==============================================================================================================
See accompanying notes to consolidated financial statements. F-6 TEKNI-PLEX, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) ================================================================================
Years ended JUNE 29, 2001 June 30, 2000 July 2, 1999 - ------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $(18,994) $ (20,968) $ 14,997 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 18,741 16,026 16,930 Amortization 18,929 18,722 18,413 Unrealized loss on derivative contracts 13,891 Provision for bad debts 250 310 370 Deferred income taxes (11,167) 2,103 7,146 Loss on sale of assets -- 62 -- Extraordinary loss on extinguishment of debt -- 35,374 -- Changes in assets and liabilities, net of acquisitions: Accounts receivable (9,527) 186 (5,709) Inventories (11,019) (29,243) (4,778) Prepaid expenses and other current assets 8,859 4,898 (1,483) Other assets (58) 205 (532) Accounts payable and other current liabilities 2,713 (15,994) (4,859) Income taxes payable 3,349 (742) (1,701) Other liabilities (19,233) (1,454) -- - ------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (3,266) 9,485 38,794 - ------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions of net assets including acquisition costs, net of cash acquired (9,233) -- (45,139) Capital expenditures (17,116) (16,258) (12,950) Additions to intangibles (428) (805) -- Cash proceeds from sale of assets -- 158 -- - ------------------------------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (26,777) (16,905) (58,089) - ------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (repayments) under line of credit 35,000 (2,030) 22,234 Proceeds from long-term debt -- 645,232 -- Repayments of long-term debt (8,820) (448,631) (10,177) Proceeds from capital contributions 36,000 43,101 -- Debt financing costs -- (18,897) -- Purchase of treasury stock -- (220,462) -- - ------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 62,180 (1,687) 12,057 - ------------------------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (17) (485) (8) - ------------------------------------------------------------------------------------------------------------- NET (DECREASE) INCREASE IN CASH 32,120 (9,592) (7,246) CASH, BEGINNING OF PERIOD 12,525 22,117 29,363 - ------------------------------------------------------------------------------------------------------------- CASH, END OF PERIOD $ 44,645 $ 12,525 $ 22,117 =============================================================================================================
See accompanying notes to consolidated financial statements. F-7 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) ================================================================================ 1. SUMMARY OF ACCOUNTING POLICIES Nature of Business Tekni-Plex, Inc. ("Tekni-Plex" or the "Company") is a global, diversified manufacturer of packaging, products, and materials for the healthcare, consumer, and food packaging industries. The Company has built a leadership position in its core markets, and focuses on vertically integrated production of highly specialized products. The Company's operations are aligned under four primary business groups: Healthcare Packaging, Products, and Materials; Consumer Packaging and Products; Food Packaging; and Specialty Resins and Compounds. Consolidation Policy The consolidated financial statements include the financial statements of Tekni-Plex, Inc. and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Inventories Inventories are stated at the lower of cost (weighted average) or market. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation and amortization are computed over the estimated useful lives of the assets primarily on the straight-line method for financial reporting purposes and by accelerated methods for income tax purposes. Repairs and maintenance are charged to expense as incurred. Intangible Assets The Company amortizes the excess of cost over the fair value of net assets acquired on a straight-line basis over 15 years, and the cost of acquiring certain patents and trademarks, over seventeen and ten years, respectively. Recoverability is evaluated periodically based on the expected undiscounted net cash flows of the related businesses. F-8 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) ================================================================================ Deferred Financing Costs The Company amortizes the deferred financing costs incurred in connection with the Company's borrowings over the life of the related indebtedness (5-10 years). Income Taxes The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes." Deferred income tax assets and liabilities are recognized for differences between the financial statement and income tax basis of assets and liabilities based upon statutory rates enacted for future periods. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Revenue Recognition The Company recognizes revenue when goods are shipped to customers. The Company provides for returned goods and volume rebates on an estimated basis. Shipping and Handling Costs During fiscal year 2001, the Company adopted EITF 00-10, "Accounting for Shipping and Handling Fees and Costs." Shipping and handling costs of $19,400 were charged to cost of sales for the year ended June 29, 2001. In prior years these costs were recorded as a reduction to sales. The 2000 and 1999 sales and cost of sales were reclassified by $18,000 and $18,100, respectively to reflect the adoption of EITF 00-10. Cash Equivalents The Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents. Fiscal Year-End The Company utilizes a 52/53 week fiscal year ending on the Friday closest to June 30. The years ended June 29, 2001, June 30, 2000 and July 2, 1999 contained 52 weeks each. Reclassifications Certain items in the prior year financial statements have been reclassified to conform to the current year presentation. F-9 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) ================================================================================ Foreign Currency Translation Assets and liabilities of international subsidiaries are translated at year end exchange rates and related translation adjustments are reported as a component of stockholders' equity. Income statement accounts are translated at the average rates during the period. Long-Lived Assets Long-lived assets, such as goodwill and property and equipment, are evaluated for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows from the use of these assets. When such impairments exist, the related assets will be written down to fair value. No impairment losses have been recorded through June 29, 2001. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Stock Based Compensation The Company applies the provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," which allows the Company to apply APB Opinion 25 and related interpretations in accounting for its stock options and present pro forma effects of the fair value of such options. F-10 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) ================================================================================ Derivative Instruments Effective July 1, 2000, Tekni-Plex adopted Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended and interpreted. FAS 133 requires that all derivative instruments, such as interest rate swaps, be recognized in the financial statements and measured at their fair market value. Changes in the fair market value of derivative instruments are recognized each period in current operations or stockholders' equity (as a component of accumulated other comprehensive loss), depending on whether a derivative instrument qualifies as a hedge transaction. In the normal course of business, Tekni-Plex is exposed to changes in interest rates. The objective in managing its exposure to interest rates is to decrease the volatility that changes in interest rates might have on operations and cash flows. To achieve this objective, Tekni-Plex uses interest rate swaps and caps to hedge a portion of total long-term debt that is subject to variable interest rates. These derivative contracts are considered to be a hedge against changes in the amount of future cash flows associated with the interest payments on variable-rate debt obligations however, they do not qualify for hedge accounting under FASB 133. Accordingly, the interest rate swaps are reflected at fair value in the Consolidated Balance Sheet and the related gains or losses on these contracts are recorded as an unrealized loss from derivative instruments in the Consolidated Statements of Operations. Currently these are the only derivative instruments held by Tekni-Plex as of June 29, 2001. The fair value of derivative contracts are determined based on quoted market values obtained from a third party. At July 1, 2000, there was no cumulative effect adjustment required to reflect the accounting change. As of July 1, 2000, Tekni-Plex had interest swap contracts to pay variable rates of interest based on a basket of LIBOR Benchmarks and receive variable rates of interest based on a 3 month dollar LIBOR on an aggregate of $344 million amount of indebtedness with maturity dates ranging from June 2006 through June 2008. In conjunction with these swap contracts, Tekni-Plex also purchased an interest rate cap. The aggregate fair market value of these interest rate swap and cap contracts was $(13,891) on June 29, 2001 and is included in other liabilities on the Consolidated Balance Sheet. For the year ended June 29, 2001, Tekni-Plex incurred realized losses of $1,806, which have been reflected in interest expense. F-11 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) ================================================================================ New Accounting Pronouncements In June 2001, the Financial Accounting Standards Board finalized FASB Statements No. 141, Business Combinations (SFAS 141), and No. 142, Goodwill and Other Intangible Assets (SFAS 142). SFAS 141 requires the use of the purchase method of accounting and prohibits the use of the pooling-of-interests method of accounting for business combinations initiated after June 30, 2001. SFAS 141 also requires that the Company recognize acquired intangible assets apart from goodwill if the acquired intangible assets meet certain criteria. SFAS 141 applies to all business combinations initiated after June 30, 2001 and for purchase business combinations completed on or after July 1, 2001. It also requires, upon adoption of SFAS 142, that the Company reclassify the carrying amounts of intangible assets and goodwill based on the criteria in SFAS 141. SFAS 142 requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually. In addition, SFAS 142 requires that the Company identify reporting units for the purposes of assessing potential future impairments of goodwill, reassess the useful lives of other existing recognized intangible assets, and cease amortization of intangible assets with an indefinite useful life. An intangible asset with an indefinite useful life should be tested for impairment in accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in fiscal years beginning after December 15, 2001 to all goodwill and other intangible assets recognized at that date, regardless of when those assets were initially recognized. SFAS 142 requires the Company to complete a transitional goodwill impairment test six months from the date of adoption. The Company is also required to reassess the useful lives of other intangible assets within the first interim quarter after adoption of SFAS 142. The Company's previous business combinations were accounted for using the purchase method. As of June 29, 2001, the net carrying amount of goodwill is $179,100 and other intangible assets is $6,516. Amortization expense during the period ended June 29, 2001 was $15,400. Currently, the Company is assessing but has not yet determined how the adoption of SFAS 141 and SAFS 142 will impact its financial position and results of operations. 2. RECAPITALIZATION In June 2000, the Company entered into a Recapitalization (the "Recapitalization") with certain of its stockholders, whereby the Company purchased approximately 51% of the outstanding stock for approximately $220,500 including related transaction fees. This stock has been reflected as treasury stock in the accompanying balance sheet. As a result of provisions in the Company's Senior Debt and Subordinated Note Agreements, the Company redeemed it's $200,000 9-1/4% Senior Subordinated Notes, its $75,000 11-1/4% Senior Subordinated Notes and repaid its Senior Debt in the amount of approximately $153,000. These transactions resulted in an extraordinary loss on the extinguishment of debt of approximately $35,374. The extraordinary loss is comprised of prepayment penalties and other interest costs of $39,303, the write-off of deferred financing costs of $16,696 and other fees of $1,325, net of a tax benefit of $21,950. These transactions were funded by $43,101 of new equity, $275,000 12-3/4% Senior Subordinated Notes (see Note 6(b)) and initial borrowings of $374,000 on a $444,000 Senior Credit Facility (see Note 6(a)). F-12 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) ================================================================================ 3. ACQUISITIONS In November 2000, the Company purchased certain assets of Super Plastics Division ("Super Plastics") of RCR International, Inc., for approximately $10,200. The acquisition was recorded under the purchase method, whereby Super Plastics' net assets were recorded at estimated fair value and its operations have been reflected in the statement of operations since that date. As a result of the acquisition, goodwill of approximately $5,500 has been recorded, which is being amortized over 15 years. In connection with the acquisition, the Company established a reserve of $2,600. The reserve was comprised of the costs to close a duplicate facility and terminate employees. There is no balance remaining in this reserve at June 29, 2001. Proforma results of operations, assuming Super Plastics was acquired on July 3, 1999, would not be materially different from the consolidated results of operations. In April 1999, the Company purchased certain assets and assumed certain liabilities of High Voltage Engineering Corp. - Natvar Division ("Natvar"), for approximately $26,000. The acquisition was recorded under the purchase method, whereby Natvar's net assets were recorded at estimated fair value and its operations have been reflected in the statement of operations since that date. As a result of the acquisition, goodwill of approximately $19,786 has been recorded, which is being amortized over 15 years. In January 1999, the Company purchased certain assets and assumed certain liabilities of Tri-Seal International, Inc. ("Tri-Seal") for approximately $21,000. The acquisition was recorded under the purchase method and Tri-Seal's operations have been reflected in the statement of operations since that date. As a result of the acquisition, goodwill of approximately $13,848 has been recorded, which is being amortized over 15 years. F-13 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) ================================================================================ The following table presents the unaudited pro forma results of operations as though the acquisition of Tri-Seal and Natvar occurred on July 4, 1998:
Years ended JULY 2, 1999 - -------------------------------------------------------------------------------- Net sales $510,050 Income from operations 70,691 Income before provision for income taxes 31,211 ================================================================================
4. INVENTORIES Inventories are summarized as follows:
JUNE 29, 2001 June 30, 2000 - -------------------------------------------------------------------------------- Raw materials $ 33,971 $44,002 Work-in-process 7,812 7,024 Finished goods 64,475 40,207 - -------------------------------------------------------------------------------- $106,258 $91,233 ================================================================================
5. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following:
Estimated JUNE 29, 2001 June 30, 2000 useful lives - -------------------------------------------------------------------------------- Land $ 15,390 $ 15,106 Building and improvements 34,886 32,016 30 - 40 years Machinery and equipment 139,591 124,549 5 - 10 years Furniture and fixtures 6,176 4,045 5 - 10 years Construction in progress 10,115 10,009 - -------------------------------------------------------------------------------- 206,158 185,725 Less: Accumulated depreciation 69,150 49,799 - -------------------------------------------------------------------------------- $137,008 $135,926 ================================================================================
F-14 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) ================================================================================ 6. LONG-TERM DEBT Long-term debt consists of the following:
JUNE 29, 2001 June 30, 2000 - -------------------------------------------------------------------------------- Senior Debt(a): Revolving line of credit $ 65,000 $ 30,000 Term notes 336,560 344,000 Senior Subordinated Notes issued June 21, 2000 at 12-3/4%, due June 15, 2010 (less unamortized discount of $3,391 and $3,768)(b). 271,609 271,232 Other, primarily foreign term loans, with interest rates ranging from 4.44% to 5.44% and maturities from 2000 to 2010. 4,981 6,361 - -------------------------------------------------------------------------------- 678,150 651,593 Less: Current maturities 8,072 8,401 - -------------------------------------------------------------------------------- $670,078 $643,192 ================================================================================
a) Senior Debt The Company has a Senior Debt agreement, which includes a $100,000 revolving credit agreement, and two term loans in the original amount of $344,000. The proceeds of the credit agreement were used as part of the Recapitalization. These loans are senior to all other indebtedness and are collateralized by substantially all the assets of the Company. The debt agreement includes various covenants including a limitation on capital expenditures and compliance with customary financial ratios. On October 4, 2001, the Company's Senior Debt agreement was amended to retroactively modify certain financial covenants effective June 29, 2001 and thereafter. The Company is in compliance with all such financial covenants, as amended. F-15 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) Revolving Credit Agreement Borrowings under the agreement may be used for general corporate purposes and $35,000 is available for borrowing at June 29, 2001. Interest, at the Company's option, is charged at the Prime Rate, plus the Applicable Base Rate (initially 2%) or the Adjusted LIBOR Rate, as defined, plus the Applicable Euro-Dollar Margin (initially 3%). The Applicable Base Rate and Applicable Euro-Dollar Margin can be reduced by up to 1.25 % based on the maintenance of certain leverage ratios. At June 29, 2001 the balance of $65,000 outstanding was borrowed at various rates ranging from 6.75% to 8.75%. At June 30, 2000, the rates charged were 9.69% on $25,000 and 11.5% on $5,000. The Revolving Credit Agreement expires in June 2006. Term Loan A Borrowings under this loan, in the original amount of $100,000, were used in connection with the Recapitalization. Interest is payable quarterly at the same rates and margins discussed above under the Revolving Credit Agreement, 7.5% and 9.81% at June 29, 2001 and June 30, 2000, respectively. Principal is currently payable in quarterly installments of $1,250. The quarterly installments subsequently increase with payments totaling $70,000 due in the final two years in the period ending in June 2006. Term Loan B Borrowings under this loan in the original amount of $244,000 were used in connection with the Recapitalization. Interest is payable quarterly at the same rate discussed above, except the Applicable Base Rate is initially 2.5% and the Applicable Euro-Dollar Margin is initially 3.5%. Rates of 7.25% and 10.31% were charged at June 29, 2001 and June 30, 2000, respectively. In addition, the Applicable Base Rate and Applicable Euro-Dollar Margin can be reduced by .5% based on the maintenance of certain leverage ratios. Principal is currently payable in quarterly installments of $610. The quarterly installments subsequently increase with payments totaling $229,000 due in the final two years in the period ending in June 2008. F-16 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) b) Senior Subordinated Notes Issued June 2000 In June 2000, the Company issued $275,000 of 12 -3/4% ten year Senior Subordinated Notes less a discount of $3,768, the proceeds of which were used in connection with the Recapitalization. The discount is being amortized over the term of the notes on the interest method. Interest is payable semi-annually and the notes are unsecured obligations and rank subordinate to existing and future senior debt, including current term loans and revolving credit facilities. The notes are callable by the Company after June 15, 2005 at a premium of 6.375%, which decreases to par after June 2008. In addition, prior to June 15, 2003, the Company may call up to 35% of the principal amount of the notes outstanding with proceeds from one or more public offerings of the Company's Capital Stock at a premium of 12.75%. Upon a change in control, the Company is required to make an offer to repurchase the notes at 101% of the principal amount. These notes also contain various covenants including a limitation on future indebtedness; limitation of payments, including prohibiting the payment of dividends; and limitations on mergers, consolidations and the sale of assets. Principal payments on long-term debt over the next five years and thereafter are as follows:
- ------------------------------------------- 2002 $ 8,072 2003 12,913 2004 12,913 2005 37,913 2006 102,913 Thereafter 506,817 ===========================================
F-17 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) The Company believes the recorded value of long-term debt approximates fair value based on current rates available to the Company for similar debt. 7. INCOME TAXES The provision for income taxes , excluding the income tax benefit associated with the extraordinary item in 2000, is summarized as follows:
Years ended JUNE 29, 2001 June 30, 2000 July 2, 1999 - ------------------------------------------------------------------------------------ Current: Federal $ -- $ 7,763 $ 3,604 Foreign 3,984 3,554 2,900 State and local 114 1,016 500 - ------------------------------------------------------------------------------------ 4,098 12,333 7,004 - ------------------------------------------------------------------------------------ Deferred: Federal (9,945) 1,756 5,918 Foreign (370) 217 328 State and local (852) 130 900 - ------------------------------------------------------------------------------------ (11,167) 2,103 7,146 - ------------------------------------------------------------------------------------ Provision (benefit) for income taxes $ (7,069) $ 14,436 $ 14,150 ====================================================================================
The components of income (loss) before income taxes are as follows:
Years ended JUNE 29, 2001 June 30, 2000 July 2, 1999 - -------------------------------------------------------- Domestic $(38,116) $ 20,150 $ 21,198 Foreign 12,053 8,692 7,949 - -------------------------------------------------------- $(26,063) $ 28,842 $ 29,147 ========================================================
F-18 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) The provision (benefit) for income taxes differs from the amounts computed by applying the applicable Federal statutory rates due to the following:
Years ended JUNE 29, 2001 June 30, 2000 July 2, 1999 - -------------------------------------------------------------------------------------- Provision (benefit) for Federal income taxes at statutory rate $ (8,861) $ 9,806 $ 9,910 State and local income taxes, net of Federal benefit (677) 756 330 Non-deductible goodwill amortization 2,785 2,310 3,765 Foreign tax rates in excess of Federal tax rate (470) 785 465 Other, net 154 779 (320) - -------------------------------------------------------------------------------------- Provision (benefit) for income taxes $ (7,069) $ 14,436 $ 14,150 ======================================================================================
Significant components of the Company's deferred tax assets and liabilities are as follows:
JUNE 29, 2001 June 30, 2000 - -------------------------------------------------------------------------------- Current deferred taxes: Allowance for doubtful accounts $ 582 $ 637 Inventory 1,190 309 Net operating loss carryforwards 3,201 -- Accrued expenses 180 4,051 - -------------------------------------------------------------------------------- Total current deferred tax assets $ 5,153 $ 4,997 ================================================================================ Long-term deferred taxes: Net operating loss carryforwards $ 39,593 $ 29,997 Accrued pension and post-retirement 1,457 1,434 Accrued expenses 620 1,108 Unrealized loss on derivative contracts 5,360 -- Difference in book vs. tax basis of assets (3,028) (4,556) Accelerated tax vs. book depreciation (19,292) (16,885) - -------------------------------------------------------------------------------- Total long-term net deferred tax assets 24,710 11,098 Valuation allowance (5,700) (5,700) - -------------------------------------------------------------------------------- Total long-term net deferred tax assets $ 19,010 $ 5,398 ================================================================================
F-19 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) Net Operating Losses The Company and its U.S. subsidiaries file a consolidated tax return. The Company and its U.S. subsidiaries have net operating loss ("NOL") carryforwards of approximately $106,578. These NOL's expire at various dates from 2009 through 2021. $86,166 of the NOL's are as a result of the acquisition of PureTec in 1997 (the "PureTec NOL's"). The PureTec NOL's are subject to IRC Section 382 change of ownership annual limitation of approximately $5,900. In addition to the domestic NOL balances, the Company has incurred losses relating to a subsidiary, taxable in Northern Ireland. Through fiscal 2001 losses aggregated $2,500 which have no expiration date. The Company believes that it is more likely than not that this deferred tax asset will not be realized and has recorded a full valuation allowance on these amounts. In addition, the net long-term domestic deferred tax assets have been subjected to a valuation allowance since management believes it is more likely than not that a portion of the (NOL) balance will not be realized as a result of the various limitations on their usage, discussed above. The domestic net operating losses are subject to matters discussed above and are subject to change due to the restructuring at the subsidiary level, as well as adjustment for the timing of inclusion of expenses and losses in the federal returns as compared to amounts included for financial statement purposes. 8. EMPLOYEE BENEFIT PLANS (a) Savings Plans i. The Company had a defined contribution profit sharing plan for the benefit of all employees having completed one year of service with its Dolco Division ("Dolco"). The Company contributed 3% of compensation for each participant and a matching contribution of up to 1% when an employee contributed 3% compensation. Contributions totaled approximately $727 for the year ended July 2, 1999. F-20 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) ii. Additionally, the Company had a savings plan for all employees of two wholly-owned subsidiaries who are not covered under a collective bargaining agreement. The two subsidiaries are Plastic Specialties & Technology, Inc. ("PST") and Burlington Resins, Inc. ("Burlington"). Under the savings plan, the Company matched each eligible employees' contribution up to 3% of the employees' earnings. Such contributions amounted to approximately $362 for the year ended July 2, 1999. iii. The Company maintains a discretionary 401(k) plan covering all eligible employees, excluding those employed by Dolco and PureTec, with at least one year of service. Contributions to the plan were determined annually by the Board of Directors. There were no contributions for year ended July 2, 1999. Effective December 1, 1999 the Dolco, PST and Burlington plans were merged into this plan. The Company will determine matching contributions to the plan each year not to exceed 2% of the employee's eligible compensation. Contributions for the fiscal years ended June 29, 2001 and June 30, 2000 amounted to approximately $863 and $996, respectively. F-21 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) (b) Pension Plans i. The Company's Burlington subsidiary has a non-contributory defined benefit pension plan that covers substantially all hourly compensated employees covered by a collective bargaining agreement, who have completed one year of service. The funding policy of the Company is to make contributions to this plan based on actuarial computations of the minimum required contribution for the plan year. The components of net periodic pension costs are as follows:
YEAR ENDED JUNE 29, Year ended June 30, 2001 2000 - ------------------------------------------------------------------------------------------------------------ Service cost $ 105 $ 117 Interest cost on projected benefit obligation 393 390 Expected actual return on plan assets (494) (492) - ------------------------------------------------------------------------------------------------------------ Net pension cost $ 4 $ 15 ============================================================================================================ CHANGE IN PROJECTED BENEFIT OBLIGATION Projected benefit obligation, beginning of period $ 5,334 $ 5,292 Service cost 105 117 Interest cost 393 390 Actuarial (gain) loss 38 (230) Benefits paid (270) (235) - ------------------------------------------------------------------------------------------------------------ Projected benefit obligation, end of period $ 5,600 $ 5,334 ============================================================================================================ CHANGE IN PLAN ASSETS Plan assets at fair value, beginning of period $ 5,550 $ 5,431 Actual return on plan assets 3 158 Company contributions 157 196 Benefits paid (270) (235) - ------------------------------------------------------------------------------------------------------------ Plan assets at fair value, end of period $ 5,440 $ 5,550 ============================================================================================================
F-22 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) The funded status of the Plan and amounts recorded in the Company's balance sheets are as follows:
JUNE 29, 2001 June 30, 2000 - -------------------------------------------------------- Funded status of the plan $(160) $ 216 Unrecognized net gain 676 147 - -------------------------------------------------------- Prepaid pension cost $ 516 $ 363 ========================================================
The expected long-term rate of return on plan assets was 9% for the periods presented and the discount rate was 7 -1/2% at June 29, 2001 and June 30, 2000. ii. The Company maintains a non-contributory defined benefit pension plan that covers substantially all non-collective bargaining unit employees of PST and Burlington, who have completed one year of service and are not participants in any other pension plan. The funding policy of the Company is to make contributions to the plan based on actuarial computations of the minimum required contribution for the plan year. On September 8, 1998, the Company approved a plan to freeze this defined benefit pension plan effective September 30, 1998, resulting in a curtailment gain of $576.
YEAR ENDED JUNE 29, Year ended June 30, 2001 2000 - ------------------------------------------------------------------------------- Service cost $ -- $ -- Interest cost on projected benefit obligation 750 704 Expected actual return on plan assets (978) (986) - ------------------------------------------------------------------------------- Net pension cost $(228) $(282) ===============================================================================
F-23 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
YEAR ENDED Year ended JUNE 29, 2001 June 30, 2000 - ---------------------------------------------------------------------------- CHANGE IN PROJECTED BENEFIT OBLIGATION Projected benefit obligation, beginning of period $ 9,978 $ 9,555 Interest cost 750 704 Actuarial (gain) loss 204 146 Benefits paid (431) (427) - ---------------------------------------------------------------------------- Projected benefit obligation, end of period $ 10,501 $ 9,978 ============================================================================ CHANGE IN PLAN ASSETS Plan assets at fair value, beginning of period $ 11,055 $ 11,113 Actual return on plan assets (79) 369 Benefits paid (431) (427) - ---------------------------------------------------------------------------- Plan assets at fair value, end of period $ 10,545 $ 11,055 ============================================================================
The funded status of the Plan and amounts recorded in the Company's balance sheets are as follows:
JUNE 29, 2001 June 30, 2000 - -------------------------------------------------------------- Funded status of the plan $ 44 $1,077 Unrecognized net gain (loss) 1,557 296 - -------------------------------------------------------------- Prepaid pension cost $1,601 $1,373 ==============================================================
The expected long-term rate of return on plan assets was 9% for the periods presented and the discount rate was 7-1/2% at June 29, 2001 and June 30, 2000. F-24 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) iii. The Company also has a defined benefit pension plan for the benefit of all employees having completed one year of service with Dolco. The Company's policy is to fund the minimum amounts required by applicable regulations. Dolco's Board of Directors approved a plan to freeze the pension plan on June 30, 1987, at which time benefits ceased to accrue. The Company has not been required to contribute to the plan since 1990. (c) Post-retirement Benefits In addition to providing pension benefits, the Company also sponsors the Burlington Retiree Welfare Plan, which provides certain healthcare benefits for retired employees of the Burlington division who were employed on an hourly basis, covered under a collective bargaining agreement and retired prior to July 31, 1997. Those employees and their families became eligible for these benefits after the employee completed five years of service, if retiring at age fifty-five, or at age sixty-five, the normal retirement age. Post retirement healthcare benefits paid for the years ended June 29, 2001 and June 30, 2000 amounted to $182 and $130, respectively. F-25 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) Net periodic post-retirement benefit costs are as follows:
YEAR ENDED Year ended JUNE 29, 2001 June 30, 2000 - --------------------------------------------------------------------------------- Service cost $ 45 $ 45 Interest cost 179 155 Transition obligation 4 -- - --------------------------------------------------------------------------------- Net post-retirement benefit cost $ 228 $ 200 ================================================================================= CHANGE IN PROJECTED BENEFIT OBLIGATION Projected benefit obligation, beginning of period $ 2,457 $ 2,101 Service cost 45 45 Interest cost 179 155 Actuarial (gain) loss 348 286 Benefits paid (182) (130) - --------------------------------------------------------------------------------- Projected benefit obligation, end of period $ 2,847 $ 2,457 ================================================================================= CHANGE IN PLAN ASSETS Plan assets at fair value, beginning of period $ -- $ -- Company contributions 182 130 Benefits paid (182) (130) - --------------------------------------------------------------------------------- Plan assets at fair value, end of period $ -- $ -- =================================================================================
F-26 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) The funded status of the Plan and amounts recorded in the Company's balance sheets are as follows:
YEAR ENDED Year ended JUNE 29, 2001 June 30, 2000 - ---------------------------------------------------------------- Funded status of the plan $(2,847) $(2,457) Unrecognized gain (loss) 630 286 - ---------------------------------------------------------------- Accrued post retirement cost $(2,217) $(2,171) ================================================================
The accumulated post-retirement benefit obligation was deter-mined using a 7-1/2% discount rate for the periods presented. The healthcare cost trend rate for medical benefits was assumed to be 6%, gradually declining until it reaches a constant annual rate of 5% in 2002. The healthcare cost trend rate assumption has a significant effect on the amounts reported. A 1% increase in healthcare trend rate would increase the accumulated post-retirement benefit obligation by $295 and $254 and increase the service and interest components by $27 and $26 at June 29, 2001 and June 30, 2000, respectively. 9. RELATED PARTY TRANSACTIONS The Company had a management consulting agreement with an affiliate of a stockholder. The terms of the agreement required the Company to pay a fee of approximately $30 per month for a period of ten years, with certain renewal provisions. Consulting service fees were approximately $400 for the year ending July 2, 1999. In June 2000 the Company agreed to terminate the management consulting agreement at a cost of $3,651 which has been included in other income/expense. F-27 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) 10. STOCK OPTIONS In January 1998, the Company adopted an incentive stock plan (the "Stock Incentive Plan"). Under the Stock Incentive Plan, 41.72948 shares are available for awards to employees of the Company. Options will be granted at fair market value on the date of grant. During 2001, 2000, 1999 and 1998, options were granted to purchase 4.02, 1.26, 7.32 and 28.37 shares of common stock at an exercise price of $559, $507, $222 and $154 per share, respectively. The options are subject to vesting provisions, as determined by the Board of Directors, at date of grant and generally vest 100% five years from grant date and expire 10 years from date of grant. In connection with the Recapitalization 22.88 of the 1998 options were cancelled. At June 29, 2001, no options were exercisable and no options have been exercised or forfeited as of June 29, 2001. The Company applies APB Opinion 25 and related interpretations in accounting for these options. Accordingly, no compensation cost has been recognized. Had compensation cost been determined based on the fair value at the grant dates for these awards consistent with the method of SFAS Statement 123, the Company's income (loss) before extraordinary items would have been reduced (increased) to the pro forma amounts indicated below. The calculations were based on a risk free interest rate of 4.0%, 5.7% and 4.75% for the 2001, 2000 and 1999 options, respectively, expected volatility of zero, a dividend yield of zero and expected lives of 8 years.
Years ended JUNE 29, 2001 June 30, 2000 July 2, 1999 - ---------------------------------------------------------------------------------------- Income (loss) before extraordinary item: As reported $(18,994) $ 14,406 $ 14,997 ======================================================================================== Pro forma $(19,154) $ 14,343 $ 14,868 ========================================================================================
F-28 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) 11. COMMITMENTS AND CONTINGENCIES Commitments (a) The Company leases building space and certain equipment in approximately 20 locations throughout the United States, Canada and Europe. At June 29, 2001, the Company's future minimum lease payments are as follows:
- ----------------------------------------------------------------------------------- 2002 $ 4,423 2003 2,504 2004 1,796 2005 1,171 2006 782 Thereafter 5,900 - ----------------------------------------------------------------------------------- $16,576 ===================================================================================
Rent expense, including escalation charges, amounted to approximately $4,308, $3,427 and $3,756 for the years ended June 29, 2001, June 30, 2000 and July 2, 1999, respectively. (b) The Company had employment contracts with two employees, which provided for combined minimum salaries of $1,800 and bonuses based on performance and was scheduled to expire in June 2002. Combined salaries and bonuses for the year ended July 2, 1999 under these contracts were $15,271. As part of the Recapitalization, the above employment agreements were amended and restated on June 21, 2000, providing minimum salaries of $7,500 with no mandatory bonuses. The salaries will increase 10% annually until the agreements expire on July 2, 2004. Salaries and bonuses for the year ended June 29, 2001 were $7,500 and for the year ended June 30, 2000 were $8,733. Contingencies (a) The Company is a party to various other legal proceedings arising in the normal conduct of business. Management believes that the final outcome of these proceedings will not have a material adverse effect on the Company's financial position. F-29 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) 12. CONCENTRATIONS OF CREDIT RISKS Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash deposits and trade accounts receivable. The Company provides credit to customers on an unsecured basis after evaluating customer credit worthiness. Since the Company sells to a broad range of customers, concentrations of credit risk are limited. The Company provides an allowance for bad debts where there is a possibility for loss. The Company maintains demand deposits at several major banks throughout the United States. As part of its cash management process, the Company periodically reviews the credit standing of these banks. 13. SUPPLEMENTAL CASH FLOW INFORMATION (a) Cash Paid
Years ended JUNE 29, 2001 June 30, 2000 July 2, 1999 - ------------------------------------------------------------------ Interest $ 74,568 $102,359 $ 37,376 ================================================================== Income taxes $ 1,661 $ 7,540 $ 10,185 ==================================================================
(b) Non-Cash Financing and Investing Activities The Company purchased certain assets of RCR International, Inc. effective November 2000, for approximately $10,226 in cash. In conjunction with the acquisition, liabilities were assumed as follows:
- ---------------------------------------------- Fair value of assets acquired $ 7,314 Goodwill 5,558 Purchase price (10,226) - ---------------------------------------------- Liabilities assumed $ 2,646 ==============================================
F-30 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) The Company purchased certain assets and assumed certain liabilities of High Voltage, effective April 1999, for approximately $26,169 in cash. In conjunction with the acquisition, liabilities were assumed as follows:
- ---------------------------------------------- Fair value of assets acquired $ 7,513 Goodwill 19,786 Cash paid (26,169) - ---------------------------------------------- Liabilities assumed $ 1,130 ==============================================
The Company purchased certain assets and assumed certain liabilities of Tri-Seal, effective January 1999, for approximately $21,272 in cash. In conjunction with the acquisition, liabilities were assumed as follows:
- ---------------------------------------------- Fair value of assets acquired $ 11,400 Goodwill 13,848 Cash paid (21,272) - ---------------------------------------------- Liabilities assumed $ 3,976 ==============================================
14. SEGMENT INFORMATION The Company operates in four industry segments: healthcare packaging, products, and materials; consumer packaging and products; food packaging; and specialty resins and compounds. The healthcare packaging, products, and materials segment principally produces pharmaceutical packaging, medical tubing and medical device materials. The consumer packaging and products segment principally produces precision tubing and gaskets, and garden and irrigation hose products. The food packaging segment produces foamed polystyrene packaging products for the poultry, meat and egg industries. The specialty resins and compounds segment produces specialty PVC resins, recycled PET resins, and general purpose PVC compounds. The healthcare packaging, products, and materials and consumer packaging and products segments have operations in the United States, Europe and Canada. F-31 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Healthcare Packaging, Consumer Specialty Products and Packaging Food Resins and June 29, 2001 Materials and Products Packaging Compounds TOTALS - ------------------------------------------------------------------------------------------------------ Revenues from external customers $148,363 $202,038 $124,526 $ 50,910 $525,837 Interest expense 24,029 23,644 18,215 10,681 76,569 Depreciation and amortization 10,962 13,501 8,385 4,544 37,392 Segment income (loss) from operations 21,227 36,914 22,465 (2,986) 77,620 Segment assets 169,410 270,731 75,266 88,894 604,301 Expenditures for segment fixed assets 2,710 8,047 3,245 3,114 17,116 ======================================================================================================
Healthcare Packaging, Consumer Specialty Products and Packaging Food Resins and June 30, 2000 Materials and Products Packaging Compounds TOTALS - -------------------------------------------------------------------------------------------------------- Revenues from external customers $159,116 $195,936 $110,011 $ 59,754 $524,817 Interest expense 11,217 12,537 9,001 5,692 38,447 Depreciation and amortization 10,876 12,316 6,866 4,480 34,538 Segment income from operations 26,202 35,491 22,842 161 84,696 Segment assets 171,764 220,576 77,642 83,900 553,882 Expenditures for segment fixed assets 7,224 4,012 3,247 1,775 16,258 ========================================================================================================
F-32 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Healthcare Packaging, Consumer Specialty Products and Packaging Food Resins and July 2, 1999 Materials and Products Packaging Compounds TOTALS - -------------------------------------------------------------------------------------------------------- Revenues from external customers $142,309 $191,584 $103,858 $ 69,563 $507,314 Interest expense 11,818 13,254 8,014 5,891 38,977 Depreciation and amortization 7,327 13,072 9,640 5,086 35,125 Segment income from operations 25,027 37,848 18,777 6,810 88,462 Segment assets 173,704 216,067 73,351 83,601 546,723 Expenditures for segment fixed assets 3,761 3,540 4,567 1,082 12,950 ========================================================================================================
F-33 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
JUNE 29, 2001 June 30, 2000 July 2, 1999 - ----------------------------------------------------------------------------------------- PROFIT OR LOSS Total operating profit for reportable segments before income taxes $ 77,620 $ 84,696 $ 88,462 Corporate and eliminations (12,618) (12,702) (20,052) - ----------------------------------------------------------------------------------------- $ 65,002 $ 71,994 $ 68,410 ========================================================================================= ASSETS Total assets from reportable segments $ 604,301 $ 553,882 $ 546,723 Other unallocated amounts 17,193 20,907 12,713 - ----------------------------------------------------------------------------------------- Consolidated total $ 621,494 $ 574,789 $ 559,436 ========================================================================================= DEPRECIATION AND AMORTIZATION Segment totals $ 37,392 $ 34,538 $ 35,125 Corporate 278 210 218 - ----------------------------------------------------------------------------------------- Consolidated total $ 37,670 $ 34,748 $ 35,343 ========================================================================================= REVENUES - ----------------------------------------------------------------------------------------- GEOGRAPHIC INFORMATION United States $ 466,804 $ 477,489 $ 463,680 Canada 14,834 5,975 4,996 Europe 44,199 41,353 38,638 - ----------------------------------------------------------------------------------------- Total $ 525,837 $ 524,817 $ 507,314 ========================================================================================= LONG-LIVED ASSETS - ----------------------------------------------------------------------------------------- GEOGRAPHIC INFORMATION United States $ 307,328 $ 323,691 $ 339,409 Canada 10,035 2,580 2,549 Europe 32,273 26,670 25,779 - ----------------------------------------------------------------------------------------- Total $ 349,636 $ 352,941 $ 367,737 =========================================================================================
F-34 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) Income from operations is total net sales less cost of goods sold and operating expenses of each segment before deductions for general corporate expenses not directly related to an individual segment and interest. Identifiable assets by industry are those assets that are used in the Company's operation in each industry segment, including assigned value of goodwill. Corporate identifiable assets consist primarily of cash, prepaid expenses, deferred income taxes and fixed assets. No customer had sales of 10% or more of total sales during the year ended June 29, 2001. One customer represented 11% of accounts receivable at June 29, 2001. For the year ended June 30, 2000, one customer represented 10% of sales and another customer represented 11% of accounts receivable at June 30, 2000. For the year ended July 2, 1999, one customer represented 11% of sales and two customers each represented 10% of accounts receivable at July 2, 1999. F-35 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) 15. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Tekni-Plex, Inc. issued 12 -3/4 % Senior Subordinated Notes in June 2000. These notes are guaranteed by all domestic subsidiaries of Tekni-Plex. The following condensed consolidating financial statements present separate information for Tekni-Plex (the "Issuer") and its domestic subsidiaries (the "Guarantors") and the foreign subsidiaries (the "Non-Guarantors"). Condensed Consolidating Statement of Operations - For the year ended June 29, 2001
Non- Issuer Guarantors Guarantors TOTAL - ------------------------------------------------------------------------------------- Sales, net $ 161,854 $ 304,950 $ 59,033 $ 525,837 Cost of sales 121,521 236,723 41,592 399,836 - ------------------------------------------------------------------------------------- Gross profit 40,333 68,227 17,441 126,001 Selling, general and administrative 38,295 17,320 5,384 60,999 - ------------------------------------------------------------------------------------- Income from operations 2,038 50,907 12,057 65,002 Interest expense, net 76,958 (318) (71) 76,569 Unrealized loss on derivative contract 13,891 - - 13,891 Other expense (income) (1,119) 1,063 661 605 - ------------------------------------------------------------------------------------- Income (loss) before provision for income taxes (87,692) 50,162 11,467 (26,063) Provision (benefit) for income taxes (16,574) 6,626 2,879 (7,069) - ------------------------------------------------------------------------------------- Net income (loss) $ (71,118) $ 43,536 $ 8,588 $ (18,994) ======================================================================================
F-36 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) Condensed Consolidating Balance Sheet - at June 29, 2001
Non- Issuer Guarantors Guarantors Eliminations TOTAL - ------------------------------------------------------------------------------------------------- CURRENT ASSETS $ 80,305 $ 146,839 $ 39,823 $ - $ 266,967 Property, plant and equipment, net 38,788 79,517 18,703 - 137,008 Intangible assets 13,208 153,960 12,448 - 179,616 Investment in subsidiaries 457,641 - - (457,641) - Deferred financing costs, net 16,607 - - - 16,607 Deferred taxes 19,022 (12) - - 19,010 Other long-term assets 28,577 261,520 12,510 (300,321) 2,286 - ------------------------------------------------------------------------------------------------- TOTAL ASSETS $ 654,148 $ 641,824 $ 83,484 $(757,962) $ 621,494 ================================================================================================= CURRENT LIABILITIES $ 22,370 $ 26,923 $ 18,545 $ - $ 67,838 Long-term debt 665,729 - 4,349 - 670,078 Other long-term liabilities 92,460 190,399 35,737 (300,321) 18,275 - ------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 780,559 217,322 58,631 (300,321) 756,191 - ------------------------------------------------------------------------------------------------- Additional paid-in capital 120,156 296,784 15,656 (312,420) 120,176 Retained earnings (deficit) (26,105) 127,685 16,269 (145,221) (27,372) Cumulative currency translation adjustment - 33 (7,072) - (7,039) Treasury stock (220,462) - - - (220,462) - ------------------------------------------------------------------------------------------------- TOTAL EQUITY (126,411) 424,502 24,853 (457,523) (134,697) - ------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND EQUITY $ 654,148 $ 641,824 $ 83,484 $(757,844) $ 621,494 =================================================================================================
Condensed Consolidating Statement of Cash Flows-For the year ended June 29, 2001
Issuer Guarantors Non-Guarantors TOTAL - ------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities: $(47,908) $ 36,694 $ 7,948 $ (3,266) - ------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Acquisitions, net of cash acquired -- (9,233) -- (9,233) Capital expenditures (2,710) (11,208) (3,198) (17,116) Additions to intangibles (322) (106) -- (428) Cash proceeds from sale of assets -- -- -- -- - ------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (3,032) (20,547) (3,198) (26,777) - ------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Net borrowings (repayment) under line of credit 35,000 -- -- 35,000 Repayments of long-term debt (7,400) -- (1,420) (8,820) Proceeds from capital contribution 36,000 -- -- 36,000 Change in intercompany accounts 14,592 (14,592) -- -- - ------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 78,192 (14,592) (1,420) 62,180 - ------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash -- -- (17) (17) - ------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash 27,252 1,555 3,313 32,120 Cash, beginning of period 5,638 3,766 3,121 12,525 - ------------------------------------------------------------------------------------------------------------- CASH, END OF PERIOD $ 32,890 $ 5,321 $ 6,434 $ 44,645 =============================================================================================================
F-37 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) Condensed Consolidating Statement of Operations - For the year ended June 30, 2000
Non- Issuer Guarantors Guarantors TOTAL - ------------------------------------------------------------------------------------- Sales, net $ 151,587 $ 325,902 $ 47,328 $ 524,817 Cost of sales 110,272 251,512 32,696 394,480 - ------------------------------------------------------------------------------------- Gross profit 41,315 74,390 14,632 130,337 Selling, general and administrative 37,991 16,042 4,310 58,343 - ------------------------------------------------------------------------------------- Income from operations 3,324 58,348 10,322 71,994 Interest expense, net 38,717 (280) 10 38,447 Other expense (income) 4,272 (1,187) 1,620 4,705 - ------------------------------------------------------------------------------------- Income (loss) before provision for income taxes and extraordinary item (39,665) 59,815 8,692 28,842 Provision (benefit) for income taxes (22,359) 33,211 3,584 14,436 - ------------------------------------------------------------------------------------- Income (loss) before extraordinary item (17,306) 26,604 5,108 14,406 Extraordinary item (35,374) - - (35,374) - ------------------------------------------------------------------------------------- Net income (loss) $ (52,680) $ 26,604 $ 5,108 $ (20,968) =====================================================================================
F-38 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) Condensed Consolidating Balance Sheet - At June 30, 2000
Non- Issuer Guarantors Guarantors Eliminations TOTAL - ------------------------------------------------------------------------------------------------- CURRENT ASSETS $ 61,275 $ 134,456 $ 26,117 $ - $ 221,848 Property, plant and equipment, net 41,852 78,957 15,117 - 135,926 Intangible assets 31,519 150,476 8,497 - 190,492 Investment in subsidiaries 398,879 - - (398,879) - Deferred financing costs, net 18,897 - - - 18,897 Deferred taxes 5,398 - - - 5,398 Other long-term assets 50,471 240,823 12,636 (301,702) 2,228 - ------------------------------------------------------------------------------------------------- TOTAL ASSETS $ 608,291 $ 604,712 $ 62,367 $(700,581) $ 574,789 ================================================================================================= CURRENT LIABILITIES $ 37,296 $ 24,390 $ 14,283 $ - $ 75,969 Long-term debt 637,793 - 5,399 - 643,192 Other long-term liabilities 72,660 211,846 20,682 (300,410) 4,778 - ------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 747,749 236,236 40,364 (300,410) 723,939 - ------------------------------------------------------------------------------------------------- Additional paid-in capital 85,355 296,880 15,641 (313,700) 84,176 Retained earnings (deficit) (4,351) 71,596 10,848 (86,471) (8,378) Cumulative currency translation adjustment - - (4,486) - (4,486) Treasury stock (220,462) - - - (220,462) - ------------------------------------------------------------------------------------------------- TOTAL EQUITY (139,458) 368,476 22,003 (400,171) (149,150) - ------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND EQUITY $ 608,291 $ 604,712 $ 62,367 $(700,581) $ 574,789 =================================================================================================
Condensed Consolidating Statement of Cash Flows-For the year ended June 30, 2000
Issuer Guarantors Non-Guarantors Total - --------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities: $ (25,883) $ 29,834 $ 5,534 $ 9,485 - --------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Acquisitions, net of cash acquired -- -- -- -- Capital expenditures (7,224) (6,747) (2,287) (16,258) Additions to intangibles (805) -- -- (805) Cash proceeds from sale of assets -- -- 158 158 - --------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (8,029) (6,747) (2,129) (16,905) - --------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Net borrowings (repayments) under line of credit (2,030) -- -- (2,030) Proceeds from long-term debt 645,232 -- -- 645,232 Repayments of long-term debt (446,661) -- (1,970) (448,631) Proceeds from capital contribution 43,101 -- -- 43,101 Debt financing costs (18,897) -- -- (18,897) Purchase of treasury stock (220,462) -- -- (220,462) Change in intercompany accounts 34,880 (26,508) (8,372) -- - --------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 35,163 (26,508) (10,342) (1,687) - --------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash -- -- (485) (485) - --------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash 1,251 (3,421) (7,422) (9,592) Cash, beginning of period 4,387 7,187 10,543 22,117 - --------------------------------------------------------------------------------------------------------------- Cash, end of period $ 5,638 $ 3,766 $ 3,121 $ 12,525 ===============================================================================================================
F-39 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) Condensed Consolidating Statement of Operations - For the year ended July 2, 1999
Non- Issuer Guarantors Guarantors TOTAL - ------------------------------------------------------------------------------------- Sales, net $ 155,141 $ 308,539 $ 43,634 $ 507,314 Cost of sales 114,634 231,928 29,808 376,370 - ------------------------------------------------------------------------------------- Gross profit 40,507 76,611 13,826 130,944 Selling, general and administrative 44,815 13,243 4,476 62,534 - ------------------------------------------------------------------------------------- Income (loss) from operations (4,308) 63,368 9,350 68,410 Interest expense (income), net 39,487 (739) 229 38,977 Other expense (income) 294 (1,180) 1,172 286 - ------------------------------------------------------------------------------------- Income (loss) before provision for income taxes (44,089) 65,287 7,949 29,147 Provision (benefit) for income taxes (23,682) 34,604 3,228 14,150 - ------------------------------------------------------------------------------------- Net income (loss) $ (20,407) $ 30,683 $ 4,721 $ 14,997 =====================================================================================
F-40 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) Condensed Consolidating Balance Sheet - at July 2, 1999:
Non- Issuer Guarantors Guarantors Eliminations TOTAL - ------------------------------------------------------------------------------------------------- CURRENT ASSETS $ 45,967 $ 117,689 $ 28,050 $ - $ 191,706 Property, plant and equipment, net 44,507 77,132 15,314 - 136,953 Intangible assets 50,965 153,747 1,428 - 206,140 Investment in subsidiaries 367,167 - - (367,167) - Deferred financing costs, net 19,257 (128) 229 - 19,358 Deferred taxes 1,346 - - - 1,346 Other long-term assets 106,330 18,938 11,350 (132,685) 3,933 - ------------------------------------------------------------------------------------------------- TOTAL ASSETS $ 635,539 $ 367,378 $ 56,371 $(499,852) $ 559,436 ================================================================================================= CURRENT LIABILITIES $ 52,551 $ 26,868 $ 10,842 $ - $ 90,261 Long-term debt 404,288 - 6,358 - 410,646 Other long-term liabilities 119,759 - 19,158 (132,685) 6,232 - ------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 576,598 26,868 36,358 (132,685) 507,139 - ------------------------------------------------------------------------------------------------- Additional paid-in capital 41,095 296,747 15,641 (312,408) 41,075 Retained earnings (deficit) 17,846 43,763 5,740 (54,759) 12,590 Cumulative currency translation adjustment - - (1,368) - (1,368) - ------------------------------------------------------------------------------------------------- TOTAL EQUITY 58,941 340,510 20,013 (367,167) 52,297 - ------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND EQUITY $ 635,539 $ 367,378 $ 56,371 $(499,852) $ 559,436 =================================================================================================
Condensed Consolidating Statement of Cash Flows-For the year ended July 2, 1999
Issuer Guarantors Non-Guarantors Total - ----------------------------------------------------------------------------------------------------------- Net cash provided by operating activities: $(23,064) $ 52,896 $ 8,962 $ 38,794 - ----------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Acquisitions, net of cash acquired -- (45,139) -- (45,139) Capital expenditures (3,761) (8,673) (516) (12,950) Additions to intangibles -- -- -- -- Cash proceeds from sale of assets -- -- -- -- - ----------------------------------------------------------------------------------------------------------- Net cash used in investing activities (3,761) (53,812) (516) (58,089) - ----------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Net borrowings (repayments) under line of credit 22,234 -- -- 22,234 Repayments of long-term debt (5,816) -- (4,361) (10,177) Change in intercompany accounts 4,592 (4,592) -- -- - ----------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 21,010 (4,592) (4,361) 12,057 - ----------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash -- -- (8) (8) - ----------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash (5,815) (5,508) 4,077 (7,246) Cash, beginning of period 10,202 12,695 6,466 29,363 - ----------------------------------------------------------------------------------------------------------- Cash, end of period $ 4,387 $ 7,187 $ 10,543 $ 22,117 ===========================================================================================================
F-41 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) 16. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
First Second* Third* Fourth 2001 Quarter Quarter Quarter Quarter - ------------------------------------------------------------------------------ Net sales $ 111,907 $ 105,873 $ 140,681 $ 167,376 Gross profit 22,422 24,123 36,785 42,671 Income from operations 7,311 9,755 21,127 26,809 Net income (loss) (5,739) (12,136) (1,473) 354 2000 - ------------------------------------------------------------------------------ Net sales $ 114,424 $ 106,879 $ 143,370 $ 160,144 Gross profit 29,005 27,498 37,994 35,840 Income from operations 14,863 12,652 23,988 20,491 Extraordinary item - net of taxes - - - (35,374) Net income (loss) 2,556 1,197 7,020 (31,741) 1999 - ------------------------------------------------------------------------------ Net sales $ 112,589 $ 98,524 $ 134,274 $ 161,927 Gross profit 27,091 24,878 37,680 41,295 Income from operations 13,131 10,320 21,273 23,686 Net income 1,543 505 5,849 7,100 ==============================================================================
*The second and third quarters reflect adjustments of $(7,229) and $(1,919), respectively to net income (loss) from previously issued financial statements related to unrealized losses on derivative instruments. The related 10-Q's are in the process of being amended. Fluctuations in net sales are due primarily to seasonality in a number of product lines, particularly garden hose and irrigation hose products. The extraordinary loss in the fourth quarter of fiscal 2000 was the result of the Recapitalization (Note 2). F-42 INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTAL SCHEDULE Board of Directors Tekni-Plex, Inc. Somerville, New Jersey The audits referred to in our report dated September 10, 2001 relating to the consolidated financial statements of Tekni-Plex, Inc. and its wholly owned subsidiaries (the "Company"), included the audits of the financial statement schedule for the years ended June 29, 2001, June 30, 2000 and July 2, 1999 listed in the accompanying index. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statement schedule based upon our audits. In our opinion, such financial statement schedule presents fairly, in all material respects, the information set forth therein. BDO Seidman, LLP Woodbridge, New Jersey September 20, 2001 F-43 TEKNI-PLEX, INC. VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Balance at Charged to Charged to BALANCE AT Beginning of Costs and Other Deductions END Period Expenses (1) Accounts (2) OF PERIOD ==================================================================================================== YEAR ENDED JULY 2, 1999 Accounts receivable allowance $1,326 $ 370 $ 68(3) $ 102 $1,662 ==================================================================================================== YEAR ENDED JUNE 30, 2000 Accounts receivable allowance $1,662 $ 310 $ - $ 330 $1,642 ==================================================================================================== YEAR ENDED JUNE 29, 2001 Accounts receivable allowance $1,642 $ 250 $ - $ 392 $1,500 ====================================================================================================
(1) To increase accounts receivable allowance. (2) Uncollectible accounts written off, net of recoveries. (3) Balances related to acquisitions. F-44 EX-13.2 14 y61170exv13w2.txt QUARTERLY REPORT ON FORM 10-Q - SEPT. 28, 2001 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 28, 2001 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from to Commission file number 333-28157 TEKNI-PLEX, INC. (Exact name of registrant as specified in its charter) Delaware 22-3286312 (State or other jurisdiction (IRS Employer Identification Number) of incorporation or organization) 260 North Denton Tap Road (972) 304-5077 Coppell, TX 75019 (Registrant's telephone number) (Address of principal executive office) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / TEKNI-PLEX, INC.
Page # PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets as of September 28, 2001 and June 29, 2001................................................ 3 Consolidated Statements of Operations for the three months ended September 28, 2001 and September 29, 2000.................. 4 Consolidated Statements of Comprehensive Income for the three months ended September 28, 2001 and September 29, 2000........... 4 Consolidated Statements of Cash Flows for the three months ended September 28, 2001 and September 29, 2000........................ 5 Notes to Consolidated Financial Statements......................... 6-16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................... 15-16 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK... 16 PART II. OTHER INFORMATION Item 1. Legal proceedings......................................... 17 Item 2. Changes in securities..................................... 17 Item 3. Defaults upon senior securities........................... 17 Item 4. Submission of matters to a vote of securities holders..... 17 Item 5. Subsequent events......................................... 17 Item 6. Exhibits and reports on Form 8-K.......................... 17
TEKNI-PLEX, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands)
SEPTEMBER 28, June 29, 2001 2001 (UNAUDITED) (Audited) ------------ --------- ASSETS CURRENT: Cash $ 24,468 $ 44,645 Accounts receivable, net of an allowance for doubtful accounts of $1,619 and $1,500 respectively 78,775 105,316 Inventories 113,273 106,258 Deferred taxes 5,153 5,153 Prepaid expenses and other current assets 7,312 5,595 --------- --------- Total current assets 228,981 266,967 PROPERTY, PLANT AND EQUIPMENT, NET 137,165 137,008 INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION OF $66,300 AND $62,271 RESPECTIVELY 176,019 179,616 DEFERRED FINANCING COSTS, NET OF ACCUMULATED AMORTIZATION OF $3,084 AND $2,549 RESPECTIVELY 16,095 16,607 DEFERRED INCOME TAXES 23,643 19,010 OTHER ASSETS 2,019 2,286 --------- --------- $ 583,922 $ 621,494 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 8,155 $ 8,072 Accounts payable - trade 26,548 34,076 Accrued payroll and benefits 5,792 5,222 Accrued interest 14,788 1,673 Accrued liabilities - other 10,400 15,446 Income taxes payable 3,349 3,349 --------- --------- TOTAL CURRENT LIABILITIES 69,032 67,838 LONG-TERM DEBT 632,483 670,078 OTHER LIABILITIES 25,916 18,275 --------- --------- TOTAL LIABILITIES 727,431 756,191 --------- --------- STOCKHOLDERS' EQUITY: Common stock -- -- Additional paid-in capital 120,176 120,176 Cumulative currency translation adjustment (6,338) (7,039) Retained earnings (36,825) (27,372) Less: Treasury stock (220,522) (220,462) --------- --------- TOTAL STOCKHOLDERS' EQUITY (143,509) (134,697) --------- --------- $ 583,922 $ 621,494 ========= =========
See accompanying notes to consolidated financial statements. 3 TEKNI-PLEX, INC. AND SUBSIDIARIES (in thousands) (Unaudited) CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended September 28, 2001 September 29, 2000 ------------------ ------------------ NET SALES $ 115,164 $ 111,907 COST OF GOODS SOLD 88,150 89,485 --------- --------- GROSS PROFIT 27,014 22,422 OPERATING EXPENSES: Selling, general and administrative 15,176 15,111 --------- --------- Operating profit 11,838 7,311 Other expenses Interest expense 17,785 18,220 Unrealized loss on derivative contracts 8,314 -- Other expense 292 530 --------- --------- Earnings before income taxes (14,553) (11,439) Income tax benefit (5,100) (5,700) --------- --------- NET EARNINGS $ (9,453) $ (5,739) ========= ========= CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME NET INCOME $ (9,453) $ (5,739) OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES Foreign currency translation adjustment 701 (1,403) --------- --------- COMPREHENSIVE INCOME (LOSS) $ (8,752) $ (7,142) ========= =========
See accompanying notes to consolidated financial statements. 4 TEKNI-PLEX, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited)
Three months ended September 28, 2001 September 29, 2000 ----------------- ------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (9,453) $ (5,739) Adjustment to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 9,303 9,141 Unrealized loss on derivative contracts 8,314 -- Deferred income taxes (4,623) (5,876) Changes in operating assets and liabilities: Accounts receivable 26,900 30,101 Inventories (6,968) (8,590) Prepaid expenses and other current assets (1,738) 2,051 Accounts payable (7,389) (3,656) Accrued interest 13,122 7,492 Accrued expenses and other liabilities (5,115) (16,446) -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 22,353 8,478 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (4,723) (4,434) Additions to intangibles (501) (111) Deposits and other assets 315 72 -------- -------- NET CASH USED IN INVESTING ACTIVITIES (4,909) (4,473) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments/borrowings of long-term debt (37,585) (4,088) Repayments/borrowings of line of credit -- (135) Payment for treasury stock (60) -- -------- -------- NET CASH USED IN FINANCING ACTIVITIES (37,645) (4,223) -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 24 (11) -------- -------- Net decrease in Cash (20,177) (229) Cash, beginning of period 44,645 12,525 -------- -------- Cash, end of period $ 24,468 $ 12,296 ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for: Interest $ 4,785 $ 10,143 -------- -------- Income taxes -- 39 -------- --------
See accompanying notes to consolidated financial statements. 5 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 1 - GENERAL Tekni-Plex is a global, diversified manufacturer of packaging, products, and materials primarily for the healthcare, food and consumer industries. The Company has built a leadership position in its core markets, and focuses on vertically integrated production of highly specialized products. The Company's operations are aligned under two business groups: Industrial Packaging, Products, and Materials and Consumer Packaging and Products. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. For further information please refer to the audited financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended June 29, 2001. NOTE 2 New Accounting Pronouncements a) In June 2001, the Financial Accounting Standards Board finalized FASB Statements No. 141, Business Combinations (SFAS 141), and No. 142, Goodwill and Other Intangible Assets (SFAS 142). SFAS 141 requires the use of the purchase method of accounting and prohibits the use of the pooling-of-interests method of accounting for business combinations initiated after June 30, 2001. SFAS 141 also requires that the Company recognize acquired intangible assets apart from goodwill if the acquired intangible assets meet certain criteria. SFAS 141 applies to all business combinations initiated after June 30, 2001 and for purchase business combinations completed on or after July 1, 2001. It also requires, upon adoption of SFAS 142, that the Company reclassify the carrying amounts of intangible assets and goodwill based on the criteria in SFAS 141. SFAS 142 requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually. In addition, SFAS 142 requires that the Company identify reporting units for the purposes of assessing potential future impairments of goodwill, reassess the useful lives of other existing recognized intangible assets, and cease amortization of intangible assets with an indefinite useful life. An intangible asset with an indefinite useful life should be tested for impairment in accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in fiscal years beginning after December 15, 2001 to all goodwill and other intangible assets recognized at that date, regardless of when those assets were initially recognized. SFAS 142 requires the Company to complete a transitional goodwill impairment test six months from the date of adoption. The Company is also required to reassess the useful lives of other intangible assets within the first interim quarter after adoption of SFAS 142. The Company's previous business combinations were accounted for using the purchase method. As of September 28, 2001, the net carrying amount of goodwill is $175,462 and other intangible assets are $557. Amortization expense during the period ended September 28, 2001 was $4,029. Currently, the Company is assessing but has not yet determined how the adoption of SFAS 141 and SFAS 142 will impact its financial position and results of operations. b) In August 2001, the FASB issued FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS 144"). The new guidance resolves significant implementation issues related to FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of ("SFAS 121"). SFAS 144 supersedes SFAS 121, but it retains its fundamental provisions. It also amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to eliminate the exception to consolidate a subsidiary for which control is likely to be temporary. SFAS 144 retains the requirement of SFAS 121 to recognize an impairment loss only if the carrying amount of a long-lived asset within the scope of SFAS 144 is not recoverable from its undiscounted cash flows and exceeds its fair value. SFAS 144 is effective for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years, with early application encouraged. The provisions of SFAS 144 generally are to be applied prospectively. The Company believes that the adoption of SFAS 144 will not have a material impact on the Company's financial position or results of operations. NOTE 3 - INVENTORIES Inventories as of September 28, 2001 and June 29, 2001 are summarized as follows:
SEPTEMBER 28,2001 June 29, 2001 ----------------- ------------- Raw materials $ 34,969 $ 33,971 Work-in-process 8,002 7,812 Finished goods 70,302 64,475 --------- --------- $ 113,273 $ 106,258 --------- ---------
6 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 4 - LONG-TERM DEBT Long-term debt consists of the following:
SEPTEMBER 28, 2001 June 29, 2001 ------------------ ------------- Senior Subordinated Notes issued June 21,2000 at 12 - -3/4% due June 15, 2010. (less unamortized discount $271,703 $271,609 of $ 3,297 and $3,391) Senior Debt: Revolving line of credit, expiring June, 2006 At September 28, 2001, the interest rate ranged 29,000 65,000 from 5.6875% to 6.625% Term notes due June, 2006 and June, 2008, with interest rates at September 28, 2001 of 6.75% 334,700 336,560 and 7.25% Other, primarily foreign term loans, with interest rates ranging from 4.25% to 8.38% and maturities 5,235 4,981 from 2001 to 2004 -------- -------- 640,638 678,150 Less: Current maturities 8,155 8,072 -------- -------- $632,483 $670,078 ======== ========
TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 5 - CONTINGENCIES (a) The Company is a party to various legal proceedings arising in the normal conduct of business. Management believes that the final outcome of these proceedings will not have a material adverse effect on the Company's financial position. 7 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 6 - SEGMENT INFORMATION Anticipating the closing of our previously announced acquisition of the garden hose business of Mark IV Industries, Inc., Tekni-plex has reorganized its business into two industry segments: Industrial Packaging, Products, and Materials and Consumer Packaging and Products. The Industrial Packaging, Products, and Materials Segment principally produces pharmaceutical packaging, medical tubing, medical device materials, foamed polystyrene packaging products for the poultry, meat and egg industries and vinyl resins and compounds. The Consumer Packaging and Products Segment principally produces precision tubing and gaskets, and garden and irrigation hose products. Both segments have operations in the United States, Europe and Canada. Financial information concerning the Company's business segments and the geographic areas in which they operate are as follows:
Industrial Packaging, CONSUMER Products, PACKAGING and Materials AND PRODUCTS TOTAL ------------- ------------- -------- September 28, 2001 Revenues from external customers $ 76,450 $ 38,714 $115,164 Interest expense 12,074 5,711 17,785 Depreciation and amortization 5,926 3,121 9,047 Segment income (loss) from operations 8,551 7,016 15,567 Expenditures for segment assets 1,586 2,967 4,553 Segment assets 305,473 249,613 555,086 -------- -------- -------- September 29, 2000 Revenues from external customers $ 78,718 $ 33,189 $111,907 Interest expense 12,281 5,939 18,220 Depreciation and amortization 6,006 2,880 8,886 Segment income from operations 6,959 3,837 10,796 Expenditures for segment assets 3,283 1,129 4,412 -------- -------- -------- June 29, 2001 Segment assets 333,570 270,731 604,301 -------- -------- --------
8 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands)
SEPTEMBER 28, 2001 September 29, 2000 ------------------ ------------------ PROFIT OR LOSS Total operating profit for reportable segments before income taxes $ 15,567 $ 10,796 Corporate and eliminations (3,729) (3,485) --------- --------- $ 11,838 $ 7,311 ========= ========= DEPRECIATION AND AMORTIZATION Segment totals $ 9,047 $ 8,886 Corporate 256 255 --------- --------- Consolidated total $ 9,303 $ 9,141 ========= ========= EXPENDITURES FOR SEGMENT ASSETS Total expenditures from reportable segments $ 4,553 $ 4,412 Other unallocated expenditures 170 22 --------- --------- Consolidated total $ 4,723 $ 4,434 ========= ========= SEPTEMBER 28, 2001 June 29, 2001 ------------------ --------------- ASSETS Total assets from reportable segments $ 555,086 $ 604,301 Other unallocated amounts 28,836 17,193 --------- --------- Consolidated total $ 583,922 $ 621,494 ========= ========= GEOGRAPHIC INFORMATION SEPTEMBER 28, 2001 September 29, 2000 ------------------ ------------------ REVENUES United States $ 102,032 $ 100,844 International 13,132 11,063 --------- --------- Total $ 115,164 $ 111,907 ========= ========= SEPTEMBER 28, 2001 June 29, 2001 ------------------ --------------- LONG-LIVED ASSETS United States $ 311,027 $ 310,866 International 43,914 43,661 --------- --------- Total $ 354,941 $ 354,527 ========= =========
9 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 7 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Consolidated Statement of Earnings (in thousands) (Unaudited) For the three months ended September 28, 2001
Non- TOTAL Issuer Guarantors Guarantors --------- --------- ---------- ---------- Net sales $ 115,164 $ 39,430 $ 62,602 $ 13,132 Cost of goods sold 88,150 29,901 48,143 10,106 --------- --------- ---------- ---------- Gross profit 27,014 9,529 14,459 3,026 Operating expenses: Selling, General and administrative 15,176 10,067 3,657 1,452 --------- --------- ---------- ---------- Operating profit (loss) 11,838 (538) 10,802 1,574 Interest expense, net 17,785 17,795 (46) 36 Unrealized loss on derivative contracts 8,314 8,314 -- -- Other expense (income) 292 53 (139) 378 --------- --------- ---------- ---------- Income (loss) before provision for income taxes (14,553) (26,700) 10,987 1,160 Provision (benefit) for income taxes (5,100) (8,644) 2,800 744 --------- --------- ---------- ---------- Net income (loss) $ (9,453) $ (18,056) $ 8,187 $ 416 ========= ========= ========== ==========
10 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) (unaudited) For the three months ended September 29, 2000
Non- TOTAL Issuer Guarantors Guarantors --------- -------- ---------- ---------- Net sales $ 111,907 $ 38,482 $ 62,362 $ 11,063 Cost of sales 89,485 29,026 52,557 7,902 --------- -------- -------- -------- Gross profit 22,422 9,456 9,805 3,161 Operating expenses: Selling, General and administrative 15,111 9,461 4,544 1,106 --------- -------- -------- -------- Operating profit (loss) 7,311 (5) 5,261 2,055 Interest expense, net 18,220 18,548 (107) (221) Other expense (income) 530 74 (63) 519 --------- -------- -------- -------- Income (loss) before provision for income taxes (11,439) (18,627) 5,431 1,757 Provision (benefit) for income taxes (5,700) (9,125) 2,700 725 --------- -------- -------- -------- Net income(loss) $ (5,739) $ (9,502) $ 2,731 $ 1,032 ========= ======== ======== ========
11 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) Condensed Consolidated Balance Sheet - at September 28, 2001 (Unaudited)
Non- TOTAL Eliminations Issuer Guarantors Guarantors --------- ------------ --------- ---------- ---------- Current assets $ 228,981 $ -- $ 51,611 $ 138,496 $ 38,874 Property, plant and equipment, net 137,165 -- 38,700 79,295 19,170 Intangible assets 176,019 -- 18,975 144,446 12,598 Investment in subsidiaries -- (466,244) 466,244 -- -- Deferred charges 16,095 -- 16,024 -- 71 Other assets 25,662 (302,113) 42,039 273,661 12,075 --------- --------- --------- --------- -------- Total assets $ 583,922 $(768,357) $ 633,593 $ 635,898 $ 82,788 ========= ========= ========= ========= ======== Current liabilities $ 69,032 $ -- $ 33,881 $ 16,556 $ 18,595 Long-term debt 632,483 -- 627,963 -- 4,520 Other long-term liabilities 25,916 (302,113) 107,673 186,686 33,670 --------- --------- --------- --------- -------- Total liabilities 727,431 (302,113) 769,517 203,242 56,785 --------- --------- --------- --------- -------- Additional paid-in capital 120,176 (312,420) 120,156 296,784 15,656 Retained earnings (deficit) (36,825) (153,824) (35,558) 135,872 16,685 Cumulative currency translation adjustment (6,338) -- -- -- (6,338) Less: Treasury stock (220,522) -- (220,522) -- -- --------- --------- --------- --------- -------- Total equity (143,509) (466,244) (135,924) 432,656 26,003 --------- --------- --------- --------- -------- Total liabilities and equity $ 583,922 $(768,357) $ 633,593 $ 635,898 $ 82,788 ========= ========= ========= ========= ========
12 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTE TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) Condensed Consolidated Balance Sheet - at June 29, 2001
Non- TOTAL Eliminations Issuer Guarantors Guarantors --------- ------------ --------- ---------- ---------- Current assets $ 266,967 $ -- $ 80,305 $ 146,839 $ 39,823 Property, plant and equipment, net 137,008 -- 38,788 79,517 18,703 Intangible assets 179,616 -- 13,208 153,960 12,448 Investment in subsidiaries -- (457,641) 457,641 -- -- Deferred financing costs, net 16,607 -- 16,607 -- -- Deferred taxes 19,010 -- 19,022 (12) -- Other assets 2,286 (300,321) 28,577 261,520 12,510 --------- --------- --------- --------- -------- Total assets $ 621,494 $(757,962) $ 654,148 $ 641,824 $ 83,484 ========= ========= ========= ========= ======== Current liabilities $ 67,838 $ -- $ 22,370 $ 26,923 $ 18,545 Long-term debt 670,078 -- 665,729 -- 4,349 Other long-term liabilities 18,275 (300,321) 92,460 190,399 35,737 --------- --------- --------- --------- -------- Total liabilities 756,191 (300,321) 780,559 217,322 58,631 --------- --------- --------- --------- -------- Additional paid-in capital 120,176 (312,420) 120,156 296,784 15,656 Retained earnings (deficit) (27,372) (145,221) (26,105) 127,685 16,269 Cumulative currency translation adjustment (7,039) -- -- 33 (7,072) Less: Treasury stock (220,462) -- (220,462) -- -- --------- --------- --------- --------- -------- Total equity (134,697) (457,641) (126,411) 424,502 24,853 --------- --------- --------- --------- -------- Total liabilities and equity $ 621,494 $(757,962) $ 654,148 $ 641,824 $ 83,484 ========= ========= ========= ========= ========
13 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Condensed Consolidated Cash Flows (Unaudited) For the three months ended September 28,2001
Non- TOTAL Issuer Guarantors Guarantors -------- -------- ---------- ---------- Net cash provided by (used in) operating activities $ 22,353 $ (213) $ 19,541 $ 3,025 -------- -------- -------- -------- Cash flows from Investing activities: Capital expenditures (4,723) (1,647) (1,658) (1,418) Additions to intangibles (501) (140) -- (361) Deposits and other assets 315 (1,909) 2,751 (527) -------- -------- -------- -------- Net cash provided by (used in) provided by investing activities (4,909) (3,696) 1,093 (2,306) -------- -------- -------- -------- Cash flows from financing activities Repayment of long term debt (37,585) (37,860) -- 275 Payment for treasury stock (60) (60) -- -- Change in intercompany accounts -- 20,117 (20,117) -- -------- -------- -------- -------- Net cash flows provided by (used in) financing activities (37,645) (17,803) (20,117) 275 -------- -------- -------- -------- Effect of exchange rate changes on cash 24 -- -- 24 -------- -------- -------- -------- Net increase (decrease) in cash (20,177) (21,712) 517 1,018 Cash, beginning of period 44,645 32,890 5,321 6,434 -------- -------- -------- -------- Cash, end of period $ 24,468 $ 11,178 $ 5,838 $ 7,452 ======== ======== ======== ========
For the three months ended September 29, 2000
Non- TOTAL Issuer Guarantors Guarantors -------- -------- ---------- ---------- Net cash provided by (used in) operating activities $ 8,478 $(14,869) $ 19,982 $ 3,365 Cash flows from Investing activities: -------- -------- -------- --------- Capital expenditures (4,434) (1,237) (2,632) (565) Additions to intangibles (111) (111) -- -- Deposits and other assets 72 1,264 (1,201) 9 -------- -------- -------- -------- Net cash used in investing activities (4,473) (84) (3,833) (556) -------- -------- -------- -------- Cash flows from financing activities Repayment of long term debt (4,088) (3,705) -- (383) Repayment of line of credit (135) -- -- (135) Change in intercompany accounts -- 15,140 (15,140) -- -------- -------- -------- -------- Net cash flows provided by (used in) financing activities (4,223) 11,435 (15,140) (518) -------- -------- -------- -------- Effect of exchange rate changes on cash (11) -- -- (11) -------- -------- -------- -------- Net increase (decrease) in cash (229) (3,518) 1,009 2,280 Cash, beginning of period 12,525 5,638 3,766 3,121 -------- -------- -------- -------- Cash, end of period $ 12,296 $ 2,120 $ 4,775 $ 5,401 ======== ======== ======== ========
14 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FIRST QUARTER OF FISCAL 2002 COMPARED WITH THE FIRST QUARTER OF FISCAL 2001 Net Sales increased to $115.2 million for the three months ended September 28, 2001 from $111.9 million for the three months ended September 29, 2000. This represents an increase of $3.3 million or 2.9%. Increases in the Consumer Segment more than offset declines in our Industrial Segment. Our Consumer Segment sales increased $5.5 million or 16.6% primarily due to the extension of our garden hose selling season resulting from a change in the buying pattern of one of this segment's major customers. Favorable weather conditions, particularly on the West Coast, also contributed to strong garden hose sales in the quarter. Our Industrial Segment reported a $2.3 million decline in sales or 2.9%. Within the segment, sales increases to our food packaging customers were offset by declining sales of specialty resins and somewhat softer sales to our healthcare customers. Cost of Sales declined to $88.2 million for the three months ended September 28, 2001 from $89.5 million for the three months ended September 29, 2000, a decrease of $1.3 million. Expressed as a percentage of net sales, cost of sales decreased to 76.5% for the three months ended September 28, 2001 from 80.0% for the three months ended September 29, 2000. Lower resin costs, improved operating efficiencies and higher selling prices for many of our products accounted for the improvement in this ratio. Gross Profit, as a result, increased to $27.0 million or 23.5% of net sales for the three months ended September 28, 2001 from $22.4 million or 20.0% of net sales for the three months ended September 29, 2000. Selling, general and administrative expense was virtually unchanged at $15.2 million in the three months ended September 28, 2001 compared to $15.1 million in the three months ended September 29, 2000. The ratio of selling, general and administrative expense to net sales decreased to 13.2% for the three months ending September 28, 2001 from 13.5% in the comparable period of last year. Operating profit, as a result of the foregoing, increased to $11.8 million or 10.3% of net sales for the three months ended September 28, 2001 from $7.3 million or 6.5% of net sales for the three months ended September 29, 2000. Interest expense decreased to $17.8 million or 15.4% of net sales in the three months ended September 28, 2001 from $18.2 million or 16.3% of net sales in the three months ended September 29, 2000. The decrease was due to lower debt levels and lower interest rates. Income (loss) before income taxes, as a result, was a loss of ($14.6) million for the three months ended September 28, 2001 compared to a loss of ($11.4) million for the three months ended September 29, 2000. Benefit for income taxes was a credit of $5.1 million for the three months ended September 28, 2001, compared to a credit of $5.7 million for the three months ended September 29, 2000. The Company's effective tax rate was 35.0% for the three months ended September 28, 2001 compared to 49.8% for the three months ending September 29, 2000. Net income (loss), as a result, was a loss of ($9.5) million for the three months ended September 28, 2001 compared with a loss of ($5.7) million for the three months ended September 29, 2000. 15 LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operations for the three months ended September 28, 2001 was $22.4 million compared with $8.5 million in the same period of the prior year. The increase of $13.9 million was due primarily to non-cash interest expense associated with our interest rate hedges in the current period as well as improvements in accrued expenses and other liabilities and prepaid expenses and other current assets. Working capital on September 28, 2001 was $159.9 million compared to $199.1 million on June 29, 2001. The decrease was due primarily to a seasonal reduction in accounts receivable offset by a normal seasonal increase in inventories. As of September 28, 2001, the Company had an outstanding balance of $29.0 million under the $100.0 million revolving credit line. This represents a reduction of $36.0 million from the outstanding balance as of June 29, 2001. The Company's capital expenditures for the three months ended September 28, 2001 and September 29, 2000 were $4.7 million and $4.4 million respectively. The Company continues to expect that its principal uses of cash for the next several years will be acquisitions, debt service, capital expenditures and working capital requirements. Management believes that cash generated from operations plus funds available in the Company's credit facility will be sufficient to meet its needs and to provide it with the flexibility to make capital expenditures and acquisitions which management believes will provide an attractive return on investment. However, the probability exists that the Company may need additional financing to take advantage of all the acquisition opportunities that might arise in the next several quarters. There can be no assurance that such financing will be available in the amounts and terms acceptable to the Company. ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is subject to market risk inherent in certain debt instruments. At September 28, 2001, the principal amount of the Company's aggregate outstanding variable rate indebtedness was $363.7 million. A hypothetical 10% adverse change in interest rates would have an annualized unfavorable impact of approximately $1.7 million on the Company's after-tax earnings and cash flows, assuming the Company's current effective tax rate and assuming no change in the principal amount. Conversely, a reduction in interest rates would favorably impact the Company's after-tax earnings and cash flows in a similar proportion. 16 PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company is party to certain litigation in the ordinary course of business, none of which the Company believes is likely to have a material adverse effect on its consolidated financial position or results of operations. Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Securities holders Not applicable Item 5. Subsequent Events On October 16, 2001, the Company acquired the garden hose business of Mark IV Industries, Inc. for $64.2 million. The transaction was structured as an acquisition of substantially all of the assets of Mark IV's Swan Hose Division by a wholly-owned subsidiary of Tekni-Plex. Swan Hose manufactures garden hose and air hose primarily for the U.S. and Canadian markets from its Bucyrus Ohio facility. Swan will become part of the Company's Consumer Packaging and Products business segment. Item 6. Exhibits and Reports on Form 8-K (a) Reports on Form 8-K None 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TEKNI-PLEX, INC. November 13, 2001 By: /s/ F. Patrick Smith ------------------------------------------- F. Patrick Smith Chairman of the Board and Chief Executive Officer By: /s/ Kenneth W.R. Baker ------------------------------------------- Kenneth W. R. Baker President and Chief Operating Officer By: /s/ James E.Condon ------------------------------------------- James E.Condon Vice President and Chief Financial Officer 18 EX-13.3 15 y61170exv13w3.txt QUARTERLY REPORT ON FORM 10-Q - DEC.28, 2001 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 28, 2001 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from to ---------------- ---------------- Commission file number 333-28157 TEKNI-PLEX, INC. (Exact name of registrant as specified in its charter) Delaware 22-3286312 (State or other jurisdiction (IRS Employer Identification Number) of incorporation or organization) 260 N. Denton Tap Road, Suite 150 (972) 304-5077 Coppell, TX 75019 (Registrant's telephone number) (Address of principal executive office) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / TEKNI-PLEX, INC.
Page # PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets as of December 28, 2001 and June 29, 2001....................................................................3 Consolidated Statements of Operations for the six months and three months ended December 28, 2001 and December 29, 2000.........................................4 Consolidated Statements of Comprehensive Income for the six months and three months ended December 28, 2001 and December 29, 2000............................4 Consolidated Statements of Cash Flows for the six months ended December 28, 2001 and December 29, 2000.........................................5 Notes to Consolidated Financial Statements...............................................6-15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................................................16-18 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...........................18 PART II. OTHER INFORMATION Item 1. Legal proceedings.................................................................19 Item 2. Changes in securities.............................................................19 Item 3. Defaults upon senior securities...................................................19 Item 4. Submission of matters to a vote of securities holders.............................19 Item 5. Other information.................................................................19 Item 6. Exhibits and reports on Form 8-K..................................................19
TEKNI-PLEX, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands)
DECEMBER 28, 2001 JUNE 29, 2001 (UNAUDITED) (AUDITED) ----------------- --------------- ASSETS CURRENT: Cash $ 15,822 $ 44,645 Accounts receivable, net of allowance for Doubtful accounts of $5,156 and $1,500 respectfully 84,051 105,316 Inventories 139,570 106,258 Deferred taxes 6,553 5,153 Prepaid and other current assets 7,470 5,595 ---------- --------- TOTAL CURRENT ASSETS 253,566 266,967 PROPERTY, PLANT AND EQUIPMENT, NET 153,961 137,008 INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION OF $70,329 AND $62,271 RESPECTIVELY 216,879 179,616 DEFERRED CHARGES, NET OF ACCUMULATED AMORTIZATION OF $3,790 AND $2,549 RESPECTIVELY 15,588 16,607 DEFERRED INCOME TAXES 22,101 19,010 OTHER ASSETS 1,392 2,286 ---------- --------- $ 663,487 $ 621,494 ========= ========= LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 10,507 $ 8,072 Accounts payable - trade 28,070 34,076 Accrued payroll and benefits 4,969 5,222 Accrued interest 4,950 1,673 Accrued liabilities - other 28,771 15,446 Income taxes payable 980 3,349 ---------- --------- TOTAL CURRENT LIABILITIES 78,247 67,838 LONG-TERM DEBT 659,097 670,078 OTHER LIABILITIES 20,578 18,275 ---------- --------- TOTAL LIABILITIES 757,922 756,191 ---------- --------- STOCKHOLDER'S EQUITY: Common stock -- -- Additional paid-in capital 170,176 120,176 Cumulative currency translation adjustment (7,331) (7,039) Retained earnings (36,758) (27,372) Less: Treasury stock (220,522) (220,462) ---------- --------- TOTAL STOCKHOLDER'S EQUITY (94,435) (134,697) ---------- --------- $ 663,487 $ 621,494 ========= =========
See accompanying notes to consolidated financial statements. 3 TEKNI-PLEX, INC. AND SUBSIDIARIES (Unaudited -- in thousands) CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SIX MONTHS ENDED DECEMBER 28, DECEMBER 29, DECEMBER 28, DECEMBER 29, 2001 2000 2001 2000 ------------ ----------- ----------- ------------ NET SALES $ 113,740 $ 105,873 $ 228,904 $ 217,780 COST OF SALES 86,056 81,750 174,206 171,235 --------- --------- --------- --------- GROSS PROFIT 27,684 24,123 54,698 46,545 OPERATING EXPENSES: Selling, general and administrative 16,609 14,368 31,785 29,479 --------- --------- --------- --------- OPERATING PROFIT 11,075 9,755 22,913 17,066 OTHER (INCOME) EXPENSES: Interest expense 16,590 19,642 34,375 37,862 Unrealized (gain) loss on derivative contracts (5,724) -- 2,590 -- Other expenses (income) 42 (80) 334 450 --------- --------- --------- --------- EARNINGS BEFORE INCOME TAXES 167 (9,807) (14,386) (21,246) PROVISION FOR INCOME TAXES 100 (4,900) (5,000) (10,600) --------- --------- --------- --------- NET INCOME (LOSS) $ 67 $ (4,907) $ (9,386) $ (10,646) ========= ========= ========= =========
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME NET INCOME (LOSS) $ 67 $ (4,907) $ (9,386) $ (10,646) OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES Foreign currency translation adjustment (993) 843 (292) (560) --------- --------- --------- --------- COMPREHENSIVE INCOME (LOSS) $ (926) $ (4,064) $ (9,678) $ (11,206) ========= ========= ========= =========
4 See accompanying notes to consolidated financial statements. TEKNI-PLEX, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited -- in thousands)
SIX MONTHS ENDED DECEMBER 28, 2001 DECEMBER 29, 2000 ----------------- ----------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (9,386) $(10,646) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 19,054 18,470 Unrealized loss on derivative contracts 2,590 -- Deferred income taxes (4,591) (10,650) Changes in operating assets and liabilities: Accounts receivable 28,449 28,896 Inventories 16,021) (31,405) Prepaid expenses and other current assets (1,749) 1,013 Income taxes (2,369) -- Accounts payable (9,552) (3,485) Accrued interest 3,277 (43) Accrued expenses and other liabilities (5,386) (18,313) -------- -------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 4,316 (26,163) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (9,142) (8,679) Acquisition costs (65,757) (9,189) Additions to intangibles (222) (95) Deposits and other assets 894 86 -------- -------- NET CASH USED IN INVESTING ACTIVITIES (74,227) (17,877) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings (repayments) of long-term debt (8,813) 35,709 Net borrowings (repayments) under line of credit -- (140) Payment for treasury stock (60) -- Receipt of Additional paid-in capital 50,000 6,000 Debt financing costs -- (131) -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 41,127 41,438 -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (39) 15 -------- -------- NET DECREASE IN CASH (28,823) (2,587) CASH, BEGINNING OF PERIOD 44,645 12,525 -------- -------- CASH, END OF PERIOD $ 15,822 $ 9,938 ======== ========= SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for: Interest $ 31,207 $ 37,551 Income taxes 1,543 932
See accompanying notes to consolidated financial statements. 5 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 1 - GENERAL Tekni-Plex is a global, diversified manufacturer of packaging, products, and materials primarily for the healthcare, food and consumer industries. The Company has built a leadership position in its core markets, and focuses on vertically integrated production of highly specialized products. The Company's operations are aligned under two business groups: Industrial Packaging, Products, and Materials and Consumer Packaging and Products. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. For further information please refer to the audited financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended June 29, 2001. NOTE 2 - NEW ACCOUNTING PRONOUNCEMENTS a) In June 2001, the Financial Accounting Standards Board finalized FASB Statements No. 141, Business Combinations (SFAS 141) and No. 142, Goodwill and Other Intangible Assets (SFAS 142). SFAS 141, requires the use of the purchase method of accounting and prohibits the use of the pooling-of-interests method of accounting for business combinations initiated after June 30, 2001. SFAS 141 requires that the Company recognize acquired intangible assets apart from goodwill if the acquired intangible assets meet certain criteria. SFAS 141 applies to all business combinations initiated after June 30, 2001 and for purchase business combinations completed on or after July 1, 2001. It also requires, upon adoption of SFAS 142, that the company reclassify the carrying amounts of intangible assets and goodwill based on the criteria in SFAS 141. SFAS 142 requires, among other things, that the companies no longer amortize goodwill, but instead test goodwill for impairment at least annually. In addition, SFAS 142 requires that the Company identify reporting units for the purposes of assessing potential future impairments of goodwill, reassess the useful lives of other existing recognized intangible assets, and cease amortization of intangible assets with an indefinite useful life. An intangible asset with an indefinite useful life should be tested for impairment in accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in fiscal years beginning after December 15, 2001 to all goodwill and other intangible assets recognized at that date, regardless of when those assets were initially recognized. SFAS 142 requires the Company to complete a transitional goodwill impairment test six months from the date of adoption. The Company is also required to reassess the useful lives of other intangible assets within the first interim quarter after adoption of SFAS 142. The Company's previous business combinations were accounted for using the purchasing method. As of December 28, 2001, the net carrying amount of goodwill is $216,404 and other intangible assets are $475. Amortization expense during the six month period ended December 28, 2001 was $8,058. Currently, the company is assessing but has not yet determined how the adoption of SFAS 141 and SFAS 142 will impact its financial position and results of operations. 6 b) In August 2001, the FASB issued FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS 144"). The new guidance resolves significant implementation issues related to FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of ("SFAS 121"). SFAS 144 supersedes SFAS 121, but it retains its fundamental provisions. It also amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to eliminate the exception to consolidate a subsidiary for which control is likely to be temporary. SFAS 144 retains the requirement of SFAS 121 to recognize an impairment loss only if the carrying amount of a long-lived asset within the scope of SFAS 144 is not recoverable from its undiscounted cash flows and exceeds its fair value. SFAS 144 is effective for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years, with early application encouraged. The provisions of SFAS 144 generally are to be applied prospectively. The company believes that the adoption of SFAS 144 will not have a material impact on the Company's financial position or results of operations. NOTE 3 - INVENTORIES Inventories as of December 28, 2001 and June 29, 2001 are summarized as follows:
DECEMBER 28, 2001 JUNE 29, 2001 ---------------- -------------- Raw materials $ 38,388 $ 33,971 Work-in-process 8,123 7,812 Finished goods 93,059 64,475 ---------------- -------------- $ 139,570 $ 106,258 ---------------- --------------
7 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 4 - LONG-TERM DEBT Long-term debt consists of the following:
DECEMBER 28, 2001 JUNE 29, 2001 ----------------- -------------- Senior Subordinated Notes issued June 21, 2000 at 12-3/4% due June 15, 2010. (Less unamortized discount of $3,202 and $3,391) $ 271,798 $ 271,609 Senior Debt: Revolving line of credit, expiring June, 2006. At December 28, 2001, the interest rate ranged from 4.94 % to 6.75%. 60,000 65,000 Term notes due June, 2006 and June, 2008, with interest rates at December 28, 2001 of 4.81% and 5.31%. 332,840 336,560 Other, primarily foreign term loans, with interest rates ranging from 4.44% to 5.44% and maturities ranging from 2002 to 2010 4,966 4,981 ----------------- -------------- 669,604 678,150 Less: Current maturities 10,507 8,072 ----------------- -------------- $ 659,097 $ 670,078 ================= ==============
8 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 5 - SEGMENT INFORMATION Tekni-plex has organized its business into two industry segments: Industrial Packaging, Products, and Materials and Consumer Packaging and Products. The Industrial Packaging, Products, and Materials segment principally produces pharmaceutical packaging, medical tubing, medical device materials, foamed polystyrene packaging products for the poultry, meat and egg industries and vinyl resins and compounds. The Consumer Packaging and Products Segment principally produces precision tubing and gaskets, and garden and irrigation hose products. Both segments have operations in the United States, Europe and Canada. Financial information concerning the Company's business segments and the geographic areas in which they operate are as follows:
INDUSTRIAL PACKAGING, CONSUMER PRODUCTS, PACKAGING AND MATERIALS AND PRODUCTS TOTAL ------------- ------------ ---------- Three months ended December 28, 2001 Revenues from external Customers $ 77,283 $ 36,457 $113,740 Interest expense 11,321 5,269 16,590 Depreciation and Amortization 6,142 3,353 9,495 Income from operations 11,372 3,550 14,922 Expenditures for segment Assets 2,942 1,049 3,991 -------------- ------------- ---------- Three months ended December 29, 2000 Revenues from external Customers $ 81,008 $ 24,865 $105,873 Interest expense 13,430 6,212 19,642 Depreciation and Amortization 6,054 3,018 9,072 Income from operations 10,050 3,276 13,326 Expenditures for segment Assets 1,158 2,705 3,863
9 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands)
INDUSTRIAL PACKAGING, CONSUMER PRODUCTS, PACKAGING AND MATERIALS AND PRODUCTS TOTAL -------------- ------------- ---------- Six months ended December 28, 2001 Revenues from external Customers $153,733 $ 75,171 $228,904 Interest expense 23,441 10,934 34,375 Depreciation and Amortization 12,068 6,474 18,542 Income from operations 19,923 10,566 30,489 Expenditures for segment Assets 4,528 4,323 8,851 -------------- ------------- ---------- Six months ended December 29, 2000 Revenues from external Customers $160,051 $ 57,729 $217,780 Interest expense 25,711 12,151 37,862 Depreciation and Amortization 12,060 5,898 17,958 Income from operations 17,009 7,113 24,122 Expenditures for segment Assets 4,441 3,834 8,275 -------------- ------------- ----------
THREE MONTHS ENDED SIX MONTHS ENDED DECEMBER 28, DECEMBER 29, DECEMBER 28, DECEMBER 29, 2001 2000 2001 2000 ------------ ----------- ------------ ----------- PROFIT OR LOSS Total operating profit for reportable segments before income taxes $ 14,922 $ 13,326 $ 30,489 $ 24,122 Corporate and eliminations (3,847) (3,571) (7,576) (7,056) ------------ ----------- ------------ ----------- $ 11,075 $ 9,755 $ 22,913 $ 17,066 ============ =========== ============ =========== DEPRECIATION AND AMORTIZATION Segment totals $ 9,495 $ 9,072 $ 18,542 $ 17,958 Corporate 256 257 512 512 ------------ ----------- ------------ ----------- Consolidated total $ 9,751 $ 9,329 $ 19,054 $ 18,470 ============ =========== ============ =========== EXPENDITURES FOR SEGMENT ASSETS Total reportable-segment expenditures $ 3,991 $ 3,863 $ 8,851 $ 8,275 Other unallocated expenditures 121 382 291 404 ------------ ----------- ------------ ----------- Consolidated total $ 4,112 $ 4,245 $ 9,142 $ 8,679 ============ =========== ============ ===========
10 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) SEGMENT ASSETS
INDUSTRIAL PACKAGING, CONSUMER PRODUCTS, PACKAGING AND MATERIALS AND PRODUCTS TOTAL --------------- ------------- ---------- December 28, 2001 288,344 347,807 636,151 June 29, 2001 333,570 270,731 604,301 -------------- ------------- ----------
DECEMBER 28, 2001 JUNE 29, 2001 ----------------- ------------- TOTAL ASSETS Total assets from reportable segments $636,151 $604,301 Other unallocated amounts 27,336 17,193 -------- -------- Consolidated total $663,487 $621,494 ======== ========
GEOGRAPHIC INFORMATION
THREE MONTHS ENDED SIX MONTHS ENDED DECEMBER 28, DECEMBER 29, DECEMBER 28, DECEMBER 29, 2001 2000 2001 2000 ----------- ------------ ------------ ------------ REVENUES United States $101,649 $ 93,906 $203,681 $194,750 International 12,091 11,967 25,223 23,030 ----------- ------------ ------------ ------------ Total $113,740 $105,873 $228,904 $217,780 =========== ============ ============ ============
DECEMBER 28, 2001 JUNE 29, 2001 ----------------- -------------- LONG-LIVED ASSETS United States $367,513 $310,866 International 43,908 43,661 -------- -------- Total $411,421 $354,527 ======== ========
11 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 6 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Consolidated Statement of Earnings (Unaudited) For the three months ended December 28,2001
NON- TOTAL ISSUER GUARANTORS GUARANTORS --------- --------- ---------- ---------- Net sales $ 113,740 $ 41,876 $ 59,773 $ 12,091 Cost of sales 86,056 30,186 46,854 9,016 --------- --------- --------- --------- Gross profit 27,684 11,690 12,919 3,075 Operating expenses: Selling, General and administrative 16,609 8,816 6,220 1,573 --------- --------- --------- --------- Income from operations 11,075 2,874 6,699 1,502 Other expense (income) 42 (543) (125) 710 Unrealized gain on derivative contracts (5,724) (5,724) -- -- Interest expense 16,590 16,559 (30) 61 --------- --------- --------- --------- Earnings before income taxes 167 (7,418) 6,854 731 Provision for income taxes 100 (3,266) 3,450 (84) --------- --------- --------- --------- Net income $ 67 $ (4,152) $ 3,404 $ 815 ========= ========= ========= =========
For the six months ended December 28, 2001
NON- TOTAL ISSUER GUARANTORS GUARANTORS --------- ----------- ----------- ----------- Net sales $ 228,904 $ 81,306 $ 122,375 $ 25,223 Cost of sales 174,206 60,087 94,997 19,122 --------- --------- --------- --------- Gross profit 54,698 21,219 27,378 6,101 Operating expenses: Selling, General and administrative 31,785 18,883 9,877 3,025 --------- --------- --------- --------- Income from operations 22,913 2,336 17,501 3,076 Unrealized loss on derivative contracts 2,590 2,590 -- -- Other expense (income) 334 (490) (264) 1,088 Interest expense 34,375 34,354 (76) 97 --------- --------- --------- --------- Earnings before income taxes (14,386) (34,118) 17,841 1,891 Provision for income taxes (5,000) (11,910) 6,250 660 --------- --------- --------- --------- Net income (loss) $ (9,386) $ (22,208) $ 11,591 $ 1,231 ========= ========= ========= =========
12 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 6 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Consolidated Statement of Earnings (Unaudited) For the three months ended December 29,2000
NON- TOTAL ISSUER GUARANTORS GUARANTORS --------- ----------- ----------- ----------- Net sales $ 105,873 $ 40,567 $ 53,339 $ 11,967 Cost of sales 81,750 30,947 42,469 8,334 --------- --------- --------- --------- Gross profit 24,123 9,620 10,870 3,633 Operating expenses: Selling, General and administrative 14,368 9,022 4,112 1,234 --------- --------- --------- --------- Income from operations 9,755 598 6,758 2,399 Interest expense (income), net 19,642 19,695 (103) 50 Other expense (income) (80) 50 (302) 172 --------- --------- --------- --------- Income (loss) before provision for income taxes (9,807) (19,147) 7,163 2,177 Provision for income taxes (4,900) (9,775) 4,083 792 --------- --------- --------- --------- Net income (loss) $ (4,907) $ (9,372) $ 3,080 $ 1,385 ======== ======== ======== ========
For the six months ended December 29, 2000
NON- TOTAL ISSUER GUARANTORS GUARANTORS --------- ----------- ----------- ----------- Net sales $ 217,780 $ 78,988 $ 115,762 $ 23,030 Cost of sales 171,235 59,912 95,087 16,236 --------- --------- --------- --------- Gross profit 46,545 19,076 20,675 6,794 Operating expenses: Selling, General and administrative 29,479 18,483 8,656 2,340 --------- --------- --------- --------- Income from operations 17,066 593 12,019 4,454 Interest expense (income), net 37,862 38,243 (210) (171) Other expense (income) 450 124 (365) 691 --------- --------- --------- --------- Income (loss) before income taxes (21,246) (37,774) 12,594 3,934 Provision for income taxes (10,600) (18,900) 6,783 1,517 --------- --------- --------- --------- Net income (loss) $ (10,646) $ (18,874) $ 5,811 $ 2,417 ========= ========= ========= =========
13 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 6 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Condensed Consolidated Balance Sheet - at December 28, 2001 (Unaudited)
NON- TOTAL ELIMINATIONS ISSUER GUARANTORS GUARANTORS --------- -------------- ---------- ----------- ------------ Current assets $ 253,566 $ -- $ 43,044 $ 171,922 $ 38,600 Property, plant and equipment, net 153,961 -- 38,258 96,118 19,585 Intangible assets, net 216,879 -- 80,644 124,111 12,124 Investment in subsidiaries -- (470,463) 470,463 -- -- Deferred financing costs, net 15,588 -- 15,363 99 126 Other long-term assets 23,493 (302,705) 45,934 268,191 12,073 --------- --------- -------- --------- --------- Total assets $ 663,487 $(773,168) $693,706 $ 660,441 $ 82,508 ========= ========= ======== ========= ========= Current liabilities $ 78,247 $ -- $ 25,783 $ 36,101 $ 16,363 Long-term debt 659,097 -- 654,698 -- 4,399 Other long-term liabilities 20,578 (302,705) 99,082 188,280 35,921 --------- --------- -------- --------- --------- Total liabilities 757,922 (302,705) 779,563 224,381 56,683 ========= ========= ======== ========= ========= Additional paid-in capital 170,176 (312,420) 170,156 296,784 15,656 Retained earnings (deficit) (36,758) (158,043) (35,491) 139,276 17,500 Cumulative currency translation adjustment (7,331) -- -- -- (7,331) Less: Treasury stock (220,522) -- (220,522) -- -- --------- --------- -------- --------- --------- Total equity (94,435) (470,463) (85,857) 436,060 25,825 --------- --------- -------- --------- --------- Total liabilities and equity $ 663,487 $(773,168) $693,706 $ 660,441 $ 82,508 ========= ========= ======== ========= =========
14 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 6 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Condensed Consolidated Balance Sheet - at June 29, 2001
NON- TOTAL ELIMINATIONS ISSUER GUARANTORS GUARANTORS --------- -------------- ---------- ----------- ------------ Current assets $ 266,967 $ -- $80,305 $ 146,839 $ 39,823 Property, plant and equipment, net 137,008 -- 38,788 79,517 18,703 Intangible assets 179,616 -- 13,208 153,960 12,448 Investment in subsidiaries -- (457,641) 457,641 -- -- Deferred financing costs, net 16,607 -- 16,607 -- -- Deferred taxes 19,010 -- 19,022 (12) -- Other long-term assets 2,286 (300,321) 28,577 261,520 12,510 --------- --------- -------- --------- --------- Total assets $ 621,494 $(757,962) $654,148 $ 641,824 $ 83,484 ========= ========= ======== ========= ======== Current liabilities $ 67,838 $ -- $ 22,370 $ 26,923 $ 18,545 Long-term debt 670,078 -- 665,729 -- 4,349 Other long-term liabilities 18,275 (300,321) 92,460 190,399 35,737 --------- --------- -------- --------- --------- Total liabilities 756,191 (300,321) 780,559 217,322 58,631 ========= ========= ======== ========= ========= Additional paid-in capital 120,176 (312,420) 120,156 296,784 15,656 Retained earnings (deficit) (27,372) (145,221) (26,105) 127,685 16,269 Cumulative currency translation adjustment (7,039) -- -- 33 (7,072) Treasury stock (220,462) -- (220,462) -- -- --------- --------- -------- --------- --------- Total equity (134,697) (457,641) (126,411) 424,502 24,853 --------- --------- -------- --------- --------- Total liabilities and equity $ 621,494 $(757,962) $654,148 $ 641,824 $ 83,484 ========= ========= ======== ========= =========
15 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Condensed Consolidated Cash Flows (Unaudited) For the six months ended December 28, 2001
NON- TOTAL ISSUER GUARANTORS GUARANTORS --------- ---------- ----------- ------------ Net cash provided by (used in) operating activities $ 4,316 $ (105,959) $ 106,824 $ 3,451 ------- ----------- ---------- -------- Cash flows from investing activities: Capital expenditures (9,142) (3,103) (3,941) (2,098) Acquisition costs (65,757) -- (65,757) -- Additions to intangibles (222) (140) -- (82) Deposits and other assets 894 (1,909) 3,331 (528) ------- ----------- ---------- -------- Net cash used in investing activities (74,227) (5,152) (66,367) (2,708) ------- ----------- ---------- -------- Cash flows from financing activities Repayment of long term debt (8,813) (8,863) -- 50 Receipt of additional paid-in capital 50,000 50,000 -- -- Payment for treasury stock (60) (60) -- -- Change in intercompany accounts -- 48,322 (48,586) 264 ------- ----------- ---------- -------- Net cash flows provided by (used in) financing activities 41,127 89,399 (48,586) 314 ------- ----------- ---------- -------- Effect of exchange rate changes on cash (39) -- -- (39) ------- ----------- ---------- -------- Net increase (decrease) in cash (28,823) (21,712) (8,129) 1,018 Cash, beginning of period 44,645 32,890 5,321 6,434 ------- ----------- ---------- -------- Cash, end of period $ 15,822 $ 11,178 $ (2,808) $ 7,452 ========= ======== ========= ========
For the six months ended December 29, 2000
NON- TOTAL ISSUER GUARANTORS GUARANTORS --------- ---------- ----------- ------------ Net cash provided by (used in) operating activities $ (26,163) $ (35,331) $ 6,323 $ 2,845 --------- ---------- ------- -------- Cash flows from Investing activities: Capital expenditures (8,679) (1,587) (4,887) (2,205) Acquisition costs (9,189) -- -- (9,189) Additions to intangibles (95) (95) -- -- Deposits and other assets 86 1,264 (1,319) 141 --------- ---------- ------- -------- Net cash used in investing activities (17,877) (418) (6,206) (11,253) --------- ---------- ------- -------- Cash flows from financing activities Repayment of long term debt 35,709 36,272 -- (563) Repayment of line of credit (140) -- -- (140) Receipt of additional paid in capital 6,000 6,000 -- -- Debt financing costs (131) (131) -- -- Change in intercompany accounts -- (8,846) (2,977) 11,823 --------- ---------- ------- -------- Net cash flows provided by (used in) financing activities 41,438 33,295 (2,977) 11,120 --------- ---------- ------- -------- Effect of exchange rate changes on cash 15 -- -- 15 --------- ---------- ------- -------- Net increase (decrease) in cash (2,587) (2,454) (2,860) 2,727 Cash, beginning of period 12,525 5,522 3,766 3,237 --------- ---------- ------- -------- Cash, end of period $ 9,938 $ 3,068 $ 906 $ 5,964 ========= ========== ======= ========
16 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 7 - ACQUISITION The Company purchased certain assets and assumed certain liabilities of the Swan garden hose division of Mark IV Industries, Inc. on October 16, 2001, for approximately $65,757 in cash. The Company utilized preliminary estimates and assumptions in determining the allocation of purchase price to assets acquired and liabilities assumed of Swan. While management believes such estimates and assumptions are reasonable, the final allocation of the purchase price may differ from that reflected in the unaudited December 28, 2001 consolidated balance sheet after a more extensive review of fair values of the assets and liabilities is completed. In conjunction with the acquisition, liabilities were assumed as follows: Fair value of assets acquired $ 42,269 Goodwill 45,070 Cash paid (65,757) ------------- Liabilities assumed $ 21,582 =============
17 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SECOND QUARTER OF FISCAL 2002 COMPARED WITH THE SECOND QUARTER OF FISCAL 2001 Net Sales increased to $113.7 million for the three months ended December 28, 2001 from $105.9 million for the three months ended December 29, 2000, representing a $7.9 million or 7.4% increase. Increases in the Consumer Segment more than offset declines in our Industrial Segment. Our Consumer Segment net sales increased $11.6 million or 46.6% primarily due to our Swan acquisition as well as strong demand for garden hose from our traditional customer base. The Swan acquisition added approximately $7.2 million of net sales in the current quarter. Our Industrial Segment reported a $3.7 million or 4.6% decline in sales. Within the segment, sales increases to our food packaging customers were offset by declining sales of specialty resins and somewhat softer sales to our healthcare customers. Cost of Sales increased to $86.1 million for the three months ended December 28, 2001 from $81.8 million for the three months ended December 29, 2000, an increase of $4.3 million. Expressed as a percentage of net sales, cost of sales decreased to 75.7% for the three months ended December 28, 2001 from 77.2% for the three months ended December 29, 2000. Lower resin costs and improved operating efficiencies accounted for the improvement in this ratio. Gross Profit, as a result, increased to $27.7 million or 24.3% of net sales for the three months ended December 28, 2001 from $24.1 million or 22.8% of net sales for the three months ended December 29, 2000. Selling, general and administrative expense increased to $16.6 million in the three months ended December 28, 2001 compared to $14.4 million in the three months ended December 29, 2000 primarily due to our Swan acquisition. The ratio of selling, general and administrative expense to net sales increased to 14.6% for the three months ending December 28, 2001 from 13.6% in the comparable period of last year. Operating profit, as a result of the foregoing, increased to $11.1 million or 9.7% of net sales for the three months ended December 28, 2001 from $9.8 million or 9.2% of net sales for the three months ended December 29, 2000. Interest expense decreased to $16.6 million or 14.6% of net sales in the three months ended December 28, 2001 from $19.6 million or 18.6% of net sales in the three months ended December 29, 2000. The decrease was due to lower debt levels and lower interest rates. Income (loss) before income taxes, as a result, was a $0.2 million for the three months ended December 28, 2001 compared to a loss of ($9.8) million for the three months ended December 29, 2000. Income tax (benefit) was $0.1 million for the three months ended December 28, 2001, compared to a credit of ($4.9) million for the three months ended December 29, 2000. The Company's effective tax rate was 59.9% for the three months ended December 28, 2001 compared to 50.0% for the three months ending December 29, 2000. Net income (loss), as a result, was a $0.1 million for the three months ended December 28, 2001 compared with a loss of ($4.9) million for the three months ended December 29, 2000. 18 FIRST SIX MONTHS OF FISCAL 2002 COMPARED WITH THE FIRST SIX MONTHS OF FISCAL 2001 Net Sales increased to $228.9 million for the six months ended December 28, 2001 from $217.8 million for the six months ended December 29, 2000, representing a $11.1 million or 5.1% increase. The Swan acquisition combined with strong garden hose sales were the primary factors contributing to this gain. Cost of Sales increased to $174.2 million for the six months ended December 28, 2001 from $171.2 million for the six months ended December 29, 2000, an increase of $3.0 million. Expressed as a percentage of net sales, cost of sales decreased to 76.1% for the six months ended December 28, 2001 from 78.6% for the six months ended December 29, 2000. Lower resin costs and improved operating efficiencies accounted for the improvement in this ratio. Gross Profit, as a result, increased to $54.7 million or 23.9% of net sales for the six months ended December 28, 2001 from $46.5 million or 21.4% of net sales for the six months ended December 29, 2000. Selling, General and Administrative Expense increased to $31.8 million in the six months ended December 28, 2001 compared to $29.5 million in the six months ended December 29, 2000 primarily due to our Swan acquisition. The ratio of selling, general and administrative expense to net sales increased slightly to 13.9% for the six months ending December 28, 2001 from 13.5% in the comparable period of last year. Operating Profit, as a result of the foregoing, increased to $22.9 million or 10.0% of net sales for the six months ended December 28, 2001 from $17.1 million or 7.8% of net sales for the six months ended December 29, 2000. Interest Expense decreased to $34.4 million or 15.0% of net sales in the six months ended December 28, 2001 from $37.9 million or 17.4% of net sales in the six months ended December 29, 2000. The decrease was due to lower debt levels and lower interest rates. Income (Loss) Before Income Taxes, as a result, was a loss of ($14.4) million for the six months ended December 28, 2001 compared to a loss of ($21.2) million for the six months ended December 29, 2000. Income Tax (Benefit) was a credit of ($5.0) million for the six months ended December 28, 2001, compared to a credit of ($10.6) million for the six months ended December 29, 2000. The Company's effective tax rate was 34.8% for the six months ended December 28, 2001 compared to 49.9% for the six months ending December 29, 2000. Net Income (Loss), as a result, was a loss of ($9.4) million for the six months ended December 28, 2001 compared with a loss of ($10.6) million for the six months ended December 29, 2000. 19 LIQUIDITY AND CAPITAL RESOURCES Net cash provided (used) by operations for the six months ended December 28, 2001 was $4.3 million compared with ($26.2) million in the same period of the prior year. The increase of $30.5 million was primarily due to a lower seasonal inventory build-up at our garden hose unit compared to last year. In addition, we reported a $2.6 million improvement in our unrealized loss on interest rate hedges in the current period. Working capital on December 28, 2001 was $173.8 million compared to $199.1 million on June 29, 2001. The decrease was due primarily to a seasonal reduction in accounts receivable offset by a normal seasonal increase in inventories. As of December 28, 2001, the Company had an outstanding balance of $60.0 million under the $100.0 million revolving credit line. This represents a reduction of $5.0 million from the outstanding balance as of June 29, 2000. The Company's capital expenditures for the six months ended December 28, 2001 and December 29, 2000 were $9.1 million and $8.7 million respectively. The Company continues to expect that its principal uses of cash for the next several years will be acquisitions, debt service, capital expenditures and working capital requirements. Management believes that cash generated from operations plus funds available in the Company's credit facility will be sufficient to meet its needs and to provide it with the flexibility to make capital expenditures and acquisitions which management believes will provide an attractive return on investment. However, the probability exists that the Company may need additional financing to take advantage of all the acquisition opportunities that may arise in the next several quarters. There can be no assurance that such financing will be available in the amounts and terms acceptable to the Company. 20 \PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company is party to certain litigation in the ordinary course of business, none of which the Company believes is likely to have a material adverse effect on its consolidated financial position or results of operations. Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Securities holders Not applicable Item 5. Subsequent Events Item 6. Exhibits and Reports on Form 8-K (a) Reports on Form 8-K None 21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TEKNI-PLEX, INC. February 11, 2002 By: /s/ F. Patrick Smith ------------------------ F. Patrick Smith Chairman of the Board and Chief Executive Officer By: /s/ Kenneth W. R. Baker ----------------------- Kenneth W. R. Baker President and Chief Operating Officer By: /s/ James E. Condon ------------------------- James E. Condon Vice President and Chief Financial Officer 22 EX-13.4 16 y61170exv13w4.txt QUARTERLY REPORT ON FORM 10-Q - MARCH 28, 2002 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 For the quarterly period ended March 29, 2002 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT - --- For the transition period from to ------- ------- Commission file number 333-28157 --------- TEKNI-PLEX, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 22-3286312 - --------------------------------------- ------------------------------------ (State or other jurisdiction (IRS Employer Identification Number) of incorporation or organization) 260 N. Denton Tap Road (972) 304-5077 - --------------------------------------- ------------------------------------ Coppell, Texas 75022 (Registrant's telephone number) - --------------------------------------- (Address of principal executive office) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / TEKNI-PLEX, INC.
Page # PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets as of March 29, 2002 and June 29, 2001 (unaudited) 3 Consolidated Statements of Operations for the nine months and three months ended March 29, 2002 and March 30, 2001 (unaudited) 4 Consolidated Statements of Comprehensive Income (loss) for the nine months and three months ended March 29, 2002 and March 30, 2001 (unaudited) 4 Consolidated Statements of Cash Flows for the nine months ended March 29, 2002 and March 30, 2001 (unaudited) 5 Notes to Consolidated Financial Statements 6-17 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 18-20 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 20 PART II. OTHER INFORMATION Item 1. Legal proceedings 21 Item 2. Changes in securities 21 Item 3. Defaults upon senior securities 21 Item 4. Submission of matters to a vote of securities holders 21 Item 5 Other information 21 Item 6 Exhibits and reports on Form 8-K 21
TEKNI-PLEX, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands)
MARCH 29, 2002 June 29, 2001 (UNAUDITED) (Audited) -------------- ------------- ASSETS CURRENT: Cash and cash equivalents $ 8,620 $ 44,645 Accounts receivable, net of allowance for doubtful accounts $6,761 and $1,500 respectively 121,274 105,316 Inventories 143,823 106,258 Deferred income taxes 5,153 5,153 Prepaid expenses and other current assets 8,254 5,595 --------- --------- TOTAL CURRENT ASSETS 287,124 266,967 PROPERTY, PLANT AND EQUIPMENT, NET 152,212 137,008 INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION OF $74,357 AND $62,271 RESPECTIVELY 211,690 179,616 DEFERRED FINANCING COSTS, NET OF ACCUMULATED AMORTIZATION OF $4,410 AND $2,549 RESPECTIVELY 14,866 16,607 DEFERRED INCOME TAXES 22,436 19,010 OTHER ASSETS 1,274 2,286 --------- --------- $ 689,602 $ 621,494 ========= ========= LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 11,747 $ 8,072 Line of credit 33 -- Accounts payable - trade 32,976 34,076 Accrued payroll and benefits 6,508 5,222 Accrued interest 15,453 1,673 Accrued liabilities - other 23,518 15,446 Income taxes payable 1,152 3,349 --------- --------- TOTAL CURRENT LIABILITIES 91,387 67,838 LONG-TERM DEBT 672,802 670,078 OTHER LIABILITIES 21,529 18,275 --------- --------- TOTAL LIABILITIES 785,718 756,191 --------- --------- STOCKHOLDER'S EQUITY: Common stock -- -- Additional paid-in capital 170,176 120,176 Cumulative currency translation adjustment (11,316) (7,039) Retained earnings (34,454) (27,372) Less: treasury stock (220,522) (220,462) --------- --------- TOTAL STOCKHOLDER'S EQUITY (96,116) (134,697) --------- --------- $ 689,602 $ 621,494 ========= =========
See accompanying notes to consolidated financial statements. 3 TEKNI-PLEX, INC. AND SUBSIDIARIES (Unaudited -- in thousands) CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Nine months ended MARCH 29, March 30, MARCH 29, March 30, 2002 2001 2002 2001 --------- --------- --------- --------- NET SALES $ 153,393 $ 140,681 $ 382,297 $ 358,461 COST OF SALES 111,385 103,896 285,591 275,131 --------- --------- --------- --------- GROSS PROFIT 42,008 36,785 96,706 83,330 OPERATING EXPENSES: Selling, general and administrative 18,529 15,658 50,314 45,137 --------- --------- --------- --------- INCOME FROM OPERATIONS 23,479 21,127 46,392 38,193 OTHER EXPENSES: Interest expense 19,014 19,824 53,389 57,686 Unrealized loss on derivative contracts 1,085 2,998 3,675 14,293 Other expense (105) 457 229 907 --------- --------- --------- --------- EARNINGS (LOSS) BEFORE INCOME TAXES 3,485 (2,152) (10,901) (34,693) PROVISION FOR INCOME TAXES 1,180 (679) (3,820) (15,345) --------- --------- --------- --------- NET INCOME (LOSS) $ 2,305 $ (1,473) $ (7,081) $ (19,348) ========= ========= ========= =========
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) NET INCOME (LOSS) $ 2,305 $ (1,473) $ (7,081) $ (19,348) OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES Foreign currency translation adjustment (3,985) (1,216) (4,277) (1,776) --------- --------- --------- --------- COMPREHENSIVE INCOME (LOSS) $ (1,680) $ (2,689) $ (11,358) $ (21,124) ========= ========= ========= =========
See accompanying notes to consolidated financial statements. 4 TEKNI-PLEX, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited -- in thousands)
Nine months ended MARCH 29, 2002 March 30, 2001 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income loss $ (7,081) $(19,348) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 29,011 27,855 Unrealized loss on derivative contracts 3,675 14,293 Deferred income taxes (3,465) (15,497) Changes in operating assets and liabilities: Accounts receivable (9,624) 641 Inventories (21,769) (34,217) Prepaid expenses and other current assets (2,703) (973) Income taxes (2,202) -- Accounts payable (5,003) 9,592 Accrued interest 13,763 16,478 Accrued expenses and other liabilities (10,033) (15,684) -------- -------- NET CASH USED IN OPERATING ACTIVITIES (15,431) (16,860) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (12,317) (12,390) Acquisition costs (65,757) (8,869) Additions to intangibles 797 (95) Deposits and other assets 846 75 -------- -------- NET CASH USED IN INVESTING ACTIVITIES (76,431) (21,279) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings (repayments) of long-term debt 6,000 38,419 Net borrowings (repayments) under line of credit 12 (123) Payment for treasury stock (60) -- Receipt of additional paid-in capital 50,000 6,000 Debt financing costs (120) (131) -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 55,832 44,165 -------- -------- EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH 5 (42) -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (36,025) 5,984 CASH, AND CASH EQUIVALENTS BEGINNING OF PERIOD 44,645 12,525 -------- -------- CASH, AND CASH EQUIVALENTS END OF PERIOD $ 8,620 $ 18,509 ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for: Interest $ 38,290 $ 40,942 -------- -------- Income taxes 1,912 1,048 -------- --------
See accompanying notes to consolidated financial statements. 5 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) NOTE 1 - GENERAL Tekni-Plex is a global, diversified manufacturer of packaging, products, and materials primarily for the healthcare, food and consumer industries. The Company has built a leadership position in its core markets, and focuses on vertically integrated production of highly specialized products. The Company's operations are aligned under two business groups: Industrial Packaging, Products, and Materials and Consumer Packaging and Products. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. For further information please refer to the audited financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended June 29, 2001. NOTE 2 - NEW ACCOUNTING PRONOUNCEMENTS a) In June 2001, the Financial Accounting Standards Board finalized FASB Statements No. 141, Business Combinations (SFAS 141) and No. 142, Goodwill and Other Intangible Assets (SFAS 142). SFAS 141, requires the use of the purchase method of accounting and prohibits the use of the pooling-of-interests method of accounting for business combinations initiated after June 30, 2001. SFAS 141 requires that the Company recognize acquired intangible assets apart from goodwill if the acquired intangible assets meet certain criteria. SFAS 141 applies to all business combinations initiated after June 30, 2001 and for purchase business combinations completed on or after July 1, 2001. It also requires, upon adoption of SFAS 142, that the company reclassify the carrying amounts of intangible assets and goodwill based on the criteria in SFAS 141. SFAS 142 requires, among other things, that the companies no longer amortize goodwill, but instead test goodwill for impairment at least annually. In addition, SFAS 142 requires that the Company identify reporting units for the purposes of assessing potential future impairments of goodwill, reassess the useful lives of other existing recognized intangible assets, and cease amortization of intangible assets with an indefinite useful life. An intangible asset with an indefinite useful life should be tested for impairment in accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in fiscal years beginning after December 15, 2001 to all goodwill and other intangible assets recognized at that date, regardless of when those assets were initially recognized. SFAS 142 requires the Company to complete a transitional goodwill impairment test six months from the date of adoption. The Company is also required to reassess the useful lives of other intangible assets within the first interim quarter after adoption of SFAS 142. The Company's previous business combinations were accounted for using the purchasing method. As of March 29, 2002, the net carrying amount of goodwill is $211,166 and other intangible assets are $524. Amortization expense during the nine month period ended March 29, 2002 was $12,086. Currently, the company is assessing but has not yet determined how the adoption of SFAS 141 and SFAS 142 will impact its financial position and results of operations. 6 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) b) In August 2001, the FASB issued FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS 144"). The new guidance resolves significant implementation issues related to FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of ("SFAS 121"). SFAS 144 supersedes SFAS 121, but it retains its fundamental provisions. It also amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to eliminate the exception to consolidate a subsidiary for which control is likely to be temporary. SFAS 144 retains the requirement of SFAS 121 to recognize an impairment loss only if the carrying amount of a long-lived asset within the scope of SFAS 144 is not recoverable from its undiscounted cash flows and exceeds its fair value. SFAS 144 is effective for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years, with early application encouraged. The provisions of SFAS 144 generally are to be applied prospectively. The company believes that the adoption of SFAS 144 will not have a material impact on the Company's financial position or results of operations. NOTE 3 - INVENTORIES Inventories as of March 29, 2002 and June 29, 2001 are summarized as follows:
MARCH 29, 2002 June 29, 2001 -------------- ------------- Raw materials $ 38,372 $ 33,971 Work-in-process 7,950 7,812 Finished goods 97,501 64,475 ----------- ----------- $143,823 $106,258 =========== ===========
7 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) NOTE 4 - LONG-TERM DEBT Long-term debt consists of the following:
MARCH 29, 2002 June 29, 2001 -------------- ------------- Senior Subordinated Notes issued June 21, 2000 at 12.75% due June 15, 2010. (Less unamortized discount of $3,108 and $3,391) $271,892 $271,609 Senior Secured Debt: Revolving line of credit, expiring June, 2006. At March 29, 2002, the interest rate ranged from 4.94% to 5.00% 77,000 65,000 Term notes due June, 2006 and June, 2008, with interest rates at March 29, 2002 of 4.81% and 5.31% 330,980 336,560 Other, primarily foreign term loans, with interest rates ranging from 4.44% to 5.44% and maturities from 2002 to 2010 4,677 4,981 -------- -------- 684,549 678,150 Less: Current maturities 11,747 8,072 -------- -------- $672,802 $670,078 ======== ========
8 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) NOTE 5 - SEGMENT INFORMATION Tekni-Plex has organized its business into two industry segments: Industrial Packaging, Products, and Materials and Consumer Packaging and Products. The Industrial Packaging, Products, and Materials segment principally produces pharmaceutical packaging, medical tubing and medical device materials, foamed polystyrene packaging products for the poultry, meat and egg industries and vinyl resins and compounds. The Consumer Packaging and Products segment principally produces precision tubing and gaskets, and garden and irrigation hose products. Both segments have operations in the United States, Europe and Canada. Financial information concerning the Company's business segments and the geographic areas in which it operates are as follows:
INDUSTRIAL PACKAGING, CONSUMER PRODUCTS, PACKAGING AND MATERIALS AND PRODUCTS TOTAL ------------- ------------ ----- Three months ended March 29, 2002 Revenues from external Customers $ 79,817 $ 73,576 $153,393 Interest expense 12,972 6,042 19,014 Depreciation and amortization 6,919 2,776 9,695 Income from operations 14,271 14,576 28,847 Expenditures for segment Assets 2,498 422 2,920 -------- -------- -------- Three months ended March 30, 2001 Revenues from external Customers $ 82,440 $ 58,241 $140,681 Interest expense 13,755 6,069 19,824 Depreciation and Amortization 5,943 3,186 9,129 Income from operations 13,818 10,293 24,111 Expenditures for segment Assets 1,930 1,691 3,621 -------- -------- --------
9 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) NOTE 5 - SEGMENT INFORMATION
INDUSTRIAL PACKAGING, CONSUMER PRODUCTS, PACKAGING AND MATERIALS AND PRODUCTS TOTAL ------------- ------------ ----- Nine months ended March 29, 2002 Revenues from external Customers $235,598 $146,699 $382,297 Interest expense 36,413 16,976 53,389 Depreciation and Amortization 18,802 9,435 28,237 Income from operations 34,138 25,198 59,336 Expenditures for segment Assets 7,026 4,745 11,771 -------- -------- -------- Nine months ended March 30, 2001 Revenues from external customers $242,491 $115,970 $358,461 Interest expense 39,466 18,220 57,686 Depreciation and amortization 18,003 9,084 27,087 Income from operations 30,827 17,406 48,233 Expenditures for segment Assets 6,371 5,525 11,896 -------- -------- --------
Three months ended Nine months ended MARCH 29, March 30, MARCH 29, March 30, 2002 2001 2002 2001 --------- --------- --------- --------- INCOME FROM OPERATIONS Total income from operations for reportable segments before income taxes $ 28,847 $ 24,111 $ 59,336 $ 48,233 Corporate and eliminations (5,368) (2,984) (12,944) (10,040) -------- -------- -------- -------- $ 23,479 $ 21,127 $ 46,392 $ 38,193 ======== ======== ======== ======== DEPRECIATION AND AMORTIZATION Segment totals $ 9,695 $ 9,129 $ 28,237 $ 27,087 Corporate 262 256 774 768 -------- -------- -------- -------- Consolidated total $ 9,957 $ 9,385 $ 29,011 $ 27,855 ======== ======== ======== ======== EXPENDITURES FOR SEGMENT ASSETS Total reportable-segment expenditures $ 2,920 $ 3,621 $ 11,771 $ 11,896 Other unallocated expenditures 255 90 546 494 -------- -------- -------- -------- Consolidated total $ 3,175 $ 3,711 $ 12,317 $ 12,390 ======== ======== ======== ========
10 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) NOTE 5 - SEGMENT INFORMATION SEGMENT ASSETS
INDUSTRIAL PACKAGING, CONSUMER PRODUCTS, PACKAGING AND MATERIALS AND PRODUCTS TOTAL ------------- ------------ ----- MARCH 29, 2002 $293,860 $369,538 $663,398 June 30, 2001 333,570 270,731 604,301 -------- -------- --------
MARCH 29, 2002 June 29, 2001 -------------- ------------- TOTAL ASSETS Total assets from reportable segments $663,398 $604,301 Other unallocated amounts 26,204 17,193 -------- -------- Consolidated total $689,602 $621,494 ======== ========
GEOGRAPHIC INFORMATION
Three months ended Nine months ended MARCH 29, March 30, MARCH 29, March 30, 2002 2001 2002 2001 --------- --------- --------- --------- REVENUES United States $137,685 $123,569 $341,366 $318,319 International 15,708 17,112 40,931 40,142 -------- -------- -------- -------- Total $153,393 $140,681 $382,297 $358,461 ======== ======== ======== ========
MARCH 29, 2002 June 29, 2001 -------------- ------------- LONG-LIVED ASSETS United States $359,206 $310,866 International 43,272 43,661 -------- -------- Total $402,478 $354,527 ======== ========
11 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) NOTE 6 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Consolidated Statement of Earnings (Unaudited) For the three months ended March 29, 2002
Non- TOTAL Issuer Guarantors Guarantors ---------- ---------- ---------- ---------- Net sales $ 153,393 $ 40,360 $ 97,325 $ 15,708 Cost of sales 111,385 27,869 72,885 10,631 --------- --------- --------- --------- Gross profit 42,008 12,491 24,440 5,077 Operating expenses: Selling, general and administrative 18,529 10,854 6,123 1,552 --------- --------- --------- --------- Income from operations 23,479 1,637 18,317 3,525 Interest expense (income), net 19,014 19,002 (10) 22 Unrealized loss on derivative contracts 1,085 1,085 -- -- Other expense (income) (105) (222) (366) 483 --------- --------- --------- --------- Income (loss) before provision for income taxes 3,485 (18,228) 18,693 3,020 Provision benefit for income taxes 1,180 (6,450) 6,700 930 --------- --------- --------- --------- Net income (loss) $ 2,305 $ (11,778) $ 11,993 $ 2,090 ========= ========= ========= =========
For the nine months ended March 29, 2002
Non- TOTAL Issuer Guarantors Guarantors ---------- ---------- ---------- ---------- Net sales $ 382,297 $ 121,666 $ 219,700 $ 40,931 Cost of sales 285,591 87,956 167,882 29,753 --------- --------- --------- --------- Gross profit 96,706 33,710 51,818 11,178 Operating expenses: Selling, general and administrative 50,314 29,737 16,000 4,577 --------- --------- --------- --------- Income from operations 46,392 3,973 35,818 6,601 Interest expense (income), net 53,389 53,356 (86) 119 Unrealized loss on derivative contracts 3,675 3,675 -- -- Other expense (income) 229 (712) (630) 1,571 --------- --------- --------- --------- Income (loss) before provision for income taxes (10,901) (52,346) 36,534 4,911 Provision benefit for income taxes (3,820) (18,360) 12,950 1,590 --------- --------- --------- --------- Net income (loss) $ (7,081) $ (33,986) $ 23,584 $ 3,321 ========= ========= ========= =========
12 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) NOTE 6 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Consolidated Statement of Earnings (Unaudited) For the three months ended March 30, 2001
Non- TOTAL Issuer Guarantors Guarantors ---------- ---------- ---------- ---------- Net sales $ 140,681 $ 42,021 $ 81,548 $ 17,112 Cost of sales 103,896 30,801 61,764 11,331 --------- --------- --------- --------- Gross profit 36,785 11,220 19,784 5,781 Operating expenses: Selling, general and administrative 15,658 9,428 4,720 1,510 --------- --------- --------- --------- Income from operations 21,127 1,792 15,064 4,271 Interest expense (income), net 19,824 19,835 (56) 45 Unrealized loss on derivative contracts 2,998 2,998 -- -- Other expense (income) 457 (624) (301) 1,382 --------- --------- --------- --------- Income (loss) before provision for income taxes (2,152) (20,417) 15,421 2,844 Provision benefit for income taxes (679) (9,779) 7,217 1,883 --------- --------- --------- --------- Net income (loss) $ (1,473) $ (10,638) $ 8,204 $ 961 ========= ========= ========= =========
For the nine months ended March 30, 2001
Non- TOTAL Issuer Guarantors Guarantors ---------- ---------- ---------- ---------- Net sales $ 358,461 $ 121,009 $ 197,310 $ 40,142 Cost of sales 275,131 90,713 156,851 27,567 --------- --------- --------- --------- Gross profit 83,330 30,296 40,459 12,575 Operating expenses: Selling, general and administrative 45,137 27,911 13,376 3,850 --------- --------- --------- --------- Income from operations 38,193 2,385 27,083 8,725 Interest expense (income), net 57,686 58,078 (266) (126) Unrealized loss on derivative contracts 14,293 14,293 -- -- Other expense (income) 907 (500) (666) 2,073 --------- --------- --------- --------- Income (loss) before provision for income taxes (34,693) (69,486) 28,015 6,778 Provision benefit for income taxes (15,345) (32,745) 14,000 3,400 --------- --------- --------- --------- Net income (loss) $ (19,348) $ (36,741) $ 14,015 $ 3,378 ========= ========= ========= =========
13 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) NOTE 6 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Condensed Consolidated Balance Sheet - at March 29, 2002 (Unaudited)
Non- TOTAL Eliminations Issuer Guarantors Guarantors ----- ------------ ------ ---------- ---------- Current assets $ 287,124 $ -- $ 37,006 $ 207,740 $ 42,378 Property, plant and equipment, net 152,212 -- 38,463 94,495 19,254 Intangible assets 211,690 -- 11,704 188,151 11,835 Investment in subsidiaries -- (484,546) 484,546 -- -- Deferred financing costs, net 14,866 -- 14,664 99 103 Other long-term assets 23,710 (308,635) 132,152 188,113 12,080 --------- --------- --------- --------- --------- Total assets $ 689,602 $(793,181) $ 718,535 $ 678,598 $ 85,650 ========= ========= ========= ========= ========= Current liabilities $ 91,387 $ -- $ 39,706 $ 33,852 $ 17,829 Long-term debt 672,802 -- 668,682 -- 4,120 Other long-term liabilities 21,529 (308,635) 93,699 196,669 39,796 --------- --------- --------- --------- --------- Total liabilities 785,718 (308,635) 802,087 230,521 61,745 --------- --------- --------- --------- --------- Additional paid-in capital 170,176 (312,420) 170,156 296,784 15,656 Accumulated currency translation adjustment (11,316) -- -- 25 (11,341) Retained earnings (deficit) (34,454) (172,126) (33,186) 151,268 19,590 Less: Treasury stock (220,522) -- (220,522) -- -- --------- --------- --------- --------- --------- Total equity (96,116) (484,546) (83,552) 448,077 23,905 --------- --------- --------- --------- --------- Total liabilities and equity $ 689,602 $(793,181) $ 718,535 $ 678,598 $ 85,650 ========= ========= ========= ========= =========
Condensed Consolidated Balance Sheet - at June 29, 2001
Non- TOTAL Eliminations Issuer Guarantors Guarantors ----- ------------ ------ ---------- ---------- Current assets $ 266,967 $ -- $ 80,305 $ 146,839 $ 39,823 Property, plant and equipment, net 137,008 -- 38,788 79,517 18,703 Intangible assets 179,616 -- 13,208 153,960 12,448 Investment in subsidiaries -- (457,641) 457,641 -- -- Deferred financing costs, net 16,607 -- 16,607 -- -- Deferred taxes 19,010 -- 19,022 (12) -- Other long-term assets 2,286 (300,321) 28,577 261,520 12,510 --------- --------- --------- --------- --------- Total assets $ 621,494 $(757,962) $ 654,148 $ 641,824 $ 83,484 ========= ========= ========= ========= ========= Current liabilities $ 67,838 $ -- $ 22,370 $ 26,923 $ 18,545 Long-term debt 670,078 -- 665,729 -- 4,349 Other long-term liabilities 18,275 (300,321) 92,460 190,399 35,737 --------- --------- --------- --------- --------- Total liabilities 756,191 (300,321) 780,559 217,322 58,631 --------- --------- --------- --------- --------- Additional paid-in capital 120,176 (312,420) 120,156 296,784 15,656 Cumulative currency translation adjustment (7,039) -- -- 33 (7,072) Retained earnings (deficit) (27,372) (145,221) (26,105) 127,685 16,269 Treasury stock (220,462) -- (220,462) -- -- --------- --------- --------- --------- --------- Total equity (134,697) (457,641) (126,411) 424,502 24,853 --------- --------- --------- --------- --------- Total liabilities and equity $ 621,494 $(757,962) $ 654,148 $ 641,824 $ 83,484 ========= ========= ========= ========= =========
14 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Condensed Consolidated Cash Flows (Unaudited) For the nine months ended March 29,2002
Non- TOTAL Issuer Guarantors Guarantors ----- ------ ---------- ---------- Net cash provided by (used in) operating activities $(15,431) $(13,346) $ (154) $ (1,931) -------- -------- -------- -------- Cash flows from investing activities: Capital expenditures (12,317) (5,209) (4,779) (2,329) Acquisition costs (65,757) -- (65,757) -- Additions to intangibles 797 (191) 1,206 (218) Deposits and other assets 846 117 299 430 -------- -------- -------- -------- Net cash used in investing activities (76,431) (5,283) (69,031) (2,117) -------- -------- -------- -------- Cash flows from financing activities Repayment of long term debt 6,000 6,298 -- (298) Repayment/borrowings of line of credit 12 -- -- 12 Receipt of additional paid-in capital 50,000 50,000 -- -- Payment for treasury stock (60) (60) -- -- Debt financing (120) (120) -- -- Change in intercompany accounts -- (68,272) 64,148 4,124 -------- -------- -------- -------- Net cash flows provided by (used in) financing activities 55,832 (12,154) 64,148 3,838 -------- -------- -------- -------- Effect of exchange rate changes on cash 5 -- -- 5 -------- -------- -------- -------- Net decrease in cash (36,025) (30,783) (5,037) (205) Cash, beginning of period 44,645 32,890 5,321 6,434 -------- -------- -------- -------- Cash, end of period $ 8,620 $ 2,107 $ 284 $ 6,229 ======== ======== ======== ========
15 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Condensed Consolidated Cash Flows (Unaudited)
For the nine months ended March 30, 2001 Non- TOTAL Issuer Guarantors Guarantors ----- ------ ---------- ---------- Net cash provided by (used in) operating activities $(16,860) $(26,261) $ 8,950 $ 451 -------- -------- -------- -------- Cash flows from Investing activities: Capital expenditures (12,390) (2,870) (7,107) (2,413) Acquisition costs (8,869) -- -- (8,869) Additions to intangibles (95) (95) -- -- Deposits and other assets 75 1,276 (1,336) 135 -------- -------- -------- -------- Net cash used in investing activities (21,279) (1,689) (8,443) (11,147) -------- -------- -------- -------- Cash flows from financing activities Repayment of long term debt 38,419 39,371 -- (952) Repayment of line of credit (123) -- -- (123) Receipt of additional paid in capital 6,000 6,000 -- -- Debt financing costs (131) (131) -- -- Change in intercompany accounts -- (12,663) 67 12,596 -------- -------- -------- -------- Net cash flows provided by (used in) financing activities 44,165 32,577 67 11,521 -------- -------- -------- -------- Effect of exchange rate changes on cash (42) -- -- (42) -------- -------- -------- -------- Net increase in cash 5,984 4,627 574 783 Cash, beginning of period 12,525 5,522 3,766 3,237 -------- -------- -------- -------- Cash, end of period $ 18,509 $ 10,149 $ 4,340 $ 4,020 ======== ======== ======== ========
16 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 7 - ACQUISITION The Company purchased certain assets and assumed certain liabilities of the Swan garden hose division of Mark IV Industries, Inc. "Swan" on October 16, 2001, for approximately $65,757 in cash. The Company utilized preliminary estimates and assumptions in determining the allocation of purchase price to assets acquired and liabilities assumed of Swan. While management believes such estimates and assumptions are reasonable, the final allocation of the purchase price may differ from that reflected in the unaudited March 29, 2002 consolidated balance sheet after a more extensive review of fair values of the assets and liabilities is completed. In connection with the acquisition, a reserve of $11,000 has been established for the costs to integrate Swan's operations with the company. The reserve is comprised of the costs to close duplicate facilities, terminate employees and other related costs. The plans to close the facilities have been put in place, however, certain related lease costs will extend beyond one year. The reserve is included in accrued expenses. The following table represents the unaudited pro forma results of operations as though the acquisition of Swan occurred on July 01, 2000. Since Swan was purchased subsequent to July 01, 2001, no amortization of goodwill has been reflected for the periods ended June 29, 2001 or March 29, 2002 in accordance with SFAS 142. Year Ended Nine Months Ended June 29, 2001 March 29, 2002 ------------- ----------------- Net Sales $602,593 $393,593 Income from Operations 73,305 44,407 Earnings (loss) before income taxes (17,760) (12,886) -------- -------- In conjunction with the acquisition, liabilities were assumed as follows: Fair value of assets acquired $ 42,269 Goodwill 45,070 Cash paid (65,757) --------- Liabilities assumed $ 21,582 ========= 17 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THIRD QUARTER OF FISCAL 2002 COMPARED WITH THE THIRD QUARTER OF FISCAL 2001 Net Sales increased to $153.4 million for the three months ended March 29, 2002 from $140.7 million for the three months ended March 30, 2001, representing a $12.7 million or 9.0% increase. Increases in the Consumer Segment more than offset declines in our Industrial Segment. Our Consumer Segment net sales increased $15.3 million or 26.3% primarily due to our Swan acquisition. Our Industrial Segment reported a $2.6 million or 3.1% decline in sales. Cost of Sales increased to $111.4 million for the three months ended March 29, 2002 from $103.9 million for the three months ended March 30, 2001, an increase of $7.5 million. Expressed as a percentage of net sales, cost of sales decreased to 72.6% for the three months ended March 29, 2002 from 73.9% for the three months ended March 30, 2001. Lower resin costs and improved operating efficiencies accounted for the improvement in this ratio. Gross Profit, as a result, increased to $42.0 million or 27.4% of net sales for the three months ended March 29, 2002 from $36.8 million or 26.1% of net sales for the three months ended March 30, 2001. Selling, general and administrative expense increased to $18.5 million in the three months ended March 29, 2002 compared to $15.7 million in the three months ended March 30, 2001, primarily due to our Swan acquisition. The ratio of selling, general and administrative expense to net sales increased to 12.1% for the three months ending March 29, 2002 from 11.1% in the comparable period of last year. Operating profit, as a result of the foregoing, increased to $23.5 million or 15.3% of net sales for the three months ended March 29, 2002 from $21.1 million or 15.0% of net sales for the three months ended March 30, 2001. Interest expense decreased to $19.0 million or 12.4% of net sales in the three months ended March 29, 2002 from $19.8 million or 14.1% of net sales in the three months ended March 30, 2001. The decrease was due to lower debt levels and lower interest rates. Income (loss) before income taxes, as a result, was $3.5 million for the three months ended March 29, 2002 compared to a loss of ($2.2) million for the three months ended March 30, 2001. Income tax (benefit) was $1.2 million for the three months ended March 29, 2002, compared to a credit of ($0.7) million for the three months ended March 30, 2001. The Company's effective tax rate was 33.9% for the three months ended March 29, 2002 compared to 31.6% for the three months ending March 30, 2001. Net income (loss), as a result, was $2.3 million for the three months ended March 29, 2002 compared with a loss of ($1.5) million for the three months ended March 30, 2001. 18 NINE MONTHS OF FISCAL 2002 COMPARED WITH THE NINE MONTHS OF FISCAL 2001 Net Sales increased to $382.3 million for the nine months ended March 29, 2002 from $358.5 million for the nine months ended March 30, 2001, representing a $23.8 million or 6.6% increase. The Swan acquisition was the primary factor contributing to this gain. Cost of Sales increased to $285.6 million for the nine months ended March 29, 2002 from $275.1 million for the nine months ended March 30, 2001, an increase of $10.5 million. Expressed as a percentage of net sales, cost of sales decreased to 74.7% for the nine months ended March 29, 2002 from 76.8% for the nine months ended March 30, 2001. Lower resin costs and improved operating efficiencies accounted for the improvement in this ratio. Gross Profit, as a result, increased to $96.7 million or 25.3% of net sales for the nine months ended March 29, 2002 from $83.3 million or 23.2% of net sales for the nine months ended March 30, 2001. Selling, general and administrative expense increased to $50.3 million in the nine months ended March 29, 2002 compared to $45.1 million in the nine months ended March 30, 2001 primarily due to our Swan acquisition. The ratio of selling, general and administrative expense to net sales increased to 13.2% for the nine months ending March 29, 2002 from 12.6% in the comparable period of last year. Operating profit, as a result of the foregoing, increased to $46.4 million or 12.1% of net sales for the nine months ended March 29, 2002 from $38.2 million or 10.7% of net sales for the nine months ended March 30, 2001. Interest expense decreased to $53.4 million or 14.0% of net sales in the nine months ended March 29, 2002 from $57.7 million or 16.1% of net sales in the nine months ended March 30, 2001. The decrease was due to lower debt levels and lower interest rates. Income (loss) before income taxes, as a result, was a loss of ($10.9) million for the nine months ended March 29, 2002 compared to a loss of ($34.7) million for the nine months ended March 30, 2001. Income tax (benefit) was a credit of ($3.8) million for the nine months ended March 29, 2002, compared to a credit of ($15.3) million for the nine months ended March 30, 2001. The Company's effective tax rate was 35.0% for the nine months ended March 29, 2002 compared to 44.2% for the nine months ending March 30, 2001. Net income (loss), as a result, was a loss of ($7.1) million for the nine months ended March 29, 2002 compared with a loss of ($19.3) million for the nine months ended March 30, 2001. 19 LIQUIDITY AND CAPITAL RESOURCES Net cash used by operations for the nine months ended March 29, 2002 was $15.4 million compared with $16.9 million in the same period of the prior year. The increase of $1.5 million was primarily due to a normal seasonal inventory build-up at our Swan unit, partially offset by a lower seasonal inventory build-up at the rest of our garden hose unit compared to last year. Working capital on March 29, 2002 was $195.7 million compared to $199.1 million on June 29, 2001. As of March 29, 2002, the Company had an outstanding balance of $77.0 million under the $100.0 million revolving credit line. This represents an increase of $12.0 million from the outstanding balance as of June 29, 2001. On May 01, 2002, the company issued $40,000,000 12-3/4% Senior Subordinated Notes due 2010. The Company's capital expenditures for the nine months ended March 29, 2002 and March 30, 2001 were $12.3 million and $12.4 million respectively. The Company continues to expect that its principal uses of cash for the next several years will be acquisitions, debt service, capital expenditures and working capital requirements. Management believes that cash generated from operations plus funds available in the Company's credit facility will be sufficient to meet its needs and to provide it with the flexibility to make capital expenditures and acquisitions which management believes will provide an attractive return on investment. However, the probability exists that the Company may need additional financing to take advantage of all the acquisition opportunities that may arise in the next several quarters. There can be no assurance that such financing will be available in the amounts and terms acceptable to the Company. SEASONALITY The garden hose business is highly seasonal with approximately 75% of sales occurring in the spring and early summer months. This seasonality tends to have an impact on the company's financial results from quarter to quarter. ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is subject to market risk inherent in the Company's financial instruments and positions represents the potential loss arising from adverse changes in interest rates. At March 29, 2002 and June 29, 2001 the principal amount of the Company's aggregate outstanding variable rate indebtedness was $407,980 and $401,560 respectively. A hypothetical 1% adverse change in interest rates would have an annualized unfavorable impact of approximately $4,100 and $4,000 respectively on the Company's earnings and cash flows based upon these debt levels. To ameliorate these risks, in June 2000, the Company entered into interest rate Swap and Cap Agreements with a notional amount of $344,000 20 PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company is party to certain litigation in the ordinary course of business, none of which the Company believes is likely to have a material adverse effect on its consolidated financial position or results of operations. Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Securities holders Not applicable Item 5. Subsequent Events Item 6. Exhibits and Reports on Form 8-K (a) Reports on Form 8-K None 21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TEKNI-PLEX, INC. May 13, 2002 By: /s/ F. Patrick Smith ------------------------------------------ F. Patrick Smith Chairman of the Board and Chief Executive Officer By: /s/ Kenneth W.R. Baker ------------------------------------------ Kenneth W. R. Baker President and Chief Operating Officer By: /s/ James E.Condon ------------------------------------------ James E.Condon Vice President and Chief Financial Officer 22 EX-23.1 17 y61170exv23w1.txt CONSENT OF BDO SEIDMAN LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We hereby consent to the incorporation by reference in this Prospectus constituting part of this Form S-4 of our report dated September 20, 2001, except for Note 6 for which the date is October 4, 2001, relating to the consolidated financial statements of Tekni-Plex, Inc. appearing in the Company's annual report on Form 10-K. We also consent to the reference to us under the caption "Experts" in such Prospectus. /s/ BDO SEIDMAN, LLP BDO Seidman, LLP Woodbridge, NJ August 22, 2002 EX-25.1 18 y61170exv25w1.txt FORM T-1 EXHIBIT 25.1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 - -------------------------------------------------------------------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) HSBC BANK USA (Exact name of trustee as specified in its charter) New York 13-2774727 (Jurisdiction of incorporation (I.R.S. Employer or organization if not a U.S. Identification No.) national bank) 452 Fifth Avenue, New York, NY 10018-2706 (212) 525-5600 (Zip Code) (Address of principal executive offices) Warren L. Tischler, SVP HSBC Bank USA 452 Fifth Avenue New York, New York 10018-2706 Tel: (212) 525-1311 (Name, address and telephone number of agent for service) TEKNI-PLEX, INC.* (Exact name of obligor as specified in its charter) Delaware 22-3286312 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 260 North Denton Tap Road Coppell, Texas 75019 (972) 304-5077 (Zip Code) (Address of principal executive offices) 12-3/4% Series B Senior Subordinated Notes due 2010 Guarantees of 12-3/4% Series B Senior Subordinated Notes due 2010 (Title of Indenture Securities) *TABLE OF ADDITIONAL REGISTRANTS
State or Other Jurisdiction of I.R.S. Employer Incorporation or Identification Name, Address and Telephone Number Organization Number - ---------------------------------- ------------ ------ PureTec Corporation (1) Delaware 22-3376449 Plastic Specialties and Technologies, Inc. (1) Delaware 22-2743384 Plastic Specialties and Technologies Investments, Inc. (1) Delaware 22-2663552 Burlington Resins, Inc. (1) Delaware 22-3334106 Pure Tech APR, Inc. (1) New York 11-3065942 Coast Recycling North, Inc. (1) California 68-0200870 Distributors Recycling, Inc. New Jersey 22-2466975 REI Distributors, Inc. (1) New Jersey 22-2418824 Pure Tech Recycling of California (1) California 77-0356589 Alumet Smelting Corp (1) New Jersey 22-2054447 Tri-Seal Holdings, Inc. (1) Delaware 52-2141575 Natvar Holdings, Inc. (1) Delaware 22-3703725 TPI Acquisition Subsidiary, Inc. (1) Delaware 52-2340472 TP/Elm Acquisition Subsidiary, Inc. (1) Delaware 71-0891561
(1) The address of these additional registrants is: 201 Industrial Parkway, Somerville, New Jersey 08876. The telephone number of each is (908) 722-4800. General Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervisory authority to which it is subject. State of New York Banking Department. Federal Deposit Insurance Corporation, Washington, D.C. Board of Governors of the Federal Reserve System, Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. Yes. Item 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None Item 16. List of Exhibits
Exhibit - ------- T1A(i) (1) Copy of the Organization Certificate of HSBC Bank USA. T1A(ii) (1) Certificate of the State of New York Banking Department dated December 31, 1993 as to the authority of HSBC Bank USA to commence business as amended effective on March 29, 1999. T1A(iii) Not applicable. T1A(iv) (3) Copy of the existing By-Laws of HSBC Bank USA as amended on April 11, 2002. T1A(v) Not applicable. T1A(vi) (2) Consent of HSBC Bank USA required by Section 321(b) of the Trust Indenture Act of 1939. T1A(vii) Copy of the latest report of condition of the trustee (June 30, 2002), published pursuant to law or the requirement of its supervisory or examining authority. T1A(viii) Not applicable. T1A(ix) Not applicable. (1) Exhibits previously filed with the Securities and Exchange Commission with Registration No. 022-22429 and incorporated herein by reference thereto. (2) Exhibit previously filed with the Securities and Exchange Commission with Registration No. 33-53693 and incorporated herein by reference thereto. (3) Exhibit previously filed with the Securities and Exchange Commission with Registration No. 333-88532 and incorporated herein by reference thereto.
SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee, HSBC Bank USA, a banking corporation and trust company organized under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York and State of New York on the 22nd day of August, 2002. HSBC BANK USA By: /s/ Frank J. Godino -------------------- Frank J. Godino Vice President EXHIBIT T1A (vii) Board of Governors of the Federal Reserve System OMB Number: 7100-0036 Federal Deposit Insurance Corporation OMB Number: 3064-0052 Office of the Comptroller of the Currency OMB Number: 1557-0081 FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL Expires March 31, 2004 - -------------------------------------------------------------------------------- Please refer to page i, Table of Contents, for the required disclosure of estimated burden. 1 - -------------------------------------------------------------------------------- CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR A BANK WITH DOMESTIC AND FOREIGN OFFICES -- FFIEC 031 REPORT AT THE CLOSE OF BUSINESS JUNE 30, 2002 (19980930) ---------- (RCRI 9999) This report is required by law; 12 U.S.C. Section 324 (State member banks); 12 U.S.C. Section 1817 with branches and consolidated subsidiaries (State nonmember banks); and 12 U.S.C.Section 161 (National banks). NOTE: The Reports of Condition and Income must be signed by an authorized officer and the Report of Condition must be attested to by not less than two directors (trustees) for State nonmember banks and three directors for State member and National Banks. I, Gerald A. Ronning, Executive VP & Controller --------------------------------------------------- Name and Title of Officer Authorized to Sign Report Of the named bank do hereby declare that these Reports of Condition and Income (including the supporting schedules) have been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and are true to the best of my knowledge and believe. /s/ Gerald A. Ronning - ---------------------------------------------- Signature of Officer Authorized to Sign Report 8/15/02 - ---------------------------------------------- Date of Signature This report form is to be filed by banks in U.S. territories and possessions, Edge or Agreement subsidiaries, foreign branches, consolidated foreign subsidiaries, or International Banking Facilities. The Reports of Condition and Income are to be prepared in accordance with Federal regulatory authority instructions. We, the undersigned directors (trustees), attest to the correctness of this Report of Condition (including the supporting schedules) and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true and correct. /s/ Youssef Nasr - ---------------------------------------------- Director (Trustee) /s/ Bernard J. Kennedy - ---------------------------------------------- Director (Trustee) /s/ Sal H. Alfieri - ---------------------------------------------- Director (Trustee) SUBMISSION OF REPORTS Each Bank must prepare its Reports of Condition and Income either: (a) in electronic form and then file the computer data file directly with the banking agencies' collection agent, Electronic Data System Corporation (EDS), by modem or computer diskette; or b) in hard-copy (paper) form and arrange for another party to convert the paper report to automated for. That party (if other than EDS) must transmit the bank's computer data file to EDS. FDIC Certificate Number 0 0 5 8 9 (RCRI 9030) http://WWW.BANKING.US.HSBC.COM Primary Internet Web Address of Bank (Home Page), if any (TEXT 4087) (Example: www.examplebank.com) For electronic filing assistance, contact EDS Call report Services, 2150 N. Prospect Ave., Milwaukee, WI 53202, telephone (800) 255-1571. To fulfill the signature and attestation requirement for the Reports of Condition and Income for this report date, attach this signature page to the hard-copy f the completed report that the bank places in its files. HSBC Bank USA - ---------------------------------------------- Legal Title of Bank (TEXT 9010) Buffalo - ---------------------------------------------- City (TEXT 9130) N.Y. 14203 - -------------------------------------------------------------------------------- State Abbrev. (TEXT 9200) ZIP Code (TEXT 9220) Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency REPORT OF CONDITION Consolidated domestic subsidiaries HSBC Bank USA of Buffalo - ---------------------------------------------- Name of Bank City in the state of New York, at the close of business June 30, 2002
ASSETS Thousands of dollars ----------- Cash and balances due from depository institutions: a. Non-interest-bearing balances currency and coin $ 1,816,157 b. Interest-bearing balances 1,658,723 Held-to-maturity securities 3,669,450 Available-for-sale securities 12,554,394 Federal funds sold and securities purchased under agreements to resell: a. Federal funds sold in domestic offices 0 b. Securities purchased under agreements to resell 5,979,340 ----------- Loans and lease financing receivables: Loans and leases held for sale $ 2,553,658 ----------- Loans and leases net of unearned income $39,015,047 ----------- LESS: Allowance for loan and lease losses 538,987 ----------- Loans and lease, net of unearned income, allowance, and reserve $38,476,060 Trading assets 11,359,431 Premises and fixed assets 737,811 Other real estate owned 11,103 Investments in unconsolidated subsidiaries 246,227 Customers' liability to this bank on acceptances outstanding 93,300 Intangible assets: Goodwill 2,162,325 Intangible assets: Other intangible assets 479,872 Other assets 2,384,822 Total assets 84,182,673 ----------- LIABILITIES Deposits: In domestic offices 38,513,703 ----------- Non-interest-bearing 5,001,941 Interest-bearing 33,511,762 ----------- In foreign offices 17,807,757 ----------- Non-interest-bearing 426,703 Interest-bearing 17,381,054 -----------
Federal funds purchased and securities sold under agreements to repurchase: a. Federal funds purchased in domestic offices 1,176,485 b. Securities sold under agreements to repurchase 704,247 Trading Liabilities 6,301,519 Other borrowed money 8,535,736 Bank's liability on acceptances 93,300 Subordinated notes and debentures 1,548,908 Other liabilities 2,440,222 ----------- Total liabilities 77,121,877 ----------- Minority Interests in consolidated Subsidiaries 172 ----------- EQUITY CAPITAL Perpetual preferred stock and related surplus -- Common Stock 205,000 Surplus 6,440,465 Retained earnings 316,467 Accumulated other comprehensive income 98,692 Other equity capital components -- Total equity capital 7,060,624 Total liabilities, minority interests and equity capital 84,182,673 -----------
EX-99.1 19 y61170exv99w1.txt FORM OF LETTER OF TRANSMITTAL EXHIBIT 99.1 LETTER OF TRANSMITTAL FOR 12.75% SENIOR SUBORDINATED NOTES DUE 2010 OF TEKNI-PLEX, INC. PURSUANT TO THE EXCHANGE OFFER IN RESPECT OF ALL OF ITS OUTSTANDING 12.75% SENIOR SUBORDINATED NOTES DUE 2010 FOR 12.75% SERIES B SENIOR SUBORDINATED NOTES DUE 2010 --------------------- PURSUANT TO THE PROSPECTUS DATED , 2002 THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2002 UNLESS THE EXCHANGE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TO: HSBC BANK USA, EXCHANGE AGENT By Mail or Hand/Overnight Delivery: By Facsimile: HSBC Bank USA (718) 488-4488 One Hanson Place Attention: Paulette Shaw Brooklyn, New York, 11243 Confirm by Telephone: Attn: Paulette Shaw (718) 488-4475 Phone (718) 488-4475
--------------------- DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW NOTES FOR THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR OLD NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE. Capitalized terms used but not defined herein shall have the same meaning given them in the Prospectus (as defined below). As used herein, the term "holder" means a holder of Old Notes (as defined below), including any participant ("DTC Participant") in the book-entry transfer facility system of The Depository Trust Company ("DTC"), whose name appears on a security position listing as the owner of the Old Notes. As used herein, the term "certificates" means physical certificates representing Old Notes. To participate in the Exchange Offer (as defined below), holders must tender by (a) book-entry transfer pursuant to the procedures set forth in the Prospectus under "The Exchange Offer -- Book-Entry Transfer" or (b) forwarding certificates herewith. Holders who are DTC Participants tendering by book-entry transfer may execute such tender through the Automated Tender Offer Program ("ATOP") of DTC. A holder using ATOP should transmit its acceptance to DTC on or prior to the Expiration Date. DTC will verify such acceptance, execute a book-entry transfer of the tendered Old Notes into the account of HSBC Bank USA (the "Exchange Agent") at DTC and then send to the Exchange Agent a Book-Entry Confirmation (as defined below), including an agent's message (as defined below) confirming that DTC has received an express acknowledgment from such holder that such holder has received and agrees to be bound by this Letter of Transmittal and that the Company (as defined below) may enforce this Letter of Transmittal against such holder. The Book-Entry Confirmation must be received by the Exchange Agent in order for the tender relating thereto to be effective. Book-entry transfer to DTC in accordance with DTC's procedures does not constitute delivery of the Book-Entry Confirmation to the Exchange Agent. If the tender is not made pursuant to the book-entry transfer procedures, certificates, as well as this Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at its address set forth herein on or prior to the Expiration Date in order for such tender to be effective. Holders of Old Notes whose certificates for such Old Notes are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date or who cannot complete the procedures for book-entry transfer on or prior to the Expiration Date, must tender their Old Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures" in the Prospectus. The Company reserves the right, at any time or from time to time, to extend the Exchange Offer at its sole discretion, in which event the term "Expiration Date" shall mean the latest time and date to which the Exchange Offer is extended. The Company shall notify the holders of the Old Notes of any extension by means of a press release or other public announcement prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. 2 LIST BELOW THE OLD NOTES TO WHICH THIS LETTER OF TRANSMITTAL RELATES. IF THE SPACE PROVIDED BELOW IS INADEQUATE, LIST THE CERTIFICATE NUMBERS, PRINCIPAL AMOUNTS AND NUMBER OF BENEFICIAL HOLDERS ON A SEPARATELY EXECUTED SCHEDULE AND AFFIX THE SCHEDULE TO THIS LETTER OF TRANSMITTAL. SEE INSTRUCTION 3.
- -------------------------------------------------------------------------------------------------------------------------- DESCRIPTION OF OLD NOTES TENDERED - -------------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT OF NUMBER OF OLD NOTES TENDERED BENEFICIAL HOLDERS NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE (IF LESS THAN ALL ARE FOR WHICH OLD (PLEASE FILL IN, IF BLANK) NUMBER(S)* TENDERED)** NOTES ARE HELD - -------------------------------------------------------------------------------------------------------------------------- $ ------------------------------------------------------- $ ------------------------------------------------------- $ ------------------------------------------------------- $ ------------------------------------------------------- $ ------------------------------------------------------- $ ------------------------------------------------------- $ ------------------------------------------------------- $ ------------------------------------------------------- $ ------------------------------------------------------- $ ------------------------------------------------------- $ ------------------------------------------------------- $ ------------------------------------------------------- $ ------------------------------------------------------- TOTAL PRINCIPAL AMOUNT OF OLD NOTES TENDERED $ - -------------------------------------------------------------------------------------------------------------------------- * NEED NOT BE COMPLETED BY HOLDERS TENDERING BY BOOK-ENTRY TRANSFER. ** OLD NOTES MAY BE TENDERED IN THE PRINCIPAL AMOUNT OF $1,000 AND INTEGRAL MULTIPLES OF $1,000 IN EXCESS THEREOF; PROVIDED THAT IF FEWER THAN ALL OF THE OLD NOTES OF A HOLDER ARE TENDERED FOR EXCHANGE, THE UNTENDERED PRINCIPAL AMOUNT OF THE HOLDER'S REMAINING OLD NOTES MUST BE $100,000 OR ANY INTEGRAL MULTIPLE OF $1,000 IN EXCESS THEREOF. ALL OLD NOTES HELD SHALL BE DEEMED TENDERED UNLESS A LESSER NUMBER IS SPECIFIED IN THUS COLUMN. SEE INSTRUCTION 4. - --------------------------------------------------------------------------------------------------------------------------
3 (BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS (DEFINED IN INSTRUCTION 1) ONLY) [ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution: DTC Account Number: Transaction Code Number: [ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s) of Old Notes: Window Ticket Number (if any): Date of Execution of Notice of Guaranteed Delivery: Name of Institution which Guaranteed Delivery: IF GUARANTEED DELIVERY IS TO BE MADE BY BOOK-ENTRY TRANSFER: Name of Tendering Institution: DTC Account Number: Transaction Code Number: [ ] CHECK HERE IF OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER AND NON- EXCHANGED OR UNTENDERED OLD NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE. [ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO HOLDS OLD NOTES ACQUIRED FOR YOUR OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE ADDITIONAL COPIES OF THE PROSPECTUS AND COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO FOR USE IN CONNECTION WITH RESALES OF NEW NOTES RECEIVED FOR YOUR OWN ACCOUNT IN EXCHANGE FOR SUCH OLD NOTES. Name: Address: Area Code and Telephone Number: Contact Person: Principal Amount of Old Notes so Held: $ 4 Ladies and Gentlemen: The undersigned hereby tenders to Tekni-Plex, Inc., a Delaware corporation (the "Company"),the aggregate principal amount of Old Notes indicated in this Letter of Transmittal, upon the terms and subject to the conditions set forth in the Company's prospectus dated , 2002 (as the same may be amended or supplemented from time to time, the "Prospectus"), receipt of which is hereby acknowledged, and in this Letter of Transmittal, which together constitute the Company's offer (the "Exchange Offer") to exchange $40 million principal amount of its 12.75% Series B Senior Subordinated Notes due 2010, which have been registered under the Securities Act of 1933, as amended (the "New Notes"), for $40 million principal amount of its issued and outstanding 12.75% Senior Subordinated Notes due 2010 (the "Old Notes" and, together with the "New Notes", the "Notes"). Subject to, and effective upon, the acceptance for exchange of all or any portion of the Old Notes tendered herewith in accordance with the terms and conditions of the Exchange Offer (including, if the Exchange Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to such Old Notes as are being tendered hereby and hereby irrevocably constitutes and appoints the Exchange Agent as attorney-in-fact of the undersigned with respect to such Old Notes (with full knowledge that the Exchange Agent is also acting as agent of the Company in connection with the Exchange Offer), with full power of substitution (such power of attorney being an irrevocable power coupled with an interest), subject only to the right of withdrawal described in the Prospectus, to (i) deliver certificates for Old Notes to the Company together with all accompanying evidences of transfer and authenticity to, or upon the order of, the Company, upon receipt by the Exchange Agent, as the undersigned's agent, of the New Notes to be issued in exchange for such Old Notes, (ii) present certificates for such Old Notes for transfer, and to transfer the Old Notes on the books of the Company, and (iii) receive for the account of the Company all benefits and otherwise exercise all rights of beneficial ownership of such Old Notes, all in accordance with the terms and conditions of the Exchange Offer. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Old Notes tendered hereby and to acquire New Notes issuable upon exchange of such tendered Old Notes, and that, when the Old Notes are accepted for exchange, the Company will acquire good, marketable and unencumbered title thereto, free and clear of all security interests, liens, restrictions, charges, encumbrances, conditional sale agreements or other obligations relating to their sale or transfer, and not subject to any adverse claim when the same are accepted by the Company. The undersigned will, upon request, execute and deliver any additional documents deemed by the Company or the Exchange Agent to be necessary or desirable to complete the exchange, assignment and transfer of the Old Notes tendered hereby, and the undersigned will comply with any obligations it may have under the registration rights agreement (as set forth in the Prospectus). The undersigned further agrees that acceptance of any tendered Old Notes by the Company and the issuance of New Notes in exchange therefor shall constitute performance in full by the Company of its obligations under the registration rights agreement and that the Company shall have no further obligations or liabilities thereunder (except in certain limited circumstances). The undersigned hereby further represents that any New Notes acquired in exchange for Old Notes tendered hereby will have been acquired in the ordinary course of business of the person receiving such New Notes, whether or not such person is the undersigned, that neither the holder of such Old Notes nor any such other person is participating, or intends to participate, or has an arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act of 1933 (as amended, the "Securities Act")) of such New Notes and that neither the holder of such Old Notes nor any such other person is an "affiliate," as defined in Rule 405 under the Securities Act, of the Company. The undersigned also acknowledges that this Exchange Offer is being made in reliance on interpretations by the staff of the Securities and Exchange Commission (the "SEC"), as set forth in no-action letters issued to third parties, that the New Notes issued in exchange for the Old Notes pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the provisions of the Securities Act), provided that such New Notes are acquired in the ordinary course of such holders' business and such holders are not participating, do not intend to participate, and have no arrangement or understanding with any person to participate in the distribution of such New Notes. However, the Company does not intend to request the SEC to consider, and the SEC has not considered, the Exchange Offer in the context of a no-action letter, and there can be no assurance that the staff of the SEC would make a similar determination 5 with respect to the Exchange Offer as in other circumstances. If any holder is an affiliate of the Company, or is engaged in or intends to engage in or has any arrangement or understanding with respect to the distribution of the New Notes to be acquired pursuant to the Exchange Offer, such holder (i) could not rely on the applicable interpretations of the staff of the SEC and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes acquired as a result of market-making or other trading activities (a "Participating Broker-Dealer"), it represents that the Old Notes to be exchanged for the New Notes were acquired by it as a result of market-making or other trading activities and acknowledges that it will deliver a Prospectus in connection with any resale of such New Notes; however, by so acknowledging and by delivering a Prospectus, such Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The Company has agreed that, subject to the provisions of the registration rights agreement, the Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of New Notes received in exchange for Old Notes which were acquired by such Participating Broker-Dealer for its own account as a result of market-making or other trading activities, for a period ending 180 days after the Expiration Date or, if earlier, when all such New Notes have been disposed of by such Participating Broker-Dealer. Any person, including any Participating Broker-Dealer, who is an "affiliate" may not rely on such interpretive letters and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. In that regard, each Participating Broker-Dealer by tendering such Old Notes and executing this Letter of Transmittal, agrees that, upon receipt of notice from the Company of the occurrence of any event or the discovery of any fact which makes any statement contained or incorporated by reference in the Prospectus untrue in any material respect or which causes the Prospectus to omit to state a material fact necessary in order to make the statements contained or incorporated by reference therein, in light of the circumstances under which they were made, not misleading, such Participating Broker-Dealer will suspend the sale of New Notes pursuant to the Prospectus until the Company has amended or supplemented the Prospectus to correct such misstatement or omission and has furnished copies of the amended or supplemented Prospectus to the Participating Broker-Dealer or the Company has given notice that the sale of the New Notes may be resumed, as the case may be. If the Company gives such notice to suspend the sale of the New Notes, it shall extend the 180-day period referred to above during which Participating Broker-Dealers are entitled to use the Prospectus in connection with the resale of New Notes by the number of days during the period from and including the date of the giving of such notice to and including the date when Participating Broker-Dealers shall have received copies of the supplemented or amended Prospectus necessary to permit resales of the New Notes or to and including the date on which the Company has given notice that the sale of New Notes may be resumed, as the case may be. The undersigned will, upon request, execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the sale, assignment and transfer of the Old Notes tendered hereby. All authority conferred or agreed to be conferred in this Letter of Transmittal and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in "The Exchange Offer -- Withdrawal of Tenders" section of the Prospectus. Holders of Old Notes whose Old Notes are accepted for exchange will not receive any interest on such Old Notes, and the undersigned hereby waives the right to receive any interest on such Old Notes in connection with the Exchange Offer. The name(s) and address(es) of the registered holder(s) of the Old Notes tendered hereby should be printed above in the box entitled "Description of Old Notes Tendered," if they are not already set forth in such box, as they appear on the certificates representing such Old Notes. The certificate number(s) of the Old Notes that the undersigned wishes to tender should be indicated in the appropriate boxes above. If tendered Old Notes are not exchanged pursuant to the Exchange Offer for any reason, or if certificates are submitted for more Old Notes than are tendered or accepted for exchange, certificates of such unexchanged or untendered Old Notes will be returned (or, in the case of Old Notes tendered by book-entry transfer, such Old Notes will be credited to an account maintained at DTC), without expense to the tendering holder, promptly following the expiration or termination of the Exchange Offer. 6 The undersigned recognizes that, under certain circumstances set forth in the Prospectus, the Company may not be required to accept for exchange any of the Old Notes tendered hereby. Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" below, the undersigned hereby directs that the New Notes be issued in the name(s) of the undersigned or, in the case of a book-entry transfer of Old Notes, that such New Notes be credited to the account indicated above maintained at DTC. If applicable, substitute certificates representing Old Notes not exchanged or not accepted for exchange will be issued to the undersigned or, in the case of a book-entry transfer of Old Notes, will be credited to the account indicated above maintained at DTC. Similarly, unless otherwise indicated under "Special Delivery Instructions" below, the undersigned hereby directs that the New Notes be delivered to the undersigned at the address shown above in the box entitled "Description of Old Notes Tendered." 7 HOLDER(S) SIGN HERE (SEE INSTRUCTIONS 2, 5 AND 6) (PLEASE COMPLETE SUBSTITUTE FORM W-9 ON PAGE 16) (NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2) - -------------------------------------------------------------------------------- Must be signed by registered holders exactly as name(s) appear(s) on certificates for the Old Notes hereby tendered or on a security position listing, or by any persons authorized to become the registered holders by endorsements and documents transmitted herewith (including such opinions of counsel, certifications and other information as may be required by the Company, the Trustee for the Old Notes, or the Exchange Agent to comply with the restrictions on transfer applicable to the Old Notes). If signature is by an attorney-in-fact, executor, administrator, trustee, guardian, officer of a corporation or another acting in a fiduciary or representative capacity, please set forth the signer's full title. See Instruction 5. - -------------------------------------------------------------------------------- (SIGNATURES OF HOLDERS) Date: - ------------------------------------ Name: - -------------------------------------------------------------------------------- (PLEASE PRINT) Capacity (full title): - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number: - -------------------------------------------------------------------------------- Taxpayer Identification or Social Security No.: - --------------------------------------------------------------------- GUARANTEE OF SIGNATURE (SEE INSTRUCTIONS 2 AND 5) - -------------------------------------------------------------------------------- Authorized Signature: - -------------------------------------------------------------------------------- Date: - ------------------------------------ Name of Firm: - -------------------------------------------------------------------------------- (PLEASE PRINT) Capacity (full title): - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number: - -------------------------------------------------------------------------------- 8 SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 4, 5 AND 6) To be completed ONLY if the New Notes and/or any Old Notes that are not tendered are to be issued in the name of someone other than the registered holder of the Old Notes whose name appears above. Issue [ ] New Notes [ ] Old Notes not Tendered to: Name: - ---------------------------------------------- (PLEASE PRINT) Address: - -------------------------------------------- - ------------------------------------------------------ (INCLUDE ZIP CODE) - ------------------------------------------------------ (AREA CODE AND TELEPHONE NUMBER) - ------------------------------------------------------ (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 4, 5 AND 6) To be completed ONLY if the New Notes and/or any Old Notes that are not tendered are to be sent to someone other than the registered holder of the Old Notes whose name appears above, or to such registered holder at an address other than that shown above. Mail [ ] New Notes [ ] Old Notes not Tendered to: Name: - ---------------------------------------------- (PLEASE PRINT) Address: - -------------------------------------------- - ------------------------------------------------------ (INCLUDE ZIP CODE) - ------------------------------------------------------ (AREA CODE AND TELEPHONE NUMBER) - ------------------------------------------------------ (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER) 9 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER OF TEKNI-PLEX, INC. TO EXCHANGE ITS 12.75% SERIES B SENIOR SUBORDINATED NOTES DUE 2010 FOR ALL OF ITS OUTSTANDING 12.75% SENIOR SUBORDINATED NOTES DUE 2010. 1. Book-Entry Transfer; Delivery of this Letter of Transmittal and Notes; Guaranteed Delivery Procedures. To tender in the Exchange Offer, holders must tender by (a) forwarding certificates herewith or (b) book-entry transfer, pursuant to the procedures set forth in "The Exchange Offer -- Procedures for Tendering" and "-- Book-Entry Transfer" in the Prospectus. Holders who are DTC Participants tendering by book-entry transfer may execute such tender through DTC's ATOP system. A holder using ATOP should transmit its acceptance to DTC on or prior to the Expiration Date. DTC will verify such acceptance, execute a book-entry transfer of the tendered Old Notes into the Exchange Agent's account at DTC and then send to the Exchange Agent a Book-Entry Confirmation, including an agent's message confirming that DTC has received an express acknowledgment from such holder that such holder has received and agrees to be bound by this Letter of Transmittal and that the Company may enforce this Letter of Transmittal against such holder. The Book-Entry Confirmation must be received by the Exchange Agent in order for the tender relating thereto to be effective. Book-entry transfer to DTC in accordance with DTC's procedures does not constitute delivery of the Book-Entry Confirmation to the Exchange Agent. The term "Book-Entry Confirmation" means a timely confirmation of a book-entry transfer of Old Notes into the Exchange Agent's account at DTC. The term "agent's message" means a message, transmitted by DTC to and received by the Exchange Agent and forming a part of a Book-Entry Confirmation, which states that DTC has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by the Letter of Transmittal (including the representations contained herein) and that the Company may enforce the Letter of Transmittal against such participant. If the tender is not made pursuant to the book-entry transfer procedures, certificates, as well as this Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at its address set forth herein on or prior to the Expiration Date in order for such tender to be effective. Old Notes may be tendered in the principal amount of $1,000 and integral multiples of $1,000 in excess thereof, provided that if fewer than all of the Old Notes of a holder are tendered for exchange, the untendered principal amount of the holder's remaining Old Notes must be $100,000 or any integral multiple of $1,000 in excess thereof. Holders of Old Notes whose certificates for Old Notes are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Old Notes pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to such procedures, (i) such tender must be made through an Eligible Institution (as defined below), (ii) prior to the Expiration Date, the Exchange Agent must receive from such Eligible Institution (by facsimile transmission, mail or hand delivery) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Company, setting forth the name and address of the holder of Old Notes and the amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange ("NYSE") trading days after the Expiration Date, the certificates for all physically tendered Old Notes, or a Book-Entry Confirmation, and any other documents required by this Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent, and (iii) a properly executed Letter of Transmittal, as well as the certificates for all physically tendered Old Notes in proper form for transfer or Book-Entry Confirmation, as the case may be, and all other documents required by this Letter of Transmittal, must be received by the Exchange Agent within three NYSE trading days after the Expiration Date. The Notice of Guaranteed Delivery must be delivered by hand, overnight courier or mail, or transmitted by facsimile transmission, to the Exchange Agent on or prior to the Expiration Date, and must include a guarantee by an Eligible Institution in the form set forth in such notice. For Old Notes to be properly tendered pursuant to the guaranteed delivery procedure, the Exchange Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration Date. As used herein and in the Prospectus, "Eligible Institution" means a firm or other entity identified in Rule 17Ad-15 under the Securities Exchange Act of 1934 as "an eligible guarantor institution," including (as such terms are defined therein) (i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or government securities broker or dealer; (iii) a credit 10 union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association that is a participant in a Securities Transfer Association. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING HOLDERS, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. DO NOT SEND THIS LETTER OF TRANSMITTAL OR ANY OLD NOTES TO THE COMPANY. The Company will not accept any alternative, conditional or contingent tenders. Each tendering holder, by book-entry transfer through ATOP or execution of a Letter of Transmittal (or facsimile thereof), waives any right to receive any notice of the acceptance of such tender. 2. Guarantee of Signatures. No signature guarantee on this Letter of Transmittal is required if: (i) this Letter of Transmittal is signed by the registered holder (which term, for purposes of this document, shall include any participant in DTC whose name appears on a security position listing as the owner of the Old Notes) of Old Notes tendered herewith, unless such holder has completed either the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" above; or (ii) such Old Notes are tendered for the account of a firm that is an Eligible Institution. In all other cases, an Eligible Institution must guarantee the signature on this Letter of Transmittal. See Instruction 5. 3. Inadequate Space. If the space provided in the box captioned "Description of Old Notes Tendered" is inadequate, the certificate number(s) and/or the principal amount of Old Notes and any other required information should be listed on a separate signed schedule which is attached to this Letter of Transmittal. 4. Partial Tenders (Not Applicable to Holders of Old Notes Who Tender by Book-Entry Transfer); Withdrawal Rights. Tenders of Old Notes will be accepted only in the principal amount of $1,000 and integral multiples of $1,000 in excess thereof, provided that if fewer than all of the Old Notes of a holder are tendered or exchanged, the untendered or unexchanged principal amount of the holder's remaining Old Notes must be $100,000 or any integral multiple of $1,000 in excess thereof. If less than all of the Old Notes evidenced by a submitted certificate are to be tendered, the tendering holder(s) should fill in the aggregate principal amount of Old Notes to be tendered in the box above entitled "Description of Old Notes Tendered -- Principal Amount of Old Notes Tendered (If Less Than All Are Tendered)." A reissued certificate representing the balance of untendered Old Notes will be sent to such tendering holder, unless otherwise provided in the appropriate box on this Letter of Transmittal, promptly after the Expiration Date. ALL OF THE OLD NOTES DELIVERED TO THE EXCHANGE AGENT WILL BE DEEMED TO HAVE BEEN TENDERED UNLESS OTHERWISE INDICATED. Except as otherwise provided herein, tenders of Old Notes may be withdrawn at any time prior to the expiration date. In order for a withdrawal to be effective prior to that time, a written or facsimile transmission notice of withdrawal must be timely received by the Exchange Agent at one of its addresses set forth above prior to the Expiration Date. Any such notice of withdrawal must specify the name of the person having deposited the Old Notes to be withdrawn, the aggregate principal amount of Old Notes to be withdrawn and (if certificates for such Old Notes have been tendered) the name of the registered holder of the Old Notes as set forth on the certificate for the Old Notes, if different from that of the person who tendered such Old Notes. If certificates for the Old Notes have been delivered or otherwise identified to the Exchange Agent, then prior to the physical release of such certificates for the Old Notes, the tendering holder must submit the serial numbers shown on the particular certificates for the Old Notes to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution, except in the case of Old Notes tendered for the account of an Eligible Institution. If Old Notes have been tendered pursuant to the procedures for book-entry transfer set forth in "The Exchange Offer -- Book-Entry Transfer" section of the Prospectus, the notice of withdrawal must specify the name and number of the account at the book-entry transfer facility system of DTC to be credited with the withdrawal 11 of Old Notes, in which case a notice of withdrawal will be effective if delivered to the Exchange Agent by written or facsimile transmission. Withdrawals of tenders of Old Notes may not be rescinded. Old Notes properly withdrawn will not be deemed to have been validly tendered for purposes of the Exchange Offer, and no New Notes will be issued with respect thereto unless the Old Notes so withdrawn are validly retendered. Properly withdrawn Old Notes may be retendered at any subsequent time on or prior to the Expiration Date by following the procedures described in the Prospectus under "The Exchange Offer -- Procedures for Tendering." All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by the Company, in its sole discretion, whose determination shall be final and binding on all parties. Neither the Company, any employees, agents, affiliates or assigns of the Company, the Exchange Agent nor any other person shall be under any duty to give any notification of any irregularities in any notice of withdrawal or incur any liability for failure to give such notification. Any Old Notes which have been tendered but which are withdrawn will be returned to the holder thereof without cost to such holder as promptly as practicable after withdrawal. 5. Signatures on this Letter of Transmittal; Bond Powers and Endorsements; Guarantee of Signatures. If this Letter of Transmittal is signed by the holder of the Old Notes tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates or on a securities position listing without any change whatsoever. If any tendered Old Notes are owned of record by two or more joint owners, all of such owners must sign this Letter of Transmittal. If any tendered Old Notes are registered in different names on several certificates or securities positions listings, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations. When this Letter of Transmittal is signed by the holder or holders of the Old Notes specified herein and tendered hereby, no endorsements of certificates or separate bond powers are required. If, however, the New Notes are to be issued, or any untendered Old Notes are to be reissued, to a person other than the holder, then endorsements of any certificates transmitted hereby or separate bond powers are required. Signatures on such certificate(s) must be guaranteed by an Eligible Institution. In connection with any tender of Old Notes in definitive certificated form, if this Letter of Transmittal is signed by a person other than the registered holder or holders of any certificate(s) specified herein, such certificate(s) must be endorsed or accompanied by appropriate bond powers, in either case signed exactly as the name or names of the registered holder or holders appear(s) on the certificate(s), and the signatures on such certificate(s) must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, evidence satisfactory to the Company of their authority to so act must be submitted. Endorsements on certificates for Old Notes or signatures on bond powers required by this Instruction 5 must be guaranteed by an Eligible Institution. 6. Special Issuance and Delivery Instructions. If New Notes are to be issued in the name of a person other than the registered holder, or if New Notes are to be sent to someone other than the registered holder or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Certificates for Old Notes not exchanged will be returned by mail or, if tendered by book-entry transfer, by crediting the account indicated above maintained at DTC unless the appropriate boxes on this Letter of Transmittal are completed. See Instruction 4. 7. Tax Identification Number. Under U.S. federal income tax law, a holder whose tendered Old Notes are accepted for exchange is required to provide the Exchange Agent (as payor) with such holder's correct taxpayer identification number ("TIN") on the Substitute Form W-9 below which, in the case of a tendering holder who is an individual, is his or her Social Security Number. In the case of a tendering holder who is an individual who does not have and is not eligible to obtain a Social Security Number (e.g., a resident alien), the correct taxpayer identification number is such holder's IRS individual taxpayer identification number ("ITIN"). If the Exchange Agent is not provided with the correct TIN, the Internal Revenue Service (the "IRS") may subject the holder or other payee to a $50 penalty. In 12 addition, payments to such holders or other payees with respect to Old Notes exchanged pursuant to the Exchange Offer may be subject to 30% backup withholding. The box in Part 3 of the Substitute Form W-9 should be checked if the tendering holder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the holder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Exchange Agent will withhold 30% of all payments made prior to the time a properly certified TIN is provided to the Exchange Agent. The Exchange Agent will retain such amounts withheld during the 60 day period following the date of the Substitute Form W-9. If the holder furnishes the Exchange Agent with its TIN within 60 days after the date of the Substitute Form W-9, the amounts retained during the 60 day period will be remitted to the holder and no further amounts shall be retained or withheld from payments made to the holder thereafter. If, however, the holder has not provided the Exchange Agent with its TIN within such 60 day period, amounts withheld will be remitted to the IRS as backup withholding. In addition, 30% of all payments made thereafter will be withheld and remitted to the IRS until a correct TIN is provided. The holder is required to give the Exchange Agent the TIN (e.g., social security number, employer identification number or IRS individual taxpayer identification number) of the registered owner of the Old Notes or of the last transferee appearing on the transfers attached to, or endorsed on, the Old Notes. If the Old Notes are registered in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. Certain holders (including, among others, corporations, financial institutions and certain foreign persons) may not be subject to these backup withholding requirements. Such holders should nevertheless complete the attached Substitute Form W-9 below, and write "exempt" on the face thereof, to avoid possible erroneous backup withholding. A foreign person may qualify as an exempt recipient by submitting a properly completed IRS Form W-8 (Certificate of Foreign Status), signed under penalties of perjury, attesting to that holder's exempt status. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional instructions. 8. Transfer Taxes. The Company will pay all transfer taxes, if any, applicable to the transfer of Old Notes to it or its order pursuant to the Exchange Offer. If, however, New Notes and/or substitute Old Notes not exchanged are to be delivered to, or are to be registered or issued in the name of, any person other than the holder of the Old Notes tendered hereby, or if tendered Old Notes are registered in the name of any person other than the person signing this Letter of Transmittal, or if a transfer tax is imposed for any reason other than the transfer of Old Notes to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering holder. EXCEPT AS PROVIDED IN THIS INSTRUCTION 8, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES SPECIFIED IN THIS LETTER OF TRANSMITTAL. 9. Determination of Validity. The Company will determine, in its sole discretion, all questions as to the form of documents, validity, eligibility (including time of receipt) and acceptance for exchange of any tender of Old Notes, which determination shall be final and binding on all parties. The Company reserves the absolute right to reject any and all tenders determined by it not to be in proper form or the acceptance of which, or exchange for which, may, in the view of counsel to the Company, be unlawful. The Company also reserves the absolute right, subject to applicable law, to waive any of the conditions of the Exchange Offer set forth in the Prospectus under the caption "The Exchange Offer" or any conditions or irregularity in any tender of Old Notes of any particular holder whether or not similar conditions or irregularities are waived in the case of other holders. The Company's interpretation of the terms and conditions of the Exchange Offer (including this Letter of Transmittal and the instructions hereto) will be final and binding. No tender of Old Notes will be deemed to have been validly made until all irregularities with respect to such tender have been cured or waived. Although the Company intends to notify holders of defects or irregularities with respect to tenders of Old Notes, neither the Company, any employees, agents, affiliates or assigns of the Company, the Exchange Agent, nor any other person shall be under any duty to give notification of any irregularities in tenders or incur any liability for failure to give such notification. 13 10. No Conditional Tenders. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Old Notes, by execution of this Letter of Transmittal, shall waive any right to receive notice of the acceptance of their Old Notes for exchange. Neither the Company, the Exchange Agent nor any other person is obligated to give notice of any defect or irregularity with respect to any tender of Old Notes nor shall any of them incur any liability for failure to give any such notice. 11. Lost, Stolen or Destroyed Old Notes. If any certificates representing Old Notes have been lost, destroyed or stolen, the holder should promptly notify the Exchange Agent. The holder will then be instructed as to the steps that must be taken in order to replace the certificates. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost, destroyed or stolen certificates have been followed. 12. Requests for Assistance or Additional Copies. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus, the Notice of Guaranteed Delivery and this Letter of Transmittal, may be directed to the Exchange Agent, at the address and telephone number indicated on the front of this Letter of Transmittal. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF OR AGENT'S MESSAGE IN LIEU THEREOF) AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE. 14 TO BE COMPLETED BY ALL TENDERING HOLDERS (SEE INSTRUCTION 7)
- ------------------------------------------------------------------------------------------------------------------------ PAYER'S NAME: HSBC BANK USA - ------------------------------------------------------------------------------------------------------------------------ SUBSTITUTE PART 1 -- Enter your TIN in the appropriate Social Security Number, Employer FORM W-9 box. For individuals, this is your social identification number OR IRS DEPARTMENT OF THE TREASURY security number (SSN). For individuals who individual taxpayer identification INTERNAL REVENUE SERVICE do not have and are not eligible to obtain number: PAYER'S REQUEST FOR TAXPAYER a Social Security Number, this is your IRS IDENTIFICATION NUMBER (TIN) individual taxpayer identification number (ITIN). For other entities, it is your employer identification number (EIN). ---------------------------------------------------------------------------------- PART 2 -- CERTIFICATION -- Under penalties If exempt recipient, write "EXEMPT" of perjury, I certify that: (1) The number in the space below. See the shown on this form is my correct Taxpayer accompanying Guidelines for Identification Number (or I am waiting for Certification of Taxpayer a number to be issued to me) and (2) I am Identification Number on Substitute not subject to backup withholding either Form W-9. because (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. ---------------------------------------------------------------------------------- CERTIFICATION INSTRUCTIONS -- You must PART 3 -- cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because you Awaiting TIN [ ] have failed to report interest or dividends on your tax return. However, if after being notified by the IRS that you are subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding do no cross out such item (2). - ------------------------------------------------------------------------------------------------------------------------ THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING. SIGNATURE ---------------------------------------- DATE -------------------- NAME ----------------------------------------------------------------------------------------------------------------------- (PLEASE PRINT) BUSINESS NAME ----------------------------------------------------------------------------------------------------------------------- (IF DIFFERENT) (PLEASE PRINT) ADDRESS ----------------------------------------------------------------------------------------------------------------------- (PLEASE PRINT) - ------------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 30% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9 15 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 30% of all reportable payments made to me will be withheld, but that such amounts will be refunded to me if I then provide a Taxpayer Identification Number within sixty (60) days. Signature ---------------------------------------- Date -------------------- Name - -------------------------------------------------------------------------------- (PLEASE PRINT) Address - -------------------------------------------------------------------------------- (PLEASE PRINT) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 16 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 HOW TO GET A TIN If you don't have a taxpayer identification number (a "TIN"), apply for one immediately. To apply, get Form SS-5, Application for a Social Security Number Card (for individuals), from your local office of the Social Security Administration, or Form SS-4, Application for Employer Identification Number (for business and all other entities), from your local IRS office. For individuals who do not have and are not eligible to obtain a Social Security Number, apply for an IRS taxpayer identification number on Form W-7 which is available from your local IRS office. If you do not have a TIN, write "Applied For" in the space for the TIN in Part I, sign and date the form, and give it to the requester. Generally, you will then have 60 days to get a TIN and give it to the requester. If the requester does not receive your TIN within 60 days, backup withholding, if applicable, will begin and continue until you furnish your TIN. NOTE: Writing "Applied For" on the form means that you have already applied for a TIN or that you intend to apply for one soon. As soon as you receive your TIN, complete a Form W-9, include your TIN, sign and date the form, and give it to the requester. SPECIFIC INSTRUCTIONS NAME. If you are an individual, you must generally enter the name shown on your social security card. However, if you have changed your last name, for instance, due to marriage, without informing the Social Security Administration of the name change, please enter your first name, the last name shown on your social security card, and your new last name. SOLE PROPRIETOR. You must enter your individual name (enter either your social security number ("SSN") or your employer identification number ("EIN") in Part 1). You may also enter your business name or "doing business as" name on the business name line. Enter your name as shown on your social security card and business name as it was used to apply for your EIN on Form SS-4. PART I -- TIN You must enter your TIN in the appropriate box. If you are a sole proprietor, you may enter either your SSN or your EIN. Also see the chart on the attached page for further clarification of name and TIN combinations. If you do not have a TIN, follow the instructions under "How to Get a TIN" above. PART II -- FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING Individuals (including sole proprietors) are not exempt from backup withholding. Corporations are exempt from backup withholding for certain payments. If you are exempt from backup withholding, you should still complete this form to avoid possible erroneous backup withholding. Enter your correct TIN in Part I, write "Exempt" in the space provided, and sign and date the form. If you are a nonresident or a foreign entity not subject to backup withholding, give the requester a completed Form W-8, Certificate of Foreign Status. The following is a list of payees exempt from backup withholding. For interest and dividends, all listed payees are exempt except the payee in item (ix). For broker transactions, payees listed in items (i) through (xiii), and a person registered under the Investment Advisors Act of 1940 who regularly acts as a broker are exempt. (i) a corporation; (ii) an organization exempt from tax under Section 501(a) of the Internal Revenue Code of 1986, as amended (the "Code"), or an individual retirement account, or a custodial account under Section 403(b)(7) of the Code if the account satisfies the requirements of Section 401(f)(2) of the Code; (iii) the United States or any of its agencies or instrumentalities; (iv) a state, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities; (v) a foreign government or any of its political subdivisions, agencies or instrumentalities; (vi) an international organization or any of its agencies or instrumentalities; (vii) a foreign central bank of issue; (viii) a dealer in securities or commodities required to register in the United States or a possession of the United States; (ix) a futures commission merchant registered with the Commodity Futures Trading Commission; (x) a real estate investment trust; (xi) an entity registered at all times during the tax year under the Investment Company Act of 1940; (xii) a common trust fund operated by a bank under Section 584(a) of the Code; (xiii) a financial institution; (xiv) a middleman known in the investment community as a nominee or who is listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee List; or (xv) a trust exempt from tax under Section 664 or described in Section 4947. PRIVACY ACT NOTICE -- Section 6109 requires to give your TIN to persons who must report certain payments to the IRS. The IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file certain tax returns. Payers must generally withhold 30% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail to furnish your TIN to a requester, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you make a false statement with no reasonable basis which results in no backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. 17 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER NAME AND IDENTIFICATION NUMBER TO GIVE THE REQUESTER. -- Social Security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the requester.
- ------------------------------------------------------------ GIVE THE SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF -- - ------------------------------------------------------------ 1. An individual's account The individual 2. Two or more individuals (joint The actual owner of account) the account or, if combined funds, the first individual on the account(1) 3. Husband and wife (joint account) The actual owner of the account or, if joint funds, the first individual on the account(1) 4. Custodian account of a minor The minor(2) (Uniform Gift to Minors Act) 5. Adult and minor (joint account) The adult or, if the minor is the only contributor, the minor(1) 6. Account in the name of guardian or The ward, minor, or committee for a designated ward, incompetent minor, or incompetent person person(3) 7. a. The usual revocable savings The grantor- trust account (grantor is also trustee(1) trustee) b. So-called trust account that is The actual owner(1) not a legal or valid trust under State law 8. Sole proprietorship account The Owner(4) 9. A valid trust, estate, or pension The legal entity trust (Do not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(5) - ------------------------------------------------------------
- ------------------------------------------------------------ GIVE THE EMPLOYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF -- - ------------------------------------------------------------ 10. Corporate account The corporation 11. Religious, charitable, or The organization educational organization account 12. Partnership account held in the The partnership name of the business 13. Association, club, or other tax- The organization exempt organization 14. A broker or registered nominee The broker or nominee 15. Account with the Department of The public entity Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments - ------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show your individual name. You may also enter your business name. You may use either your Social Security Number or Employer Identification Number. (5) List first and circle the name of the legal trust, estate, or pension trust Note: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 18 EX-99.2 20 y61170exv99w2.txt FORM OF NOTICE OF GUARANTEED DELIVERY EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY FOR 12.75% SENIOR SUBORDINATED NOTES DUE 2010 OF TEKNI-PLEX, INC. This form or one substantially equivalent hereto must be used to accept the Exchange Offer of Tekni-Plex, Inc., a Delaware corporation (the "Company"), made pursuant to the Prospectus, dated , 2002 (as the same may be amended or supplemented from time to time the "Prospectus"), if certificates for the outstanding 12.75% Senior Subordinated Notes due 2010 of the Company (the "Old Notes") are not immediately available or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit the Old Notes, the Letter of Transmittal and all other required documents to reach HSBC Bank USA (the "Exchange Agent") on or prior to 5:00 p.m., New York City time, on the Expiration Date of the Exchange Offer. This Notice of Guaranteed Delivery may be delivered by hand, overnight courier or mail, or transmitted by facsimile transmission, to the Exchange Agent as set forth below. See "The Exchange Offer -- Procedures for Tendering" in the Prospectus. Capitalized terms used herein but not defined herein have the respective meanings given to them in the Prospectus. THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2002 UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TO: HSBC BANK USA, AS EXCHANGE AGENT By Mail or Hand/Overnight Delivery: By Facsimile: HSBC Bank USA (718) 488-4488 One Hanson Place Attention: Paulette Shaw Brooklyn, New York, 11243 Confirm by Telephone: Attn: Paulette Shaw (718) 488-4475 Phone (718) 488-4475
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON THE LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL. Ladies and Gentlemen: The undersigned hereby tender(s) to the Company, upon the terms and subject to the conditions set forth in the Prospectus and the related Letter of Transmittal, receipt of which is hereby acknowledged, the aggregate principal amount of Old Notes set forth below pursuant to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery Procedures." All authority herein conferred or agreed to be conferred by this Notice of Guaranteed Delivery shall survive the death or incapacity of the undersigned and every obligation of the undersigned under this Notice of Guaranteed Delivery shall be binding upon the heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other legal representatives of the undersigned. PLEASE SIGN AND COMPLETE Signature(s) of Owner(s) or Name(s) of Registered Holder(s): Authorized Signatory: - ----------------------------------------------- ----------------------------------------------- - ----------------------------------------------- ----------------------------------------------- Principal Amount of Old Notes Tendered:* Address: ----------------------------------------------- - ----------------------------------------------- ----------------------------------------------- - ----------------------------------------------- Area Code and Telephone No.: ------------------------ Certificate No(s). of Old Notes (if available): If Old Notes will be tendered by book-entry transfer provide the following information: - ----------------------------------------------- Signature: ----------------------------------------------- - ----------------------------------------------- DTC Account Number: -------------------------------- Date: Date: - ----------------------------------------------- -----------------------------------------------
- --------------- * Must be in denominations of principal amount of $1,000 and integral multiples of $1,000 in excess thereof, provided that if fewer than all of the Old Notes of a holder are tendered for exchange, the untendered principal amount of the holder's remaining Old Notes must be $100,000 or any integral multiple of $1,000 in excess thereof. 2 This Notice of Guaranteed Delivery must be signed by the holder(s) of Old Notes exactly as its (their) name(s) appear on certificates for Old Notes or on a security position listing as the owner of Old Notes, or by person(s) authorized to become holder(s) by endorsements and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must provide the following information. PLEASE PRINT NAME(S) AND ADDRESS(ES) Name(s): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Capacity: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Address(es): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. NOTES SHOULD BE SENT TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL. THE GUARANTEE ON THE FOLLOWING PAGE MUST BE COMPLETED 3 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm or other entity identified in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as an "eligible guarantor institution," including (as such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities broker, municipal securities dealer, government securities broker or government securities dealer; (iii) a credit union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association that is a participant in a Securities Transfer Association recognized program (each of the foregoing being referred to as an "Eligible Institution"), hereby guarantees to deliver to the Exchange Agent at the address set forth above, either the Old Notes tendered hereby in proper form for transfer, or confirmation of the book-entry transfer of such Old Notes to the Exchange Agent's account at The Depository Trust Company, pursuant to the procedure for book-entry transfer set forth in the Prospectus, in either case together with one or more properly completed and duly executed Letters of Transmittal (or facsimile thereof or agent's message in lieu thereof) and any other required documents within three New York Stock Exchange trading days after the Expiration Date. The undersigned acknowledges that it must deliver the Letter of Transmittal (or agent's message in lieu thereof) and Old Notes tendered hereby to the Exchange Agent within the time period set forth above and that failure to do so could result in financial loss to the undersigned. Name of Firm: ----------------------------------------- ----------------------------------------------- (AUTHORIZED SIGNATURE) Address: Name: - ----------------------------------------------- ----------------------------------------------- Title: - ----------------------------------------------- ----------------------------------------------- (INCLUDE ZIP CODE) Area Code and Date: ----------------------------------------------- Telephone No.: -----------------------------------------
DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. NOTES SHOULD BE SENT TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL. 4 EX-99.3 21 y61170exv99w3.txt FORM OF TENDER INSTRUCTIONS INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER OF TEKNI-PLEX, INC. TO EXCHANGE ITS 12.75% SERIES B SENIOR SUBORDINATED NOTES DUE 2010 FOR ALL OF ITS OUTSTANDING 12.75% SENIOR SUBORDINATED NOTES DUE 2010. 1. Book-Entry Transfer; Delivery of this Letter of Transmittal and Notes; Guaranteed Delivery Procedures. To tender in the Exchange Offer, holders must tender by (a) forwarding certificates herewith or (b) book-entry transfer, pursuant to the procedures set forth in "The Exchange Offer -- Procedures for Tendering" and "-- Book-Entry Transfer" in the Prospectus. Holders who are DTC Participants tendering by book-entry transfer may execute such tender through DTC's ATOP system. A holder using ATOP should transmit its acceptance to DTC on or prior to the Expiration Date. DTC will verify such acceptance, execute a book-entry transfer of the tendered Old Notes into the Exchange Agent's account at DTC and then send to the Exchange Agent a Book-Entry Confirmation, including an agent's message confirming that DTC has received an express acknowledgment from such holder that such holder has received and agrees to be bound by this Letter of Transmittal and that the Company may enforce this Letter of Transmittal against such holder. The Book-Entry Confirmation must be received by the Exchange Agent in order for the tender relating thereto to be effective. Book-entry transfer to DTC in accordance with DTC's procedures does not constitute delivery of the Book-Entry Confirmation to the Exchange Agent. The term "Book-Entry Confirmation" means a timely confirmation of a book-entry transfer of Old Notes into the Exchange Agent's account at DTC. The term "agent's message" means a message, transmitted by DTC to and received by the Exchange Agent and forming a part of a Book-Entry Confirmation, which states that DTC has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by the Letter of Transmittal (including the representations contained herein) and that the Company may enforce the Letter of Transmittal against such participant. If the tender is not made pursuant to the book-entry transfer procedures, certificates, as well as this Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at its address set forth herein on or prior to the Expiration Date in order for such tender to be effective. Old Notes may be tendered in the principal amount of $1,000 and integral multiples of $1,000 in excess thereof, provided that if fewer than all of the Old Notes of a holder are tendered for exchange, the untendered principal amount of the holder's remaining Old Notes must be $100,000 or any integral multiple of $1,000 in excess thereof. Holders of Old Notes whose certificates for Old Notes are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Old Notes pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to such procedures, (i) such tender must be made through an Eligible Institution (as defined below), (ii) prior to the Expiration Date, the Exchange Agent must receive from such Eligible Institution (by facsimile transmission, mail or hand delivery) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Company, setting forth the name and address of the holder of Old Notes and the amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange ("NYSE") trading days after the Expiration Date, the certificates for all physically tendered Old Notes, or a Book-Entry Confirmation, and any other documents required by this Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent, and (iii) a properly executed Letter of Transmittal, as well as the certificates for all physically tendered Old Notes in proper form for transfer or Book-Entry Confirmation, as the case may be, and all other documents required by this Letter of Transmittal, must be received by the Exchange Agent within three NYSE trading days after the Expiration Date. The Notice of Guaranteed Delivery must be delivered by hand, overnight courier or mail, or transmitted by facsimile transmission, to the Exchange Agent on or prior to the Expiration Date, and must include a guarantee by an Eligible Institution in the form set forth in such notice. For Old Notes to be properly tendered pursuant to the guaranteed delivery procedure, the Exchange Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration Date. As used herein and in the Prospectus, "Eligible Institution" means a firm or other entity identified in Rule 17Ad-15 under the Securities Exchange Act of 1934 as "an eligible guarantor institution," including (as such terms are defined therein) (i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or government securities broker or dealer; (iii) a credit 10 union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association that is a participant in a Securities Transfer Association. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING HOLDERS, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. DO NOT SEND THIS LETTER OF TRANSMITTAL OR ANY OLD NOTES TO THE COMPANY. The Company will not accept any alternative, conditional or contingent tenders. Each tendering holder, by book-entry transfer through ATOP or execution of a Letter of Transmittal (or facsimile thereof), waives any right to receive any notice of the acceptance of such tender. 2. Guarantee of Signatures. No signature guarantee on this Letter of Transmittal is required if: (i) this Letter of Transmittal is signed by the registered holder (which term, for purposes of this document, shall include any participant in DTC whose name appears on a security position listing as the owner of the Old Notes) of Old Notes tendered herewith, unless such holder has completed either the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" above; or (ii) such Old Notes are tendered for the account of a firm that is an Eligible Institution. In all other cases, an Eligible Institution must guarantee the signature on this Letter of Transmittal. See Instruction 5. 3. Inadequate Space. If the space provided in the box captioned "Description of Old Notes Tendered" is inadequate, the certificate number(s) and/or the principal amount of Old Notes and any other required information should be listed on a separate signed schedule which is attached to this Letter of Transmittal. 4. Partial Tenders (Not Applicable to Holders of Old Notes Who Tender by Book-Entry Transfer); Withdrawal Rights. Tenders of Old Notes will be accepted only in the principal amount of $1,000 and integral multiples of $1,000 in excess thereof, provided that if fewer than all of the Old Notes of a holder are tendered or exchanged, the untendered or unexchanged principal amount of the holder's remaining Old Notes must be $100,000 or any integral multiple of $1,000 in excess thereof. If less than all of the Old Notes evidenced by a submitted certificate are to be tendered, the tendering holder(s) should fill in the aggregate principal amount of Old Notes to be tendered in the box above entitled "Description of Old Notes Tendered -- Principal Amount of Old Notes Tendered (If Less Than All Are Tendered)." A reissued certificate representing the balance of untendered Old Notes will be sent to such tendering holder, unless otherwise provided in the appropriate box on this Letter of Transmittal, promptly after the Expiration Date. ALL OF THE OLD NOTES DELIVERED TO THE EXCHANGE AGENT WILL BE DEEMED TO HAVE BEEN TENDERED UNLESS OTHERWISE INDICATED. Except as otherwise provided herein, tenders of Old Notes may be withdrawn at any time prior to the expiration date. In order for a withdrawal to be effective prior to that time, a written or facsimile transmission notice of withdrawal must be timely received by the Exchange Agent at one of its addresses set forth above prior to the Expiration Date. Any such notice of withdrawal must specify the name of the person having deposited the Old Notes to be withdrawn, the aggregate principal amount of Old Notes to be withdrawn and (if certificates for such Old Notes have been tendered) the name of the registered holder of the Old Notes as set forth on the certificate for the Old Notes, if different from that of the person who tendered such Old Notes. If certificates for the Old Notes have been delivered or otherwise identified to the Exchange Agent, then prior to the physical release of such certificates for the Old Notes, the tendering holder must submit the serial numbers shown on the particular certificates for the Old Notes to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution, except in the case of Old Notes tendered for the account of an Eligible Institution. If Old Notes have been tendered pursuant to the procedures for book-entry transfer set forth in "The Exchange Offer -- Book-Entry Transfer" section of the Prospectus, the notice of withdrawal must specify the name and number of the account at the book-entry transfer facility system of DTC to be credited with the withdrawal 11 of Old Notes, in which case a notice of withdrawal will be effective if delivered to the Exchange Agent by written or facsimile transmission. Withdrawals of tenders of Old Notes may not be rescinded. Old Notes properly withdrawn will not be deemed to have been validly tendered for purposes of the Exchange Offer, and no New Notes will be issued with respect thereto unless the Old Notes so withdrawn are validly retendered. Properly withdrawn Old Notes may be retendered at any subsequent time on or prior to the Expiration Date by following the procedures described in the Prospectus under "The Exchange Offer -- Procedures for Tendering." All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by the Company, in its sole discretion, whose determination shall be final and binding on all parties. Neither the Company, any employees, agents, affiliates or assigns of the Company, the Exchange Agent nor any other person shall be under any duty to give any notification of any irregularities in any notice of withdrawal or incur any liability for failure to give such notification. Any Old Notes which have been tendered but which are withdrawn will be returned to the holder thereof without cost to such holder as promptly as practicable after withdrawal. 5. Signatures on this Letter of Transmittal; Bond Powers and Endorsements; Guarantee of Signatures. If this Letter of Transmittal is signed by the holder of the Old Notes tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates or on a securities position listing without any change whatsoever. If any tendered Old Notes are owned of record by two or more joint owners, all of such owners must sign this Letter of Transmittal. If any tendered Old Notes are registered in different names on several certificates or securities positions listings, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations. When this Letter of Transmittal is signed by the holder or holders of the Old Notes specified herein and tendered hereby, no endorsements of certificates or separate bond powers are required. If, however, the New Notes are to be issued, or any untendered Old Notes are to be reissued, to a person other than the holder, then endorsements of any certificates transmitted hereby or separate bond powers are required. Signatures on such certificate(s) must be guaranteed by an Eligible Institution. In connection with any tender of Old Notes in definitive certificated form, if this Letter of Transmittal is signed by a person other than the registered holder or holders of any certificate(s) specified herein, such certificate(s) must be endorsed or accompanied by appropriate bond powers, in either case signed exactly as the name or names of the registered holder or holders appear(s) on the certificate(s), and the signatures on such certificate(s) must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, evidence satisfactory to the Company of their authority to so act must be submitted. Endorsements on certificates for Old Notes or signatures on bond powers required by this Instruction 5 must be guaranteed by an Eligible Institution. 6. Special Issuance and Delivery Instructions. If New Notes are to be issued in the name of a person other than the registered holder, or if New Notes are to be sent to someone other than the registered holder or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Certificates for Old Notes not exchanged will be returned by mail or, if tendered by book-entry transfer, by crediting the account indicated above maintained at DTC unless the appropriate boxes on this Letter of Transmittal are completed. See Instruction 4. 7. Tax Identification Number. Under U.S. federal income tax law, a holder whose tendered Old Notes are accepted for exchange is required to provide the Exchange Agent (as payor) with such holder's correct taxpayer identification number ("TIN") on the Substitute Form W-9 below which, in the case of a tendering holder who is an individual, is his or her Social Security Number. In the case of a tendering holder who is an individual who does not have and is not eligible to obtain a Social Security Number (e.g., a resident alien), the correct taxpayer identification number is such holder's IRS individual taxpayer identification number ("ITIN"). If the Exchange Agent is not provided with the correct TIN, the Internal Revenue Service (the "IRS") may subject the holder or other payee to a $50 penalty. In 12 addition, payments to such holders or other payees with respect to Old Notes exchanged pursuant to the Exchange Offer may be subject to 30% backup withholding. The box in Part 3 of the Substitute Form W-9 should be checked if the tendering holder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the holder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Exchange Agent will withhold 30% of all payments made prior to the time a properly certified TIN is provided to the Exchange Agent. The Exchange Agent will retain such amounts withheld during the 60 day period following the date of the Substitute Form W-9. If the holder furnishes the Exchange Agent with its TIN within 60 days after the date of the Substitute Form W-9, the amounts retained during the 60 day period will be remitted to the holder and no further amounts shall be retained or withheld from payments made to the holder thereafter. If, however, the holder has not provided the Exchange Agent with its TIN within such 60 day period, amounts withheld will be remitted to the IRS as backup withholding. In addition, 30% of all payments made thereafter will be withheld and remitted to the IRS until a correct TIN is provided. The holder is required to give the Exchange Agent the TIN (e.g., social security number, employer identification number or IRS individual taxpayer identification number) of the registered owner of the Old Notes or of the last transferee appearing on the transfers attached to, or endorsed on, the Old Notes. If the Old Notes are registered in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. Certain holders (including, among others, corporations, financial institutions and certain foreign persons) may not be subject to these backup withholding requirements. Such holders should nevertheless complete the attached Substitute Form W-9 below, and write "exempt" on the face thereof, to avoid possible erroneous backup withholding. A foreign person may qualify as an exempt recipient by submitting a properly completed IRS Form W-8 (Certificate of Foreign Status), signed under penalties of perjury, attesting to that holder's exempt status. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional instructions. 8. Transfer Taxes. The Company will pay all transfer taxes, if any, applicable to the transfer of Old Notes to it or its order pursuant to the Exchange Offer. If, however, New Notes and/or substitute Old Notes not exchanged are to be delivered to, or are to be registered or issued in the name of, any person other than the holder of the Old Notes tendered hereby, or if tendered Old Notes are registered in the name of any person other than the person signing this Letter of Transmittal, or if a transfer tax is imposed for any reason other than the transfer of Old Notes to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering holder. EXCEPT AS PROVIDED IN THIS INSTRUCTION 8, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES SPECIFIED IN THIS LETTER OF TRANSMITTAL. 9. Determination of Validity. The Company will determine, in its sole discretion, all questions as to the form of documents, validity, eligibility (including time of receipt) and acceptance for exchange of any tender of Old Notes, which determination shall be final and binding on all parties. The Company reserves the absolute right to reject any and all tenders determined by it not to be in proper form or the acceptance of which, or exchange for which, may, in the view of counsel to the Company, be unlawful. The Company also reserves the absolute right, subject to applicable law, to waive any of the conditions of the Exchange Offer set forth in the Prospectus under the caption "The Exchange Offer" or any conditions or irregularity in any tender of Old Notes of any particular holder whether or not similar conditions or irregularities are waived in the case of other holders. The Company's interpretation of the terms and conditions of the Exchange Offer (including this Letter of Transmittal and the instructions hereto) will be final and binding. No tender of Old Notes will be deemed to have been validly made until all irregularities with respect to such tender have been cured or waived. Although the Company intends to notify holders of defects or irregularities with respect to tenders of Old Notes, neither the Company, any employees, agents, affiliates or assigns of the Company, the Exchange Agent, nor any other person shall be under any duty to give notification of any irregularities in tenders or incur any liability for failure to give such notification. 13 10. No Conditional Tenders. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Old Notes, by execution of this Letter of Transmittal, shall waive any right to receive notice of the acceptance of their Old Notes for exchange. Neither the Company, the Exchange Agent nor any other person is obligated to give notice of any defect or irregularity with respect to any tender of Old Notes nor shall any of them incur any liability for failure to give any such notice. 11. Lost, Stolen or Destroyed Old Notes. If any certificates representing Old Notes have been lost, destroyed or stolen, the holder should promptly notify the Exchange Agent. The holder will then be instructed as to the steps that must be taken in order to replace the certificates. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost, destroyed or stolen certificates have been followed. 12. Requests for Assistance or Additional Copies. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus, the Notice of Guaranteed Delivery and this Letter of Transmittal, may be directed to the Exchange Agent, at the address and telephone number indicated on the front of this Letter of Transmittal. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF OR AGENT'S MESSAGE IN LIEU THEREOF) AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE. 14 EX-99.4 22 y61170exv99w4.txt FORM OF EXCHANGE AGENT AGREEMENT EXHIBIT 99.4 , 2002 EXCHANGE AGENT AGREEMENT HSBC Bank USA Issuer Services 452 Fifth Avenue New York, New York 10018-2706 Ladies and Gentlemen: Tekni-Plex, Inc., a Delaware corporation (the "COMPANY"), proposes to make an offer (the "EXCHANGE OFFER") to exchange up to $40,000,000 principal amount of its 12.75% Series B Senior Subordinated Notes due 2010 (the "NEW NOTES"), for a like principal amount of its respective outstanding 12.75% Senior Subordinated Notes due 2010 (the "OLD NOTES"). The terms and conditions of the Exchange Offer are set forth in a prospectus (the "PROSPECTUS") included in the Company's registration statement on Form S-4 (File No. 333- ), as it may be amended from time to time (the "REGISTRATION STATEMENT"), filed with the Securities and Exchange Commission (the "SEC"), and proposed to be distributed to all record holders of the Old Notes. The Old Notes and the New Notes are collectively referred to herein as the "NOTES." Capitalized terms used herein and not defined shall have the respective meanings ascribed to them in the Prospectus or accompanying Letter of Transmittal. The Company hereby appoints HSBC Bank USA to act as exchange agent (the "EXCHANGE AGENT") in connection with the Exchange Offer. References hereinafter to "YOU" shall refer to HSBC Bank USA. The Exchange Offer is expected to be commenced by the Company on or about , 2002. The Letter of Transmittal accompanying the Prospectus (or in the case of book entry-securities, either the Letter of Transmittal or the Automated Tender Offer Program ("ATOP") system) is to be used by the holders of the Old Notes to accept the Exchange Offer and contains instructions with respect to the delivery of certificates for Old Notes tendered. The Exchange Offer shall expire at 5:00 P.M., New York City time, on , 2002, or on such later date or time to which the Company may extend the Exchange Offer (the "EXPIRATION DATE"). Subject to the terms and conditions set forth in the Prospectus, the Company expressly reserves the right to extend the Exchange Offer from time to time and may extend the Exchange Offer by giving oral (confirmed in writing) or written notice to you before 9:00 A.M., New York City time, on the next business day after the previously scheduled Expiration Date. The Company expressly reserves the right, in its sole discretion, to amend or terminate the Exchange Offer, and not to accept for exchange any Old Notes not theretofore accepted for exchange. The Company will give oral (confirmed in writing) or written notice of any amendment, termination or nonacceptance to you as promptly as practicable. In carrying out your duties as Exchange Agent, you are to act in accordance with the following instructions: 1. You will perform such duties and only such duties as are specifically set forth in the section of the Prospectus captioned "The Exchange Offer," in the Letter of Transmittal accompanying the Prospectus or as specifically set forth herein; provided, however, that in no way will your general duty to act in good faith and without gross negligence or willful misconduct be limited by the foregoing. 2. You will promptly establish an account with respect to the Old Notes at The Depository Trust Company ("DTC") for purposes of the Exchange Offer, and any financial institution that is a participant in DTC's systems may, until the Expiration Date, make book-entry delivery of the Old Notes by causing DTC to transfer such Old Notes into your account in accordance with DTC's procedures for such transfer. In every case, however, a Letter of Transmittal (or a manually executed facsimile thereof) or an agent's message, properly completed and duly executed, with any required signature guarantees and any other required documents must be transmitted to and received by you prior to the Expiration Date or the guaranteed delivery procedures described in the Exchange Offer must be complied with. 3. You are to examine each of the Letters of Transmittal and certificates for Old Notes (and confirmation of book-entry transfers of Old Notes into your account at DTC) and any other documents delivered or mailed to you by or for holders of the Old Notes, to ascertain whether: (i) the Letters of Transmittal, certificates and any such other documents are duly executed and properly completed in accordance with instructions set forth therein and that such Book-Entry Confirmations are in due and proper form and contain the information required to be set forth therein, (ii) the Old Notes have otherwise been properly tendered, (iii) the Old Notes tendered in part are tendered in principal amounts of $1,000 and integral multiples of $1,000 in excess thereof and that if any Old Notes are tendered for exchange in part, the untendered principal amount thereof is $100,000 or any integral multiple of $1,000 in excess thereof, and (iv) holders have provided their Tax Identification Number or required certification. In each case where the Letter of Transmittal or any other document has been improperly completed or executed, or where Book-Entry Confirmations are not in due and proper form or omit certain information, or any of the certificates for Old Notes are not in proper form for transfer or some other irregularity in connection with the acceptance of the Exchange Offer exists, you will endeavor to inform the presenters of the need for fulfillment of all requirements and to take any other action as may be necessary or advisable to cause such irregularity to be corrected. 4. With the approval of the President, any Vice President, the Secretary or any Assistant Secretary of the Company (such approval, if given orally, to be confirmed in writing) or any other person designated by such an officer in writing, you are authorized to waive any irregularities in connection with any tender of Old Notes pursuant to the Exchange Offer. 5. At the written request of the Company or its counsel, you shall notify tendering holders of Old Notes in the event of any extension, termination or amendment of the Exchange Offer. In the event of any such termination, you will return all tendered Old Notes to the persons entitled thereto, at the request and expense of the Company. 6. Tenders of Old Notes may be made only as set forth in the Letter of Transmittal and in the section of the Prospectus captioned "The Exchange Offer," and Old Notes shall be considered properly tendered to you only when tendered in accordance with the procedures set forth therein. Notwithstanding the provisions of this paragraph 6, Old Notes which the President, any Vice President, the Secretary or any Assistant Secretary of the Company or any other person designated by any such person shall approve as having been properly tendered shall be considered to be properly tendered (such approval, if given orally, shall be confirmed in writing). New Notes are to be issued in exchange for Old Notes pursuant to the Exchange Offer only (i) against deposit with you prior to the Expiration Date or, in the case of a tender in accordance with the guaranteed delivery procedures outlined in Instruction 1 of the Letter of Transmittal, within three New York Stock Exchange trading days after the Expiration Date of the Exchange Offer, together with executed Letters of Transmittal and any other documents required by the Exchange Offer or (ii) in the event that the holder is a participant in DTC's system, by the utilization of DTC's ATOP and any evidence required by the Exchange Offer. 7. You shall advise the Company with respect to any Old Notes received subsequent to the Expiration Date and accept its instructions with respect to disposition of such Old Notes. 8. You shall accept tenders: (a) in cases where the Old Notes are registered in two or more names only if signed by all named holders; 2 (b) in cases where the signing person (as indicated on the Letter of Transmittal) is acting in a fiduciary or a representative capacity only when proper evidence of his or her authority so to act is submitted; and (c) from persons other than the registered holder of Old Notes provided that customary transfer requirements, including those regarding any applicable transfer taxes, are fulfilled. You shall accept partial tenders of Old Notes when so indicated and as permitted in the Letter of Transmittal and deliver certificates for Old Notes to the Security Registrar for split-up and return any untendered Old Notes to the holder (or such other person as may be designated in the Letter of Transmittal) as promptly as practicable after expiration or termination of the Exchange Offer. 9. Upon satisfaction or waiver of all of the conditions to the Exchange Offer, the Company will notify you (such notice, if given orally, to be confirmed in writing) of its acceptance, promptly after the Expiration Date, of all Old Notes properly tendered and you, on behalf of the Company, will exchange such Old Notes for New Notes and cause such Old Notes to be canceled. Delivery of New Notes will be made on behalf of the Company by you at the rate of $1,000 principal amount of New Notes for each $1,000 principal amount of the Old Notes tendered promptly after notice (such notice, if given orally, to be confirmed in writing) of acceptance of said Old Notes by the Company; provided, however, that in all cases, Old Notes tendered pursuant to the Exchange Offer will be exchanged only after timely receipt by you of certificates for such Old Notes (or confirmation of book-entry transfer into your account at DTC), a properly completed and, except as described in the section of the Prospectus captioned "The Exchange Offer -- Procedures for Tendering", duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees and any other required documents. Unless otherwise instructed by the Company, you shall issue New Notes only in denominations of $1,000 or any integral multiple thereof. 10. Tenders, pursuant to the Exchange Offer are irrevocable, except that, subject to the terms and upon the conditions set forth in the Prospectus and the Letter of Transmittal, Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any time on or prior to the Expiration Date in accordance with the terms of the Exchange Offer. 11. The Company shall not be required to exchange any Old Notes tendered if any of the conditions set forth in the Exchange Offer is not met. Notice of any decision by the Company not to exchange any Old Notes tendered shall be given (and confirmed in writing) by the Company to you. 12. If, pursuant to the Exchange Offer, the Company does not accept for exchange all or part of the Old Notes tendered because of an invalid tender, the occurrence of certain other events set forth in the Prospectus or otherwise, you shall as soon as practicable after the expiration or termination of the Exchange Offer return those certificates for unaccepted Old Notes (or effect appropriate book-entry transfer), together with any related required documents and the Letters of Transmittal relating thereto that are in your possession, to the persons who deposited them (or effected such book-entry transfer). 13. All certificates for reissued Old Notes, unaccepted Old Notes or for New Notes (other than those effected by book-entry transfer) shall be forwarded by (a) first-class certified mail, return receipt requested, under a blanket surety bond obtained by you protecting you and the Company from loss or liability arising out of the nonreceipt or nondelivery of such certificates or (b) by registered mail insured by you separately for the replacement value of each of such certificate. 14. As soon as practicable after the Expiration Date, you shall arrange for cancellation of the Old Notes submitted to you or returned by DTC in connection with ATOP. Such Old Notes shall be cancelled and retired by you as you are instructed by the Company (or a representative designated by the Company) in writing. 15. You are not authorized to pay or offer to pay any concessions, commissions or other solicitation fees to any broker, dealer, commercial bank, trust company or other nominee or to engage or use any person to solicit tenders. 3 16. As Exchange Agent hereunder, you: (a) shall have no duties or obligations other than those specifically set forth in the Prospectus, the Letter of Transmittal or herein or as may be subsequently agreed to in writing by you and the Company; (b) will be regarded as making no representations and having no responsibilities as to the validity, sufficiency, value or genuineness of any of the certificates for the Old Notes deposited with you pursuant to the Exchange Offer, and will not be required to and will make no representation as to the validity, value or genuineness of the Exchange Offer; (c) shall not be obligated to take any legal action hereunder which might in your reasonable judgment involve any expense or liability, unless you shall have been furnished with reasonable indemnity; (d) may reasonably rely on and shall be protected in acting in reliance upon any certificate, instrument, opinion, notice, letter, telegram or other document or security delivered to you and reasonably believed by you to be genuine and to have been signed by the proper party or parties; (e) may reasonably act upon any tender, statement, request, comment, agreement or other instrument whatsoever not only as to its due execution and validity and effectiveness of its provisions, but also as to the truth and accuracy of any information contained therein, which you shall in good faith believe to be genuine or to have been signed or represented by a proper person or persons; (f) may rely on and shall be protected in acting upon written or oral instructions from any officer of the Company; (g) may consult with your counsel with respect to any questions relating to your duties and responsibilities, and the written opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by you hereunder in good faith and in accordance with the written opinion of such counsel; and (h) shall not advise any person tendering Old Notes pursuant to the Exchange Offer as to whether to tender or refrain from tendering all or any portion of Old Notes or as to the market value, decline or appreciation in market value of any Old Notes that may or may not occur as a result of the Exchange Offer or as to the market value of the New Notes; provided, however, that in no way will your general duty to act in good faith and without gross negligence or willful misconduct be limited by the foregoing. 17. You shall take such action as may from time to time be requested by the Company or its counsel (and such other action as you may reasonably deem appropriate) to furnish copies of the Prospectus, Letter of Transmittal and the Notice of Guaranteed Delivery (as defined in the Prospectus) or such other forms as may be approved from time to time by the Company to all persons requesting such documents and to accept and comply with telephone requests for information relating to the Exchange Offer, provided, that such information shall relate only to the procedures for accepting (or withdrawing from) the Exchange Offer. The Company will furnish you with copies of such documents at your request. 18. You shall advise by facsimile transmission or telephone, and promptly thereafter confirm in writing to Dr. F. Patrick Smith, Chief Executive Officer, of the Company (telephone number (972) 304-5077, facsimile number (972) 304-6297) and such other person or persons as the Company may request, daily (and more frequently during the week immediately preceding the Expiration Date and if otherwise requested), up to and including the Expiration Date, as to the number and aggregate principal amount of Old Notes which have been duly tendered pursuant to the Exchange Offer and the items received by you pursuant to the Exchange Offer and this Agreement, separately reporting and giving cumulative totals as to items properly received and items improperly received. In addition, you will also inform, and cooperate in making available to, the Company or any such other person or persons upon oral request made from time to time prior to the Expiration Date of such other information as it or he or 4 she reasonably requests. Such cooperation shall include, without limitation, the granting by you to the Company and such person as the Company may request of access to those persons on your staff who are responsible for receiving tenders, in order to ensure that immediately prior to the Expiration Date the Company shall have received information in sufficient detail to enable it to decide whether to extend the Exchange Offer, including the identity of the holders of Old Notes who have not tendered such Old Notes as of the date such request was made. You shall prepare a final list of all persons whose tenders were accepted, the number and aggregate principal amount of Old Notes tendered, the number and aggregate principal amount of Old Notes accepted and the identity of any Participating Broker-Dealers (as defined in the Letter of Transmittal) and the number and aggregate principal amount of New Notes delivered to each, and deliver said list to the Company. 19. Letters of Transmittal, Book-Entry Confirmations and Notices of Guaranteed Delivery received by you shall be preserved by you for a period of time at least equal to the period of time you preserve other records pertaining to the transfer of securities, or one year, whichever is longer, and thereafter shall be delivered by you to the Company. You shall dispose of unused Letters of Transmittal and other surplus materials, upon consultation with the Company, in accordance with your customary procedures. 20. You hereby expressly waive any lien, encumbrance or right of set-off whatsoever that you may have with respect to funds deposited with you for the payment of transfer taxes by reasons of amounts, if any, borrowed by the Company, or any of its subsidiaries or affiliates pursuant to any loan, credit or other agreement with you or for compensation owed to you hereunder or under any other agreement. 21. For services rendered as Exchange Agent hereunder, you shall be entitled to such compensation as set forth on the Schedule attached hereto. 22. You hereby acknowledge receipt of the Prospectus and the Letter of Transmittal and further acknowledge that you have examined each of them. Any inconsistency between this Agreement, on the one hand, and the Prospectus and the Letter of Transmittal (as they may be amended from time to time), on the other hand, shall be resolved in favor of the latter two documents, except with respect to the duties, liabilities and indemnification of you as Exchange Agent, which shall be controlled by this Agreement. 23. The Company covenants and agrees to indemnify and hold you harmless in your capacity as Exchange Agent hereunder against any loss, liability, cost or expense, including reasonable attorneys' fees and expenses arising out of or in connection with any act, omission, delay or refusal made by you in reliance upon any signature, endorsement, assignment, certificate, order, request, notice, instruction or other instrument or document reasonably believed by you to be valid, genuine and sufficient and in accepting any tender or effecting any transfer of Old Notes reasonably believed by you in good faith to be authorized, and in delaying or refusing in good faith to accept any tenders or effect any transfer of Old Notes; provided, however, that anything in this Agreement to the contrary notwithstanding, the Company shall not be liable for indemnification or otherwise for any loss, liability, cost or expense to the extent arising out of your gross negligence or willful misconduct. The Company shall be entitled to participate, at its own expense, in the defense of any such claim or other action, and, if the Company so elects, the Company may assume the defense of any pending or threatened action against you in respect of which indemnification may be sought hereunder, in which case the Company shall not thereafter be responsible for the subsequently incurred fees and disbursements of legal counsel for you under this paragraph so long as the Company shall retain counsel reasonably satisfactory to you to defend such suit; provided, that the Company shall not be entitled to assume the defense of any such action if the named parties to such action include both you and the Company and representation of both parties by the same legal counsel would, in the written opinion of your counsel, be inappropriate due to actual or potential conflicting interests between you and the Company. You understand and agree that the Company shall not be liable under this paragraph for the fees and expenses of more than one legal counsel for you. 5 24. You shall arrange to comply with all requirements under the tax laws of the United States, including those relating to missing Tax Identification Numbers, and shall file any appropriate reports with the Internal Revenue Service. 25. You shall notify the Company of the amount of any transfer taxes payable in respect of the exchange of Old Notes and, upon receipt of a written approval from the Company, shall deliver or cause to be delivered, in a timely manner to each governmental authority to which any transfer taxes are payable in respect of the exchange of Old Notes, your check in the amount of all transfer taxes so payable, and the Company shall reimburse you for the amount of any and all transfer taxes payable in respect of the exchange of Old Notes; provided, however, that you shall reimburse the Company for amounts refunded to you in respect of your payment of any such transfer taxes, at such time as such refund is received by you. 26. THIS AGREEMENT AND YOUR APPOINTMENT AS EXCHANGE AGENT HEREUNDER SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, AND WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. 27. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and its successor and assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. Without limitation of the foregoing, the parties hereto expressly agree that no holder of Old Notes or New Notes shall have any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. 28. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, and all of which taken together shall constitute one and the same agreement. 29. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 30. This Agreement shall not be deemed or construed to be modified, amended, rescinded, canceled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged. 31. Unless otherwise provided herein, all notices, requests and other communications to any party hereunder shall be in writing (including facsimile or similar writing) and shall be given to such party, addressed to it, at its address or telecopy number set forth below: If to the Company, to: Tekni-Plex, Inc. 260 N. Denton Tap Road, Suite 150 Coppell, Texas 75019 Telephone: (972) 304-5077 Facsimile: (972) 304-6297 Attention: Dr. F. Patrick Smith Chief Executive Officer with a copy to: Francis J. Morison, Esq. Davis Polk & Wardwell 450 Lexington Avenue New York, NY 10017 6 If to the Exchange Agent, to: HSBC Bank USA Issuer Services 452 Fifth Avenue New York, New York 10018-2706 Telephone: (212) 525-1316 Facsimile: (212) 525-1300 32. Unless terminated earlier by the parties hereto, this Agreement shall terminate 90 days following the Expiration Date. Notwithstanding the foregoing, paragraphs 19, 21, 23 and 25 shall survive the termination of this Agreement. Upon any termination of this Agreement, you shall promptly deliver to the Company any certificates for New Notes, funds or property then held by you as Exchange Agent under this Agreement. 33. This Agreement shall be binding and effective as of the date hereof. Please acknowledge receipt of this Agreement and confirm the arrangements herein provided by signing and returning the enclosed copy. TEKNI-PLEX, INC. By: ------------------------------------ Name: Title: Accepted as of the date first above written: HSBC BANK USA, as Exchange Agent By: -------------------------------------------------------- Name: Title: 7 EXHIBIT A SCHEDULE OF FEES FOR SERVICES AS EXCHANGE AGENT TEKNI-PLEX, INC. 12 3/4% SENIOR SUBORDINATED NOTES DUE 2010 EXCHANGE AGENT FEE ......................................... $
This one-time fee covers the acceptance of our appointment as Exchange Agent, review and consideration of the Exchange Agent Agreement and all supporting documents consultations with attorneys, and establishment of procedures to perform the services required by the Agreement. The fees quoted above by HSBC Bank USA are subject to our review of the governing documents to the transaction. These fees do not include reimbursement for out-of-pocket expenses which will be in addition to the fees quoted and will be charged to you at cost. Out-of-pocket expenses that are to be reimbursed to the bank include (but are not limited to) postage, overnight mail, telephone, facsimile charges, stationery, accountants' fees and/or counsel fees (and their expenses). If the above-referenced transaction should fail to be brought to a successful conclusion, the bank reserves the right to charge our acceptance fee, plus any out-of-pocket expenses that have been incurred. Please note that the above fees are the bank's routine fees and, as such, do not include fees for extraordinary services for non-routine services or default administration for which other fees will be imposed upon appraisal by the bank's Corporate Trust Services department. The bank reserves the right to amend this fee proposal upon final review of the governing documents or to withdraw its offer to provide Corporate Trust services prior to execution of the governing documents. EX-99.5 23 y61170exv99w5.txt INSTRUCTION TO REGISTERED HOLDERS EXHIBIT 99.5 INSTRUCTION TO REGISTERED HOLDER AND/OR BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM OWNER OF TEKNI-PLEX, INC. 12.75% SENIOR SUBORDINATED NOTES DUE 2010 (THE "OLD NOTES") TO REGISTERED HOLDER AND/OR PARTICIPANT OF THE BOOK-ENTRY TRANSFER FACILITY: The undersigned hereby acknowledges receipt of the Prospectus dated , 2002 (the "PROSPECTUS") of Tekni-Plex, Inc., a Delaware corporation (the "COMPANY"), and the accompanying Letter of Transmittal (the "LETTER OF TRANSMITTAL"), that together constitute the Company's offer (the "EXCHANGE OFFER"). Capitalized terms used but not defined herein have the meanings as ascribed to them in the Prospectus or the Letter of Transmittal. This will instruct you, the registered holder and/or book-entry transfer facility participant, as to the action to be taken by you relating to the Exchange Offer with respect to the Old Notes held by you for the account of the undersigned. The aggregate face amount of the Old Notes held by you for the account of the undersigned is (fill in amount): $ of the 12.75% Senior Subordinated Notes Due 2010 With respect to the Exchange Offer, the undersigned hereby instructs you (check appropriate box): [ ] To TENDER the following Old Notes held by you for the account of the undersigned (insert principal amount of Old Notes to be tendered, if any): $ of the 12.75% Senior Subordinated Notes Due 2010 [ ] NOT to TENDER any Old Notes held by you for the account of the undersigned. If the undersigned instructs you to tender the Old Notes held by you for the account of the undersigned, it is understood that you are authorized to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representations and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner, including but not limited to the representations, that (i) the holder is not an "affiliate" of the Company, (ii) any New Notes to be received by the holder are being acquired in the ordinary course of its business, and (iii) the holder has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such New Notes. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes, it represents that such Old Notes were acquired as a result of market-making activities or other trading activities, and it acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes. By acknowledging that it will deliver and by delivering a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes, such broker-dealer is not deemed to admit that it is an "underwriter" within the meaning of the Securities Act of 1933, as amended. SIGN HERE Name of beneficial owner(s): - --------------------------------------------------------------------------- Signature(s): - -------------------------------------------------------------------------------- Name(s) (please print): - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- Telephone Number: - -------------------------------------------------------------------------------- Taxpayer Identification or Social Security Number: - ---------------------------------------------------- Date: - -------------------------------------------------------------------------------- 2 EX-99.6 24 y61170exv99w6.txt BROKER'S LETTER TO CLIENTS EXHIBIT 99.6 TEKNI-PLEX INCORPORATED OFFER TO EXCHANGE ITS 12.75% SERIES B SENIOR SUBORDINATED NOTES DUE 2010 FOR ANY AND ALL OF ITS OUTSTANDING 12.75% SENIOR SUBORDINATED NOTES DUE 2010 To Our Clients: Enclosed is a Prospectus, dated , 2002, of Tekni-Plex Inc., a Delaware corporation (the "COMPANY"), and a related Letter of Transmittal (which together constitute the "EXCHANGE OFFER") relating to the offer by the Company to exchange its 12.75% Series B Senior Subordinated Notes Due 2010 (the "NEW NOTES"), pursuant to an offering registered under the Securities Act of 1933, as amended (the "SECURITIES ACT"), for a like principal amount of its issued and outstanding 12.75% Senior Subordinated Notes Due 2010 (the "OLD NOTES") upon the terms and subject to the conditions set forth in the Exchange Offer. PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2002, UNLESS EXTENDED. The Exchange Offer is not conditioned upon any minimum number of Old Notes being tendered. We are the holder of record and/or participant in the book-entry transfer facility of Old Notes held by us for your account. A tender of such Old Notes can be made only by us as the record holder and/or participant in the book-entry transfer facility and pursuant to your instructions. The Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender Old Notes held by us for your account. We request instructions as to whether you wish to tender any or all of the Old Notes held by us for your account pursuant to the terms and conditions of the Exchange Offer. We also request that you confirm that we may on your behalf make the representations contained in the Letter of Transmittal. Pursuant to the Letter of Transmittal, each holder of Old Notes will represent to the Company that (i) the holder is not an "affiliate" of the Company, (ii) any New Notes to be received by the holder are being acquired in the ordinary course of its business, and (iii) the holder has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such New Notes. If the tendering holder is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes, we will represent on behalf of such broker-dealer that the Old Notes to be exchanged for the New Notes were acquired by it as a result of market-making activities or other trading activities, and acknowledge on behalf of such broker-dealer that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes. By acknowledging that it will deliver and by delivering a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes, such broker-dealer is not deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Very truly yours, EX-99.7 25 y61170exv99w7.txt EXCHANGE OFFER COVER LETTER EXHIBIT 99.7 TEKNI-PLEX INCORPORATED OFFER TO EXCHANGE ITS 12.75% SERIES B SENIOR SUBORDINATED NOTES DUE 2010 FOR ANY AND ALL OF ITS OUTSTANDING 12.75% SENIOR SUBORDINATED NOTES DUE 2010 To Registered Holders and The Depository Trust Company Participants: Enclosed are the materials listed below relating to the offer by Tekni-Plex Incorporated, a Delaware corporation (the "COMPANY"), to exchange its 12.75% Series B Senior Subordinated Notes Due 2010 (the "NEW NOTES"), pursuant to an offering registered under the Securities Act of 1933, as amended (the "SECURITIES ACT"), for a like principal amount of its issued and outstanding 12.75% Senior Subordinated Notes Due 2010 (the "OLD NOTES") upon the terms and subject to the conditions set forth in the Company's Prospectus, dated , 2002, and the related Letter of Transmittal (which together constitute the "EXCHANGE OFFER"). Enclosed herewith are copies of the following documents: 1. Prospectus dated , 2002; 2. Letter of Transmittal; 3. Notice of Guaranteed Delivery; 4. Instruction to Registered Holder and/or Book-Entry Transfer Participant from Owner; and 5. Letter which may be sent to your clients for whose account you hold Old Notes in your name or in the name of your nominee, to accompany the instruction form referred to above, for obtaining such client's instruction with regard to the Exchange Offer. WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2002 UNLESS EXTENDED. The Exchange Offer is not conditioned upon any minimum number of Old Notes being tendered. Pursuant to the Letter of Transmittal, each holder of Old Notes will represent to the Company that (i) the holder is not an "affiliate" of the Company, (ii) any New Notes to be received by it are being acquired in the ordinary course of its business, and (iii) the holder has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such New Notes. If the tendering holder is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes, you will represent on behalf of such broker-dealer that the Old Notes to be exchanged for the New Notes were acquired by it as a result of market-making activities or other trading activities, and acknowledge on behalf of such broker-dealer that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes. By acknowledging that it will deliver and by delivering a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes, such broker-dealer is not deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The enclosed Instruction to Registered Holder and/or Book-Entry Transfer Participant from Owner contains an authorization by the beneficial owners of the Old Notes for you to make the foregoing representations. The Company will not pay any fee or commission to any broker or dealer or to any other persons (other than the Exchange Agent) in connection with the solicitation of tenders of Old Notes pursuant to the Exchange Offer. The Company will pay or cause to be paid any transfer taxes payable on the transfer of Old Notes to it, except as otherwise provided in Instruction 8 of the enclosed Letter of Transmittal. Additional copies of the enclosed material may be obtained from the undersigned. Very truly yours, HSBC BANK USA NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL MAKE YOU THE AGENT OF TEKNI-PLEX, INC. OR HSBC BANK USA OR AUTHORIZE YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. 2 -----END PRIVACY-ENHANCED MESSAGE-----